As filed with the Securities and Exchange Commission on , 1997
Registration No. 333-4778
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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PRE-EFFECTIVE AMENDMENT NO. 5
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ELECTRONICS COMMUNICATIONS CORP.
(Exact name of issuer as specified in its charter)
Delaware 11-2649088
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Plog Road, Fairfield, New Jersey 07004
(Address of Principal Executive Offices) (Zip Code)
William S. Taylor, President
Electronics Communications Corp.
10 Plog Road
Fairfield, NJ 07004
(Name and address of agent for service)
(201) 808-8862
(Telephone number, including area code of agent for service)
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copies to:
Joel C. Schneider, Esq.
Sommer & Schneider LLP
600 Old Country Road, Suite 535
Garden City, NY 11530
(516) 228-8181
<PAGE>
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of securities Amount to be Proposed Proposed Amount of
to be registered registered maximum maximum registration
offering aggregate fee
price per offering
share price
<S> <C> <C> <C> <C>
Common Stock, $.05 par value......... 104,145 $2.375 $247,344 $85.16(1)
A Warrants........................... 800,000 $1.00 $800,000 $275.44(1)
Common Stock, $.05 par value(2)...... 800,000 $2.25(5) $1,800,000(5) $620.69(6)
Common Stock, $.05 par value(3)...... 280,000 $1.50 $420,000 $127.28(4)
A Warrants(3)........................ 560,000 $0.625 $350,000 $106.06(4)
Common Stock, $.05 par value(2)(3)... 560,000 $2.25(5) $1,260,000 $381.82(4)
Total................................ $4,877,344 $1,596.45
</TABLE>
(1) The fee with respect to these shares has been calculated pursuant to Rules
457(h) and 457(c) under the Securities Act of 1933 and based upon the
average of the last price per share of the Registrant's A Warrants and
Common Stock on April 26, 1996 a date within five (5) days prior to the
date of initial filing of this Registration Statement, as reported by the
NASDAQ Small-Cap Market. The registration fee for these shares has
previously been paid with the initial filing of this Form S-3.
(2) Issuable upon the exercise of A Warrants.
(3) These shares were first included on Pre-Effective Amendment Number 4 to
this Form S-3.
(4) The fee with respect to these shares has been calculated pursuant to Rules
457(h) and 457(c) under
<PAGE>
the Securities Act of 1933 and based upon the average of the last price
per share of the Registrant's A Warrants and Common Stock on February 20,
1997 a date within five (5) days prior to the date of filing Pre-Effective
Amendment No. 4 to Form S-3, as reported by the NASDAQ Small-Cap Market.
The registration fee with respect to these shares has been paid with the
filing of Pre-Effective Amendment No. 4 to Form S-3.
(5) On or about December 24, 1996 the board of directors authorized a
reduction in the exercise price of the A Warrants from $5.00 to $2.25.
(6) The Company has paid a registration fee of $1,377.20 for these A Warrants
based on a exercise price of $5.00 with the initial filing of this Form
S-3.
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Documents Incorporated by Reference Yes |X| No |_|
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED
ELECTRONICS COMMUNICATIONS CORP.
384,145 SHARES OF COMMON STOCK
1,360,000 CLASS A REDEEMABLE COMMON STOCK PURCHASE
WARRANTS AND 1,360,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF CLASS A REDEEMABLE COMMON STOCK
PURCHASE WARRANTS.
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This Prospectus relates to 384,145 shares of Common Stock, par value $.05
(the "Common Stock"), 1,360,000 Class A Redeemable Common Stock Purchase
Warrants (the "A Warrants") and 1,360,000 shares of Common Stock issuable upon
the exercise of the A Warrants. The Common Stock, A Warrants and the shares of
the Company's Common Stock underlying the A Warrants will be sold by holders of
such securities. See "Selling Securityholders." Each A Warrant entitles the
holder thereof to purchase one share of Common Stock, at $2.25 per share during
the period from May 12, 1995 to May 12, 1999 (the "Exercise Period"). The A
Warrants are subject to redemption by the Company, with the prior consent of
Investors Associates, Inc., the representative ("Representative") of the several
underwriters (the "Underwriters) of the Company's public offering consummated on
May 19, 1995, at $.001 per A Warrant at anytime following May 12, 1996, on 45
days prior written notice, provided the closing bid quotation for the Common
Stock on NASDAQ is at least $8.00 for the 20 consecutive trading days ending
three days prior to the notice of redemption. See "Selling Securityholders" and
"Description of Securities." The Common Stock, A Warrants and shares of Common
Stock issuable upon the exercise of A Warrants are sometimes collectively
referred to herein as the "Securities".
The Company will not receive any of the proceeds from the sales of shares
of Common Stock or A Warrants by the holders of such Securities listed herein
under the caption "Selling Securityholders" (the "Selling Securityholders"). The
Securities may be offered from time to time by the Selling Securityholders,
through ordinary brokerage transactions in the over-the-counter market, in
negotiated transactions or otherwise, at market prices prevailing at the time of
sale or negotiated prices. See "Selling Securityholders."
The Selling Securityholders maybe deemed to be "underwriters" as defined
in the Securities Act of 1933, as amended (the "Securities Act"). If any
broker-dealers are used by the Selling Securityholders, any commissions paid to
broker-dealers and, if broker-dealers purchase any Selling Securityholders'
Securities as principals, any profits received by such broker-dealers on the
resale of the Selling Securityholders' Securities may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Securityholders, may be deemed to be
underwriting commissions. All costs, expenses and fees in connection with the
registration of the Selling Securityholders' offered by Selling Securityholders
will be borne by the Company. Brokerage commission, if any, attributable to the
sale of the Selling Securityholders' Securities will be borne by the Selling
Securityholders.
<PAGE>
No underwriting arrangements have been entered into by the Selling
Securityholders. The distribution of the A Warrants and Common Stock by the
Selling Securityholders, may be effected in one or more transactions that may
take place on the over-the-counter market, including ordinary broker's
transactions, privately-negotiated transactions or through sales to one or more
dealers for resale of such shares as principals, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or
negotiated prices. Usual and customary or specifically negotiated brokerage fees
or commissions may be paid by the Selling Securityholders, in connection with
sale of the Securities.
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THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY INVESTORS WHO
CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" APPEARING
ON PAGES 7 - 24.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is .
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, NW, Room 1204, Washington, DC 20549; at 500 West Madison Street, Suite
1400, Chicago, IL 60661-2511; and at 75 Park Place, Suite 1400, New York, NY
10007. Copies of such material also may be obtained at prescribed rates from the
Public Reference Section of the Commission, 450 Fifth Street, NW, Judiciary
Plaza, Washington, DC 20549. In addition, material filed by the Company can be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, NW, Washington, DC 20002. The Registration Statement,
including all exhibits and schedules, and such reports and other information may
also be accessed electronically by means of the Commission's web site on the
World Wide Web at http://www.sec.gov.
REPORTS TO SECURITYHOLDERS
The Company furnishes its stockholders with annual reports containing
financial statements audited by independent certified public accountants.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in this Registration
Statement and made a part hereof:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996;
(b) The Company's Amended Annual Report on Form 10-KSB/A-1 for the
fiscal year ended December 31, 1996;
(c) The Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1997; and
(d) All other documents filed by the Company after the date of this
Registration Statement under Section 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, prior to the filing of a post-effective
amendment to the Registration Statement which indicates that all securities
offered have been sold or which deregisters all securities then remaining in the
Registration Statement and to be part thereof from the date of filing of such
documents.
Any person receiving a copy of this Prospectus may obtain without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents (unless such
exhibits are specifically incorporated by reference into the documents which
this Prospectus incorporates). Requests should be directed to Brenda Taylor,
Corporate Secretary, Electronics Communications Corp., 10 Plog Road, Fairfield,
New Jersey 07004, telephone number (201) 808-8862.
Any statement made in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that such statement is replaced or modified by a statement contained in a
subsequently dated document incorporated by reference or contained in this
Prospectus. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
2
<PAGE>
Until , 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities whether or not participating
in this distribution, may be required to deliver a Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus with respect to
their solicitation of offers to purchase the Securities offered hereby.
PROSPECTUS SUMMARY
The following information is qualified in its entirety by more detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus.
The Company
The Company intends to continue to mature as a full-service, regional,
telecommunications company, which management believes is positioned to take
advantage of the rapidly emerging wireless telecommunications marketplace
through its advanced technologies and services. The Company operates its own
United States Federal Communications Commission ("FCC") licensed,
state-of-the-art, Glenayre 900 Mhz Flex(TM) Paging Network (the "Paging
Network"), covering metropolitan New York, New Jersey, lower Connecticut and
downtown Philadelphia, a trunked radio paging network, is a reseller of airtime
on third-party paging networks, and acts as an agent in the solicitation of
activation of cellular telephone numbers and service. Significantly, the Company
is also engaged in the development and construction of facilities for a Personal
Communications Services ("PCS") network, as a predicate to becoming an operating
company to provide PCS services pursuant to licenses ("PCS Licenses") recently
acquired at FCC auction, covering nearly 1.5 million POPs (points of
population). The Company's PCS licenses cover the following markets:
Bangor/Lewiston_Auburn/Waterville_Augusta, Maine; Burlington/Rutland Bennington,
Vermont; and Elmira Corning Hornell, New York (the "PCS License Area"). The new
PCS technology utilizes higher radio frequencies auctioned by the FCC, and
substantially reduces static and improves reliability as compared to existing
non-digital cellular telephones. The advanced PCS phones will also offer many
features unavailable on current cellular telephones, such as paging, fax, E-mail
and Caller ID capabilities.
The Company's principal source of revenue during the 1996 fiscal year was
derived from its activities as an agent for Bell Atlantic NYNEX Mobile, Inc.
("BANMC"), with respect to the sale of cellular telephone service and related
equipment. On or about the middle of May 1996, the Company terminated its
relationship with BANMC, including its dealer/agency relationship with NYNEX
Mobil Communications ("NYNEX") and Bell Atlantic Mobil Communication ("Bell
Atlantic"). The Company's principal current source of revenue is derived from
its activities as a sub-agent for AT&T agents and dealers, with respect to the
solicitation and sale of cellular telephone service and related equipment, its
solicitation for activation for PCS as an agent for OmniPoint, in the New York
Metropolitan Area and from the operation of its proprietary Paging Network.
The Company's emergence as a wireless telecommunications carrier will
represent a material change in the focus and direction of the Company's
operations, which previously centered upon the Company's role as a distributor
of communications, consumer, and business-oriented electronics products. Those
operations, which were principally carried on by the Company's wholly owned
subsidiary, Free Trade Distributors, Inc., have been substantially eliminated or
reduced, in light of a longer term view regarding profitability and diminishing
margins; and so that the Company could focus on activities within the
telecommunications arena.
The Company's offices are located at 10 Plog Road, Fairfield, NJ 07004.
Its telephone number is (201) 808-8862.
3
<PAGE>
THE OFFERING
Common Stock being offered by Selling
Securityholders........................... 384,145
A Warrants being offered by Selling
Securityholders........................... 1,360,000
A Warrants Outstanding...................... 9,965,501
Common Stock Outstanding assuming no
exercise of outstanding A Warrants........ 14,659,174
Series B Preferred Non-Voting Convertible
Stock..................................... 4,000,000
NASDAQ Symbols for:
Common Stock.............................. "ELCC"
A Warrants................................ "ELCCW"
Boston Stock Exchange Symbols for:
Common Stock.............................. "ELC"
A Warrants................................ "ELCW"
Description of A Warrants................... Each A Warrant is exercisable
during the period from May 12,
1995 to May 12, 1999. Each A
Warrant entitles the holder to
purchase one share of Common Stock
at a price of $2.25. The A
Warrants are redeemable by the
Company at $.001 per A Warrant
under certain conditions. See
"Description of Securities."
Risk Factors................................ An investment in the Securities
offered hereby involves a high
degree of risk. Prospective
investors should review carefully
and consider the factors described
in the following sections under
Risk Factors: History of Losses;
Possible Delisting of Securities
from NASDAQ or Boston Stock
Exchange; Future Operating Losses
and Negative Cash Flow from
Operations; Substantial Leverage;
Ability to Service Debt to FCC;
Need for Additional Financing;
Termination of Contractual
Relationship with BANMC; PCS
System Implementation and
Operation Risks; Lack of In-House
Engineering; Uncertainty of CDMA
Commercial Operations; Ability to
Offer Roaming Services; Handset
Availability; License Transfer
Restrictions: Competition; Limited
PCS Operating History in the
United States; Significant Change
in the Wireless Industry;
Government Regulation; Financial
Affiliation Rules; Management of
Growth; Rapid Technological
Change; Radio Frequency Emission
Concerns; Medical Device
Interference; Relocation of
Incumbent Fixed Microwave
Licensees; Termination of
Contractual Relationship with
BANMC; Dependence Upon External
Suppliers; Technological
Obsolescence; Lack of Proprietary
Technology; Maintenance of
Customer Base; Dependence on Key
Personnel; Voting Control by
Officers, Directors and Related
Entities; Transactions with
Affiliates; Two Independent
Directors; Absence of Cash
Dividends; Rights of Common
Stockholders May be Materially
Limited or
4
<PAGE>
Qualified by Rights of
Preferred Stockholders; Possible
Adverse Market Effect of Exercise
of Warrants and Limitation on
Future Financing; Possible
Increase in Shares Eligible for
Future Sale; Risk of Redemption by
the Company of the A Warrants;
Investors May Be Unable to
Exercise A Warrants; Corporate
Takeover Provisions; Certain
Charter and Bylaws Provisions;
Legal Proceedings.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth certain summary consolidated financial data
of the Company and its subsidiaries at the dates and for the periods indicated.
These summary consolidated financial data do not purport to be complete and
should be read in conjunction with the audited consolidated financial statements
and notes thereto set forth in the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996, and the Company's Quarterly Report on
Form 10-QSB for the quarter ended March 31, 1997, as amended which financial
statements are incorporated herein by reference, and in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained therein.
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended
----------------------- -------------------
March 31
--------
1996 1995 1994 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenue.............................................. $7,357,437 $8,736,515 $9,423,964 $ 865,288 $2,263,526
Gross Profit......................................... 1,164,668 1,172,421 1,241,277 147,182 546,275
Operating Income (Loss)
Before Other Expenses and Income Taxes............. (5,823,725) (1,967,823) 125,460 (1,686,450) (10,559)
Income (Loss) Before Income Taxes.................. (6,031,090) (2,628,959) 34,093 (1,744,439) (108,130)
Net Income (Loss).................................... (6,031,090) (2,628,959) 29,819 (1,744,439) (108,130)
Earnings (Loss) Per Share, Fully Diluted............. (1.13) (1.11) .02 (.14) (.04)
Weighted Average Common Shares and Equivalent Shares
Outstanding, Fully Diluted......................... 5,337,876 2,368,809 1,506,227 12,189,174 3,082,318
<CAPTION>
December 31, December 31, December 31, March 31,
1996 1995 1994 1997
Actual Actual Actual Unaudited
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Current Assets....................................... $1,170,660 $5,428,434 $2,309,894 $ 2,135,656
Total Assets......................................... 34,100,651 6,246,658 3,231,332 33,779,209
Working Capital (Deficit)............................ (3,956,977) 1,724,852 (615,872) (4,467,264)
Total Liabilities.................................... 29,724,227 3,782,383 2,925,766 31,138,156
Minority Interest.................................... 415,474 424,542
Stockholders' Equity................................. 3,960,950 2,464,275 305,566 2,216,511
</TABLE>
6
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Statements of Operations for the year
ended December 31, 1996 gives effect to the Company's acquisition of 51% of
Threshold Communications, Inc. ("TCI"), and the acquisition by TCI of General
Communications and Electronics, Inc. ("GCE") and General Towers of America, Inc.
("GTA") as if this transaction occurred in the beginning of the periods
specified. The Unaudited Pro Forma Consolidated Statements of Operations are for
the periods ending December 31, 1996. All of the entities presented have either
historically or pro forma used calendar year ends for reporting purposes.
Year Ended
December 31, 1996
-----------------
Statements of Operations Data:
Sales................................. $8,492,801
Gross Profit.......................... 1,678,954
Operating Income (Loss)
Before Other Expenses and Income
Taxes............................... (4,835,844)
Income (Loss) Before Income Taxes... (5,815,046)
Net Income............................ (5,815,046)
Earnings (Loss) Per Share, Fully
Diluted............................. (1.09)
Weighted Average Common Shares and
Equivalent Shares Outstanding, Fully
Diluted............................. 5,337,876
RISK FACTORS
The Securities being offered by this Prospectus involve a high degree of
risk. They should be purchased only by a person who can afford to lose his or
her entire investment. Therefore, each prospective investor should, prior to
purchase, consider carefully the following risk factors, together with other
information in this Prospectus.
History of Losses
For the three months ended March 31, 1997, the Company had a net loss of
$1,744,439 from sales of $865,288, as compared to a net loss of $108,130 from
sales of $2,263,526 for the three months ended March 31, 1996. The Company had a
net loss of $6,031,090 from sales of $7,357,437 for the year ended December 31,
1996. During the years ended December 31, 1995 and 1994, the Company's sales
were $8,736,515 and $9,423,964 and the Company incurred net income (losses) of
$(2,628,959) and $29,819 respectively. The Company intends to continue to invest
in domestic paging systems, wireless telephone systems and other
telecommunications products, which may not be profitable for extended periods of
time, if at all, and which are capital intensive. The Company also intends to
continue its cellular agency business. There can be no assurance that revenues
from the operation of the Company's Paging Network, plus activation and residual
income from its cellular agency business will be sufficient, alone or together
with additional capital raising or financing efforts and mechanisms, which may
not be feasible without a short or long-term prospect of profit, and which may
not be accomplished for other reasons beyond the Company's control, to meet the
Company's financial needs and there can be no assurance of profitability.
7
<PAGE>
Possible Delisting of Securities from NASDAQ or Boston Stock Exchange
The NASD imposes stringent criteria for continued listing of securities on
the NASDAQ Small-Cap Market. To maintain the listing of its securities on the
NASDAQ Small-Cap Market, the Company must have, among other things, total assets
of $2,000,000 (it currently has more than $3 million), capital and surplus of
$1,000,000 (it currently has $4 million) and, in certain circumstances, a
minimum bid price for its common stock of $1.00 per share (recent bid prices
have ranged at or about $0.56). In the event the Common Stock or A Warrants are
delisted from the NASDAQ Small-Cap Market as a result of losses or otherwise,
trading, if any, would thereafter be conducted in the over-the-counter market in
the so-called "pink sheets" or the NASD's Electronic Bulletin Board. The Boston
Stock Exchange ("BSE") imposes similar continuing listing requirements. As a
consequence of delisting, an investor could find it more difficult to dispose
of, or to obtain accurate quotations as to the price of, the Company's
securities. The Company could also suffer a loss of news coverage, and
information relating to the Company may become more difficult to obtain, which
could in turn result in a decline in the market for the Company's securities and
make it more difficult for the Company to obtain additional financing.
On November 6, 1996, the Board of Directors of NASDAQ approved certain
changes in NASDAQ rules to strengthen both the quantitative and qualitative
standards for issuers on NASDAQ. These proposed changes are in the "public
comment" stage and may be adopted in the near term, upon filing with the
Commission. The following is a summary of certain rule changes which could
affect the Company; (i) elimination of the alternative to a $1.00 bid
requirement; (ii) application of the National Market corporate governance
standards to Small-Cap issuers, which would require: (a) a minimum of two
independent directors; (b) an Audit Committee, a majority of which are
independent directors; (c) an annual shareholder meeting: and (d) shareholder
approval for certain corporate actions. The Company believes it currently
satisfies all of these additional requirements; (iii) certain accounting changes
relating to computation of net tangible assets, as a result of accounting for
good will associated with various merger and acquisition activities, or as in
the case of telecommunications companies, such as the Company, significant
depreciation changes. (It is believed that these proposed changes will benefit
the Company); and (iv) peer review of auditors for NASDAQ companies.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure, relating to the market for penny stocks, in connection
with trades in any stock defined as a penny stock. The Commission recently
adopted regulations that generally define a penny stock to be an equity security
that has a market price of less than $5.00 per share, subject to certain
exceptions. Such exceptions include any equity security listed on the NASDAQ
Small-Cap Market and any equity security listed by an issuer that has: (i) net
tangible assets of at least $2,000,000, if such issue has been in continuous
operation for three years, (ii) net tangible assets of at least $5,000,000, if
such issuer has been in continuous operation for less than three years, or (iii)
average annual revenue of at least $6,000,000, if such an issuer has been in
operation for less than three years. Unless an exception is available, the
regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks
associated therewith.
In addition, if the Company's securities are not quoted on the NASDAQ
Small-Cap Market, or the Company does not have $2,000,000 in net tangible
assets, trading in the Company's securities would be covered by Rule 15g-9
promulgated under the Securities Exchange Act of 1934 for non-NASDAQ and
non-exchange listed securities. Under such rule, broker/dealers who recommend
such securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a transaction prior
to sale. Securities also are exempt from this rule if the market price is at
least $5.00 per share.
8
<PAGE>
Although the Company's Common Stock and A Warrants will, as of the date of
this memorandum, be outside the definitional scope of a penny stock, as they
will be listed on the NASDAQ Small-Cap Market, in the event the Common Stock and
A Warrants were subsequently to become characterized as a penny stock, the
market liquidity for the Company's Securities could be severely adversely
affected. In such event, the regulations on penny stocks could limit the ability
of broker/dealers to sell the Company's securities and thus the ability of
holders of the company's securities to sell their securities in the secondary
market.
Future Operating Losses and Negative Cash Flow from Operations
Due to its recent change in focus and direction from an electronics
distribution company to a multi-faceted wireless telecommunications company, and
its anticipated required large additional capital and development needs, the
Company must be deemed to be as if it were at an early stage of development,
with substantial uncertainty about its future. As of the date of this prospectus
, the Company has had a very limited commercial operation of its Paging Network,
and no commercial PCS operations. Consequently, the Company may be deemed to
have limited relevant historical financial information upon which a prospective
investor could perform an evaluation, other than with respect to its mobile
cellular telephone operations. The Company will continue to incur significant
expenses in advance of generating revenues, and is expected to realize
significant operating losses and significant negative cash flow over at least
the next four quarters, or more. The Company has suffered recurring losses from
operations during its transition period and has a net capital deficiency that
raises substantial doubt about its ability to continue as a going concern. The
Company's cash flow and results from operations could be more adversely affected
due to the recent termination of its relationship with BANMC, including its
dealer/agency relationships with each of NYNEX and Bell Atlantic. See
"Termination of Contractual Relationship With BANMC."
Although the Company is well settled and satisfied with the adequacy of
its premises, and has a management team and equipment in place, the Company may
nevertheless be deemed to be subject to many risks typically associated with a
start-up entity. These risks will include the Company's ability to implement its
strategic plan for two-way radio, paging and PCS operations, including
continuing to attract and retain qualified individuals and the ability to raise
appropriate financing as necessary. As such, no assurance can be given as to the
timing and extent of revenue receipts and expense disbursements or the Company's
ability to successfully complete all the tasks associated with developing and
maintaining a successful enterprise. In addition, there can be no assurance that
the Company will be able to successfully attract sufficiently skilled labor to
build out, operate and manage its new PCS operations.
The Company believes that its future operating results over both the short
and long term will be subject to annual and quarterly fluctuations due to
several factors, some of which are outside the control of the Company. These
factors include the very substantial cost of building its PCS networks
(including any unanticipated costs associated therewith), fluctuating market
demand for the Company's services, establishment of a market for PCS, pricing
strategies for competitive services, delays in the introductions of the
Company's services, new offerings of competitive services, changes in the
regulatory environment, the cost and availability of PCS infrastructure and
subscriber equipment and general economic conditions.
The Company has incurred cumulative net losses through March 31, 1997 of
approximately $1,744,439 . These losses resulted primarily from expenditures
associated with the development and marketing of the Company's paging and
two-way radio systems, the acquisition of TCI, circumstances relating to its
successful bid on the PCS Licenses, the transition away from its agency
relationship with BANMC, and the Company's move to more suitable premises. The
Company expects to continue to incur significant operating losses and to
generate negative cash flow from operating activities while it develops and
constructs its PCS networks and builds its customer base for both paging and PCS
operations. The Company cannot accurately determine the extent to which such
operating losses will be offset by revenues generated from its Paging Network
and cellular solicitations and activations, and other related sales and
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services. Profitable operation of its PCS networks may be several years away,
and there can be no assurance that the Company will achieve or sustain
profitability or positive cash flow from operating activities in the future. If
the Company cannot achieve operating profitability or positive cash flow from
operating activities in a timely manner, it may not be able to meet its debt
service or working capital requirements.
Substantial Leverage; Ability to Service Debt to FCC
As of the date of this Prospectus, the Company is highly leveraged. The
indebtedness to the FCC alone, in connection with the award of PCS Licenses, is
approximately $23,806,980, with annual interest payments of approximately $1.7
million and the six separate Installment Payment Plan Notes ("Plan Notes"),
payable in quarterly installments for the first six (6) years and then principal
and interest in years seven through ten. See "PCS Licenses." The Company may
incur substantial financial penalties, license revocation or other enforcement
measures at the FCC's discretion in the event that the Company becomes unable to
make timely payments on the Plan Notes. In the event that the Company
anticipates defaulting on any required payment, it may request a three to six
month grace period before the FCC cancels its license. In the event of default
by the Company, the FCC could reclaim the licenses, reauction them, and subject
the Company to a penalty comprised of the difference between the price at which
it acquired its license and the amount of the winning bid at the reauction, plus
an additional penalty of three percent of the subsequent winning bid. There can
be no assurance that the Company will submit all of the required payments
pursuant to the FCC's installment payment plan in a timely manner.
As of March 31, 1997 the Company's total indebtedness to the FCC was
$23,806,980, or approximately 70% of its total capitalization, and its
stockholders' equity was $2,216,511. On or about the end of March 1997, the
Company made a payment of approximately $390,000 to the FCC for a partial
payment of the December 31, 1996 interest payment. On March 31, 1997 the
Wireless Telecommunications Bureau released an Order which suspended the March
31, 1997 deadline for all interest installment payments under the Plan Notes
until further notice, including interest installments otherwise due from the
Company. Interest will continue to accrue on all unpaid payments until action is
taken by the Federal Communications Commission. The Company is presently holding
the balance of the December 31, 1996 interest payment until the FCC lifts its
suspension. As the FCC has suspended payments due under the Plan Notes, the
March 31, 1997 payment has not become due, and the Company is not in default in
any payment under the Plan Notes. There can be no assurance that the Company
will have this remaining balance when the FCC lifts its suspension, nor any time
period as to when the FCC will lift its suspension or what terms it may then
impose upon the Company under the Plan Notes. In addition, the Company intends
to enter into secured financing agreements with equipment manufacturers and
other vendors during the next 12 to 18 months in connection with the build-out
of its PCS networks. The Company's total indebtedness and debt service
requirements will be substantially increased as a result of such additional
financing, and the Company will continue to be subject to significant financial
restrictions and limitations.
The Company's leverage could have important consequences on the following:
(i) the Company's vulnerability to general economic and industry conditions;
(ii) the Company's ability to obtain financing to fund future anticipated and
unknown capital requirements, capital expenditures or other general corporate
purposes; (iii) the application of a substantial portion of the Company's cash
flow from operations to the payment for principal of and interest on
indebtedness; (iv) the possibility that the Company will not have sufficient
funds to pay interest on the indebtedness or to repay the indebtedness at
maturity; and (v) the ability to effectively compete with better and larger
capitalized companies.
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Need for Additional Financing
The development, construction and initial start-up phase associated with
construction of the Company's PCS networks will require substantial capital
investment. In June 1997 the Company has undertaken to raise up to a maximum of
$2,500,000 in a sale of the Company's debentures. See "Recent Significant
Developments". Assuming the Company completes the maximum offering, the net
proceeds from the offering, together with anticipated revenue from operations
over the next four quarters, will not be sufficient to fund the initial network
build-out of the Company's PCS markets, and service its debt through the end of
1997. In fact, the maximum offering does not purport to finance any of the next
four installments of interest under the FCC Notes, or certain advertising and
capital needs for 1997 but rather is intended to provide for cash needs for
operation through the first quarter of 1998. Unless cash flows are better than
anticipated, or the FCC's interest moratorium is extended until a time when the
Company's cash flows are expected to substantially in prove (i.e. Mid 1998),
there will not be sufficient monies to pay the next two quarterly installments
on the FCC Notes, and there will be markedly reduced amounts for working
capital. In addition, the estimated cost of a full build-out of an operating PCS
system throughout the PCS License Area will be approximately sixty million
dollars with approximately twenty million dollars required in the first three
years, and the balance required over approximately the seven succeeding years.
It is anticipated that the Company will require either a significant and
substantial joint venture partner, substantial vendor financing or some other
means of financing to construct the infrastructure of its PCS system.
By virtue of its strategic arrangement with NextWave (See "Recent
Significant Developments"), it is anticipated that NextWave may provide sources
of capital or bank or other institutional financing to assist the Company with
respect to these capital needs, or will otherwise assist PCN in vendor financed
or assisted construction and supply, which sources maybe more favorably disposed
to assisting the Company as Next Wave's strategic partner, but who are no likely
to extend such assistance unless the Company substantially meets relevant
financial criteria. Confirmation of potentially profitable arrangements with
Next Wave may be a substitute in part for existing profitability. To date, the
Company has not obtained any written agreement from Next Wave in this
connection; and there is no assurance that Next Wave will develop alternative
relationships. Moreover, there can be no assurance that the Company's
relationship with Next Wave will be successful, or that Next Wave will continue
to survive as a viable entity, or that other factors and circumstances may not
evolve which would adversely impact on the availability of such financing. The
Company, to the extent it is not able to finance its PCS system build-out from
future cash flow or from its own banking or other financing arrangements, may be
required to engage in additional sales of its Common Stock or other securities,
representing further potential dilution, or to enter into an arrangement with a
strategic partner for such construction in consideration of an allocation of
profits, if any, or it may be required to attempt, to sell some or all of its
PCS Licenses. The Company has no present intention to sell any of its PCS
Licenses.
Pursuant to its strategic relationship with NextWave, the Company is
hopeful that NextWave may assist the Company with respect to various
introductions to institutional lending sources or equipment leasing or other
vendor financing arrangements for the build-out of its PCS system. However,
NextWave is a development stage enterprise, has incurred net losses since
inception, is highly leveraged, and anticipates requiring approximately $1.3
billion to build-out its PCS networks.
To date, NextWave's revenues have been limited to minimal TELE-Code
consulting services and consequently, there can be no assurance that NextWave
will succeed or survive as a viable business. There is no assurance that
NextWave will obtain its necessary financing or that it will survive start-up,
or that it will enter into any binding arrangements to assist the Company. Other
sources of additional capital may include additional vendor financing and public
and private equity and debt financing by the Company or its subsidiaries.
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The Company currently has limited sources of income, but is separately
exploring a public or private financing of its PCN subsidiary for these
purposes. There can be no assurance that any of the aforementioned mechanisms
will be available to the Company or its PCN subsidiary, or, if available, that
it can be obtained on terms acceptable to the Company and within any limitations
that may be imposed on the Company. Failure to obtain such financing could
result in the delay or abandonment of some or all of the Company's development
and expansion plans and could have a material adverse effect on the Company's
financial condition and continued viability.
In the event the Company is successful in arranging financing for the
buildout of its PCS system, it intends to operate digital networks, through
which the Company will provide low-cost, advanced wireless telecommunications
services in the PCS License Area, targeting several categories of customers,
including home, business and other commercial customers with respect to both
their local and long distance usage. The Company will seek to expand the
regional footprint of its wireless networks throughout the United States through
a combination of prospective affiliations, alliances, acquisitions, and through
roaming agreements with other PCS carriers. However, there is no guarantee that
the Company will be able to successfully expand or enter into any affiliations,
alliances, acquisitions or agreements with any party.
Termination of Contractual Relationship With BANMC
During 1996, the Company received 100% of its cellular service and
solicitation income from BANMC, approximately $3,400,000 in revenues which
represented 46% of the Company's total revenues for this period. In the first
quarter of 1997 the Company derived $227,732 in revenues from the BANMC Contract
which represented 26% of the Company's total revenues for this period. As of May
1997, the Company terminated its relationship with BANMC, including its
dealer/agency relationships with each of NYNEX and Bell Atlantic; and BANMC
accepted and agreed to such termination in a settlement and separation agreement
(the "Settlement and Separation Agreement"). See "Recent Significant
Developments".
Although the revenues derived from the BANMC relationship were substantial
and material to the Company's business in 1996, the Company believes that it can
replace or exceed such revenues by initially becoming an indirect agent for the
solicitation of cellular activation through AT&T, BANMC's largest competitor,
and by becoming a direct agent for OmniPoint, one of the largest licensees of
PCS services in the New York Metropolitan Area, with respect to activations for
PCS services. The Company does not believe it is advantageous to become a direct
agent for AT&T, because AT&T, unlike BANMC, does not restrict its agents from
offering non-AT&T PCS services. Thus, the Company will initially attempt to
develop indirect access to AT&T cellular telephone numbers, with respect to
which activations it will earn a greater activation fee per number than was
received from BANMC, in a manner where it will not be contractually restricted
from solicitations for PCS activations and services. It is anticipated that
while this activity is being ramped up, the Company will explore a more direct
relationship with AT&T. As result, the Company may continue to pursue cellular
activations and the appurtenant income, while beginning its entry into the PCS
arena. There an be no assurance that the Company will be successful in achieving
both of these goals and activities at the same time.
In pursuance of the foregoing, at the present time, the Company has
entered into sub-agency agreements to solicit cellular activations for AT&T, and
an agency agreement to solicit cellular activations and sales for OmniPoint. The
Company is hopeful that it will be able to substantially replace or exceed this
prior income source by the first quarter of 1998, but there is no guarantee that
any future affiliations will successfully generate revenues for the Company. If
the Company is unable to secure such arrangements, or to replace such income,
its cash flow from operations may be inadequate to meet the Company's cash
needs.
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PCS System Implementation and Operation Risks; Lack of In-House Engineering
In marked contrast to the build-out of its Paging Network, the Company
does not plan to perform design and systems engineering with respect to the
build-out of its PCS system and network. The Company does not presently have
either the engineering acumen or expertise, nor sufficient available capital to
accomplish this. Accordingly, the Company will rely on consultants such as
NextWave Telecom, Inc. (See "Recent Significant Developments"). There can be no
assurance that the design and systems engineering teams retained by the Company
will be successful in implementing its PCS networks, or that such networks will
perform as well or better than PCS networks designed by infrastructure equipment
vendors. In addition, the Company will need to hire additional engineering
personnel and make extensive use of outside contractors to deploy its PCS
networks. There can be no assurance that the Company will be able to locate and
hire such additional engineering resources. The failure to do so could have a
material adverse effect on the Company's timely deployment of its PCS networks
and its financial condition and results of operations.
The successful construction of the Company's PCS networks will depend, to
a significant degree, on the Company's ability to lease or acquire sites for the
location of its base station transmitter equipment. The site selection process
will require the negotiation of lease or acquisition agreements for
approximately 240 sites for the Company's PCS networks, and may require the
Company to obtain zoning variances or other governmental approvals or permits in
rural areas, which may be resistant to technological change. The Company intends
to retain consultants to provide site identification and acquisition services in
each of its markets. The Company expects that the site acquisition process will
continue throughout the construction of the Company's PCS networks. Each stage
of the process involves various risks and contingencies, many of which are not
within the control of the Company and any of which could adversely affect the
construction of the Company's PCS networks.
There can be no assurance that the Company will be able to construct its
PCS networks in any particular market within its PCS Licenses, in accordance
with any construction plan and schedule for implementation of PCS that is
developed. If the Company is not able to implement its construction plan, the
Company may not be able to provide services comparable to those provided by
cellular and other PCS operators in its PCS markets, and, as a result, the
Company's growth may be limited. In addition, each of the Company's licenses are
subject to an FCC requirement that the Company construct network facilities that
offer coverage to at least one-third of the population in each such PCS market
within five years of the grant of the applicable license, and to at least
two-thirds of the population within ten years of the grant. Failure to comply
with these requirements could result in the revocation or forfeiture of the
Company's licenses or the imposition of fines on the Company by the FCC. The
construction of the Company's PCS networks is subject to successful completion
of the design of the networks, site and facility acquisitions, the purchase and
installation of the networks' equipment, testing of the networks and
satisfactory relocation or other accommodation of microwave users currently
using the spectrum. Winners of the A-Block and B-Block PCS licenses, which were
granted their licenses in June 1995, have a significant head-start in
constructing their networks. Most cellular licensees have at least a five to
ten-year time advantage over PCS licensees and are currently upgrading their
networks to digital technology. Therefore, delays in implementation could have a
material adverse effect on the Company.
In addition, the implementation of any construction plan is subject to the
availability of the Code Division Multiple Access ("CDMA") infrastructure
equipment that the Company plans to use. There is considerable demand for PCS
infrastructure equipment, manufacturers of such equipment have substantial
backlogs or orders and lead times for delivery of such equipment are long. The
Company intends to enter into additional agreements for the supply of
infrastructure and/or subscriber equipment. However, there can be no assurance
that the Company will be able to purchase equipment on terms favorable to the
Company, or at delivery dates required by the Company to construct its PCS
networks in a timely manner. In addition, there are certain risks in the
Company's strategy of building-out its networks in phases. There can be no
assurance that the Company will be able to successfully deploy its initial
networks to achieve maximum
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population coverage in its targeted markets within the expected time frame and
an acceptable construction budget.
The Company's success in the implementation and operation of its system is
subject to other factors beyond the Company's control. These factors include,
without limitation, changes in general and local economic conditions,
availability of equipment necessary to operate the PCS system, changes in
communications service rates charged by others, changes in the supply and demand
for PCS, and the commercial viability of PCS systems as a result of competition
with wireline and wireless operators in the same geographic area, demographic
changes that might affect negatively the potential market for PCS, changes in
the federal and state regulatory scene affecting the operation of PCS systems
(including the enactment of new statutes and the promulgation of changes in the
interpretation or enforcement of existing or new rules and regulations), changes
in technology that have the potential of rendering obsolete the Company's
technology and equipment, and the myriad of external forces and conditions with
respect to which the Company may have no control, such as labor unrest, acts of
nature, and other circumstances related to construction. In addition, such
demand, which is anticipated to increase the extent of the potential demand for
PCS, cannot be estimated with any degree of certainty. There can be no assurance
that one or more of these factors will not have significant adverse effects on
the Company's financial condition and results of operations.
Uncertainty of CDMA Commercial Operations; Ability to Offer Roaming Services;
Handset Availability
CDMA technology has only recently been implemented on a wide commercial
scale in the United States and has been used internationally on a limited basis.
The first commercial use of CDMA began in October 1995 in Hong Kong. There can
be no assurance that CDMA technology will be successful in a broader market with
a substantially larger subscriber base. In addition, certain networks
implementing CDMA have experienced problems in their early trials including poor
hand-offs (the transfer of a subscriber from one cell to another as the
subscriber travels through geographic areas) and problems with analog
interference with dual-mode CDMA handsets for 800 MHz cellular operations. While
the Company believes that some of the problems are unique to 800 MHz cellular
operations and solutions for other problems have been identified and are in the
process of being resolved, there can be no assurance that the Company will not
encounter the same or other technological problems, or that the proposed
resolutions of existing problems will be successful.
As of the date of this Prospectus the Company anticipates selecting CDMA
technology, but there can be no guarantee that the Company will not select a
competing technology other than CDMA technology. A risk associated with the
Company's possible selection of CDMA technology is the ability of the Company to
offer PCS roaming service to its customers' subscribers when they are in other
markets. In order for the Company's subscribers to roam in other wireless
markets (and vice versa), at least one PCS licensee in the other market must
utilize CDMA technology and roaming arrangements must be agreed upon between the
Company and such other PCS licensee, or the subscribers must use a dual-band
phone that would permit the subscriber to use the cellular system existing in
the other market. The Company has been advised that such dual-band phones are
not expected to be available in large quantities until late 1997 at the
earliest. Based on public announcements by A-Block and B-Block licensees and
winning bidders in the C-Block auction, the Company believes that CDMA will be
widely deployed in the U.S. Nevertheless, such PCS licensees are under no
obligation to use any particular access technology. There can be no assurance
that PCS licensees planning to use CDMA technology will not elect to use time
division multiple access ("TDMA"), global system for mobile communications
("GSM") or some other technology of the future. Accordingly, although the
Company has made a preliminary determination to utilize CDMA technology, the
Company will continue to assess the market and may alter its technology plans.
There can be no assurance that one of the other three technologies will not also
pose problems.
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Currently there are very few suppliers of CDMA handsets. Additional
suppliers are scheduled to deliver larger quantities of CDMA handsets commencing
in the fourth quarter of 1997. There can be no assurance, however, that those
suppliers will commence production or, if they do commence production, that they
will be able to deliver quality handsets in sufficient quantities and at
desirable prices. Handsets used for PCS systems cannot currently be used with
analog cellular systems and vice versa. While the Company believes that
dual-band handsets will allow a user to access both PCS systems and analog
cellular networks and will be commercially available in 1997, there can be no
assurance that consumers can obtain such handsets at competitive prices. In
addition, dual-band full digital handsets are expected to be larger and more
expensive than single-mode handsets. The lack of interoperability or the
comparatively higher cost of such handsets may impede the Company's ability to
attract potential new wireless communications resellers.
License Transfer Restrictions
The FCC has also promulgated regulations restricting transfer of C-Block
licenses. Most notably, transfer of C-Block licenses is not permitted within the
first five years of grant of the license unless the transfer is to another
entity eligible to be a C-Block licensee, such as another small business. After
five years, licenses are freely transferable provided FCC approval prior to the
transfer has been obtained. All transfers during the first ten-year license term
are subject to unjust enrichment penalties, including reimbursement to the
government of bidding credits and/or outstanding principal and interest
payments. At the present time, the Company has no intention to transfer the PCS
Licenses.
In addition, the FCC is considering whether to allow PCS licensees to
"partition" their licensed geographic areas and to permit "spectrum
disaggregation" in their frequency blocks. Partitioning and disaggregation would
allow licensees to spin off discrete portions of their licensed areas and/or
frequencies to third parties. While the Company may benefit from the ability to
transfer unwanted portions of its licenses, other PCS licensees and future
wireless communications services ("WCS") licensees with whom the Company will
compete will also have that ability, thereby increasing the number of
competitors the Company may face in a given market.
Competition
Competition in the wireless industry is intense. There can be no assurance
that the Company will be able to compete successfully or that new technologies
and products that are more commercially effective than the Company's
technologies and products will not be developed. In addition, many of the
Company's competitors have substantially greater financial, technical,
marketing, sales and distribution resources than those of the Company. Some
competitors are expected to market other services, such as cable television
access, landline telephone service and Internet access with their wireless
telecommunications service offerings. Several of the Company's competitors are
operating, or planning to operate, through joint ventures and affiliation
arrangements with wireless telecommunications networks that cover most of the
United States.
The FCC issued PCS licenses to the A-Block and B-Block license winners in
June 1995. Accordingly, the holders of the A-Block and B-Block PCS licenses in
the Company's basic trading area ("BTA") have a significant time-to-market
advantage over the Company. There can be no assurance that such time-to-market
advantage will not have a material adverse effect on the Company successfully
implementing its marketing strategy. In addition, the increase in the number of
PCS competitors in each of the Company's markets is expected to lead to
substantial increases in the capacity of wireless minutes of use ("MOU")
available in such markets. Many cellular providers currently sell MOUs on a
wholesale basis to other carriers as well as on a retail basis to consumers. The
Company anticipates that such cellular providers, as well as new PCS providers,
will compete with the Company in the future, and offer to wholesale MOUs for
digital wireless services.
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The Company expects to compete with other communications technologies that
now exist, such as paging (including two-way digital paging), enhanced
specialized mobile radio ("ESMR") and domestic and global mobile satellite
service ("MSS"). In the future, cellular service and PCS will also compete more
directly with traditional landline telephone service providers, energy
utilities, local multipoint-distribution service and cable operators who expand
into the offering of traditional communications services over their cable
systems and utilities seeking to offer communications services by leveraging
their existing infrastructure. In addition, the Company may face competition
from technologies that may be introduced in the future, such as WCS.
Limited PCS Operating History in the United States; Significant Change in the
Wireless Industry
PCS systems have limited operating history in the United States and there
can be no assurance that operation of these systems will become profitable. In
addition, the extent of potential demand for PCS in the Company's markets cannot
be estimated with any degree of certainty. The wireless telecommunications
industry is experiencing significant technological changes, as evidenced by the
increasing pace of digital upgrades in existing analog wireless services,
evolving industry standards, ongoing improvements in the capacity and quality of
digital technology, shorter development cycles for new products and
enhancements, and changes in end-user requirements and preferences. There is
also uncertainty as to the extent of customer demand as well as the extent to
which airtime and monthly access rates may continue to decline. As a result, the
future prospects of the industry and the Company and the success of PCS and
other competitive services remain uncertain.
Government Regulation
The licensing, construction, operation, sale and interconnection
arrangements of wireless telecommunications systems are regulated to varying
degrees by state regulatory agencies, the FCC, Congress and the courts. There
can be no assurance that the FCC, Congress, the courts or state agencies having
jurisdiction over the Company's business will not adopt or change regulations or
take other actions that would adversely affect the Company's financial condition
or results of operations. Many of the FCC's rules for the C-Block auction and
the PCS licenses acquired thereunder have not been tested by the courts and are
subject to being changed by Congressional action. In addition, FCC licenses to
provide PCS services are subject to renewal and revocation. The Company's PCS
Licenses have ten year renewable terms. There can be no assurance that the
Company's PCS Licenses will be renewed.
The Telecommunications Act of 1996 mandates significant changes in
existing regulation of the telecommunications industry to promote competitive
development of new service offerings, to expand public availability of
telecommunications services and to streamline regulation of the industry.
Included in these mandates are requirements that the local exchange carriers
("LECs") must: (i) permit other competitive carriers, which may include PCS
licensees, to interconnect to their networks; (ii) establish reciprocal
compensation agreements with competitive carriers to terminate traffic on each
other's networks; and (iii) offer resale of its local loop facilities. The
implementation of these mandates by the FCC and state authorities potentially
involves numerous changes in established rules and policies which could
adversely affect the Company's financial condition and results of operation.
The FCC has proceedings in process which could open up other frequency
bands for wireless telecommunications and PCS-like services. The FCC also is
considering, in a pending rule making proceeding, the ability of PCS licensees
to offer a variety of fixed services. The FCC is also considering flexible
spectrum use for PCS and for future spectrum allocations, such as WCS. There can
be no assurance that these proceedings would not adversely affect the Company
and the Company's ability to offer a full range of PCS services.
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The Company's broadband PCS operations are expected to use microwave
communications facilities to "backhaul" its telecommunications traffic between
fixed points in its service areas. Under rules that became effective in August
1996, new microwave licenses carry a 10-year license term. The FCC has recently
proposed to auction certain fixed microwave licenses, some of which the Company
may seek to use. If adopted, this proposal would increase the Company's
microwave license acquisition costs.
Under existing law, the FCC can refuse or revoke certain licenses,
including PCS licenses, if it finds that it would not be in the public interest
for more than 25% of the capital stock of the parent of an FCC licensee to be
owned, directly or indirectly, or voted by non-U.S. citizens or their
representatives, by a foreign government or its representatives or by a foreign
corporation. Although the Company's "long-form" license application filed with
the FCC after the completion of the C-Block auction indicates that the Company
is in compliance with the FCC rules, if the foreign ownership of the Company, as
the parent of FCC-licensed subsidiaries, were to exceed 25%, the FCC could
revoke the FCC licenses of its subsidiaries if the FCC found the public interest
would be served thereby, although the Company could seek a declaratory ruling
from the FCC that more that more than 25% foreign ownership was in the public
interest, or take action to reduce the Company's foreign ownership percentage in
order to avoid the loss of its licenses. The restrictions on foreign ownership
could also adversely affect the ability of the Company to attract additional
equity financing from entities that are, or are owned by, non-U.S. entities.
Financial Affiliation Rules
To be financially eligible as an entrepreneur and/or small business
applicant for C-Block PCS licenses, the gross revenues and assets of the
applicant's "financial affiliates," are counted towards (or "attributed to") the
applicant's total gross revenues and total assets. Financial affiliation can
arise from common investments, familial or spousal relationships, contractual
relationships, voting trusts, joint venture agreements, stock ownership, stock
options, convertible debentures and agreements to merge. Affiliates of
non-controlling investors with ownership interests that do not exceed the
applicable FCC "passive" investor ownership thresholds are not attributed to
C-Block applicants for purposes of determining whether such applicants
financially qualify for the applicable C-Block auction preferences. In case the
Company changes its equity structure, no passive investor would be permitted to
own more than 25% of the Company's total equity or voting stock on a fully
diluted basis.
In addition, if an entity makes bona fide loans to a C-Block applicant,
the assets and revenues of the creditor would not be attributed to the applicant
unless the creditor is otherwise deemed an affiliate of the applicant, or the
loan is treated by the FCC as an equity investment and such treatment would
cause the creditor/investor to exceed the applicable ownership interest
thresholds (for purposes of both the financial affiliation and foreign ownership
rules). Although the FCC permits a creditor/investor to use standard terms to
protect its investment in C-Block applicants, such as covenants, rights of first
refusal, and supermajority voting rights on specified issues, the FCC has stated
that it will be guided, but not bound by criteria used by the Internal Revenue
Service to determine whether a debt investment is bona fide debt. The Company
may seek loans by various creditor/investors or vendors, some of which may be
alien (non-U.S.) entities. These can be no assurance that the FCC will not treat
such debt financings as equity, and that such treatment would not cause the
Company to exceed the applicable foreign ownership thresholds.
Management of Growth
As the Company's business expands, the Company will need to implement
enhanced operational and financial systems and will require additional employees
and management, operational and financial resources including more sophisticated
financial and operational personnel. There can be no assurance that the Company
will successfully implement
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and maintain such operational and financial systems, or successfully obtain,
integrate and utilize the required employees and management, operational and
financial resources to manage a developing and expanding business. Failure to
implement such systems, successfully obtain, integrate and utilize the required
employees and management, operational, and financial systems, or successfully
obtain, integrate and utilize the required employees and management, operational
and financial resources to manage a developing and expanding business, failure
to implement such systems successfully and use such resources effectively could
have a material adverse effect on the Company's results of operations and
financial viability.
Rapid Technological Change
The wireless PCS service industry is embryonic and, as such, is
experiencing very rapid technological change. To remain competitive, the
Company's business must develop or gain access to new technologies in order to
increase product performance and functionality and increase cost-effectiveness.
Given the emerging nature of the wireless PCS industry, there can be no
assurance that the Company's products or technology, such as its selection of
CDMA, will not be rendered obsolete by alternative technologies. The development
of new wireless PCS products is highly complex and the Company could experience
delays in developing and introducing its equipment. Alternative technological
and service advancements could materialize in the future which could prove both
viable and competitive to those employed by the Company in offering wireless
services.
Radio Frequency Emission Concerns; Medical Device Interference
Media reports have suggested that radio frequency ("RF") emissions from
wireless handsets may be linked to various health concerns, including cancer,
and may interfere with various electronic medical devices, including hearing
aids and pacemakers. Other health concerns may materialize over a longer period
of time. Concerns over RF emissions may have the effect of discouraging the use
of wireless handsets, which could have an adverse effect on the Company's
business. On August 1, 1996, the FCC adopted rules which update the guidelines
and methods it uses for evaluating RF emissions from radio equipment, including
wireless handsets. While the adopted rules impose more restrictive standards on
RF emissions from lower power devices such as wireless handsets, it is believed
that all wireless handsets to be marketed and to be used by the Company's
subscribers, comply with such new standards. Studies performed by wireless
telephone equipment manufacturers have rebutted these allegations, and a major
industry trade association and certain governmental agencies have stated
publicly that the use of such phones poses no undue health risk. Regardless of
the truth of these allegations, their very existence could have an adverse
effect on the Company, and could have future substantial adverse impacts on the
mobile cellular telephone and PCS markets. Although CDMA handsets operate at
lower power than other wireless handsets, and therefore would comply with the
proposed standards, if adopted, the same concerns about RF emissions could
remain present with CDMA handsets. These concerns could have an adverse effect
on the Company's financial condition and the results of its operations.
In addition, digital wireless telephones have been shown to cause
interference to some electronic devices, such as hearing aids and pacemakers.
Industry trade associations, together with the University of Oklahoma Center for
the Study of Wireless Electromagnetic Compatibility and other interested
parties, currently are studying the extent of, and possible solutions to, this
interference.
Relocation of Incumbent Fixed Microwave Licensees
In an effort to balance the competing interests of 2GHz microwave
incumbents and newly authorized PCS licensees in that spectrum band, the FCC has
adopted: (i) a transition plan to relocate fixed microwave operators that
currently are operating in the 2GHz band, and (ii) a cost sharing plan so that
if the relocation of an incumbent benefits more than one PCS licensee, the
benefiting PCS licensees will help
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defray the costs of the relocation. PCS licensees will only be required to
relocate fixed microwave incumbents if they cannot share the same spectrum. The
transition and cost sharing plans expire on April 4, 2005, at which time
remaining incumbents in the PCS spectrum will be responsible for their costs to
relocate to alternate spectrum locations.
Relocation generally involves a PCS operator compensating an incumbent for
costs associated with system modifications and new equipment required to move to
alternate, readily available spectrum. This transition plan allows most
microwave users to operate in the PCS spectrum for a two-year voluntary
negotiation period and an additional one-year mandatory negotiation period. For
public safety entities dedicating a majority of their system communications for
police, fire, or emergency medical service operations, the voluntary negotiation
period is three years. The FCC currently is considering whether to shorten the
voluntary negotiation period by one year. Parties unable to reach agreements
within these time periods may refer the matter to the FCC for resolution, but
the existing microwave user is permitted to continue its operations until final
FCC resolution of the matter.
The FCC's cost-sharing plan allows PCS licensees that relocate fixed
microwave links outside of their license areas to receive reimbursements from
later-entrant PCS licensees that benefit from the clearing of their spectrum.
Recently, the FCC designated two non-profit associations to serve as
clearinghouses to administer the cost-sharing plan.
The Company has not yet done an in-depth analysis of the microwave
installations in its PCS License Area, but does not believe that its relocation
expenditures will exceed $350,000.
Dependence Upon External Suppliers
The company does not manufacture either its cellular, paging or
PCS-related wireless equipment or accessories. Cellular, paging, and PCS
equipment utilized by the Company is supplied by a variety of vendors such as
Ericsson, Motorola, Nokia, Samsung, Standard Telecom and
others.
There are over 20 companies worldwide that are licensed to manufacture and
supply CDMA network equipment, including Lucent Technologies, Hughes Network
Systems, Hyundai Electronics, LG InfoComm ("LGIC"), Motorola, NEC, Northern
Telecom and Samsung Electronics. In addition, Alps Electric, AT&T, Fujitsu,
Hyundai Electronics, LGIC, Maxom Electronics, Mitsubishi, Motorola, NEC, NOKIA
Mobile Phones, OK/Electric, Matsushita (Panasonic), Nippon Denzo, QUALCOMM,
Samsung Electronics, SONY Electronics and SANYO Electric are licensed to
manufacture and sell CDMA subscriber equipment. The Company intends to deploy
equipment from multiple vendors in its networks. However, shortage of supply for
CDMA handsets and other equipment is anticipated in 1997 and 1998.
The Company will be relying upon these external sources of supply, none of
which are currently bound to supply the Company with its requirements. There can
be no assurance that a suitable supply of equipment will be available at such
times as the Company may require.
Technological Obsolescence
The telecommunications industry in general, and wireless communications in
particular, are undergoing rapid and significant technological change. The
Company will need access to improving technology in order to remain competitive.
There can be no assurance that the Company can obtain access to such new
technology through licensing agreements, joint ventures or otherwise.
Consequently, the Company may invest time and financial resources in new
technology, such as PCS, with no assurance that the Company will be successful
in accessing new technology and, even if the Company is successful in its
development efforts, that the technology will be commercially viable or will be
competitive with the then existing technology.
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Lack of Proprietary Technology
Although the Company is protected by its FCC paging and PCS Licenses in
their respective license areas, those licenses are subject to renewal at the end
of ten (10) years, and in the case of the PCS License, to the Company's ability
to make timely payment of the installment under the FCC Notes, and to meet
developmental time deadlines and requirements. The failure to obtain renewal of
its licenses could substantially erode the value of its respective investment in
paging and PCS network infrastructure. Moreover, the Company does not have, nor
does it presently intend to develop, proprietary communications technology. As
noted above, the Company's participation in the telecommunications industry is
dependent upon it obtaining access to technology for new products and services
through purchase of equipment and services from large suppliers. Large
manufacturers dominate technological development in the wireless communications
industry and changes in their methods of distributing such products could reduce
access to technology and harm its growth prospects.
Maintenance of Customer Base
During the quarter ended March 31, 1997, approximately 26% of the
Company's revenues were derived from activation and residual payments from the
cellular carrier. Prior to the termination of the BANMC Contract (see
"Termination of Contractual Relationship with BANMC") the Company had a customer
base of approximately 40,000 subscribers for which it received monthly residual
payments from the cellular carriers, these subscribers had no long-term
contracts and were permitted to terminate their service at any time. Moreover,
upon the termination of the Company's relationship with BANMC, these residuals
were discontinued, and there are no arrangements for residual payments under the
Company's new arrangements as an AT&T sub-agent. Specifically, as part of its
Settlement and Separation Agreement with BANMC, the Company obtained a release
from any restrictions otherwise prohibiting the solicitation of its prior
customer base. The Company believes this customer base may be exploited for new
business, especially with respect to the emerging new PCS service, but there is
no guarantee that the Company will successfully generate new business from this
customer base.
Dependence upon Key Personnel
The Company is highly dependent upon the personal efforts and abilities of
its President and Chief Executive Officer, William S. Taylor, and its Executive
Vice President and Treasurer, Les Winder. The loss of the services of Mr. Taylor
and/or Mr. Winder could have a material adverse effect on the Company. The
Company has entered into five-year employment agreement with Mr. Taylor and Mr.
Winder, which expire in October, 1999 and April, 2000 respectively, and which
are renewable at the option of Messrs. Taylor and Winder for a successive
three-year term. The agreements include non-disclosure and non-competition
provisions. The Company has obtained key-person insurance on the lives of
Messrs. Taylor and Winder in the amount of $1,000,000 and $500,000,
respectively, the proceeds of which are payable to the Company. In addition,
certain key managers of the Company have yet to be identified and any delay in
identifying and any difficulty in hiring such key managers could negatively
affect the Company.
Voting Control by Officers, Directors and Related Entities
The Company's officers and directors and persons which may be considered
affiliates of, or related to, such officers and directors initially will
beneficially own approximately 37.6% of the Company's outstanding Common Stock,
and securities convertible into Common Stock, and other securities of the
Company. If they voted in the same manner, such stockholders would represent a
significant portion of the votes required to elect the entire board of directors
of the Company and, in general, to determine the outcome of matters submitted to
the stockholders for approval. In addition, on May 28, 1997, the Board of
Directors voted to amend the Company's Articles of Incorporation to add voting
rights to the four million Class "B" Preferred Shares held by Ms. Brenda Taylor
and Messrs. Taylor, Winder and DePalo (which are
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convertible into Common Stock at an exchange rate of one-and-one-half share of
Common Stock for each share of Class "B" Preferred Stock). The voting rights
would feature the same ratio, allowing the four million shares of Series B
Preferred Stock to vote at the rate of six million shares of Common Stock. If
this change is accomplished, such officer, directors and affiliates will have
substantially enhanced voting rights, without the necessity of first converting
their existing Preferred Stock into Common Stock.
Transactions with Affiliates; Two Independent Directors
The Company has engaged in several transactions with affiliates, see
"Recent Significant Developments", which the Company believes are on terms at
least as favorable to the Company as could be obtained with unaffiliated third
parties under the circumstances of such transactions and arrangements. The
Company's board of directors has adopted a policy that the Company will not
enter into any further transactions with affiliates unless the Company first
obtains approval of the board of directors, and a majority of its independent
directors. The Company presently has two independent directors. Accordingly,
both directors must agree to approve such transactions.
Absence of Cash Dividends
The board of directors does not anticipate paying cash dividends on the
Common Stock, preferred stock or other securities of the Company in the
foreseeable future, and intends to retain all future earnings, if any, to
finance the growth of the Company's business, including its capital needs with
respect to PCS operations. Payment of dividends, if any, will depend, among
other factors, on earnings, capital requirements and the general operating and
financial condition of the Company.
Rights of Common Stockholders May be Materially Limited or Qualified by
Rights of Preferred Stockholders
The Company is authorized to issue 8,000,000 shares of preferred stock,
$0.01 par value ("Preferred Stock"). In September 1996, the Company issued an
aggregate of 4,000,000 Series B Preferred Non-Voting Convertible Stock to the
following officers and directors of the Company: Brenda Taylor (1,000,000) and
Messrs. William Taylor (1,000,000), Les Winder (1,000,000) and Robert Depalo
(1,000,000). See "Description of Securities." The Preferred Stock may be issued
in series from time to time with such designation rights, preferences and
limitations as the board of directors of the Company may determine by
resolution. The rights, preferences and limitations of a separate series of
Preferred Stock may differ with respect to such matters as may be determined by
the board of directors, including without limitation, the rate of dividends,
methods and nature of payment of dividends, terms of redemption, amounts payable
on liquidation, sinking fund provisions (if any), conversion rights (if any),
and voting rights (See "Description of Securities") . Any and all such rights
that may be granted to preferred stockholders may be in preference to common
stockholders and to common stockholders' detriment. In general, additional
shares of Preferred Stock may be issued by the board of directors without
stockholder approval. In the event of issuance, the Preferred Stock could be
utilized under certain circumstances as a method of discouraging, delaying or
preventing a change in control of the Company. This may have the effect of
discouraging third party bidders from ever making a bid, may reduce any premium
that such bid could yield to holders of Common Stock over market value and may
have a depreciative effect on the price of the Company's Common Stock. Although
the Company has no present intention to issue any additional shares of its
Preferred Stock, there can be no assurance that the Company will not do so in
the future. The Company may not publicly offer or sell any shares of Preferred
Stock without the consent of the Representative, for a period ending May 12,
1998.
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Possible Adverse Market Effect of Exercise of Warrants and Limitation on Future
Financing
Assuming the exercise of the A Warrants currently outstanding and being
offered by the Selling Securityholders, there will be a 9,965,501 share increase
in the number of outstanding shares of Common Stock to a total of approximately
24,624,675 shares. If such exercise occurs within a reasonably short period of
time, this increase in the amount of Common Stock in any trading market could
cause a substantial reduction in the price of the Common Stock. The A Warrants
give the respective holders the opportunity to benefit from an increase in the
market price of the Common Stock at nominal cost to them. While the A Warrants
are outstanding, the terms on which the Company may obtain additional financing
may be adversely affected.
Possible Increase in Shares Eligible for Future Sale
As of the date hereof, 1,298,675 of the 14,659,174 shares of issued and
outstanding Common Stock are "restricted securities," as that term is defined
under Rule 144 promulgated under the Securities Act, which will become eligible
for sale under Rule 144 beginning in or about May, 1997, through in or about
March, 1998.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the company (or persons whose shares are aggregated), who owns restricted shares
of common stock which have been held for a period of at least one year after the
later of the acquisition of such shares from the issuer or from an affiliate of
the issuer is entitled to sell, within any three-month period, a number of
shares that does exceed the greater of 1% of the total number of outstanding
shares of the same class or, if the common stock is listed on an exchange or
quoted on NASDAQ, the average weekly trading volume during the four calendar
weeks preceding the sale. A person who has not been an affiliate of the company
of at least the three months preceding the sale and who owns shares of common
stock which have been held for a period of at least two years after the later of
the acquisition of such shares from the issuer or from an affiliate of the
issuer is entitled to sell such shares under Rule 144 without regard to the
volume limitations described above. An increase in the number of shares of
common stock offered for sale by existing holders and prospective investors, can
have an adverse effect on the market price of the Company's securities.
Risk of Redemption by the Company of the A Warrants
The Company may redeem the A Warrants offered hereunder for $0.01 per A
Warrant, at any time after the closing inside bid quotation for the Common Stock
on the NASDAQ Small-Cap Market is at least $8.00 for 30 consecutive trading
days, ending ten (10) days prior to the notice of redemption. Notice of
redemption of the A Warrants could cause the holders thereof to exercise the A
Warrants and to pay the exercise price at a time when it may be disadvantageous
for the holders to do so; to sell the A Warrants at the current market price
when they might otherwise wish to hold the A Warrants; or to accept the
redemption price, which is likely to be less than the market value of the A
Warrants at the time of redemption. See "Description of Securities."
Investors May be Unable to Exercise A Warrants
For the life of the A Warrants, the Company has agreed to maintain a
current effective registration statement with the Commission relating to the
shares of Common Stock issuable upon exercise of the A Warrants. If the Company
is unable to maintain a current registration statement, the A Warrant holders
will be unable to exercise the A Warrants and the A Warrants may become
valueless. Although during this offering the A Warrants will not knowingly be
sold in any jurisdiction in which they are not registered or otherwise
qualified, a purchaser of the A Warrants may relocate into a jurisdiction in
which the shares of Common Stock underlying the A Warrants are not registered or
qualified. If the Company is unable or
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chooses not to register or qualify or maintain the registration or qualification
of the shares of Common Stock underlying the A Warrants for sale in all of the
states in which the A Warrant holders reside, the Company would not permit such
A Warrants to be exercised and A Warrant holders in those states may have no
choice but to either sell their A Warrants or let them expire. Prospective
investors and other interested persons who wish to know whether or not the
Common Stock may be issued upon the exercise of A Warrants in a particular state
should consult with the securities department of the state in question or send a
written inquiry to the Company.
Corporate Takeover Provisions
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Under Section 203, certain "business
combinations" between a Delaware corporation whose stock generally is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that such
stockholder became an interested stockholder, unless (i) the corporation has
elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election); (ii) the business
combination was approved by the board of directors of the corporation before the
other party to the business combination became an interested stockholder; (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to render or vote stock held by
the plan); or, (v) the business combination was approved by the board of
directors of the corporation and ratified by two-thirds of the voting stock
which the interested stockholder did not own. The three-year prohibition also
does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of the majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," transactions with an "interested stockholder" involving the assets
or stock of the corporation or its majority owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. The
term "interested stockholder" is defined generally as a stockholder who,
together with affiliates and associates, owns (or, within three years prior, did
own) 15% or more of a Delaware corporation's voting stock. Section 203 could
prohibit or delay a merger, takeover or other change in control of the Company
and therefore could discourage attempts to acquire the Company.
Certain Charter and By-laws Provisions
The Company's certificate of incorporation, as amended, and by-laws, limit
the liability of directors and officers to the maximum extent permitted by
Delaware law. Delaware law provides that directors of a corporation will not be
personally liable for monetary damages for breach of their fiduciary duties as
directors, including gross negligence, except liability for: (i) breach of the
director's duty of loyalty; (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of the law; (iii) the
unlawful payment of a dividend or unlawful stock purchase or redemption; and
(iv) any transaction from which the director derives an improper personal
benefit. Delaware law does not permit a corporation to eliminate a director's
duty of care, and this provision of the Company's Certificate of Incorporation
has no effect on the availability of equitable remedies, such as injunction or
rescission, based upon a director's breach of the duty of care.
The Company's certificate of incorporation, as amended, authorizes the
Company to purchase and maintain insurance for the purposes of indemnification.
The Company intends to apply for directors' and officers' insurance, although
there can be no assurance that the Company will be able to obtain such
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insurance on reasonable terms, or at all. At present, there is no pending
litigation or proceeding involving any director, officer, employee or agent for
which indemnification will be required or permitted under the certificate of
incorporation, as amended, or by-laws. The Company is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
Legal Proceedings
On March 4, 1996 the Company commenced an action entitled Electronics
Communications Corp. against Toshiba America Consumer Products, Inc. ("Toshiba")
and Audiovox Corporation ("Audiovox"), case number 96 Civ. 1365, in the United
States District Court of the Southern District of New York. The Complaint
asserts claims for antitrust, breach of contract, tortious interference with
contract and tortious interference with prospective economic advantage and
business relations. The complaint seeks damages in excess of $3,000,000. This
action was commenced because the Company expended significant monies and
resources including the issuance of 200,000 shares of the Company's Common Stock
to a consultant in anticipation of a South American cellular telephone program
which the Company was to undertake exclusively on behalf of Toshiba, based on
certain reliance on Toshiba, and the withdrawal of Toshiba's commitment based on
what the Company believes is an unlawful conspiracy with Audiovox. Immediately
prior to the commencement of the program, Toshiba discontinued manufacturing the
line of cellular telephones that the program was designed to offer. This
decision, which the Company believes was coerced by Audiovox, has caused
significant damages to the Company.
The defendants Toshiba and Audiovox moved to dismiss a portion of the
case, claiming that the Company had not pled a cognizable antitrust cause of
action, and that the remaining claims should be dismissed for the lack of
supplemental jurisdiction, which could then be prosecuted in state courts. On
August 12, 1996 the Court ruled in favor of the motion of defendants, Toshiba
and Audiovox, and the case was dismissed on such date. The Company appealed the
Court's ruling, filing its Brief on Appeal on February 21, 1997. On March 12,
1997, Toshiba and Audiovox served their responsive briefs, and oral argument
before the United States Court of Appeals for the Second Circuit was held on May
22, 1997, and the parties are awaiting the Court's decision.
On or about March 11, 1997, the Company was served with a Summons and
Complaint in an action entitled "Daily News, L.P. v. Free Trade a/k/a Free Trade
Distributors, Inc. and Electronics Communications Corp.," which is currently
pending in the United States District Court of the Southern District of New
York. The Daily News, claims breach of a certain advertising contract, in that
the Company's subsidiary failed to pay for certain advertising and failed to
meet the minimum advertising expenditures set forth therein, which concerns the
dependency of the level of the Company's advertising on the continuation of the
Company's agency with BANMC, resulting in the imposition of a "short rate." As a
result, the Daily News claims damages aggregating $156,284.87. The Company
believes it has an excellent working relationship with the Daily News, and that
this suit resulted from a misunderstanding between the respective principals of
the parties, which remained unclarified due to the illness of an officer of the
Company. The Company believes that the two sides are close to reaching a
settlement in this matter, but there are no guarantees that this matter will be
resolved without the furtherance of litigation.
RECENT SIGNIFICANT DEVELOPMENTS
January 1996 Private Placement
On January 16, 1996 the Company consummated a private placement offering
of 69,430 shares of the Company's Common Stock at a price of $2.25 per share.
The total offering resulted in gross proceeds of $156,218. The proceeds of this
offering were utilized as general working capital. Each subscriber, in addition
to the shares, received demand registration rights, which require the Company to
file a registration
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statement upon request of 25% or more of the shares sold in the offering at
anytime during the 18 month period commencing 30 days from the closing date.
February 1996 Financing Arrangement
On February 29, 1996, the Company entered into a financing arrangement
with a non-affiliated corporation in the amount of $134,000. The proceeds of
this loan were utilized as general working capital. Interest is payable at a
rate of 10% in monthly installments of $1,117. The loan becomes due on February
28, 1997. As additional consideration, the Company issued the corporation
800,000 A Warrants with 90 day registration rights and "piggy back" registration
rights with any other offering of the Company. These A Warrants are being
registered for possible sale pursuant to this Prospectus. This note has been
paid in January 1997.
FCC Auction Guarantees and Issuance of PCN Stock
In February 1996 the Company experienced a cash shortfall and was unable
to post the required deposit to be entitled to bid at the FCC auction. To assist
the Company in obtaining financing to facilitate its bid, William S. Taylor, Les
Winder, Brenda Taylor and Robert DePalo guaranteed loans by the Company in the
sum of approximately $1,150,000 and posted certain cash collateral.
On July 23, 1996 the board of directors of the Company authorized the
purchase of 24 shares of Personal Communications Network, Inc. ("PCN") Common
Stock representing 24% of the issued and outstanding common stock of PCN by
Brenda Taylor (6 shares), Les Winder (6 shares), William S. Taylor (6 shares)
and Robert DePalo (6 shares). The purchase price was $1,000 per share which was
paid in cash. In connection with this transaction, in July 1996, the board of
directors granted to Brenda Taylor, William S. Taylor, Les Winder and Robert
Depalo the right to purchase an aggregate of 1,800,000 A Warrants for nominal
consideration. To date, none of these individuals have exercised their right to
purchase the A Warrants. These individuals were granted the PCN stock and the
right to acquire the A Warrants in return for certain guarantees, and the
posting of certain cash collateral. There was no valuation method employed in
determining the terms of the issuance of the PCN stock. The terms of the
issuance of PCN common stock to certain members of the board of directors of the
Company was determined by the non-interested members of the board of directors.
The PCN common stock was issued to these individuals at the end of March 1997
upon the execution of the FCC Notes and related security agreements. The benefit
that these individuals received by purchasing the PCN common stock was that
PCN's sole asset, the PCS Licenses represent a substantial portion of the
Company's assets and these individuals benefit in the event the Company
completes its buildout of its PCS system or if the PCS Licenses are over sold at
a profit. PCN has 200 shares of common stock authorized, and 100 shares of
common stock issued and outstanding. In additional to the aforementioned shares
issued to Ms. Taylor and Messrs. Taylor, Winder and DePalo, PCN issued eight
shares of its common stock to EGT, representing eight 8% percent of the issued
and outstanding common stock, and two shares of common stock, representing two
2% percent of the issued and outstanding common stock of PCN to Andrew James
pursuant to an agreement dated October 7, 1996 (See "EGT Agreement") and the
remaining issued and outstanding shares of PCN common stock were issued to the
Company (66 shares or 66% of the issued and outstanding common stock of PCN).
The assets of PCN consist of the six PCS Licenses awarded at the FCC's "C" Block
auction, which entitles PCN to build and operate wireless PCS telephone systems
covering approximately 1.5 million people in various markets in New York, Maine
and Vermont. PCN's winning bids at the FCC's "C" Block auction aggregated
$26,452,200. The PCS License's represent approximately 79% of the Company's
total assets. See "PCS Licenses." The Company has no present intention to issue
any additional shares of PCN Common Stock, nor to dilute the ownership of the
PCS Licenses.
Shareholders Demand Registration
In March 1996, the subscribers in the January 1996 Private Placement
demanded that the Company file a registration statement covering their shares.
The Company at that time was unable to comply with the request. In order to
avoid potential litigation for failing to file a registration statement on a
timely basis, the
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Company issued an aggregate of 34,715 additional shares to the subscribers.
These shares along with the original 69,430 shares are being registered for
possible sale pursuant to this Prospectus.
March 1996 Private Placement
On March 21, 1996, the Company entered into a letter of intent with an
independent investment banking firm, Baytree Associates, Inc., ("Baytree"),
pursuant to which the Company offered up to $6,000,000 principal amount of the
Company's Subordinated Convertible Debentures (the "Debentures"). The Company
sold an aggregate of $2,990,000 of the Debentures in two tranches after which
the Company and Baytree agreed to terminate the offering. William S. Taylor, Les
Winder, Brenda Taylor, and Robert DePalo personally guaranteed the principal
amount of the Debentures. The principal amount of the Debentures was convertible
into shares of the Company's Common Stock at the option of the holder,
immediately upon issuance, at a price equivalent to a 25% discount from the
average high closing bid price for the five days prior to the conversion or
$1.50, whichever is less. The Debentures bear interest at the rate of 5% per
annum payable on April 1 of each year commencing April 1, 1997. The Debentures
are redeemable and callable for conversion under certain circumstances. The
Company paid Baytree a placement fee equal to 10% of the gross proceeds, a 2%
non-accountable expense allowance and 200,000 warrants to purchase the Company's
Common Stock at $2.25 per share. The Company used the proceeds of this offering
pay its downpayment for the licenses it won in the PCS auction (the "PCS
Auction"), to build out its paging system and for general working capital
purposes. The Debenture holders converted their Debentures into shares of the
Company's Common Stock from June 25, 1996 to September 9, 1996 (the "Conversion
Period"). The average price at which the Debentures were converted into Common
Stock was $0.52 per share. The average bid price of the Company's Common Stock
during the Conversion Period was $0.65 per share. The highest conversion price
was $1.50 per share of Common Stock on June 25, 1996 (the average closing bid
price for the preceding five days was $1.87) and the lowest conversion price was
$0.3984 per share of Common Stock (the average closing bid price for the
preceding five days was $0.50). The conversion of the Debentures was not induced
by the Company. The holders of the Debentures exercised the conversion feature
contained in the Debentures, which provided for conversion at the sole option of
the holder. As of the date hereof, all $2,990,000 principal amount of the
Debentures has converted into an aggregate of 5,706,822 shares of the Company's
Common Stock. Baytree Associates was also the investment banking firm for the
Company's May 1996 Private Placement. See "May 1996 Private Placement."
TCI's Acquisition of GCE
On March 22, 1996 TCI acquired substantially all of the assets and assumed
certain liabilities of GCE. As a result of the transaction with GCE, TCI became
a paging reseller with a subscriber base of approximately 9,000 persons. TCI
offers paging service primarily through various paging carriers in the New York
metropolitan area. TCI offers national paging service through a sales and
distribution agreement with Skytel. Under this agreement, TCI pursues regional
and national accounts through its present dealer network in the paging service
area (the "Paging Service Area"). TCI also has the necessary infrastructure to
operate a paging operation, including but not limited to a full service
technical shop and repair facility, engineering capability, marketing and sales
force, billing and collection systems and ancillary product support capability
for paging related products.
TCI was formed to engage in the radio paging business shortly before its
acquisition of GCE. Prior the Company's acquisition of a 51% ownership interest
in TCI, TCI had acquired a paging subscriber base, associated paging hardware
and a paging carrier agreement with Skytel, a company that provides nationwide
paging, voice messaging and related messaging services to subscribers and
others. In addition, TCI owns a 900 megahertz FCC paging license in the Paging
Service Area and holds a long term lease for a paging transmission site. Joseph
P. Albanese, Sr., the founder of TCI, arranged for the acquisition of a paging
transmission site in West Orange, New Jersey, the proximity of which to certain
telephone company
26
<PAGE>
switching facilities represented substantial economies of scale if incorporated
into the Company's business, and arranged for the purchase of a 2,000 customer
base from Skytel. After the Company was unsuccessful, Mr. Albanese was able to
consummate a transaction for the purchase of GCE, at a substantially reduced
aggregate consideration than was offered by the Company in a failed bid to
acquire GCE, and its valuable FCC 900 MHz paging license. In connection with
TCI's acquisition of GCE, the Company assumed a $350,000 non-interest bearing
note payable to a corporation owned by a shareholder of the Company. The balance
of this loan was $281,944 as of March 31, 1997.
PCS Licenses
On May 8, 1996, the Company won six PCS Licenses. The total winning bids
amounted to $26,452,200 after the 25% discount provided to small business which
the Company qualifies for under the terms of the auction. The Company has
deposited $2,645,220 with the FCC which equals 10% of the cost of the licenses.
On September 17, 1996, the FCC officially awarded the six PCS Licenses to
the Company. In connection therewith, the Company entered into six separate Plan
Notes with the FCC in the aggregate amount of $23,807,010. Interest only is due
commencing December 31, 1996, with the first payment of $479,400.84 and
subsequent payments in equal consecutive quarterly installments of $416,622.16
($1,666,488.64 annually) until September 30, 2002. Commencing December 31, 2002,
the Company shall pay principal and interest in equal quarterly installments of
$1,718,853.88 ($6,875,415.52 annually) until September 30, 2006 (the "Maturity
Date"). The entire unpaid principal amount, together with accrued and unpaid
interest on the Plan Notes and all remaining obligations thereunder, shall be
due and payable on the Maturity Date. A C-Block licensee that fails to make
timely quarterly installment payments may incur substantial financial penalties,
license revocation or other enforcement measures at the FCC's discretion. Where
a C-Block applicant anticipates defaulting on any required payment, it may
request a three to six month grace period before the FCC cancels its license. In
the event of a default by a C-Block licensee, the FCC is empowered to reclaim
the licenses, reauction them, and subject the defaulting party to a penalty
comprised of the difference between the price at which it acquired its license
and the amount of the winning bid at reauction, plus an additional penalty of
three percent of the subsequent winning bid, or the defaulting high bid,
whichever is lower. As the FCC has suspended payments under the Plan Notes, the
Company is not in default in any quarterly interest payment due thereunder.
May 1996 Private Placement
On May 22, 1996 the Company sold an aggregate of 500,000 shares of its
Common Stock for $625,000, or $1.25 per share, to three unrelated parties
through Baytree. On May 22, 1996 the Company's Common Stock was trading at
$2.00, the Company sold the stock at a discount to market due to the fact the
stock was restricted, and the large quantity of shares made the stock relatively
illiquid in comparison to the Company's average daily volume prior to May 22,
1996. The Company received net proceeds from this sale of $543,750. The Company
utilized the proceeds generated by this issuance of stock for general working
capital purposes.
Acquisition of TCI
On June 28, 1996, the Company completed the acquisition of 51% of the
issued and outstanding stock of TCI for an aggregate purchase price of
$1,114,000. Previously, the Company loaned TCI an aggregate of $725,000, which
in addition to 194,500 shares of the Company's Common Stock (at the time was
$2.00 per share) represented the consideration paid by the Company. TCI is a
recently formed corporation engaged in the radio paging business. Prior to the
acquisition, TCI acquired a paging subscriber base, associated paging hardware
and a paging carrier agreement with Skytel, a company that provides nationwide
paging, voice messaging and related messaging services to subscribers and
others. In addition,
27
<PAGE>
TCI owns a 900 megahertz FCC paging license in the Paging Service Area and holds
a long-term lease for a paging transmission site.
Issuance of Series B Preferred Stock
On July 23, 1996 the board of directors of the Company, at a Special
Meeting of the Board of Directors, authorized the issuance of an aggregate of
4,000,000 Series B Preferred Shares of the Company to Brenda Taylor (1,000,000)
and Messrs. Taylor (1,000,000), Winder (1,000,000) and DePalo (1,000,000) in
return for their personal guarantees of approximately $3,000,000 of the
Company's Subordinated Convertible Debentures. On September 1, 1996 the Company
issued these shares to the aforementioned officers and directors. Each share of
the Series B Preferred Stock is valued at $1.50 per share and convertible into
1.50 shares of Common Stock. These shares of Series B Preferred Stock are
payable by a three year promissory note bearing interest at the rate of 7% per
annum, with interest accruing, but not payable until the securities are sold.
The promissory notes are immediately extended for additional one-year terms. The
Series B Preferred Shares are fully paid and non-assessable. The promissory
notes are non-recourse, but are collateralized by a pledge of the Series B
Preferred Shares.
These Series B Preferred Shares are subject to a three year vesting period
pursuant to which one-third of the shares will vest immediately, and thereafter,
on July 23, 1997, if Brenda Taylor and Messrs. Taylor, Winder and DePalo are
still employed by or a director of the Company at such time, an additional
one-third shall vest and thereafter on July 23, 1998, if the aforementioned
individuals are still employed by, or a director of the Company at such time,
the balance shall vest. On July 23, 1996, the Company reserved 6,000,000 shares
of Common Stock for issuance upon the conversion of these Series B Preferred
Shares.
Client Services Agreement
On September 4, 1996, the Company entered into a Client Service Agreement
with Great Deals, Inc. ("Great Deals"). Pursuant to the terms of this agreement,
Great Deals was hired as a financial public relations consultant, to promote the
Company's business to the financial community. The term of the agreement is for
two years. In consideration of the services to be performed by Great Deals, the
Company issued 2,300,000 shares of the Company's Common Stock to Great Deals. In
addition, the Company registered these shares on an S-8 registration statement.
Board of Director Annual Salaries
On September 12, 1996 the board of directors of the Company authorized a
20% increase in the annual salaries of each William Taylor and Les Winder, and
an annual salary of $75,000 for Brenda Taylor. Additionally, due to cash flow
shortfalls, each of Messrs. Taylor and Winder and Brenda Taylor deferred payment
of their salary from the beginning of November 1996 to the beginning of January
1997. These deferred salaries have been paid by the Company to these individuals
during the first quarter of 1997. Messrs. Taylor and Winder have deferred such
salary increase, subject to accrual, until the Company's cash flow improves.
Marrotta Loan
On September 20, 1996, the Company entered into a loan agreement with the
Marrotta Group ("Marrotta"), pursuant to which the Company borrowed $500,000.
This loan, which was obtained to provide the Company with the ability to meet
its additional shortfalls on a further deposit with the FCC, was arranged by
Robert DePalo, a director, pursuant to a personal and business relationship with
Marrotta, and one or more of its principal shareholders. The loan bears interest
at the rate of 10% per annum, and becomes due and payable on or before June 20,
1997; however, the Company may request an automatic three (3)
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<PAGE>
month extension on the due date. As additional consideration for making the
loan, the Company agreed to issue to Marrotta 200,000 shares of the Company's
Common Stock, and 400,000 A Warrants, with demand and piggyback registration
rights. These shares of Common Stock and A Warrants are being registered for
possible sale pursuant to this Prospectus. This loan has been paid in July 1997.
EGT Agreement
On October 7, 1996, the Company entered into an agreement (the "EGT
Agreement") with Emerging Technologies Inc. ("EGT") and Mr. Andrew James
("James") for consulting, investment banking, financial planning and strategy,
and business introduction services, for purposes of, among other things,
introducing the Company to various third party strategic partners. Management
believed that it could not have obtained these services and introductions
without the assistance of EGT and James, and believed that EGT and James,
through their unique contacts and resources, valuable business contacts, and
resources, could substantially assist the Company in its long and short term
goals. Accordingly, in the absence of adequate capital, and unable to negotiate
an alternative which management considered as adequate, the Company consented to
EGT's demand for the immediate transfer of 10 shares of PCN's common stock
(equivalent to 10% of PCN's outstanding common stock) (8 shares to EGT, 2 shares
to James), its sole class of stock, although some of the services were
prospective in nature. EGT and James are not affiliated with any officer,
director or shareholder of the Company. In connection with this agreement, EGT
and James have introduced the Company and PCN to such parties as Emerson Radio
Corp., Teletek, Inc., Solomon Brothers, and others and have consulted with the
Company and PCN on other corporate matters.
Mr. Robert DePalo Loan
On October 9, 1996, the Company entered into a loan with Robert DePalo, a
director of the Company, pursuant to which the Company borrowed $180,000. This
loan bears interest at the rate of 10% per annum. The loan is due upon three
days written demand. The Company used the proceeds of this loan for general
corporate purposes. This loan has been paid in March 1997.
Shareholder Approval of Issuance of Series B Preferred Stock
On October 17, 1996, at the Annual Meeting of Shareholders, shareholders
voting in person and by proxy, voted to approve "Proposal No. 3" described in
the Company's Notice of Annual Meeting and Proxy Statement, which ratified the
Board of Directors July 23, 1996 authorization of the issuance of 4,000,000
Series B Preferred Shares. See "Issuance of Series B Preferred Stock."
Strategic Marketing Int'l. Inc. Loan
On October 21, 1996 the Company entered into a loan agreement with
Strategic Marketing Int'l Inc. ("Strategic"), pursuant to which the Company
borrowed $200,000. This loan bears interest at the rate of 10% per annum, and
becomes due and payable on October 21, 1997. As additional consideration for
making the loan, the Company agreed to issue to Strategic 80,000 shares of the
Company's Common Stock and 160,000 A Warrants, with demand and piggy back
registration rights. The Company used the proceeds of the loan for general
corporate purposes. These shares of Common Stock and A Warrants are being
registered for possible sale pursuant to this Prospectus. This loan has been
paid in July 1997.
NextWave Telecomm, Inc. Agreement
To facilitate the required build-out of its PCS services, and to expand
its capabilities, reach and scope in the emerging PCS segment of the wireless
communications market, the Company, through PCN, entered into a ten year
strategic resale agreement (the "Resale Agreement") with Next Wave Telecom, Inc.
("NextWave") effective October 29, 1996. Under the terms of the Resale
Agreement, the Company
29
<PAGE>
guaranteed that it would purchase MOUs from Next Wave, in that entity's capacity
as a wholesale carrier. The price per MOU ranges depending upon various
incentive clauses contained in the Resale Agreement. The Company does not
currently have the capability or capacity to fulfill its obligations under the
Resale Agreement, nor can the Company accurately predict when, if ever, it will
be able to fulfill its obligations thereunder.
Through its participation in the same FCC auction in which the Company was
awarded its licenses, NextWave was the winning bidder for 63 PCS markets,
representing 110 million POPS. NextWave's licenses cover 29% of the top United
States markets, including New York, Los Angeles, Washington/Baltimore, Boston,
Houston, Minneapolis, Denver, Seattle, Portland and San Diego. In pursuance of
its bids, as shown in its Registration Statement on Form S-1, as filed with the
Commission, NextWave deposited approximately $210,000,000 with the FCC.
NextWave was formed on May 16, 1995, and is a holding company with three
wholly-owned subsidiaries, NextWave Personal Communications Inc. ("NextWave
PCI"), TELE-Code and NextWave Wireless, Inc. ("NextWave Wireless"). NextWave PCI
was formed to acquire PCS licenses in the FCC's PCS auctions. TELE-Code was
formed to develop CDMA-based products and provide engineering services to the
Company and others. NextWave was formed to act as an operating company and
intends to form subsidiaries for each of the Company's seven regions and any
clusters of additional markets that may comprise operating regions. As also
shown in its recently filed Registration Statement, NextWave has raised an
aggregate of approximately $450 million in private capital to finance its
acquisition of PCS licenses at FCC auction.
NextWave intends to operate primarily as a "carrier's carrier,"
wholesaling low-cost MOU's to a broad range of sellers. NextWave plans to target
several categories of customers, including long distance companies, the Regional
Bell Operating Company ("RBOCs") and other Local Exchange Carriers ("LECs"),
Competitive Access Providers ("CAPs"), and other major PCS retailers, cellular
service providers, utilities, cable television system operators and independent
resellers, as well as retailers and manufacturers of mass-market consumer
products and services.
December 1996 Private Offering
In December, 1996 the Company sold 2,470,000 units (the "Units"), at a
price of $1.00 per Unit for total proceeds of $2,470,000. Each Unit consists of
one share of the Company's Common Stock, and one and one-half A Warrants,
entitling the purchaser, as holder of each A Warrant, to purchase one share of
Common Stock, at $2.25 per share, at any time prior to May 12, 1999, subject to
prior redemption by the Company.
The Company sold the Units through selling arrangements between the
Company and participating registered NASD Broker-Dealers and, where permitted by
law, through offeree representatives and others, in connection with sales of
Units solicited by them (collectively, the "Placement Agents"). The Placement
Agents received, in the aggregate, a selling commission of up to ten (10%)
percent of the aggregate amount of the Unit offering, plus a 1% non-accountable
due diligence allowance, and an outright grant of 750,000 A Warrants, which
shall be allocated and distributed to the Placement Agents pro rata, based on
the number and percentage of Units placed by such Placement Agent(s), and the
aggregate amount of sale proceeds generated.
Termination of BANMC Contract
As of May 1997, the Company terminated its relationship with BANMC,
including its dealer/agency relationships with each of NYNEX and Bell Atlantic;
and BANMC accepted and agreed to such termination in a settlement and separation
agreement (the "Settlement and Separation Agreement").
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<PAGE>
The Company perceived that it was BANMC's strategy and plan to minimize the role
of its agents and dealers, presently and in the future. This was most
prominently manifested by BANMC's broadly publicized program, offered under the
tradename of the "E-Z Max Plan," which was available to the public directly from
BANMC, but which was not available from BANMC's agents and dealers, such as the
Company.
Moreover, any renewal of the Company's contractual relationship with BANMC
was anticipated to encompass a continued imposition of BANMC's restrictions,
prohibiting the solicitation by the Company of PCS customers within the
geographic area specified in the Company's agreements with NYNEX and Bell
Atlantic, and any future solicitation of cellular activation customers obtained
by the Company. Since the Company believes PCS is the future of wireless
communications, it was extremely reticent to make any long-term commitments that
would restrict its entry into this market, including indirectly as agent into
territories beyond its own PCS License Areas, where the Company will act as a
carrier.
The Settlement and Separation Agreement includes the payment to the
Company of certain overdue commissions and a full and complete release from all
of the non-competition and non-solicitation provisions contained in the
Company's contracts with NYNEX and Bell Atlantic. This will permit solicitation
of prior cellular customers and PCS customers in the New York Metropolitan Area,
which would have otherwise been prohibited.
Cancellation of Notes
On May 28, 1997 the board of directors approved in principal the
cancellation of certain indebtedness owed to the Company by Messrs. Taylor,
Winder and DePalo, and Brenda Taylor, in connection with the issuance of the
Series B Preferred Stock to these individuals. This approval was given subject
to anticipated structuring of the transaction so as to minimize the expense to
the Company and income to the shareholders. It is anticipated that when such
structuring is achieved by counsel, this matter will be resubmitted to the board
of directors for final approval and will be put to a vote at the Company's
Special Meeting of Shareholders to be noticed and called for in July/August
1997. In the event this matter is finally approved by the board of directors,
such persons may realize pro rata up to $6,000,000 in income in or with respect
to 1997, without any accompanying receipt of cash. As a result, such individuals
may be unable to meet their financial and tax obligations with respect to such
transaction, which may have other impacts on their overall financial condition,
and on their ability to perform on behalf of the Company. This circumstance
involves tax issues which may not be without uncertainty, including issues
relating to the valuation of the Series B Preferred Stock. Such persons are also
consulting with their personal tax advisors.
June 1997 Private Offering
The Company is currently offering a maximum of $4,970,334 principal amount
of 8% Cumulative Convertible Debentures due June 30, 2000. These debentures are
convertible into the Company's Common Stock at anytime after forty-one (41) days
with respect to the Regulation "S" Investors and at any time after the Exercise
Hold Period, with respect to the investors in the December 1996, Private
Offering, as measured from the date of issuance of these debentures, at a
conversion price equal to a thirty (30%) percent discount from the five (5) day
average daily closing bid price, as reported on NASDAQ for the five (5) trading
days immediately preceding the applicable conversion date ("Conversion Price").
The Company may, at its option, upon not less than ten (10) days written notice
to all holders, elect to convert these debentures into Common Stock at any time,
and these debentures are also subject to a mandatory, thirty-six (36) month
conversion feature, measured from the date of issuance, or not later than June
30, 2000 (the "Mandatory Conversion Date"). In either case, the conversion of
these debentures by the Company shall be effected at the Conversion Price. Upon
the expiration of the Mandatory Conversion Date all of these Debentures then
outstanding, together with accrued interest thereon, will be converted by the
Company at the Conversion Price.
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<PAGE>
The offering of these debentures actually consist of and is comprised by
two separate, but concurrent, offerings to two distinct groups of investors.
$2,500,000 of principal amount of these debentures are being offered only to
non-U.S. persons as defined in Rule 903 of Regulation "S", in accordance with
Regulation "S" of the Securities Act of 1933. Such investors will purchase up to
$2,500,000 of these debentures, resulting in new and additional capital to the
Company.
At the same time but separate from this Regulation "S" Offering,
$2,470,334 principal amount Debentures are being offered only to those persons
who subscribed to and participated in the Company's December 1996 Private
Placement of the Units, Those investors in the December 1996 Private Offering
only are being offered the opportunity to exchange all, but not less than all,
of their Units, on a dollar for dollar basis, for these Debentures. This special
exchange offer was precipitated as a result of several circumstances. Many of
the investors in the December 1996 Private Offering expressed concern about
certain events which impacted on the market price of the Company's Common Stock,
some of which relate to certain questionable transactions by First Cambridge
Securities Corp., formerly known as J.J. Morgan (one of the original
underwriters of the Company), which ceased operations April 29, 1997. First
Cambridge Securities Corp. was an active market-maker in the Company's stock,
and the Company believes, but cannot be certain, that the closure of First
Cambridge Securities Corp. was a factor in the decline in the share price of the
Company's stock after April 29, 1997. In addition, the Company was compelled to
obtain certain additional financing in the sum of $2,500,000 due to larger than
expected cash flow deficiencies, in the form of this debenture offering.
This debenture offering will be made pursuant to selling arrangements
between the Company and certain placement agents who will receive in the
aggregate a selling commission of up to thirteen (13%) percent of the aggregate
amount of this offering.
Redirection of Operations
Beginning in May 1996 the Company has redirected its current operations
and business away from acting principally as a distributor of consumer, home and
office electronics products and has committed to operations as a multi-faceted
wireless telecommunications company. The Company will continue to sell cellular
telephones which accounted for approximately 94% of the Company's electronics
sales in 1996. At the present time, the Company derives most of its revenue from
cellular and PCS telephonesolicitation commissions relating to the Company's
direct sales and solicitations for subscriptions for mobile cellular telephone
activations. It is anticipated that in the future, the majority of the Company's
revenues will be derived from its paging and PCS network operations.
The change in the direction and focus of the Company was precipitated by
the anticipated continued growth and profit potentials in the rapidly emerging
market and utilization of wireless communications, and concomitantly by a
deteriorating and shrinking market for electronics products distribution,
accentuated by the concentration of large retailers such as The Wiz, Circuit
City, and others, serving in a dual role and capacity as both distributor and
retailer.
The Company's transition to the wireless telecommunications arena was most
specifically enhanced and facilitated by: (i) the Company's successful build-out
of its new, state-of-the-art, Paging Network, serving customers in New York, New
Jersey, Connecticut and Philadelphia, which became operational on or about
November 10, 1996; (ii) the development and acquisition of a trunked two-way
radio system, covering New York and New Jersey; and (iii) the Company's
successful bid at the FCC auction for six PCS Licenses, covering the PCS License
Area.
Although the Company completed its build-out during 1996 and has commenced
operation of its Paging Network, utilizing 36 ground transmitters, it has just
begun to develop a customer base and it may be some time before substantial
income is derived from this activity. Moreover, very substantial capital
32
<PAGE>
expenditures will be required to build-out the infrastructure necessary to
operate the Company's PCS system in its PCS License Area. Therefore, despite a
prior operating history, and anticipated substantial additional capital
requirements, prior results of operations may bear little relationship to future
operations and anticipated results of operations.
The Company intends to act as a full-service regional telecommunications
company which management believes is well-positioned to take advantage of the
rapidly emerging wireless marketplace with state-of-the-art technologies. The
Company believes that there is and will be a growing demand for accessibility
and portability, among both business and individual customers and users, and
increasing reliance on "anywhere-anytime" wireless communication, creating a
growing market for users who need and will require integrated, discrete and
elegant wireless solutions compatible with vastly expanding work-days and
workplaces, creating an evolving "working lifestyle."
It is the Company's strategy and intention to finance and build a wireless
communications network, and to provide wireless residential, business and
commercial telephone service, with the ability to transition into the mobile
environment utilizing one telephone number. It is the Company's marketing and
distribution strategy to make it simple and convenient for businesses and
consumers to take advantage of the latest wireless products and services by
providing one-stop shopping by phone. The Company is positioning itself to be
the telemarketing, channel-dominate wireless product sales and service operation
in the northeast.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the A
Warrants by the Selling SecurityHolders. The Company will apply any amounts paid
to the Company by the Selling Securityholders upon exercise of their A Warrants
to the Company's working capital.
DILUTION
As of March 31, 1997, the net tangible book deficit of the Company's
Common Stock, after deduction of $40,000 of liquidation preference related to
4,000,000 shares of Series B Preferred Stock and before giving effect to any of
the Units in the Company's December 1996 Private Offering, was $27,319,729 or
($2.24) per share. Accordingly, purchasers of shares of the Company's Common
Stock in the open market, assuming a market price of $0.56 would suffer
immediate dilution of $2.80 per share. The principal transaction which resulted
in the Company's significant net tangible book deficit was the Company's
purchase of the PCS Licenses, which are intangible, at the FCC's auction for
$26,829,482 and the issuance of a note payable to the FCC which has a balance
due at March 31, 1997 of $23,806,980. In addition, the net worth was impacted
by the issuance of 2,300,000 shares to various parties which resulted in a
non-cash expense of $1,437,500.
The foregoing does not include the dilutive effect of the possible
issuance of 6,000,000 shares of Common Stock issuable upon the conversion of the
Series B Preferred Stock solely to officers and directors at the equivalent of
$1.00 per share of Common Stock.
CERTAIN MARKET INFORMATION
Prior to May 12, 1995, the Company's Common Stock was traded
over-the-counter on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") Stock Market's Electronic Bulletin Board (the
"OTC Bulletin Board").
The Common Stock and A Warrants are currently traded in the NASDAQ
Small-Cap Market under the respective symbols "ELCC" and "ELCCW" and on the
Boston Stock Exchange, under the respective
33
<PAGE>
symbols "ELC" and "ELCW".
The following table sets forth the range of high and low bid quotations of
the Common Stock and A Warrants, as reported on the OTC Bulletin Board or the
NASDAQ Small-Cap Market, for the periods indicated, as adjusted to reflect the 1
for 5 reverse stock split in the second quarter of 1995. These quotations
represent inter-dealer quotations, do not include retail mark-ups, mark-downs or
commissions, and do not necessarily represent actual transactions
<TABLE>
<CAPTION>
COMMON
------
STOCK
-----
Low High
--- ----
<S> <C> <C>
1994
Second Quarter (beginning June 1, 1994)...................................... $5.312 $8.750
Third Quarter................................................................ $2.500 $5.312
Forth Quarter................................................................ $1.250 $5.000
1995
First Quarter................................................................ $2.000 $4.250
Second Quarter (through May 12, 1995)........................................ $0.750 $4.750
<CAPTION>
Low High Low High
--- ---- --- ----
COMMON A WARRANTS
------ ----------
STOCK
-----
1995
<S> <C> <C> <C> <C>
Second Quarter (beginning May 15,1995)................... $4.7500 $5.500 $1.2500 $1.3750
Third Quarter............................................ $4.7500 $6.160 $1.1200 $1.8100
Fourth Quarter........................................... $2.0000 $4.750 $0.5000 $1.1875
1996
First Quarter............................................ $1.8750 $2.375 $0.3750 $0.6875
Second Quarter........................................... $1.5000 $2.593 $0.3750 $1.1560
Third Quarter............................................ $0.5000 $1.560 $0.3750 $0.6250
Fourth Quarter........................................... $1.2810 $2.250 $0.5310 $1.0620
1997
First Quarter............................................ $1,2813 $1.8700 $0.4687 $0.7500
Second Quarter........................................... $0.4063 $1.5313 $0.0938 $0.5625
</TABLE>
On July 14, 1997 the closing bid prices of the Common Stock and A Warrants
as reported on the NASDAQ Small Cap Market were $0.375 and $0.09375
respectively. On July 14, 1997, there were 510 recordholders of the Common Stock
and 54 recordholders of the A Warrants. The Company believes that there are in
excess of 1,000 beneficial holders of the Common Stock and A Warrants.
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<PAGE>
SELLING SECURITYHOLDERS
This Prospectus relates to the sale of shares of Common Stock and A
Warrants by the Selling Securityholders, as well as for the Sale by the Company
of shares of Common Stock upon the exercise of A Warrants. The following table
sets forth as of the date hereof certain information with respect to the persons
for whom the Company is registering the securities for sale to the public. None
of such persons has held any position or office with the Company within the past
three years. The Company will not receive any of the proceeds from the sale of
the Securities by Selling Securityholders.
A WARRANTS
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering After Offering
----------------- --------------
Name of Selling Securityholder A Warrants Percentage A Warrants A Warrants Percentage
- ------------------------------ --------------------- ---------- ---------------------
Offered
-------
<S> <C> <C> <C> <C> <C>
Technics In Design &
Manufacturing, Inc............. 800,000 6.16% 800,000 -0- 0.0%
Marrotta Group................... 400,000 3.17% 400,000 -0- 0.0%
Strategic Marketing Int'l Inc.... 160,000 1.3% 160,000 -0- 0.0%
<CAPTION>
COMMON STOCK
Beneficial Ownership Beneficial Ownership
Prior to Offering After Offering
----------------- --------------
Name of Selling Securityholder Shares Percentage Shares Shares Percentage
- ------------------------------ ------ ---------- ------ -----------------
Offered
-------
<S> <C> <C> <C> <C> <C>
Steven W. Machan........................... 9,999 .08% 9,999 -0- 0.0%
Joseph Amedure............................. 6,666 .05% 6,666 -0- 0.0%
Ann Marie DeMarco.......................... 3,333 .03% 3,333 -0- 0.0%
Richard G. Fishman......................... 6,666 .05% 6,666 -0- 0.0%
Joseph P. Meyer............................ 3,333 .03% 3,333 -0- 0.0%
Nancy H. Scher............................. 37,500 .31% 37,500 -0- 0.0%
Alan DeFabbio.............................. 13,332 .11% 13,332 -0- 0.0%
Angelina Lombardo.......................... 6,666 .05% 6,666 -0- 0.0%
Nicole Raineri............................. 16,650 .14% 16,650 -0- 0.0%
Marrotta Group............................. 200,000 1.64% 200,000 -0- 0.0%
Strategic Marketing Int'l Inc.............. 80,000 .66% 80,000 -0- 0.0%
</TABLE>
PLAN OF DISTRIBUTION
The Selling Securityholders have advised the Company that sales of the
Securities may be effected from time to time by themselves, in transactions
(which may include transactions in the over-the-counter market), in negotiated
transactions, through the writing of options on the Common Stock or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, or at negotiated prices. The
Selling Securityholders may effect such transactions by selling the Securities
35
<PAGE>
directly to purchasers or through broker-dealers that may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholders or the
purchasers of the Securities for whom such broker-dealers may act as agents or
to whom they sell as principals, or both (which compensation as to a particular
broker-dealer must be in excess of customary commissions).
The Selling Securityholders, and any broker-dealers that act in connection
with the sale of the Securities as principals may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act and any commissions
received by them and any profit on the resale of the Securities as principals
might by deemed to be underwriting discounts and commissions under the
Securities Act. The Selling Securityholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
Securities against certain liabilities, including liabilities arising under the
Securities act. The Company will not receive any proceeds from the sales of the
securities but will receive proceeds from the exercise of A Warrants. Sales of
the Securities, or even the potential of such sales, would likely have an
adverse effect on the market price of the Common Stock and A Warrants.
DESCRIPTION OF SECURITIES
The following description relating to the Common Stock and A Warrants of
the Company is a summary and is qualified in its entirety by the provisions of
the Company's certificate of incorporation, as amended, and by-laws, copies of
which are available from the Company upon written request.
Common Stock
The shares of Common Stock: (i) have equal ratable rights to dividends
from funds legally available therefore, when, as and if declared by the board of
directors of the Company are subject to the preference given to holders of
Preferred Stock; (ii) are entitled to share ratable in all of the assets of the
Company available for distribution to holders of Common Stock upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) are not subject
to pre-emptive, subscription or conversion rights and there are no redemption or
sinking fund provisions applicable thereto, and (iv) are entitled to one non-
cumulative vote per share on all matters which stockholders may vote on at all
meetings of stockholders. All outstanding shares of Common Stock are, and the
shares of Common Stock to be sold in this offering when issued and paid for will
be, fully paid and non-assessable.
The Company has paid no cash dividends and it is not anticipated that any
cash dividends will be paid in the foreseeable future. In all events, the
declaration of cash dividends will depend upon future earnings, if any, the
financial needs of the Company, and other pertinent factors.
The Company intends to furnish its stockholders with annual reports of its
operations, containing audited financial statements and with additional
information concerning the business and affairs of the Company whenever deemed
appropriate by the board of directors.
Series B Preferred Stock
On July 23, 1996 the board of directors of the Company at a Special
Meeting of the Board of Directors authorized the issuance of an aggregate of
4,000,000 Series B Preferred Shares of the Company to Brenda Taylor (1,000,000)
and Messrs. Taylor (1,000,000), Winder (1,000,000) and DePalo (1,000,000) in
return for their personal guarantees of approximately $3,000,000 of the
Company's Subordinated Convertible Debentures. Each share of the Series B
Preferred Stock is valued at $1.50 per share and convertible into 1.50 shares of
Common Stock. The Series B Preferred Shares are payable by a three year
promissory note bearing interest at the rate of 7% per annum, with interest
accruing, but not payable until the securities are sold. The promissory notes
are immediately extended for additional one-year terms. The
36
<PAGE>
Series B Preferred Shares are fully paid and non-assessable. The promissory
notes are non-recourse, but are collateralized by a pledge of the Stock.
These Series B Preferred Shares are subject to a three (3) year vesting
period pursuant to which 1/3 of the shares will vest immediately, and
thereafter, on July 23, 1997, if Brenda Taylor and Messrs. Taylor, Winder and
DePalo are still employed by or a director of the Company at such time, an
additional one-third shall vest and thereafter on July 23, 1998, if the
aforementioned individuals are still employed by or a director of the Company at
such time, the balance shall vest. On July 23, 1996, the Company reserved
6,000,000 shares of Common Stock for issuance upon the conversion of these
Series B Preferred Shares.
On October 17, 1996, at the Annual Meeting of Shareholders, shareholders
voting in person and by proxy, voted to approve "Proposal No. 3" described in
the Company's Notice of Annual Meeting and Proxy Statement, which ratified the
issuance of the Series B Preferred Shares.
On May 28, 1997, at a special meeting of the board of directors, the board
voted unanimously both to amend the Company's Articles of Incorporation to
provide voting rights to the four million shares of Series B Preferred Stock
held by Messrs. Taylor, Winder and Depalo and Brenda Taylor at the same voting
ration as equates to the conversion of such shares into Common Stock (i.e. 1 to
1 1/2) and to cancel the notes due in connection with these shares of Series B
Preferred Stock. The vesting provisions remain unaltered. As a result of these
actions it is anticipated that the Company will incur a substantial interest
expense (up to $6,000,000) with respect to the period beginning in the second
quarter of 1997. The voting rights of these shares of Series B Preferred Stock
will be submitted to a vote by the Company's shareholders at a meeting
anticipated to be noticed for and held in July 1997. The affirmative vote of the
Company's shareholders is necessary to effect this change. If this change is
accomplished, such officers, directors and affiliates, will have substantially
enhanced voting rights, without the necessity of first converting their existing
shares of Series B Preferred Stock into Common Stock.
A Warrants
The A Warrants are governed by and subject to the terms of a warrant
agreement as amended (the "Warrant Agreement") between the Company and American
Stock Transfer and Trust Company, New York, New York, as the warrant agent (the
"Warrant Agent"). The following statements are brief summaries of certain
provisions of the Warrant Agreement. Copies of the Warrant Agreement may be
obtained from the Company or the Warrant Agent and have been filed with the
Commission as an exhibit to the Registration Statement of which this Prospectus
is a part. See "Additional Information."
As of the date hereof, there are 9,965,501 A Warrants issued and
outstanding. The Company has reserved an equivalent number of shares of Common
Stock for issuance upon the exercise of the A Warrants.
The Company may redeem the A Warrants with the consent of the
Representative at any time after May 12, 1996 at a price of $0.001 per A Warrant
upon 45 days' prior written notice if the closing bid quotation of the Common
Stock on NASDAQ has been at least $8.00 during the 20 consecutive trading days
ending on the third day prior to the day on which notice of redemption is given.
On or about December 24, 1996 the board of directors authorized a
reduction in the conversion price of the A Warrants from $5.00 to $2.25. The
Company intends to comply with all securities laws with regard to this reduction
in the conversion price. Each A Warrant entitles the holder thereof to purchase
one share of Common Stock at a price of $2.25 per share exercisable until May
12, 1999. The A Warrants contain anti-dilution provisions that protect the Class
A Warrant holders against dilution by adjustment of the exercise price in
certain events including, but not limited to, stock dividends, stock splits,
reclassifications or mergers. Class A Warrant holders do not possess any rights
as a stockholder of the
37
<PAGE>
Company. The shares of Common Stock, when issued upon the exercise of the A
Warrants in accordance with the terms thereof, will be fully paid and
non-assessable.
During the time when the A Warrants are exercisable, the Company is
required to have a current registration statement on file with the Commission
and to effect appropriate qualifications under the laws and regulations of the
states in which the holders of A Warrants reside in order to comply with
applicable laws in connection with the exercise of the A Warrants and the resale
of the Common Stock issued upon such exercise. So long as the A Warrants are
outstanding, the Company has undertaken to file all post-effective amendments to
the registration statement required to be filed under the Securities Act, and to
take appropriate action under Federal and state securities laws to permit the
issuance and resale of Common Stock issuable upon exercise of the A Warrants.
However, there can be no assurance that the Company will be in a position to
effect such action under the federal and applicable state securities laws, and
the failure of the Company to effect such action may cause the exercise of the A
Warrants and the resale or other disposition of the Common Stock issued upon
such exercise to become unlawful. The Company may amend the terms of the A
Warrants but only by extending the termination date or lowering the exercise
price thereof. The Company has no present intention of amending such terms.
B Warrants
The Company has authorized the issuance of B Warrants to purchase a
maximum of 1,000,000 shares of Common Stock, and has reserved an equivalent
number of shares of Common Stock for issuance upon the exercise of such B
Warrants. As of the date hereof 990,000 B Warrants have been issued. No
fractional shares will be issued upon the exercise of the B Warrants, the
Company will pay cash in lieu of fractional shares. On November 20, 1995 the
board of directors authorized an amendment to the Warrant Agreement to provide
for the consolidation of 690,000 B Warrants having the same economic terms as
outstanding A Warrants and to permit the holders of such 690,000 B Warrants to
hold A Warrants in registered form. At this time the board of directors
authorized the issuance of an additional 690,000 A Warrants to replace these
690,000 B Warrants. As of the date of this prospectus there are 300,000 B
Warrants outstanding.
The Company may redeem the B Warrants at a price of $.001 per warrant at
any time after May 12, 1996 upon 45 days' prior written notice if the closing
bid quotation of the Common Stock has been at least $8.00 on all 20 of the
trading days ending on the third day prior to the day on which notice of
redemption is given. Each B Warrant entitles the holder thereof to purchase one
share of Common Stock at a price of $5.00 per share until the fourth anniversary
of the Effective Date. On January 20, 1995, the Company agreed to reduce the
exercise price of 300,000 B Warrants from $5.00 to $2.50 and amended the
exercise period of these 300,000 B Warrants so that they are not exercisable
until February 1, 1996. The B Warrants contain provisions that protect the B
Warrant holders against dilution by adjustment of the exercise price in certain
events including, but not limited to, stock dividends, stock splits,
reclassifications or mergers. B Warrantholders will not possess any rights as a
shareholder of the Company. The shares of Common Stock, when issued upon the
exercise of the B Warrants in accordance with the terms thereof, will be fully
paid and non- assessable. The Company may amend the terms of the B Warrants. The
Company has no present intention of amending such terms.
Transfer and Warrant Agent
The Company's transfer agent and Warrant Agent is American Stock Transfer
& Trust Company, 40 Wall Street, 46th Floor, New York, NY 10005.
38
<PAGE>
LEGAL MATTERS
The validity of the shares of Securities offered hereby will be passed
upon for the Company by Sommer & Schneider LLP, 600 Old Country Road, Suite 535,
Garden City, NY 11530.
EXPERTS
The consolidated financial statements of Electronics Communications Corp.
at December 31, 1996 and 1995 for the years then ended, and for the quarter
ended March 31, 1997, incorporated by reference in this Prospectus and the
registration statement have been examined by Stetz, Belgiovine CPAs, P.C.
independent public accountants, as of and for the periods indicated whose report
thereon appears elsewhere in the prospectus. Such financial statements have been
included in reliance upon the report of Stetz, Belgiovine CPAs, P.C. given upon
their authority as experts in accounting and auditing.
39
<PAGE>
TABLE OF CONTENTS
Page
Available Information................................................ 2
Documents Incorporated by Reference.................................. 2
Prospectus Summary................................................... 3
The Offering......................................................... 4
Summary Consolidated Financial Data.................................. 6
Pro Forma Consolidated Financial Data................................ 7
Risk Factors......................................................... 7
Recent Significant Developments...................................... 24
Use of Proceeds...................................................... 33
Dilution............................................................. 33
Certain Market Information........................................... 33
Selling Securityholders.............................................. 35
Plan of Distribution................................................. 35
Description of Securities............................................ 36
Legal Matters........................................................ 39
Experts.............................................................. 39
ELECTRONICS
COMMUNICATIONS CORP. INC.
-----------
PROSPECTUS
-----------
40
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Estimated expenses in connection with the issuance and distribution of the
Securities to be registered are as follows:
Securities and Exchange Commission............................ $1,596.45
Accounting.................................................... 2,000.00
Printing...................................................... 2,000.00
Legal Fees and Disbursements.................................. 15,000.00
Miscellaneous................................................. 1,000.00
$21,596.45
The Selling Securityholders will not bear any portion of the expenses of
this Offering. The Company will therefore bear all expenses of this Offering.
Item 15. Indemnification of Officers, Directors and Others
Pursuant to the Company's certificate of incorporation, as amended, and
bylaws, filed as exhibits hereto, the Company shall indemnify its directors,
officers, employees and agents to the fullest extent permissible under the
General Corporation Law of the State of Delaware, as effective from time to
time, or any other applicable law.
Under Section 145 of the Delaware General Corporation Law, the Company has
the power to indemnify directors, officers, employees and agents under certain
prescribed circumstances against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which any of them is a party by reason of
his being a director, officer, employee or agent of the Company if it is
determined that he acted in accordance with the applicable standard of conduct
set forth in such statutory provisions.
The Company's certificate of incorporation, as amended, and by-laws
provide that no director of the Company shall be personally liable to the
Company or its stockholders for monetary damages for breach of his or her
fiduciary duty as a director, except: (i) for any breach of the director's duty
of loyalty to the Company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) for paying a dividend or approving a stock repurchase which was
illegal under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper benefit.
The foregoing provisions may provide indemnification against liabilities
arising under the Securities Act. Insofar as indemnification for liabilities
arising under Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy.
41
<PAGE>
Item 16. Exhibits
Exhibit Description Incorporated by
No. ------------- Reference to
--- ------------
4.2 Form of Warrant Certificate (1)
4.3 Form of Warrant Agreement (2)
4.4 Amendment to Warrant Agreement (7)
5.1 Opinion of Sommer & Schneider, LLP including consent (3)
23.1 Consent of Stetz, Belgiovine CPAs, P.C. (4)
23.2 Consent of Sommer & Schneider, LLP (included in Exhibit 5.1) (3)
24 Power of Attorney (5)
99.1 FCC Licensing Agreements (4)
99.2 FCC Plan Notes (4)
99.3 Agreement with EGT (4)
99.4 Agreement with NextWave* (4)
99.5 Settlement and Separation Agreement (4)
99.6 Agreement with D & L Consultants Ltd. (4)
- -----------
(1) Incorporated by reference to Amendment No. 1 to Registration Statement
on Form SB-2 (File No. 33-89336).
(2) Incorporated by reference to initial Registration Statement on Form
SB-2 (File No. 33-89336).
(3) Filed as part of Amendment No. 2 to this Registration Statement.
(4) Filed herein.
(5) Filed as part of the initial filing of this Registration Statement.
(6) Filed as part of Amendment No. 3 to this Registration Statement.
(7) Filed as part of Amendment No. 4 to this Registration Statement.
* Confidential treatment being sought as to a portion of the agreement.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to any charter provision, bylaw, contract arrangements,
statute, or otherwise, the registrant has been advised that in the opinion of
the Commission such indemnification is against policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other that the payment by the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
42
<PAGE>
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post- effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement, and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) for determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this registration statement at the
time the SEC declared it effective, and
(5) for determining any liability under the Securities Act, treat each
post- effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that is has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fairfield, State of New Jersey, on July 14, 1997.
Electronics Communications Corp.
By: /s/ Les Winder
-------------------------------
Les Winder,
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
/s/ William S. Taylor Chairman of the Board, Chief July 14, 1997
- ------------------------ Executive Officer, President
William S. Taylor (Principal Executive and Financial
Officer)
/s/ Les Winder Executive Vice President, Treasurer July 14, 1997
- ------------------------ and Director
Les Winder
/s/ Brenda Taylor Director and Secretary July 14, 1997
- ------------------------
Brenda Taylor
/s/ Andrew A. Miller Controller July 14, 1997
- ------------------------
Andrew A. Miller
* Director July 14, 1997
- ------------------------
Mal Gurian
* Director July 14, 1997
- ------------------------
Ira J. Tabankin
/s/ Robert DePalo Director July 14, 1997
- ------------------------
Robert DePalo
*By Les Winder, pursuant to a power of
attorney
44
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We have issued our report dated February 17, 1997 accompanying the
financial statements of Electronics Communications Corp. appearing in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996
which is incorporated by reference in the Registration Statement of the
aforementioned report and consent to the use of our report and our name as it
appears under the "Experts."
STETZ, BELGIOVINE CPAs, P.C.
Montclair, New Jersey
July 14, 1997
[FEDERAL
COMMUNICATIONS
COMMISSION SEAL]
United States of America
Federal Communications Commission
RADIO STATION AUTHORIZATION
Commercial Mobile Radio Services
Personal Communications Service - Broadband
PERSONAL COMMUNICATIONS NETWORK, INC. Call Sign: KNLF755
ATTN: LES WINDER Market: B030
10 PLOG ROAD
FAIRFIELD, NJ 07004 BANGOR, ME
Channel Block: C
File Number: 00114-CW-L-96
- --------------------------------------------------------------------------------
The licensee hereof is authorized, for the period indicated, to construct and
operate radio transmitting facilities in accordance with the terms and
conditions hereinafter described. This authorization is subject to the
provisions of the Communications Act of 1934, as amended, subsequent Acts of
Congress, international treaties and agreements to which the United States is a
signatory, and all pertinent rules and regulations of the Federal Communications
Commission, contained in the Title 47 of the U.S. Code of Federal Regulations.
- --------------------------------------------------------------------------------
Initial Grant Date .............................. September 17, 1996
Five-year Build Out Date ........................ September 17, 2001
Expiration Date ................................. September 17, 2006
- --------------------------------------------------------------------------------
CONDITIONS:
Pursuant to Section 309(h) of the Communications Act of 1934, as amended, (47
U.S.C. ss. 309(h)), this license is subject to the following conditions: This
license does not vest in the licensee any right to operate a station nor any
right in the use of frequencies beyond the term thereof nor in any other manner
than authorized herein. Neither this license nor the right granted thereunder
shall be assigned or otherwise transferred in violation of the Communications
Act of 1934, as amended (47 U.S.C. ss. 151, et seq.). This license is subject in
terms to the right of use or control conferred by Section 706 of the
Communications Act of 1934, as amended (47 U.S.C. ss. 606).
Conditions continued on Page 2.
- --------------------------------------------------------------------------------
WAIVERS:
No waivers associated with this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 1 of 2
<PAGE>
CONDITIONS:
This authorization is subject to the condition that, in the event that systems
using the same frequencies as granted herein are authorized in an adjacent
foreign territory (Canada/United States), future coordination of any base
station transmitters within 72 km (45 miles) of the United States/Canada border
shall be required to eliminate any harmful interference to operations in the
adjacent foreign territory and to ensure continuance of equal access to the
frequencies by both countries.
This authorization is conditioned upon the full and timely payment of all monies
due pursuant to Sections 1.2110 and 24.711 of the Commission's Rules and the
terms of the Commission's installment plan as set forth in the Note and Security
Agreement executed by the licensee. Failure to comply with this condition will
result in the automatic cancellation of this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 2 of 2
<PAGE>
[FEDERAL
COMMUNICATIONS
COMMISSION SEAL]
United States of America
Federal Communications Commission
RADIO STATION AUTHORIZATION
Commercial Mobile Radio Services
Personal Communications Service - Broadband
PERSONAL COMMUNICATIONS NETWORK, INC. Call Sign: KNLF756
ATTN: LES WINDER Market: B063
10 PLOG ROAD
FAIRFIELD, NJ 07004 BURLINGTON, VT
Channel Block: C
File Number: 00439-CW-L-96
- --------------------------------------------------------------------------------
The licensee hereof is authorized, for the period indicated, to construct and
operate radio transmitting facilities in accordance with the terms and
conditions hereinafter described. This authorization is subject to the
provisions of the Communications Act of 1934, as amended, subsequent Acts of
Congress, international treaties and agreements to which the United States is a
signatory, and all pertinent rules and regulations of the Federal Communications
Commission, contained in the Title 47 of the U.S. Code of Federal Regulations.
- --------------------------------------------------------------------------------
Initial Grant Date .............................. September 17, 1996
Five-year Build Out Date ........................ September 17, 2001
Expiration Date ................................. September 17, 2006
- --------------------------------------------------------------------------------
CONDITIONS:
Pursuant to Section 309(h) of the Communications Act of 1934, as amended, (47
U.S.C. ss. 309(h)), this license is subject to the following conditions: This
license does not vest in the licensee any right to operate a station nor any
right in the use of frequencies beyond the term thereof nor in any other manner
than authorized herein. Neither this license nor the right granted thereunder
shall be assigned or otherwise transferred in violation of the Communications
Act of 1934, as amended (47 U.S.C. ss. 151, et seq.). This license is subject in
terms to the right of use or control conferred by Section 706 of the
Communications Act of 1934, as amended (47 U.S.C. ss. 606).
Conditions continued on Page 2.
- --------------------------------------------------------------------------------
WAIVERS:
No waivers associated with this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 1 of 2
<PAGE>
CONDITIONS:
This authorization is subject to the condition that, in the event that systems
using the same frequencies as granted herein are authorized in an adjacent
foreign territory (Canada/United States), future coordination of any base
station transmitters within 72 km (45 miles) of the United States/Canada border
shall be required to eliminate any harmful interference to operations in the
adjacent foreign territory and to ensure continuance of equal access to the
frequencies by both countries.
This authorization is conditioned upon the full and timely payment of all monies
due pursuant to Sections 1.2110 and 24.711 of the Commission's Rules and the
terms of the Commission's installment plan as set forth in the Note and Security
Agreement executed by the licensee. Failure to comply with this condition will
result in the automatic cancellation of this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 2 of 2
<PAGE>
[FEDERAL
COMMUNICATIONS
COMMISSION SEAL]
United States of America
Federal Communications Commission
RADIO STATION AUTHORIZATION
Commercial Mobile Radio Services
Personal Communications Service - Broadband
PERSONAL COMMUNICATIONS NETWORK, INC. Call Sign: KNLF757
ATTN: LES WINDER Market: B127
10 PLOG ROAD
FAIRFIELD, NJ 07004 ELMIRA-CORNING-HORNELL, NY
Channel Block: C
File Number: 00444-CW-L-96
- --------------------------------------------------------------------------------
The licensee hereof is authorized, for the period indicated, to construct and
operate radio transmitting facilities in accordance with the terms and
conditions hereinafter described. This authorization is subject to the
provisions of the Communications Act of 1934, as amended, subsequent Acts of
Congress, international treaties and agreements to which the United States is a
signatory, and all pertinent rules and regulations of the Federal Communications
Commission, contained in the Title 47 of the U.S. Code of Federal Regulations.
- --------------------------------------------------------------------------------
Initial Grant Date .............................. September 17, 1996
Five-year Build Out Date ........................ September 17, 2001
Expiration Date ................................. September 17, 2006
- --------------------------------------------------------------------------------
CONDITIONS:
Pursuant to Section 309(h) of the Communications Act of 1934, as amended, (47
U.S.C. ss. 309(h)), this license is subject to the following conditions: This
license does not vest in the licensee any right to operate a station nor any
right in the use of frequencies beyond the term thereof nor in any other manner
than authorized herein. Neither this license nor the right granted thereunder
shall be assigned or otherwise transferred in violation of the Communications
Act of 1934, as amended (47 U.S.C. ss. 151, et seq.). This license is subject in
terms to the right of use or control conferred by Section 706 of the
Communications Act of 1934, as amended (47 U.S.C. ss. 606).
Conditions continued on Page 2.
- --------------------------------------------------------------------------------
WAIVERS:
No waivers associated with this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 1 of 2
<PAGE>
CONDITIONS:
This authorization is subject to the condition that, in the event that systems
using the same frequencies as granted herein are authorized in an adjacent
foreign territory (Canada/United States), future coordination of any base
station transmitters within 72 km (45 miles) of the United States/Canada border
shall be required to eliminate any harmful interference to operations in the
adjacent foreign territory and to ensure continuance of equal access to the
frequencies by both countries.
This authorization is conditioned upon the full and timely payment of all monies
due pursuant to Sections 1.2110 and 24.711 of the Commission's Rules and the
terms of the Commission's installment plan as set forth in the Note and Security
Agreement executed by the licensee. Failure to comply with this condition will
result in the automatic cancellation of this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 2 of 2
<PAGE>
[FEDERAL
COMMUNICATIONS
COMMISSION SEAL]
United States of America
Federal Communications Commission
RADIO STATION AUTHORIZATION
Commercial Mobile Radio Services
Personal Communications Service - Broadband
PERSONAL COMMUNICATIONS NETWORK, INC. Call Sign: KNLF758
ATTN: LES WINDER Market: B251
10 PLOG ROAD
FAIRFIELD, NJ 07004 LEWISTON-AUBURN, ME
Channel Block: C
File Number: 00451-CW-L-96
- --------------------------------------------------------------------------------
The licensee hereof is authorized, for the period indicated, to construct and
operate radio transmitting facilities in accordance with the terms and
conditions hereinafter described. This authorization is subject to the
provisions of the Communications Act of 1934, as amended, subsequent Acts of
Congress, international treaties and agreements to which the United States is a
signatory, and all pertinent rules and regulations of the Federal Communications
Commission, contained in the Title 47 of the U.S. Code of Federal Regulations.
- --------------------------------------------------------------------------------
Initial Grant Date .............................. September 17, 1996
Five-year Build Out Date ........................ September 17, 2001
Expiration Date ................................. September 17, 2006
- --------------------------------------------------------------------------------
CONDITIONS:
Pursuant to Section 309(h) of the Communications Act of 1934, as amended, (47
U.S.C. ss. 309(h)), this license is subject to the following conditions: This
license does not vest in the licensee any right to operate a station nor any
right in the use of frequencies beyond the term thereof nor in any other manner
than authorized herein. Neither this license nor the right granted thereunder
shall be assigned or otherwise transferred in violation of the Communications
Act of 1934, as amended (47 U.S.C. ss. 151, et seq.). This license is subject in
terms to the right of use or control conferred by Section 706 of the
Communications Act of 1934, as amended (47 U.S.C. ss. 606).
Conditions continued on Page 2.
- --------------------------------------------------------------------------------
WAIVERS:
No waivers associated with this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 1 of 2
<PAGE>
CONDITIONS:
This authorization is subject to the condition that, in the event that systems
using the same frequencies as granted herein are authorized in an adjacent
foreign territory (Canada/United States), future coordination of any base
station transmitters within 72 km (45 miles) of the United States/Canada border
shall be required to eliminate any harmful interference to operations in the
adjacent foreign territory and to ensure continuance of equal access to the
frequencies by both countries.
This authorization is conditioned upon the full and timely payment of all monies
due pursuant to Sections 1.2110 and 24.711 of the Commission's Rules and the
terms of the Commission's installment plan as set forth in the Note and Security
Agreement executed by the licensee. Failure to comply with this condition will
result in the automatic cancellation of this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 2 of 2
<PAGE>
[FEDERAL
COMMUNICATIONS
COMMISSION SEAL]
United States of America
Federal Communications Commission
RADIO STATION AUTHORIZATION
Commercial Mobile Radio Services
Personal Communications Service - Broadband
PERSONAL COMMUNICATIONS NETWORK, INC. Call Sign: KNLF759
ATTN: LES WINDER Market: B388
10 PLOG ROAD
FAIRFIELD, NJ 07004 RUTLAND-BENNINGTON, VT
Channel Block: C
File Number: 00458-CW-L-96
- --------------------------------------------------------------------------------
The licensee hereof is authorized, for the period indicated, to construct and
operate radio transmitting facilities in accordance with the terms and
conditions hereinafter described. This authorization is subject to the
provisions of the Communications Act of 1934, as amended, subsequent Acts of
Congress, international treaties and agreements to which the United States is a
signatory, and all pertinent rules and regulations of the Federal Communications
Commission, contained in the Title 47 of the U.S. Code of Federal Regulations.
- --------------------------------------------------------------------------------
Initial Grant Date .............................. September 17, 1996
Five-year Build Out Date ........................ September 17, 2001
Expiration Date ................................. September 17, 2006
- --------------------------------------------------------------------------------
CONDITIONS:
Pursuant to Section 309(h) of the Communications Act of 1934, as amended, (47
U.S.C. ss. 309(h)), this license is subject to the following conditions: This
license does not vest in the licensee any right to operate a station nor any
right in the use of frequencies beyond the term thereof nor in any other manner
than authorized herein. Neither this license nor the right granted thereunder
shall be assigned or otherwise transferred in violation of the Communications
Act of 1934, as amended (47 U.S.C. ss. 151, et seq.). This license is subject in
terms to the right of use or control conferred by Section 706 of the
Communications Act of 1934, as amended (47 U.S.C. ss. 606).
Conditions continued on Page 2.
- --------------------------------------------------------------------------------
WAIVERS:
No waivers associated with this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 1 of 2
<PAGE>
CONDITIONS:
This authorization is subject to the condition that, in the event that systems
using the same frequencies as granted herein are authorized in an adjacent
foreign territory (Canada/United States), future coordination of any base
station transmitters within 72 km (45 miles) of the United States/Canada border
shall be required to eliminate any harmful interference to operations in the
adjacent foreign territory and to ensure continuance of equal access to the
frequencies by both countries.
This authorization is conditioned upon the full and timely payment of all monies
due pursuant to Sections 1.2110 and 24.711 of the Commission's Rules and the
terms of the Commission's installment plan as set forth in the Note and Security
Agreement executed by the licensee. Failure to comply with this condition will
result in the automatic cancellation of this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 2 of 2
<PAGE>
[FEDERAL
COMMUNICATIONS
COMMISSION SEAL]
United States of America
Federal Communications Commission
RADIO STATION AUTHORIZATION
Commercial Mobile Radio Services
Personal Communications Service - Broadband
PERSONAL COMMUNICATIONS NETWORK, INC. Call Sign: KNLF760
ATTN: LES WINDER Market: B0465
10 PLOG ROAD
FAIRFIELD, NJ 07004 WATERVILLE-AUGUSTA, ME
Channel Block: C
File Number: 00461-CW-L-96
- --------------------------------------------------------------------------------
The licensee hereof is authorized, for the period indicated, to construct and
operate radio transmitting facilities in accordance with the terms and
conditions hereinafter described. This authorization is subject to the
provisions of the Communications Act of 1934, as amended, subsequent Acts of
Congress, international treaties and agreements to which the United States is a
signatory, and all pertinent rules and regulations of the Federal Communications
Commission, contained in the Title 47 of the U.S. Code of Federal Regulations.
- --------------------------------------------------------------------------------
Initial Grant Date .............................. September 17, 1996
Five-year Build Out Date ........................ September 17, 2001
Expiration Date ................................. September 17, 2006
- --------------------------------------------------------------------------------
CONDITIONS:
Pursuant to Section 309(h) of the Communications Act of 1934, as amended, (47
U.S.C. ss. 309(h)), this license is subject to the following conditions: This
license does not vest in the licensee any right to operate a station nor any
right in the use of frequencies beyond the term thereof nor in any other manner
than authorized herein. Neither this license nor the right granted thereunder
shall be assigned or otherwise transferred in violation of the Communications
Act of 1934, as amended (47 U.S.C. ss. 151, et seq.). This license is subject in
terms to the right of use or control conferred by Section 706 of the
Communications Act of 1934, as amended (47 U.S.C. ss. 606).
Conditions continued on Page 2.
- --------------------------------------------------------------------------------
WAIVERS:
No waivers associated with this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 1 of 2
<PAGE>
CONDITIONS:
This authorization is subject to the condition that, in the event that systems
using the same frequencies as granted herein are authorized in an adjacent
foreign territory (Canada/United States), future coordination of any base
station transmitters within 72 km (45 miles) of the United States/Canada border
shall be required to eliminate any harmful interference to operations in the
adjacent foreign territory and to ensure continuance of equal access to the
frequencies by both countries.
This authorization is conditioned upon the full and timely payment of all monies
due pursuant to Sections 1.2110 and 24.711 of the Commission's Rules and the
terms of the Commission's installment plan as set forth in the Note and Security
Agreement executed by the licensee. Failure to comply with this condition will
result in the automatic cancellation of this authorization.
- --------------------------------------------------------------------------------
Issue Date: September 17, 1996
FCC Form 463a Page 2 of 2
SECURITY AGREEMENT
(Broadband Personal Communications Service, C Block: Auction Event No. 5)
License No. PBB030C
This SECURITY AGREEMENT DATED September 17, 1996, ("Agreement") between PERSONAL
COMMUNICATIONS NETWORK, INC., a corporation ("Debtor") and the FEDERAL
COMMUNICATIONS COMMISSION, an independent regulatory agency of the United States
("Commission" or "Secured Party")
WITNESSETH
WHEREAS, Debtor has submitted the highest accepted bid for license number
PBB030C in the Broadband Personal Communications Service C Block auction
(hereinafter the "License") conducted by the Commission to assign such licenses;
WHEREAS, the Commission has duly determined to grant the License to
Debtor, subject to the terms and conditions set forth in the orders and
regulations of the Commission applicable to such licenses, and the
Communications Act of 1934, as amended;
WHEREAS, Debtor wishes to pay its auction price for the License by
installments through an Installment Payment Plan as provided by 47 C.F.R. ss.ss.
24.711, 1.2110 (hereinafter the "Installment Payment Plan") and undertakes to
hold the License under the terms and conditions set forth in the Commission's
orders and regulations, as amended, applicable to such licenses, and the
Communications Act of 1934, as amended and the terms and conditions of this
Agreement;
WHEREAS, the Commission has agreed to permit the Debtor to make payment of
the auction price for the License through an Installment Payment Plan; and
WHEREAS, as a condition to such agreement, Debtor has agreed to execute
the Installment Payment Plan Note of even date ("Note") and to enter into this
Agreement and make the pledge and assignment of collateral contemplated herein.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
contained herein and for other good and valuable consideration, the receipt,
adequacy, and sufficiency of which is hereby acknowledged, and in order to
induce the Commission to permit Debtor to pay the auction price for the License
through the Installment Payment Plan, Debtor hereby agrees with the Commission
as follows:
<PAGE>
1. Pledge and Assignment of Collateral for Obligations Under Note. Debtor
hereby pledges, assigns, hypothecates, delivers, and sets over to the Commission
and grants to the Commission a first lien on and continuing security interest in
all of the Debtor's rights and interest in the License and all proceeds, profits
and products of any sale of or other disposition thereof (collectively the
"Collateral"), all as collateral security for the prompt and complete payment
when due (whether in accordance with the schedule of payments, at the stated
maturity, by acceleration, or otherwise) of the unpaid principal and interest
due, and such other additional costs, expenses, late charges, administrative
charges, attorneys fees, and default payments assessable under the terms of the
Note (all collectively "Obligations"). It is expressly understood by Debtor that
all of the terms of the Note apply to this Agreement and that reference herein
to "this Agreement" includes both the Security Agreement herein and the Note.
For purposes of interpreting the terms used in this Agreement shall have the
meaning ascribed to them in the Uniform Commercial Code (Official Text and
Comments, American Law Institute).
2. Interest of Commission. It is understood and acknowledged by Debtor
that pursuant to Section 301 of the Communications Act of 1934, as amended, the
Commission is charged with the regulatory mandate to maintain control over all
channels of radio transmission (the Spectrum"), and to provide licenses for the
use of such radio channels, but not ownership thereof. Debtor understands and
acknowledges that it holds a mere conditional license to use the Spectrum with
no ownership interest in the Collateral (or any underlying right to use the
Spectrum), or any power to assign the License without the prior approval of the
Commission pursuant to Section 310(d) of the Communications Act of 1934, as
amended. Debtor further understands and acknowledges that it is giving a
security interest to the Commission in the Collateral only to assist the
Commission in protecting its ability to enforce the Commission's regulations
which condition holding the license in compliance with all then-applicable
orders and regulations of the Commission, including, but not limited to, full
and timely payment of all payments under the Installment Payment Plan. To that
end, and not in derogation of any of the Commission's regulatory authority over
the License, Debtor hereby acknowledges that the Commission has a first security
interest in the Collateral, and Debtor shall not dispute such first security
interest, or the Commission's rights as a secured party hereunder, in any legal
or equitable proceeding in which Debtor, or any assignee or trustee of the
estate of Debtor in bankruptcy, is a party. Nothing set forth herein shall
preclude the Debtor from granting to other parties a subordinated security
interest limited to a subordinated interest in the proceeds arising from an
authorized assignment or transfer of the License to a third party (hereinafter a
"Subordinated Security Interest"), provided however that any such Subordinated
Security Interest shall be subordinated to and in no way inconsistent with the
Commission's first security interest in the Collateral, including but not
limited to the proceeds of any disposition of the License, and further provided
that said Subordinated Security Interest shall not survive if the License is
rescinded, cancelled, or revoked by regulatory action of the Commission for
violation of the terms and conditions of the License, including but not limited
to regulatory action upon a default under this Agreement pursuant to 47 C.F.R.
ss. 1.2110. The Debtor shall provide to the Commission upon request the name and
address of any party with a Subordinated Security Interest in the proceeds of
any disposition of the License, and a copy of any documents setting forth such a
Subordinated Security Interest.
Page 2
<PAGE>
3. Compliance with Commission Orders and Regulations. Nothing in this
Agreement shall be deemed to modify any then-applicable orders and regulations
of the Commission, and nothing in this Agreement shall be deemed to release
Debtor from compliance therewith.
4. Representations and Warranties of Debtor. Debtor represents and
warrants to the Commission as follows:
(a) It has full power, authority and legal right to execute, deliver
and perform this Agreement, the Note, and any other documents delivered in
connection with the Note, this Agreement and the transactions contemplated
therein to make the debt transaction evidenced by the Note, and to pledge
the Collateral pursuant to this Agreement.
(b) It is a duly organized corporation, existing in good standing
under the laws of Delaware and is duly qualified to do business wherever
necessary to carry on its present operations. Its principal place of
business and chief executive office are located at 10 Plog Road,
Fairfield, NJ 07004.
(c) The representative of Debtor purporting to act on behalf of
Debtor in executing this Agreement, the Note, and any other documents
delivered in connection with the Note, this Agreement and the transactions
contemplated therein, is duly authorized by Debtor to take all such acts
and to execute all such documents.
(d) No security agreements have been executed and delivered, and no
financing statements have been filed in any jurisdiction, granting or
purporting to grant a security interest in the Collateral that would give
any other person any right or interest in the Collateral, or any portion
thereof, except for a Subordinated Security Interest, as defined herein,
and that no person has an a secured interest that is or will be in any way
inconsistent with the rights of the Commission herein as the first secured
party or the terms of this Agreement.
(e) No consent of any other party and no consent, license, approval
or authorization of, exemption by, or registration or declaration with,
any governmental instrumentality, domestic or foreign other than the
Commission, is required to be obtained in connection with the execution,
delivery or performance of this Agreement, the Note or any other document
executed and delivered in connection with the delivery of the Note or this
Agreement.
(f) The execution, delivery and performance of this Agreement and
the Note, does not and will not violate any provision of any applicable
law or regulation or any order, judgment, writ, award or decree of any
court, arbitrator, governmental instrumentality, domestic or foreign, or
of any indenture, contract, agreement or other undertaking to which Debtor
is a party or which purports to be binding upon Debtor or upon any of
Debtor's assets, and will not result in the creation or imposition of any
lien, charge or encumbrance on or security interest in any of the assets
of Debtor, except as contemplated by this Agreement.
Page 3
<PAGE>
(g) Debtor will not permit any financing statement to be filed with
respect to the Collateral or any portion thereof or interest therein that would
give said any other person a right or any interest in the Collateral, or any
portion thereof, except that Debtor may permit a third party to file a
Subordinated Security Interest, as defined herein, so long as said Subordinated
Security Interest, is not in any way inconsistent with the terms of this
Agreement and the rights of the Commission herein as the first secured party.
Debtor will promptly notify Secured Party of, and will defend the Collateral
against, all claims and demands of all persons at any time claiming the same or
any interest therein that would give any other person a right or any interest in
the Collateral not subordinated to the rights of the Commission herein as the
first secured party, or that is in any way inconsistent with the terms of this
Agreement.
5. Covenants of Debtor. Debtor hereby covenants and agrees as follows:
(a) That it will defend the Commission's right, title and security
interest in and to the Collateral against the claims and demands of all persons
whomsoever.
(b) That it will execute all financing statements and other instruments or
documents related to the perfection of the Commission's security interest,
including but not limited to any renewal financing statements or instruments as
required to maintain the Commission's security interest, or as otherwise
reasonably requested by the Commission, and to file and pay the cost of filing
any such instruments or documents as required under this paragraph in whichever
public office deemed advisable by the Commission.
(c) That it will not make any indenture, contract, agreement or other
undertaking to which Debtor is a party or which purports to be binding upon
Debtor, or upon any of Debtor's assets, that would result in the creation or
imposition of any lien, charge or encumbrance on or security interest in any of
the assets of Debtor that would give any other person a right or any interest in
the Collateral, or any portion thereof, except for a Subordinated Security
Interest, as defined herein, provided that such Subordinated Security Agreement
is not inconsistent with the terms of this Agreement and interest of the
Commission as the first secured party.
(d) That it will pay all costs and expenses, including reasonable
attorneys' fees, of the Commission incurred in connection with the enforcement
of this Agreement and any and all liability incurred by the Commission resulting
from any act or omission of Debtor with respect to the Collateral and this
Agreement.
(e) Debtor will execute, alone or with Secured Party, any document, will
procure any document and do all other acts and pay all connected costs, in a
timely and proper manner, which from the character or use of the Collateral may
be reasonably necessary to protect the Collateral against the rights, claims or
interests of third persons, and will otherwise preserve the Collateral as
security hereunder. The specific undertakings required of Debtor in this
Agreement shall not be construed to exclude the aforementioned general
obligation.
Page 4
<PAGE>
6. Power of Attorney. Debtor hereby irrevocably constitutes and appoints
the Commission and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Debtor and in the name of Debtor
or in its own name, from time to time in the Commission's discretion, for the
purpose of carrying out the terms of this Agreement and, to the extent permitted
by applicable law, to take any and all appropriate actions and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement. Such appointment is a power coupled
with an interest until all Obligations have been paid in full by Debtor.
7. Event of Default. Debtor shall be in default under this Agreement if an
Event of Default (as defined in the Note) has occurred.
8. Remedies. If an Event of Default shall occur, the Commission shall
thereafter have the following rights and remedies (to the extent permitted by
applicable law) in addition to the rights and remedies relating to the Note, all
such remedies being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently at such time or times as Commission deems
expedient:
(a) the License shall be automatically canceled pursuant to 47
C.F.R. ss. 1.2110;
(b) all Obligations secured hereunder shall become immediately due
and payable without presentment, demand, protest, further notice, or other
requirements of any kind;
(c) the Commission may demand, sue for, and collect the outstanding
balance of the unpaid Obligations, and make any compromise, or settlement
the Commission deems suitable with respect to any Collateral which may be
held by it hereunder;
(d) Debtor hereby acknowledges the Commission's authority, pursuant
to the Communications Act of 1934, as amended, and the Commission's orders
and regulations then-applicable to such licenses, to conduct another
public auction or assign the License in the event that the Commission
rescinds, cancels, or revokes the License for any default under this
Agreement or any other violation of the terms and conditions of the
License. The Undersigned hereby waives all notices prior to the conduct of
said public auction or assignment by the Commission or its agents. Debtor
further acknowledges that in the event that the Commission rescinds,
cancels, or revokes the License for any default under this Agreement or
any other violation of the terms and conditions of the License, Debtor has
no right or interest in any moneys or evidence of indebtedness given to
the Commission by a subsequent licensee of the Spectrum and that all such
moneys or evidence of indebtedness are, and shall remain, the full
property of the federal Treasury, pursuant to Section 309(j) of the
Communications Act of 1934, as amended, and then-applicable Commission
orders and regulations.
(e) In addition to other remedies hereunder, Debtor shall remain
liable, and obligated to pay on demand, all costs of collection and
reasonable attorneys' fees and
Page 5
<PAGE>
expenses incurred or paid by the Commission in enforcing this Agreement
including, without limitation, all administrative fees and expenses of the
Commission in attempting to collect the Obligations or to enforce this
Agreement, or the prosecution or defense of any action or proceeding
related to the subject matter of this Agreement, and all payments assessed
by the Commission in the event of default as specified in Commission
orders and regulations applicable to such licenses.
(f) Debtor hereby acknowledges that the Commission has no adequate
remedy at law with respect to a breach of any covenant contained in this
Agreement and, as a consequence, agrees that each and every covenant
contained in this Agreement shall be specifically enforceable against
Debtor, and Debtor hereby waives and agrees not to assert any defense
against an action for specific performance of such covenants.
(g) Secured Party may exercise any and all of the rights and
remedies conferred upon Secured Party by this Agreement, any other loan
documents, or by applicable law, either concurrently or in such order as
Secured Party may determine.
(h) Secured Party may make such payments and do such acts as Secured
Party may deem necessary to protect its secured interest in the
Collateral.
(i) the Commission may exercise any remedies of a Secured Party
under the Uniform Commercial Code (Official Text and Comments, American
Law Institute), or any other applicable law.
(j) Secured Party shall have the right to enforce one or more
remedies hereunder or under the Note, successively or concurrently, and
such action shall not operate to estop or prevent Secured Party from
pursuing any further remedy which it may have.
9. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10. No Waiver; Cumulative Remedies. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Commission. The Commission shall not
by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies under this Agreement, and no waiver shall be valid unless in
writing, signed by the Commission, and then only to the extent therein set
forth. A waiver by the Commission of any right or remedy under this Agreement on
any one occasion shall not be construed as a bar to any right or remedy which
the Commission would otherwise have on any future occasion. No failure to
exercise nor any delay in exercising on the part of the Commission, any right,
power or privilege under this Agreement shall operate as a waiver
Page 6
<PAGE>
thereof; nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right power or privilege. The rights and remedies
provided in this Agreement are cumulative and may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
11. Compliance With Other Applicable Orders and Regulations. Debtor
recognizes that its continued retention of the License, and rights to operate as
a Commission licensee thereunder, are conditioned upon compliance with all
Commission orders and regulations applicable to the License and the
Communications Act of 1934, as amended. Debtor further recognizes that full and
timely payment as set forth in the Note does not otherwise relieve it of its
obligations otherwise to comply with the then-applicable orders and regulations
of the Commission, and the Communications Act of 1934, as amended.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with Communications Act of 1934, as amended, then-applicable
Commission orders and regulations, as amended, and federal law.
13. Successors, Assigns, Designated Agents. Subject to the provisions of
Paragraph 2 of this Agreement regarding the restriction upon Debtor's ability to
assign the License, this Agreement shall be binding upon Debtor, its successors
and assigns and shall inure to the benefit of the Commission, and its successors
and assigns. The Commission may designate agents other than the Commission to
act on its behalf with respect to any and all rights and remedies of the
Commission under this Agreement or the Note, and such designee shall have all of
the rights, powers and remedies available to the Commission within the scope of
its designation. Nothing herein, however, shall be construed as granting Debtor
any right to sell or assign the License.
14. Singular and Plural. Wherever used, the singular number shall include
the plural, the plural shall include the singular, and the use of any gender
shall be applicable to all genders.
15. Financing Statements. To the extent permitted by applicable law,
Debtor authorizes the Commission to sign and file financing statements at any
time with respect to any of the Collateral without the signature of Debtor.
Debtor will, however, at the same time and from time to time, execute such
financing statements, agreements and other instruments and perform such acts as
Commission may request in order to establish and maintain a validly perfected
first priority security interest in the Collateral. All reasonable costs of
filing and recording will be paid by Debtor.
16. Indemnification. Debtor hereby agrees to defend, indemnify and hold
harmless Secured Party and its employees, officers and agents, from and against
any and all liabilities, claims and obligations which may be incurred, asserted
or imposed upon them or any of them as a result of or in connection with any
use, operation, lease or consumption of any of the Collateral or as a result of
Secured Party's seeking to obtain performance of any of the obligations due with
respect to the Collateral.
Page 7
<PAGE>
17. Notices. All notices, requests and demands hereunder shall be in
writing and shall be deemed to have been duly given, made or served on the
earliest of (I) three (3) business days after the date mailed if sent by
first-class U.S. mail, postage prepaid, (ii) actual delivery thereof if
delivered by hand to the party to be notified, (iii) receipt thereof if sent by
express mail or other overnight courier service, or (iv) transmission to the
telecopier number listed below for the party to be notified if sent within
normal business hours or, otherwise, on the next business day thereafter. In
each case such notification with respect to the Debtor and the Commission shall
be addressed as set forth below or as may be hereafter designed by the
respective parties hereto.
As to Debtor: Mr. Les Winder
Personal Communications Network, Inc.
c/o Electronics Communications Corporation
10 Plog Road
Fairfield, NJ 07004
As to the Commission:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
DEBTOR: PERSONAL COMMUNICATIONS NETWORK, INC.
Date: 12/12/96 By: /s/ Les Winder
----------------------------------
Its: Executive Vice President
----------------------------------
FEDERAL COMMUNICATIONS COMMISSION
Date: By:
---------- ----------------------------------
Its: Associate Managing Director for Operations (or
Designee)
Page 8
<PAGE>
SECURITY AGREEMENT
(Broadband Personal Communications Service, C Block: Auction Event No. 5)
License No. PBB063C
This SECURITY AGREEMENT DATED September 17, 1996, ("Agreement") between PERSONAL
COMMUNICATIONS NETWORK, INC., a corporation ("Debtor") and the FEDERAL
COMMUNICATIONS COMMISSION, an independent regulatory agency of the United States
("Commission" or "Secured Party")
WITNESSETH
WHEREAS, Debtor has submitted the highest accepted bid for license number
PBB063C in the Broadband Personal Communications Service C Block auction
(hereinafter the "License") conducted by the Commission to assign such licenses;
WHEREAS, the Commission has duly determined to grant the License to
Debtor, subject to the terms and conditions set forth in the orders and
regulations of the Commission applicable to such licenses, and the
Communications Act of 1934, as amended;
WHEREAS, Debtor wishes to pay its auction price for the License by
installments through an Installment Payment Plan as provided by 47 C.F.R. ss.ss.
24.711, 1.2110 (hereinafter the "Installment Payment Plan") and undertakes to
hold the License under the terms and conditions set forth in the Commission's
orders and regulations, as amended, applicable to such licenses, and the
Communications Act of 1934, as amended and the terms and conditions of this
Agreement;
WHEREAS, the Commission has agreed to permit the Debtor to make payment of
the auction price for the License through an Installment Payment Plan; and
WHEREAS, as a condition to such agreement, Debtor has agreed to execute
the Installment Payment Plan Note of even date ("Note") and to enter into this
Agreement and make the pledge and assignment of collateral contemplated herein.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
contained herein and for other good and valuable consideration, the receipt,
adequacy, and sufficiency of which is hereby acknowledged, and in order to
induce the Commission to permit Debtor to pay the auction price for the License
through the Installment Payment Plan, Debtor hereby agrees with the Commission
as follows:
<PAGE>
1. Pledge and Assignment of Collateral for Obligations Under Note. Debtor
hereby pledges, assigns, hypothecates, delivers, and sets over to the Commission
and grants to the Commission a first lien on and continuing security interest in
all of the Debtor's rights and interest in the License and all proceeds, profits
and products of any sale of or other disposition thereof (collectively the
"Collateral"), all as collateral security for the prompt and complete payment
when due (whether in accordance with the schedule of payments, at the stated
maturity, by acceleration, or otherwise) of the unpaid principal and interest
due, and such other additional costs, expenses, late charges, administrative
charges, attorneys fees, and default payments assessable under the terms of the
Note (all collectively "Obligations"). It is expressly understood by Debtor that
all of the terms of the Note apply to this Agreement and that reference herein
to "this Agreement" includes both the Security Agreement herein and the Note.
For purposes of interpreting the terms used in this Agreement shall have the
meaning ascribed to them in the Uniform Commercial Code (Official Text and
Comments, American Law Institute).
2. Interest of Commission. It is understood and acknowledged by Debtor
that pursuant to Section 301 of the Communications Act of 1934, as amended, the
Commission is charged with the regulatory mandate to maintain control over all
channels of radio transmission (the Spectrum"), and to provide licenses for the
use of such radio channels, but not ownership thereof. Debtor understands and
acknowledges that it holds a mere conditional license to use the Spectrum with
no ownership interest in the Collateral (or any underlying right to use the
Spectrum), or any power to assign the License without the prior approval of the
Commission pursuant to Section 310(d) of the Communications Act of 1934, as
amended. Debtor further understands and acknowledges that it is giving a
security interest to the Commission in the Collateral only to assist the
Commission in protecting its ability to enforce the Commission's regulations
which condition holding the license in compliance with all then-applicable
orders and regulations of the Commission, including, but not limited to, full
and timely payment of all payments under the Installment Payment Plan. To that
end, and not in derogation of any of the Commission's regulatory authority over
the License, Debtor hereby acknowledges that the Commission has a first security
interest in the Collateral, and Debtor shall not dispute such first security
interest, or the Commission's rights as a secured party hereunder, in any legal
or equitable proceeding in which Debtor, or any assignee or trustee of the
estate of Debtor in bankruptcy, is a party. Nothing set forth herein shall
preclude the Debtor from granting to other parties a subordinated security
interest limited to a subordinated interest in the proceeds arising from an
authorized assignment or transfer of the License to a third party (hereinafter a
"Subordinated Security Interest"), provided however that any such Subordinated
Security Interest shall be subordinated to and in no way inconsistent with the
Commission's first security interest in the Collateral, including but not
limited to the proceeds of any disposition of the License, and further provided
that said Subordinated Security Interest shall not survive if the License is
rescinded, cancelled, or revoked by regulatory action of the Commission for
violation of the terms and conditions of the License, including but not limited
to regulatory action upon a default under this Agreement pursuant to 47 C.F.R.
ss. 1.2110. The Debtor shall provide to the Commission upon request the name and
address of any party with a Subordinated Security Interest in the proceeds of
any disposition of the License, and a copy of any documents setting forth such a
Subordinated Security Interest.
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3. Compliance with Commission Orders and Regulations. Nothing in this
Agreement shall be deemed to modify any then-applicable orders and regulations
of the Commission, and nothing in this Agreement shall be deemed to release
Debtor from compliance therewith.
4. Representations and Warranties of Debtor. Debtor represents and
warrants to the Commission as follows:
(a) It has full power, authority and legal right to execute, deliver
and perform this Agreement, the Note, and any other documents delivered in
connection with the Note, this Agreement and the transactions contemplated
therein to make the debt transaction evidenced by the Note, and to pledge
the Collateral pursuant to this Agreement.
(b) It is a duly organized corporation, existing in good standing
under the laws of Delaware and is duly qualified to do business wherever
necessary to carry on its present operations. Its principal place of
business and chief executive office are located at 10 Plog Road,
Fairfield, NJ 07004.
(c) The representative of Debtor purporting to act on behalf of
Debtor in executing this Agreement, the Note, and any other documents
delivered in connection with the Note, this Agreement and the transactions
contemplated therein, is duly authorized by Debtor to take all such acts
and to execute all such documents.
(d) No security agreements have been executed and delivered, and no
financing statements have been filed in any jurisdiction, granting or
purporting to grant a security interest in the Collateral that would give
any other person any right or interest in the Collateral, or any portion
thereof, except for a Subordinated Security Interest, as defined herein,
and that no person has an a secured interest that is or will be in any way
inconsistent with the rights of the Commission herein as the first secured
party or the terms of this Agreement.
(e) No consent of any other party and no consent, license, approval
or authorization of, exemption by, or registration or declaration with,
any governmental instrumentality, domestic or foreign other than the
Commission, is required to be obtained in connection with the execution,
delivery or performance of this Agreement, the Note or any other document
executed and delivered in connection with the delivery of the Note or this
Agreement.
(f) The execution, delivery and performance of this Agreement and
the Note, does not and will not violate any provision of any applicable
law or regulation or any order, judgment, writ, award or decree of any
court, arbitrator, governmental instrumentality, domestic or foreign, or
of any indenture, contract, agreement or other undertaking to which Debtor
is a party or which purports to be binding upon Debtor or upon any of
Debtor's assets, and will not result in the creation or imposition of any
lien, charge or encumbrance on or security interest in any of the assets
of Debtor, except as contemplated by this Agreement.
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<PAGE>
(g) Debtor will not permit any financing statement to be filed with
respect to the Collateral or any portion thereof or interest therein that would
give said any other person a right or any interest in the Collateral, or any
portion thereof, except that Debtor may permit a third party to file a
Subordinated Security Interest, as defined herein, so long as said Subordinated
Security Interest, is not in any way inconsistent with the terms of this
Agreement and the rights of the Commission herein as the first secured party.
Debtor will promptly notify Secured Party of, and will defend the Collateral
against, all claims and demands of all persons at any time claiming the same or
any interest therein that would give any other person a right or any interest in
the Collateral not subordinated to the rights of the Commission herein as the
first secured party, or that is in any way inconsistent with the terms of this
Agreement.
5. Covenants of Debtor. Debtor hereby covenants and agrees as follows:
(a) That it will defend the Commission's right, title and security
interest in and to the Collateral against the claims and demands of all persons
whomsoever.
(b) That it will execute all financing statements and other instruments or
documents related to the perfection of the Commission's security interest,
including but not limited to any renewal financing statements or instruments as
required to maintain the Commission's security interest, or as otherwise
reasonably requested by the Commission, and to file and pay the cost of filing
any such instruments or documents as required under this paragraph in whichever
public office deemed advisable by the Commission.
(c) That it will not make any indenture, contract, agreement or other
undertaking to which Debtor is a party or which purports to be binding upon
Debtor, or upon any of Debtor's assets, that would result in the creation or
imposition of any lien, charge or encumbrance on or security interest in any of
the assets of Debtor that would give any other person a right or any interest in
the Collateral, or any portion thereof, except for a Subordinated Security
Interest, as defined herein, provided that such Subordinated Security Agreement
is not inconsistent with the terms of this Agreement and interest of the
Commission as the first secured party.
(d) That it will pay all costs and expenses, including reasonable
attorneys' fees, of the Commission incurred in connection with the enforcement
of this Agreement and any and all liability incurred by the Commission resulting
from any act or omission of Debtor with respect to the Collateral and this
Agreement.
(e) Debtor will execute, alone or with Secured Party, any document, will
procure any document and do all other acts and pay all connected costs, in a
timely and proper manner, which from the character or use of the Collateral may
be reasonably necessary to protect the Collateral against the rights, claims or
interests of third persons, and will otherwise preserve the Collateral as
security hereunder. The specific undertakings required of Debtor in this
Agreement shall not be construed to exclude the aforementioned general
obligation.
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6. Power of Attorney. Debtor hereby irrevocably constitutes and appoints
the Commission and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Debtor and in the name of Debtor
or in its own name, from time to time in the Commission's discretion, for the
purpose of carrying out the terms of this Agreement and, to the extent permitted
by applicable law, to take any and all appropriate actions and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement. Such appointment is a power coupled
with an interest until all Obligations have been paid in full by Debtor.
7. Event of Default. Debtor shall be in default under this Agreement if an
Event of Default (as defined in the Note) has occurred.
8. Remedies. If an Event of Default shall occur, the Commission shall
thereafter have the following rights and remedies (to the extent permitted by
applicable law) in addition to the rights and remedies relating to the Note, all
such remedies being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently at such time or times as Commission deems
expedient:
(a) the License shall be automatically canceled pursuant to 47
C.F.R. ss. 1.2110;
(b) all Obligations secured hereunder shall become immediately due
and payable without presentment, demand, protest, further notice, or other
requirements of any kind;
(c) the Commission may demand, sue for, and collect the outstanding
balance of the unpaid Obligations, and make any compromise, or settlement
the Commission deems suitable with respect to any Collateral which may be
held by it hereunder;
(d) Debtor hereby acknowledges the Commission's authority, pursuant
to the Communications Act of 1934, as amended, and the Commission's orders
and regulations then-applicable to such licenses, to conduct another
public auction or assign the License in the event that the Commission
rescinds, cancels, or revokes the License for any default under this
Agreement or any other violation of the terms and conditions of the
License. The Undersigned hereby waives all notices prior to the conduct of
said public auction or assignment by the Commission or its agents. Debtor
further acknowledges that in the event that the Commission rescinds,
cancels, or revokes the License for any default under this Agreement or
any other violation of the terms and conditions of the License, Debtor has
no right or interest in any moneys or evidence of indebtedness given to
the Commission by a subsequent licensee of the Spectrum and that all such
moneys or evidence of indebtedness are, and shall remain, the full
property of the federal Treasury, pursuant to Section 309(j) of the
Communications Act of 1934, as amended, and then-applicable Commission
orders and regulations.
(e) In addition to other remedies hereunder, Debtor shall remain
liable, and obligated to pay on demand, all costs of collection and
reasonable attorneys' fees and
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expenses incurred or paid by the Commission in enforcing this Agreement
including, without limitation, all administrative fees and expenses of the
Commission in attempting to collect the Obligations or to enforce this
Agreement, or the prosecution or defense of any action or proceeding
related to the subject matter of this Agreement, and all payments assessed
by the Commission in the event of default as specified in Commission
orders and regulations applicable to such licenses.
(f) Debtor hereby acknowledges that the Commission has no adequate
remedy at law with respect to a breach of any covenant contained in this
Agreement and, as a consequence, agrees that each and every covenant
contained in this Agreement shall be specifically enforceable against
Debtor, and Debtor hereby waives and agrees not to assert any defense
against an action for specific performance of such covenants.
(g) Secured Party may exercise any and all of the rights and
remedies conferred upon Secured Party by this Agreement, any other loan
documents, or by applicable law, either concurrently or in such order as
Secured Party may determine.
(h) Secured Party may make such payments and do such acts as Secured
Party may deem necessary to protect its secured interest in the
Collateral.
(i) the Commission may exercise any remedies of a Secured Party
under the Uniform Commercial Code (Official Text and Comments, American
Law Institute), or any other applicable law.
(j) Secured Party shall have the right to enforce one or more
remedies hereunder or under the Note, successively or concurrently, and
such action shall not operate to estop or prevent Secured Party from
pursuing any further remedy which it may have.
9. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10. No Waiver; Cumulative Remedies. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Commission. The Commission shall not
by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies under this Agreement, and no waiver shall be valid unless in
writing, signed by the Commission, and then only to the extent therein set
forth. A waiver by the Commission of any right or remedy under this Agreement on
any one occasion shall not be construed as a bar to any right or remedy which
the Commission would otherwise have on any future occasion. No failure to
exercise nor any delay in exercising on the part of the Commission, any right,
power or privilege under this Agreement shall operate as a waiver
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<PAGE>
thereof; nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right power or privilege. The rights and remedies
provided in this Agreement are cumulative and may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
11. Compliance With Other Applicable Orders and Regulations. Debtor
recognizes that its continued retention of the License, and rights to operate as
a Commission licensee thereunder, are conditioned upon compliance with all
Commission orders and regulations applicable to the License and the
Communications Act of 1934, as amended. Debtor further recognizes that full and
timely payment as set forth in the Note does not otherwise relieve it of its
obligations otherwise to comply with the then-applicable orders and regulations
of the Commission, and the Communications Act of 1934, as amended.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with Communications Act of 1934, as amended, then-applicable
Commission orders and regulations, as amended, and federal law.
13. Successors, Assigns, Designated Agents. Subject to the provisions of
Paragraph 2 of this Agreement regarding the restriction upon Debtor's ability to
assign the License, this Agreement shall be binding upon Debtor, its successors
and assigns and shall inure to the benefit of the Commission, and its successors
and assigns. The Commission may designate agents other than the Commission to
act on its behalf with respect to any and all rights and remedies of the
Commission under this Agreement or the Note, and such designee shall have all of
the rights, powers and remedies available to the Commission within the scope of
its designation. Nothing herein, however, shall be construed as granting Debtor
any right to sell or assign the License.
14. Singular and Plural. Wherever used, the singular number shall include
the plural, the plural shall include the singular, and the use of any gender
shall be applicable to all genders.
15. Financing Statements. To the extent permitted by applicable law,
Debtor authorizes the Commission to sign and file financing statements at any
time with respect to any of the Collateral without the signature of Debtor.
Debtor will, however, at the same time and from time to time, execute such
financing statements, agreements and other instruments and perform such acts as
Commission may request in order to establish and maintain a validly perfected
first priority security interest in the Collateral. All reasonable costs of
filing and recording will be paid by Debtor.
16. Indemnification. Debtor hereby agrees to defend, indemnify and hold
harmless Secured Party and its employees, officers and agents, from and against
any and all liabilities, claims and obligations which may be incurred, asserted
or imposed upon them or any of them as a result of or in connection with any
use, operation, lease or consumption of any of the Collateral or as a result of
Secured Party's seeking to obtain performance of any of the obligations due with
respect to the Collateral.
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17. Notices. All notices, requests and demands hereunder shall be in
writing and shall be deemed to have been duly given, made or served on the
earliest of (I) three (3) business days after the date mailed if sent by
first-class U.S. mail, postage prepaid, (ii) actual delivery thereof if
delivered by hand to the party to be notified, (iii) receipt thereof if sent by
express mail or other overnight courier service, or (iv) transmission to the
telecopier number listed below for the party to be notified if sent within
normal business hours or, otherwise, on the next business day thereafter. In
each case such notification with respect to the Debtor and the Commission shall
be addressed as set forth below or as may be hereafter designed by the
respective parties hereto.
As to Debtor: Mr. Les Winder
Personal Communications Network, Inc.
c/o Electronics Communications Corporation
10 Plog Road
Fairfield, NJ 07004
As to the Commission:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
DEBTOR: PERSONAL COMMUNICATIONS NETWORK, INC.
Date: 12/12/96 By: /s/ Les Winder
----------------------------------
Its: Executive Vice President
----------------------------------
FEDERAL COMMUNICATIONS COMMISSION
Date: By:
---------- ----------------------------------
Its: Associate Managing Director for Operations (or
Designee)
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<PAGE>
SECURITY AGREEMENT
(Broadband Personal Communications Service, C Block: Auction Event No. 5)
License No. PBB127C
This SECURITY AGREEMENT DATED September 17, 1996, ("Agreement") between PERSONAL
COMMUNICATIONS NETWORK, INC., a corporation ("Debtor") and the FEDERAL
COMMUNICATIONS COMMISSION, an independent regulatory agency of the United States
("Commission" or "Secured Party")
WITNESSETH
WHEREAS, Debtor has submitted the highest accepted bid for license number
PBB127C in the Broadband Personal Communications Service C Block auction
(hereinafter the "License") conducted by the Commission to assign such licenses;
WHEREAS, the Commission has duly determined to grant the License to
Debtor, subject to the terms and conditions set forth in the orders and
regulations of the Commission applicable to such licenses, and the
Communications Act of 1934, as amended;
WHEREAS, Debtor wishes to pay its auction price for the License by
installments through an Installment Payment Plan as provided by 47 C.F.R. ss.ss.
24.711, 1.2110 (hereinafter the "Installment Payment Plan") and undertakes to
hold the License under the terms and conditions set forth in the Commission's
orders and regulations, as amended, applicable to such licenses, and the
Communications Act of 1934, as amended and the terms and conditions of this
Agreement;
WHEREAS, the Commission has agreed to permit the Debtor to make payment of
the auction price for the License through an Installment Payment Plan; and
WHEREAS, as a condition to such agreement, Debtor has agreed to execute
the Installment Payment Plan Note of even date ("Note") and to enter into this
Agreement and make the pledge and assignment of collateral contemplated herein.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
contained herein and for other good and valuable consideration, the receipt,
adequacy, and sufficiency of which is hereby acknowledged, and in order to
induce the Commission to permit Debtor to pay the auction price for the License
through the Installment Payment Plan, Debtor hereby agrees with the Commission
as follows:
<PAGE>
1. Pledge and Assignment of Collateral for Obligations Under Note. Debtor
hereby pledges, assigns, hypothecates, delivers, and sets over to the Commission
and grants to the Commission a first lien on and continuing security interest in
all of the Debtor's rights and interest in the License and all proceeds, profits
and products of any sale of or other disposition thereof (collectively the
"Collateral"), all as collateral security for the prompt and complete payment
when due (whether in accordance with the schedule of payments, at the stated
maturity, by acceleration, or otherwise) of the unpaid principal and interest
due, and such other additional costs, expenses, late charges, administrative
charges, attorneys fees, and default payments assessable under the terms of the
Note (all collectively "Obligations"). It is expressly understood by Debtor that
all of the terms of the Note apply to this Agreement and that reference herein
to "this Agreement" includes both the Security Agreement herein and the Note.
For purposes of interpreting the terms used in this Agreement shall have the
meaning ascribed to them in the Uniform Commercial Code (Official Text and
Comments, American Law Institute).
2. Interest of Commission. It is understood and acknowledged by Debtor
that pursuant to Section 301 of the Communications Act of 1934, as amended, the
Commission is charged with the regulatory mandate to maintain control over all
channels of radio transmission (the Spectrum"), and to provide licenses for the
use of such radio channels, but not ownership thereof. Debtor understands and
acknowledges that it holds a mere conditional license to use the Spectrum with
no ownership interest in the Collateral (or any underlying right to use the
Spectrum), or any power to assign the License without the prior approval of the
Commission pursuant to Section 310(d) of the Communications Act of 1934, as
amended. Debtor further understands and acknowledges that it is giving a
security interest to the Commission in the Collateral only to assist the
Commission in protecting its ability to enforce the Commission's regulations
which condition holding the license in compliance with all then-applicable
orders and regulations of the Commission, including, but not limited to, full
and timely payment of all payments under the Installment Payment Plan. To that
end, and not in derogation of any of the Commission's regulatory authority over
the License, Debtor hereby acknowledges that the Commission has a first security
interest in the Collateral, and Debtor shall not dispute such first security
interest, or the Commission's rights as a secured party hereunder, in any legal
or equitable proceeding in which Debtor, or any assignee or trustee of the
estate of Debtor in bankruptcy, is a party. Nothing set forth herein shall
preclude the Debtor from granting to other parties a subordinated security
interest limited to a subordinated interest in the proceeds arising from an
authorized assignment or transfer of the License to a third party (hereinafter a
"Subordinated Security Interest"), provided however that any such Subordinated
Security Interest shall be subordinated to and in no way inconsistent with the
Commission's first security interest in the Collateral, including but not
limited to the proceeds of any disposition of the License, and further provided
that said Subordinated Security Interest shall not survive if the License is
rescinded, cancelled, or revoked by regulatory action of the Commission for
violation of the terms and conditions of the License, including but not limited
to regulatory action upon a default under this Agreement pursuant to 47 C.F.R.
ss. 1.2110. The Debtor shall provide to the Commission upon request the name and
address of any party with a Subordinated Security Interest in the proceeds of
any disposition of the License, and a copy of any documents setting forth such a
Subordinated Security Interest.
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3. Compliance with Commission Orders and Regulations. Nothing in this
Agreement shall be deemed to modify any then-applicable orders and regulations
of the Commission, and nothing in this Agreement shall be deemed to release
Debtor from compliance therewith.
4. Representations and Warranties of Debtor. Debtor represents and
warrants to the Commission as follows:
(a) It has full power, authority and legal right to execute, deliver
and perform this Agreement, the Note, and any other documents delivered in
connection with the Note, this Agreement and the transactions contemplated
therein to make the debt transaction evidenced by the Note, and to pledge
the Collateral pursuant to this Agreement.
(b) It is a duly organized corporation, existing in good standing
under the laws of Delaware and is duly qualified to do business wherever
necessary to carry on its present operations. Its principal place of
business and chief executive office are located at 10 Plog Road,
Fairfield, NJ 07004.
(c) The representative of Debtor purporting to act on behalf of
Debtor in executing this Agreement, the Note, and any other documents
delivered in connection with the Note, this Agreement and the transactions
contemplated therein, is duly authorized by Debtor to take all such acts
and to execute all such documents.
(d) No security agreements have been executed and delivered, and no
financing statements have been filed in any jurisdiction, granting or
purporting to grant a security interest in the Collateral that would give
any other person any right or interest in the Collateral, or any portion
thereof, except for a Subordinated Security Interest, as defined herein,
and that no person has an a secured interest that is or will be in any way
inconsistent with the rights of the Commission herein as the first secured
party or the terms of this Agreement.
(e) No consent of any other party and no consent, license, approval
or authorization of, exemption by, or registration or declaration with,
any governmental instrumentality, domestic or foreign other than the
Commission, is required to be obtained in connection with the execution,
delivery or performance of this Agreement, the Note or any other document
executed and delivered in connection with the delivery of the Note or this
Agreement.
(f) The execution, delivery and performance of this Agreement and
the Note, does not and will not violate any provision of any applicable
law or regulation or any order, judgment, writ, award or decree of any
court, arbitrator, governmental instrumentality, domestic or foreign, or
of any indenture, contract, agreement or other undertaking to which Debtor
is a party or which purports to be binding upon Debtor or upon any of
Debtor's assets, and will not result in the creation or imposition of any
lien, charge or encumbrance on or security interest in any of the assets
of Debtor, except as contemplated by this Agreement.
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(g) Debtor will not permit any financing statement to be filed with
respect to the Collateral or any portion thereof or interest therein that would
give said any other person a right or any interest in the Collateral, or any
portion thereof, except that Debtor may permit a third party to file a
Subordinated Security Interest, as defined herein, so long as said Subordinated
Security Interest, is not in any way inconsistent with the terms of this
Agreement and the rights of the Commission herein as the first secured party.
Debtor will promptly notify Secured Party of, and will defend the Collateral
against, all claims and demands of all persons at any time claiming the same or
any interest therein that would give any other person a right or any interest in
the Collateral not subordinated to the rights of the Commission herein as the
first secured party, or that is in any way inconsistent with the terms of this
Agreement.
5. Covenants of Debtor. Debtor hereby covenants and agrees as follows:
(a) That it will defend the Commission's right, title and security
interest in and to the Collateral against the claims and demands of all persons
whomsoever.
(b) That it will execute all financing statements and other instruments or
documents related to the perfection of the Commission's security interest,
including but not limited to any renewal financing statements or instruments as
required to maintain the Commission's security interest, or as otherwise
reasonably requested by the Commission, and to file and pay the cost of filing
any such instruments or documents as required under this paragraph in whichever
public office deemed advisable by the Commission.
(c) That it will not make any indenture, contract, agreement or other
undertaking to which Debtor is a party or which purports to be binding upon
Debtor, or upon any of Debtor's assets, that would result in the creation or
imposition of any lien, charge or encumbrance on or security interest in any of
the assets of Debtor that would give any other person a right or any interest in
the Collateral, or any portion thereof, except for a Subordinated Security
Interest, as defined herein, provided that such Subordinated Security Agreement
is not inconsistent with the terms of this Agreement and interest of the
Commission as the first secured party.
(d) That it will pay all costs and expenses, including reasonable
attorneys' fees, of the Commission incurred in connection with the enforcement
of this Agreement and any and all liability incurred by the Commission resulting
from any act or omission of Debtor with respect to the Collateral and this
Agreement.
(e) Debtor will execute, alone or with Secured Party, any document, will
procure any document and do all other acts and pay all connected costs, in a
timely and proper manner, which from the character or use of the Collateral may
be reasonably necessary to protect the Collateral against the rights, claims or
interests of third persons, and will otherwise preserve the Collateral as
security hereunder. The specific undertakings required of Debtor in this
Agreement shall not be construed to exclude the aforementioned general
obligation.
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6. Power of Attorney. Debtor hereby irrevocably constitutes and appoints
the Commission and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Debtor and in the name of Debtor
or in its own name, from time to time in the Commission's discretion, for the
purpose of carrying out the terms of this Agreement and, to the extent permitted
by applicable law, to take any and all appropriate actions and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement. Such appointment is a power coupled
with an interest until all Obligations have been paid in full by Debtor.
7. Event of Default. Debtor shall be in default under this Agreement if an
Event of Default (as defined in the Note) has occurred.
8. Remedies. If an Event of Default shall occur, the Commission shall
thereafter have the following rights and remedies (to the extent permitted by
applicable law) in addition to the rights and remedies relating to the Note, all
such remedies being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently at such time or times as Commission deems
expedient:
(a) the License shall be automatically canceled pursuant to 47
C.F.R. ss. 1.2110;
(b) all Obligations secured hereunder shall become immediately due
and payable without presentment, demand, protest, further notice, or other
requirements of any kind;
(c) the Commission may demand, sue for, and collect the outstanding
balance of the unpaid Obligations, and make any compromise, or settlement
the Commission deems suitable with respect to any Collateral which may be
held by it hereunder;
(d) Debtor hereby acknowledges the Commission's authority, pursuant
to the Communications Act of 1934, as amended, and the Commission's orders
and regulations then-applicable to such licenses, to conduct another
public auction or assign the License in the event that the Commission
rescinds, cancels, or revokes the License for any default under this
Agreement or any other violation of the terms and conditions of the
License. The Undersigned hereby waives all notices prior to the conduct of
said public auction or assignment by the Commission or its agents. Debtor
further acknowledges that in the event that the Commission rescinds,
cancels, or revokes the License for any default under this Agreement or
any other violation of the terms and conditions of the License, Debtor has
no right or interest in any moneys or evidence of indebtedness given to
the Commission by a subsequent licensee of the Spectrum and that all such
moneys or evidence of indebtedness are, and shall remain, the full
property of the federal Treasury, pursuant to Section 309(j) of the
Communications Act of 1934, as amended, and then-applicable Commission
orders and regulations.
(e) In addition to other remedies hereunder, Debtor shall remain
liable, and obligated to pay on demand, all costs of collection and
reasonable attorneys' fees and
Page 5
<PAGE>
expenses incurred or paid by the Commission in enforcing this Agreement
including, without limitation, all administrative fees and expenses of the
Commission in attempting to collect the Obligations or to enforce this
Agreement, or the prosecution or defense of any action or proceeding
related to the subject matter of this Agreement, and all payments assessed
by the Commission in the event of default as specified in Commission
orders and regulations applicable to such licenses.
(f) Debtor hereby acknowledges that the Commission has no adequate
remedy at law with respect to a breach of any covenant contained in this
Agreement and, as a consequence, agrees that each and every covenant
contained in this Agreement shall be specifically enforceable against
Debtor, and Debtor hereby waives and agrees not to assert any defense
against an action for specific performance of such covenants.
(g) Secured Party may exercise any and all of the rights and
remedies conferred upon Secured Party by this Agreement, any other loan
documents, or by applicable law, either concurrently or in such order as
Secured Party may determine.
(h) Secured Party may make such payments and do such acts as Secured
Party may deem necessary to protect its secured interest in the
Collateral.
(i) the Commission may exercise any remedies of a Secured Party
under the Uniform Commercial Code (Official Text and Comments, American
Law Institute), or any other applicable law.
(j) Secured Party shall have the right to enforce one or more
remedies hereunder or under the Note, successively or concurrently, and
such action shall not operate to estop or prevent Secured Party from
pursuing any further remedy which it may have.
9. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10. No Waiver; Cumulative Remedies. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Commission. The Commission shall not
by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies under this Agreement, and no waiver shall be valid unless in
writing, signed by the Commission, and then only to the extent therein set
forth. A waiver by the Commission of any right or remedy under this Agreement on
any one occasion shall not be construed as a bar to any right or remedy which
the Commission would otherwise have on any future occasion. No failure to
exercise nor any delay in exercising on the part of the Commission, any right,
power or privilege under this Agreement shall operate as a waiver
Page 6
<PAGE>
thereof; nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right power or privilege. The rights and remedies
provided in this Agreement are cumulative and may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
11. Compliance With Other Applicable Orders and Regulations. Debtor
recognizes that its continued retention of the License, and rights to operate as
a Commission licensee thereunder, are conditioned upon compliance with all
Commission orders and regulations applicable to the License and the
Communications Act of 1934, as amended. Debtor further recognizes that full and
timely payment as set forth in the Note does not otherwise relieve it of its
obligations otherwise to comply with the then-applicable orders and regulations
of the Commission, and the Communications Act of 1934, as amended.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with Communications Act of 1934, as amended, then-applicable
Commission orders and regulations, as amended, and federal law.
13. Successors, Assigns, Designated Agents. Subject to the provisions of
Paragraph 2 of this Agreement regarding the restriction upon Debtor's ability to
assign the License, this Agreement shall be binding upon Debtor, its successors
and assigns and shall inure to the benefit of the Commission, and its successors
and assigns. The Commission may designate agents other than the Commission to
act on its behalf with respect to any and all rights and remedies of the
Commission under this Agreement or the Note, and such designee shall have all of
the rights, powers and remedies available to the Commission within the scope of
its designation. Nothing herein, however, shall be construed as granting Debtor
any right to sell or assign the License.
14. Singular and Plural. Wherever used, the singular number shall include
the plural, the plural shall include the singular, and the use of any gender
shall be applicable to all genders.
15. Financing Statements. To the extent permitted by applicable law,
Debtor authorizes the Commission to sign and file financing statements at any
time with respect to any of the Collateral without the signature of Debtor.
Debtor will, however, at the same time and from time to time, execute such
financing statements, agreements and other instruments and perform such acts as
Commission may request in order to establish and maintain a validly perfected
first priority security interest in the Collateral. All reasonable costs of
filing and recording will be paid by Debtor.
16. Indemnification. Debtor hereby agrees to defend, indemnify and hold
harmless Secured Party and its employees, officers and agents, from and against
any and all liabilities, claims and obligations which may be incurred, asserted
or imposed upon them or any of them as a result of or in connection with any
use, operation, lease or consumption of any of the Collateral or as a result of
Secured Party's seeking to obtain performance of any of the obligations due with
respect to the Collateral.
Page 7
<PAGE>
17. Notices. All notices, requests and demands hereunder shall be in
writing and shall be deemed to have been duly given, made or served on the
earliest of (I) three (3) business days after the date mailed if sent by
first-class U.S. mail, postage prepaid, (ii) actual delivery thereof if
delivered by hand to the party to be notified, (iii) receipt thereof if sent by
express mail or other overnight courier service, or (iv) transmission to the
telecopier number listed below for the party to be notified if sent within
normal business hours or, otherwise, on the next business day thereafter. In
each case such notification with respect to the Debtor and the Commission shall
be addressed as set forth below or as may be hereafter designed by the
respective parties hereto.
As to Debtor: Mr. Les Winder
Personal Communications Network, Inc.
c/o Electronics Communications Corporation
10 Plog Road
Fairfield, NJ 07004
As to the Commission:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
DEBTOR: PERSONAL COMMUNICATIONS NETWORK, INC.
Date: 12/12/96 By: /s/ Les Winder
----------------------------------
Its: Executive Vice President
----------------------------------
FEDERAL COMMUNICATIONS COMMISSION
Date: By:
---------- ----------------------------------
Its: Associate Managing Director for Operations (or
Designee)
Page 8
<PAGE>
SECURITY AGREEMENT
(Broadband Personal Communications Service, C Block: Auction Event No. 5)
License No. PBB251C
This SECURITY AGREEMENT DATED September 17, 1996, ("Agreement") between PERSONAL
COMMUNICATIONS NETWORK, INC., a corporation ("Debtor") and the FEDERAL
COMMUNICATIONS COMMISSION, an independent regulatory agency of the United States
("Commission" or "Secured Party")
WITNESSETH
WHEREAS, Debtor has submitted the highest accepted bid for license number
PBB251C in the Broadband Personal Communications Service C Block auction
(hereinafter the "License") conducted by the Commission to assign such licenses;
WHEREAS, the Commission has duly determined to grant the License to
Debtor, subject to the terms and conditions set forth in the orders and
regulations of the Commission applicable to such licenses, and the
Communications Act of 1934, as amended;
WHEREAS, Debtor wishes to pay its auction price for the License by
installments through an Installment Payment Plan as provided by 47 C.F.R. ss.ss.
24.711, 1.2110 (hereinafter the "Installment Payment Plan") and undertakes to
hold the License under the terms and conditions set forth in the Commission's
orders and regulations, as amended, applicable to such licenses, and the
Communications Act of 1934, as amended and the terms and conditions of this
Agreement;
WHEREAS, the Commission has agreed to permit the Debtor to make payment of
the auction price for the License through an Installment Payment Plan; and
WHEREAS, as a condition to such agreement, Debtor has agreed to execute
the Installment Payment Plan Note of even date ("Note") and to enter into this
Agreement and make the pledge and assignment of collateral contemplated herein.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
contained herein and for other good and valuable consideration, the receipt,
adequacy, and sufficiency of which is hereby acknowledged, and in order to
induce the Commission to permit Debtor to pay the auction price for the License
through the Installment Payment Plan, Debtor hereby agrees with the Commission
as follows:
<PAGE>
1. Pledge and Assignment of Collateral for Obligations Under Note. Debtor
hereby pledges, assigns, hypothecates, delivers, and sets over to the Commission
and grants to the Commission a first lien on and continuing security interest in
all of the Debtor's rights and interest in the License and all proceeds, profits
and products of any sale of or other disposition thereof (collectively the
"Collateral"), all as collateral security for the prompt and complete payment
when due (whether in accordance with the schedule of payments, at the stated
maturity, by acceleration, or otherwise) of the unpaid principal and interest
due, and such other additional costs, expenses, late charges, administrative
charges, attorneys fees, and default payments assessable under the terms of the
Note (all collectively "Obligations"). It is expressly understood by Debtor that
all of the terms of the Note apply to this Agreement and that reference herein
to "this Agreement" includes both the Security Agreement herein and the Note.
For purposes of interpreting the terms used in this Agreement shall have the
meaning ascribed to them in the Uniform Commercial Code (Official Text and
Comments, American Law Institute).
2. Interest of Commission. It is understood and acknowledged by Debtor
that pursuant to Section 301 of the Communications Act of 1934, as amended, the
Commission is charged with the regulatory mandate to maintain control over all
channels of radio transmission (the Spectrum"), and to provide licenses for the
use of such radio channels, but not ownership thereof. Debtor understands and
acknowledges that it holds a mere conditional license to use the Spectrum with
no ownership interest in the Collateral (or any underlying right to use the
Spectrum), or any power to assign the License without the prior approval of the
Commission pursuant to Section 310(d) of the Communications Act of 1934, as
amended. Debtor further understands and acknowledges that it is giving a
security interest to the Commission in the Collateral only to assist the
Commission in protecting its ability to enforce the Commission's regulations
which condition holding the license in compliance with all then-applicable
orders and regulations of the Commission, including, but not limited to, full
and timely payment of all payments under the Installment Payment Plan. To that
end, and not in derogation of any of the Commission's regulatory authority over
the License, Debtor hereby acknowledges that the Commission has a first security
interest in the Collateral, and Debtor shall not dispute such first security
interest, or the Commission's rights as a secured party hereunder, in any legal
or equitable proceeding in which Debtor, or any assignee or trustee of the
estate of Debtor in bankruptcy, is a party. Nothing set forth herein shall
preclude the Debtor from granting to other parties a subordinated security
interest limited to a subordinated interest in the proceeds arising from an
authorized assignment or transfer of the License to a third party (hereinafter a
"Subordinated Security Interest"), provided however that any such Subordinated
Security Interest shall be subordinated to and in no way inconsistent with the
Commission's first security interest in the Collateral, including but not
limited to the proceeds of any disposition of the License, and further provided
that said Subordinated Security Interest shall not survive if the License is
rescinded, cancelled, or revoked by regulatory action of the Commission for
violation of the terms and conditions of the License, including but not limited
to regulatory action upon a default under this Agreement pursuant to 47 C.F.R.
ss. 1.2110. The Debtor shall provide to the Commission upon request the name and
address of any party with a Subordinated Security Interest in the proceeds of
any disposition of the License, and a copy of any documents setting forth such a
Subordinated Security Interest.
Page 2
<PAGE>
3. Compliance with Commission Orders and Regulations. Nothing in this
Agreement shall be deemed to modify any then-applicable orders and regulations
of the Commission, and nothing in this Agreement shall be deemed to release
Debtor from compliance therewith.
4. Representations and Warranties of Debtor. Debtor represents and
warrants to the Commission as follows:
(a) It has full power, authority and legal right to execute, deliver
and perform this Agreement, the Note, and any other documents delivered in
connection with the Note, this Agreement and the transactions contemplated
therein to make the debt transaction evidenced by the Note, and to pledge
the Collateral pursuant to this Agreement.
(b) It is a duly organized corporation, existing in good standing
under the laws of Delaware and is duly qualified to do business wherever
necessary to carry on its present operations. Its principal place of
business and chief executive office are located at 10 Plog Road,
Fairfield, NJ 07004.
(c) The representative of Debtor purporting to act on behalf of
Debtor in executing this Agreement, the Note, and any other documents
delivered in connection with the Note, this Agreement and the transactions
contemplated therein, is duly authorized by Debtor to take all such acts
and to execute all such documents.
(d) No security agreements have been executed and delivered, and no
financing statements have been filed in any jurisdiction, granting or
purporting to grant a security interest in the Collateral that would give
any other person any right or interest in the Collateral, or any portion
thereof, except for a Subordinated Security Interest, as defined herein,
and that no person has an a secured interest that is or will be in any way
inconsistent with the rights of the Commission herein as the first secured
party or the terms of this Agreement.
(e) No consent of any other party and no consent, license, approval
or authorization of, exemption by, or registration or declaration with,
any governmental instrumentality, domestic or foreign other than the
Commission, is required to be obtained in connection with the execution,
delivery or performance of this Agreement, the Note or any other document
executed and delivered in connection with the delivery of the Note or this
Agreement.
(f) The execution, delivery and performance of this Agreement and
the Note, does not and will not violate any provision of any applicable
law or regulation or any order, judgment, writ, award or decree of any
court, arbitrator, governmental instrumentality, domestic or foreign, or
of any indenture, contract, agreement or other undertaking to which Debtor
is a party or which purports to be binding upon Debtor or upon any of
Debtor's assets, and will not result in the creation or imposition of any
lien, charge or encumbrance on or security interest in any of the assets
of Debtor, except as contemplated by this Agreement.
Page 3
<PAGE>
(g) Debtor will not permit any financing statement to be filed with
respect to the Collateral or any portion thereof or interest therein that
would give said any other person a right or any interest in the
Collateral, or any portion thereof, except that Debtor may permit a third
party to file a Subordinated Security Interest, as defined herein, so long
as said Subordinated Security Interest, is not in any way inconsistent
with the terms of this Agreement and the rights of the Commission herein
as the first secured party. Debtor will promptly notify Secured Party of,
and will defend the Collateral against, all claims and demands of all
persons at any time claiming the same or any interest therein that would
give any other person a right or any interest in the Collateral not
subordinated to the rights of the Commission herein as the first secured
party, or that is in any way inconsistent with the terms of this
Agreement.
5. Covenants of Debtor. Debtor hereby covenants and agrees as follows:
(a) That it will defend the Commission's right, title and security
interest in and to the Collateral against the claims and demands of all
persons whomsoever.
(b) That it will execute all financing statements and other
instruments or documents related to the perfection of the Commission's
security interest, including but not limited to any renewal financing
statements or instruments as required to maintain the Commission's
security interest, or as otherwise reasonably requested by the Commission,
and to file and pay the cost of filing any such instruments or documents
as required under this paragraph in whichever public office deemed
advisable by the Commission.
(c) That it will not make any indenture, contract, agreement or
other undertaking to which Debtor is a party or which purports to be
binding upon Debtor, or upon any of Debtor's assets, that would result in
the creation or imposition of any lien, charge or encumbrance on or
security interest in any of the assets of Debtor that would give any other
person a right or any interest in the Collateral, or any portion thereof,
except for a Subordinated Security Interest, as defined herein, provided
that such Subordinated Security Agreement is not inconsistent with the
terms of this Agreement and interest of the Commission as the first
secured party.
(d) That it will pay all costs and expenses, including reasonable
attorneys' fees, of the Commission incurred in connection with the
enforcement of this Agreement and any and all liability incurred by the
Commission resulting from any act or omission of Debtor with respect to
the Collateral and this Agreement.
(e) Debtor will execute, alone or with Secured Party, any document,
will procure any document and do all other acts and pay all connected
costs, in a timely and proper manner, which from the character or use of
the Collateral may be reasonably necessary to protect the Collateral
against the rights, claims or interests of third persons, and will
otherwise preserve the Collateral as security hereunder. The specific
undertakings required of Debtor in this Agreement shall not be construed
to exclude the aforementioned general obligation.
Page 4
<PAGE>
6. Power of Attorney. Debtor hereby irrevocably constitutes and appoints
the Commission and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Debtor and in the name of Debtor
or in its own name, from time to time in the Commission's discretion, for the
purpose of carrying out the terms of this Agreement and, to the extent permitted
by applicable law, to take any and all appropriate actions and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement. Such appointment is a power coupled
with an interest until all Obligations have been paid in full by Debtor.
7. Event of Default. Debtor shall be in default under this Agreement if an
Event of Default (as defined in the Note) has occurred.
8. Remedies. If an Event of Default shall occur, the Commission shall
thereafter have the following rights and remedies (to the extent permitted by
applicable law) in addition to the rights and remedies relating to the Note, all
such remedies being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently at such time or times as Commission deems
expedient:
(a) the License shall be automatically canceled pursuant to 47
C.F.R. ss. 1.2110;
(b) all Obligations secured hereunder shall become immediately due
and payable without presentment, demand, protest, further notice, or other
requirements of any kind;
(c) the Commission may demand, sue for, and collect the outstanding
balance of the unpaid Obligations, and make any compromise, or settlement
the Commission deems suitable with respect to any Collateral which may be
held by it hereunder;
(d) Debtor hereby acknowledges the Commission's authority, pursuant
to the Communications Act of 1934, as amended, and the Commission's orders
and regulations then-applicable to such licenses, to conduct another
public auction or assign the License in the event that the Commission
rescinds, cancels, or revokes the License for any default under this
Agreement or any other violation of the terms and conditions of the
License. The Undersigned hereby waives all notices prior to the conduct of
said public auction or assignment by the Commission or its agents. Debtor
further acknowledges that in the event that the Commission rescinds,
cancels, or revokes the License for any default under this Agreement or
any other violation of the terms and conditions of the License, Debtor has
no right or interest in any moneys or evidence of indebtedness given to
the Commission by a subsequent licensee of the Spectrum and that all such
moneys or evidence of indebtedness are, and shall remain, the full
property of the federal Treasury, pursuant to Section 309(j) of the
Communications Act of 1934, as amended, and then-applicable Commission
orders and regulations.
(e) In addition to other remedies hereunder, Debtor shall remain
liable, and obligated to pay on demand, all costs of collection and
reasonable attorneys' fees and
Page 5
<PAGE>
expenses incurred or paid by the Commission in enforcing this Agreement
including, without limitation, all administrative fees and expenses of the
Commission in attempting to collect the Obligations or to enforce this
Agreement, or the prosecution or defense of any action or proceeding
related to the subject matter of this Agreement, and all payments assessed
by the Commission in the event of default as specified in Commission
orders and regulations applicable to such licenses.
(f) Debtor hereby acknowledges that the Commission has no adequate
remedy at law with respect to a breach of any covenant contained in this
Agreement and, as a consequence, agrees that each and every covenant
contained in this Agreement shall be specifically enforceable against
Debtor, and Debtor hereby waives and agrees not to assert any defense
against an action for specific performance of such covenants.
(g) Secured Party may exercise any and all of the rights and
remedies conferred upon Secured Party by this Agreement, any other loan
documents, or by applicable law, either concurrently or in such order as
Secured Party may determine.
(h) Secured Party may make such payments and do such acts as Secured
Party may deem necessary to protect its secured interest in the
Collateral.
(i) the Commission may exercise any remedies of a Secured Party
under the Uniform Commercial Code (Official Text and Comments, American
Law Institute), or any other applicable law.
(j) Secured Party shall have the right to enforce one or more
remedies hereunder or under the Note, successively or concurrently, and
such action shall not operate to estop or prevent Secured Party from
pursuing any further remedy which it may have.
9. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10. No Waiver: Cumulative Remedies. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Commission. The Commission shall not
by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies under this Agreement, and no waiver shall be valid unless in
writing, signed by the Commission, and then only to the extent therein set
forth. A waiver by the Commission of any right or remedy under this Agreement on
any one occasion shall not be construed as a bar to any right or remedy which
the Commission would otherwise have on any future occasion. No failure to
exercise nor any delay in exercising on the part of the Commission, any right,
power or privilege under this Agreement shall operate as a waiver
Page 6
<PAGE>
thereof; nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right power or privilege. The rights and remedies
provided in this Agreement are cumulative and may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
11. Compliance With Other Applicable Orders and Regulations. Debtor
recognizes that its continued retention of the License, and rights to operate as
a Commission licensee thereunder, are conditioned upon compliance with all
Commission orders and regulations applicable to the License and the
Communications Act of 1934, as amended. Debtor further recognizes that full and
timely payment as set forth in the Note does not otherwise relieve it of its
obligations otherwise to comply with the then-applicable orders and regulations
of the Commission, and the Communications Act of 1934, as amended.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with Communications Act of 1934, as amended, then-applicable
Commission orders and regulations, as amended, and federal law.
13. Successors, Assigns, Designated Agents. Subject to the provisions of
Paragraph 2 of this Agreement regarding the restriction upon Debtor's ability to
assign the License, this Agreement shall be binding upon Debtor, its successors
and assigns and shall inure to the benefit of the Commission, and its successors
and assigns. The Commission may designate agents other than the Commission to
act on its behalf with respect to any and all rights and remedies of the
Commission under this Agreement or the Note, and such designee shall have all of
the rights, powers and remedies available to the Commission within the scope of
its designation. Nothing herein, however, shall be construed as granting Debtor
any right to sell or assign the License.
14. Singular and Plural. Wherever used, the singular number shall include
the plural, the plural shall include the singular, and the use of any gender
shall be applicable to all genders.
15. Financing Statements. To the extent permitted by applicable law,
Debtor authorizes the Commission to sign and file financing statements at any
time with respect to any of the Collateral without the signature of Debtor.
Debtor will, however, at the same time and from time to time, execute such
financing statements, agreements and other instruments and perform such acts as
Commission may request in order to establish and maintain a validly perfected
first priority security interest in the Collateral. All reasonable costs of
filing and recording will be paid by Debtor.
16. Indemnification. Debtor hereby agrees to defend, indemnify and hold
harmless Secured Party and its employees, officers and agents, from and against
any and all liabilities, claims and obligations which may be incurred, asserted
or imposed upon them or any of them as a result of or in connection with any
use, operation, lease or consumption of any of the Collateral or as a result of
Secured Party's seeking to obtain performance of any of the obligations due with
respect to the Collateral.
Page 7
<PAGE>
17. Notices. All notices, requests and demands hereunder shall be in
writing and shall be deemed to have been duly given, made or served on the
earliest of (I) three (3) business days after the date mailed if sent by
first-class U.S. mail, postage prepaid, (ii) actual delivery thereof if
delivered by hand to the party to be notified, (iii) receipt thereof if sent by
express mail or other overnight courier service, or (iv) transmission to the
telecopier number listed below for the party to be notified if sent within
normal business hours or, otherwise, on the next business day thereafter. In
each case such notification with respect to the Debtor and the Commission shall
be addressed as set forth below or as may be hereafter designed by the
respective parties hereto.
As to Debtor:
Mr. Les Winder
Personal Communications Network, Inc.
c/o Electronics Communications Corp.
10 Plog Road
Fairfield, NJ 07004
As to the Commission:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
DEBTOR: PERSONAL COMMUNICATIONS NETWORK, INC.
Date: 12/12/96 By: /s/ Les Winder
-------- -------------------------------
Its: Executive Vice President
------------------------------
FEDERAL COMMUNICATIONS COMMISSION
Date: By:
-------- -------------------------------
Its: Associate Managing Director for
Operations (or Designee)
Page 8
<PAGE>
SECURITY AGREEMENT
(Broadband Personal Communications Service, C Block: Auction Event No. 5)
License No. PBB388C
This SECURITY AGREEMENT DATED September 17, 1996, ("Agreement") between PERSONAL
COMMUNICATIONS NETWORK, INC., a corporation ("Debtor") and the FEDERAL
COMMUNICATIONS COMMISSION, an independent regulatory agency of the United States
("Commission" or "Secured Party")
WITNESSETH
WHEREAS, Debtor has submitted the highest accepted bid for license number
PBB388C in the Broadband Personal Communications Service C Block auction
(hereinafter the "License") conducted by the Commission to assign such licenses;
WHEREAS, the Commission has duly determined to grant the License to
Debtor, subject to the terms and conditions set forth in the orders and
regulations of the Commission applicable to such licenses, and the
Communications Act of 1934, as amended;
WHEREAS, Debtor wishes to pay its auction price for the License by
installments through an Installment Payment Plan as provided by 47 C.F.R. ss.ss.
24.711, 1.2110 (hereinafter the "Installment Payment Plan") and undertakes to
hold the License under the terms and conditions set forth in the Commission's
orders and regulations, as amended, applicable to such licenses, and the
Communications Act of 1934, as amended and the terms and conditions of this
Agreement;
WHEREAS, the Commission has agreed to permit the Debtor to make payment of
the auction price for the License through an Installment Payment Plan; and
WHEREAS, as a condition to such agreement, Debtor has agreed to execute
the Installment Payment Plan Note of even date ("Note") and to enter into this
Agreement and make the pledge and assignment of collateral contemplated herein.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
contained herein and for other good and valuable consideration, the receipt,
adequacy, and sufficiency of which is hereby acknowledged, and in order to
induce the Commission to permit Debtor to pay the auction price for the License
through the Installment Payment Plan, Debtor hereby agrees with the Commission
as follows:
<PAGE>
1. Pledge and Assignment of Collateral for Obligations Under Note. Debtor
hereby pledges, assigns, hypothecates, delivers, and sets over to the Commission
and grants to the Commission a first lien on and continuing security interest in
all of the Debtor's rights and interest in the License and all proceeds, profits
and products of any sale of or other disposition thereof (collectively the
"Collateral"), all as collateral security for the prompt and complete payment
when due (whether in accordance with the schedule of payments, at the stated
maturity, by acceleration, or otherwise) of the unpaid principal and interest
due, and such other additional costs, expenses, late charges, administrative
charges, attorneys fees, and default payments assessable under the terms of the
Note (all collectively "Obligations"). It is expressly understood by Debtor that
all of the terms of the Note apply to this Agreement and that reference herein
to "this Agreement" includes both the Security Agreement herein and the Note.
For purposes of interpreting the terms used in this Agreement shall have the
meaning ascribed to them in the Uniform Commercial Code (Official Text and
Comments, American Law Institute).
2. Interest of Commission. It is understood and acknowledged by Debtor
that pursuant to Section 301 of the Communications Act of 1934, as amended, the
Commission is charged with the regulatory mandate to maintain control over all
channels of radio transmission (the Spectrum"), and to provide licenses for the
use of such radio channels, but not ownership thereof. Debtor understands and
acknowledges that it holds a mere conditional license to use the Spectrum with
no ownership interest in the Collateral (or any underlying right to use the
Spectrum), or any power to assign the License without the prior approval of the
Commission pursuant to Section 310(d) of the Communications Act of 1934, as
amended. Debtor further understands and acknowledges that it is giving a
security interest to the Commission in the Collateral only to assist the
Commission in protecting its ability to enforce the Commission's regulations
which condition holding the license in compliance with all then-applicable
orders and regulations of the Commission, including, but not limited to, full
and timely payment of all payments under the Installment Payment Plan. To that
end, and not in derogation of any of the Commission's regulatory authority over
the License, Debtor hereby acknowledges that the Commission has a first security
interest in the Collateral, and Debtor shall not dispute such first security
interest, or the Commission's rights as a secured party hereunder, in any legal
or equitable proceeding in which Debtor, or any assignee or trustee of the
estate of Debtor in bankruptcy, is a party. Nothing set forth herein shall
preclude the Debtor from granting to other parties a subordinated security
interest limited to a subordinated interest in the proceeds arising from an
authorized assignment or transfer of the License to a third party (hereinafter a
"Subordinated Security Interest"), provided however that any such Subordinated
Security Interest shall be subordinated to and in no way inconsistent with the
Commission's first security interest in the Collateral, including but not
limited to the proceeds of any disposition of the License, and further provided
that said Subordinated Security Interest shall not survive if the License is
rescinded, cancelled, or revoked by regulatory action of the Commission for
violation of the terms and conditions of the License, including but not limited
to regulatory action upon a default under this Agreement pursuant to 47 C.F.R.
ss. 1.2110. The Debtor shall provide to the Commission upon request the name and
address of any party with a Subordinated Security Interest in the proceeds of
any disposition of the License, and a copy of any documents setting forth such a
Subordinated Security Interest.
Page 2
<PAGE>
3. Compliance with Commission Orders and Regulations. Nothing in this
Agreement shall be deemed to modify any then-applicable orders and regulations
of the Commission, and nothing in this Agreement shall be deemed to release
Debtor from compliance therewith.
4. Representations and Warranties of Debtor. Debtor represents and
warrants to the Commission as follows:
(a) It has full power, authority and legal right to execute, deliver
and perform this Agreement, the Note, and any other documents delivered in
connection with the Note, this Agreement and the transactions contemplated
therein to make the debt transaction evidenced by the Note, and to pledge
the Collateral pursuant to this Agreement.
(b) It is a duly organized corporation, existing in good standing
under the laws of Delaware and is duly qualified to do business wherever
necessary to carry on its present operations. Its principal place of
business and chief executive office are located at 10 Plog Road,
Fairfield, NJ 07004.
(c) The representative of Debtor purporting to act on behalf of
Debtor in executing this Agreement, the Note, and any other documents
delivered in connection with the Note, this Agreement and the transactions
contemplated therein, is duly authorized by Debtor to take all such acts
and to execute all such documents.
(d) No security agreements have been executed and delivered, and no
financing statements have been filed in any jurisdiction, granting or
purporting to grant a security interest in the Collateral that would give
any other person any right or interest in the Collateral, or any portion
thereof except for a Subordinated Security Interest, as defined herein,
and that no person has an a secured interest that is or will be in any way
inconsistent with the rights of the Commission herein as the first secured
party or the terms of this Agreement.
(e) No consent of any other party and no consent, license, approval
or authorization of, exemption by, or registration or declaration with,
any governmental instrumentality, domestic or foreign other than the
Commission, is required to be obtained in connection with the execution,
delivery or performance of this Agreement, the Note or any other document
executed and delivered in connection with the delivery of the Note or this
Agreement.
(f) The execution, delivery and performance of this Agreement and
the Note, does not and will not violate any provision of any applicable
law or regulation or any order, judgment, writ, award or decree of any
court, arbitrator, governmental instrumentality, domestic or foreign, or
of any indenture, contract, agreement or other undertaking to which Debtor
is a party or which purports to be binding upon Debtor or upon any of
Debtor's assets, and will not result in the creation or imposition of any
lien, charge or encumbrance on or security interest in any of the assets
of Debtor, except as contemplated by this Agreement.
Page 3
<PAGE>
(g) Debtor will not permit any financing statement to be filed with
respect to the Collateral or any portion thereof or interest therein that
would give said any other person a right or any interest in the
Collateral, or any portion thereof, except that Debtor may permit a third
party to file a Subordinated Security Interest, as defined herein, so long
as said Subordinated Security Interest, is not in any way inconsistent
with the terms of this Agreement and the rights of the Commission herein
as the first secured party. Debtor will promptly notify Secured Party of,
and will defend the Collateral against, all claims and demands of all
persons at any time claiming the same or any interest therein that would
give any other person a right or any interest in the Collateral not
subordinated to the rights of the Commission herein as the first secured
party, or that is in any way inconsistent with the terms of this
Agreement.
5. Covenants of Debtor. Debtor hereby covenants and agrees as follows:
(a) That it will defend the Commission's right, title and security
interest in and to the Collateral against the claims and demands of all
persons whomsoever.
(b) That it will execute all financing statements and other
instruments or documents related to the perfection of the Commission's
security interest, including but not limited to any renewal financing
statements or instruments as required to maintain the Commission's
security interest, or as otherwise reasonably requested by the Commission,
and to file and pay the cost of filing any such instruments or documents
as required under this paragraph in whichever public office deemed
advisable by the Commission.
(c) That it will not make any indenture, contract, agreement or
other undertaking to which Debtor is a party or which purports to be
binding upon Debtor, or upon any of Debtor's assets, that would result in
the creation or imposition of any lien, charge or encumbrance on or
security interest in any of the assets of Debtor that would give any other
person a right or any interest in the Collateral, or any portion thereof,
except for a Subordinated Security Interest, as defined herein, provided
that such Subordinated Security Agreement is not inconsistent with the
terms of this Agreement and interest of the Commission as the first
secured party.
(d) That it will pay all costs and expenses, including reasonable
attorneys' fees, of the Commission incurred in connection with the
enforcement of this Agreement and any and all liability incurred by the
Commission resulting from any act or omission of Debtor with respect to
the Collateral and this Agreement.
(e) Debtor will execute, alone or with Secured Party, any document,
will procure any document and do all other acts and pay all connected
costs, in a timely and proper manner, which from the character or use of
the Collateral may be reasonably necessary to protect the Collateral
against the rights, claims or interests of third persons, and will
otherwise preserve the Collateral as security hereunder. The specific
undertakings required of Debtor in this Agreement shall not be construed
to exclude the aforementioned general obligation.
Page 4
<PAGE>
6. Power of Attorney. Debtor hereby irrevocably constitutes and appoints
the Commission and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Debtor and in the name of Debtor
or in its own name, from time to time in the Commission's discretion, for the
purpose of carrying out the terms of this Agreement and, to the extent permitted
by applicable law, to take any and all appropriate actions and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement. Such appointment is a power coupled
with an interest until all Obligations have been paid in full by Debtor.
7. Event of Default. Debtor shall be in default under this Agreement if an
Event of Default (as defined in the Note) has occurred.
8. Remedies. If an Event of Default shall occur, the Commission shall
thereafter have the following rights and remedies (to the extent permitted by
applicable law) in addition to the rights and remedies relating to the Note, all
such remedies being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently at such time or times as Commission deems
expedient:
(a) the License shall be automatically canceled pursuant to 47
C.F.R. ss. 1.2110;
(b) all Obligations secured hereunder shall become immediately due
and payable without presentment, demand, protest, further notice, or other
requirements of any kind;
(c) the Commission may demand, sue for, and collect the outstanding
balance of the unpaid Obligations, and make any compromise, or settlement
the Commission deems suitable with respect to any Collateral which may be
held by it hereunder;
(d) Debtor hereby acknowledges the Commission's authority, pursuant
to the Communications Act of 1934, as amended, and the Commission's orders
and regulations then-applicable to such licenses, to conduct another
public auction or assign the License in the event that the Commission
rescinds, cancels, or revokes the License for any default under this
Agreement or any other violation of the terms and conditions of the
License. The Undersigned hereby waives all notices prior to the conduct of
said public auction or assignment by the Commission or its agents. Debtor
further acknowledges that in the event that the Commission rescinds,
cancels, or revokes the License for any default under this Agreement or
any other violation of the terms and conditions of the License, Debtor has
no right or interest in any moneys or evidence of indebtedness given to
the Commission by a subsequent licensee of the Spectrum and that all such
moneys or evidence of indebtedness are, and shall remain, the full
property of the federal Treasury, pursuant to Section 309(j) of the
Communications Act of 1934, as amended, and then-applicable Commission
orders and regulations.
(e) In addition to other remedies hereunder, Debtor shall remain
liable, and obligated to pay on demand, all costs of collection and
reasonable attorneys' fees and
Page 5
<PAGE>
expenses incurred or paid by the Commission in enforcing this Agreement
including, without limitation, all administrative fees and expenses of the
Commission in attempting to collect the Obligations or to enforce this
Agreement, or the prosecution or defense of any action or proceeding
related to the subject matter of this Agreement, and all payments assessed
by the Commission in the event of default as specified in Commission
orders and regulations applicable to such licenses.
(f) Debtor hereby acknowledges that the Commission has no adequate
remedy at law with respect to a breach of any covenant contained in this
Agreement and, as a consequence, agrees that each and every covenant
contained in this Agreement shall be specifically enforceable against
Debtor, and Debtor hereby waives and agrees not to assert any defense
against an action for specific performance of such covenants.
(g) Secured Party may exercise any and all of the rights and
remedies conferred upon Secured Party by this Agreement, any other loan
documents, or by applicable law, either concurrently or in such order as
Secured Party may determine.
(h) Secured Party may make such payments and do such acts as Secured
Party may deem necessary to protect its secured interest in the
Collateral.
(i) the Commission may exercise any remedies of a Secured Party
under the Uniform Commercial Code (Official Text and Comments, American
Law Institute), or any other applicable law.
(j) Secured Party shall have the right to enforce one or more
remedies hereunder or under the Note, successively or concurrently, and
such action shall not operate to estop or prevent Secured Party from
pursuing any further remedy which it may have.
9. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10. No Waiver: Cumulative Remedies. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Commission. The Commission shall not
by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies under this Agreement, and no waiver shall be valid unless in
writing, signed by the Commission, and then only to the extent therein set
forth. A waiver by the Commission of any right or remedy under this Agreement on
any one occasion shall not be construed as a bar to any right or remedy which
the Commission would otherwise have on any future occasion. No failure to
exercise nor any delay in exercising on the part of the Commission, any right,
power or privilege under this Agreement shall operate as a waiver
Page 6
<PAGE>
thereof; nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right power or privilege. The rights and remedies
provided in this Agreement are cumulative and may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
11. Compliance With Other Applicable Orders and Regulations. Debtor
recognizes that its continued retention of the License, and rights to operate as
a Commission licensee thereunder, are conditioned upon compliance with all
Commission orders and regulations applicable to the License and the
Communications Act of 1934, as amended. Debtor further recognizes that full and
timely payment as set forth in the Note does not otherwise relieve it of its
obligations otherwise to comply with the then-applicable orders and regulations
of the Commission, and the Communications Act of 1934, as amended.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with Communications Act of 1934, as amended, then-applicable
Commission orders and regulations, as amended, and federal law.
13. Successors, Assigns, Designated Agents. Subject to the provisions of
Paragraph 2 of this Agreement regarding the restriction upon Debtor's ability to
assign the License, this Agreement shall be binding upon Debtor, its successors
and assigns and shall inure to the benefit of the Commission, and its successors
and assigns. The Commission may designate agents other than the Commission to
act on its behalf with respect to any and all rights and remedies of the
Commission under this Agreement or the Note, and such designee shall have all of
the rights, powers and remedies available to the Commission within the scope of
its designation. Nothing herein, however, shall be construed as granting Debtor
any right to sell or assign the License.
14. Singular and Plural. Wherever used, the singular number shall include
the plural, the plural shall include the singular, and the use of any gender
shall be applicable to all genders.
15. Financing Statements. To the extent permitted by applicable law,
Debtor authorizes the Commission to sign and file financing statements at any
time with respect to any of the Collateral without the signature of Debtor.
Debtor will, however, at the same time and from time to time, execute such
financing statements, agreements and other instruments and perform such acts as
Commission may request in order to establish and maintain a validly perfected
first priority security interest in the Collateral. All reasonable costs of
filing and recording will be paid by Debtor.
16. Indemnification. Debtor hereby agrees to defend, indemnify and hold
harmless Secured Party and its employees, officers and agents, from and against
any and all liabilities, claims and obligations which may be incurred, asserted
or imposed upon them or any of them as a result of or in connection with any
use, operation, lease or consumption of any of the Collateral or as a result of
Secured Party's seeking to obtain performance of any of the obligations due with
respect to the Collateral.
Page 7
<PAGE>
17. Notices. All notices, requests and demands hereunder shall be in
writing and shall be deemed to have been duly given, made or served on the
earliest of (I) three (3) business days after the date mailed if sent by
first-class U.S. mail, postage prepaid, (ii) actual delivery thereof if
delivered by hand to the party to be notified, (iii) receipt thereof if sent by
express mail or other overnight courier service, or (iv) transmission to the
telecopier number listed below for the party to be notified if sent within
normal business hours or, otherwise, on the next business day thereafter. In
each case such notification with respect to the Debtor and the Commission shall
be addressed as set forth below or as may be hereafter designed by the
respective parties hereto.
As to Debtor:
Mr. Les Winder
Personal Communications Network, Inc.
c/o Electronics Communications Corp.
10 Plog Road
Fairfield, NJ 07004
As to the Commission:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
DEBTOR: PERSONAL COMMUNICATIONS NETWORK, INC.
Date: 12/12/96 By: /s/ Les Winder
--------- --------------------------------
Its: Executive Vice President
--------------------------------
FEDERAL COMMUNICATIONS COMMISSION
Date: By:
--------- --------------------------------
Its: Associate Managing Director for
Operations (or Designee)
Page 8
<PAGE>
SECURITY AGREEMENT
(Broadband Personal Communications Service, C Block: Auction Event No. 5)
License No. PBB465C
This SECURITY AGREEMENT DATED September 17, 1996, ("Agreement") between PERSONAL
COMMUNICATIONS NETWORK, INC., a corporation ("Debtor") and the FEDERAL
COMMUNICATIONS COMMISSION, an independent regulatory agency of the United States
("Commission" or "Secured Party")
WITNESSETH
WHEREAS, Debtor has submitted the highest accepted bid for license number
PBB465C in the Broadband Personal Communications Service C Block auction
(hereinafter the "License") conducted by the Commission to assign such licenses;
WHEREAS, the Commission has duly determined to grant the License to
Debtor, subject to the terms and conditions set forth in the orders and
regulations of the Commission applicable to such licenses, and the
Communications Act of 1934, as amended;
WHEREAS, Debtor wishes to pay its auction price for the License by
installments through an Installment Payment Plan as provided by 47 C.F.R. ss.ss.
24.711, 1.2110 (hereinafter the "Installment Payment Plan") and undertakes to
hold the License under the terms and conditions set forth in the Commission's
orders and regulations, as amended, applicable to such licenses, and the
Communications Act of 1934, as amended and the terms and conditions of this
Agreement;
WHEREAS, the Commission has agreed to permit the Debtor to make payment of
the auction price for the License through an Installment Payment Plan; and
WHEREAS, as a condition to such agreement, Debtor has agreed to execute
the Installment Payment Plan Note of even date ("Note") and to enter into this
Agreement and make the pledge and assignment of collateral contemplated herein.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
contained herein and for other good and valuable consideration, the receipt,
adequacy, and sufficiency of which is hereby acknowledged, and in order to
induce the Commission to permit Debtor to pay the auction price for the License
through the Installment Payment Plan, Debtor hereby agrees with the Commission
as follows:
<PAGE>
1. Pledge and Assignment of Collateral for Obligations Under Note. Debtor
hereby pledges, assigns, hypothecates, delivers, and sets over to the Commission
and grants to the Commission a first lien on and continuing security interest in
all of the Debtor's rights and interest in the License and all proceeds, profits
and products of any sale of or other disposition thereof (collectively the
"Collateral"), all as collateral security for the prompt and complete payment
when due (whether in accordance with the schedule of payments, at the stated
maturity, by acceleration, or otherwise) of the unpaid principal and interest
due, and such other additional costs, expenses, late charges, administrative
charges, attorneys fees, and default payments assessable under the terms of the
Note (all collectively "Obligations"). It is expressly understood by Debtor that
all of the terms of the Note apply to this Agreement and that reference herein
to "this Agreement" includes both the Security Agreement herein and the Note.
For purposes of interpreting the terms used in this Agreement shall have the
meaning ascribed to them in the Uniform Commercial Code (Official Text and
Comments, American Law Institute).
2. Interest of Commission. It is understood and acknowledged by Debtor
that pursuant to Section 301 of the Communications Act of 1934, as amended, the
Commission is charged with the regulatory mandate to maintain control over all
channels of radio transmission (the Spectrum"), and to provide licenses for the
use of such radio channels, but not ownership thereof. Debtor understands and
acknowledges that it holds a mere conditional license to use the Spectrum with
no ownership interest in the Collateral (or any underlying right to use the
Spectrum), or any power to assign the License without the prior approval of the
Commission pursuant to Section 310(d) of the Communications Act of 1934, as
amended. Debtor further understands and acknowledges that it is giving a
security interest to the Commission in the Collateral only to assist the
Commission in protecting its ability to enforce the Commission's regulations
which condition holding the license in compliance with all then-applicable
orders and regulations of the Commission, including, but not limited to, full
and timely payment of all payments under the Installment Payment Plan. To that
end, and not in derogation of any of the Commission's regulatory authority over
the License, Debtor hereby acknowledges that the Commission has a first security
interest in the Collateral, and Debtor shall not dispute such first security
interest, or the Commission's rights as a secured party hereunder, in any legal
or equitable proceeding in which Debtor, or any assignee or trustee of the
estate of Debtor in bankruptcy, is a party. Nothing set forth herein shall
preclude the Debtor from granting to other parties a subordinated security
interest limited to a subordinated interest in the proceeds arising from an
authorized assignment or transfer of the License to a third party (hereinafter a
"Subordinated Security Interest"), provided however that any such Subordinated
Security Interest shall be subordinated to and in no way inconsistent with the
Commission's first security interest in the Collateral, including but not
limited to the proceeds of any disposition of the License, and further provided
that said Subordinated Security Interest shall not survive if the License is
rescinded, cancelled, or revoked by regulatory action of the Commission for
violation of the terms and conditions of the License, including but not limited
to regulatory action upon a default under this Agreement pursuant to 47 C.F.R.
ss. 1.2110. The Debtor shall provide to the Commission upon request the name and
address of any party with a Subordinated Security Interest in the proceeds of
any disposition of the License, and a copy of any documents setting forth such a
Subordinated Security Interest.
Page 2
<PAGE>
3. Compliance with Commission Orders and Regulations. Nothing in this
Agreement shall be deemed to modify any then-applicable orders and regulations
of the Commission, and nothing in this Agreement shall be deemed to release
Debtor from compliance therewith.
4. Representations and Warranties of Debtor. Debtor represents and
warrants to the Commission as follows:
(a) It has full power, authority and legal right to execute, deliver
and perform this Agreement, the Note, and any other documents delivered in
connection with the Note, this Agreement and the transactions contemplated
therein to make the debt transaction evidenced by the Note, and to pledge
the Collateral pursuant to this Agreement.
(b) It is a duly organized corporation, existing in good standing
under the laws of Delaware and is duly qualified to do business wherever
necessary to carry on its present operations. Its principal place of
business and chief executive office are located at 10 Plog Road,
Fairfield, NJ 07004.
(c) The representative of Debtor purporting to act on behalf of
Debtor in executing this Agreement, the Note, and any other documents
delivered in connection with the Note, this Agreement and the transactions
contemplated therein, is duly authorized by Debtor to take all such acts
and to execute all such documents.
(d) No security agreements have been executed and delivered, and no
financing statements have been filed in any jurisdiction, granting or
purporting to grant a security interest in the Collateral that would give
any other person any right or interest in the Collateral, or any portion
thereof, except for a Subordinated Security Interest, as defined herein,
and that no person has an a secured interest that is or will be in any way
inconsistent with the rights of the Commission herein as the first secured
party or the terms of this Agreement.
(e) No consent of any other party and no consent, license, approval
or authorization of, exemption by, or registration or declaration with,
any governmental instrumentality, domestic or foreign other than the
Commission, is required to be obtained in connection with the execution,
delivery or performance of this Agreement, the Note or any other document
executed and delivered in connection with the delivery of the Note or this
Agreement.
(f) The execution, delivery and performance of this Agreement and
the Note, does not and will not violate any provision of any applicable
law or regulation or any order, judgment, writ, award or decree of any
court, arbitrator, governmental instrumentality, domestic or foreign, or
of any indenture, contract, agreement or other undertaking to which Debtor
is a party or which purports to be binding upon Debtor or upon any of
Debtor's assets, and will not result in the creation or imposition of any
lien, charge or encumbrance on or security interest in any of the assets
of Debtor, except as contemplated by this Agreement.
Page 3
<PAGE>
(g) Debtor will not permit any financing statement to be filed with
respect to the Collateral or any portion thereof or interest therein that
would give said any other person a right or any interest in the
Collateral, or any portion thereof, except that Debtor may permit a third
party to file a Subordinated Security Interest, as defined herein, so long
as said Subordinated Security Interest, is not in any way inconsistent
with the terms of this Agreement and the rights of the Commission herein
as the first secured party. Debtor will promptly notify Secured Party of,
and will defend the Collateral against, all claims and demands of all
persons at any time claiming the same or any interest therein that would
give any other person a right or any interest in the Collateral not
subordinated to the rights of the Commission herein as the first secured
party, or that is in any way inconsistent with the terms of this
Agreement.
5. Covenants of Debtor. Debtor hereby covenants and agrees as follows:
(a) That it will defend the Commission's right, title and security
interest in and to the Collateral against the claims and demands of all
persons whomsoever.
(b) That it will execute all financing statements and other
instruments or documents related to the perfection of the Commission's
security interest, including but not limited to any renewal financing
statements or instruments as required to maintain the Commission's
security interest, or as otherwise reasonably requested by the Commission,
and to file and pay the cost of filing any such instruments or documents
as required under this paragraph in whichever public office deemed
advisable by the Commission.
(c) That it will not make any indenture, contract, agreement or
other undertaking to which Debtor is a party or which purports to be
binding upon Debtor, or upon any of Debtor's assets, that would result in
the creation or imposition of any lien, charge or encumbrance on or
security interest in any of the assets of Debtor that would give any other
person a right or any interest in the Collateral, or any portion thereof,
except for a Subordinated Security Interest, as defined herein, provided
that such Subordinated Security Agreement is not inconsistent with the
terms of this Agreement and interest of the Commission as the first
secured party.
(d) That it will pay all costs and expenses, including reasonable
attorneys' fees, of the Commission incurred in connection with the
enforcement of this Agreement and any and all liability incurred by the
Commission resulting from any act or omission of Debtor with respect to
the Collateral and this Agreement.
(e) Debtor will execute, alone or with Secured Party, any document,
will procure any document and do all other acts and pay all connected
costs, in a timely and proper manner, which from the character or use of
the Collateral may be reasonably necessary to protect the Collateral
against the rights, claims or interests of third persons, and will
otherwise preserve the Collateral as security hereunder. The specific
undertakings required of Debtor in this Agreement shall not be construed
to exclude the aforementioned general obligation.
Page 4
<PAGE>
6. Power of Attorney. Debtor hereby irrevocably constitutes and appoints
the Commission and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Debtor and in the name of Debtor
or in its own name, from time to time in the Commission's discretion, for the
purpose of carrying out the terms of this Agreement and, to the extent permitted
by applicable law, to take any and all appropriate actions and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement. Such appointment is a power coupled
with an interest until all Obligations have been paid in full by Debtor.
7. Event of Default. Debtor shall be in default under this Agreement if an
Event of Default (as defined in the Note) has occurred.
8. Remedies. If an Event of Default shall occur, the Commission shall
thereafter have the following rights and remedies (to the extent permitted by
applicable law) in addition to the rights and remedies relating to the Note, all
such remedies being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently at such time or times as Commission deems
expedient:
(a) the License shall be automatically canceled pursuant to 47
C.F.R. ss. 1.2110;
(b) all Obligations secured hereunder shall become immediately due
and payable without presentment, demand, protest, further notice, or other
requirements of any kind;
(c) the Commission may demand, sue for, and collect the outstanding
balance of the unpaid Obligations, and make any compromise, or settlement
the Commission deems suitable with respect to any Collateral which may be
held by it hereunder;
(d) Debtor hereby acknowledges the Commission's authority, pursuant
to the Communications Act of 1934, as amended, and the Commission's orders
and regulations then-applicable to such licenses, to conduct another
public auction or assign the License in the event that the Commission
rescinds, cancels, or revokes the License for any default under this
Agreement or any other violation of the terms and conditions of the
License. The Undersigned hereby waives all notices prior to the conduct of
said public auction or assignment by the Commission or its agents. Debtor
further acknowledges that in the event that the Commission rescinds,
cancels, or revokes the License for any default under this Agreement or
any other violation of the terms and conditions of the License, Debtor has
no right or interest in any moneys or evidence of indebtedness given to
the Commission by a subsequent licensee of the Spectrum and that all such
moneys or evidence of indebtedness are, and shall remain, the full
property of the federal Treasury, pursuant to Section 309(j) of the
Communications Act of 1934, as amended, and then-applicable Commission
orders and regulations.
(e) In addition to other remedies hereunder, Debtor shall remain
liable, and obligated to pay on demand, all costs of collection and
reasonable attorneys' fees and
Page 5
<PAGE>
expenses incurred or paid by the Commission in enforcing this Agreement
including, without limitation, all administrative fees and expenses of the
Commission in attempting to collect the Obligations or to enforce this
Agreement, or the prosecution or defense of any action or proceeding
related to the subject matter of this Agreement, and all payments assessed
by the Commission in the event of default as specified in Commission
orders and regulations applicable to such licenses.
(f) Debtor hereby acknowledges that the Commission has no adequate
remedy at law with respect to a breach of any covenant contained in this
Agreement and, as a consequence, agrees that each and every covenant
contained in this Agreement shall be specifically enforceable against
Debtor, and Debtor hereby waives and agrees not to assert any defense
against an action for specific performance of such covenants.
(g) Secured Party may exercise any and all of the rights and
remedies conferred upon Secured Party by this Agreement, any other loan
documents, or by applicable law, either concurrently or in such order as
Secured Party may determine.
(h) Secured Party may make such payments and do such acts as Secured
Party may deem necessary to protect its secured interest in the
Collateral.
(i) the Commission may exercise any remedies of a Secured Party
under the Uniform Commercial Code (Official Text and Comments, American
Law Institute), or any other applicable law.
(j) Secured Party shall have the right to enforce one or more
remedies hereunder or under the Note, successively or concurrently, and
such action shall not operate to estop or prevent Secured Party from
pursuing any further remedy which it may have.
9. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10. No Waiver; Cumulative Remedies. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Commission. The Commission shall not
by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies under this Agreement, and no waiver shall be valid unless in
writing, signed by the Commission, and then only to the extent therein set
forth. A waiver by the Commission of any right or remedy under this Agreement on
any one occasion shall not be construed as a bar to any right or remedy which
the Commission would otherwise have on any future occasion. No failure to
exercise nor any delay in exercising on the part of the Commission, any right,
power or privilege under this Agreement shall operate as a waiver
Page 6
<PAGE>
thereof; nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right power or privilege. The rights and remedies
provided in this Agreement are cumulative and may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
11. Compliance With Other Applicable Orders and Regulations. Debtor
recognizes that its continued retention of the License, and rights to operate as
a Commission licensee thereunder, are conditioned upon compliance with all
Commission orders and regulations applicable to the License and the
Communications Act of 1934, as amended. Debtor further recognizes that full and
timely payment as set forth in the Note does not otherwise relieve it of its
obligations otherwise to comply with the then-applicable orders and regulations
of the Commission, and the Communications Act of 1934, as amended.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with Communications Act of 1934, as amended, then-applicable
Commission orders and regulations, as amended, and federal law.
13. Successors, Assigns, Designated Agents. Subject to the provisions of
Paragraph 2 of this Agreement regarding the restriction upon Debtor's ability to
assign the License, this Agreement shall be binding upon Debtor, its successors
and assigns and shall inure to the benefit of the Commission, and its successors
and assigns. The Commission may designate agents other than the Commission to
act on its behalf with respect to any and all rights and remedies of the
Commission under this Agreement or the Note, and such designee shall have all of
the rights, powers and remedies available to the Commission within the scope of
its designation. Nothing herein, however, shall be construed as granting Debtor
any right to sell or assign the License.
14. Singular and Plural. Wherever used, the singular number shall include
the plural, the plural shall include the singular, and the use of any gender
shall be applicable to all genders.
15. Financing Statements. To the extent permitted by applicable law,
Debtor authorizes the Commission to sign and file financing statements at any
time with respect to any of the Collateral without the signature of Debtor.
Debtor will, however, at the same time and from time to time, execute such
financing statements, agreements and other instruments and perform such acts as
Commission may request in order to establish and maintain a validly perfected
first priority security interest in the Collateral. All reasonable costs of
filing and recording will be paid by Debtor.
16. Indemnification. Debtor hereby agrees to defend, indemnify and hold
harmless Secured Party and its employees, officers and agents, from and against
any and all liabilities, claims and obligations which may be incurred, asserted
or imposed upon them or any of them as a result of or in connection with any
use, operation, lease or consumption of any of the Collateral or as a result of
Secured Party's seeking to obtain performance of any of the obligations due with
respect to the Collateral.
Page 7
<PAGE>
17. Notices. All notices, requests and demands hereunder shall be in
writing and shall be deemed to have been duly given, made or served on the
earliest of (I) three (3) business days after the date mailed if sent by
first-class U.S. mail, postage prepaid, (ii) actual delivery thereof if
delivered by hand to the party to be notified, (iii) receipt thereof if sent by
express mail or other overnight courier service, or (iv) transmission to the
telecopier number listed below for the party to be notified if sent within
normal business hours or, otherwise, on the next business day thereafter. In
each case such notification with respect to the Debtor and the Commission shall
be addressed as set forth below or as may be hereafter designed by the
respective parties hereto.
As to Debtor: Mr. Les Winder
Personal Communications Network, Inc.
c/o Electronics Communications Corp.
10 Plog Road
Fairfield, NJ 07004
As to the Commission:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
DEBTOR: PERSONAL COMMUNICATIONS NETWORK, INC.
Date: 12/12/96 By: /s/ [ILLEGIBLE]
--------- --------------------------------
Its: Executive Vice President
--------------------------------
FEDERAL COMMUNICATIONS COMMISSION
Date: By:
--------- --------------------------------
Its: Associate Managing Director for
Operations (or Designee)
Page 8
[LOGO] ECC
ELECTRONICS COMMUNICATIONS CORP. 10 Plog Road, Fairfield, N.J. 07004
A NASDAQ Company - Symbol "ELCC" 201 808-8862 Fax: 201 808-8865
- --------------------------------------------------------------------------------
October 7, 1996
Emerging Growth Technologies, Inc.
369 Lexington Avenue
New York, NY 10017
Gentlemen:
This is to confirm that heretofore Electronics Communications Corp.
("ECC") and its wholly-owned subsidiary, Personal Communications Network, Inc.
("PCN") have retained the services of Emerging Growth Technologies, Inc. ("EGT")
and Andrew James ("James") to provide financial consulting and advisory services
to ECC and PCN including, without limitation, general advise with respect to
financing, acquisition, joint venture or other corporate transactions which ECC
and PCN are currently contemplating or which they may consider at a future time.
In connection with the foregoing, EGT and James have introduced ECC and
PCN to such parties as Emerson Radio Corp., Teletek, Inc., Solomon Brothers, and
others and have consulted with ECC and PCN on other corporate matters. In
consideration of the foregoing and the services rendered by the undersigned to
date, PCN is herewith issuing to EGT 8 shares of its common stock and to James,
2 shares of its common stock, which shares of common stock equal 10% of the
issued and outstanding common stock of PCN (the "Shares") giving affect to the
within transaction. ECC and PCN represent and warrant to the undersigned that
the issuance of the Shares to the undersigned was duly authorized by PCN and ECC
and the Shares are validly issued, fully paid and non-assessable. Further, ECC
and PCN warrant that PCN has only one (1) class of capital stock authorized; to
wit, its common stock and there are no shares of common stock issued and
outstanding as of the date hereof.
The parties agree that on and after the date hereof, if PCN shall issue
any further shares of its capital stock or any securities convertible into
shares of its capital stock, it will allow EGT and James the right to subscribe
to such additional shares of PCN's capital stock so that each of EBT and James
may maintain their current percentage of equity ownership in PCN.
<PAGE>
The parties agree that the certificate evidencing the Shares shall bear
the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
If the foregoing fairly reflects our agreement, please be so kind as to
sign this letter where indicated below.
Very truly yours
Emerging Growth Technologies, Inc.
By /s/ Martine Amen
----------------------------------
Martine Amen, Assistant Secretary
AGREED AND CONSENTED TO:
Electronics Communications Corp.
By: /s/ William S. Taylor
-----------------------------
William S. Taylor, President
Personal Communications Network, Inc.
By: /s/ William S. Taylor
-----------------------------
William S. Taylor, President
PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE STAMPED "CONFIDENTIAL
TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE
COMMISSION." THE APPROPRIATE SECTION HAS BEEN MARKED AT THE APPROPRIATE PLACE.
NEXTWAVE RESALE AGREEMENT
WITH
PERSONAL COMMUNICATIONS NETWORK, INC.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
NEXTWAVE RESALE AGREEMENT
This PCS ("Personal Communications Services") Resale Agreement
("Agreement") is entered into and is in effect as of October 29, 1996, by and
between NEXTWAVE WIRELESS INC. and its Affiliates, a Delaware corporation, with
principal offices located at 9455 Towne Centre Drive, San Diego, California
92121 ("NextWave") and Personal Communications Network, Inc and its Affiliates,
a Delaware corporation, with principal offices located at 10 Plog Road,
Fairfield, NJ 07004 ("COMPANY") and the terms of which are contained herein.
A. NextWave Personal Communications Inc. ("NextWave PCI") is a wholly
owned subsidiary of NextWave Telecom Inc. a Delaware corporation. NextWave PCI
was formed to participate in the Federal Communications Commission's ("FCC's")
PCS auctions;
B. NextWave is a wholly owned subsidiary of NextWave Telecom Inc.
organized to construct facilities, deploy PCS network equipment, and provide PCS
in the licensed markets.
C. NextWave PCI has successfully bid for 63 licenses covering
approximately 110 million POPs (based on current census data) in various markets
across the United States (see Attachment B).
D. NextWave intends to construct facilities, deploy PCS network equipment
and provide PCS in those licensed markets.
E. Subject to the terms and conditions set forth herein, in the PCS
markets awarded to NextWave in the C-block auction and any other PCS markets
NextWave is awarded in the FCC's D, E, and F-block auctions, COMPANY desires to
purchase PCS minutes of use ("MOUs") on a resale basis from NextWave pursuant to
a ten (10) year commitment by COMPANY to purchase digital wireless voice
services from NextWave in all markets where COMPANY desires to resell digital
wireless voice services where NextWave provides service. NextWave desires to
sell PCS minutes of use to COMPANY for resale in those markets under a
[REDACTED] based upon COMPANY's advance commitment to purchase minutes of use.
COMPANY will be responsible to provide customer acquisition (i.e., sales,
marketing, advertising and customer activation), billing, collections, customer
service/care, customer retention, handset fulfillment and any other services
required to acquire and retain retail customers.
THEREFORE, in consideration of the foregoing, and of the mutual covenants
and agreements hereinafter set forth, NextWave and COMPANY agree as follows:
1. DEFINITIONS.
(a) Affiliate means, with respect to any party, any person, corporation or
other legal entity that, directly or indirectly, controls, is controlled by or
is under common control with such party. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), means the possession, directly
NextWave Confidential and Proprietary 1
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION
or indirectly, of the power (i) to vote securities having ordinary voting power
sufficient to elect a majority of the directors of such party or (ii) to direct
or cause the direction of the management and policies (including investment
policies) of that party, whether by contract or otherwise.
Presently, NextWave's Affiliates consist of: NextWave Telecom Inc., NextWave
PCI, NextWave Partners, Next Wave Power Partners, and TELE*code.
Presently, COMPANY's Affiliates consist of: Electronics Communications Corp.,
Electrocomm Wireless, Inc., Threshold Communications, Inc., and General Towers
of America, Inc.
(b) Full Mobility Service means the provision of digital wireless voice
airtime with mobile inter-cell (base station) hand-off capability.
(c) Licenses means PCS licenses held by NextWave.
(d) PCS Auctions means the auction conducted by the FCC to assign licenses
to the successful bidders for 120 MHz of spectrum as broadband PCS licenses in
the 1850-1990 MHz band. The PCS band has been sub-divided into three 30 MHz
blocks (blocks A, B, and C) and three 10 MHz blocks (blocks D, E and F). The FCC
has allocated a portion of the broadband PCS spectrum (blocks C and F) to
certain entities called "Entrepreneurs". The FCC completed the C-block auction
in July, 1996. Together these two blocks make up the "Entrepreneurs' Band".
(e) Minute of Use ("MOU") means the particular use interval provided by
NextWave for digital mobile voice service for resale to end-users and is
measured from time of seizure of a control channel to the time of release of the
channel on NextWave's network.
(f) Base MOU Price means NextWave's MOU price prior to any discounts.
Usage is billed in [REDACTED]
(g) BTA (Basic Trading Area) means a particular market boundary as defined
by Rand McNally & Company and the FCC.
(h) Roaming Agreements means any agreement whereby NextWave or its
Affiliates has the ability to purchase airtime from, interconnect with and/or
use the wireless network facilities of another operator of a wireless network.
(i) Term has the meaning set forth in Article 9.
(j) Transfer of Control and Ownership shall mean the completion of any
transaction where upon the holder of COMPANY's outstanding voting securities
immediately prior to the transaction either (i) own less than fifty (50) percent
of COMPANY's outstanding voting securities immediately after the completion of
the transaction, or (ii) transfer a number of the outstanding voting securities
of the COMPANY sufficient to permit the acquiring party to elect a majority of
the board of directors of the COMPANY.
NextWave Confidential and Proprietary 2
<PAGE>
2. PROVISION OF AIRTIME.
2.1 Provision of Services. NextWave shall sell Full Mobility Services to
COMPANY in each BTA for which NextWave or any of its Affiliates is awarded or
otherwise obtains a License, or enters into a Roaming Agreement.
2.2 Services Description. Full Mobility Services shall involve the
establishment and maintenance of wireless circuits for the continuous
transmission of digital voice signals.
2.3 COMPANY Forecast. Ninety (90) days prior to the offering of commercial
Full Mobility Service in any BTA, as communicated to COMPANY by NextWave at
least One Hundred and Twenty-Days (120) prior to the offering of such commercial
Service, COMPANY will provide NextWave with a forecast of anticipated Full
Mobility Service requirements for that BTA for the remainder of the calendar
year. COMPANY will provide NextWave with quarterly updates to its initial and
annual forecasts.
2.4 Network Feature Functionality. As practicable, NextWave is committed
to maintain its infrastructure with the most recent commercial releases of
vendor software available that implements the standards and protocols described
in the J-STD-008 air interface and associated standards as detailed in
Attachment E, and new feature functionality that operates with such standards
and protocols. For those capabilities that affect end users or subscribers,
NextWave will share with COMPANY its timeline and schedule of infrastructure
upgrades as they become available.
2.5 Roaming Arrangements. NextWave will make reasonable efforts to
negotiate favorable roaming agreements and rates with other wireless licensees
in the United States, and wireless operators in Canada, Mexico, and other
countries that may provide for roaming from PCS networks in the United States
for traffic to and from each other's wireless licensed markets. NextWave will
make available rapid roaming clearing capabilities through, at NextWave's sole
discretion, either a direct interface to other networks with which it has
roaming arrangements or via industry clearing houses.
2.6 Interconnection.
(a) LEC Interconnection. NextWave has the responsibility to negotiate
interconnect agreements with local carriers. COMPANY and NextWave agree on the
need to minimize interconnect charges for MOUs originating and terminating on
NextWave's network. NextWave will continue its efforts to influence lower
interconnect rates through the regulatory agencies and processes. MOU pricing is
exclusive of interconnection fees for both originating and terminating traffic
from and to non-NextWave networks, which shall be charged to COMPANY at the
negotiated base rate.
If COMPANY elects facilities-based resale, it will be responsible for the
fixed and recurring costs of providing, operating, and maintaining the circuits
between NextWave's and COMPANY's switches and between COMPANY's switch and the
Public Switched Telephone Network ("PSTN").
NextWave Confidential and Proprietary 3
<PAGE>
(b) IXC Interconnection. NextWave intends to interconnect with the
major interexchange carriers (e.g., AT&T, MCI, Sprint) via trunk connections
with their points of presence at the expense of the IXC. Similarly, as COMPANY
requires, NextWave will use reasonable efforts to interconnect with other long
distance services under similar conditions. NextWave's price for MOUs includes
origination for direct interconnection with-IXCs for mobile-to-land calls to the
extent that the costs of such interconnection are borne by the IXC. If the IXC
does not bear the cost of such interconnection or if direct interconnection with
the IXC is not feasible or practicable, then any interconnection charges shall
be borne by COMPANY on a pass-through basis.
If COMPANY elects facilities-based resale, it will be responsible for the
fixed and recurring costs of providing, operating, and maintaining the circuits
between NextWave's and COMPANY's switches and between COMPANY's switch and the
PSTN.
2.7 Number Ownership.
(a) Purchase and Allocation of Numbers. COMPANY shall obtain numbers
("Numbers") from North American Numbering Plan Administration ("NANPA") for
activation by NextWave on the Network. In the event COMPANY is not authorized or
is otherwise unable to obtain Numbers, NextWave shall obtain Numbers, in entire
block increments, on a pass-through cost basis. In the event there is a shortage
of Numbers and an allocation of Number blocks is required, NextWave may
allocate Number blocks pro rata among its airtime customers based on the
relative number of subscribers.
(b) Number Transfers. COMPANY will pay a nominal fee for the engineering
and administrative charges associated with the moving of COMPANY's numbers to
another network. COMPANY will be charged a comparable rate to other carriers'
rates and industry practices, a standard rate per number and all non-recurring
charges associated with forwarding COMPANY's traffic to any number on a
non-NextWave network. In the event the governing agencies mandate number
portability, NextWave will support, in a timely manner, the guidelines specified
in the ruling.
(c) Transfer Support. NextWave will support COMPANY's move of the numbers
to the new wireless network, for a nominal charge, ensuring proper addressing
and recording for the Local Exchange Routing Guide ("LERG").
2.8 Reseller Switch Interface.
(a) Non-Facilities Based. NextWave will make available to COMPANY, at a
mutually agreed upon fee, access to customer care capabilities including, but
not limited to, home location register services (i.e., customer profile
management and customer features service management), authentication, and if
practicable, call detail recording ("CDR") access. COMPANY will be responsible
for providing personnel and all other resources required to deliver customer
care services to COMPANY's subscribers.
(b) Facilities-Based. NextWave will make available a T1/T3 interface to a
COMPANY owned and operated switch for the delivery of COMPANY's calls to and
from the PSTN. COMPANY's numbers must be activated on NextWave's switch to
NextWave to
NextWave Confidential and Proprietary 4
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
properly provide mobility to those customers. The demarcation point will be at
NextWave's switch and COMPANY will be responsible for the provisioning and
costs, both recurring and non-recurring, of all circuits between COMPANY's
switch and demarcation point at NextWave's switch. If COMPANY desires, NextWave
will engineer and maintain these circuits at a mutually agreed fee.
2.9 Service Activations, De-Activations and Charges.
(a) Service Activation Platform. NextWave will offer COMPANY a direct
datalink interface to NextWave's service activation platform to allow COMPANY an
automated mechanism to perform customer on-line activations, de-activations, and
service change orders. NextWave reserves the right to set the interface standard
for connections to its service activation platform. NextWave's service
activation platform will collect COMPANY service orders, format the requests,
and download them into NextWave's switches and appropriate sub-systems in as
near real time as practicable. COMPANY will be responsible for all of the costs
associated with providing and maintaining its own on-site computer terminal,
software and modem/datalink connection.
(b) Number Removal Charges. COMPANY's service activation for each customer
is free of any activation fee as long as COMPANY purchases its PCS numbers
directly from NANPA. COMPANY will be charged a [REDACTED] for those situations
when a number is removed from a NextWave switch. The fee is required to cover
administrative expenses. In the event the governing agencies mandate number
portability, NextWave will support, in a timely manner, the guidelines specified
in the ruling.
2.10 Handset Sourcing and Fulfillment.
(a) Volume Purchase Orders and Delivery. If COMPANY desires, NextWave,
through its association with specific strategic partners and suppliers, will use
reasonable efforts to allow COMPANY to participate in any NextWave volume
purchase arrangements. NextWave will make arrangements for the ordering of the
handsets and accessories and the equipment will be drop shipped by the
manufacturer to COMPANY. COMPANY and supplier will be responsible for making,
shipping, delivery and payment arrangements.
(b) Pricing and Third Party Equipment. Pricing of the services in (a)
above is not available at this time, but will be determined and shared with
COMPANY in advance of NextWave's commercial service introduction. Further,
COMPANY is free to purchase any licensed subscriber equipment directly from
equipment manufacturers as long as purchased subscriber equipment is in full
compliance with the established TIA, CTIA and NextWave's network air-interface
and performance standards.
2.11 Enhanced Services.
(a) COMPANY Provided Services. NextWave will offer COMPANY the opportunity
to provide its own enhanced services platform. If COMPANY desires to provide
additional vertical services to its customers through its own or through a
third-party's enhanced services platform and if such addition to NextWave's
network is practicable, COMPANY and NextWave will make reasonable efforts to
jointly develop and mutually agree to the technical
NextWave Confidential and Proprietary 5
<PAGE>
procedures and lockdown requirements to properly test the service prior to its
introduction on the NextWave network. NextWave reserves its right to set its
interface standard for any connections to NextWave's switches. Engineering and
set-up fees for such service configurations will be determined on a case-by-case
basis and mutually agreed-to prior to service introduction. The interconnection
to COMPANY's enhanced services platform will be based upon NextWave's standard
interface. The demarcation point will be at NextWave's switch. COMPANY will be
responsible for all of the recurring and non-recurring interconnection costs
associated with providing and maintaining the connection to COMPANY's enhanced
services platform. Hardware, software and tangible resources (i.e., switching,
processing or storage of data) on NextWave's master switching center and network
that are required to support features and functionality provided by COMPANY's
enhanced services platform shall be made available by NextWave, to the extent
practicable, at prices based on NextWave's reasonable, direct and allocable
expenses relating to such hardware, software or tangible resources utilization.
(b) NextWave Provided Services. NextWave plans to offer a family of
enhanced services which may include voice mail, enhanced voice (with
out-dial-to-a-pager capability), short messaging, custom calling features (i.e.,
call waiting, three-way calling, call forwarding, no answer transfer, etc.),
single number service, fax store and forward, e-mail, star features and
information services. These services will be offered to COMPANY on an individual
and/or package basis on terms to be agreed upon.
(c) Enhanced Services Pricing. The parties agree that service features,
enhanced services, and their associated pricing must be competitive. Pricing for
NextWave's features and enhanced services will be competitive with prevailing
retail pricing. NextWave will price services either individually or provide bulk
pricing for global feature activation in a market. NextWave recognizes that
switch-based features and enhanced services will increasingly be packaged at
retail with airtime and become a "tablestakes" for the business. Prior to
commercial availability, the parties agree to develop a plan for enhanced
services to identify COMPANY's needs, refine NextWave implementation
approaches that might include use of COMPANY AIN platforms, and agree on
wholesale pricing for such services. For situations where COMPANY purchases
enhanced services from NextWave and subsequently migrates to another enhanced
services platform, the parties will develop a plan to minimize COMPANY's
subscriber churn and to recover NextWave's capital investment.
2.12 Network Service Training and Trouble Reporting.
(a) Scope of Services. NextWave will provide COMPANY network service
training and documentation prior to COMPANY's introduction of any NextWave
enhanced services offering in any market. Scheduling for such training will be
mutually agreed upon by both parties.
(b) Notification of Service. NextWave will promptly notify COMPANY's
customer care department or COMPANY's assigned point of contact of service
enhancements, network expansions, and major services outages. NextWave and
COMPANY will mutually agree to the notification procedures prior to NextWave's
commercial service offering. Additionally, NextWave will routinely provide
COMPANY with updated NextWave service maps as service is expanded.
NextWave Confidential and Proprietary 6
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
2.13 Network Access to Local Customer Care. NextWave, at no cost to
COMPANY, will provide COMPANY with one (1) customer care "star feature" (e.g.,
*CARE) that will directly connect COMPANY's customer to COMPANY's local customer
care center. COMPANY will be responsible for any network access charges related
to interconnection and transport of such calls from Next Wave's switches to
COMPANY's customer care center. For the situation where these star feature
customer service calls originate in a roaming market and are routed directly to
COMPANY's customer care center, COMPANY will be responsible for local network
interconnection and transport charges.
3. PURCHASE COMMITMENT.
3.1 Subject to the terms and conditions hereof, NextWave agrees to provide
Full Mobility Service MOUs for resale and COMPANY agrees to purchase on a
[REDACTED] basis from NextWave a minimum of [REDACTED] ([REDACTED]) of Full
Mobility Service during the Term in all of the BTAs in which NextWave has a
license (the "Commitment").
3.2 Subject to the quality provisions detailed in Attachments D and E and
NextWave's build out conditions detailed in Section 11.3, COMPANY shall purchase
at least REDACTED % of its Commitment within the REDACTED period following
the date NextWave first offers Full Mobility Service on a commercial basis in a
NextWave BTA ("Commercial Service Date") and [REDACTED]% of its Commitment
within the [REDACTED] period following the Commercial Service Date.
In the event COMPANY fails to satisfy the Initial Purchase Commitment by
the [REDACTED] anniversary of the Commercial Service Date (the "[REDACTED]
Anniversary Date"), COMPANY shall remit to NextWave, within five (5) business
days thereof, an amount in cash equal to the difference between the Initial
Purchase Commitment and the actual number of minutes of Full Mobility Service
purchased by COMPANY prior to the [REDACTED] Anniversary Date multiplied by the
then applicable purchase price per minute being charged to COMPANY in accordance
with Section 4.1 hereof.
In the event COMPANY fails to satisfy the Secondary Purchase Commitment by
the [REDACTED] anniversary of the Commercial Service Date (the "[REDACTED]
Anniversary Date"), COMPANY shall remit to NextWave, within five (5) business
days thereof, an amount in cash equal to the difference between the Secondary
Purchase Commitment and the actual number of minutes of Full Mobility Service
purchased by COMPANY prior to the [REDACTED] Anniversary Date multiplied by the
then applicable purchase price per minute being charged to COMPANY in accordance
with Section 4.1 hereof.
In the event COMPANY fails to purchase one hundred percent (100%) of the
Commitment prior to the tenth anniversary of the Commercial Service Date (the
"Tenth Anniversary Date"), COMPANY shall remit to NextWave, within five (5)
business days thereof, an amount in cash equal to the difference between the
Commitment and the actual number of minutes of Full Mobility Service purchased
by COMPANY prior to the Tenth Anniversary Date multiplied by the then applicable
purchase price per minute being charged to COMPANY in accordance with Section
4.1 hereof.
NextWave Confidential and Proprietary 7
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
3.3 In addition to the amount of any purchase price to be paid by COMPANY
under this Agreement, COMPANY agrees to pay to NextWave, and NextWave will in
turn regularly remit to a third party escrow agent designated by NextWave, the
amount of [REDACTED] ($ REDACTED) (the "Escrow Payment") for the first
[REDACTED] (REDACTED) used by COMPANY under this Agreement to ensure the
purchase of the full Commitment by COMPANY. NextWave will include such Escrow
Payment on its regular invoices to COMPANY for billable MOUs. If and when
COMPANY purchases and NextWave receives all payments for the full Commitment,
then the aggregate amount of the Escrow Payments in escrow, together with
accrued interest, if any, less the reasonable costs of the escrow agent, shall
be promptly returned to COMPANY. If COMPANY fails to purchase the full
Commitment within the time required by this Agreement, or if this Agreement
expires or is otherwise terminated (other than for the convenience of or breach
by NextWave) prior to COMPANY's purchase of the full Commitment, then the
aggregate amount of the Escrow Payment held in escrow, together with accrued
interest, if any, shall be permanently retained by NextWave. Nothing contained
herein shall release COMPANY from its obligations under Section 3.2 of this
Agreement nor shall it limit NextWave's remedies, rights or relief under this
Agreement or at law or equity.
4. PRICING AND PAYMENT TERMS.
4.1 Full Mobility Pricing. Pricing for Full Mobility Service, measured in
one minute increments, for each BTA will be as set forth for in the Pricing
Schedule attached hereto as Attachment C. Next Wave's pricing illustrated in
Attachment C is exclusive of the interconnection fees and enhanced services
that are listed in Article 9.
4.2 Resale to Facilities-Based Carriers. If COMPANY resells Full Mobility
Service to facilities-based carriers and in connection therewith requires
NextWave to implement a PIC/CIC code, their COMPANY shall pay NextWave an
[REDACTED] of Full Mobility Service sold to each such carrier of management of
PIC/CIC and associated databases.
4.3 Roaming Agreements. Pricing for Full Mobility Service provided
pursuant to a Roaming Agreement will be the greater of (i) the Full Mobility
Service price set forth in the Pricing Schedule in Attachment C or (ii)
[REDACTED]
4.4 Wireless Local Loop Services. The Parties also desire to enter into an
arrangement in the future whereby NextWave would provide COMPANY with a wireless
local loop service ("Wireless Local Loop") which would be a premises based
wireless communication service similar in application to today's narrowband
wireline service offerings. The Parties intend to negotiate in good faith the
terms and conditions including, but not limited to the performance
specifications and pricing of the Wireless Local Loop service sometime following
the execution of this Airtime Agreement. Any MOUs committed or used under this
Agreement are for Full Mobility Service only. Wireless Local Loop MOUs will
require a separate commitment and will be priced separately from this Agreement.
NextWave Confidential and Proprietary 8
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4.5 E911 Service. Emergency (911 and E911) and Lawful Intercept calls will
be handled by NextWave, unless otherwise required by regulatory authorities.
Each airtime invoice shall include a monthly charge (calculated on a per
subscriber basis in the maximum amount allowed by applicable regulatory
authority), for the provision of Emergency and Lawful Intercept services.
COMPANY shall pay such charges within the timeframe specified for payment of
Full Mobility Services. If regulatory authorities subsequently change the
requirements for Emergency or Lawful Intercept calls or mandate the provision of
other services, the parties shall cooperate in the provision of such services
with associated fees and charges to be handled in a similar manner to the
Emergency and Lawful Intercept Services.
4.6 Invoices.
(a) NextWave will offer COMPANY either (i) a datalink interface to
electronically deliver COMPANY's monthly billing data or (ii) a magnetic tape
version of the same. Magnetic billing tapes are NextWave's standard means of
delivering COMPANY's billing data. If COMPANY desires a datalink interface,
COMPANY will be responsible for all costs of providing and maintaining the
datalink.
(b) NextWave's billing data to COMPANY will include the customer's mobile
number, electronic serial number and peak/off-peak indicators, dialed number,
originating and terminating call site identification, and/or time stamps on a
call-by-call basis.
(c) If COMPANY desires its billing data transferred in shorter intervals
other than monthly (i.e., bi-monthly, etc.), NextWave and COMPANY will negotiate
in good faith, the terms and conditions of providing billing data in shorter
intervals.
(d) NextWave will offer multiple billing cycles from which COMPANY can
choose to allow COMPANY flexibility as to when it will be billed. COMPANY must
formally request its selected billing cycle in writing (or by some mutually
agreed to means). Absent a formal request, NextWave will assign COMPANY a
billing cycle.
(e) Invoices are payable in full upon receipt. Each invoice will contain a
Due Date. Such Due Date will be calculated based on the date the bills are
generated plus 30 days. If payment is not received by the Due Date, then a Late
Payment Penalty equal to 1.5% of the balance due will be assessed. Additionally,
a Late Payment Charge equal to 0.06% of the unpaid past due balance will be
assessed for each day that payment is not received.
(f) At NextWave's sole discretion, service may be restricted or
interrupted if payment of any undisputed past due amount is not made within ten
days after the Due Date.
(g) At NextWave's sole discretion, an additional security deposit or
letter of credit may be assessed if COMPANY incurs a Late Payment Penalty more
than once in any six month period.
(h) If NextWave commences legal proceedings to collect any undisputed past
due amount, COMPANY will be liable for all charges (including, without
limitation, collection costs, court costs and attorney's fees) reasonably
incurred by NextWave in enforcing its rights hereunder.
NextWave Confidential and Proprietary 9
<PAGE>
4.7 Disputed Charges. COMPANY shall provide NextWave with written notice
of any disputed charges on or before the Due Date of such charges. Any disputed
charges will be handled under the dispute resolution process described in
Article 8 herein. If a disputed amount is not resolved within twenty (20) days
after the Due Date or if either party seeks resolution in accordance with
Section 8.2, then the disputed amounts shall be placed into an escrow account
pending resolution. Failure to place such amounts in an escrow account will
result in such amounts being treated as undisputed past due amounts. Any earned
interest accrued on these amounts will pass to the party being awarded the
disputed amounts. If the disputed amounts are shared in any manner between the
parties, the accrued interest will be shared in the same proportion as the
disputed amounts. Any Late Payment Penalties or Late Payment Charges incurred as
a result of past due amounts that are ultimately credited to the COMPANY will be
reversed.
4.8 Taxes and Surcharges. The prices paid by COMPANY for MOUs are
exclusive of any applicable sales, use, personal property or other taxes or
surcharges attributable to periods during the Term based upon or measured by the
MOUs and any associated services provided or used by NextWave in performing its
obligations under this Agreement. COMPANY shall reimburse NextWave on a
pass-through basis for those taxes paid by NextWave that are attributable to
COMPANY pursuant to this Section 4.8. Each party shall provide and make
available to the other any resale certificates, information regarding
out-of-state sales or use of equipment, materials or services, and other
exemption certificates or information reasonably requested by the other party.
The parties will also work together to segregate into separate payment streams,
any taxable, nontaxable or items for which a sales, use or similar tax has
already been paid by NextWave.
4.9 Retail Bad Debt and Fraud Responsibility; Detection and Prevention.
(a) Retail Bad Debt and Subscription Fraud. Retail bad debt and fraudulent
usage as a result of subscription fraud is COMPANY's sole responsibility.
COMPANY will be responsible for all originating and terminating fees, long
distance and roaming charges, and MOUs used on Next Wave's network incurred from
retail bad debt and subscription fraud.
(b) Cloning Fraud. NextWave will make reasonable efforts to limit or
eliminate cloning fraud on its network. NextWave's development of CDMA
technology and its "coding of each call" is anticipated to reduce exposure to
cloning fraud. Additionally, NextWave will make reasonable efforts to deploy
systems to monitor usage patterns, traffic patterns and the like to detect
potential cloning fraudulent use on a number. Upon detection of suspected
cloning activity, NextWave will notify COMPANY to investigate the number further
and take proper action. COMPANY will have 24 hours to substantiate the
customer's usage or to suspend service or change the mobile number/serial number
combination to correct the situation. If COMPANY determines that cloning fraud
was committed, NextWave will credit COMPANY for the local Airtime usage only
deemed to be fraudulent and incurred prior to NextWave's notice to COMPANY. In
situations where the COMPANY identifies cloning fraud that NextWave did not
detect, the COMPANY may submit a request to NextWave for credit for the local
Airtime usage only deemed to be fraudulent. In either case, the COMPANY must
supply NextWave with reasonable evidence that cloning fraud did in fact occur.
COMPANY will be responsible for all other charges, including but not limited to
long distance, international, and roaming charges, and
NextWave Confidential and Proprietary 10
<PAGE>
for any costs incurred by the COMPANY associated with preventing, detecting or
correcting a cloning fraud occurrence. NextWave and COMPANY will work together
in good faith to curtail cloning fraud, and will follow customer-industry
practice for billing and crediting of fraudulent usage. In the event that
COMPANY, its employees or Affiliates were negligent in taking reasonable
measures to prevent cloning fraud, COMPANY will be responsible for all charges
and will not receive any credits from NextWave.
4.10 Audits of Financial Records. NextWave and COMPANY each shall keep
adequate books and records in sufficient detail to enable the amounts to be paid
under Article 4 of this Agreement. Each party shall be entitled to have an
accounting firm of national recognition reasonably acceptable to the other party
audit the relevant books and records of the other party for the purpose of
confirming the accuracy of the calculation of the amounts due under Article 4.
The auditor will disclose to the reviewing party only the information necessary
to verify the calculation of the amounts due under Article 4 and not any
confidential information of the other party, including but not limited to any
customer lists of the other party. Any such audit shall be performed at the
requesting party's expense (except if such audit reveals an overcharge of more
than five percent (5%) of the correct amount due under Article 4, then such
audit shall be at the expense of the other party), during normal business hours
after reasonable notice and, at the request of the audited party, shall be
subject to the independent agent's execution of a reasonable confidentiality
agreement. Such audits shall be conducted no more frequently than once every
year. In no event may a party commence an inspection of any statement later than
two (2) years from the date of such statement. Prior to any inspection by a
party, the parties will in good faith meet, discuss and attempt to resolve any
objection or discrepancy claimed by the party requesting the audit.
5. CONFIDENTIALITY.
5.1 Confidential Information. By virtue of this Agreement, the parties may
have access to, or exchange, information that is confidential to one another. As
used in this Agreement, the term "Confidential Information" shall mean only such
information of the other party that may be reasonably understood from legends,
the nature of such information itself and/or the circumstances of such
information's disclosure, to be confidential and/or proprietary to the other
Party or to third-parties to which the other Party owes a duty of
non-disclosure. Notwithstanding the foregoing, NextWave agrees that all of the
following information which NextWave may receive or otherwise obtain in the
course of its performance under this Agreement, including without limitation in
the course of providing the Service, shall be deemed the Confidential
Information of COMPANY for purposes for this Agreement: (i) COMPANY Subscriber
lists and numbers, account information, usage, and information regarding
business planning and operations of COMPANY and COMPANY's administrative,
financial information, forecasts, predictions or marketing reports or
activities; (ii) all Subscriber and other customer information: and (iii)
COMPANY network and Intelligent Network capabilities, interconnection
arrangements, architecture, strategies, development and implementation plans,
and vendor relationships. Notwithstanding the foregoing, COMPANY agrees that all
of the following information which COMPANY may receive or otherwise obtain in
the course of its performance under this Agreement shall be deemed Confidential
Information of NextWave for purposes for this Agreement: information concerning
NextWave's Network, Network performance trials, equipment requirements, Network
system engineering and design specifications, cell-site
NextWave Confidential and Proprietary 11
<PAGE>
location planning strategies, Network usage and performance data, development
plans for its intelligent network and enhanced features and services, financial,
accounting or marketing reports, and business plans, analyses, forecasts, and
predictions.
5.2 Restrictions on Disclosure and Use. Each of the Parties agrees that as
to any Confidential Information relating to one party ("Discloser") obtained in
any manner by the other party ("Recipient") hereunder:
(a) to use such Confidential Information only in the performance of
this Agreement or as otherwise expressly permitted by this Agreement or by the
Discloser;
(b) not to make copies of any such Confidential Information or any
part thereof except to the extent required to fulfill the Party's obligations
under this Agreement;
(c) not to disclose any such Confidential Information to any
third-party, using the same degree of care used to protect Recipient's own
confidential or proprietary information of like importance, but in any case
using no less than reasonable degree of care; provided, however, that Recipient
may disclose Confidential Information received hereunder to (i) its Affiliates
who are bound to protect the received Confidential Information from unauthorized
use and disclosure under the terms of a written agreement (including without
limitation a pre-existing written agreement), and (ii) its employees,
consultants and agents, and it Affiliates' employees, consultants and agents,
who have a need to know to perform or exercise rights under this Agreement, and
who are bound to protect the received Confidential Information from unauthorized
use and disclosure under the terms of a written agreement (including without
limitation a pre-existing written agreement). Confidential Information shall not
otherwise be disclosed to any third-party without the prior written consent of
the Discloser; and
(d) to return to the other party, or destroy, all of such party's
Confidential Information received hereunder, whether in any tangible medium of
expression or electronic or other form or format, promptly upon the expiration
or termination this Agreement.
5.3 Exceptions. The restrictions set forth in this Article 5 on the use
and disclosure of Confidential Information shall not apply to information that:
(a) was publicly known at the time of Discloser's communication
thereof to Recipient;
(b) becomes publicly known through no fault of Recipient subsequent
to the time of Discloser's communication thereof to Recipient;
(c) is in Recipient's possession free of any obligation of
confidence at the time of Discloser's communication thereof to Recipient;
(d) is developed by Recipient independently of and without use of
any of Discloser's Confidential Information or other information that Discloser
disclosed in confidence to any third-party;
NextWave Confidential and Proprietary 12
<PAGE>
(e) is rightfully obtained by Recipient without restriction from
third-parties authorized to make such disclosure; or
(f) is identified by Discloser in writing as no longer proprietary
or confidential.
5.4 Disclosure Pursuant to Legal Requirement. In the event Recipient is
required by law, regulation or court order to disclose any of Discloser's
Confidential Information, Recipient will promptly notify Discloser in writing
prior to making any such disclosure in order to facilitate Discloser seeking a
protective order or other appropriate remedy from the proper authority.
Recipient agrees to cooperate with Discloser in seeking such order or other
remedy. Recipient further agrees that if Discloser is not successful in
precluding the requesting legal body from requiring the disclosure of the
Confidential Information, it will furnish only that portion of the Confidential
Information which is legally required and will exercise all reasonable efforts
to obtain reliable assurances that confidential treatment will be accorded the
Confidential Information.
5.5 Publicity. The Parties expressly agree that the terms and conditions
of this Agreement, and any activities contemplated hereby or performed
hereunder, are the Confidential Information of the Parties and shall not be
disclosed in any manner without the prior written approval of the other Party
(which shall not be unreasonably withheld); provided, however, that (i) COMPANY
and NextWave agree that NextWave shall have the right to issue a news release to
announce the transaction contemplated herein and (ii) the Parties acknowledge
that NextWave has filed a registration statement with the Securities and
Exchange Commission and will be required to disclose the existence of this
Agreement and describe the material terms contained herein. To the extent any
information has been disclosed to the public pursuant to this Section 5.5, such
information shall not be deemed Confidential Information. Notwithstanding the
foregoing, each party agrees that the Airtime pricing terms contained in
Attachment C are confidential and shall not be disclosed, except as may be
required by law or pursuant to any legal proceeding, in which ease the
provisions of Section 5.4 shall apply. The Parties acknowledge that NextWave
will be required to file this Agreement with the Securities and Exchange
Commission as an exhibit to its registration statement. NextWave shall seek
confidential treatment of the Airtime pricing terms.
5.6 Proprietary Notices. Each Party shall reproduce and maintain on any
copies of the other Party's Confidential Information received or made hereunder
such proprietary legends or notices (whether of the party providing the
Confidential Information or of a third-party) as are contained in or on the
original.
5.7 Return of Confidential Information. Each party agrees to return to the
other Party or destroy all of such other Party's Confidential Information
promptly upon the termination of this Agreement. Neither party shall thereafter
retain any such Confidential information or any copies thereof fixed in any
tangible medium of expression in whatever form or format.
5.8 Cooperation. In the event either Party becomes aware that any Person
(including, without limitation, any employee or agent of a party) is taking or
threatens to take any action which would violate any of the foregoing
provisions, such Party shall promptly and fully advise
NextWave Confidential and Proprietary 13
<PAGE>
the other Party (with written confirmation as soon as practicable thereafter) of
all facts known to it concerning such action or threatened action. Neither Party
shall in any way aid, abet or encourage any such action or threatened action.
Each Party agrees to cooperate in all reasonable ways to prevent such action or
threatened action, including, without limitation, assigning any cause of action
it may have related to the violation of the foregoing provisions, to the other
Party, and each Party agrees to do all reasonable things and cooperate in all
reasonable ways as may be requested by the other Party to protect the trade
secret and proprietary rights of such other Party in and to the Confidential
Information. A Party shall also be liable for any breach of the terms of this
Article 5 in the event that Confidential Information received from the other
party is disclosed by an employee, agent or consultant of such Party or a
third-party to whom such Party has disclosed such information and such
disclosure would violate the terms of this Article 5 were such employee, agent,
consultant or third-party a party hereto.
5.9 No Use of NextWave Intellectual Property Rights. Nothing herein shall
be deemed to grant to COMPANY any right, license or other interest in or under,
or right to use, and COMPANY shall not use, any patents, copyrights, trade
secrets, trademarks, service marks, trade names or other similar designation, or
any other intellectual property rights of NextWave or any of its Affiliates.
No Use of COMPANY Intellectual Property Rights. Nothing herein shall be
deemed to grant to NextWave any right, license or other interest in or under, or
right to use, and NextWave shall not use, any patents, copyrights, trade
secrets, trademarks, service marks, trade names or other similar designation,
or any other intellectual property rights of COMPANY or any of its Affiliates.
6. LIMITED LIABILITY.
6.1 IN NO EVENT WILL EITHER PARTY AND/OR ANY OF ITS AFFILIATES BE LIABLE
TO OR THROUGH THE OTHER PARTY FOR ANY OF THE FOLLOWING:
(a) DAMAGES CAUSED BY OTHER PARTY'S AND/OR ITS AFFILIATES' OR
SUPPLIERS' FAILURE TO PERFORM THEIR OBLIGATIONS OR RESPONSIBILITIES;
(b) CLAIMS OR DEMANDS BROUGHT AGAINST THE OTHER PARTY BY THIRD
PARTIES OTHER THAN THOSE THIRD PARTY CLAIMS IN RESPECT OF WHICH SUCH PARTY IS
EXPRESSLY OBLIGATED TO INDEMNIFY THE OTHER PARTY PURSUANT TO A PROVISION OF THIS
AGREEMENT; OR
(c) ANY LOST PROFITS, LOSS OF BUSINESS, LOSS OF USE (OR
INTERRUPTIONS OF BUSINESS), LOST SAVINGS, LOST OPPORTUNITIES OR OTHER
CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT, EXEMPLARY OR PUNITIVE DAMAGES;
ANY OR ALL OF WHICH ARISE FROM OR IN CONNECTION WITH THE DELIVERY. USE, OR
PERFORMANCE OF SERVICE GOVERNED BY THIS AGREEMENT, EVEN IF A PARTY AND/OR ANY OF
ITS AFFILIATES HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS.
NextWave Confidential and Proprietary 14
<PAGE>
6.2 The limitations of remedies and liabilities set forth in this Article
6 shall not apply to any obligation of one party to pay the other party all
amounts due and owing under this Agreement.
7. INDEMNIFICATION.
7.1 NextWave shall indemnify, defend and hold harmless COMPANY, and all of
COMPANY's and its Affiliates' officers, directors, partners, employees and
agents, from and against any and all losses, claims, damages, liabilities or
expenses of any kind (including, but not limited to, reasonable attorneys fees
and costs) arising out of any claim, action or proceeding by a third party
against any of them to the extent it is based on (i) a claim for personal injury
(including death) or damage to personal property for which NextWave or any of
its Affiliates is legally responsible, or (ii) NextWave or any Affiliate's
failure to comply with all applicable laws, regulations and orders in the
performance of its obligations under this Agreement.
7.2 COMPANY shall indemnify, defend and hold harmless NextWave, and all of
NextWave's and its Afflliates' officers, directors, partners, employees and
agents, from and against any and all losses, claims, damages, liabilities or
expenses of any kind (including, but not limited to, reasonable attorneys fees
and costs) arising out of any claim, action or proceeding by a third-party
against any of them to the extent it is based on (i) a claim for personal
injury (including death) or damage to personal property for which COMPANY or any
of its Affiliates is legally responsible, or (ii) a claim by a customer of
COMPANY, or (iii) COMPANY or its Affiliate's failure to comply with all
applicable laws, regulations and orders in the performance of its obligations
under this Agreement.
7.3 The party seeking indemnity under the foregoing provisions shall
notify the indemnifying party of any such claim, action or proceeding, and the
indemnifying party shall promptly and at its sole cost undertake the defense
thereof, except for claims by a customer of COMPANY, for which COMPANY shall at
its sole cost undertake the defense thereof for itself, and upon demand thereof,
NextWave and/or its Affiliates. No such claim shall be compromised or settled
without the prior written consent of the indemnified party if the settlement
would restrict or adversely affect the indemnified party. Such consent shall not
be unreasonably withheld. After the indemnified party tenders the defense of any
such claim, action or proceeding, the indemnified party shall have the right to
participate at its own cost and expense in such claim, action, or proceeding
using counsel of its own choosing.
8. DISPUTE RESOLUTION
8.1 Dispute Resolution. Either Party may identify a dispute that has
arisen in performance of this Agreement by notifying the other Party's account
manager in writing, setting forth the dispute with reasonable specificity. The
account managers shall promptly attempt to resolve such dispute by negotiation.
If within ten (10) calendar days of written notice of a dispute the account
managers have been unable to resolve it, then either Party may escalate
resolution of the dispute to an appropriate senior executive of NextWave or to
an appropriate senior executive of COMPANY by notifying them in writing, setting
forth the dispute with reasonable specificity. The senior executives shall
attempt to resolve such dispute by negotiation. If within ten (10) calendar days
of such escalation of a dispute the senior executives have been
NextWave Confidential and Proprietary 15
<PAGE>
unable to resolve it, then either Party may seek resolution of the dispute by
arbitration in accordance with Section 8.2.
8.2 Arbitration. Without prejudice to either party's right to seek
equitable relief (including, but not limited to, injunction) from a court, 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") and in
accordance with the terms of this Article 8. 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
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 any
award that provides for punitive or exemplary damages. The arbitrator's decision
shall follow the plain meaning of the relevant documents, and 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.
9. TERM.
This Agreement shall be effective when executed. The Term of this
Agreement shall be ten (10) years with one (1) renewal option for COMPANY to
renew for an additional five (5) years, which renewal shall not be unreasonably
withheld; provided that if COMPANY elects to renew the Agreement the parties
shall review and adjust the pricing. The Term shall commence upon the first day
of commercial availability of Full Mobility Service in any NextWave BTA, where
the conditions in Section 11.3 below are met. One (1) year prior to the
expiration of the initial ten-year Term, the parties will meet to determine the
pricing for the five-year renewal period. If the parties are unable to reach
agreement six (6) months prior to the expiration of the initial ten-year Term,
the then existing terms and conditions, including pricing shall continue for a
transition period of six (6) months after the expiration of the initial ten-year
Term. If, in the event that COMPANY exceeds five (5) billion billable MOU during
the Term, then the parties will meet to determine the pricing for volume breaks
above five (5) billion MOU for the Airtime table in Attachment C.
10. TERMINAT1ON PROVISION.
10.1 NextWave may terminate this Agreement without liability by written
notice to COMPANY in the event that:
(i) COMPANY fails to pay any amounts due hereunder within (30) days
after notice from NextWave other than amounts that are being reasonably disputed
pursuant to Section 4.6; or
(ii) COMPANY's use of NextWave's services or network (a) violates
any laws, rules or regulations (b) is in non compliance with services standards
established by NextWave; or
NextWave Confidential and Proprietary 16
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(iii) COMPANY commits a material breach of this Agreement and it is
not cured within sixty (60) days of notice from NextWave.
10.2 COMPANY may terminate this Agreement without liability by written
notice to NextWave in the event that:
(i) NextWave fails to meet the conditions provide for in Section
11.3; or
(ii) NextWave commits a material breach of this Agreement and it is
not cured within sixty (60) days of notice from COMPANY.
(iii) Within the earlier of forty-five (45) calendar days from the
date of execution of this Agreement or December 12, 1996, there is a voluntary
or involuntary Transfer of Control and Ownership of COMPANY to a non-COMPANY
Affiliate.
11. MISCELLANEOUS.
11.1 Governing Law and Choice of Forum. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York other than
the laws thereof that would require reference to the laws of any other
jurisdiction. For all purposes for which resort to a court may be had, the
parties irrevocably consent to the exclusive jurisdiction and venue of the
federal and state courts located in the State of New York.
11.2 Notices. All notices, demands, requests, or other communications
which may be or are required to be given or made by any party, to the other
party pursuant to this Agreement shall be in writing and shall be hand
delivered, mailed first-class registered or certified mail, return receipt
requested, postage pre-paid, delivered by overnight air courier, or transmitted
by telegram, telex, or facsimile transmission addressed as follows:
If to Personal Communications Network, Inc.:
10 Plog Road
Fairfield, NJ 07004
Attn: William Taylor
Fax: (201) 808-2674
with a copy to:
10 Plog Road
Fairfield, NJ 07004
Attn: Les Winder
Fax: (201) 808-2674
NextWave Confidential and Proprietary 17
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If to NextWave:
NextWave Wireless Inc.
3 Skyline Drive, 3rd Floor
Hawthorne, NY 10532
Attn: Kevin R. Carroll
Assistant Vice President, Business Planning & Development
Fax: (914)345-1141
with a copy to:
NextWave Wireless Inc.
9455 Towne Centre Drive
San Diego, CA 92121
Attn: General Counsel
Fax: (619)642-1912
Each Party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be given, served or
sent. Each notice, demand, request or communication which shall be mailed,
delivered, or transmitted in the manner described above shall be deemed
sufficiently given, served, sent or received for all purposes at such time as it
is delivered to the addressees (with the return receipt, the delivery receipt or
affidavit of messenger, or the facsimile answer back being deemed conclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
11.3 Conditions. COMPANY's commitment to purchase Airtime from NextWave is
subject to each or the following conditions being satisfied: (a) NextWave
offering commercial mobility service in Markets covering at least 40 million
POPs by December 31, 1998, and at least 70 million POPs by December 31, 2001;
(b) NextWave providing Airtime in its Markets meeting the system performance
criteria and technical specifications detailed in Attachment D and Attachment E
respectively; and (c) NextWave providing COMPANY and its Affiliates
interconnection as specified in Section 2.6.
11.4 Force Majeure. Neither party shall be liable for delays in delivery
or performance, or for failure to provide service, deliver or perform when
caused by any of the following which are beyond the reasonable control of the
delayed party:
(i) Acts of God, acts of the public enemy, acts or failures to act
by the other party, acts of civil or military authority, governmental
priorities, strikes or other labor disturbances, hurricanes, earthquakes, fires,
floods, epidemics, embargoes, war, riots, delays in transportation, and loss or
damage to goods in transit; or
(ii) Inability on account of causes beyond the reasonable control of
the delayed party to obtain products, components, services or facilities.
NextWave Confidential and Proprietary 18
<PAGE>
In the event of such delay, the date of delivery or performance shall be
extended for a period equal to the effect of the time lost by reason of the
delay.
11.5 Assignment. This Agreement may not be assigned, in whole or in part,
by any Party without the prior written consent of the other Party, except that
either Party may assign this Agreement to any of its Affiliates without the
consent of the other Party and either Party may assign this Agreement to a
successor in connection with the acquisition of the Party; provided that the
successor confirms by written agreement its agreement to assume the acquired
Party's obligations under this Agreement. For purposes of this subsection only,
the term "Affiliates" shall mean an entity under common control, controlling or
controlled by a Party; provided that "control" as used herein shall mean the
ownership, directly or indirectly, of at least eighty percent (80%) of the
aggregate of all voting interests in such entity. Any other attempt to assign
this Agreement shall be null, void and of no force or effect.
11.6 Authorization and Enforceability. Each party hereby represents that:
(A) it has all requisite corporate power and authority to enter into
this Agreement and to carry out the transactions contemplated hereby;
(B) the execution, delivery and performance of this agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the party of each party; and
(C) this Agreement has been duly executed and delivered by such
party and is valid and binding obligation of such party, enforceable against it
in accordance with its terms.
11.7 Severability. If any provision of this Agreement shall be found by
any court or administrative body of competent jurisdiction to be invalid or
unenforceable, the invalidity or unenforceability of such provision shall not
affect the other provisions of this Agreement and all provisions not affected by
such invalidity or unenforceability shall remain in full force and effect. The
parties hereby agree to attempt to substitute for any invalid or unenforceable
provision a valid and enforceable provision which achieves to the greatest
extent possible the economic, legal and commercial objectives of the invalid and
unenforceable provision.
11.8 Survival. The following provisions shall survive the termination of
this Agreement, and shall continue in full force and effect along with any other
provisions of this Agreement which by their nature or in accordance with the
terms, whether or not listed, shall survive such termination: Articles 5, 6, 7,
8 and 9 and Sections 4.9, 11.1, 11.2, 11.7, 11.8, 11.13, 11.14, 11.16 and 11.17.
11.9 Entire Agreement. This Agreement, which includes the attached
Schedules, constitutes the entire agreement and understanding between the
parties hereto in connection with subject matter hereof, and supersedes and
cancels all previous negotiations, commitments and writings with respect
thereto.
NextWave Confidential and Proprietary 19
<PAGE>
11.10 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party or the signatures
of all persons required to bind party, appear on each counterpart; but it shall
be sufficient that the signature of, or on behalf of, each party, or the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement.
11.11 Captions for Convenience Only. The captions used in this Agreement
are included for convenience only and shall not be considered part of this
Agreement for any purpose. Unless expressly state otherwise, all references
herein to "Articles" are to the relevant portions of this Agreement, and all
references to "Schedules" are to the attachments to this Agreement.
11.12 Amendment. This Agreement shall not be amended, modified or
rescinded in any manner, except by an instrument in writing signed by duly
authorized representatives of each of the parties hereto.
11.13 No Third-Party Beneficiary. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties and their
respective successors and permitted assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third person
to any party, nor shall any provision give any third person any right of
subrogation or action against any party.
11.14 Expenses. Except as otherwise expressly provided in this Agreement,
whether or not the transactions contemplated hereby are consummated, each party
will pay its own costs and expenses incurred in connection with the negotiation
and execution of this Agreement and the transactions contemplated hereby
(including executing all such documents and doing such acts and things as may
reasonably be required for the purpose of giving full effect to this Agreement).
11.15 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
11.16 Binding. This Agreement is binding upon, inures to the benefit of
and is enforceable by the parties hereto and their respective permitted
successors and assigns.
11.17 Specific Performance. The obligations of the parties under Article 5
of this agreement are unique. If any party should be in Default under Article 5
of this Agreement, the Defaulting Party acknowledges that it would be extremely
impracticable to measure the resulting damages. Accordingly, in addition to any
other available rights or remedies, the Non-Defaulting Party may sue in equity,
for specific performance and the Defaulting Party expressly waives the defense
that a remedy in damages would be adequate.
NextWave Confidential and Proprietary 20
<PAGE>
11.18 Regulatory Compliance. Notwithstanding any provision in this
Agreement to the contrary, NextWave shall not be obligated to furnish COMPANY
with Full Mobility Services under rates, charges, terms or conditions that
violate any applicable provisions of the Communications Act of 1934, as amended,
the applicable rules, regulations or policies of the FCC or any other federal or
state agency with jurisdiction over NextWave's services.
[Remainder of Page Intentionally Left Blank]
NextWave Confident and Proprietary 21
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective and
delivered as of the date set forth below.
PERSONAL COMMUNICATIONS NEXTWAVE WIRELESS INC.,
NETWORK, INC. A DELAWARE CORPORATION
A DELAWARE CORPORATION
Date: October 29, 1996 Date: October 29, 1996
---------------------------- -----------------------------
/s/ Les Winder /s/ Kevin R. Carroll
---------------------------- -----------------------------
(Signature) (Signature)
By: Les Winder By: Kevin R. Carroll
---------------------------- -----------------------------
Title: President Title: AVP - Business Plng. & Devlp.
---------------------------- -----------------------------
NextWave Confidential and Proprietary 22
<PAGE>
ATTACHMENT A
NextWave's Network Elements and Functionality
The following are the network elements and functionality NextWave will make
available, to the extent practicable and pursuant to pricing specified in the
Agreement, in each PCS market either directly or indirectly through a third
party:
a.) Advanced Intelligent Network ("AIN") Platform. The AIN platform is the
platform from which COMPANY will store and offer its and customers all of their
non-switched based vertical services. As an option, when available NextWave may
provide its AIN platform.
b.) Third Party Interconnection Access. The physical interconnection to
the Public Switching Telephone Network ("PSTN"). The responsibility for the
associated monthly and usage-sensitive costs for such circuits carrying
COMPANY's customers' mobile-to-landline and landline-to-mobile traffic to and
from NextWave's network is COMPANY's.
c.) Backhaul Interconnection. In BTA markets where COMPANY is a local
access provider of facilities, COMPANY will make available to NextWave standard
T1 and T3 facilities at COMPANY's most favorable rate for like terms,
quantities, and conditions. These facilities may be used by NextWave for
switch-to-base station, switch-to-base station controller, base station-to-base
controller and switch-to-switch connections.
d.) SS-7 Backbone. The SS-7 signaling backbone network carrying standard
IS-41 message sets between NextWave's network and COMPANY's HLR database
access.
e.) FCC License to Provide PCS. The Federal Communications Commission's
("FCC") license to provide Personal Communication Service ("PCS") in the markets
of interest.
f.) Radio Coverage and Access. The deployment of competitive coverage at a
predetermined and mutually agreed to minimum level/grade of PCS access service.
g.) Mobile Switching Center. The switching capability to provide the end
customer with the proper mobility and roaming capability. AIN software for
standard IS-41 interconnection to COMPANY's AIN platform and PSTN
interconnection.
h.) Switch-based Vertical Services. These end customer vertical software
services provided at the Mobile Switching Center for example, but not limited
to, Call Waiting, Call Forwarding, Three-Way Calling, and Caller ID.
i.) Local Wireless Operations and Management of the Network. NextWave will
design, engineer, construct, and maintain the PCS network in each BTA and
maintain a minimum service availability level.
Next Wave Confidential and Proprietary
<PAGE>
ATTACHMENT B
NextWave's PCS Markets
- --------------------------------------------------------------------------------
Colonial Region Lone Star Region Ohio Valley Region
Boston, MA Austin, TX Cincinnati, OH
Manchester/Nashua, NH Bryan-College Station, TX Columbus, OH
New London, CT Houston, TX Dayton, OH
Portland/Brunswick, ME San Antonio, TX
Providence, RI Temple-Killeen, TX Hoosier Region
Worcester, MA Bloomington, IN
Amigo Region Columbus, IN
Hollywood Region Brownsville, TX Evansville, IN
Los Angeles, California El Paso, TX Indianapolis, IN
Las Cruces, NM Lafayette, IN
Dolphin Region McAllen, TX
San Diego, California Sooner Region
NY-Metro Region Oklahoma City, OK
Albany, NY
Capital Region Allentown, PA
Baltimore, MD New Haven, CT Thoroughbred Region
Hagerstown, MD Poughkeepsie, NY Lexington, KY
Norfolk, VA Scranton, PA Louisville, KY
Richmond, VA
Washington, DC Twin Cities Region
Big Apple Region Minneapolis, MN
NYC BTA
Greengrass Region
Asheville, NC Rocky Mountain Region
Charlotte, NC Steeler Region Denver
Greensboro, NC Pittsburgh, PA
Hickory, NC Pacific Northwest Region
Roanoke, VA Sunshine Region Bellingham, WA
Gainsville, FL Longview, WA
Mid. America Jacksonville, FL Olympia, WA
Joplin, MO Lakeland-Winter Haven, FL Portland, OR
Kansas City, MO Melbourne, FL Seattle, WA
Springfield, MO Orlando, FL
Sarasota, FL
Buckeye Region Tampa, FL
Cleveland, OH
- --------------------------------------------------------------------------------
NextWave Confidential and Proprietary
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
ATTACHMENT C
PRICING SCHEDULE
[REDACTED]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Attachment D
System Performance Criteria
1.1 Coverage Area
The Coverage Area shall be that minimal signal strength necessary to provide
service such that calls are successful [REDACTED] of the time averaged along the
Coverage Area boundary, irrespective of the direction of the call (land-mobile,
mobile-land) with no greater than [REDACTED] frame error rate (FER) on average.
1.2 Handset Compatibility
NextWave shall demonstrate the full compatibility of its network with handsets
of COMPANY's choice that have been certified as compliant with domestic PCS
interface standards, so long as these handsets have been demonstrated to be
fully compatible with one other domestic IS-95 (CDMA) compliant 1.9 GHz network
and certified as IS-95, 1.9 GHz compliant by recognized standard or
certification bodies.
1.3 Network Call Blockage/Quality Objectives
The following considerations are required concerning network call blockage:
o Average busy hour blockage within the NextWave network will not exceed
[REDACTED] of all call attempts.
o The above values are to be met, unless superseded by necessary regulatory
mandates.
o Emergency calls should be given the highest possible resource priority.
1.4 Dropped Calls
The number of dropped calls measured over a period of a month in a Coverage Area
shall not exceed [REDACTED] of the total number of subscriber calls originated
in that Coverage Area.
1.5 Network Availability
NextWave will engineer and manage its network to meet the above service and
quality levels established for the Coverage Area. The emphasis of management
activities will be on preventative maintenance, such that potential outages will
be resolved before customers are affected.
A Network Outage is the inability, or a significant degradation in the ability
of a customer to establish and maintain a channel of communication as a result
of failure or degradation in the performance of NextWave's network.
NextWave Confidential and Proprietary
<PAGE>
In the event of a major network outage, NextWave will notify COMPANY of the
conditions affecting the customers, including, but not limited to out-of-service
events, and high system traffic loads.
Any FCC-reportable Network Outages, including disruption of 91l/E911 and
emergency services will be reported to COMPANY.
1.6 Performance Verification
NextWave will provide to the COMPANY statistics that define the performance of
the network including blocked calls, dropped calls, and frame error rates. In
addition, NextWave will provide coverage maps that define the Coverage Area.
NextWave Confidential and Proprietary
<PAGE>
ATTACHMENT E
NextWave shall be in general compliance with the following standards:
I. Wireless Network Interface Standards
A. IS-4lRev B Cellular Radio Telecommunications Intersystem Operations
NextWave's Network shall be in general compliance with IS-41 Revision B. This
shall be upgraded to be in general compliance with IS-41 Revision C when IS-41
Revision C is commercially available.
B. EIA/TIA/IS-52: Uniform Dialing Procedures and Call Processing Treatment For
Cellular Radio Telecommunications - November, 1989
C. EIA/TIA/IS-52-A: Uniform Dialing Procedures and Call Processing Treatment For
Cellular Radio Telecommunications - When Published
D. EIA/TIA/IS-53: Cellular Features Description: - August, 1991
E. EIA/TIA/IS-53-A: Cellular Features Description: - May, 1995
F. EIA/TIA/IS-93: Cellular Radio Telecommunications A-D Interface Standards
- - October, 1993.
II. SS7 Interface Standards
A. TR-NWT-000246: Bell Communications Research Specification of Signaling System
Number 7, Issue 3
B. TR-NWT-000082: Signaling Transfer Point Generic Requirements, Issue 5
C. TR-TSY-000317: Switching System Requirements for Call Control Using the
Integrated Services Digital Network User Part (ISDNUP)
D. TR-TSY-000394: Switching System Requirements for Interchange Carriers Using
the Integrated Services Digital Network User Part (ISDNUP)
E. TR-NWT-000444: Switching system Generic Requirements supporting ISDN Access
using the Integrated Services Digital Network User Part (ISDNUP)
F. ANSI T1.114 SS7 Transaction Capabilities Application Part (TCAP)
G. ANSI T1.112: SS7 Signaling Connection Control Part (SCCP)
H. ANSI T1.111: SS7 Message Transfer Part (MTP)
III. Air Interface Standards
A. ANSI-J-STD-008: Personal Station -Base station Compatibility requirements for
1.8 to 2.0 GHz CDMA Personal Communications Systems.
NextWave Confidential and Proprietary
SETTLEMENT AND SEPARATION AGREEMENT
AGREEMENT made this 15th day of May, 1997 by, between and among Free Trade
Distributors, Inc ("Free Trade"), Trade Zone Distributors, Inc. ("Trade Zone")
and Electronics Communications Corp. ("ECC") ("Free Trade", "Trade Zone" and
"ECC" are sometimes hereinafter collectively referred to as "ECC"), and Bell
Atlantic NYNEX Mobile, Inc. ("BANM"), NYNEX Mobile Communications, Inc.
("NYNEX"), Bell Atlantic Mobile Systems, Inc. ("Bell Atlantic") and Cellco
Partnership ("Cellco"). ("BANM", "NYNEX", "Bell Atlantic" and "Cellco" are
sometimes hereinafter collectively referred to as "BANM.")
R E C I T A L S:
WHEREAS, ECC and BANM, through one or more of its and/or their
Representatives (as hereinafter defined) entered into certain "Agency
Agreements," dated November 1, 1993 and February 10, 1995, respectively,
pursuant to which ECC was appointed as an agent for each of NYNEX and Bell
Atlantic to solicit cellular telephone activations and services in certain
designated geographic areas; and otherwise have entered into a certain "OMNI"
Debit Card Program, and one or more customer agreements of general import (all
of the foregoing agreements and arrangements being hereinafter collectively
referred to and defined as the "Agreements"); and
WHEREAS, BANM has succeeded to all of the business and assets of NYNEX,
Bell Atlantic and/or Cellco, by way of merger, consolidation or otherwise,
solely in connection with the Agreements, as above referred to and defined; and
WHEREAS, ECC and BANM are desirous of providing for an orderly termination
of all of the Agreements, and any and all rights and obligations thereunder; and
are desirous of obtaining and arranging for a separation from the various
relationships between them, arising therefrom, including the resolution and
payment of all obligations and liabilities thereunder, and the termination of
all terms, conditions, restrictions and covenants contained in the Agreements,
and a final disposition, resolution and settlement of all other matters of every
kind and nature with respect to such Agreements, and the relationships between
ECC and BANM;
NOW, THEREFORE, IT IS AGREED, as follows:
1. Settlement of All Amounts Due and Payable.
Controversies exist with respect to the payment of various invoices, bills
and statements from BANM to ECC, reflecting claims of payment obligations of ECC
to BANM, and with respect to commissions and other amounts claimed to be due
from BANM to ECC. Any and all of such amounts of every kind and nature due
between and among BANM, ECC, and ECC and BANM, whether contingent, fixed or
inchoate, and whether known or unknown, are hereby fixed, determined and settled
by BANM's agreement and obligation hereunder to pay to ECC the lump sum of
$95,000.00, by delivering to ECC's attorneys, Rosenberg & Fein, as attorneys, a
certified or bank cashier's check in said amount or by delivering funds in such
amount via Federal Funds Wire Transfer upon the execution and delivery of this
Settlement and Separation Agreement, pursuant to instructions to be provided by
Rosenberg & Fein.
<PAGE>
2. Release of All Liabilities, Restrictions,
Covenants and Obligations - Contractual or Otherwise.
In addition, controversies also exist between and among ECC and BANM with
respect to the renewal of one or more of the Agreements, and/or with respect to
the renewal or other continuation of certain rights and obligations there.
Accordingly, upon the execution of this Agreement, and by the execution and
delivery of the General Releases in the form annexed hereto, and upon the
delivery, collection and payment of the sum of $95,000.00, as provided in para.
"1", BANM and ECC intend to, and do hereby, terminate in all respects the
Agreements, and each of them, and all rights and obligations thereunder of each
and every kind and nature; and ECC and BANM do hereby release and discharge each
other, and each and all their respective Representatives, from any and all
obligations, liabilities, restrictions, and covenants of any kind and nature,
under, and pursuant to, the Agreements, and each of them, including, without
limitation, any and all non-competition, non-solicitation, restrictive covenant,
confidentiality, non-circumvention or other contractual provisions, including
any claims of unfair trade practices, and any and all other claims of any and
all nature between the parties hereto; and from and after the execution and
delivery of this Agreement, and the performance of the obligations at Closing
hereunder (whether in person or otherwise), each of ECC and BANM, and each of
their Representatives, shall be free to pursue and conduct their business(es) as
if the Agreements had never been entered into or existed -- it being the
intention of the parties to make this mutual release of any and all liabilities
as broad as legally possible, without reservation of any kind or nature.
3. General Releases.
To effectuate the foregoing purposes, each of ECC and BANM shall execute,
and contemporaneously deliver at the Closing of this Agreement, General Releases
in the form annexed hereto.
4. Separation: No Disparagement.
As noted above, the foregoing provisions contained in paras. "1", "2" and
"3" preceding are intended to set forth the basis of, and obligation for, an
orderly, responsible and business-like separation of the parties with respect to
the obligations, responsibilities and relationships set forth in and/or created
by the Agreements. The parties have determined and agree that it is in their
collective and respective best interests that they should also separate, and
they do hereby agree to separate, from the relationships created by the
Agreements in a manner and way such that neither party disparages the business,
business practices, credit, expertise, stewardship or other aspects of the
business, staff or prospects of the other, from and after the date hereof, as
related to any aspect or relationship pertaining to, existing under, and/or
created by the Agreements; except as may result from the good faith and
professional prosecution of competitive, business-like endeavors, by such
parties in the ordinary course of their business, without regard to the
transactions and occurrences which are the subject of this "Settlement and
Separation Agreement."
2
<PAGE>
5. Definitions.
For all purposes of this Settlement and Separation Agreement, the term
"Representative" shall be liberally construed and shall mean and include, but
shall not be limited to, all agents, employees, officers, executives, directors,
subsidiaries, associates and affiliates (as those terms are defined under the
Securities Act of 1933, and the Securities and Exchange Act of 1934, each as
amended, or otherwise), of each of ECC and BANM, and any others who directly, or
indirectly, represent, or act on behalf of, or for, the benefit of, in any
manner, the person or entity referred to, and shall also include and encompass
for these purposes, any corporation, partnership, joint venture, or other
entity, in which such person has an equity, voting or other substantial and
substantive interest, of record or beneficially, and any company and entity with
which such person is associated or affiliated.
6. Binding Effect.
All the terms of this Agreement shall be binding upon ECC and BANM and
each of its, or their employees, shareholders, representatives, successors,
assigns or administrators, and shall inure to the benefit of each of ECC and
BANM, and any of their successors or assigns or transferees, whether by
operation of law, or otherwise.
7. Attorneys' Fees and Costs.
In the event of a breach of any term or provision hereof, or the filing of
a suit or other legal proceeding in connection with the enforcement of any
provision hereof, the prevailing party shall, in addition to any other remedies
available to it, be entitled to reimbursement or the direct payment of its
attorneys' fees and costs from the losing party; provided such legal proceeding
is prosecuted to completion and determination is made by a judge or jury as to
the prevailing party.
8. Entire Agreement - Modification.
This Agreement and any other agreements or instruments executed
concurrently herewith, and contemplated hereunder, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof.
No claim of waiver, modification or amendment, consent or acquiescence with
respect to any of the provisions hereof, shall be made against any party, except
on the basis of a written instrument duly executed by all adverse parties, or
potential adverse parties, and duly acknowledged.
9. Governing Law.
This Agreement shall be deemed executed and delivered in the State of New
York, and this Agreement shall, in all respects, be construed in accordance
with, and governed by, the laws of the State of New York.
3
<PAGE>
10. Each Party is Represented by Separate Counsel
Each of the parties hereto represents and acknowledges that it has been
represented in the negotiation and consummation of this Agreement by their own
counsel; and the terms, conditions and provisions of this Agreement have been
fully negotiated at arms-length. Accordingly, there shall not be any presumption
in favor of any party in the construction, interpretation or enforcement of this
Agreement by reason of any rules of construction against the party preparing
this Agreement, or any other similar rules of construction and interpretation.
11. Counterparts.
This Agreement shall be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The number of counterparts, which shall in all
respects be identical, shall be marked in the upper right-hand corner of the
first page of each such counterpart and shall be initialed by a representative
of each party.
IN WITNESS WHEREOF, this Agreement has been executed by the Undersigned on
the date first written above.
ELECTRONICS COMMUNICATIONS CORP. TRADE ZONE DISTRIBUTORS, INC.
By: /s/ Les Winder By: /s/ Les Winder
- ------------------------------ ------------------------------
Authorized Representative Authorized Representative
FREE TRADE DISTRIBUTORS, INC. BELL ATLANTIC NYNEX MOBILE, INC.
By: /s/ Les Winder By: /s/ S. Mark Tuller
- ------------------------------ ------------------------------
Authorized Representative Authorized Representative
Cellco Partnership, as assignee of Cellco Partnership, as assignee of
NYNEX MOBILE COMMUNICATIONS, INC. BELL ATLANTIC MOBILE SYSTEMS, INC.
or: BELL ATLANTIC NYNEX MOBILE, INC. or: BELL ATLANTIC NYNEX MOBILE, INC.
By: /s/ S. Mark Tuller By: /s/ S. Mark Tuller
- ------------------------------ ------------------------------
Authorized Representative Authorized Representative
CELLCO PARTNERSHIP
By: Bell Atlantic NYNEX Mobile, Inc.
By: /s/ S. Mark Tuller
- ------------------------------
Authorized Representative {Acknowledgments Overleaf}
4
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On May 9, 1997, before me personally came Les Winder, the Exec. V.P. of
Electronics Communications Corp., to me known, and known to me to be the
authorized officer who executed this instrument, and he acknowledged to me that
he set his hand and seal this day on behalf of Electronics Communications Corp.
JEFFREY L. ROSENBERG
NOTARY PUBLIC, STATE OF NEW YORK
NO 4955153 /s/ Jeffrey L. Rosenberg
QUALIFIED IN NASSAU COUNTY ------------------------
COMMISSION EXPIRES AUGUST 28, 1998 N O T A R Y P U B L I C
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On May 9, 1997, before me personally came Les Winder, the Exec. V.P. of
Free Trade Distributors, Inc., to me known, and known to me to be the authorized
officer who executed this instrument, and he acknowledged to me that he set his
hand and seal this day on behalf of Free Trade Distributors, Inc.
JEFFREY L. ROSENBERG
NOTARY PUBLIC, STATE OF NEW YORK
NO 4955153 /s/ Jeffrey L. Rosenberg
QUALIFIED IN NASSAU COUNTY ------------------------
COMMISSION EXPIRES AUGUST 28, 1998 N O T A R Y P U B L I C
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On May 9, 1997, before me personally came Les Winder, the Exec. V.P. of
Trade Zone Distributors, Inc., to me known, and known to me to be the authorized
officer who executed this instrument, and he acknowledged to me that he set his
hand and seal this day on behalf of Trade Zone Distributors, Inc.
JEFFREY L. ROSENBERG
NOTARY PUBLIC, STATE OF NEW YORK
NO 4955153 /s/ Jeffrey L. Rosenberg
QUALIFIED IN NASSAU COUNTY ------------------------
COMMISSION EXPIRES AUGUST 28, 1998 N O T A R Y P U B L I C
5
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On May 14, 1997, before me personally came S. Mark Tuller, the Vice
President Legal & External Affairs, General Counsel; Secretary of Bell Atlantic
NYNEX Mobile, Inc., to me known, and known to me to be the authorized officer
who executed this instrument, and he acknowledged to me that he set his hand and
seal this day on behalf of Bell Atlantic NYNEX Mobile, Inc.
MARTHA J. LIOTTA /s/ Martha J. Liotta
A Notary Public of New Jersey --------------------------
My Commission Expires Aug. 16 1997 N O T A R Y P U B L I C
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On May 14, 1997, before me personally came S. Mark Tuller, the Vice
President Legal & External Affairs, General Counsel; Secretary of Bell Atlantic
NYNEX Mobile, Inc., the managing general partner of Cellco Partnership, assignee
of NYNEX Mobile Communications, Inc., to me known, and known to me to be the
authorized officer who executed this instrument, and he acknowledged to me that
he set his hand and seal this day on behalf of Cellco Partnership.
MARTHA J. LIOTTA /s/ Martha J. Liotta
A Notary Public of New Jersey --------------------------
My Commission Expires Aug. 16 1997 N O T A R Y P U B L I C
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On May 14, 1997, before me personally came S. Mark Tuller, the Vice
President Legal & External Affairs, General Counsel; Secretary of Bell Atlantic
NYNEX Mobile, Inc., the managing general partner of Cellco Partnership, assignee
of Bell Atlantic Mobile Systems, Inc., to me known, and known to me to be the
authorized officer who executed this instrument, and he acknowledged to me that
he set his hand and seal this day on behalf of Cellco Partnership.
MARTHA J. LIOTTA /s/ Martha J. Liotta
A Notary Public of New Jersey --------------------------
My Commission Expires Aug. 16 1997 N O T A R Y P U B L I C
6
<PAGE>
To all to whom these Presents shall come or may Concern, know That
ELECTRONICS COMMUNICATIONS CORP.
[Illegible] corporation organized under the laws of the State of Delaware, as
RELEASOR, [Illegible] consideration of the sum of
Ten Dollars and other good and valuable consideration ($10.00),
Received from
Bell Atlantic NYNEX Mobile, Inc., NYNEX Mobile Communications, Inc., Bell
Atlantic Mobile Systems, Inc. and Cellco Partnership
as RELEASEE,
Receipt whereof is hereby acknowledged, releases and discharges
Bell Atlantic NYNEX Mobile, Inc., NYNEX Mobile Communications, Inc., Bell
Atlantic Mobile Systems, Inc. and Cellco Partnership
the RELEASEE, RELEASEE'S heirs, executors, administrators,
successors and assigns from all actions, causes of action, suits, debts, dues,
sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, claims, and demands whatsoever, in law,
admiralty or equity, which against the RELEASEE, the RELEASOR, RELEASOR'S heirs,
executors, administrators, successors and assigns ever had, now have or
hereafter can, shall or may, have for, upon, or by reason of any matter, cause
or thing whatsoever from the beginning of the world to the day of the date of
this RELEASE.
Whenever the text hereof requires, the use of singular number shall
include the appropriate plural number as the text of the within instrument may
require.
This RELEASE may not be changed orally.
In Witness Whereof, the RELEASOR has caused this RELEASE to be executed
by its duly authorized officers and its corporate seal to be hereunto affixed on
May 9 1997.
In presence of:
ELECTRONICS COMMUNICATIONS CORP.
---------------------------------
By /s/ Les Winder
------------------------------
STATE OF NEW YORK COUNTY OF NEW YORK ss.:
On May 9 1997 before me personally came Les Winder to me
known, who, by me duly sworn, did depose and say that deponent resides at
that deponent is the Executive Vice President of Electronics Communications
Corp. the corporation described in, and which executed the foregoing RELEASE,
that deponent knows the seal of the corporation, that the seal affixed to the
RELEASE is the corporate seal, that it was affixed by order of the board of
of the corporation; and that deponent signed deponent's name by like order.
JEFFREY L. ROSENBERG
NOTARY PUBLIC, STATE OF NEW YORK
NO 4955153 /s/ Jeffrey L. Rosenberg
QUALIFIED IN NASSAU COUNTY ------------------------
COMMISSION EXPIRES AUGUST 28, 1998 N O T A R Y P U B L I C
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On May 14, 1997, before me personally came S. Mark Tuller, an authorized
signatory for Bell Atlantic NYNEX Mobile, Inc., to me known, and known to me to
be an authorized signatory for and on behalf of Cellco Partnership, and who
executed this instrument as an authorized representative of Bell Atlantic NYNEX
Mobile, Inc., which exercised this instrument for and on behalf of Cellco
Partnership.
MARTHA J. LIOTTA /s/ Martha J. Liotta
A Notary Public of New Jersey --------------------------
My Commission Expires Aug. 16 1997 N O T A R Y P U B L I C
7
<PAGE>
To all to whom these Presents shall come or may Concern, know That Cellco
Partnership, by Bell Atlantic NYNEX Mobile, Inc., its managing general partner,
individually and as assignee of NYNEX Mobile Communications, Inc and Bell
Atlantic Mobile Systems, Inc.; and Bell Atlantic NYNEX Mobile, Inc.,
Cellco Partnership being a general partnership, and Bell Atlantic NYNEX Mobile,
Inc. being a corporation, each [Illegible] organized under the laws of the State
of New Jersey, as RELEASOR, [Illegible] consideration of the sum of Ten Dollars
and other good and valuable consideration ($10.00),
Received from
Electronics Communications Corp.
as RELEASEE,
Receipt whereof is hereby acknowledged, releases and discharges
Electronics Communications Corp.
the RELEASEE, RELEASEE'S heirs, executors, administrators,
successors and assigns from all actions, causes of action, suits, debts, dues,
sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, claims, and demands whatsoever, in law,
admiralty or equity, which against the RELEASEE, the RELEASOR, RELEASOR'S heirs,
executors, administrators, successors and assigns ever had, now have or
hereafter can, shall or may, have for, upon, or by reason of any matter, cause
or thing whatsoever from the beginning of the world to the day of the date of
this RELEASE.
Whenever the text hereof requires, the use of singular number shall
include the appropriate plural number as the text of the within instrument may
require.
This RELEASE may not be changed orally.
In Witness Whereof, the RELEASOR has caused this RELEASE to be executed
by its duly authorized officers and its corporate seal to be hereunto affixed on
May 14, 1997.
In presence of: Cellco Partnership, Bell Atlantic NYNEX Mobile, Inc., its
managing general partner, individually and as assignee of NYNEX Mobile
Communications, Inc. and Bell Atlantic Mobile Systems, Inc.; and Bell Atlantic
NYNEX Mobile, Inc.
By /s/ S. Mark Tuller
------------------------------
S. Mark Tuller
STATE OF New Jersey COUNTY OF Somerset ss.:
On May 14 1997 before me Martha J. Liotta personally came S. Mark Tuller
to me known, who, by me duly sworn, did depose and say that deponent resides at
that deponent is the Vice President Legal and External Affairs, General Counsel
of Bell Atlantic NYNEX Mobile, Inc. the corporation described in, and which
executed the foregoing RELEASE, that deponent knows the seal of the corporation,
that the seal affixed to the RELEASE is the corporate seal, that it was affixed
by order of the board of
of the corporation; and that deponent signed deponent's name by like order.
MARTHA J. LIOTTA /s/ Martha J. Liotta
A Notary Public of New Jersey --------------------------
My Commission Expires Aug. 16 1997 N O T A R Y P U B L I C
<PAGE>
To all to whom these Presents shall come or may Concern, know That
FREE TRADE DISTRIBUTORS, INC.
[Illegible] corporation organized under the laws of the State of Delaware, as
RELEASOR, [Illegible] consideration of the sum of Ten Dollars and other good and
valuable consideration ($10.00),
Received from
Bell Atlantic NYNEX Mobile, Inc., NYNEX Mobile Communications, Inc., Bell
Atlantic Mobile Systems, Inc. and Cellco Partnership
as RELEASEE,
Receipt whereof is hereby acknowledged, releases and discharges
Bell Atlantic NYNEX Mobile, Inc., NYNEX Mobile Communications, Inc., Bell
Atlantic Mobile Systems, Inc. and Cellco Partnership
the RELEASEE, RELEASEE'S heirs, executors, administrators,
successors and assigns from all actions, causes of action, suits, debts, dues,
sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, claims, and demands whatsoever, in law,
admiralty or equity, which against the RELEASEE, the RELEASOR, RELEASOR'S heirs,
executors, administrators, successors and assigns ever had, now have or
hereafter can, shall or may, have for, upon, or by reason of any matter, cause
or thing whatsoever from the beginning of the world to the day of the date of
this RELEASE.
Whenever the text hereof requires, the use of singular number shall
include the appropriate plural number as the text of the within instrument may
require.
This RELEASE may not be changed orally.
In Witness Whereof, the RELEASOR has caused this RELEASE to be executed
by its duly authorized officers and its corporate seal to be hereunto affixed on
May 9 1997.
In presence of:
FREE TRADE DISTRIBUTORS, INC.
---------------------------------
By /s/ Les Winder
------------------------------
STATE OF NEW YORK COUNTY OF NEW YORK ss.:
On May 9 1997 before me personally came Les Winder to me
known, who, by me duly sworn, did depose and say that deponent resides at
that deponent is the Executive Vice President of Free Trade Distributors, Inc.
the corporation described in, and which executed the foregoing RELEASE, that
deponent knows the seal of the corporation, that the seal affixed to the RELEASE
is the corporate seal that it was affixed by order of the board of
of the corporation; and that deponent signed deponent's name by like order.
JEFFREY L. ROSENBERG
NOTARY PUBLIC, STATE OF NEW YORK
NO 4955153 /s/ Jeffrey L. Rosenberg
QUALIFIED IN NASSAU COUNTY ------------------------
COMMISSION EXPIRES AUGUST 28, 1998 N O T A R Y P U B L I C
<PAGE>
To all to whom these Presents shall come or may Concern, know That
TRADE ZONE DISTRIBUTORS, INC.
[Illegible] corporation organized under the laws of the State of Delaware, as
RELEASOR, [Illegible] consideration of the sum of
Ten Dollars and other good and valuable consideration ($10.00),
Received from
Bell Atlantic NYNEX Mobile, Inc., NYNEX Mobile Communications, Inc., Bell
Atlantic Mobile Systems, Inc. and Cellco Partnership
as RELEASEE,
Receipt whereof is hereby acknowledged, releases and discharges
Bell Atlantic NYNEX Mobile, Inc., NYNEX Mobile Communications, Inc., Bell
Atlantic Mobile Systems, Inc. and Cellco Partnership
the RELEASEE, RELEASEE'S heirs, executors, administrators,
successors and assigns from all actions, causes of action, suits, debts, dues,
sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, claims, and demands whatsoever, in law,
admiralty or equity, which against the RELEASEE, the RELEASOR, RELEASOR'S heirs,
executors, administrators, successors and assigns ever had, now have or
hereafter can, shall or may, have for, upon, or by reason of any matter, cause
or thing whatsoever from the beginning of the world to the day of the date of
this RELEASE.
Whenever the text hereof requires, the use of singular number shall
include the appropriate plural number as the text of the within instrument may
require.
This RELEASE may not be changed orally.
In Witness Whereof, the RELEASOR has caused this RELEASE to be executed
by its duly authorized offices and its corporate seal to be hereunto affixed on
May 9 1997.
In presence of:
TRADE ZONE DISTRIBUTORS, INC.
---------------------------------
By /s/ Les Winder
------------------------------
STATE OF NEW YORK COUNTY OF NEW YORK ss.:
On May 9 1997 before me personally came Les Winder to me known, who, by
me duly sworn, did depose and say that deponent resides at
that deponent is the Executive Vice President of Trade Zone Distributors, Inc.
the corporation described in, and which executed the foregoing RELEASE, that
deponent knows the seal of the corporation, that the seal affixed to the RELEASE
is the corporate seal that it was affixed by order of the board of
of the corporation; and that deponent signed deponent's name by like order.
JEFFREY L. ROSENBERG
NOTARY PUBLIC, STATE OF NEW YORK
NO 4955153 /s/ Jeffrey L. Rosenberg
QUALIFIED IN NASSAU COUNTY ------------------------
COMMISSION EXPIRES AUGUST 28, 1998 N O T A R Y P U B L I C
<PAGE>
================================================================================
Cellco Partnership, by Bell Atlantic NYNEX Mobile, Inc., its managing general
partner, individually and as assignee of NYNEX Mobile Communications, Inc. and
Bell Atlantic Mobile Systems, Inc.; and Bell Atlantic NYNEX Mobile, Inc.
RELEASOR
Electronics Communications Corp. RELEASEE
================================================================================
General Release
================================================================================
Dated 1997
LAW OFFICES OF
D & L Consultants Ltd.
460 Park Avenue South,
4th Floor
New York, New York 10016
------
Tel: (212) 683-1845
Fax: (212) 686-6726
June 1,1995
Electronic Communications Corp.
4 Madison Road
Fairfield, NJ 07004
Attn: William S. Taylor, President
Dear Mr. Taylor,
This Letter Agreement will confirm the prior mutual understanding between
D & L Consultants Ltd. (hereafter "Consultant"), and Electronic Communications
Corp. (hereafter "the Company") in writing.
The Company is in the business of providing, through operating
subsidiaries, distribution of home and office electronic equipment, cellular
service through licensed master carriers, and is contemplating further expansion
with "PCS" paging and other telecommunications services. With respect to its
existing operations, the Company utilizes a leased warehouse and adjoining
offices located at 4 Madison Road, Fairfield, NJ 07004.
The Consultant consists of an experienced team of certified financial
experts in the management, operation, leasing and financing of real and personal
property and has a broad background in business activities with an emphasis on
marketing and financial planning. Legal services, where required, are provided
by licensed attorneys with whom Consultant has a working relationship. The
Consultant agrees to render services under the terms set forth herein.
The Company is desirous of obtaining the services of the Consultant to
assist in various functions relating to its business and more fully described
below:
Consultant Services
Consultant agrees during the term hereof to render the following services,
which Consultant represents it is qualified to provide, as and when the same may
be requested by the Company:
(a) To advise upon prospective lease locations for future warehouse and
office facilities and to assist the Company in lease negotiations to
obtain the most favorable lessor concessions for retail distribution
center.
(b) To assist in the preparation and review of and make recommendations
with respect to budgets prepared by or on behalf of the Company in
connection with its future operations.
<PAGE>
Mr. Taylor -2- June 1, 1995
(c) To seek sources for financing and facilitate obtaining of lending
commitments on behalf of the Company.
(d) To network and present the Company to various affiliated brokerage
houses in order to maintain a visible market presence in it stock
offering. The Consultants will also assist the Company in any new
stock offerings of any Company owned project or subsidiary of the
same.
(e) The Consultant will render such further advise and reports as may be
reasonable and appropriate under the circumstances in connection
with the ownership, management or financing of the Company's
activities.
The Consultant shall furnish the foregoing services through its
officers, employees, and contractees from time to time as may be
requested by the Company. The foregoing services will be provided to
the Company only when requested and shall not prevent the Company
from seeking similar services from other vendors (providers). The
Company shall be under no obligation to furnish confidential
information concerning the Company's business to Consultant unless
the Company, in its sole discretion, deems it necessary and proper
for the Consultant to render services to the Company under this
Agreement.
In addition, the Company will enter into an exclusive Collection
Contract with the law firm of Joseph P. Albanese. This law firm will
exclusively handle all collections for the Company.
Consultant's Compensation
In consideration of the Services to be performed by Consultant pursuant to
this Agreement, Company shall pay to Consultant a fee of $144,000.00 per year in
twelve(12) equal monthly installments of $12,000.00, commencing June 1, 1995.
The Consultant's fee shall be deemed earned upon receipt and shall be
nonrefundable representing Consultant's sole and exclusive compensation by
reason of this transaction, except as herein expressly provided. This fee shall
be paid notwithstanding no services were requested of Consultant by the Company
for the period of said payment.
Term and Termination
This Agreement shall be for an exclusive term of five (5) years commencing
June 1,1995 and will remain in full force and effect until May 31, 2000. It is
further agreed that said fee will increase on a yearly basis at the rate of
twelve percent (12%) per year. In the event the Company is showing a loss in any
calendar year, the next due increase shall be deleted and the parties shall
mutually agree to a new fee schedule.
In the event the Consultant defaults hereunder, the Company shall notify
the Consultant (Certified Mail/Return Receipt Requested) to remedy and in the
event Consultant fails to cure the default within thirty (30) days following
receipt of such notice, Company may make an application for arbitration of the
dispute as below provided. In the event the panel rules in favor of the
<PAGE>
Mr. Taylor -3- June 1, 1995
Company, Company shall have the option to terminate this Agreement on thirty
(30) days notice to Consultant.
Consultant is an independent contractor and this Agreement will not be
construed, in anyway, as creating a joint venture or employment between the
Company and Consultant. Consultant acknowledges and agrees that with respect to
its employees, it is solely responsible for withholding, collecting and paying
employment taxes, filing information returns, and performing all other duties
imposed upon employers under applicable federal, state and local laws, rules and
regulations.
Provided the Company has fully performed and satisfied all of its
obligations hereunder, Consultant hereby indemnifies the Company and its
officers, director and control persons from any expenses including reasonable
attorney's fees arising out of the breach of any representation or warranty made
by Consultant in this Agreement. The indemnification contained herein shall
survive the termination of this Agreement.
Any notice or other communication under, in connections with, or pursuant
to this Agreement, shall be in writing and signed, and will be deemed to be
given when sent by certified or registered mail, postage prepaid with return
receipt requested and addressed to the respected parties at their above
addresses or to any other address to which either party may notify the other.
This Agreement will be governed by the laws of the State of New York
without giving effect to the choice law or conflict of laws provisions thereof.
In the event that any provision of this Agreement will be considered void,
voidable, illegal or invalid for any reason such provision will be of no force
and effect only to the extent it is so declared void, voidable, illegal or
invalid. All of the provisions of this Agreement not specifically found to be so
deficient will remain in full force and effect.
Any controversy or claim arising under this Agreement shall be submitted
to arbitration in New York City in accordance with the Commercial Arbitration
Rules of the American Arbitration Association before a single arbitrator. The
administrative costs paid to the American Arbitration Association shall be borne
equally by the parties.
Agreed and Accepted: Agreed and Accepted:
/s/ William s. Taylor /s/ Joseph P. Albanese
- ----------------------------- -----------------------------
WILLIAM S. TAYLOR JOSEPH P. ALBANESE, ESQ.
President E.C.C. D & L Consultants Ltd.
