SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
_ X _ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31,
1996
_ _ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD _ _ _
TO _ _
Commission File Number 1-13732
SHARED TECHNOLOGIES CELLULAR, INC.
(Exact name of registrant as specified in its
charter)
Delaware 06-1386411
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
100 Great Meadow Road, Suite 102
Wethersfield, Connecticut 06109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(860) 258-2500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
<PAGE>
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes_ _X_ _ No _ _ _ _
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's Common Stock held
by nonaffiliates as of March 19, 1997 was approximately
$2,321,000, based on the average of the closing bid and asked
prices as reported on such date in the over-the-counter market.
Indicate the number of shares outstanding of each of the
registrant's classes of Common Stock, as of March 19, 1997
5,112,737 shares of Common Stock
$.01 par value
The following document is hereby incorporated by reference into
Part III of this Form 10-K: The registrant's Proxy Statement for
its Annual Meeting of Stockholders to be held on May 23, 1997 to
be filed with the Securities and Exchange Commission in
definitive form on or before April 30, 1997.
<PAGE>
PART I
Item 1.
Business
(a) General Development of Business - Shared Technologies
Cellular, Inc. (`
`STC'
' or the `
`Company'
'), a Delaware
corporation incorporated in 1989, is a national cellular service
provider offering rental or prepaid services in over 640 of
approximately 950 Cellular Geographical Service Areas (`
`CGSA'
')
within the United States, and cellular activation services in
over 690 CGSA's. As a reseller or agent for cellular and PCS
carriers, STC can offer cellular service to approximately 94% of
the US population. STC rents portable cellular telephones to
business and leisure travelers, the press, attendees, and
participants at conventions, sporting events and government
agencies. STC also operates as a cellular agent at certain
locations which involves selling, installing and providing
airtime services for cellular customers. STC also performs
nationwide cellular activation services through major retail
chains, automobile dealers and mail order distribution companies.
Most recently, STC began supporting the activation, customer
service and collection services for national prepaid (debit)
cellular service operation.
Through the acquisitions of certain assets from Road and Show
Cellular East, Inc., Road and Show South Ltd. and Road and Show
Pennsylvania, Inc. (collectively `
`Road and Show'
'), in December
1993, the Company obtained a national distribution network,
including relationships with national car rental companies and
hotels, which the Company has significantly expanded since that
date. Immediately following the Road and Show acquisitions, the
Company had approximately 1,300 portable cellular telephones
available to rent at approximately 60 distribution outlets. As of
December 31, 1996, the Company had approximately 5,000 cellular
telephones available to rent at approximately 350 distribution
outlets.
In April 1995, the Company completed its initial public offering.
Prior to the offering, the Company was an approximately 86% owned
subsidiary of Shared Technologies Fairchild Inc., (`
`STFI'
'). The
Company sold 950,000 shares of its common stock, $0.01 par value
(`
`Common Stock'
') for $5.25 per share, which generated net
proceeds of approximately $3,562,000 after underwriters
commissions and offering expenses. In conjunction with the
Company's initial public offering, $1,184,000 of the amount due
to STFI was contributed to the Company's capital in excess of par
value.
<PAGE>
In May and June 1995, the Company commenced management and
subsequently completed its acquisition of the outstanding capital
stock of Cellular Hotline, Inc., (`
`Hotline'
') for $617,000. The
$617,000 was comprised of $367,000 in cash, paid at closing, and
the issuance of 50,000 shares of Common Stock, valued at
$250,000. The Company used a portion of the proceeds from its
April 21, 1995 public offering for the cash portion of the
purchase. At the discretion of the former Hotline stockholders,
in September 1995, STC was required to repurchase all of the
Common Stock issued to the former Hotline stockholders for $5.00
per share, at an aggregate cost of $250,000. The Common Stock
was subsequently retired. Additionally, at closing, STC issued
options to purchase 50,000 additional shares, excersizable at
$7.50 per share for three years. Hotline is one of the largest
providers of cellular activation services in the United States.
In addition, the acquisition also enabled the Company to begin
offering debit services by utilizing the technology developed by
Hotline.
In November 1995, the Company commenced management and
subsequently completed its acquisition of certain assets of PTC
Cellular, Inc. (`
`PTCC'
'). The purchase price was $3,800,000,
comprised of $300,000 in cash, $1,200,000 in assumed accounts
payable, a five-year promissory note in the principal amount of
$2,000,000 and the issuance of 100,000 shares of Common Stock,
valued at $300,000. Additionally, the agreement provided for
royalty payments in the amount of three percent (3%) of revenues
generated from certain of the acquired assets, not to exceed an
aggregate of $2,500,000. PTCC was one of the largest in-car
cellular telephone providers in the United States and a main
competitor of the Company.
In December 1995, the Company sold its resale business to SNET
Mobility, Inc. The sale included the Company's customer accounts
relating to the resale business and the corresponding accounts
receivable, for approximately $1.1 million in cash.
On December 29, 1995, the Company completed a $3 million private
placement of equity with International Capital Partners, Inc.,
(`
`ICP'
'), a Stamford, Connecticut based investment firm, two of
whose principals are currently directors of the Company. The $3
million offering proceeds, net of commissions, was used primarily
for the acquisition of certain assets of PTCC and to provide
additional working capital. Under the terms of the offering, STC
issued 300,000 shares of its Series A Convertible Preferred
Stock, $.01 par value per share (the `
`Series A Stock'
'). In
addition, the Company issued to ICP a five-year warrant to
purchase 150,000 shares of the Company's Common Stock at an
exercise price of $2.50. On May 14, 1996, all of the outstanding
Series A Stock was converted into 1,146,450 shares of Common
Stock. Subsequently, in August 1996 the Company's stockholders
voted to cancel the Company's authority to issue additional
shares of the Series A Stock.
<PAGE>
On April 27, 1996 the Company completed its acquisition of
certain assets of Cellular Global Investments of Northern
California, Inc., Access Cellular Corp., Road and Show Cellular
West, Road and Show Cellular Arizona Corp, Summit Assurance
Cellular, Inc., Northstar Cellular Corp, and Craig A. Marlar
(`
`Summit'
'). The purchase price was approximately $3,562,000
comprised of approximately $335,000 in cash, $1,324,000 in
assumed liabilities, the issuance of a promissory note for
approximately $953,000, and the issuance of 300,000 shares of
Common Stock, valued at $937,500. Additionally, at closing, the
Company issued three-year warrants, valued at $12,500, to
purchase an aggregate of 300,000 additional shares of Common
Stock. The warrants are excersizable as follows: 100,000 shares
at $3.00 per share; 100,000 shares at $4.00 per share and 100,000
at $5.00 per share.
On August 19, 1996 the Company completed a $5 million private
placement with ICP and STFI for 500,000 shares of its newly
issued Series B Preferred Stock, $.01 par value per share (the
`
`Series B Stock'
'). The Company received gross proceeds from
the offering of $5 million, including the cancellation of
$1,200,000 or preexisting debt to STFI. A commission of $125,000
was paid to ICP. Each share of Series B Stock is convertible into
the Company's Common Stock, at a conversion factor of 2.50 to
3.33 per share, subject to certain adjustments. For each
preferred share converted, the holder will receive a warrant to
purchase such equal number of shares of Common Stock at an
exercise price of $3.00 per share. The Series B Stock has
immediate voting rights similar to the Common Stock as if the
holder held four (4) shares of Common Stock for each share of
such Series B Stock. Separately, the Company has engaged the
services of ICP to provide certain financial advisory services to
the Company for a period of one year. In consideration for such
services, the Company issued a five-year Common Stock Warrant to
ICP for the purchase of 240,000 shares of the Company's Common
Stock at an exercise price of $3.00 per share and on terms
substantially the same as those provided for in the Common Stock
Warrants issued to the purchasers of the Series B Stock.
On December 27, 1996, the Company entered into an agreement (the
`
`Purchase Agreement'
') with RHI Holdings, Inc. (`
`RHI'
') pursuant
to which the Company agreed to sell to RHI up to 1,500,000 common
stock units (`
`Units'
') with each Unit consisting of one share of
Common Stock, and one warrant to purchase an additional share of
Common Stock at $3.00 per share. On December 30, 1996, the
Company closed on the sale of 250,000 Units to RHI, and received
proceeds of $730,000, net of certain transactional expenses. On
February 10, 1997, the Company sold an additional 250,000 Units
to RHI, receiving net proceeds of $750,000. The Purchase
Agreement has since terminated. As such, RHI has no obligation
to purchase any additional Units from the Company. However, the
Company may sell additional Units to other purchasers. The
<PAGE>
Purchase Agreement provides that STC shall use its best efforts
to cause the Board of Directors of STC to include at least one
member designated by RHI so long as RHI owns capital stock (or
the rights to purchase capital stock) comprising of 5% or more of
the voting power in STC and at least two members designated by
RHI so long as RHI owns capital stock (or the rights to purchase
capital stock) comprising 10% or more of the voting power in STC.
To date, no RHI-designated directors have joined the Board of
Directors. The Company used the proceeds received from the sale
of the Units for working capital.
(b) Financial Information about Industry Segments - The Company
is engaged in one industry segment, the telecommunications
industry, providing a wide range of services including, short-
term cellular telephone rentals, activation of cellular phones
and debit cellular phone systems.
(c) Narrative Description of Business
(1) (i) Products and Services
Cellular Phone Rentals
The Company markets its cellular telephone rental services
principally through car rental agencies, international airlines
and hotels. The Company has agreements with the Hertz
Corporation (`
`Hertz'
'), National Car Rental System, Inc.,
(`
`National'
'), and Budget Rent a Car Corporation (`
`Budget'
') and
a letter of intent with Avis Rent a Car Systems, Inc (`
`Avis'
'),
as well as significant car rental company licensees, to
exclusively offer its portable cellular telephones at designated
car rental locations, primarily at terminal airports, in
approximately 70 cities throughout the United States. In
addition, during 1996, the Company developed an airline cellular
rental program designed to market to international customers in-
bound to the United States. These travelers typically do not
utilize the car rental companies, and require the communication
convenience of renting a cellular phone. Through contracts with
United Airlines (`
`United'
'), Continental Airlines
(`
`Continental'
'), and most recently American Airlines
(`
`American'
'), STC coordinates cellular phone rentals in most
major cities, utilizing its centralized reservation/customer
service and fulfillment center located in St. Louis, MO.
In addition, the Company markets its cellular telephone services
at conventions and sporting events. For example, the Company
rented cellular telephones at the 1994 World Cup soccer
tournament (which was held in nine cities throughout the United
States), the 1995 Special Olympics, the 1995 and 1996 New York
Marathon, and the 1996 Olympics in Atlanta. The Company also
rents cellular telephones on site following emergency and
disaster situations through arrangements with telecommunications
carriers, the Federal Emergency Management Agency and other
<PAGE>
governmental agencies. In that connection, the Company provided
portable cellular telephones to businesses and emergency response
personnel following the 1995 Oklahoma City bombing and the 1996
TWA Flight 800 crash.
Activation Services
With the acquisition of Hotline, STC became one of the largest
providers of nationwide cellular phone activation services in the
United States. Hotline acts as an agent linking retail points of
sale to more than 690 cellular markets, using its 1,200
individual carrier contracts nationwide. By serving the unique
activation requirements of major national retail chains,
automobile dealers, and mail order distribution companies,
Hotline acts as a single point of contact for these distribution
outlets. Hotline maintains contracts and relationships with most
cellular carriers in the United States and Canada, and can
provide the necessary administrative services to permit a
customer in a store within the United States to purchase a phone
with activated cellular service. In addition to charging a fee
for their service to the national distribution partner, the
Company also collects revenue from the cellular carrier in the
form of commissions, residual payments, and other payments.
Debit Services
In addition to national cellular activations, the acquisition of
Hotline propelled STC into the prepaid (debit) cellular service
market. The growth of the cellular industry has been accompanied
by increasing amounts of fraudulent use and bad debts. Cellular
carriers have responded to the bad debt problem by imposing
stringent credit requirements on potential customers which have
resulted in 35% of the subscribers who apply for cellular service
being rejected. To allow these customers to enjoy the advantages
of cellular communications, STC has embarked on a program to
capitalize on this growing segment of subscribers. Through its
Hotline operations, subscribers are presented with a cellular
debit phone, which allows subscribers an easy, pay-as-you-go
option for cellular service. Debit, or prepaid, cellular service
is presented as a solution for credit issues and for businesses
requiring more control over the cellular expenses in their
organizations. Cellular debit services open a substantial and
relatively untapped segment of the cellular marketplace, which
STC intends to aggressively pursue. Hotline provides the
necessary tracking, customer service, collection services, and
reporting functions required to support its prepaid cellular
service. The Company currently has an agreement with a national
retailer, Thorn Americas, Inc. (`
`Rent A Center'
') for whom the
Company is performing these functions. As of March 25, 1997 the
Company had activated approximately 14,000 lines for Rent a
Center throughout the United States.
<PAGE>
Agency Sales
For customers who require a more traditional approach to cellular
telecommunications, STC serves as an agent for select cellular
carriers. The Company provides cellular activation as well as
mobile equipment sales and services.
The agency division targets niche regional markets, (ie:
corporate accounts, government organizations) which allows its
customers, through the services provided by STC, to achieve
economies of scale. As an agent for the cellular carriers, STC
can offer an extensive list of cellular products and services to
its customer base. Currently, STC has operations in Dallas, and
Ft. Worth Texas and in Hartford and Stamford, Connecticut, with
plans to expand into new cities in the future.
(iv) Patents, Trademarks, Licenses, Franchises, Concessions
`
`Shared Technologies Cellular'
' is a registered trademark, which
is licensed to the Company by STFI. The Company holds a
registration on the servicemark `
`CellEase'
' which is used in
connection with the Company's debit cellular businesses.
(v) Seasonality
The Company has experienced a reduction of revenues in the winter
months due to the reduction in business travel during the holiday
season and inclimate weather.
(vi) Working Capital
Since its inception as a subsidiary of STFI, and through its
initial public offering in April 1995, the Company's losses had
been funded by STFI. In addition, STFI funded the purchase price
paid in the Company's Road and Show acquisitions. In January
1994 and in April 1995, STFI contributed to the Company's capital
in excess of par value approximately $1,700,000 and $1,184,000,
respectively, of the Company's indebtedness to STFI. See Item
1(a) - `
`General Development of Business'
', `
`Management's
Discussion and Analysis of Results of Operations and Financial
Condition,'
' and `
`Notes to Consolidated Financial Statements'
'
herein.
(vii) Dependence on a Single Customer
The Company is dependent upon its relationships with Hertz and
National, which collectively account for approximately 32% and
38% of the Company's revenues during 1996 and 1995 respectively.
The Company's agreements with Hertz and National are terminable
on 120 and 90 days' notice with cause, respectively. The
<PAGE>
termination of either of these relationships would have a
material adverse effect on the Company. In addition, individual
locations covered by the Hertz agreement may be terminated on the
same notice. The termination of one or more significant revenue
producing locations could have a material adverse effect on the
Company.
(viii) Backlog
At any given period the Company maintains approximately 5,000
portable cellular telephones available for short-term rentals.
Due to the varying utilization of the telephones, backlog
information for the portable rental business cannot be
quantified. As of December 31, 1996, the Company has activated
approximately 5,000 debit lines for Rent A Center, and had a
backlog of approximately 9,000 additional debit lines to be
activated, which have since been fulfilled.
(ix) Government Regulation
From time to time, legislation and regulations that could
potentially affect the Company, either beneficially or adversely,
have been proposed by federal and state legislators and
regulators. Management is not aware of any current pending or
proposed legislation or regulations which, if adopted, would
have a material adverse impact on the Company's operations.
(x) Competition
The telecommunications industry in general, and the cellular
telephone industry in particular, are highly competitive.
Competitive factors include price, customer service, geographical
coverage and the ability to increase revenues through marketing.
The Company's short-term portable service competes with both
regional and national cellular service companies, some of which
have substantially more experience and greater financial,
technical and other resources than the Company.
In the agency and activation business, the Company faces
competition mainly from other resellers, mass merchants, carriers
and agents, many of which may have substantially more experience
and greater financial, marketing, technical and other resources
than the Company.
(xiii) Employees
As of March 15, 1997, the Company had approximately 192
employees; 11 in management, 71 in administration, 105 in sales
and service and 5 in technical positions. The Company's
employees are not represented by an union. The Company believes
its relations with its employees are satisfactory.
<PAGE>
Item 2.
Property
The Company does not own any real estate and has no present plans
to purchase any real estate. The Company's principal executive
offices are leased and are located at 100 Great Meadow Road,
Suite 102, Wethersfield, Connecticut 06109.
The Company currently occupies approximately 6,250 square feet
pursuant to a five year lease agreement expiring in 1999 (the
`
`Term'
'). The Company pays a monthly rent of approximately
$8,100 during the remainder of the Term. In addition, the
Company leases an aggregate of approximately 15,700 square feet
in certain locations for the purposes of direct sales by its
sales force for a total monthly rent of approximately $13,000.
Each of the leased properties is, in management's opinion,
generally well maintained and is suitable to support the
Company's business. The Company does not anticipate a
significant expansion of its current leased space.
Item 3.
Legal Proceedings
In connection with the Company's purchase of certain assets from
PTC Cellular, Inc. (`
`PTCC'
') in November 1995, the Company
delivered a $2 million note to PTCC. The current principal
balance on such note was approximately $1,700,000 as of March 24,
1997, payable in semi-annual installments of $225,000, plus
interest of 8%, through 1999. The Company did not pay the
November 1, 1996 installment due under the note. Consequently,
on January 16, 1997, PTCC filed a claim against the Company for
breach of the note, which claim was filed in the Circuit Court of
the 11th Judicial Circuit, Dade County, Florida. Although the
Company reserves certain defenses to PTCC's claim, it
subsequently made a partial payment of the missed installment
payment and is actively in negotiations with PTCC to resolve this
matter. In the event that the Company does not reach a
satisfactory resolution with PTCC, an adverse outcome from this
claim would be likely to have a material adverse effect to the
Company's financial condition and cash flows.
The Company is not involved in any other litigation which,
individually or in the aggregate, if resolved against the Company
would be likely to have a material adverse effect on the
Company's financial condition, results of operations or cash
flows.
Item 4.
<PAGE>
Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company was held on
June 12, 1996. Three matters of business were held to vote for
the following purposes: (1) the election of eight directors of
the Company for the ensuing annual term (`
`Proposal 1'
') (2) the
amendment of the 1994 Director Option Plan (`
`Proposal 2'
'); and
(3) the reappointment of the Company's auditors (`
`Proposal 3'
').
The following tables provide shareholder election results in
number of shares:
Proposal 1
<TABLE>
<CAPTION>
Directors For Withheld
<S> <C> <C>
Anthony D. Autorino 3,226,523 6,000
Thomas H. Decker 3,225,923 6,600
William A. DiBella 3,225,923 6,600
Vincent DiVincenzo 3,226,523 6,000
Sean P. Hayes 3,226,523 6,000
Ajit G. Hutheesing 3,226,523 6,000
Craig A. Marlar 3,225,923 6,600
Kevin Schottlaender 3,225,923 6,600
Richard P. Webb 3,225,923 6,600
</TABLE>
Proposal 2
For Against Abstain
3,221,823 6,350 4,350
Proposal 3
For Against Abstain
3,227,173 3,100 2,250
PART II
Item 5.
Market for Registrant's Common Stock and Related Stockholder
Matters
The Company's shares of common stock (trading symbol: STCL) have
been quoted and traded in the over-the-counter market since April
21, 1995. Over-the-counter market quotations reflect interdealer
prices, without retail mark-up, mark-down or commission and may
<PAGE>
not necessarily represent actual transactions. During 1996 and
1995, the quarterly high and low closing prices were as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995
High Low High Low
<S> <C> <C> <C> <C>
First Quarter 4 1/8 1 5/8 n/a n/a
Second Quarter 6 1/8 2 3/4 6 3 1/2
Third Quarter 4 1/4 1 15/16 4 15/32 3
Fourth Quarter 3 1 1/2 4 1/8 1 5/8
</TABLE>
Number of beneficial holders of the Company's common stock as of
March 6, 1997 was 1,123.
Item 6.
Selected Financial Data
The following table sets forth the selected financial data of the
Company for each of the last five years. Financial statements
for 1993 and 1992 are not presented in this filing. Such
selected financial data were derived from audited financial
statements not included herein. The selected financial data of
the Company should be read in conjunction with the Consolidated
Financial Statements and related notes appearing elsewhere in
this Form 10-K. All amounts, except per share amounts, are in
thousands.
<TABLE>
<CAPTION>
Statement of 1996 1995 1994 1993 1992
Operations-Data:
<S> <C> <C> <C> <C> <C>
Revenues $20,914 $13,613 $10,217 $2,200 $1,394
Gross margin 7,285 5,026 4,923 596 382
Total operating
expenses 14,172 8,015 4,272 1,463 803
Income (loss) from
operations (6,888) (2,989) 651 (867) (421)
Gain on sale of
division - 689 - - -
Loss on
discontinued
affiliate - 364 - - -
<PAGE>
Loss on contract
cancellation (980) - - - -
Interest expense
(income)net 906 136 49 (8) (3)
Net income (loss)
before income taxes (8,774) (2,800) 602 (859) (418)
Income taxes (22) (48) - - -
Net income (loss) (8,796) (2,848) 602 (859) (418)
Preferred stock
dividends (113) - - - -
Net income (loss)
applicable to
common stock (8,909) (2,848) 602 (859) (418)
Net income (loss)
per common share (2.18) (1.04) 0.28 (0.39) (0.19)
Weighted average
number of shares
outstanding 4,082 2,748 2,185 2,185 2,185
Balance Sheet-Data:
Working Capital
(deficit) $(8,975) $(1,851) $(920) $(301) $(1073)
Total assets 14,262 14,378 5,452 3,173 (630)
Notes payable
(including current
portion) 2,579 2,000 - - 82
Obligations under
capital leases
(including current
portion) - - - 190 -
Other liabilities 8,767 6,290 2,449 687 328
Indebtedness to
STFI 59 985 2,434 4,153 1,219
Accumulated deficit(13,013) (4,105) (1,256) (1,858) (581)
Stockholders'
equity (deficit) 2,857 5,102 569 (1,857) (989)
</TABLE>
Item 7.
Management's Discussion and Analysis of Results of Operations and
Financial Condition
The following management's discussion and analysis of results of
operations and financial condition include forward-looking
statements with respect to the Company's future financial
performance. These forward-looking statements are subject to
various risks and uncertainties which could cause actual results
to differ materially from historical results of those currently
anticipated.
Revenues
Shared Technologies Cellular, Inc.'s revenues rose to a record of
<PAGE>
$20,914,000 in the year ended December 31, 1996, an increase of
$7,301,000 (54%) over the year ended December 31, 1995 revenues.
Acquisitions in conjunction with the expansion of the Company's
existing businesses were the major factors for the growth in
revenues.
The portable rental operation had a $5,825,000 (79%) revenue
increase due to several factors: In April 1996, the Company
purchased the portable cellular telephone business of Summit,
(See Item 1(a) - `
`General Development of Business.'
') completing
the Company's ability to be a nationwide provider of portable
cellular telephones. This acquisition allowed the Company to
generate $2,399,000 (33%) in additional revenues in 1996. The
Company also generated approximately $1,434,000 (19%) in revenues
at the 1996 Summer Olympics in Atlanta. The balance of the
increase ($1,992,000 or 27%) in the portable rental operation was
due to the transition of some of the in-car accounts and improved
penetration at existing locations. As a result of the acquisition
of certain in-car cellular telephone assets of PTCC as of
November 1, 1995, the Company generated $2,171,000 (223%) more in
in-car rental revenues in 1996 than in 1995. However, due to
unacceptable profit margins, the Company transitioned the
existing accounts to portable rentals, and discontinued offering
in-car cellular telephone rentals in the fourth quarter of 1996.
The debit, or prepaid, cellular telephone operation was started
in late 1995 and generated $1,516,000 in revenues in 1996, versus
$33,000 in 1995. In late 1996, the Company signed an agreement
with Rent A Center which was principally responsible for this
dramatic revenue growth. This increase in debit revenues were
offset by a decrease of $856,000 (33%) in activation revenues
from 1996 to 1995. This decrease was due to several national
retailers discontinuing to offer cellular telephone activations
to their customers.
The agency operation had revenues of $1,339,000 in 1996, a
$665,000 increase from 1995. The increase was due to the
conversion of the sales force in Connecticut from a resale
business into an agency operation. In December 1995, the Company
sold the resale business to SNET Mobility, Inc. The resale
business generated $1,987,000 in revenues in 1995.
The Company's revenues of $13,613,000 for the year ended December
31, 1995 represented an increase of $3,396,000 (33%) over the
year ended December 31, 1994. The increase was mainly due to the
acquisition of Hotline in May 1995 which generated $2,570,000 of
revenues in 1995 and the acquisition of certain assets of PTCC in
November 1995 which generated $972,000 of revenues in 1995. The
transportation portable rental operation had a $1,898,000 revenue
increase (58%) due to the Company's continued expansion in the
number of car rental outlets from which it rents phones, and the
increased penetration within its existing locations. This
increase in the transportation portable rental operation was
<PAGE>
offset by a $2,364,000 decrease in the Company's events portable
rental operations due principally to the significant ($1,820,000)
revenue generated by the World Cup in 1994.
Gross Margin
Gross margin increased $2,259,000, or 45%, for the year ended
December 31, 1996 over the year ended December 31, 1995. As a
percentage of revenues, gross margin decreased slightly in 1996
to 35% of revenues from 37% of revenues in 1995. The decrease
was the result of significant changes in the Company's revenue
mix as a result of various acquisitions, the sale of the resale
business and the rapid growth of the debit business. In
addition, the in-car rental operation showed a dramatic decrease
in its gross margin as a result of decreasing revenues offset by
fixed costs and significant amounts of fraudulent phone usage,
which the Company was forced to absorb. The following chart
summarizes the impact of these changes on gross margins for both
1996 and 1995:
<TABLE>
<CAPTION>
1996 1996 1995 1995
Revenues Gross Revenues Gross
Margin Margin
<S> <C> <C> <C> <C>
Portable Rental 63% 43% 54% 43%
In Car Rental 15% (1%) 7% 28%
Debit 7% 20% 0% 0%
Activation 8% 23% 19% 25%
Agency 7% 67% 5% 68%
CT Resale 0% 0% 15% 23%
Total 100% 35% 100% 37%
</TABLE>
Gross margin decreased in 1995 to 37% of revenues from 48% of
revenues in 1994. The decrease was the result of significant
changes in the Company's revenue mix in 1995 as a result of the
Hotline and PTCC in-car acquisitions in 1995. Both the Hotline
and the in-car operations achieved lower gross margins
(approximately 25% and 28% respectively) than the portable rental
operation. In addition, in 1994 the World Cup generated higher
than normal gross margins as compared to other short-term
cellular telephone rentals.
Operating Expenses
Operating expenses increased to $14,172,000 for the year ended
December 31, 1996 compared to $8,015,000 for the year ended
December 31, 1995. As a percentage of revenues, operating
expenses increased to 68% for the year ended 1996 from 59% for
<PAGE>
the year ended 1995. Part of this increase as a percentage of
revenue was due to the conversion of the resale operation into an
agency operation at the beginning of 1996. Although operating
expenses for this group were similar for the two years, as a
percentage of revenues, the expenses went from 19% in 1995 to 47%
in 1996. However, due to better margins in the agency
operations, the group generated more operating profits in 1996
than in 1995. If the resale operation had been converted into an
agency business at the beginning of 1995, operating expenses for
the Company in 1995 would have been 65% of revenues, making the
1996 percentage in line with the prior year. However, had the
Company not had several extraordinary operating expenses in 1996,
which should not be repeated in 1997, the 1996 percentage would
have dropped to approximately 52%. The following are the
extraordinary operating expenses incurred by the Company in 1996.
The Company's events division rents cellular telephones on a
short-term basis at special events such as conventions and
sporting events. Due to the significant overhead requirements
for this division, the Company decided to consolidate the
division into its existing portable rental operations at mid
year. Operating expenses for the events division were
approximately $1,300,000 in 1996, representing over 120% of the
revenues generated. Prior to the consolidation, the events
division had approximately 30 employees, most of which were
terminated in the consolidation. Consequently, the majority of
the operating expenses incurred in 1996 should not be repeated in
1997.
Operating expenses in 1996 included over $1,000,000 related to
the in-car operation. As previously discussed, the Company began
transitioning the existing in-car accounts to portable rentals
and discontinued offering in-car rentals in the fourth quarter of
1996 and terminated the approximately 20 employees and
substantially all of the related expenses associated with the in-
car operation.
The Company also invested approximately $600,000 in the expansion
of the portable rental operation into the international airlines
business. These expenses were incurred in an effort to start-up
and market its rental services through various worldwide
airlines, primarily focusing on international travelers who
cannot use their cellular phones in the United States. The
Company was successful in obtaining contract with two (2) major
international airlines during 1996, and should start to generate
substantial revenues in 1997. These significant costs should not
be repeated in 1997, and, as revenues from the airlines business
begin to increase in 1997, operating expenses should become a
significantly smaller percentage of revenues.
Operating expenses in 1996 include approximately $500,000 related
to the start up and expansion of debit or prepaid cellular
services. Due to the dramatic sales growth of this operation,
<PAGE>
5,000 lines activated through the end of 1996 with an additional
9,000 lines on backorder, the significant increase in operating
expenses incurred in 1996 are expected to continue into 1997.
However, the Company has created an infrastructure which can
accommodate significant revenue growth without the addition of
significant operating costs. These benefits should be realized
in 1997.
Another significant operating expense incurred by the Company was
the provision for bad debts. The bad debt expense was $1,772,000
in 1996, $1,249,000 in 1995 and $308,000 in 1994. As a
percentage of revenues, the provision was 8% in 1996, 9% in 1995
and 3% in 1994. The significant increase from 1994 to 1995 in
bad debts as a percentage of revenues was due to a change in the
Company's marketing approach. The Company negotiated with
various car rental companies to allow the car rental company
employees to deal directly with the Company's customers. This
allowed the Company to significantly expand the number of
locations renting its cellular telephones, thereby increasing the
Company's revenues. However, as a result of the change in the
marketing approach, the Company was exposed to an increased level
of credit risk which resulted in an increase in bad debts
realized during 1996 and 1995. The Company continues to work
closely with its car rental company partners to improve the
integration of specific information between the Company and the
car rental companies computer systems, in an effort to reduce the
credit risk.
In general, the Company is anticipating additional revenues in
1997 from the transition of the in-car accounts into portable
rental outlets, the expansion of the airline business and the
rapid growth of the debit cellular service. Those additional
revenues, together with the above-mentioned reductions in
operating expenses should reduce operating expenses as a whole,
as well as, operating expenses as a percentage of revenues in
1997.
Operating expenses increased to $8,015,000 for the year ended
December 31, 1995, compared to $4,273,000 for the year ended
December 31, 1994. As a percentage of revenue, operating
expenses increased to 59% for the year ended December 31, 1995,
compared to 42% for the year ended 1994. The increase in
operating expense can be attributed to several factors. One
reason is the acquisitions completed in 1995. In May 1995, the
Company acquired Hotline which allowed STC to enter the
activation and debit cellular business. STC incurred
approximately $772,000 in operating expenses in 1995 related to
Hotline. In November 1995, the Company acquired certain assets
of PTCC, one of the largest in-car cellular telephone providers.
The Company incurred an additional $542,000 in operating expenses
in 1995 with the in-car operation. In addition to investing in
the acquisitions, during 1995 the Company also invested in the
expansion of its existing businesses. Operating expenses in the
<PAGE>
portable rental operations more than doubled from the prior year,
to $2,883,000, as a result of an increase in the number of car
rental outlets from which it rents phones. The events division
incurred approximately $1,040,000 in operating expenses in its
attempt to increase short-term rentals at special events such as
conventions and sporting events. In addition, the Company made
significant investments in its infrastructure to ensure long-term
growth and stability. In general, the Company increased the
number of employees from approximately 88 at the beginning of
1995 to approximately 200 employees at the end of 1995.
Interest Expense
Interest expense increased significantly to $906,000 for the year
ended December 31, 1996 compared to $136,000 for the year ended
December 31, 1995. This increase was mainly due to debt incurred
as a result of the acquisition of certain assets from PTCC and
Summit. In addition, the Company recorded a $491,000 accrual
related to estimated interest payments to taxing authorities that
may arise from certain taxes that are in arrears.
Loss on Contract Cancellation
As part of the acquisition of certain assets of PTCC, the Company
made a commitment to make an investment in the new telephone
technology for the in-car business. Consequently, the Company
entered into a contract with a vendor to build new in-car
cellular telephones with the revised state of the art technology
developed by the Company. When the Company determined that the
in-car business could not justify the significant investment
needed to purchase the next generation of in-car cellular
telephones, the Company negotiated with the vendor to terminate
the contract.
Gain or Sale of Assets
Effective December 26, 1995, the Company sold its resale business
to SNET Mobility, Inc. (`
`Mobility'
'). The sale included the
Company's customer accounts relating to the resale business and
the corresponding accounts receivable for approximately $1.1
million in cash. The Company realized a gain on the sale of
approximately $689,000. Subsequent to the sale of the resale
business, the Company entered into an agreement with a local
cellular carrier to serve as an agent, providing cellular
activations as well as mobile equipment sales and service.
Loss of Discontinued Affiliate
In December 1995, the Company's affiliate, SafeCall, Inc., ceased
its operations. Amounts previously advanced to the affiliate
were written off.
<PAGE>
Preferred Stock Dividends
In 1996, the Company issued preferred stock dividends totaling
$112,603 to the shareholders of the Series A Stock, payable in
11,260 additional shares of Series A Stock. The outstanding
Series A Stock as of May 14, 1996 was converted into 1,146,450
shares of the Company's Common Stock.
Liquidity and Capital Resources
The Company had a working capital deficit of $8,975,000 as of
December 31, 1996, compared to a deficit of $1,851,000 as of
December 31, 1995. Stockholders' equity at December 31, 1996 was
$2,857,000, compared to $5,102,000 at December 31, 1995.
Net cash used in operations increased to $5,043,000 for the year
ended December 31, 1996, compared to $798,000 for the year ended
December 31, 1995. This increase in cash used in operations was
mainly due to the $8,796,000 net loss incurred during 1996 offset
by noncash items, such as depreciation and amortization, and
provision for bad debts. The cash used in operations for 1995
was mainly due to the $2,848,000 net loss and $364,000 loss on
discontinued affiliates, offset by the $689,000 gain on the sale
of the resale business and such noncash items as depreciation and
amortization, and provision for bad debts.
The Company continued to focus its investment activities on the
purchase and enhancements of its equipment, and on growth through
acquisitions. During the year ended December 31, 1996, the
Company invested $953,000 in the purchase of equipment. The
Company also paid $335,000 at the closing of the Summit
acquisition. In addition, the Company invested approximately
$329,000 in enhancements to the cellular telephone software which
the Company will be able to utilize for various applications,
such as remote retail activations. The Company also invested
approximately $230,000 to sign long-term contracts with various
airline companies. These amounts were partially offset by
$1,078,000 received on the note receivable from the sale of the
resale business. In 1995, the Company invested approximately
$1,047,000 to complete the Hotline and PTCC acquisitions in May
1995 and November 1995, respectively. The Company also invested
$342,000 in the purchase of portable cellular equipment.
Financing activities were primarily focused on raising capital to
meet the obligations incurred with the various acquisitions and
for working capital. The Company issued 380,000 shares of Series
B Stock through a private placement, which generated net proceeds
of approximately $3,633,000, in addition to the exchange of
$1,200,000 of amounts previously advanced from STFI for an
additional 120,000 shares of Series B Stock. In addition, the
Company raised $730,000, net of expenses, through the sale of
250,000 Units. A portion of the proceeds from both financing
activities was used to repay some of the obligations incurred
<PAGE>
from the acquisition of certain assets of both PTCC and Summit.
In 1995, the Company raised cash of approximately $3,591,000, net
of expenses, with the completion of its initial public offering
in April 1995, and $2,686,000, net of expenses, with the private
placement of Series A Preferred Stock in December 1995.
Cash requirements for the foreseeable future will include funds
needed to sustain the cash used in operations and for existing
obligations arising from completed acquisitions. Subsequent to
year end, the Company raised $750,000 as a result of the sale of
an additional 250,000 of the aforementioned Units. The Company
is currently in default on payments to PTCC for the principal on
the promissory note issued in conjunction with the acquisition.
The balance at March 27, 1996 on this note is approximately
$1,700,000. Management believes that an additional infusion of
cash via either debt or equity will be necessary. Management
does not believe that, at this time, existing operations can
generate sufficient cash to sustain operations as well as meet
its existing obligations.
Item 8.
Financial Statements and Supplementary Data
Attached.
Item 9.
Changes in and Disagreements with Accountants in Accounting and
Financial Disclosure.
None
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
(ITEM 8)
Page
Financial Statements:
Independent Auditors' Report F-2
consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6-7
Notes to Consolidated Financial Statements F-8-21
Financial Statement Schedule:
Schedule VIII - Valuation and Qualifying Accounts
for the Years Ended December 31, 1996, 1995 and 1994 S-1
Note:
(a) All other schedules are not submitted because they are not
applicable, not required or the required information is included
in the consolidated financial statements or notes thereto.
<PAGE>
F-1
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Shared Technologies Cellular, Inc.
We have audited the accompanying consolidated balance sheets of
Shared Technologies Cellular, Inc. and Subsidiary as of December
31, 1996 and 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Shared Technologies Cellular, Inc. and
Subsidiary as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 3 to the consolidated financial
statements, the Company's significant operating losses, default
on a promissory note, and working capital deficits raise
<PAGE>
substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also
described in Note 3. The consolidated financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
Our audits were made for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The
schedule listed in the index on Page F-1 is presented for
purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated
financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly
states, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
ROTHSTEIN, KASS & COMPANY, P.C.
Roseland, New Jersey
March 11, 1997
F-2
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
<S> <C> <C>
Current Assets:
Cash $143,621 $2,541,827
Accounts receivable
less allowance for
doubtful accounts of
$1,392,176 in 1996 and
$684,875 in 1995 1,621,317 1,172,671
<PAGE>
Carrier commissions
receivable, less
unearned income 52,967 452,610
Inventories 79,529 49,076
Current portion of
note receivable 39,474 59,136
Prepaid expenses and
other current assets 132,813 471,356
Receivable from sale
of assets - 1,077,856
Total current assets 2,069,721 5,824,532
Telecommunications and
office equipment, less
accumulated
depreciation 2,130,713 2,157,685
Other assets:
Intangible assets,
less accumulated
amortization 9,322,373 6,129,101
Deposits 373,074 142,080
Note receivable, less
current portion 118,994 124,407
Assets held for
disposition 247,418 -
10,061,859 6,395,588
$14,262,293 $14,377,805
LIABILITY AND
STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of
notes payable $2,218,406 $400,000
Accounts payable and
other current
liabilities 8,718,814 5,838,718
Commissions payable 48,441 452,611
Due to parent 58,809 984,592
Total current
liabilities 11,044,470 7,675,921
Notes payable, less
current portion 360,417 1,600,000
Commitments and
Contingencies
Stockholders' Equity:
Preferred stock, $.01
par value, Series A
Convertible,
authorized, issued and
outstanding none and
300,000 shares - 3,000
Preferred stock, $.01
par value, Series B
Convertible,
authorized 1,250,000
<PAGE>
shares, issued and
outstanding 500,000
shares and none 5,000 -
Common stock, $.01 par
value, authorized
20,000,000 shares,
issued and outstanding
4,862,737 shares and
3,089,189 shares 48,628 30,892
Common stock
subscription 5,000
Capital in excess of
par value 15,816,979 9,172,583
Accumulated deficit (13,013,201) (4,104,591)
Note receivable
arising from stock
purchase agreement - (5,000)
Total Stockholders'
Equity 2,857,406 5,101,884
$14,262,293 $14,377,805
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
F-3
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Revenues $20,913,969 $13,613,161 $10,217,300
Cost of 13,629,248 8,587,272 5,293,845
revenues
Gross margin 7,284,721 5,025,889 4,923,455
Selling,
general and
administrative 14,172,415 8,015,184 4,272,786
expenses
Income (loss)
from operations (6,887,694) (2,989,295) 650,669
Other income
(expense):
Interest (906,385) (136,395) (48,659)
expense
Gain on sale of
assets - 689,480 -
Loss on
discontinued - (364,327) -
affiliate
Loss on
contract (979,631) - -
cancellation
(1,886,016) 188,758 (48,659)
Income (loss)
before income (8,773,710) (2,800,537) 602,010
taxes
Income taxes (22,297) (47,924) -
Net income (8,796,007) (2,848,461) 602,010
(loss)
Preferred stock
dividends (112,603) - -
Net income
(loss)
applicable to $(8,908,610) $(2,848,461) $602,010
common stock
Income (loss)
<PAGE>
per common $(2.18) $(1.04) $.28
share
Weighted
average number
of common 4,082,000 2,748,000 2,185,000
shares
outstanding
</TABLE>
See accompanying notes to consolidated financial statements
F-4
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A Series A Series B Series B
Preferred Preferred Preferred Preferred
Stock Stock Stock Stock
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Balances, January
1, 1994 - $ - $
Common stock
issued for
services
Transfer of
investment of
parent
Issuance of common
stock
Contribution to
<PAGE>
capital by parent
Common stock
subscription
Net income
Balances, December
31, 1994 - - - -
Issuance of stock 300,000 3,000
Contribution to
capital by parent
Issuance of common
stock for
acquisitions
Acquisition of
common stock
Net loss
Balances, December
31, 1995 300,000 3,000 - -
Issuance of stock 500,000 5,000
Preferred stock
dividend 11,260 113
Conversion of
preferred stock (311,260) (3,113)
Issuance of common
stock for
acquisitions
Common stock
subscriptions
Net loss
Balances, December
31, 1996 - $- 500,000 $5,000
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Common Common Capital in
Stock Stock Stock Excess
Shares Amount Subscrip of Par
tion Value
<S> <C> <C> <C> <C>
Balances, January
1, 1994 67,973 $680 $- $-
Common stock
issued for
services 207,119 2,071 14,429
Transfer of
investment of
parent 108,136
Issuance of (17,929)
common stock 1,795,478 17,955
Contribution to
capital by parent 1,700,000
Common stock
subscription 5,000
Net income
Balances,
December 31, 1994 2,070,570 20,706 5,000 1,804,636
Issuance of stock 950,000 9,500 6,084,633
Contribution to
capital by parent 1,184,000
Issuance of
common stock for 150,000 1,500 473,500
acquisitions
Acquisition of
common stock (81,381) (814) (374,186)
Net loss
Balances,
December 31, 1995 3,089,189 30,892 5,000 9,172,583
Issuance of stock 264,335 2,643 5,588,886
Preferred stock
dividend 112,490
Conversion of
preferred stock 1,146,450 11,465 (8,352)
Issuance of
common stock for 300,000 3,000 947,000
acquisitions
Common stock
subscriptions 62,763 628 (5,000) 4,372
Net loss:
Balances,
December 31, 1996 4,862,737 $48,628 $15,816,979
</TABLE>
<PAGE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated Note Total
Deficit receivab Stockholders
le ' Equity
<S> <C> <C> <C>
Balances, January
1, 1994 $(1,858,140) $- $(1,857,460)
Common stock
issued for 16,500
services
Transfer of
investment of 108,136
parent
Issuance of
common stock 26
Contribution to
capital by parent 1,700,000
Common stock
subscription (5,000)
Net income 602,010 602,010
Balances December
31, 1994 (1,256,130) (5,000) 569,212
Issuance of stock 6,097,133
Contribution to
capital by parent 1,184,000
Issuance of
common stock for 475,000
acquisitions
Acquisition of
common stock (375,000)
Net loss (2,848,461) (2,848,461)
Balances,
December 31, 1995 (4,104,591) (5,000) 5,101,884
Issuance of stock - 5,596,529
Preferred stock
dividend (112,603) -
Conversion of
preferred stock - -
Issuance of
common stock for - 950,000
acquisitions
Common stock
subscriptions - 5,000 5,000
Net loss (8,796,007) (8,796,007)
Balances,
December 31, 1996 $(13,013,201) $- $2,857,406
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
F-5
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 AND 1994.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash flows from
operating
activities:
Net income loss) $(8,796,077) $(2,848,461) $602,010
Adjustment to
reconcile net
income (loss) to
net cash
provided by
(used in)
operating
activities:
Depreciation and
amortization 1,683,938 1,085,685 578,843
Provision for
doubtful 1,771,918 1,248,620 307,617
accounts
Common stock
issued for
compensation and 39,821 16,500
services
Accretion of
interest on 30,231
notes payable
Gain on sale of
franchise (202,033)
Gain on sale of
assets (689,480)
Loss on
discontinued 364,327
affiliate
Changes in
assets and
liabilities, net
of effect of
acquisitions:
Accounts (2,200,564) (1,409,378) (1,170,369)
receivable
Inventories (30,453) (51,375) (3,706)
Carrier
commissions 399,643 13,259
receivable
Prepaid expenses
and other 338,543 (238,867) (68,859)
current assets
Accounts payable
<PAGE>
and other
current 2,124,032 1,748,965 1,637,265
liabilities
Commissions (404,170) (21,209)
payable
Net cash
provided by
(used in) (5,043,068) (797,914) 1,697,268
operating
activities
Cash flows from
investing
activities:
Acquisitions of
businesses (335,415) (1,046,933)
Purchases of
equipment (953,260) (342,314) (726,507)
Payments for
deposits (230,994) (52,521) (17,684)
Payments for
intangible (514,234) (612,346) (527,366)
assets
Collection of
receivable from
sale of assets 1,077,856
Collections of
note receivable 45,000 18,490
Net cash used in
investing (911,047) (2,035,684) (1,271,557)
activities
Cash flows from
financing
activities:
Payments on
capital lease (175,595)
obligations
Payments on
notes payable (1,080,016) (86,250)
Advances from
(payments to) 274,217 (265,545) 115,626
parent
Deferred
registration (182,135)
costs
Payments to (273,531) (90,796)
affiliate
Issuance of
common and 4,361,708 6,279,268
preferred stock
Acquisition of
common stock (375,000)
Net cash
provided by
<PAGE>
(used in) 3,555,909 5,365,192 (419,150)
financing
activities
Net increase
(decrease) in (2,398,206) 2,531,594 6,561
cash
Cash, beginning
of year 2,541,827 10,233 3,672
Cash,end of year $143,621 $2,541,827 $10,233
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years Ended December 31, 1996, 1995 AND 1994.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Supplemental
disclosures of cash
flow information:
Cash paid during
the year for:
Interest $280,468 $75,620 $65,372
Income taxes $20,322 $47,924 $-
Supplemental
schedules of
noncash investing
and financing
activities:
Transfer of
investment to $- $- $108,136
parent
Note received for
sale of franchise $- $- $202,033
Contribution to
capital in excess
of par value of due $- $1,184,000 $1,700,000
to parent
Cost of intangible
assets included in
accounts payable $87,500 $203,074 $202,985
Note received for
sale of assets $- $1,077,856 $-
Issuance of common
stock for $950,000 $475,000 $-
acquisitions
Note payable
incurred for $1,139,000 $2,000,000 $-
acquisitions of
assets
Issuance of Series
B Convertible
Preferred Stock in
exchange for amount $1,200,000 $- $-
due to parent
Preferred stock
issued for
preferred stock $112,603 $- $-
dividend
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -Nature of Operations
Shared Technologies Cellular, Inc. (STC) together with
its subsidiary (collectively the "Company") is a
nationwide provider of short-term cellular telephone
services, activation services and debit telephone
services in the United States.
The Company's operations are subject to regulation by
the Federal Communications Commission (FCC), which has
generally preempted the regulatory jurisdiction of state
agencies with respect to the business which the Company
is engaged in.
NOTE 2 -Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the
accounts of STC and its wholly-owned subsidiary. All
material intercompany accounts and transactions have
been eliminated in consolidation.
Cash
The Company maintains its cash in bank deposit accounts,
which at times, may exceed federally insured limits.
The Company has not experienced any losses in such
accounts and believes it is not subject to any
significant credit risk on cash.
Fair Value of Financial Instruments
The fair value of the Company's assets and liabilities
which qualify as financial instruments under Statement
of Financial Accounting Standards No. 107 approximate
the carrying amounts presented in the consolidated
balance sheets.
Inventories
Inventories consisting of telecommunications equipment
and parts expected to be sold to customers, are valued
at the lower of cost, on the first-in, first-out method
(FIFO), or market.
Carrier Commissions Receivable
Carrier commissions receivable are due from cellular
<PAGE>
carriers for new cellular telephone line activations.
The commissions are earned only after the cellular
telephone user has remained on the cellular telephone
network for a specified period of time (vesting period).
The Company records an allowance, as a reduction to
carrier commissions receivable, for estimated
cancellations of cellular service by the user, prior to
the end of the aforementioned vesting period.
F-8
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 -Summary of Significant Accounting Policies (Continued)
Impairment of Long-Lived Assets
The Company reviews its long-lived assets, such as
telecommunications and office equipment, identifiable
intangibles and goodwill, for impairment whenever events
or changes in circumstances indicate that the carrying
amount of the assets may not be fully recoverable. To
determine recoverability of its long-lived assets, the
Company evaluates the probability that future
undiscounted net cash flows, without interest charges,
will be less than the carrying amount of the assets.
Impairment is measured at fair value.
Telecommunications and Office Equipment
Telecommunications and office equipment are stated at
cost. The Company records depreciation on the straight-
line method over the estimated useful lives of the
assets as follows:
Telecommunications equipment 2-5 years
Office equipment 3-5 years
Intangible Assets
Goodwill represents the excess of cost over the net
assets of acquired businesses and is amortized over
periods ranging from 15 to 20 years from the respective
acquisition dates. The Company monitors the cash flows
of the acquired operations to assess whether any
impairment of recorded goodwill has occurred.
Deferred start-up costs relate to costs associated with
the opening of new cellular telephone rental locations
throughout the United States. These costs are amortized
on a straight-line basis over 12 months.
Certain agreements are amortized on the straight-line
basis over the life of the respective agreements,
ranging from five to six years.
Capitalized Software Development Costs
Capitalized software development costs, including
significant product enhancements incurred subsequent to
establishing technological feasibility in the process of
software production are capitalized according to
<PAGE>
Statement of Financial Accounting Standards No. 86.
Costs incurred prior to the establishment of
technological feasibility are charged to research,
product development, and support expenses. Capitalized
software development costs are amortized using the
straight-line method over a five year period.
F-9
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 -Summary of Significant Accounting Policies (Continued)
Advertising Costs
The Company generally expenses costs of advertising and
promotions as incurred.
Advertising expenses included in selling, general and
administrative expenses for the years ended December 31,
1996, 1995 and 1994 were approximately $153,000,
$137,000 and $113,000, respectively.
Income Taxes
The Company filed its federal income tax returns on a
consolidated basis with its parent through April 1995,
the date of its initial public offering ("IPO").
Subsequent to April 1995, the Company's income tax
returns are being be filed on a separate return basis.
The Company complies with Statement of Financial
Accounting Standards No. 109 (SFAS No.109), "Accounting
for Income Taxes", which requires an asset and liability
approach to financial reporting for income taxes.
Deferred income tax assets and liabilities are computed
for differences between the financial statement and tax
basis of assets and liabilities that will result in
taxable or deductible amounts in the future, based on
enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable
income. Valuation allowances are established, when
necessary, to reduce the deferred tax assets to the
amount expected to be realized.
Income (Loss) Per Common Share
Primary income (loss) per common share is computed by
deducting preferred stock dividends from net income
(loss). The resulting net income (loss) is applicable
to common stock, which is then divided by the weighted
average number of common shares outstanding after giving
effect to the stock splits referred to in Note 11. The
weighted average for all periods prior to the IPO
include shares issued within the twelve month period of
the IPO, including those issued through the subscription
agreement (Note 11) and those issued through the
Company's Stock Option Plan, at a price less than the
public offering price.
<PAGE>
Fully diluted income (loss) per common share is computed
by dividing net income applicable to common stock by the
weighted average number of common and common equivalent
shares and the effect of preferred stock conversions, if
dilutive. Fully diluted income (loss) per common share
is substantially the same as primary income (loss) per
common share for the years ended December 31, 1996, 1995
and 1994.
F-10
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 -Summary of Significant Accounting Policies (Continued)
Use of Estimates
The preparation of the consolidated financial statements
in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and
expenses during the reporting period. Actual results
could differ from those estimates.
Newly Issued Accounting Standard
On March 3, 1997, the Financial Accounting Standards
Board released Statement No.128 (SFAS No. 128),
"Earnings Per Share". SFAS No. 128 requires dual
presentation of basic and diluted earnings per share on
the face of the income statement for all periods
presented. Basic earnings per share excludes dilution
and is computed by dividing income available to common
stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur
if securities or other contracts to issue common stock
were exercised or converted into common stock or
resulted in the issuance of common stock that then
shared in the earnings of the entity. Diluted earnings
per share is computed similarly to fully diluted
earnings per share pursuant to Accounting Principles
Board Opinion No. 15. SFAS No. 128 is effective for
fiscal years ending after December 15, 1997, and when
adopted, it will require restatement of prior years'
earnings per share.
Since the effect of outstanding options is antidilutive,
they have been excluded from the Company's computation
of net income (loss) per share. Accordingly, management
does not believe that SFAS No. 128 will have a material
impact upon historical net income (loss) per share as
reported.
NOTE 3 - Uncertainty - Ability to Continue as a Going Concern
The Company's consolidated financial statements have
been prepared on the basis that it is a going concern,
which contemplates the realization of assets and the
<PAGE>
satisfaction of liabilities in the normal course of
business. The Company has incurred net losses of
approximately $8,796,000 and $2,848,000 for the years
ended December 31, 1996 and 1995, respectively, is in
default of a promissory note with a balance due of
$1,800,000, and has a working capital deficit of
approximately $8,975,000 at December 31, 1996. The
Company is in the process of seeking additional equity
or debt financing. Continuation of the Company as a
going concern is dependent on its ability to resolve its
liquidity problem, obtain credit and attain profitable
operations. The financial statements do not include any
adjustments that might result from this uncertainty.
F-11
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - Acquisitions
In April 1996, the Company completed its acquisition of
substantially all of the assets of its only franchisee,
Summit Assurance Cellular Inc. and subsidiaries and
affiliates (SAC). The purchase price was $3,562,662,
comprised of $335,415 in cash, the assumption of
$668,564 of accounts payable and $655,822 of notes
payable, the issuance of a promissory note for $952,861,
the issuance of 300,000 shares of the Company's common
stock valued at $3.125 per share and warrants to
purchase 100,000 shares of the Company's common stock at
prices of $3.00, $4.00 and $5.00 per share,
respectively. These warrants, valued at $12,500, vest
immediately and expire in three years.
In November 1995, STC completed its acquisition of
substantially all of the assets of PTC Cellular, Inc.
(PTCC). The purchase price was $3,725,000, comprised of
$300,000 in cash, the assumption of $1,200,000 of
accounts payable, the issuance of a promissory note of
$2,000,000 and the issuance of 100,000 shares of the
Company's common stock valued at $2.25 per share. The
agreement provides for a maximum of $2,500,000 of
royalty payments, computed at 3% of quarterly revenues
generated from certain of the acquired assets.
In May 1995, the Company commenced management of, and
subsequently acquired the outstanding capital stock of,
Cellular Hotline, Inc. (Hotline), a cellular telephone
activation service provider. The purchase price was
$617,000, comprised of $217,000 in cash, the assumption
of $150,000 of certain indebtedness and the balance
through the issuance of 50,000 shares of the Company's
common stock (Shares) valued at $5.00 per share. The
former Hotline stockholders had the right to require the
Company to repurchase all or a portion of the Shares for
$5.00 per share. In September 1995, the former Hotline
stockholders exercised their put option and the Company
purchased all the Shares and subsequently retired them.
In connection with the acquisition, the Company issued
the former Hotline stockholders a three year option to
purchase an aggregate of 50,000 shares of the Company's
common stock at a price of $7.50 per share.
These acquisitions were accounted for as purchases, and
the purchase prices were allocated on the basis of the
relative fair market values of the net assets acquired
and net liabilities assumed, as follows:
<PAGE>
<TABLE>
<CAPTION>
Hotline PTCC SAC
<S> <C> <C> <C>
Cash $19,462 $- $20,000
Accounts receivable 13,000
Commissions
receivable,net 465,869
Prepaid expenses and
other current assets 70,431 61,910
Equipment 50,000 1,806,480 169,600
Intangibles 520,000
Excess of cost over net
assets acquired 710,264 1,336,610 3,373,062
Accounts payable and
other current liabilities (238,206)
Commissions payable (473,820)
$617,000 $3,725,000 $3,562,662
</TABLE>
F-12
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - Acquisitions (Continued)
The following unaudited pro forma condensed combined
statements of operations for 1996 and 1995 give effect
to the acquisitions of SAC, PTCC and Hotline as if they
had occurred on January 1 of each year.
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Revenues $21,783,519 $24,828,724
Net loss $(9,269,212) $(4,580,591)
Net loss applicable to common
stockholders $(9,381,815) $(4,580,591)
Loss per common share $(2.25) $(1.46)
</TABLE>
NOTE 5 - Telecommunications and Office Equipment
Telecommunications and office equipment consist of the
following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Telecommunications
equipment $3,298,110 $2,611,128
Office equipment 635,494 503,126
3,933,604 3,114,254
Accumulated 1,802,891 956,569
depreciation
$2,130,713 $2,157,685
</TABLE>
Depreciation for the years ended December 31, 1996, 1995
and 1994 was $902,413, $537,018 and $327,543,
respectively.
F-13
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - Intangible Assets
Intangible assets consist of the following at December
31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Goodwill $8,417,581 $5,023,920
Franchise costs 75,573
Deferred start-up costs 902,660 617,500
Covenant not to compete 142,373 142,373
Rental car agreement 520,000 520,000
Capitalized software
development costs 890,555 594,579
10,873,169 6,973,945
Accumulated amortization 1,550,796 844,844
$9,322,373 $6,129,101
</TABLE>
Amortization for the years ended December 31, 1996, 1995
and 1994 was $781,525, $548,667 and $258,805,
respectively.
NOTE 7 - Note Receivable
In connection with the acquisition of SAC (Note 4), the
unpaid balance of a note receivable from SAC of $180,000
was renegotiated to a three year non-interest bearing
note, due in monthly installments of $5,000 through
February 2000. In discounting the note to $158,468,
interest has been imputed at 10% per annum.
NOTE 8 - Assets Held For Disposition
In connection with the Company's discontinuance of
providing In-Car cellular phone services, the Company
has recorded, as assets held for disposition, certain
telecommunications equipment at its net book value,
which approximates fair market value.
NOTE 9 - Accounts Payable and Other Current Liabilities
Accounts payable and other current liabilities consist
of the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
<PAGE>
1996 1995
<S> <C> <C>
Trade $6,227,304 $4,465,198
Sales and other
taxes 1,684,714 668,610
Payroll and payroll
taxes 194,315 110,290
Other 612,418 594,620
$8,718,814 $5,838,718
</TABLE>
F-14
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - Notes Payable
Notes payable consist of the following at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Promissory note $2,000,000
original face amount,
bearing interest at 8% per
annum and payable in semi-
annual principal
installments of $225,000
through May 2000. The note
is collateralized by $1,800,000 $2,000,000
substantially all of the
assets acquired from PTCC
Promissory note for the
purchase of SAC, non-
interest bearing and payable
in installments through 292,345
February 1997
Promissory notes, bearing
interest at 10% per annum
and payable in monthly
installments aggregating 486,478
$24,727 through March 2002
2,578,823 2,000,000
Less current portion 2,218,406 400,000
$360,417 $1,600,000
</TABLE>
The Company is currently in default in its payments
under the $2,000,000 promissory note and has classified
the entire balance due as current (Note 16).
Aggregate future principal payments for the next five
years are as follows:
Year Ending December 31
1997 $2,218,406
1998 79,079
1999 77,085
2000 85,158
2001 94,075
<PAGE>
NOTE 11 - Stockholders' Equity
During December 1996, the Company entered into an
agreement to issue an aggregate of 500,000 units, at
$3.00 per unit, through a private placement. Each unit
consists of one share of common stock and one warrant to
purchase one share of common stock at $3.00 per share.
As of December 31, 1996, 250,000 units have been issued,
and the remaining 250,000 units were issued in January
1997. The Company has the option to repurchase the
units sold, at any time prior to May 31, 1997, at a
price of $3.45 per unit.
F-15
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - Stockholders' Equity (Continued)
During August 1996, the Company's certificate of
incorporation was amended whereby the authorized number
of shares of the Company's common stock was increased to
20,000,000. In addition, the Company was authorized to
issue 5,000,000 shares of preferred stock at $.01 par
value, issuable from time to time in one or more series
with such rights, preferences, privileges and
restrictions as determined by the Board of Directors.
As of December 31, 1996, the Company authorized
1,250,000 shares of $.01 par value Series B Convertible
Preferred Stock (Series B).
On August 19, 1996, the Company sold 500,000 shares of
Series B for $10 per share through a private placement,
including 250,000 shares purchased by its former parent,
Shared Technologies Fairchild Inc. (STFI). Each share
of Series B is convertible into a minimum of 2.50 shares
and a maximum of 3.33 shares of the Company's common
stock, subject to certain adjustments. In addition,
Series B stock pays no dividends. Upon conversion of
the Series B shares, the holder shall receive a warrant
to purchase an additional share of the Company's common
stock at an exercise price of $3.00 per share. Each
share of Series B has voting rights equivalent to four
shares of common stock. The Company has the right to
require the conversion of the Series B into common
stock, at any time after one year, provided that the
Company maintains a certain market value of its common
stock, as defined. In the event that the Company does
not meet certain financial criteria by December 31,
1997, each holder of Series B shall have the right to
require the Company to redeem such holder's shares at a
per share price equal to the original issue price, plus
a rate of return equal to 12% per annum. In addition,
the Company paid an advisory fee of $125,000 and issued
warrants to purchase 240,000 shares of common stock, at
an exercise price of $3.00 per share, for certain
financial advisory services rendered by a firm, who was
a party to the sale of 250,000 shares of Series B, in
which one of its principals is a director of the
Company.
In December 1995, the Company sold 300,000 shares of
Series A Convertible Preferred Stock (Series A) at $10
per share through a private placement. Each preferred
stockholder is entitled to receive dividends equal to
10% per annum for the first twelve month period, payable
in additional shares of Series A. The Company paid an
<PAGE>
advisory fee of $300,000 and issued warrants to purchase
150,000 shares of common stock, at an exercise price of
$2.50, to a firm, in which one of its principals is a
director of the Company. During 1996, the Series A
stockholders converted all their shares, including
11,260 shares received as dividends, into 1,146,450
shares of the Company's common stock.
In June 1995, in connection with a consulting agreement,
the Company issued warrants to purchase 95,000 shares of
its common stock, at an exercise price of $6.00 per
share, subject to certain anti-dilutive provisions.
In May 1995, the Company purchased 31,381 shares of its
common stock for $125,000 from a consultant and
subsequently retired the shares.
In April 1995, the Company completed its initial public
offering of 950,000 shares of its common stock at $5.25
per share.
On March 23, 1995, the Board of Directors adopted a
resolution to effect a reverse stock split of two for
three. Accordingly, all number of shares and per share
data presented in these consolidated financial
statements have been restated to reflect this stock
split.
F-16
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - Stockholders' Equity (Continued)
In September 1994, the Board of Directors approved a
resolution to effect a stock split of 1,083 shares for
1. In addition, during December 1994, the Board of
Directors adopted a resolution to effect a reverse stock
split of 1 share for 1.0622 shares. Accordingly, all
number of shares and per share data presented in these
consolidated financial statements have been restated to
reflect these stock splits.
In January 1994, the Company entered into a stock
subscription agreement to issue 62,763 shares of its
common stock for $5,000 ($.08 per share).
On January 1, 1994, the Company transferred its 65%
ownership in a company to STFI. In connection with this
transaction, $108,136 was recorded in 1994 as capital in
excess of par value.
On January 1, 1994, the Company issued an aggregate of
207,119 shares of its common stock to certain officers
and consultants. The value ascribed to these shares,
$16,500 ($.08 per share), has been included in general
and administrative expenses for the year ended December
31, 1994.
NOTE 12 - Stock Option Plans
The Board of Directors adopted, and the Company's
stockholders approved, a stock option plan (the Plan)
pursuant to which 274,797 shares of the Company's common
stock were reserved for issuance upon the exercise of
options granted to officers, employees, consultants and
directors of the Company. Options issued under the Plan
are non-qualified stock options (NSO's) and the Board of
Directors (Committee) may grant NSO's at an exercise
price which is not less than the fair market value on
the date such options are granted. The Plan further
provides that the maximum period in which stock options
may be exercised will be determined by the Committee,
except that they may not be exercisable after ten years
from the date of grant. At December 31, 1996, options
to purchase 266,999 shares of common stock are
outstanding.
The Board of Directors adopted, and the stockholders
approved, the Company's 1994 Director Option Plan (the
Director Plan) pursuant to which 33,333 shares of the
<PAGE>
Company's common stock are reserved for issuance upon
the exercise of options to be granted to non-employee
directors of the Company. Under the Director Plan, an
eligible director will automatically receive, at the
commencement of the Director's one year term,
nonstatutory options to purchase 2,000 shares of the
Company's common stock at an exercise price equal to the
fair market value of such shares at the time of grant.
Each such option is immediately exercisable for ten
years from the date of grant, but generally may not be
exercised more than 90 days after the date an optionee
ceases to serve as a director of the Company. At
December 31, 1996, options to purchase 14,000 shares of
the Company's common stock were outstanding under the
Director Plan.
F-17
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - Stock Option Plans (Continued)
The activity in the Plan and the Director Plan are as
follows:
<TABLE>
<CAPTION>
Exercise Exercise
Price Per Price Per
Share Share
Number of Range Weighted
options Average
<S> <C> <C> <C>
Granted in
1994 and
balance
outstanding, 171,048 $3.68 $3.68
December 31,
1994
Granted 95,000 2.38-5.00 3.15
Expired (34,715) 3.68 3.68
Balance
outstanding,
December 31, 231,333 2.38-5.00 3.45
1995
Granted 55,000 2.25-4.75 3.69
Expired (5,334) 3.68 3.68
Balance
outstanding,
December 31, 280,999 $2.25-5.00 $3.36
1996
Exercisable,
December 31, 168,332 $2.25-5.00 $3.60
1996
</TABLE>
The Company has adopted the disclosure requirements of
SFAS No. 123, "Accounting for Stock-Based Compensation",
effective for the December 31, 1996 financial
statements. The Company applies APB Opinion No. 25 and
related interpretations in accounting for its plans.
Accordingly, compensation cost has been recognized for
its stock plans based on the intrinsic value of the
stock option at date of grant (the difference between
the exercise price and the fair value of the common
stock). Had compensation cost for the Company's stock-
based compensation plans been determined based on the
fair value at the grant dates, consistent with the
<PAGE>
method of SFAS No. 123, the Company's net loss and loss
per share would have been adjusted to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net loss applicable
to common
shareholders:
As reported $(8,908,610) $(2,848,461)
Pro forma (8,919,610) (2,854,461)
Loss per common
share:
As reported (2.18) (1.04)
Pro forma (2.19) (1.04)
</TABLE>
The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions
used for grants in 1996 and 1995, respectively: risk-
free interest rate of 6%; no dividend yield; expected
lives of 3 to 10 years; and expected volatility of 62%.
F-18
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - Related Party Transactions
The Company entered into an agreement, effective January
1, 1996, whereby the Company will pay a fee of $25,000
per month not to exceed $200,000 annually, for certain
services to be performed by STFI. The fee is not
payable in any month in which there is a pre-tax loss
and cannot exceed pre-tax profit prior to the fee. No
payments were due under the agreement for the year ended
December 31, 1996. In addition, STFI agrees to provide
telecommunications services, as may be requested,
including local access and long distance service, at a
price not to exceed STFI's cost for such services plus
20%. This agreement is cancelable by the Company on
thirty days notice to STFI.
Amounts due to parent are due on demand, unsecured and
non-interest bearing.
NOTE 14 - Savings and Retirement Plan
In June 1996, the Company formed a savings and
retirement plan (the Plan), which covers substantially
all eligible employees. Participants in the Plan may
elect to make contributions up to a maximum of 20% of
their compensation. For each participant, the Company
will make a matching contribution of one-half of the
participant's contributions, up to 5% of the
participant's compensation. Matching contributions may
be made in the form of the Company's common stock and
are vested at the rate of 33% per year. Prior to the
formation of the Plan, the Company participated in a
plan maintained by STFI. Matching contributions in
STFI's plan were made in STFI common stock. For the
years ended December 31, 1996, 1995 and 1994, the
Company's matching contributions were approximately
$40,000, $24,900 and $17,500, respectively.
NOTE 15 - Income Taxes
A reconciliation of income tax expense (credit), to the
federal statutory rate follows:
<TABLE>
<CAPTION>
Years Ended Years Ended Years
December 31, December Ended
1996 31, 1995 December
31, 1994
<S> <C> <C> <C>
Income tax expense
(credit) on reported
<PAGE>
pretax income (loss)
at federal statutory (34.0)% (34.0)% 34.0%
rate
State income tax, net
of federal benefit - (1.7) 5.3
Net operating loss
carryforward 34.0 34.0 (39.3)
(utilized)
Income taxes 0% 1.7% 0%
</TABLE>
In accordance with the tax sharing arrangement it had
with STFI in effect through April 1995, the Company
utilized net operating loss carryforwards generated in
prior years.
At December 31, 1996 and 1995, the Company recorded
deferred tax assets of approximately $4,400,000 and
$1,104,000, respectively, and valuation allowances in
the same amounts. The valuation allowances were
increased by $3,296,000, $994,000 and $110,000,
respectively, for the years ended December 31, 1996,
1995 and 1994. SFAS No. 109 requires that the Company
record a valuation allowance when it is "more likely
than not that some portion or all of the deferred tax
asset will not be realized". The ultimate realization
of this deferred tax asset depends on the ability to
generate sufficient taxable income in the future.
F-19
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - Income Taxes (continued)
The net deferred tax assets and liabilities as of
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax
assets:
Net operating
loss $3,940,000 $945,000
carryforwards
Allowance for
doubtful accounts 550,000 269,000
Asset basis
difference, 10,000 -
intangible assets
4,500,000 1,214,000
Deferred tax
liabilities:
Asset basis
difference, fixed (100,000) (97,000)
assets
Asset basis
difference, (13,000)
intangible assets
(100,000) (110,000)
Deferred tax 4,400,000 1,104,000
asset, net
Valuation
allowance for (4,400,000) (1,104,000)
deferred tax
asset
$- $-
</TABLE>
At December 31, 1996, the Company has federal net
operating loss carryforwards of approximately
$10,115,000, which can be utilized against future
taxable income and expire through the year 2011. Net
operating losses available for state income tax purposes
are less than those for federal purposes and generally
expire earlier.
<PAGE>
NOTE 16 - Commitments and Contingencies
The Company leases office facilities, which expire in
various years through December 2001. Future aggregate
minimum annual rental payments as of December 31, 1996
are as follows:
Year Ending December 31
1997 $202,000
1998 135,000
1999 127,000
2000 47,000
2001 35,000
Rent expense for the years ended December 31, 1996, 1995
and 1994 was approximately $418,000, $256,000 and
$155,000, respectively.
The Company is a defendant to a claim arising out of the
breach of terms of a promissory note having a $2,000,000
face value, which was issued in connection with the
Company's acquisition of the assets of PTCC. The breach
is due to the Company's inability to make certain
required principal payments under the note. PTCC is
seeking payment of unpaid principal of $1,800,000, in
addition to unpaid interest and fees. The Company is
actively seeking a settlement agreement with PTCC.
F-20
<PAGE>
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - Commitments and Contingencies (Continued)
On October 1, 1996, the Company entered into a one year
consulting agreement for $385,000, of which $222,500 was
earned upon the signing of the contract. During the
term of the agreement and for two years thereafter, the
consultant may not compete with the Company in the
business of renting cellular telephones anywhere in the
United States, Mexico and Canada.
In connection with the Hotline acquisition, the Company
entered into employment agreements, effective June 20,
1995, with two former Hotline stockholders. The
agreements expire in June 1997, and provide for annual
compensation of $165,000. The former Hotline
stockholders may not compete with the Company in certain
businesses, as defined, anywhere in the United States.
NOTE 17 - Dependence Upon Key Relationships and Major
Customers
Approximately 20% and 12%, 22% and 16%, and 18% and 11%
of the Company's revenues for 1996, 1995 and 1994,
respectively, were attributable to cellular telephone
rentals made to customers of two national car rental
companies. The agreements with these companies are
terminable on 120 days and 90 days notice with cause,
respectively. The termination of either of these
agreements would have a material adverse effect on the
Company. In addition, for the year ended December 31,
1994, the Company received approximately 18% of its
revenues from one special event.
NOTE 18 - Loss on Contract Cancellation
In connection with the discontinuance of the In-Car
cellular phone service, the Company recognized a loss of
approximately $980,000 relating to the cancellation of a
certain contract for the production of certain in-car
telecommunications equipment.
<PAGE>
F-21
<PAGE>
SCHEDULE VIII
SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Descripti Balance at Charged to Charged Deductions Balance at
on Beginning Cost and to Other (1) End of Year
of Year Expenses Accounts
<S> <C> <C> <C> <C> <C>
December
31, 1996:
Allowance
for
doubtful
accounts $684,875 $1,771,918 $- $1,064,617 $1,392,176
and
discounts
December
31, 1995:
Allowance
for
doubtful
accounts $242,680 $1,248,620 $- $806,425 $684,875
and
discounts
December
31, 1994
Allowance
for
doubtful
accounts $44,537 $307,617 $- $109,474 $242,680
and
discounts
</TABLE>
(1) Represents write off of uncollectible accounts, net of
recoveries.
<PAGE>
S-1
PART III
Item 10
Directors and Executive Officers of the Registrant
<PAGE>
Item 11
Executive Compensation
Item 12
Security Ownership of Certain Beneficial Owners and Management
Item 13
Certain Relationships and Related Transactions.
The Company incorporates by reference items 10, 11, 12, and 13 in
its Proxy Statement for its Annual Meeting of Stockholders to be
held on May 23, 1997 (to be filed with the Securities and
Exchange Commission on or before April 30, 1997).
PART IV
Item 14
Exhibits, Financial Statement Schedules and Reports on Form 10-K
(a) Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1996 and 1995.
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995, and 1994.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flow for the years ended December
31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Financial Statement Schedules: Schedule VIII.
(b) Reports on Form 8-K
On January 22, 1997 the Company filed a Form 8-K Item 5 detailing
that the Company entered into an agreement on December 27, 1996
to sell up to 1,500,000 common stock Units for an aggregate
purchase price of $4,500,000.
(c) Exhibits
Exhibit No. Description of Exhibit
<PAGE>
3. (i) Amended and Restated Certificate of
Incorporation. Incorporated by reference from Exhibit 3.1 of the
Company's Registration Statement on Form SB-2 dated December 8,
1994.
3. (ii) By-laws. Incorporated by reference from
Exhibit 3.1 of the Company's Registration Statement on Form SB-2
dated December 8, 1994.
4.1 Specimen of Common Stock Certificate.
Incorporated by reference from exhibit 4.2 of the Company's
Registration Statement of Form SB-2 filed with Amendment No. 3 to
such Registration Statement dated January 27, 1995.
4.2 Certificate of Designations, Preferences and
Rights of Series B Convertible Preferred Stock of Shared
Technologies Cellular, Inc. dated August 19, 1996. Incorporated
by Reference from Exhibit 4.1 of the Company's Form 8-K dated
August 19, 1996 and filed September 5, 1996.
4.3 Series B Convertible Preferred Stock Purchase
Agreement by and between International Capital Partners, Inc. and
the Company dated August 19, 1996 (agreement between STFI and
the Company is substantially the same), including form of Common
Stock Warrant. Incorporated by Reference from Exhibit 4.2 of the
Company's Form 8-K dated August 19, 1996 and filed September 15,
1996.
4.4 Equity Holders Agreement by and among
International Capital Partners, Inc. Zeisiger Capital Group, LLC
and Shared Technologies Fairchild, Inc. dated August 19, 1996.
Incorporated by Reference from Exhibit 4.3 of the Company's Form
8-K dated August 19, 1996 and filed September 15, 1996.
4.5 Purchase Agreement, Common Stock Warrant
Certificate and Option Agreement by and among RHI Holdings, Inc.,
and the Company dated December 27, 1996. Incorporated by
Reference from Exhibit 4.1, 4.2, 4.3 respectively of the
Company's Form 8-K dated December 27, 1996, and filed January 22,
1997.
10.1 Agreement by and between the Hertz
Corporation and the Company dated October 1, 1996.
10.2 Agreement by and between National Car Rental
System, Inc. and the Company dated July 1, 1996.
<PAGE>
10.3 Lease Agreement by and between Putnam Park
Associated and the Company dated January 1, 1995. Incorporated by
reference from Exhibit 10.10 of the Company's Registration
Statement on Form SB-2 filed with Amendment No. 1 to such
Registration Statement dated January 4, 1995.
10.4 1994 Stock Option Plan. Incorporated by
reference from Exhibit 10.10 of the Company's Registration
Statement on Form SB-2 dated December 9, 1994.
10.5 1994 Director Option Plan, as amended.
10.6 Management Agreement by and between the
Company and Shared Technologies Fairchild Inc., dated January 1,
1996. Incorporated by reference from Exhibit 10.13 of the
Company's Form 10-K dated March 23, 1996
10.7 Employment Agreement by and between Sean P.
Hayes and the Company dated October 1, 1994. Incorporated by
reference from Exhibit 10.14 of the Company's Registration
Statement on Form SB-2 filed with Amendment No. 1 to such
Registration Statement dated January 4, 1995.
10.8 Sample Customer Service Agreement.
Incorporated by reference from Exhibit 10.15 of the Company's
Registration Statement on Form SB-2 filed with Amendment No. 1 to
such Registration Statement dated January 4, 1995.
10.9 Sample Customer Service Agreement.
Incorporated by reference from Exhibit 10.16 of the Company's
Registration Statement on Form SB-2 filed with Amendment No. 1 to
such Registration Statement dated January 4, 1995.
10.10 Stock Purchase Agreement by and between the
stockholders of The Cellular Hotline, Inc. and the Company dated
June 11, 1995. Incorporated by reference from Exhibit 10.1 of the
Company's Form 8-K dated June 19, 1995 and filed June 30, 1995.
10.11 Asset Purchase Agreement by and between
Peoples Telephone Company, Inc., PTC Cellular, Inc. and the
Company dated November 1, 1995. Incorporated by reference from
Exhibit 10.1 of the Company's Form 8-K dated November 13, 1995
and filed November 22, 1995.
10.12 Consulting Agreement between Vertical
Financial Holding and the Company dated June 21, 1995.
Incorporated by reference from Exhibit 10.19 of the Company's
Form 10-K dated March 28, 1996.
10.13 Employment Agreement by and between Jon
Sorenson and the Company dated October 1, 1996.
<PAGE>
10.14 Asset Purchase Agreement by and between
Summit, et al. the Company dated April 27, 1996. Incorporated by
reference from Exhibit 10.1 of the Company's Form 8-K dated April
27, 1996 and filed May 9, 1996.
10.15 Shared Technologies Cellular, Inc Savings and
Retirement Plan Effective as of April 1, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SHARED TECHNOLOGIES CELLULAR ,INC.
(Registrant)
By
----------------------------------
Anthony D. Autorino
Chief Executive Officer
and Director March 27, 1997
By
----------------------------------
Vincent DiVincenzo
Chief Financial Officer
and Director
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
By: __________________ By: _____________________
Anthony D. Autorino William A. DiBella
Chief Executive Officer Director
and Director Date:________________
Date:_________________
By: __________________ By: _____________________
Ajit G. Huthessing Thomas H. Decker
Director Director
Date:_________________ Date:________________
By: __________________ By: _____________________
Vincent DiVincenzo Nicholas E. Sinacori
Chief Financial Officer Director
and Director Date:________________
Date:_________________
By:___________________
Craig A. Marlar
Director
Date:_________________
<PAGE>
[TYPE] EX-27
[DESCRIPTION] ART. 5 FDS FOR YEAR END 10-K
[ARTICLE] 5
[MULTIPLIER] 1000
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[CASH] 144
[SECURITIES] 0
[RECEIVABLES] 3013
[ALLOWANCES] 1392
[INVENTORY] 80
[CURRENT-ASSETS] 2070
[PP&E] 3934
[DEPRECIATION] 1802
[TOTAL-ASSETS] 14362
[CURRENT-LIABILITIES] 11044
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 5
[COMMON] 49
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 14262
[SALES] 20914
[TOTAL-REVENUES] 20914
[CGS] 13629
[TOTAL-COSTS] 27801
[OTHER-EXPENSES] 950
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 906
[INCOME-PRETAX] (8774)
[INCOME-TAX] 22
[INCOME-CONTINUING] (8796)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (3907)
[EPS-PRIMARY] (2.18)
[EPS-DILUTED] (2.18)
<PAGE>
Exhibit 21
Subsidiary of Shared Technologies Cellular, Inc.
1. Cellular Hotline, Inc.
<PAGE>
Exhibit 10.1
AGREEMENT BETWEEN
SHARED TECHNOLOGIES CELLULAR, INC.
AND
THE HERTZ CORPORATION
This Agreement (the "Agreement") is made as of the ___ day of
_________________, 1996 (the "Effective Date"), by and between
Shared Technologies Cellular, Inc., a Delaware corporation,
having offices at 100 Great Meadow Road, Wethersfield, CT 06109,
("STC"), and The Hertz Corporation, a Delaware corporation,
having its principal office at 225 Brae Boulevard, Park Ridge, NJ
07656-0713 ("Hertz").
WHEREAS, Hertz is in the business of renting vehicles to the
traveling public from various locations throughout the United
States; and
WHEREAS, STC is in the business of providing portable cellular
telephones including all accessories (the "Equipment") for short-
term use; and
WHEREAS, STC and Hertz desire to enter into this Agreement to
allow STC the non-exclusive right to provide Equipment rentals to
Hertz customers at those locations identified in the attached
Exhibit A
(the "Location Schedule"), which may be amended from
time to time to add or delete locations by written mutual consent
of the parties.
NOW THEREFORE, in consideration of the promises and covenants
contained herein, the receipt and adequacy of which are
acknowledged, the parties agree as follows.
1. Term and Termination.
(a) This non-exclusive Agreement shall have a term of two (2)
years, commencing as of the date first written above, subject to
the following. This Agreement shall be renewed only by the
written mutual agreement of the parties. This Agreement may be
terminated for cause in accordance with Paragraph 10 below. From
and after the first anniversary of the Effective Date of this
Agreement, either party may terminate this Agreement at any time
with ninety (90) days written notice to the other party.
(b) Notwithstanding anything contained in this Agreement to the
contrary, STC will have the right to immediately terminate this
Agreement upon written notice to Hertz, if (1) the Federal
Communications Commission or any other regulatory agency
promulgates any rule, regulation, or order which i) in effect or
application substantially impedes STC from fulfilling its
<PAGE>
obligations hereunder, or ii) materially or adversely affects
STC's ability to conduct its business, or (2) Hertz fails to
maintain in
full force and effect any license, permit or approval required
for the conduct of its business.
(c) Notwithstanding anything contained in this Agreement to the
contrary, upon furnishing Hertz with reasonable evidence that the
continuation of the Equipment rentals at any location identified
in the Location Schedule is not or is not likely to become a
profitable business in the then foreseeable future, STC may
terminate the Equipment rental program at such location(s). In
such event, Hertz shall have the right to engage a third party to
replace STC as provider of Equipment rentals at such location(s).
(d) Notwithstanding anything contained in this Agreement to the
contrary, upon furnishing Hertz with reasonable evidence that
STC's losses due to fraud or Equipment theft are so great that it
is no longer economically practical to operate at a location
identified in the Location Schedule, STC may terminate the
Equipment rental program at such location(s). In such event,
Hertz shall have the right to engage a third party to replace STC
as provider of Equipment rentals at such location(s).
2. Appointment.
(a) Hertz hereby grants to STC the non-exclusive right to
provide Equipment on a rental basis to Hertz customers at those
Hertz corporate locations in the United States identified in the
Location Schedule.
(b) Notwithstanding anything contained in this Agreement to the
contrary, Hertz agrees that STC shall have a right of first
refusal to provide Equipment rentals at any Hertz corporate
location in the United States where Hertz desires to offer
Equipment rentals to Hertz customers. In the event that during
the term of this Agreement Hertz desires to expand the Equipment
rental program to additional Hertz corporate locations within the
United States other than the locations identified in the Location
Schedule, Hertz shall notify STC in writing and STC shall have a
right of first refusal to provide Equipment rentals to Hertz
customers at the locations designated by Hertz in such written
notice on the same terms and conditions set forth herein. STC
shall have up to thirty (30) days to exercise such right of
first refusal. If STC exercises such right of first refusal, STC
shall have up to ninety (90) days from the date of the notice
from Hertz to implement an Equipment rental program at the
locations identified in such notice. In the event that STC does
not exercise such right of first refusal as provided above, Hertz
may contract with third parties to provide cellular phone rentals
at the locations designated by Hertz in its written notice to
STC.
<PAGE>
(c) Upon request by STC, Hertz agrees to approach any third
party who operates a car rental business pursuant to a grant of a
franchise or license from Hertz (a "Hertz Licensee") to promote
STC as Hertz's preferred cellular phone rental services provider
and to assist STC in securing an agreement with such Hertz
Licensee for an
Equipment rental program.
3. Responsibilities of Hertz.
(a) Hertz acknowledges that all Equipment delivered under this
Agreement is the property of STC. Upon termination of this
Agreement for any reason whatsoever or the termination of the
rental program at any individual location, STC may remove its
Equipment from Hertz's premises during normal business hours. If
STC does not remove its Equipment within forty-five (45) days
from the termination date of this Agreement, then Hertz may
dispose of such Equipment in any manner it may choose.
(b) With respect to each location identified on the Location
Schedule, Hertz agrees to:
i) Provide a safe and secure area for the storage and
recharging of Equipment;
ii) Designate a responsible individual who will interface
with STC on the day to day Equipment rental business;
iii) Inform each of its renting customers of the Equipment
rental program and the opportunity to rent a portable
cellular telephone from STC;
iv) Solicit orders for Equipment rentals by asking each
Hertz customer at the time the customer rents a vehicle from
Hertz if such customer wants to rent Equipment from STC;
v) Display marketing and promotional materials, including
signs mutually agreed to by the parties, point-of-sale
posters and rate cards, where not prohibited at Hertz
counters.
vi) Develop cooperative marketing programs and promotional
materials with STC to maximize revenue potential at all
locations. All promotional materials developed on a
cooperative basis will require the prior approval of
both Hertz and STC and each party will mutually agree
to its share of the cost of such cooperative marketing
materials in advance;
vii) Report all malfunctions, improper operation, damage,
<PAGE>
theft or other loss of Equipment to STC; and
viii) Be responsible for the Equipment rental and return
functions during STC's unstaffed hours of operation.
(c) Hertz shall be solely responsible for obtaining any permits,
licenses, consents or other authorizations as required by any
airport authority or other governmental entity having
jurisdiction over Hertz's operations at any location identified
on the Location Schedule to conduct the Equipment rental program
with STC. In the event that an airport authority refuses to
authorize Hertz to conduct the business provided hereunder, such
airport location will be deemed to be deleted from the Location
Schedule.
4. Responsibilities of STC.
(a) For those locations identified on the Location Schedule, STC
agrees to maintain a supply of Equipment that is sufficient to
meet customer demand, but in no event less than five (5) cellular
phones for each location (or such number of phones mutually
agreed upon by Hertz and STC for an individual location).
(b) STC will provide staff ranging from full time rental agents,
who will complete the entire rental and return process, to
support staff only, who will train and assist Hertz employees in
completing the rental and return process, as more fully described
in the attached Exhibit B.
(c) STC will provide the following monthly management reports
for each location identified on the Location Schedule:
i) A detailed revenue and utilization analysis; and
ii) Commission reports, which STC will provide to Hertz
within twenty (20) days of the end of each month for the
applicable reporting period.
(d) With respect to each location identified on the Location
Schedule, STC agrees to:
i) Train local Hertz personnel in the use of the
Equipment, STC's pre-packaged telephone kits, and STC's
sales materials. STC will inform all Hertz employees that
they are not authorized to use Equipment without completing
a rental agreement and paying all normal charges for such
use. Hertz employees will be billed directly by STC for any
charges for such use;
ii) Establish call restrictions and all rates to be charged
<PAGE>
for Equipment rental and metered airtime usage. STC has the
right to offer special promotions or rate changes as it
deems proper. Such promotions or rate changes will remain
competitive with the industry. STC will provide Hertz with
point of sales materials that reflect such promotions or
rate changes;
iii) Be responsible for billing all charges to each customer
for the rental of Equipment and the provision of service;
iv) Be responsible for resolving all customer billing
inquiries. In the event of an irreconcilable billing
dispute between STC and a customer, STC will notify Hertz.
Upon such notification, Hertz will have the right to
intervene in the dispute and attempt to bring about a
reasonable solution;
v) Be responsible for administrative paperwork, battery
charging, equipment maintenance, and inventories associated
with the Equipment rental program. All repairs and
maintenance of the Equipment will be at the expense of STC,
except any repairs caused by the negligence of Hertz and its
employees or agents; and
vi) Provide and produce point-of-sales materials (counter
signs and quick contracts only). Notwithstanding the
foregoing, if the parties develop promotional materials on a
cooperative basis, then such materials will require the
prior approval of both Hertz and STC and each party will
mutually agree to its share of the cost of such cooperative
marketing materials in advance;
(e) STC shall allow Hertz, upon reasonable prior notice and at
the sole cost and expense of Hertz, to inspect the books and
records of STC during normal business hours, as such records
pertain to Hertz.
5. Compensation.
(a) STC agrees to pay Hertz a monthly commission ("Commission")
in the amount of twenty-five percent (25%) of the Gross Revenues
(as hereinafter defined) billed by STC for Equipment rentals
provided at each Hertz location identified on the Location
Schedule for the applicable month. Gross Revenues shall mean the
total amount of airtime revenues billed by STC for Equipment
rentals provided at the applicable Hertz locations; provided,
however, that Gross Revenues shall exclude all customer credits
issued by STC other than credits for bad debt. Commissions shall
be payable on a location by location basis. STC shall pay
Commissions to Hertz within twenty (20) days after the end of
each month in which such compensation is earned.
<PAGE>
(b) In addition to the commissions payable by STC pursuant to
Paragraph 5(a), STC agrees that Hertz employees shall be eligible
for incentives as provided by the STC Commission Incentive
Program attached hereto as Exhibit C and made a part hereof. The
parties acknowledge and agree that payments for any commissions
payable to Hertz employees hereunder will be made in accordance
with the following procedures (the "Commission Incentive
Procedures"):
(i) On or before the 20th of each month during the term
hereof, STC will send a commission report to Hertz for
commissions earned by Hertz employees for the prior month.
Such monthly commission reports shall be in magnetic tape
form and shall identify the following information for each
Hertz employee who earned commissions in the prior month:
Hertz employee number, Hertz location number and commissions
earned for the prior month.
(ii) Hertz, through its payroll department, shall process
the monthly commission reports received from STC by
verifying the Hertz employee number and location number
stated therein. Hertz shall make commission payments by the
last Thursday of each month to each employee identified in
such monthly reports, provided that the Hertz employee
number and location number for a particular Hertz employee
are supported by Hertz's records.
(iii) STC shall reimburse Hertz monthly for commissions
earned by Hertz employees hereunder. Such commission
payments shall be due and payable on or before the 20th of
each month. Payment shall be made to Hertz at the address
provided in Paragraph 12.
(c) STC agrees to pay Hertz an annual bonus commission ("Annual
Bonus") in accordance with the following schedule, so long as
during each Contract Year (as hereinafter defined) STC has
operated at all Hertz corporate locations in the United States
(other than any location where STC has determined that it is not
economically feasible to operate its Equipment rental business).
Such Annual Bonus will be based on the indicated percentage of
Gross Revenues billed by STC during each Contract Year for
Equipment rentals provided by STC for the applicable Contract
Year at all Hertz corporate locations in the United States.
Contract Year shall mean each successive period of one (1) year
during the term of this Agreement, ending on the same day and
month, but not year, as the day and month on which the Effective
Date occurs. The Annual Bonus shall be payable by STC within
ninety (90) days of the end of each Contract Year. Once a higher
percentage becomes applicable, it applies to all lower threshold
levels for a particular Contract Year.
<PAGE>
Total Gross Revenues
Billed by STC for Percentage of Gross
All Hertz Locations for Revenues for Annual
Applicable Contract Year Bonus Calculation
0 to $4,500,000 0%
$4,500,000.01 to $5,000,000 1%
$5,000,000.01 to $5,500,000 2%
$5,500,000.01 to $6,000,000 3%
$6,000,000.01 to $6,500,000 4%
$6,500,000.01 and greater 5%
6. Indemnification.
(a) Hertz shall defend, indemnify and hold STC and its officers,
directors, employees and agents harmless from and against all
claims, damages and liabilities arising from Hertz's negligence
or other wrongful acts or omissions arising in any way out of
this Agreement or Hertz's performance hereunder.
(b) STC shall defend, indemnify and hold Hertz and its officers,
directors, employees and agents harmless from and against all
claims, damages and liabilities arising from STC's negligence or
other wrongful acts or omissions arising in any way out of this
Agreement or STC's performance hereunder.
7. Risk of Loss.
(a) Hertz acknowledges that all Equipment provided to it in
connection with the performance of this Agreement is the
property of STC. Hertz shall be responsible for the safekeeping
of all Equipment delivered to it by STC and shall bear the risk
of loss of or damage to, or theft of, such Equipment. However,
STC shall bear the risk of loss or damage to, or theft of, the
<PAGE>
Equipment in the possession of a customer, provided that such
Equipment left the possession of Hertz pursuant to a rental
agreement signed by a customer and in accordance with STC's
instructions, policies and procedures, as provided to Hertz by
STC from time to time (the "Procedures").
(b) Hertz understands that in the event of loss of or damage to,
or theft of, Equipment (other than Equipment that left the
possession of Hertz in accordance with the Procedures), Hertz
shall be responsible for the replacement cost of the Equipment
and for all charges attributable to the use of the Equipment,
subject to the following. STC agrees that the replacement cost
of the Equipment shall not exceed $500 per cellular phone and
that the usage charges shall be billed to Hertz on the basis of
STC's actual cost for cellular airtime. In addition, STC agrees
that Hertz shall not be responsible for usage charges after one
(1) business day has elapsed from the date STC receives a report
from Hertz, in a form reasonably specified by STC, of the loss or
theft of a cellular phone. In the event that Hertz incurs any
payment obligation to STC for lost, damaged or stolen Equipment,
then STC shall have the right to withhold such amounts from any
commissions owed to Hertz under this Agreement.
8. Confidentiality. Each party shall maintain the
confidentiality of, and shall not disclose to any third party,
any confidential or proprietary information concerning the other
party, including, without limitation, customer lists and
financial information. This Paragraph shall remain in effect for
a period of two (2) years following the termination of this
Agreement.
9. Trademarks. Neither party shall use any trademarks or
tradenames of the other party in any manner, except as expressly
authorized by the other party. Upon termination of this
Agreement, Hertz shall return to STC all marketing and sales
materials then in the possession of Hertz.
10. Default. In the event either party fails to perform any of
its obligations under this Agreement and such failure continues
for more than thirty (30) days following written notice of such
default, then the non-defaulting party shall have the right to
terminate this Agreement, without limiting any other remedies
available hereunder or at law or equity. However, if such breach
cannot be cured within said thirty (30) day period, then, if the
breaching party has commenced to cure within such period and
diligently pursues the cure, such party shall not be in default
hereunder as long as it continues to diligently pursue such cure,
but in no event for a period in excess of sixty (60) days from
the initial notice date.
<PAGE>
11. Relationship of the Parties.
(a) STC shall at all times hereunder be deemed to be an
independent contractor of Hertz. Nothing in this Agreement is
intended to constitute either party as a joint venturer, partner,
agent, dealer, franchisee or employee of the other for any
purpose whatsoever.
(b) Hertz's employees will not be or be deemed to be STC
employees or joint employees. Hertz assumes full responsibility
for the acts of its employees and for their supervision, daily
direction and control. STC will not be responsible for workers
compensation premiums, disability benefits, withholding taxes,
social security, unemployment insurance or any other taxes or
benefits of Hertz or Hertz's employees.
(c) Neither party shall have any authority to enter into or bind
the other party in contract, nor make any unauthorized
representations or warranties concerning the other party's
products or services.
12. Notice. All notices required or permitted to be given
hereunder shall be deemed to have been given when deposited in
the mail (certified and postage prepaid) or delivered in hand to
the applicable address set forth below. Either party may change
its notice address by so notifying the other in writing.
If to STC:
Shared Technologies Cellular, Inc.
100 Great Meadow Road
Suite 104
Wethersfield, CT 06109
Attn: Legal Department
If to Hertz:
The Hertz Corporation
P.O. Box 25722
Oklahoma City, OK 73125-0722
Attn: Robert J. Bailey, Sr. VP, Quality Assurance &
Administration
13. Limitation of Liability.
Notwithstanding any other
provision of this Agreement, neither party shall be liable to the
other, either directly or through the operation of any
<PAGE>
indemnification or hold harmless provision of this Agreement, for
any consequential (including lost profits), incidental, indirect,
special or punitive damages arising in any way out of this
Agreement.
14. General.
(a) Each party hereto represents and warrants to the other that
this Agreement will not conflict with or violate any prior
commitment, agreement or understanding that it has with any third
party and that the person signing this Agreement on its behalf
has been properly authorized and empowered to enter into this
Agreement.
(b) This agreement shall be governed by the laws of the State of
Connecticut.
(c) This Agreement constitutes the entire understanding between
the parties relating to the subject matter hereof and supersedes
any and all prior discussions, proposals or agreements, whether
oral or written. No modification or addition to this Agreement
shall be valid unless in writing signed by the parties hereto.
(d) The section headings of this agreement are for reference
purposes only and shall not constitute a part hereof or affect
the meaning or interpretation of this Agreement.
(e) In the event of a dispute arising out of this Agreement, the
prevailing party shall be entitled to recovery of its reasonable
legal fees and expenses.
(f) The waiver of any provision of this Agreement shall not be
construed as a continuing waiver of such breach or of other
breaches of the same or of other provisions hereof.
(g) The parties acknowledge that they have each read this
Agreement in its entirety, understand it and agree to be bound by
the terms and conditions contained herein.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
Shared Technologies The Hertz Corporation
Cellular, Inc.
By:__________________________ By:__________________________
Its:_________________________ Its:_________________________
<PAGE>
Date:________________________ Date:________________________
<PAGE>
EXHIBIT A
HERTZ LOCATIONS
Locations Locations
Albuquerque, NM New York, JFK
Albany, NY* New York, LaGuardia
Amarillo, TX* New York, Manhattan
Anaheim, CA Newark, NJ
Atlanta, GA Oakland, CA
Austin, TX* Oklahoma City, OK
Baltimore-BWI, MD Ontario, CA
Birmingham, AL* Orange County, CA
Boston-Downtown, MA Orlando, FL
Boston-Logan, MA Palm Springs, CA
Buffalo, NY Pensacola, FL
Burbank, CA Philadelphia, PA
Canada Phoenix, AZ
Toronto Pittsburgh, PA
Winnipeg Portland, ME*
Ottawa Portland, OR
Vancouver Providence, RI
Halifax Raleigh, NC
Calgary Richmond, VA*
Montreal Roanoke, VA*
Charleston, SC Rochester, NY
Charlotte, NC Sacramento, CA
Chicago Midway, IL Salt Lake City, UT*
Chicago O'Hare, IL San Antonio, TX*
Cincinnati, OH San Diego, CA
Cleveland, OH San Francisco, CA
Colorado Springs, CO San Jose, CA
Dallas, TX Sarasota, FL*
Dayton, OH Savannah, GA
Denver, CO Seattle, WA
Detroit, MI St. Louis, MO
Fresno, CA Syracuse, NY
Ft Lauderdale, FL Tallahassee, FL
Ft Myers, FL Toronto, ONT*
Grand Rapids, MI Tucson, AZ
Hartford, CT Tulsa, OK
Honolulu, HI Vancouver, BC*
Houston, TX Washington, DC
Dulles
Indianapolis, IN Washington, DC Natl
Kansas City, MO West Palm Beach, FL
Las Vegas, NV
Los Angeles, CA
Louisville, KY
Maui, HI
Miami, FL
Milwaukee, WI
Minneapolis, MN
Monterey, CA
<PAGE>
Nashville, TN
New Orleans, LA
* Hertz locations that
STC intends to use
reasonable efforts to
open within 6 months
from the
effective date of the
Agreement.
<PAGE>
EXHIBIT B
Hertz Locations Job Title % Time
*
Albany, NY Area Manager 25%
Albuquerque, NM Area Manager 34%
Anaheim, CA Area Manager 100%
Atlanta, GA Area Manager 50%
Atlanta, GA CSR 50%
Atlanta, GA CSR 50%
Baltimore-BWI, MD Area Manager 30%
Baltimore-BWI, MD CSR 30%
Boston-Downtown, MA Area Manager 10%
Boston-Logan, MA Area Manager 50%
Boston-Logan, MA CSR 50%
Boston-Logan, MA CSR 50%
Buffalo, NY Area Manager 100%
^
Burbank, CA CSR 38%
Charleston, SC Area Manager 33%
Charlotte, NC Area Manager 60%
Chicago , IL Area Manager 50%
Chicago Midway, IL Area Manager 33%.
^
Chicago O'Hare, IL CSR 100%
Cincinnati, OH Area Manager 38%
Cleveland, OH Area Manager 42%
Colorado Springs, CO Area Manager 92%
Dallas, TX Area Manager 33%
Dallas/Fort Worth, TX CSR 33%
<PAGE>
Dallas/Fort Worth, TX CSR 33%
Dayton, OH Area Manager 26%
Denver, CO Area Manager 50%
Denver, CO CSR 50%
Detroit, MI Area Manager 47%
Detroit, MI CSR 47%
Fresno, CA Area Manager 60%
Ft Lauderdale, FL CSR 50%
Ft Myers, FL Area Manager 25%
Grand Rapids, MI Area Manager 10%
Hartford, CT Area Manager 55%
Honolulu, HI TBD 50%
Houston, TX Area Manager 33%
Houston, TX CSR 33%
Houston, TX CSR 75%
Indianapolis, IN CSR TBD
Kansas City, MO Area Manager 60%
Las Vegas, NV Area Manager 40%
Las Vegas, NV CSR 40%
Los Angeles, CA Area Manager 60%
Los Angeles, CA CSR 100%
Louisville, KY Area Manager 70%
^
Maui, HI TBD 50%
Miami, FL Area Manager 40%
Miami, FL CSR 100%
Milwaukee, WI Area Manager 50%
^
<PAGE>
Minneapolis, MN Area Manager 33%
Monterey, CA Area Manager 33%
Nashville, TN Area Manager 33%
New Orleans, LA Area Manger 40%
New York, Manhattan NYC Manager 66%
New York, Manhattan CSR 66%
New York, JFK CSR 48%
New York, LaGuardia CSR 50%
Newark Area Manager 52%
Newark, NJ CSR 52%
Oakland, CA Area Manager 40%
Oklahoma City, OK Area Manager 30%
Ontario, CA Area Manager 60%
Orange County, CA Area Manager 25%
Orlando, FL Area Manager 33%
Orlando, FL CSR 75%
Palm Springs, CA Area Manager 60%
Pensacola, FL Area Manager 33%
Philadelphia, PA CSR 50%
Philadelphia, PA CSR 50%
Phoenix, AZ Area Manager 50%
Pittsburgh, PA CSR 50%
Portland, ME CSR 10%
Portland, OR Area Manager 80%
Providence, RI Area Manager 60%
Raleigh, NC Area Manager TBD
<PAGE>
Richmond, VA Area Manager TBD
Roanoke, VA Area Manager TBD
Rochester, NY Area Manager 50%
^
Sacramento, CA Area Manager 36%
San Diego, CA Area Manager 50%
San Francisco, CA Area Manager 70%
San Francisco, CA CSR 100%
San Jose, CA Area Manager 45%
Savannah, GA Area Manager 33%
Seattle, WA Area Manager 33%
St. Louis, MO Area Manager 100%
Syracuse, NY Area Manager 60%
^
Tallahassee, FL Area Manger 33%
Tucson, AZ Area Manager 100%
Tulsa, OK Area Manager 33%
^
Washington, DC Area Manager 50%
Washington, DC Dulles CSR 50%
Washington, DC Natl CSR 33%
West Palm Beach, FL Area Manager 40%
* The percentage of time, based
on a forty (40)
work week, that a STC employee
will spend at a particular
Hertz location.
^ STC Employee who is a
commission only Sales Agent
TBD= To be determined
STC reserves the right to
change staffing and
necessary. STC will provide
requirements as it deems
Hertz with a 30 day advance
written notice
<PAGE>
of such changes. If Hertz
objects to such change, Hertz
will notify
STC within 10 days of its
objection. STC will then
cancel its planned staffing
change(s), or Hertz at its
option may delete such
location(s) from this
<PAGE>
EXHIBIT C
STC COMMISSION INCENTIVE PROGRAM
STC agrees to pay a one-time commission in the amount of $3.00
for each Equipment rental that is procured solely by the efforts
of a Hertz employee from the Effective Date through December 31,
1996. Such one-time commission will be increased by $1.00 for
the period January 1, 1997 through the termination date of the
Agreement. The basis for the Hertz employee compensation will be
receipt of an Equipment rental application completed by the Hertz
employee. The order must be signed by the Customer and must
designate the Hertz location number and the Hertz employee as the
source of the sale. Payment will be made in accordance with the
Commission Incentive Procedures adopted by Hertz and STC.
<PAGE>
Exhibit 10.2
AGREEMENT BETWEEN
SHARED TECHNOLOGIES CELLULAR, INC.
AND
NATIONAL CAR RENTAL SYSTEM, INC.
This Agreement (the "Agreement") is made as of the 1st day of
July, 1996 (the "Effective Date"), by and between Shared
Technologies Cellular, Inc., a Delaware corporation, having
offices at 100 Great Meadow Road, Wethersfield, CT 06109,
("STC"), and National Car Rental System, Inc., a Delaware
corporation, having offices at 7700 France Avenue South,
Minneapolis, MN 55435 ("National").
WHEREAS, National is in the business of renting vehicles to the
traveling public from various rental locations throughout the
United States; and
WHEREAS, STC is in the business of providing portable cellular
telephones including all accessories (the "Equipment") for short-
term use; and
WHEREAS, National and STC desire to enter into this Agreement to
allow STC the right to provide Equipment rentals to National
customers at those locations identified in the attached Exhibit A
(the "Location Schedule"), which may be amended from time to time
to add or delete locations by written mutual consent of the
parties hereto.
NOW THEREFORE, in consideration of the promises and covenants
contained herein, the receipt and adequacy of which are
acknowledged, the parties agree as follows.
1. Term and Termination.
(a) This Agreement shall have a term of three (3) years,
commencing as of the date first written above, subject to the
following. The term hereof shall automatically renew for
successive one (1) year terms, unless terminated by either party
by written notice given to the other party at least ninety (90)
days prior to the end of the initial term or any term then in
effect.
(b) Notwithstanding anything contained in this Agreement to the
contrary, STC will have the right to immediately terminate this
Agreement upon written notice to National specifying the reason
for termination pursuant to this Paragraph 1(b), if the Federal
Communications Commission or any other regulatory agency
promulgates any rule, regulation, or order which i) in effect or
application substantially impedes STC from fulfilling its
obligations hereunder, or ii) materially or adversely affects
<PAGE>
STC's ability to conduct its business. For the purposes of this
Agreement, a regulatory rule, regulation or order will be deemed
to
"substantially impede" STC from fulfilling its obligations
hereunder if STC must significantly alter the manner in which it
provides cellular phone rentals to end users.
(c) Notwithstanding anything contained in this Agreement to the
contrary, within thirty (30) days after furnishing National with
reasonable evidence that the continuation of the Equipment
rentals at any location identified in the Location Schedule is
not or is not likely to become a profitable business in the then
foreseeable future, STC may terminate the Equipment rental
program at such location(s). In such event, National shall have
the right to engage a third party to replace STC as provider of
Equipment rentals at such location(s).
(d) Notwithstanding anything contained in this Agreement to the
contrary, within thirty (30) days after furnishing National with
reasonable evidence that STC's losses due to fraud or Equipment
theft are so great that it is no longer economically practical to
operate at a location identified in the Location Schedule, STC
may terminate the Equipment rental program at such location(s).
In such event, National shall have the right to engage a third
party to replace STC as provider of Equipment rentals at such
location(s).
(e) Notwithstanding anything contained in this Agreement to the
contrary, in the event that the cellular phone rental program is
terminated at an individual National corporate location in
accordance with Paragraph 3(c) or Paragraph 3(d) below and the
average monthly gross revenues received by STC from the Equipment
rentals made at such location are at least $7,500, then National
and STC shall enter into good faith negotiations to reduce the
Minimum Commission and the Annual Bonus payments payable by STC
pursuant to Paragraph 5 of this Agreement.
2. Appointment.
(a) National hereby grants to STC the exclusive right to provide
Equipment on a rental basis to National customers at all of
National's corporate locations in the United States, which
locations are identified on the Location Schedule.
Notwithstanding the foregoing, National shall have a period of
sixty (60) days from the Effective Date to wind down and
terminate its cellular phone rental program with a third party
vendor at each of those corporate locations identified on the
Location Schedule as a location where a third party vendor is
operating on the Effective Date. In the event that National
closes its car rental operations at a corporate location during
the term of this Agreement, National shall provide STC with at
<PAGE>
least thirty (30) days prior written notice and upon the
expiration of such 30-day period, the closed corporate location
shall be deemed to be deleted from the Location Schedule. The
addition of new corporate car rental locations shall be governed
by Paragraph 2(c) below.
(b) Upon request by STC, National agrees to approach any third
party who operates a car rental business pursuant to a grant of a
franchise or license from National (a "National Licensee") to
promote STC as National's exclusive cellular phone rental
services provider. If STC enters into an agreement with a
National Licensee for the provision of cellular telephone rentals
as a result of the contact and promotion by National, then STC
agrees that the gross collected airtime revenues received by STC
from a cellular phone rental program conducted with such National
Licensee shall be included in the calculation of the Annual Bonus
described in Paragraph 5(e) below.
(c) In the event that during the term of this Agreement National
opens additional corporate locations in the United States,
National shall notify STC in writing and STC shall have the right
of first refusal to provide Equipment to National customers at
the additional locations on the same terms and conditions set
forth herein. STC shall have up to thirty (30) days to exercise
its right of first refusal. In the event STC does not exercise
its right of first refusal as provided above, National may
negotiate with third parties to provide cellular phone rentals at
the locations designated by National in its written notice to
STC. In the event that STC exercises its right of first refusal,
the Location Schedule shall be modified to include the corporate
location(s) designated by National in its written notice to STC.
(d) STC reserves the right to grant licenses and/or award
franchises to a third party to operate an Equipment rental
business in those cities identified on the Location Schedule, and
National agrees that in such event STC's licensee or franchisee
shall have the right to provide Equipment rentals in accordance
with the terms of this Agreement.
3. Responsibilities of National.
(a) National acknowledges that all Equipment delivered under
this Agreement is the property of STC. Upon termination of this
Agreement for any reason whatsoever or the termination of the
rental program at any individual location, STC may remove its
Equipment from National's premises.
(b) With respect to each location identified on the Location
Schedule, National agrees to:
i) Provide a safe and secure area for the storage and
recharging of Equipment. National shall be responsible for
locking unused inventory in the boxes provided by STC
<PAGE>
pursuant to Paragraph 4(d) during any hours of operation
that an STC employee is not staffing a particular National
location;
ii) Designate a responsible individual who will interface
with STC on the day to day Equipment rental business;
iii) Inform each of its customers of the Equipment rental
program and the opportunity to rent a portable cellular
telephone from STC;
iv) Solicit orders for Equipment rentals by asking each
National customer at the time the customer reserves a
vehicle from National if such customer wants to rent
Equipment from STC;
v) Display marketing and promotional materials, including
point-of-sale posters and rate cards provided by STC, where
not prohibited at National counters;
vi) Develop cooperative marketing programs and promotional
materials with STC to maximize revenue potential at all
locations;
vii) Report all malfunctions, improper operation, damage,
theft or other loss of Equipment to STC; and
viii) Be responsible for the Equipment rental and return
functions during STC's unstaffed hours of operation.
(c) National shall be solely responsible for obtaining any
permits, licenses, consents or other authorizations as required
by any federal, state or local law or by any airport authority or
other governmental entity having jurisdiction over National's
operations at any location identified on the Location Schedule to
conduct the Equipment rental program with STC. In the event that
an airport authority refuses to authorize National to conduct the
business provided hereunder, such airport location will be deemed
to be deleted from the Location Schedule and National and STC
agree to use their best efforts to develop a mutually acceptable
proposal to address the concerns of such airport authority so
that such location may be included in the cellular phone rental
program at a later date.
(d) National frequently leases its facilities and operates its
car rental business under grant from various state and local
governmental and airport entities (which grants and leases are
hereby referred to as "Concession Agreements"). The parties
acknowledge and agree that this Agreement is entirely separate
and distinct from and independent of National's Concession
Agreements. Consequently, National shall be solely responsible
<PAGE>
for the performance or non-performance of any of its obligations
under its Concession Agreements, including, without limitation,
the payment of any applicable airport concession fees. In the
event that an airport authority or other governmental entity with
jurisdiction over an individual location identified on the
Location Schedule advises National that the rental of cellular
phones constitutes a violation of National's Concession
Agreement for such location or that the airport authority has
promulgated a rule that prohibits cellular phone rental vendors
from operating at such location, then STC agrees to cooperate
with National to terminate the cellular phone rental program at
such location.
4. Responsibilities of STC.
(a) For those locations identified on the Location Schedule, STC
agrees to maintain a supply of Equipment that is sufficient to
meet customer demand. STC agrees to maintain a sufficient
inventory for each location identified on the Location Schedule
such that the average daily utilization (rental) level of
inventory assigned to a particular location will not exceed sixty
percent (60%).
(b) STC will provide staff ranging from full time rental agents,
who will complete the entire rental process, to support staff
only, who will train and assist National employees in completing
the rental process. STC employees shall conduct themselves in a
professional and courteous manner at all times hereunder.
(c) STC will provide the following monthly management reports
for each location identified on the Location Schedule:
i) A detailed revenue report, which will include market
area rankings and utilization analysis; and
ii) Commission reports, which will include an explanation
of any offsets that STC is entitled to hereunder.
In addition, STC will provide a year end statement to National,
which will include a summary of all monthly commission payments
made by STC during the prior calendar year.
(d) At its sole cost, STC will provide National with a
sufficient number of storage boxes containing a lock mechanism to
be used for storing and securing Equipment in inventory.
(e) With respect to each location identified on the Location
Schedule, STC agrees to:
i) Train National personnel in the use of the Equipment,
STC's pre-packaged telephone kits, and STC's sales
materials. STC will inform all National employees that they
<PAGE>
are not authorized to use Equipment without completing a
rental agreement and paying all normal charges for such use.
National employees will be billed directly by STC for any
charges for such use;
ii) Establish call restrictions and all rates to be charged
for Equipment rental and metered airtime usage. STC has the
right to offer special promotions or rate changes as it
deems proper. Such promotions or rate changes will remain
competitive with the industry. STC will provide National
with point of sales materials that reflect such promotions
or rate changes;
iii) Be responsible for billing all charges to each customer
for the rental of Equipment and the provision of service;
iv) Be responsible for resolving all customer billing
inquiries. In the event of an irreconcilable billing
dispute between STC and a customer, STC will notify
National. Upon such notification, National will have the
right to intervene
in the dispute and attempt to bring about a reasonable
solution;
v) Be responsible for administrative paperwork, battery
charging, equipment maintenance, and inventories associated
with the Equipment rental program during any hours of
operation that an STC employee is staffing a particular
National location. All repairs and maintenance of the
Equipment will be at the expense of STC, except any repairs
caused by the negligence of National and its employees or
agents; and
vi) Provide and produce collateral materials, including
without limitation, point-of-sales materials.
(f) STC shall allow National, upon reasonable prior notice and
at the sole cost and expense of National, to inspect the books
and records of STC during normal business hours, as such records
pertain to National. If audit results reveal a discrepancy of
more than three percent (3%), STC agrees to bear the expense of
the audit.
(g) STC shall have the sole responsibility for complying with
any law, rule, order or regulation of the Federal Communications
Commission or a state Public Utility or Service Commission having
jurisdiction over STC's cellular phone rental business.
5. Compensation.
<PAGE>
(a) Unless otherwise designated on the Location Schedule, STC
agrees to pay National a commission (the "Commission") in the
amount of twenty-five percent (25%) of the monthly collected
gross revenues received by STC for airtime usage and equipment
rental charges in connection with Equipment rentals made at each
National corporate location identified on the Location Schedule.
For the purposes of determining Commissions hereunder, the term
"gross revenues" shall exclude any state, federal or local taxes.
Commissions shall be paid by STC monthly in arrears within thirty
(30) days after the end of each month in which such compensation
is earned.
(b) In addition to the Commissions payable by STC pursuant to
Paragraph 5(a), STC agrees to pay incentives to National
employees as provided by the STC Commission Incentive Program
attached hereto as Exhibit B and made a part hereof.
(c) Notwithstanding anything contained in this Agreement to the
contrary, STC agrees that the aggregate Commission payments made
to National pursuant to Paragraph 5(a) during each full calendar
year of this Agreement shall not be less than $500,000 ("Minimum
Commission"), so long as STC has the exclusive right to provide
Equipment rentals at all National corporate locations in the
United States and subject to the following. Such Minimum
Commission shall be prorated for any partial calendar year.
Annually within ninety (90) days of the end of each calendar
year, the parties shall reconcile the Minimum Commission with the
actual Commission payments made during the calendar year. Any
sum due National as a result of such reconciliation shall be paid
within said ninety (90) days.
(d) In the event that on or before August 15, 1996, National
incorporates STC's Equipment rental program into National's
electronic car rental reservation system, including, but not
limited to the EDS rental counter system at each National
corporate location, then STC will increase the Minimum Commission
to $600,000.
(e) STC agrees to pay National an annual bonus commission
("Annual Bonus") in accordance with the following schedule, based
on the indicated percentage of total gross revenues received by
STC during each contract year during the term for airtime usage
and equipment rental charges in connection with Equipment rentals
made at all National corporate locations identified on the
Location Schedule and at all locations operated by a National
Licensee, subject to the following. Contract year shall mean
each successive period of one (1) year during term of this
Agreement, ending on the same day and month, but not year, as the
day and month on which the Effective Date occurs. Gross revenues
shall exclude any state, federal or local taxes, refunds issued
to customers, credits, bad debt incurred or the like.
<PAGE>
Total Gross Revenues
Received During Percentage of
Applicable Contract Year Gross Revenues
$2,500,000 - $3,249,999.99 1%
$3,250,000 - $3,749,999.99 2%
$3,750,000 - $4,249,999.99 3%
$4,250,000 - $4,749,999.99 4%
$4,750,000 and greater 5%
The Annual Bonus shall be payable within ninety (90) days of
the end of each contract year during the term of this Agreement.
6. Indemnification.
(a) National shall defend, indemnify and hold STC and its
officers, directors, employees and agents harmless from and
against all claims, damages and liabilities arising from
National's negligence or other wrongful acts or omissions arising
in any way out of this Agreement or National's performance
hereunder.
(b) STC shall defend, indemnify and hold National and its
officers, directors, employees and agents harmless from and
against all claims, damages and liabilities arising from STC's
negligence or other wrongful acts or omissions arising in any way
out of this Agreement or STC's performance hereunder.
(c) To induce National to provide the credit card information
contained in rental profiles, STC agrees to defend, indemnify and
hold National harmless from and against any and all claims,
demands or liabilities of whatever kind and nature, imposed on,
incurred by or asserted against National in any way caused by or
proximately relating to or arising out of any use or misuse of
any customer credit card information by STC. This indemnity is
in addition to and not in substitution of any other indemnity in
<PAGE>
this Agreement.
7. Insurance. STC shall obtain and provide evidence of coverage
of insurance satisfactory to National including general
comprehensive liability insurance of One Million Dollars
($1,000,000) on which National shall be named as additional
insured. STC shall carry all other insurance required by the
states in which STC does business, including worker's
compensation.
8. Risk of Loss.
(a) National acknowledges that all Equipment provided to it in
connection with the performance of this Agreement is the personal
property of STC. National shall be responsible for the
safekeeping of all Equipment delivered to it by STC and shall
bear the risk of loss or damage to, or theft of, such Equipment.
However, STC shall bear the risk of loss or damage to, or theft
of, the Equipment in the possession of a customer, provided that
such Equipment left the possession of a National employee
pursuant to a rental agreement signed by a customer and in
accordance with STC's instructions, policies and procedures, as
provided to National by STC from time to time (the "Procedures").
(b) National understands that in the event of loss or damage to,
or theft of, Equipment (other than Equipment that left the
possession of National in accordance with the Procedures),
National shall be responsible for the replacement cost of the
Equipment and for all charges attributable to the use of the
Equipment until such loss or theft has been reported to STC. In
the event that National incurs any payment obligation to STC for
lost, damaged or stolen Equipment, then STC shall have the right
to withhold such amounts from any commissions owed to National
hereunder. STC agrees to include an explanation in its monthly
commission report to National for any amounts withheld from
commissions owed to National.
9. Default. In the event either party fails to perform any of
its obligations under this Agreement and such failure continues
for more than thirty (30) days following written notice of such
default, then the non-defaulting party shall have the right to
terminate this Agreement, without limiting any other remedies
available at law or in equity. However, if such breach cannot be
cured within said thirty (30) day period, then, if the breaching
party has commenced to cure within such period and diligently
pursues the cure, such party shall not be in default hereunder as
long as it continues to diligently pursue such cure, but in no
event for a period in excess of ninety (90) days from the initial
<PAGE>
notice date.
10. Confidentiality. Each party shall maintain the
confidentiality of, and shall not disclose to any third party,
any confidential or proprietary information concerning the other
party, including, without limitation, customer lists and
financial information. This Paragraph shall remain in effect for
a period of two (2) years following the termination of this
Agreement.
11. Trademarks. Neither party shall use any trademarks or
tradenames of the other party in any manner, except as expressly
authorized by the other party. Upon termination of this
Agreement, National shall return to STC all marketing and sales
materials then in the possession of National.
12. Relationship of the Parties.
(a) STC shall at all times hereunder be deemed to be an
independent contractor of National. Nothing in this Agreement is
intended to constitute either party as a joint venturer, partner,
agent, dealer, franchisee or employee of the other for any
purpose whatsoever.
(b) National's employees will not be or be deemed to be STC
employees or joint employees. National assumes full
responsibility for the acts of its employees and for their
supervision, daily direction and control. STC will not be
responsible for workers compensation premiums, disability
benefits, withholding taxes, social security, unemployment
insurance or any other taxes or benefits of National or
National's employees.
(c) Neither party shall have any authority to enter into or bind
the other party in contract, nor make any unauthorized
representations or warranties concerning the other party's
products or services.
13. Notice. All notices required or permitted to be given
hereunder shall be deemed to have been given when deposited in
the mail (certified and postage prepaid) or delivered in hand to
the applicable address set forth below. Either party may change
its notice address by notifying the other in writing.
If to STC:
Shared Technologies Cellular, Inc.
100 Great Meadow Road
Suite 104
<PAGE>
Wethersfield, CT 06109
Attn: Legal Department
If to National:
National Car Rental System, Inc.
World Headquarters
7700 France Avenue South
Minneapolis, MN 55435
Attn: Properties Legal Department
Mary F. Zeise, Legal Assistant
14. Limitation of Liability.
Notwithstanding any other
provision of this Agreement, neither party shall be liable to the
other, either directly or through operation of any
indemnification or hold harmless provision of this Agreement, for
any consequential (including lost profits), incidental, indirect,
special or punitive damages arising in any way out of this
Agreement.
15. Most Favored Nations. As part of the inducement to National
for this Agreement, STC represents and agrees that, as of the
Effective Date, STC will not provide portable cellular rental
services to any car rental firm on terms more favorable to such
firm than those being granted to National under this Agreement.
16. General.
(a) Each party hereto represents and warrants to the other that
this Agreement will not conflict with or violate any prior
commitment, agreement or understanding that it has with any third
party.
(b) This agreement shall be governed by the laws of the State of
Connecticut. However, any dispute arising out of this Agreement
which solely effects the operation of the Equipment rental
program at a particular location identified on the Location
Schedule shall be resolved in accordance with the applicable laws
of the state governing such location.
(c) This Agreement constitutes the entire understanding between
the parties relating to the subject matter hereof and supersedes
any and all prior discussions, proposals or agreements, whether
oral or written. No modification or addition to this Agreement
shall be valid unless in writing signed by the parties hereto.
(d) The section headings of this agreement are for reference
purposes only and shall not constitute a part hereof or affect
the meaning or interpretation of this Agreement.
<PAGE>
(e) In the event of a dispute arising out of this Agreement, the
prevailing party shall be entitled to recovery of its reasonable
legal fees and expenses.
(f) The waiver of any provision of this Agreement shall not be
construed as a continuing waiver of such breach or of other
breaches of the same or of other provisions hereof.
(g) The parties acknowledge that they have each read this
Agreement in its entirety, understand it and agree to be bound by
the terms and conditions contained herein.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
Shared Technologies National Car Rental Systems,
Cellular, Inc. Inc.
By:_________________________ By:_________________________
Jon Sorenson Jeffrey Panell
Its:_________________________ Its: Executive Vice President
Date:_________________________ Date:_________________________
(6/12/96)
EXHIBIT A
LOCATION SCHEDULE
<PAGE>
National Locations
Albuquerque, NM
Atlanta, GA
Baltimore, MD
Birmingham**
Boston, MA
Buffalo, NY
Burbank, CA
Charleston, SC
Charlotte, NC
Chicago, IL
Chicago, O'Hare
Chicago, Midway
Cincinnati, OH
Cleveland, OH
Dallas, Love
Dallas, North
Dallas, South
Dayton, OH
Denver, CO
Detroit, MI
Fresno, CA
Ft. Lauderdale, FL
Ft. Meyers, FL
Ft. Walton Beach, FL
Grand Rapids, MI
Greensboro, NC
Gulfport-Biloxi**
Harlingen**
Hartford, CT
Honolulu, HI
Houston, Hobby
Houston, IAH
Huntsville, AL**
Jacksonville, FL
Kansas City, MO
Las Vegas, NV
Long Beach, CA
Los Angeles, LAX
Louisville, KY
Manhattan, NY
McAllen**
Memphis, TN**
Miami, FL
Milwaukee, WI
Minneapolis, MN
Mobile, AL**
Monterey, CA
Naples, FL
Nashville, TN**
New Orleans, LA
<PAGE>
New York, JFK
New York, LaGuardia
Newark, NJ
Newport/Orange County, CA
Oakland, CA
Ontario, CA
Orlando, FL*
Panama City, FL
Pensacola, FL
Philadelphia, PA
Phoenix, AZ
Pittsburgh, PA
Portland, OR
Raleigh, NC
Reno, NV**
Richmond, VA
Rochester, NY
Sacramento, CA
San Diego, CA
San Francisco, DT
San Francisco, SFO
San Jose, CA
Savannah, GA
Seattle, WA
Syracuse, NY
Tallahassee, FL
Tulsa, OK
Washington DC
Washington, DC National
Washington, DC Dulles
West Palm Beach, FL
All applicable corporate locations where both parties mutually
agree.
Shared Technologies Cellular, Inc. National Car Rental System,
Inc.
By: By:
Its: Its:
Date: Date:
*The commission rate for this location shall be thirty percent
(30%) for the purposes of calculating commissions payable by STC
pursuant to Paragraph 5(a) of the Agreement.
**On the Effective Date of this Agreement, National has a third
party vendor providing cellular phone rentals at this location.
Pursuant to Section 2(a) of the Agreement, National has sixty
(60) days from the Effective Date to wind down and terminate its
<PAGE>
cellular phone rental program with such third party vendor.
Shared Technologies National Car Rental Systems,
Cellular, Inc. Inc.
By:_________________________ By:_________________________
Its:_________________________ Its:_________________________
Date:_________________________
Date:_________________________
<PAGE>
Exhibit B
STC Incentive Program
1. STC agrees to pay a one-time commission in the amount of Four
Dollars ($4) for each Equipment rental order that is procured
solely by the efforts of a National car rental agent employee,
subject to the following. Such one-time commission will be
increased by One Dollar ($1) for each customer who accepts STC's
theft protection pursuant to an Equipment rental order procured
by a National car rental agent employee. The basis for the one-
time commission payable to an individual National employee will
be the receipt by STC of an Equipment rental application
completed by the National car rental agent employee. Such
application must be signed by the customer and must designate the
National location and the National car rental agent employee as
the source of the sale. Generally, the one-time commission will
be paid by STC to individual National car rental employees on a
weekly basis. STC will issue individual National car rental
employees a Form 1099 in accordance with applicable IRS
requirements.
2. Notwithstanding anything contained in Paragraph 1 above, if a
National bus driver employee assists a National car rental agent
employee in procuring an Equipment rental order, then the one-
time commission payable by STC pursuant to Paragraph 1 above
shall be shared on an equal basis between such National
employees.
<PAGE>
Exhibit 10.5
SHARED TECHNOLOGIES CELLULAR, INC.
1994 DIRECTOR OPTION PLAN
1. PURPOSE
The purpose of this 1994 Director Option Plan (The "Plan")
of Shared Technologies Cellular, Inc., a Delaware corporation
(the "Company"), is to encourage ownership in the Company by
outside directors of the Company whose continued services are
considered essential to the Company's future progress and to
provide them with a further incentive to remain as directors of
the Company.
2. ADMINISTRATION
The Board of Directors shall supervise and administer the
Plan. Grants of stock options under the Plan and the amount and
nature of the awards to be granted shall be automatic and
nondiscretionary in accordance with Section 5. However, all
questions of interpretation of the Plan or of any options issued
under it shall be determined by the Board of Directors and such
determination shall be final and binding upon all persons having
an interest in the Plan.
3. DIRECTORS ELIGIBLE FOR PARTICIPATION
Each director of the Company who is not an employee of the
Company or any Subsidiary, or affiliate of the Company shall be
eligible to participate in the Plan.
4. STOCK SUBJECT TO THE PLAN
(a) The maximum number of shares which may be issued under
the Plan shall be 50,000 shares of the Company's Common Stock.
$.01 par value per share ("Common Stock")
(b) If any outstanding option under the Plan for any reason
expires or is terminated without having been exercised in full,
the shares allocable to the unexercised portion of such option
shall again become available for grant pursuant to the Plan.
(c) All options granted under the Plan shall be non-
statutory options not entitled to special tax treatment under
Section 422 of the Internal Revenue Code of 1986, as amended to
date and as may be amended from time to time (the "Code").
<PAGE>
5. TERMS, CONDITIONS AND FORMS OF OPTIONS
Each option granted under the Plan shall be evidenced by a
written agreement in such form as the Board of Directors shall
from time to time approve, which agreements shall comply with and
be subject to the following terms and conditions:
(a) Option Grant Dates. Each eligible director,
including a director serving in that capacity on the effective
date of the Plan, will automatically receive an option to
purchase 2,000 thousand shares after having served, from and
after September 20, 1994, one (1) year as a director.
Thereafter, each eligible director will automatically receive an
option to purchase an additional 2,000 shares upon commencement
of each subsequent year of service as an eligible director. All
options granted under the Plan will be immediately exercisable
after six (6) months from the date of grant.
(b) Option Exercise Price. The option exercise price per
share for each option granted under the Plan shall be equal: (i)
if the Common Stock is then traded on the over-the-counter market
the average of the Closing bid and ask prices for the shares of
Common Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Common Stock in
such market; (ii) if the Common Stock is then listed on a
national securities exchange, the closing sales price per share
for the last preceding date on which there was a sale of such
Common Stock on such exchange; or (iii) if, on the relevant
date, the Common Stock is not publicly traded or reported as
described in (i) or (ii), the value determined in good faith by
the Board of Directors.
(c) Options Non-Transferable. Each option granted under the
Plan by its terms shall not be transferable by the optionee
otherwise than by will, or by the laws of descent and
distribution, and shall be exercised during the lifetime of the
optionee only by him. No option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee
during his lifetime, whether by operation of law or otherwise, or
be made subject to execution, attachment or similar process.
(d) Exercise Period. Except as otherwise provided in the
Plan, each option may be exercised fully on the date of grant of
<PAGE>
such option, provided that, subject to the provisions of Section
5(e), no option may be exercised more than ninety (90) days after
the optionee ceases to serve as a director of the Company. No
option shall be exercisable after the expiration of ten (10)
years from the date of grant or prior to approval of the Plan by
the stockholders of the Company, whichever is earlier.
(e) Exercise Period Upon Disability or Death.
Notwithstanding the provisions of Section 5(d), any option
granted under the Plan:
(i) may be exercised in full by an optionee who
becomes disabled (within the meaning of Section 22(e) (3) of the
Code or any successor provision thereto) while serving as a
director of the Company; or (ii) may be exercised
(x) in full upon the death of an optionee while
serving as a director of the Company, or
(y) to the extent then exercisable upon the death of
an optionee within ninety (90) days of ceasing to serve as a
director of the Company,
by the person to whom it is transferred by will, by the laws of
descent and distribution, or by written notice filed pursuant to
Section 5(h);
in each such case within six months (or such longer period as may
be determined by the Board of Directors in its sole discretion)
after the date the optionee ceases to be such a director;
provided, that in no option shall be exercisable after the
expiration of ten (10) years from the date of grant.
(f) Exercise Procedure. Options may be exercised only by
written notice to the Company at its principal office accompanied
by payment of the full consideration for the shares as to which
they are exercised.
(g) Payment of Purchase Price. Options granted under the
Plan may provide for the payment of the exercise price (i) by
delivery of cash (or cash equivalent) in an amount equal to the
exercise price of such options or, (ii) to the extent provided in
the applicable option agreement, by delivery to the Company of
shares of Common Stock then owned by the optionee having a fair
market value equal in amount to the exercise price of the options
being exercised, or (iii) by any combination of such methods of
payment. The fair market value of any shares of Common Stock or
other non-cash consideration which may be delivered upon exercise
of an option shall be determined by the Board of Directors.
<PAGE>
(h) Exercise by Representative Following Death of
Director. A director, by written notice to the Company, may
designate one or more persons (and for time to time change such
designation) including his legal representative, who, by reason
of his death, shall acquire the right to exercise all or a
portion of the option. If the person or persons so designated
wish to exercise all or a portion of the option, they must do so
within the term of the option as provided herein. Any exercise
by a representative shall be subject to the provisions of the
Plan.
6. ASSIGNMENTS
The rights and benefits under the Plan may not be
assigned except for the designation of a beneficiary as provided
in Section 5.
7. LIMITATION OF RIGHTS
(a) No Right to Continue as a Director. Neither
the Plan, nor the granting of an option not any other action
taken pursuant to the Plan, shall constitute or be evidence of
any agreement or understanding, express or implied, that the
Company will retain a director for any period of time.
(b) No Stockholders' Right for Options. An
optionee shall have no rights as a stockholder with respect to
the shares covered by his options until the date of the issuance
to him of a stock certificate therefor, and no adjustment will be
made for dividends or other rights for which the record date is
prior to the date such certificate is issued.
8. CHANGES IN CAPITAL STOCK
(a) If (x) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind
of shares or other securities of the Company, or (y) additional
shares of Common Stock or new or different shares of Common Stock
or other securities of the Company or other non-cash assets are
distributed with respect to such shares or other securities,
through or as a result of any merger, consolidation, sale of all
or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar
transaction with respect to such shares or other securities, an
appropriate and proportionate adjustment shall be made in (i) the
<PAGE>
maximum number and kind of shares reserved for issuance under the
Plan, and (ii) the number and kind of shares or other securities
subject to any then outstanding options under the Plan, and (iii)
the price for each share subject to any then outstanding options
under the Plan without changing the aggregate purchase price for
each share subject to any then outstanding options under the
Plan, without changing the aggregate purchase price as to which
such options remain exercisable. No fractional shares will be
issued under the Plan on account of any such adjustments.
Notwithstanding the foregoing, no adjustment shall be made
pursuant to this Section 8 if such adjustment would cause the
Plan to fail to comply with Rule 16b-3 or any successor rule
promulgated pursuant to Section 16 of the Securities Exchange Act
of 1934.
(b) In the event that the Company is merged or consolidated
into or with another corporation (in which consolidation or
merger, the stockholders of the Company receive distributions of
cash or securities of another issuer as a result thereof), or in
the event that all or substantially all of the assets of the
Company are acquired by any other person or entity, or in the
event of a reorganization or liquidation of the Company, the
Board of Directors of the Company, or the Board of Directors of
any corporation assuming the obligations of the Company, shall,
as to outstanding options, take one or more of the following
actions; (i) provide that such options shall be assumed, or
equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), (ii) upon
written notice to the optionees, provide that all unexercised
options will terminate immediately prior to the consummation of
such transaction unless exercised by the optionee within a
specified period following the date of such notice, or (iii) if,
under the terms of a merger transaction, holders of the Common
Stock of the Company will receive upon consummation thereof a
cash payment for each share surrendered in the merger (the
"Merger Price"), make or provide for a cash payment to the
optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such
outstanding options (to the extent then exercisable at prices not
in excess of the Merger Price) and (B) the aggregate exercise
price of all such outstanding options in exchange for the
termination of such options.
9. AMENDMENT OF THE PLAN
The Board of Directors may suspend or discontinue the
Plan or review or amend it in any respect whatsoever; provided,
however that without approval of the stockholders of the Company
no revision or amendment shall change the number of shares
subject to the Plan or the number of shares issuable to any
director of the Company under the Plan (except as provided in
<PAGE>
Section 8), change the designation of the class of any directors
eligible to receive options, or materially increase the benefits
accruing to participants under the Plan. The Plan may not be
amended more than once in any six-month period.
10. WITHHOLDING
Prior to issuance of shares of Common Stock upon
exercise of an Option, the Optionee shall pay or make adequate
provision for any federal or local taxes or any kind required by
law to be withheld by the Company with respect to any shares
issued upon exercise of options under the Plan.
11. EFFECTIVE DATE AND DURATION OF THE PLAN
(a) Effective Date. The Plan shall become effective
when adopted by the Board of Directors and approved by the
Company's stockholders. Amendments to the Plan not requiring
stockholder approval shall become effective when adopted by the
Board of Directors; amendments requiring stockholder approval
shall become effective when adopted by the Board of Directors,
but no option granted after the date of such amendment shall
become exercisable (to the extent that such amendment to the Plan
was required to enable the Company to grant such option to a
particular optionee) unless and until such amendment shall have
been approved by the Company's stockholders. If such stockholder
approval is not obtained within twelve months of the Board's
adoption of such amendment, any options granted on or after the
date of such amendment shall terminate to the extent that such
amendment to the Plan was required to enable the Company to grant
such option to a particular optionee.
(b) Termination. Unless sooner terminated in
accordance with Section 9, the Plan shall terminate upon the
close of business on the day next preceding the tenth anniversary
of the date of its adoption by the Board of Directors.
12. COMPLIANCE WITH RULE 16b-3
Transactions under the Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successor
promulgated pursuant to Section 16 of the Securities Exchange Act
of 1934. To the extent any provision of the Plan or action by
the Board of Directors in administering the Plan fails to so
comply, it shall be deemed null and void, to the extent permitted
by law and deemed advisable by the Board of Directors.
<PAGE>
13. GOVERNING LAW
The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of
Delaware.
14. SUCCESSORS AND ASSIGNS
This Plan shall inure to the benefit of and be binding
upon each successor and assign of the Company. All obligations
imposed upon a optionee, and all rights granted to the Company
hereunder, shall be binding upon the optionee's heirs, legal
representatives and successors.
15. ENTIRE AGREEMENT
This Plan and the written agreement with respect to
each option granted under this Plan constitute the entire
agreement with respect to the subject matter hereof and thereof,
provided that in the event of any inconsistency between the Plan
and such written agreement, the terms and conditions of this Plan
shall control.
<PAGE>
Exhibit 10.13
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of
October 1, 1996 by and between SHARED TECHNOLOGIES CELLULAR,
INC., a Delaware corporation (the "Company") and JON F. SORENSON
("Employee").
WITNESSETH
WHEREAS, the Company desires to obtain the services of
Employee in accordance with the terms, conditions and provisions
of the Agreement;
WHEREAS, Employee desires to provide services to the Company
in accordance with the terms, conditions and provisions of the
Agreement; and
WHEREAS, each of the Company and Employee agree that the
terms, conditions and provisions of the Agreement are fair and
reasonable and are necessary to protect the legitimate business
interests of each other.
NOW THEREFORE, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and
Employee hereby accepts such employment and agrees to perform his
duties and responsibilities hereunder, in accordance with the
terms and conditions hereinafter set forth.
2. Employment Term.
The employment term of the Agreement
shall commence as of October 1, 1996 (the "Effective Date") and
shall expire September 30, 1997, unless earlier terminated in
accordance with Section 9 of the Agreement; provided that the
Agreement will renew automatically for additional consecutive
one-year periods, and otherwise upon the same terms and
conditions hereof, unless either party hereto shall have notified
the other party in writing at least 60 days prior to the end of
the initial one-year term or any subsequent one-year term that
the Agreement will be terminated effective as of the end of such
term. The initial term of the Agreement, and any subsequent term
hereof, through the termination of the Agreement in accordance
with the provisions hereof, shall hereinafter be referred to as
the "Employment Term".
3. Duties and Responsibilities.
During the Employment
Term, Employee shall be employed as President of the Company's
Rental Division, and Employee shall perform those duties normally
<PAGE>
associated with that position, subject to such policies,
guidelines and directions consistent therewith as may be
established from time to time by the Chief Executive Officer or
the Board of Directors of the Company. Without limiting the
generality of the foregoing, Employee's duties and
responsibilities hereunder shall include management
responsibility for the operations of the Company's Rental
Division, subject to the direction of the Chief Executive Officer
of the Company, to whom Employee shall report. The Company shall
propose to its Board of Directors that the Employee be appointed
to serve as an officer of the Company in his capacity as
President - Rental Division.
<PAGE>
4. Extent of Services.
During the Employment Term,
Employee will utilize a hands-on management approach and will
devote his full time, attention and energies to the business of
the Company, and will perform and discharge his duties and
responsibilities under Section 3 hereof faithfully, diligently,
to the best of his efforts and abilities and in a manner
consistent with any and all policies, guidelines and directions,
consistent with those duties normally associated with the
Employee's position, as may be established from time to time by
the Chief Executive Officer of the Company. Except as provided
in Section 8 hereof, the foregoing shall not be construed as
preventing Employee from making investments in other businesses
or enterprises not competitive with the Company (as defined in
Section 8(a) hereof), provided that Employee agrees not to become
engaged in any other business activity which may interfere with
his ability to discharge his duties and responsibilities
hereunder. Employee further agrees not to work either on a part
time or independent contracting basis for any other business or
enterprise without the prior written consent of the Company as
may be provided in its sole discretion.
5. Compensation, Benefits and Expenses.
(a) Salary. The Company shall pay to Employee a
salary at the rate of Ninety-five Thousand Dollars ($95,000) per
annum, less deduction and withholding required by applicable law,
payable in arrears in accordance with the Company's regular
payroll schedule. The parties intend to review and reevaluate
such salary rate at year end.
(b) Bonuses. In addition to the salary set forth in
Section 5(a) hereof, during the Employment Term, Employee shall
be eligible to receive the following bonuses in accordance with
the terms hereinafter set forth:
(i) Post-financing Bonus.
The Company is
currently in discussions to secure debt and/or equity financing.
Upon funding of a minimum of $1,000,000 of such financing, the
Company shall pay to Employee a bonus of $2,500;
(ii) Performance Bonus.
For each fiscal year in
which this Agreement is in effect, the Company's Chief Executive
Officer shall establish, in writing, performance objectives for
Employee for the purpose of enabling Employee to earn a year-end
performance-based bonus.
<PAGE>
(iii) Discretionary Bonus. Employee also shall be
entitled to receive a year-end discretionary bonus, subject to
the discretion of the Company's Chief Executive Officer.
(iv) The foregoing notwithstanding, if the
Employment Term should terminate during any fiscal year, in lieu
of the payment of any performance-based bonus for said fiscal
year, the Company shall pay to the Employee such bonus on a pro
rata basis (herein referred to as a "Final Performance Bonus"),
such that the amount of the Final Performance Bonus shall equal
the amount of the performance-based bonus that would otherwise
have been payable multiplied by a fraction, the numerator of
which is the number of days in the applicable fiscal year that
this Agreement was in effect and the denominator of which is 365.
The foregoing notwithstanding, in the event that the Employee
voluntarily leaves the employment of the Company prior to the
expiration of the Employment Term, or is terminated for Cause, as
defined in Section 9 hereof, the Company shall not be required to
pay to Employee, and Employee shall not be entitled to receive,
any Final Performance Bonus. All bonuses payments shall be
subject to withholding and deductions as required by applicable
law.
(c) Automobile. In recognition of Employee's need for
an automobile for business purposes commensurate with Employee's
position, the Company shall pay to Employee during the Employment
Term a car allowance of Four Hundred Dollars ($400) per month,
adjusted as hereinafter set forth, and payable in accordance with
the customary practices of the Company in effect from time to
time. In addition, the Company shall maintain at its expense a
insurance coverage for such automobile, in such amounts as
reasonably determined by the Company. Employee may participate
in any automobile lease program established by the Company.
(d) Expenses. During the Employment Term, the Company
shall reimburse Employee monthly for his travel and other
reasonable business expenses incurred in connection with his
services under this Agreement during the preceding month upon
submission of written receipts substantiating such expenses and
otherwise in accordance with the Company's expense reimbursement
policies.
(e) Vacation and Personal Days. During the Employment
Term, Employee shall be entitled to paid time off for vacation
and personal days in accordance with the Company's vacation
policy.
<PAGE>
(f) Other Employee Benefits.
During the Employment
Term, the Company shall provide to Employee such fringe benefits,
including without limitation paid sick leave, paid holidays,
participation in health, dental, disability and life insurance
plans, and other employee benefit plans which may be regularly
maintained by the Company for its employees, in accordance with
the policies of the Company in effect from time to time, it being
acknowledged that the maintenance of such plans shall be in the
Company's sole discretion. In addition, Employee shall receive
supplemental disability coverage and $500,000 of term life
insurance during the term hereof.
6. Confidential Information.
(a) Employee acknowledges and agrees that all
customer, supplier and distributor lists; trade secrets; plans;
manufacturing techniques; sales, marketing and expansion
strategies; technology and processes; products; services; methods
of production; product development activities; procurement and
sales activities and procedures; promotion and pricing
techniques; and credit, financial and other proprietary data and
information of the Company (collectively, "Confidential
Information") are valuable, special and unique assets of the
Company. Employee acknowledges his access to and knowledge of
the Confidential Information is essential to the performance of
his duties for the Company. In light of the competitive nature
of the industry in which the business of the Company is
conducted, Employee agrees that all knowledge and information
about the Confidential Information known or in the future
obtained by Employee in connection with the performance of the
duties of his employment with the Company will be considered
Confidential Information. In recognition of this, Employee
represents and agrees that except as specifically authorized in
writing by the Chief Executive Officer of the Company or in
connection with the performance of the duties of his employment
with the Company, Employee will not either during or after the
Employment Term (i) disclose any Confidential Information to any
person or entity for any purpose whatsoever, or (ii) make use of
any Confidential Information for his own purposes or for the
benefit of any other person or entity, other than the Company.
(b) Employee acknowledges and agrees that all manuals,
drawings, blueprints, letters, notes, notebooks, reports, books,
procedures, forms, documents, records or papers, or copies
thereof, pertaining to the operations or business of the Company
made or received by Employee or made known to him in any way in
connection with his employment and any other Confidential
Information are and will be the exclusive property of the
Company. Employee agrees not to copy or remove any of the above
from the premises and custody of the Company, or disclose the
<PAGE>
contents thereof to any other person or entity, or make use
thereof for his own purposes or for the benefit of any other
person or entity, except as specifically authorized in writing by
the Chief Executive Officer of the Company or in connection with
the performance of his duties under the Agreement. Employee
acknowledges that all such papers and records will at all times
be subject to the control of the Company, and Employee agrees to
surrender and return the same to the Company upon request of the
Company, and in any event will surrender and return such no later
than the termination of the Employment Term, whether voluntary or
involuntary. The Company may notify anyone employing Employee at
any time of the provision of the Agreement. The obligations of
this Section 6 shall survive the termination of the Agreement.
7. Inventions and Discoveries.
Employee hereby assigns,
transfers and conveys to the Company all of the Employee's right,
title and interest to, and shall promptly disclose to the Chief
Executive Officer of the Company, all ideas, inventions,
discoveries or improvements (whether or not patentable) conceived
or developed solely, or jointly with others by Employee during
the Employment Term and for six (6) months thereafter (a) which
relate directly or indirectly to the business of the Company as
conducted at any time during the Employment Term; (b) which
relate to the actual or anticipated research or development
activities of the Company; (c) which result from any work
performed or managed by Employee for the Company; or (d) for
which equipment, supplies, facilities or Confidential Information
of the Company was used (collectively "Discoveries"). Upon the
request of the Company, Employee shall execute and deliver to the
Company any and all instruments, documents and papers, give
evidence and do any and all other acts which the Company deems
necessary or desirable to document such assignment transfer and
conveyance or to enable the Company to file and prosecute
applications for and to acquire, maintain and enforce any and all
patents, trademark registrations or copyrights under United
States or foreign law with respect to the Discoveries or to
obtain any extension, validation, reissue, continuance or renewal
of any such patent, trademark or copyright. The Company will be
responsible for the preparation of any such instruments,
documents and papers and shall reimburse Employee for all
reasonable expenses incurred by him in compliance with the
provisions of this Section 7; provided, Employee shall not be
entitled to any further compensation or consideration for
performance of his obligations under this Section 7. The
obligations of Employee under this Section 7 shall survive the
termination of the Agreement.
8. Restrictive Covenant.
During the Employment Term, and if Employee leaves the employ of
<PAGE>
the Company or otherwise terminates the Agreement prior to the
termination of the Employment Term, or is terminated for Cause,
as defined in Section 9, or notifies Employer in accordance with
Section 2 of this Agreement of his decision not to renew this
Agreement, for a period of one (1) year after the termination or
expiration thereof, Employee shall not, directly or indirectly,
either as an individual or as an employee, partner, officer,
owner, director, shareholder, advisor or consultant, or in any
other capacity whatsoever, of any person, firm, corporation or
partnership:
(a) conduct or assist others in conducting or be
involved or interested in any manner in any business relating to
the rental of cellular telephones;
(b) recruit, solicit or hire, or assist any other
person or party in recruiting, soliciting or hiring any Employee
(as hereinafter defined), or induce or attempt to induce or
assist any other person or entity in inducing or attempting to
induce any Employee to terminate or alter his relationship with
the Company (collectively "Recruiting Activity"). For the
purposes of this Section 8(b), the term "Employee" shall mean any
person who is, or within the twelve (12) month period preceding
the date of any such Recruiting Activity was, an employee or
consultant of the Company; or
(c) solicit any Customer (as hereinafter defined), or
induce, attempt to induce or assist any other person or entity in
inducing or attempting to induce any Customer to discontinue or
alter its relationship with the Company (collectively
"Solicitation Activity"). For the purposes of this Section 8(c),
the term "Customer" shall mean any individual, firm, partnership,
corporation or other entity which is, or within the twelve (12)
month period immediately preceding the date of such Solicitation
Activity was, a customer, distributor, dealer or independent
salesperson of the Company. It is understood and agreed that the
business(es) of the Company are or will be international in
scope, and that geographical limitations on the covenants set
forth in this Section 8 are therefore not appropriate. It is
expressly understood and agreed that the scope of each of the
covenants contained in this Section 8 are reasonable as to time,
affected persons, scope of activities and geographic area and are
necessary to protect the legitimate business interests of the
Company. It is further agreed that such covenants will be
regarded as divisible and if any such covenant is found by any
court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range
of activities or persons or in too broad a geographic area, it
shall be interpreted to extend over the maximum period of time,
range of activities or persons, or geographic area as to which it
may be enforceable. The provisions of this Section 8 shall
survive the termination of the Agreement.
<PAGE>
9. Termination.
(a) This Agreement shall terminate if Employee is
discharged by the Company for Cause (as hereinafter defined).
For the purposes of this Section 9(a), the term "Cause" shall
mean: (i) the willful and continued failure by Employee
after written notice from his superior to substantially perform
his duties hereunder, (ii) any act of dishonesty by Employee
involving or affecting the Company, (iii) any misappropriation by
Employee of any asset of the Company, (iv) the intentional
engaging by Employee in conduct which is materially injurious to
the business or reputation of the Company, monetarily or
otherwise, (v) gross negligence or recklessness by Empoloyee in
the performance of his duties huereunder, (vi) the conviction or
indictment of Employee of a crime, (vii) any breach by Employee
of his obligations under Sections 6, 7 or 8 hereof, (viii) the
engagement in conduct which involves a significant conflict of
interest between Employee and the Company, unless such conduct
has been disclosed to and approved in writing by the Company's
Chairman or Chief Executive Officer, (ix) abuse of alcohol or
other substances so as to interfere with the performance of
Emoployee's duties hereunder or, (x) the material violation of
any Company policy by Employee.
(b) The Company will give prior written notice to Employee
of such discharge specifying the effective date of the discharge
and the cause of the discharge.
(c) This Agreement shall terminate upon the death or, at
the option of the Company, upon the Disability (as hereinafter
defined) of Employee. For the purposes of this Section 9, the
term "Disability" shall mean that, as a result of Employee's
incapacity due to physical or mental illness or disability,
Employee is unable to perform his duties under this Agreement for
sixty (60) consecutive days or sixty (60) days in the aggregate
in any one hundred twenty (120) day period.
(d) Upon the termination of this Agreement, all rights and
obligations of the parties under the Agreement, except those
rights and obligations set forth in Sections 6, 7 and 8 hereof,
shall terminate, except as otherwise required by law. The
provisions of Sections 6, 7 and 8 hereof shall survive any
termination of the Agreement, and Employee acknowledges that the
Agreement and the compensation and benefits payable hereunder are
fair and adequate consideration, in part, for the covenants of
Employee under Sections 6, 7 and 8 and the survival of such
covenants after the termination of the Agreement.
(e) In the event of termination of this Agreement by the
<PAGE>
Company without Cause, Employee shall receive severance pay in an
amount equal to six (6) months' salary, payable in lump sum
within 15 days of the effective date of such termination.
10. Stock Options.
The Company agrees to cause to be issued to
Employee stock options (the "Options") to purchase 20,000 shares
of the common stock of the Company, $.01 par value. Such Options
shall be issued as of October 1, 1996 and shall have an exercise
price of $2.75 per share. The Options shall vest at the rate of
one-third (1/3) per year of employment. In the event of
termination of this Agreement, such Options shall be exercisable
for a period of thirty (30) days following the date of
termination of this Agreement, after which they shall expire.
Absent such termination, the Options shall have a term of five
(5) years from the issuance date thereof. The exercise price
shall be due and payable in cash to the Company upon the exercise
of the Options, in part or in whole, which shall be exercised if
at all by written notice delivered to the Company, which shall
indicate the number of shares to be purchased.
11. Injunctive Relief. Employee acknowledges that a remedy
at law for any breach or attempted breach of Sections 6, 7 and 8
of this Agreement would be inadequate, and agrees that the
Company will be entitled to specific performance and injunctive
and other equitable relief in case of any breach or attempted
breach and agrees not to use as a defense that any party has an
adequate remedy at law. Sections 6,7 and 8 of this Agreement
shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance, and
appropriate injunctive relief may be applied for and granted in
connection herewith. Such remedy shall not be exclusive and
shall be in addition to any other remedies now or hereafter
existing at law or in equity, by statute or otherwise. No delay
or omission in exercising any right or remedy set forth in this
Agreement shall operate as a waiver thereof or of any right or
remedy and no single or partial exercise thereof shall preclude
any other or further exercise thereof or the exercise of any
other right or remedy.
12. Compliance With Other Agreements.
Employee represents
and warrants that the execution and delivery of this Agreement
and the performance of the obligations hereunder have been duly
authorized by all appropriate action, and will not conflict with,
result either in the breach of any provisions or the termination
of, or constitute a default under, any agreements to which he is
or may be bound. Employee agrees that he is not presently bound
by, nor will he enter into any agreement, either written or oral,
in conflict with this Agreement.
<PAGE>
13. Binding Effect.
This Agreement shall inure to the
benefit of, and shall be binding upon, each of the parties hereto
and his or its respective executors, administrators, heirs,
personal representatives, successors and assigns; provided that
(a) Employee may not assign or in any way transfer any of its
rights hereunder without the prior written consent of the
Company; provided, that in the event of such assignment,
Employee, together with such assignee, shall remain legally bound
and liable, in accordance with the terms of the Agreement, to the
same extent and with the same effect as if such assignment had
not been made, and (b) the Company shall be permitted to assign
or otherwise transfer any or all of its rights hereunder to any
affiliate or to a successor to its business.
14. Severability. If any provision of this Agreement is
declared or found to be illegal, unenforceable or void, in whole
or in part, then both parties will be relieved of all obligations
arising under such provision, but only to the extent it is
illegal, unenforceable or void. The intent and agreement of the
parties to the Agreement is that this Agreement will be deemed
amended by modifying any such illegal, unenforceable or void
provision to the extent necessary to make it legal and
enforceable while preserving its intent, or if such is not
possible, by substituting therefor another provision that is
legal and enforceable and achieves the same objectives.
Notwithstanding the foregoing, if the remainder of this Agreement
will not be affected by such declaration or finding and is
capable of substantial performance, then each provision not so
affected will be enforced to the extent permitted by law.
15. Waiver. Any delay or omission by either party to this
Agreement in exercising any right or power under this Agreement
will not impair such right or power or be construed as a waiver
thereof. A waiver by either party to this Agreement of any of
the covenants to be performed by the other or any breach thereof
will not be construed to be a waiver of any succeeding breach
thereof or of any other covenant contained in this Agreement.
All remedies provided for in this Agreement will be cumulative
and in addition to and not in lieu of any other remedies
available to either party, in equity, or otherwise.
16. Governing Law.
This Agreement will be governed by and
construed in accordance with the laws of the State of Connecticut
without giving effect to any principle of conflict-of-laws that
would require the application of the law of any other
jurisdiction.
17. Notices. All notices required or permitted hereunder
<PAGE>
shall be delivered by hand or sent registered or certified mail,
return receipt requested to the parties as follows:
If to the Company: Shared Technologies Cellular, Inc.
100 Great Meadow Road
Wethersfield, CT 06109
Attn: Legal Department
If to Employee: Jon F. Sorenson
439 Round Hill Road
Fairfield, CT 06430
18. Entire Agreement.
This Agreement constitutes the
entire agreement between the parties to this Agreement with
respect to the subject matter of this Agreement and there are no
understandings or agreements relative to this Agreement which are
not fully expressed in this Agreement. All prior agreements with
respect to the subject matter of this Agreement are expressly
superseded by this Agreement. No amendment to or waiver or
discharge of this Agreement will be valid unless in writing and
signed by each of the parties hereto.
19. Section Headings and Recitals.
The section headings
and recitals in this Agreement are for reference only and shall
not limit or control the meaning or interpretation of this
Agreement.
20. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
21. Gender. Words of number or gender may be read as
singular or plural, or masculine, feminine or neuter, as required
by the context.
IN WITNESS WHEREOF, the parties to this Agreement have executed
and delivered the Agreement on the date first above written.
SHARED TECHNOLOGIES CELLULAR, INC.:
By:______________________________
Anthony D. Autorino
Its: Chairman and Chief Executive Officer
EMPLOYEE:
<PAGE>
_________________________________
Jon F. Sorenson
<PAGE>
Exhibit 10.15
SHARED TECHNOLOGIES CELLULAR, INC.
SAVINGS AND RETIREMENT PLAN
EFFECTIVE AS OF APRIL 1, 1996
WHEREAS, Shared Technologies Cellular, Inc. (hereinafter
sometimes referred to as the "Company") desires to adopt the
Shared Technologies Cellular, Inc. Savings and Retirement Plan
(hereinafter referred to as the "Plan"), effective as of April 1,
1996, which is to be funded through the medium of a Trust Fund;
and
WHEREAS, the Company desires to adopt the Plan in compliance
with the Tax Reform Act of 1986, the Omnibus Reconciliation Acts
of 1986 and 1987, the Revenue Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, the Omnibus Reconciliation Act
of 1989, the Omnibus Budget Reconciliation Act of 1993 and
subsequent legislation and regulations;
NOW, THEREFORE, the Company hereby adopts the Plan,
effective April 1, 1996, with such Plan to be known as the Shared
Technologies Cellular, Inc. Savings and Retirement Plan as
follows:
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
I DEFINITIONS 1
II PARTICIPATION AND ENTRY DATE 17
III CONTRIBUTIONS 19
IV ADMINISTRATION OF FUNDS 37
V RETIREMENT BENEFITS 44
VI DEATH BENEFITS 47
VII VESTING AND SEPARATION FROM SERVICE 49
VIII WITHDRAWALS AND LOANS 51
IX ADMINISTRATION 56
X AMENDMENT, TERMINATION AND MERGERS 59
XI MISCELLANEOUS PROVISIONS 63
XII TOP-HEAVY PROVISIONS 66
<PAGE>
ARTICLE I DEFINITIONS DEFINITIONS DEFINITIONS
DEFINITIONS DEFINITIONS DEFINITIONS DEFINITIONS
DEFINITIONS DEFINITIONS DEFINITIONS DEFINITIONS
DEFINITIONS DEFINITIONS DEFINITIONS DEFINITIONS
DEFINITIONS
1.01 "Account" shall mean with respect to a Participant all
of the various accounts maintained to define such Participant's
proportionate interest in the Trust Fund as follows:
(a) A "Salary Deferral Contribution Account" shall be
maintained for each Participant which includes the Salary
Deferral Contributions made on behalf of the Participant, and the
appreciation or depreciation of the investments allocated to that
Account and the income earned on such investments.
(b) An "After-Tax Contribution Account" shall be
maintained for each Participant which includes the Participant's
After-Tax Contributions, and the appreciation or depreciation of
the investments allocated to that Account and the income earned
on such investments.
(c) A "Matching Employer Contribution Account" shall
be maintained for each Participant which reflects the Matching
Employer Contributions allocated to the Participant and the
appreciation or depreciation of the investments allocated to that
<PAGE>
Account and the income earned on such investments.
(d) A "Discretionary Employer Contribution Account"
shall be maintained for each Participant which reflects the
Discretionary Employer Contributions allocated to the Participant
and the appreciation or depreciation of the investments allocated
to that Account and the income earned on such investments.
(e) A "Rollover Contribution Account" shall be
maintained for each Participant
which reflects any rollover contribution made in accordance with
Section 3.12 and the appreciation or depreciation of the
investments allocated to that Account and the income earned on
such investments.
1.02 "Affiliated Organization" shall mean (i) any
corporation on or after the date it becomes a member of a
controlled group of corporations which includes the Company, as
determined under the provisions of Section 414(b) of the Code,
(ii) any trade or business, whether or not incorporated, on or
after it comes under common control with the Company, as
determined under Section 414(c) of the Code, (iii) any
organization which is an affiliated service organization within
the meaning of Section 414(m) of the Code, and (iv) any other
entity required to be aggregated pursuant to regulations under
Section 414(o) of the Code.
<PAGE>
1.03 "Age" or "age" shall mean the chronological age
attained by the Participant at his most recent birthday or as of
such other date of reference as set forth in this Plan.
1.04 "Board of Directors" shall mean the board of directors
of the Company.
1.05 "Break-in-Service" shall mean a Plan Year during which
an Employee has not completed more than five hundred (500) Hours
of Service.
1.06 "Code" means the Internal Revenue Code of 1986 as the
same presently exists, and as it may hereafter be amended or
clarified by regulations, rulings, notices or other publications
of the Internal Revenue Service having legal effect.
1.07 "Compensation" shall mean, for any applicable period,
the total earnings of a Participant including bonuses, overtime,
commissions and any Salary Deferral Contribution made on behalf
of the Participant under this Plan, and any contributions made by
salary reduction to a plan established in accordance with Section
125 or 129 of the Code. Compensation shall exclude severance
pay, reimbursements for expenses and any other fringe benefits.
Compensation shall not exceed $200,000, or such other maximum
<PAGE>
amount as set forth under Section 401(a)(17) of the Code,
adjusted at the same time and in the same manner as under Section
415(d) of the Code, except that the dollar increase in effect on
January 1 of any calendar year is effective for Plan Years
beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected on January 1, 1990. If
Compensation is determined over a Plan Year that contains fewer
than 12 calendar months, the annual compensation limit is an
amount equal to the annual compensation limit for the calendar
year in which the compensation period begins multiplied by the
ratio obtained by dividing the number of full months in the
period by 12.
In addition to other applicable limitations set forth
in the Plan, and notwithstanding any other provision of the Plan
to the contrary, the annual Compensation of each Employee taken
into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the
cost-of-living in accordance with Section 401(a)(17)(B) of the
Internal Revenue Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding 12
months, over which Compensation is determined (determination
period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination
period, and the denominator of which is 12.
<PAGE>
Any reference in this Plan to the limitation under
Section 401(a)(17) of the Code shall mean OBRA '93 annual
compensation limit set forth in this provision.
If Compensation for any prior determination period is
taken into account in determining an employee's benefits accruing
in the current Plan Year, the Compensation for that prior
determination period is subject to the OBRA '93 annual
compensation limit in effect for that prior determination period.
For this purpose, for determination periods beginning before the
first day of the first Plan Year beginning on or after January 1,
1994, the OBRA '93 annual compensation limit is $150,000.
In determining the Compensation of a Participant for
purposes of this limitation, the rules of Section 414(q)(6) of
the Code shall apply, except in applying such rules, the term
"family" shall include only the spouse of the Participant and any
lineal descendants of the Participant who have not attained age
19 before the close of the Plan Year.
1.08 "Contribution" shall mean any or all of the various
types of contributions made under the Plan by Participants or the
Employer, as described below:
(a) "Salary Deferral Contribution" shall mean that
portion of the Contribution made to the Plan on behalf of a
Participant by his Employer through a salary reduction agreement,
as described under Section 3.01.
(b) "After-Tax Contribution" shall mean that portion
of a Participant's Contribution to the Plan which he elects to
<PAGE>
make independent of a salary reduction agreement, as described
under Section 3.02.
(c) "Matching Employer Contribution" shall mean a
Contribution made by an Employer based on a Participant's After-
Tax Contribution or Salary Deferral Contribution as described
under Section 3.04.
(d) "Discretionary Employer Contribution" shall mean a
Contribution made by an Employer which is unrelated to any
Participant Contributions, as described under Section 3.05.
(e) "Qualified Non-elective Contribution" shall mean a
Contribution made by an Employer (other than those listed above)
in order that the Plan will satisfy the requirements of Section
3.06 for a Plan Year. The allocation may be made to all Active
Participants who are not Highly-Paid Employees or, with respect
to satisfaction of the ADP test, only to those Active
Participants who have made Salary Deferral Contributions for a
Plan Year and who are not Highly-Paid Employees. Such
Contributions shall be treated as Salary Deferral Contributions
for all purposes under the Plan.
1.09 "Contribution Percentage" shall mean the percentage
determined by dividing (i) the sum of the Salary Deferral
Contribution, After-Tax Contribution, Matching Employer
Contribution and any Qualified Non-elective Contribution used to
satisfy the non-discrimination requirements of Section 3.06 or
<PAGE>
any combination of such Contributions, whichever is applicable,
made by or on behalf of a Participant for the applicable period
by (ii) his compensation as defined under Code Section 414(s).
'ADP' shall sometimes be used herein to refer to the average
Contribution Percentage with respect to Salary Deferral
Contributions or amounts treated as Salary Deferral
Contributions. 'ACP' shall sometimes be used herein to refer to
the average Contribution Percentage with respect to Matching
Employer Contributions and After-Tax Contributions, if
applicable.
1.10 "Date of Employment" shall mean the first date on which
an Employee is credited with an Hour of Service for the Employer.
1.11 "Disability" shall mean a physical or mental condition
of such severity and probable prolonged duration as to cause the
Participant to be unable to continue his duties as an Employee.
The existence of any Disability shall be determined by a
physician chosen by the Plan Administrator, based on medical
evidence of a physical or mental impairment that can be expected
to last more than 12 months or result in death, or on other
uniform and non-discriminatory criteria as established by the
Plan Administrator. Notwithstanding the foregoing, eligibility
for Social Security Disability benefits or for long term
disability benefits under an insured plan sponsored by the
<PAGE>
Employer shall be deemed conclusive proof of disability.
1.12 "Effective Date" of this Plan shall mean April 1, 1996.
1.13 "Eligible Employee" shall mean any Employee who has
completed three (3) months of service and has attained age
twenty-one (21), excluding any person whose terms and conditions
of employment are determined by collective bargaining with a
third party and with respect to whom inclusion in this Plan has
not been provided for in the collective bargaining agreement
setting forth those terms and conditions of employment. The term
"Eligible Employee" also shall not include any independent
contractor, leased employee, or a non-resident alien who receives
no United States source income. For purposes of this Section
1.13, an Eligible Employee will be deemed to have completed three
(3) months of service if he is in the employ of the Employer at
any time three (3) months after his Date of Employment.
1.14 "Employee" shall mean any employee of the Employer or
an Affiliated Organization, including a leased employee as
defined under Section 414(n) of the Code.
The term "leased employee" means any person (other than
an employee of the recipient organization) who pursuant to an
agreement between the recipient organization and any other person
("leasing organization") has performed services for the recipient
<PAGE>
organization (including related persons determined in accordance
with Section 414(n)(6) of the Code) on a substantially full-time
basis for at least one (1) year, and such services are of a type
historically performed by employees in the business field of the
recipient organization. Contributions or benefits provided a
leased employee by the leasing organization which are
attributable to services performed for the recipient employer
shall be treated as provided by the recipient employer.
A leased employee shall not be considered an employee
of the recipient organization if: (i) such employee is covered by
a money purchase pension plan providing immediate participation,
full and immediate vesting and a nonintegrated employer
contribution rate of at least ten (10%) percent of compensation
(as defined in Section 415(c)(3) of the Code, but including
amounts contributed by the employer pursuant to a salary
reduction agreement which are excludable from the employee's
gross income under Section 125, Section 402(a)(8), Section 401(h)
or Section 403(b) of the Code). Also, the leased employees must
not constitute more than twenty percent (20%) of the recipient
organization's nonhighly compensated workforce.
1.15 "Employer" shall mean Shared Technologies Cellular,
Inc. (hereinafter sometimes referred to as the "Company"), and
its subsidiaries and affiliates and any successor entities
thereto which adopt this Plan and join in the corresponding
<PAGE>
Trust. The term "Employer" shall also include any other entity
which, with the consent of the Plan Administrator, adopts this
Plan and joins in the corresponding Trust. The term "Employer"
shall not include any subsidiary affiliate of the Company unless
such subsidiary or affiliate is specifically designated as an
Employer in this Plan or subsequently adopts this Plan and joins
in the corresponding Trust.
"Employer Securities" shall mean shares of common stock
of Shared Technologies Cellular, Inc. traded on NASDAQ (Small
Cap) under the symbol STCL. "Employer Securities" shall also
mean shares of common stock of Shared Technology Fairchild Inc.
traded on NASDAQ under the symbol STCH, which shall be liquidated
and invested pursuant to Participant investment elections during
1997, in accordance with Article IV of the Plan.
1.16 "Entry Date" shall mean April 1, 1996, October 1, 1996
and each January 1st, April 1st, July 1st and October 1st after
the Effective Date during which the Plan remains in effect.
1.17 "ERISA" means the Employee Retirement Income Security
Act of 1974 (P.L. 93-406), including all amendments thereto.
1.18 "Fund" or "Trust Fund" shall mean all of the assets of
the Plan held by the Trustees (or any nominees thereof) at any
<PAGE>
time under the Trust Agreement.
1.19 "Highly-Paid Employee" shall mean any Employee who
during the current or preceding Plan Year (`determination year'
and `look back year', respectively):
(a) was at any time a 5% owner of the Employer or an
Affiliated Organization; or
(b) received compensation for such Plan Year in excess
of $75,000 or such higher amount as provided under Section 414(q)
of the Code, as adjusted at the same time and in the same manner
as under Section 415(d) of the Code; or
(c) received compensation for such Plan Year in excess
of $50,000 or such higher amount as provided under Section 414(q)
of the Code, as adjusted at the same time and in the same manner
as under Section 415(d) of the Code, provided such compensation
exceeded that of 80% of all Employees for the applicable Plan
Year; or
(d) was at any time an officer of the Employer or an
Affiliated Organization, and received compensation for such Plan
Year in excess of $45,000, as adjusted at the same time and in
the same manner as under Section 415(d) of the Code (or, if
higher, 50% of the amount in effect under Section 415(b)(1)(A) of
the Code for such Plan Year).
For each Plan Year for which a determination in
accordance with the above paragraph is being made, any individual
<PAGE>
not described in subparagraph (b), (c) or (d) for the preceding
Plan Year (without regard to this paragraph) shall not be treated
as described in subparagraph (b), (c) or (d) for the current Plan
Year unless such individual is among the one-hundred (100)
highest paid Employees for the current Plan Year.
In no event shall the number of officers taken into
account under subparagraph (d) exceed the lesser of (i) fifty
(50), and (ii) the greater of (A) three or (B) 10% of the total
Employees. Furthermore, if no officer of the Employer or an
Affiliated Organization is described in subparagraph (d) for a
Plan Year, then the highest paid officer shall be treated as
described in subparagraph (d) for such Plan Year.
The term "Highly-Paid Employee" shall include any
highly paid former employee who separated from service (or was
deemed to have separated) prior to the determination year,
performs no service for the Employer during the determination
year, and was a Highly-Paid Employee for either the separation
year or any determination year ending on or after the Employee's
55th birthday.
Effective January 1, 1997, this paragraph shall be null
and void for all Plan Years commencing on and after January 1,
1997. If an Employee is, during a determination year or look-
back year, a family member of either a five percent (5%) owner
who is an active or former Employee or a Highly-Paid Employee who
is one of the ten (10) most highly compensated Employees ranked
<PAGE>
on the basis of Compensation paid by the Employer during such
year, then the family member and the five percent (5%) owner or
top-ten Highly-Paid Employee shall be aggregated. In such case,
the family member and five percent (5%) owner or top-ten Highly-
Paid Employee shall be treated as a single Employee receiving
compensation and plan contributions or benefits equal to the sum
of such compensation and contributions or benefits of the family
member and five percent owner or top-ten Highly-Paid Employee.
For purposes of this Section, family member includes the spouse,
lineal ascendants and descendants of the Employee or former
Employee and the spouses of such lineal ascendants and
descendants.
The determination of who is a Highly-Paid Employee,
including the determinations of the number and identity of
Employees in the top-paid group, the top one hundred (100)
Employees, the number of Employees treated as officers and the
compensation that is considered, will be made in accordance with
Section 414(q) of the Code. In determining the identity of
Highly-Paid Employees for a determination year, the Company may
make the calendar year election provided for in Answer 14(b) of
Treasury Reg. Section 1.414(q)-IT.
1.20 "Hour of Service" shall mean the following:
(a) An Hour of Service is each hour for which an
Employee is paid, or entitled to payment, for the performance of
<PAGE>
duties for the Employer or an Affiliated Organization during the
Plan Year.
(b) An Hour of Service is each hour for which an
Employee is paid, or entitled to payment, (either directly or
indirectly), by the Employer or an Affiliated Organization on
account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity
(including
disability), lay-off, jury duty, military duty or leave of
absence. Notwithstanding the preceding sentence:
(i) No more than 501 Hours of Service
shall be credited under this paragraph (b) to
an Employee on account of any single
continuous period during which the Employee
performs no duties (whether or not such
period occurs in a single Plan Year) except
as the following provisions may result in a
credit of more than 501 Hours of Service:
(1) If an Employee
receives full pay during any authorized
leave of absence, and he returns to work
after such absence, he shall be credited
with an Hour of Service for each hour
<PAGE>
for which he was paid.
(2) If an Employee is on
a paid sick leave, he shall receive an
Hour of Service for each hour that he
would have normally worked during such
leave.
(3) If an Employee is
absent in military service, and he
retained re-employment rights under the
law, and he completed requirements under
the law as to re-employment and was
re-employed, he shall be credited with
an Hour of Service for each hour that he
would have normally worked had he not
entered military service solely for
purposes of determining his vested
rights; and
(4) If an Employee
transfers to an employment status which
is ineligible to participate in this
Plan, he will continue to be credited
with Hours of Service as described
above, for purposes of determining his
vested rights. However, he will receive
no Hours of Service for purposes of
<PAGE>
determining his right to receive a
Contribution to his Account after the
date of his change in employment status.
( ii) An hour for which an Employee
is directly or indirectly paid, or entitled
to payment, on account of a period during
which no duties are performed, is not
required to be credited to the Employee if
such payment is made or due under a plan
maintained solely for the purpose of
complying with applicable workers
compensation, unemployment compensation or
disability insurance laws; and
(iii) Hours of Service are not
required to be credited for a payment which
solely reimburses an Employee for medical or
medically related expenses incurred by the
Employee.
(c) An hour worked at overtime or premium pay will
count as only one Hour of Service under the Plan.
(d) An Hour of Service is each hour for which back
pay, irrespective of mitigation of damages, is either awarded to
or agreed to by the Employer. The same Hours of Service shall
not be credited both under paragraph (a) or paragraph (b), as the
case may be, and under this paragraph (d). Crediting of Hours of
<PAGE>
Service for each pay awarded shall be subject to the limitations
set forth in paragraphs (a), (b) and (c).
(e) An Hour of Service shall also be credited for
reasons other than the performance of duties in accordance with
Department of Labor Regulations, Section 2530.200b-2(b).
Further, the computation periods used for purposes of crediting
Hours of Service shall be in accordance with Department of Labor
Regulations, Section 2530.200b-2(c). If an Employer does not
maintain hourly records with respect to any Employee, such
Employee shall be credited with forty-five (45) Hours of Service
for each week in which he is entitled to be credited with an Hour
of Service.
1.21 "Named Fiduciary" shall mean the Employer, the
Trustee(s) and the Plan Administrator. Each named Fiduciary
shall have only those particular powers, duties, responsibilities
and obligations as are specifically given him under the Plan
and/or the Trust Agreement.
1.22 "Normal Retirement Date" shall mean the Participant's
attainment of Age 65.
1.23 "Participant" shall mean any person who is eligible to
receive benefits under the Plan. The term "Participant" shall
include an Active Participant (each Eligible Employee who has
satisfied the participation requirements of Section 2.01 as of an
<PAGE>
applicable Entry Date or who has made a Rollover Contribution),
Terminated Vested Participants (former Employees who are entitled
at some future date to the distribution of benefits from this
Plan), and Inactive Participants (former Participants who are not
Terminated Vested Participants and who continue to be employed in
a non-covered class by an Employer or by an Affiliated
Organization).
1.24 "Plan" shall mean the Shared Technologies Cellular,
Inc. Savings and Retirement Plan as set forth herein, and as the
same may from time to time hereafter be amended.
1.25 "Plan Administrator" or "Administrator" shall mean the
Employer, or the persons or committee named as such pursuant to
the provisions of Article IX hereof.
1.26 "Plan Year" shall mean the nine (9) month period
beginning on April 1, 1996 and ending on December 31, 1996.
Thereafter, "Plan Year" shall mean a twelve (12) month period
beginning on January 1st and ending on each December 31st.
1.27 "Qualified Spouse" shall mean a spouse to whom the
Participant is married at his date of death and to whom the
Participant has been married for at least one year.
<PAGE>
1.28 "Trust Agreement" shall mean the Shared Technologies
Cellular, Inc. Savings and Retirement Plan Trust Agreement as the
same presently exists and as it may from time to time hereafter
be amended.
1.29 "Trustees" shall mean the party or parties so
designated pursuant to the Trust Agreement.
1.30 "Valuation Date" shall mean the last day of each Plan
Year and any other date as of which the Plan Administrator elects
to make a valuation of Plan Accounts.
1.31 "Wage Base" shall mean the amount of compensation with
respect to which old age and survivors insurance benefits would
be provided for a Participant under the Social Security Act, as
in effect for the calendar year in which the Plan Year commences.
1.32 "Year of Service" shall mean a Plan Year in which an
Employee has completed at least one thousand (1,000) Hours of
Service.
Years of Service credited under the Shared
Technologies, Inc. Savings and Retirement Plan shall be credited
as Years of Service under this Plan through March 31, 1996.
All Years of Service shall be counted regardless of
whether or not such years are continuous.
<PAGE>
ARTICLE II PARTICIPATION AND ENTRY DATE PARTICIPATION
AND ENTRY DATE PARTICIPATION AND ENTRY DATE PARTICIPATION AND
ENTRY DATE PARTICIPATION AND ENTRY DATE PARTICIPATION AND
ENTRY DATE PARTICIPATION AND ENTRY DATE PARTICIPATION AND
ENTRY DATE PARTICIPATION AND ENTRY DATE PARTICIPATION AND
ENTRY DATE PARTICIPATION AND ENTRY DATE PARTICIPATION AND
ENTRY DATE PARTICIPATION AND ENTRY DATE PARTICIPATION AND
ENTRY DATE PARTICIPATION AND ENTRY DATE
PARTICIPATION AND ENTRY DATE
2.01 Initial Eligibility.
Each Employee who is a Participant in the Shared
Technologies, Inc. Savings and Retirement Plan immediately prior
to the Effective Date of this Plan shall be eligible to
participate in this Plan as of such Effective Date. Each other
Employee shall be eligible to become a Participant on the Entry
Date coincident with or next following the date he first becomes
an Eligible Employee.
2.02 Plan Participation.
<PAGE>
Each Employee who is eligible to participate in
accordance with Section 2.01 shall complete such forms and
provide such data as are reasonably required by the Plan
Administrator as a precondition to Plan participation. In order
to receive a Salary Deferral Contribution, a Participant must
enter into a salary reduction agreement to be effective as of an
Entry Date, electing to reduce his salary by an amount equal to
his Salary Deferral Contribution. A Participant's Salary
Deferral Contribution for any Plan Year shall not exceed the
lesser of (i) 15% of his Compensation for the Plan Year or
portion of such Plan Year during which he was an Active
Participant, subject to the limitations set forth in Article III,
and (ii) $9,500, or such higher maximum contribution for a
taxable year as may be permitted under Section 402(g) of the
Code. The Plan Administrator shall determine the minimum and/or
maximum permitted salary reduction for any applicable period.
Any maximum permitted salary reduction may apply to all
Participants or solely to those Participants who are Highly-Paid
Employees. Participants shall make separate elections with
respect to Salary Deferral and After-Tax Contributions, and the
election of either type of contribution shall not, in any way, be
contingent upon any other election made under the Plan. By
becoming a Participant, an Employee shall for all purposes be
deemed conclusively to have assented to the provisions of the
Plan, the corresponding Trust Agreement and to all amendments to
<PAGE>
such instruments.
2.03 Reemployment.
In the event an Employee terminates employment, and is
reemployed, he shall be eligible to be admitted or readmitted as
an Active Participant coincident with or next following the date
he becomes an Eligible Employee.
2.04 Change in Status.
In the event that a person who has been an Employee in
an employment status not eligible for participation in this Plan
subsequently becomes eligible by reason of a change in status, he
shall be eligible to become a Participant on the Entry Date
coincident with or next following the date on which he becomes an
Eligible Employee.
<PAGE>
ARTICLE III CONTRIBUTIONS CONTRIBUTIONS CONTRIBUTIONS
CONTRIBUTIONS CONTRIBUTIONS CONTRIBUTIONS CONTRIBUTIONS
CONTRIBUTIONS CONTRIBUTIONS CONTRIBUTIONS CONTRIBUTIONS
CONTRIBUTIONS CONTRIBUTIONS CONTRIBUTIONS CONTRIBUTIONS
CONTRIBUTIONS
3.01 Salary Deferral Contributions.
The Employer will make a Salary Deferral Contribution
to the Plan for each Active Participant who has entered into a
salary reduction agreement, in accordance with Section 2.02, as
determined by such salary reduction agreement. In addition, for
any Plan Year, an Employer may elect to make a Qualified Non-
elective Contribution (including a qualified matching
Contribution) allocable only to those Participants who are not
Highly-Paid Employees, in order that the Plan will satisfy
requirements of Section 3.06 for such Plan Year. Any
Contribution made in accordance with the preceding sentence shall
be allocated among applicable Participants in proportion to the
ratios of each such Participant's Compensation or, with respect
to satisfaction of the ADP test, only to those Participants who
have made Salary Deferral Contributions (under the same
allocation procedure used for Matching Employer Contributions or
<PAGE>
pro-rata). Matching Employer Contributions used to satisfy the
test described under Section 3.06 must comply with the
Regulations under Code Section 1.401(k)-1(b)(3).
"Excess Elective Deferrals" shall mean any Salary
Deferral Contributions which exceed the dollar limitation under
Code Section 402(g). Such Excess Elective Deferrals shall be
treated as annual additions under the Plan unless they are
distributed in accordance with this Article.
A Participant may assign to this Plan any Excess
Elective Deferrals made during a taxable year of the Participant
by providing fifteen (15) days written notification to the
Administrator of the amount of the Excess Elective Deferrals to
be assigned to this Plan. Such notice shall be provided no later
than the first March 1st following the close of the individual's
tax year. Excess Elective Deferrals with respect to the
combination of Excess Elective Deferrals and deferrals under
another plan of deferred compensation of an Employer or an
Affiliated Organization may automatically be returned to the
Participant.
Notwithstanding any other provision of the Plan, Excess
Elective Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15th to any
Participant to whose Account Excess Elective Deferrals were
assigned for the preceding year and who claims Excess Elective
Deferrals for such taxable year.
<PAGE>
Excess Elective Deferrals shall be adjusted for any
income or loss. The income or loss allocable to Excess Elective
Deferrals is the income or loss allocable to the Participant's
Account for the taxable year multiplied by a fraction, the
numerator of which is such Participant's Excess Elective
Deferrals for the year and the denominator of which is the
Participant's Salary Deferral Contribution Account without regard
to any income or loss occurring during such taxable year.
3.02 After-Tax Contributions.
Participants may elect to make After-Tax Contributions
to the Trust for each Plan Year in amounts not less than one
percent (1%) of Compensation provided that the combined total
percentage of Compensation of the Salary Deferral Contributions
and After-Tax Contributions elected by a Participant for a Plan
Year does not exceed 20% of a Participant's Compensation for a
Plan Year or any applicable period.
3.03 Method of Contribution.
Salary Deferral and After-Tax Contributions may be made
by periodic payroll deductions or on such other basis as shall be
determined from time to time by the Plan Administrator. Nothing
contained herein shall preclude the Plan Administrator from not
allowing Salary Deferral or After-Tax Contributions to be made by
<PAGE>
any Participant in accordance with Section 3.06 or from limiting
the number of payroll periods in a Plan Year during which such
Contributions are permitted. A Participant may elect an increase
or decrease in his Salary Deferral Contribution(s) or After-Tax
Contributions, provided that written notice of such change
(including amendment of a salary reduction agreement, if
applicable) is submitted to the Plan Administrator at least
fifteen (15) days in advance of the effective date, which date
shall be the first day of a calendar quarter. A Participant may
cease Contributions as of any payroll period upon fifteen (15)
days written notice.
No contributions may be made by or on behalf of any
Participant during any period that he is receiving long term
disability benefits, worker's compensation benefits or while the
Participant is on a leave of absence for which no Compensation is
being paid from the Employer.
3.04 Matching Employer Contributions.
The Employer may elect, in its sole discretion, to make
Matching Employer Contributions in cash or in shares of Shared
Technologies Cellular, Inc. stock for a Plan Year for
each Active Participant on whose behalf Salary Deferral
Contributions and After-Tax Contributions have been made during
the Plan Year.
<PAGE>
For any Plan Year, the Matching Employer Contributions
shall be allocated to the Account of each Active Participant.
The allocation shall be fifty percent (50%) (or such other
percentage as determined by the Board of Directors for a Plan
Year) of the total amount of After-Tax Contributions and Salary
Deferral Contributions not in excess of ten percent (10%) of each
Participant's Compensation for each Active Participant for such
Plan Year.
3.05 Discretionary Employer Contributions.
For any Plan Year, an Employer may elect, in its sole
discretion, to make a Discretionary Employer Contribution. If a
Discretionary Employer Contribution is made, then it shall be
allocated as of the last day of the Plan Year to the Account of
each Active Participant who is actively employed as of such date.
Any individual who is terminated prior to the last day of a Plan
Year but who is receiving severance pay as of such date, shall
not be deemed to be actively employed as of the last day of a
Plan Year. The Discretionary Employer Contribution amount
allocated to each such Participant shall be an amount chosen by
the Company to be allocated under (a) below. If any
Discretionary Employer Contribution remains, such amount shall be
allocated in accordance with (b) below.
(a) An amount shall be allocated equal to a percentage
of each such Participant's Compensation earned while a
Participant for such Plan Year, plus the same percentage of the
excess of (i) such Participant's Compensation earned while a
Participant for the Plan Year above (ii) the Wage Base for such
<PAGE>
Plan Year. However, the percentage of Compensation used for
allocations above the Wage Base shall not exceed 5.7% or such
other percentage which equals the maximum percentage permitted
under Code Section 401(l).
(b) Any remaining Discretionary Employer Contribution
shall be allocated to each such Participant in proportion to the
ratio that each such Participant's Compensation earned while a
Participant bears to such eligible Compensation of all eligible
Participants for the Plan Year.
3.06 Non-Discrimination Test.
For any Plan Year, the average Contribution Percentage
for Highly-Paid Employees determined based on Salary Deferral
Contributions (ADP) and separately based on the sum of After-Tax
Contributions and any Matching Employer Contributions (ACP) shall
not exceed the greater of:
(a) 1.25 multiplied by the average Contribution
Percentage for all Eligible Employees who are not Highly-Paid
Employees; or
(b) the lesser of
( i) twice the average Contribution
Percentage for all Eligible Employees who are
not Highly-Paid Employees; and
(ii) the average Contribution Percentage
for all Eligible Employees who are not
Highly-Paid Employees, plus two percent (2%).
If the limitation described under subsection (b) above
is applied with respect to Salary Deferral Contributions, it
<PAGE>
shall not be applied with respect to the sum of After-Tax
Contributions and Matching Employer Contributions, and
vice-versa, except as otherwise permitted under the following
Definitions and Special Rules Section describing the multiple use
test.
For purposes of this Section, an Excess Contribution
shall mean the excess of a Highly-Paid Employee's Salary Deferral
Contribution (or amounts treated as Salary Deferral
Contributions) over the maximum amount of such Contributions as
provided under the above test.
For purposes of this Section, Excess Aggregate
Contributions shall mean the excess of the aggregate amount of
After-Tax Contributions and Matching Employer Contributions which
were made on behalf of Highly-Paid Employees for any Plan Year,
over the maximum amount of such Contributions as provided under
the above test.
The Excess Contributions or Excess Aggregate
Contributions, whichever is applicable, shall be allocated by
reducing the actual Contribution Percentage of the Highly-Paid
Employee with the highest actual Contribution Percentage. Such
Contribution Percentage shall be reduced until the Highly-Paid
Employee with the highest actual Contribution Percentage is equal
to that of the Highly-Paid Employee with the next highest actual
Contribution Percentage or until the above test is passed. This
process shall be repeated until the test is passed and such
leveling method shall determine the amount of Excess
Contributions attributable to each Highly-Paid Employee. The
<PAGE>
Excess Aggregate Contribution amount shall be determined after
any Salary Deferral Contributions are recharacterized as After-
Tax Contributions.
Definitions and Special Rules:
"Aggregate Limit" shall mean the sum of (i) 125 percent
of the greater of the ADP of the Non-Highly-Paid Employees for
the Plan Year or the ACP of Non-Highly-Paid Employees under the
Plan subject to Code Section 401(m) for the Plan Year beginning
with or within the Plan Year of the cash or deferred arrangement
(`CODA') and (ii) the lesser of 200% or two plus the lesser of
such ADP or ACP. `Lesser' is substituted for `greater' in (i)
above and `greater' is substituted for `lesser' after `two plus
the' in (ii) if it would result in a larger Aggregate Limit.
A multiple use method may be used in order to satisfy
the non-discrimination test if one or more Highly-Paid Employees
participate in both a CODA and a plan maintained by the Employer
subject to the ACP test. If the sum of the ADP and ACP of those
Highly-Paid Employees subject to either or both tests exceeds the
Aggregate Limit, then the ACP of those Highly-Paid Employees who
also participate in a CODA will be reduced (beginning with such
Highly-Paid Employee whose ACP is the highest) so that the limit
is not exceeded. The amount by which each Highly-Paid Employee's
Contribution Percentage amount is reduced shall be treated as an
Excess Aggregate Contribution. The ADP and ACP of the Highly-
Paid Employees are determined after any corrections required to
meet the ADP and ACP tests. Multiple use does not occur if both
the ADP and ACP of the Highly-Paid Employees does not exceed 1.25
<PAGE>
multiplied by the ADP and ACP of the Non-Highly Paid Employees.
For purposes of determining the Contribution Percentage
test, After-Tax Contributions are considered to have been made in
the Plan Year in which contributed to the trust. Salary Deferral
Contributions, Matching Employer Contributions and Qualified Non-
elective Contributions will be considered made for a Plan Year
only if made no later than the end of the twelve-month period
beginning on the day after the close of the Plan Year.
The Employer shall maintain records sufficient to
demonstrate satisfaction of the above tests and the amount of
Qualified Non-elective Contributions, including qualified
matching Contributions, if applicable, used in the test.
The determination and treatment of the Contribution
Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
A Participant may treat his Excess Contributions under
Section 3.01 as an amount distributed to the Participant and then
contributed by such Participant to the Plan. Such
recharacterized amounts will remain nonforfeitable and subject to
the same distribution requirements as Salary Deferral
Contributions. Amounts may not be recharacterized by a Highly-
Paid Employee to the extent that such amount, in combination with
other After-Tax Contributions made by that Employee, would exceed
any stated limit under the Plan on After-Tax Contributions.
Recharacterization must occur no later than two and
one-half months after the last day of the Plan Year in which such
<PAGE>
Excess Contributions arose and is deemed to occur no earlier than
the date the last Highly-Paid Employee is informed in writing of
the amount recharacterized and the consequences thereof.
Recharacterized amounts will be taxable to the Participant for
the Participant's tax year in which the Participant would have
received them in cash.
Prior to January 1, 1997, if a Highly-Paid Employee is
subject to the family aggregation rules of the Code, the combined
actual Contribution Percentage (based on Salary Deferral
Contributions and separately based on After-Tax Contributions and
Matching Employer Contributions) for the family group shall be
treated as one Highly-Paid Employee. The combined actual
Contribution Percentage shall be determined as the combined
actual Contribution Percentage of all eligible family members.
The Excess Contributions or Excess Aggregate Contributions for
the family members shall be allocated in proportion to the ratio
of such Contributions for each family member.
Any distribution or forfeiture of Excess Contributions
or Excess Aggregate Contributions for any Plan Year shall be made
based on the respective portions of such amounts attributable to
each Highly-Paid Employee.
Excess Contributions or Excess Aggregate Contributions
shall be adjusted for any income or loss. The income or loss
allocable to such Contributions is the income or loss allocable
to the Participant's Account for the Plan Year multiplied by a
fraction, the numerator of which is such Participant's Excess
Contributions or Excess Aggregate Contributions for the year and
<PAGE>
the denominator is the Participant's Account attributable to
satisfaction of ADP and ACP test (as applicable) without regard
to any income or loss occurring during such Plan Year.
Notwithstanding the preceding paragraph, any other
reasonable method for computing the income allocable to Excess
Contributions or Excess Aggregate Contributions may be used,
provided that the method is non-discriminatory, is used
consistently for all Participants and for all corrective
distributions under the Plan for the Plan Year, and is used by
the Plan for allocating income to Participants' Accounts.
Excess Contributions and Excess Aggregate Contributions
shall be forfeited, or if not forfeitable, distributed from the
Participant's various Accounts in proportion to the ratio of such
Participant's applicable Accounts. Excess Contributions shall be
distributed from the Participant's Qualified Non-elective
Contribution Account only to the extent that such Excess
Contributions exceed the balance in the Participant's Salary
Deferral Account and Matching Contribution Account.
Forfeitures of Excess Aggregate Contributions shall be
applied to reduce Employer Contributions in accordance with
Section 3.07.
Excess Contributions or Excess Aggregate Contributions,
plus any income and minus any loss allocable thereto, shall be
forfeited, or if not forfeitable, distributed no later than the
last day of each Plan Year to Participants to whose Accounts such
Contributions were allocated for the preceding Plan Year. If
such excess amounts are distributed more than 2 1/2 months after
<PAGE>
the last day of the Plan Year in which such excess amounts arose,
a ten percent (10%) excise tax will be imposed on the Employer
maintaining the Plan with respect to such amounts to the extent
required by law.
In the event that this Plan satisfies the requirements
of Sections 401(k), 401(m), 401(a)(4), or 410(b) of the Code only
if aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such Sections of the Code
only if aggregated with this Plan, then this Section 3.06 shall
be applied by determining the Contribution Percentage of
Employees as if all such plans were a single plan. For Plan
Years beginning after December 31, 1989, plans may be aggregated
in order to satisfy Section 401(k) or 401(m) of the Code only if
they have the same Plan Year.
The ADP for any Participant who is a Highly-Paid
Employee for the Plan Year and who is eligible to have Salary
Deferral Contributions (or amounts treated as Salary Deferral
Contributions for purposes of the ADP test) allocated to his or
her accounts under two or more arrangements described in Section
401(k) of the Code that are maintained by the Employer, shall be
determined as if such Contributions were made under a single
arrangement. If a Highly-Paid Employee participates in two or
more cash or deferred arrangements that have different Plan
Years, all cash or deferred arrangements ending with or within
the same calendar year shall be treated as a single arrangement.
In the event that any provisions of this Section 3.06
are no longer required or applicable for qualification of the
<PAGE>
Plan under the Code, then any applicable provisions of this
Section 3.06 shall thereupon be void.
3.07 Forfeitures.
As of the end of each Plan Year, any forfeitures
occurring during such Plan Year resulting from an Employee's
termination of employment and election to receive a distribution
prior to being one hundred percent (100%) vested in accordance
with Section 7.01 shall first be applied to restore the
previously forfeited accounts, if applicable, of former
Terminated Vested Participants who have been reemployed. If a
Participant elects to defer his distribution the resulting
forfeiture (subject to Section 7.03) shall occur after a one year
Break-in-Service.
Any remaining portion of the total forfeiture not
applied in accordance with the preceding paragraph shall be used
to reduce a Matching Employer Contribution or Discretionary
Employer Contributions.
Should a Participant who is 0% vested in his Matching
Employer Contribution and Discretionary Employer Contribution
Accounts under Section 7.01 terminate employment, he shall cease
to be a Participant (unless reemployed) and the resulting
forfeiture of his Matching and Discretionary Employer
Contribution Accounts shall be deemed a full distribution of such
Accounts.
If a terminated Participant who was 0% vested in his
<PAGE>
Matching Employer Contribution and Discretionary Employer
Contribution Accounts and was deemed to have received a
distribution is subsequently reemployed by the Employer prior to
the occurrence of five consecutive one year Breaks-in-Service
after the date of his termination of employment, any amount
forfeited shall be reinstated to his Account.
3.08 Maximum Employer Contributions.
Notwithstanding the above, the total amount of Salary
Deferral Contributions, Matching Employer Contributions and
Discretionary Employer Contributions for any Plan Year shall not
exceed an amount equal to fifteen percent (15%) of the total
compensation of all Participants for such Plan Year. Prior to
January 1, 1998, such compensation shall be reduced
by any Salary Deferral Contributions made by the Participant and
also reduced by any contributions made by salary reduction to a
plan established in accordance with Sections 125 or 129 of the
Code.
3.09 Time of Payment.
Matching Employer Contributions and Discretionary
Employer Contributions may be made at any time on or before the
date required for deduction of such Contributions on the
Employer's Federal income tax return.
<PAGE>
3.10 Annual Additions Limitation.
Defined contribution dollar limitation: $30,000 or if
greater, one-fourth of the defined benefit dollar limitation set
forth in Section 415(b)(1) of the Code as in effect for the
limitation year.
Notwithstanding the above provisions of this Article,
in no event shall the annual additions to a Participant's Account
exceed the maximum amount permitted under Section 415 of the
Code, and all provisions of such Section are hereby incorporated
in the Plan by reference. The term "limitation year", as defined
under the Code, shall mean the Plan Year.
The term Defined Contribution Fraction shall mean a
fraction, the numerator of which is the sum of the annual
additions to the Participant's Account under all the defined
contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior limitation years
(including the annual additions attributable to the Participant's
nondeductible employee contributions to all defined benefit plans
maintained by the Employer, whether or not terminated, and the
annual additions attributable to all welfare benefits funds, as
defined in Section 419(e) of the Code, and individual medical
accounts, as defined in Section 415(1)(2) of the Code, maintained
by the Employer), and the denominator of which is the sum of the
maximum aggregate amounts for the current and all prior
limitation years of service with the Employer (regardless of
<PAGE>
whether a defined contribution plan was maintained by the
Employer). The maximum aggregate amount in any limitation year
is the lesser of 125 percent of the dollar limitation determined
under Sections 415(b) and (d) of the Code in effect under Section
415(c)(1)(A) of the Code or 35 percent of the Participant's
compensation for such year.
If the Employee was a participant as of the end of the
first day of the first limitation year beginning after December
31, 1986, in one or more defined contribution plans maintained by
the Employer which were in existence on May 5, 1986, the
numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise exceed
1.0 under the terms of this Plan. Under the adjustment, an
amount equal to the product of (1) the excess of the sum of the
fractions over 1.0 times (2) the denominator of this fraction,
will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as
they would be computed as of the end of the last limitation year
beginning before January 1, 1987, and disregarding any changes in
the terms and conditions of the plan made after May 5, 1986, but
using the Code Section 415 limitation applicable to the first
limitation year beginning on or after January 1, 1987.
The term "Defined Benefit Fraction" shall mean a
fraction, the numerator of which is the sum of the Participant's
projected annual benefits under all the defined benefit plans
(whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125 percent of the dollar
<PAGE>
limitation determined for the limitation year under Sections
415(b) and (d) of the Code or 140 percent of the highest average
compensation, including any adjustments under Section 415(b) of
the Code.
Notwithstanding the above, if the Participant was a
participant as of the first day of the first limitation year
beginning after December 31, 1986, in one or more defined benefit
plans maintained by the Employer which were in existence on May
5, 1986, the denominator of this fraction will not be less than
125 percent of the sum of the annual benefits under such plans
which the participant had accrued as of the close of the last
limitation year beginning before January 1, 1987, disregarding
any changes in the terms and conditions of the plan after May 5,
1986. The preceding sentence applies only if the defined benefit
plans individually and in the aggregate satisfied the
requirements of section 415 for all limitation years beginning
before January 1, 1987.
As soon as administratively feasible after the end of
the limitation year, the maximum permissible amount for the
limitation year will be determined on the basis of the
Participant's actual compensation for the limitation year.
If due to the maximum permitted above or as a result of
the allocation of forfeitures there is an excess amount, the
excess will be disposed of as follows:
(1) Any After-Tax Contributions, to the extent they
would reduce the excess amount, will be returned to the
Participant;
<PAGE>
(2a) If an excess amount still exists, and the
Participant is covered
by the Plan at the end of the limitation
year, the excess amount in the Participant's Account will be used
to reduce Employer Contributions (including any allocation of
forfeitures) for such Participant in the next limitation year,
and each succeeding limitation year if necessary; or
(2b) If an excess amount still exists, and the
Participant is not covered by the Plan at the end of a limitation
year, the excess amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future
Employer Contributions for all remaining Participants in the next
limitation year, and each succeeding limitation year if
necessary.
If a suspense account is in existence at any time
during a limitation year pursuant to this Section, such account
will not receive an allocation of the trust's investment gains
and losses. If a suspense account is in existence at any time
during a particular limitation year, all amounts in the suspense
account must be allocated and reallocated to Participant's
Accounts before any Employer or any employee contributions may be
made to the Plan for that limitation year. Excess amounts may
not be distributed to Participants or former Participants, except
as provided below.
Notwithstanding the method for disposing of excess
amounts as indicated above, in the case where a reasonable error
is made so that the limitations of Section 415 are violated, the
<PAGE>
Plan may distribute Salary Deferral Contributions (within the
meaning of Section 402(g)(3) of the Code) to the extent that the
distribution would reduce the excess amounts in the Participant's
Account. These amounts are disregarded for purposes of the ADP
and ACP tests.
3.11 Return of Contribution.
Except as provided in Section 3.10 and paragraphs (a),
(b), (c), (d), (e) and (f) of this Section, and notwithstanding
any other provision of this Plan or of the Trust Agreement, the
Employer irrevocably divests itself of any interest or reversion
whatsoever in any sums contributed by it to the Trust Fund, and
it shall be impossible for any portion of the Trust Fund to be
used for, or diverted to, any purpose other than for the
exclusive benefit of Participants or their Beneficiaries.
(a) If a contribution by the Employer is conditioned
upon initial qualification of the Plan or any amendment thereto
under Section 401 of the Code and the Plan or amendment does not
so qualify, the contribution shall be returned to the Employer
within one year of the date of denial of such qualification or of
the failure to qualify.
(b) If a contribution made by the Employer is based
upon a good faith mistake of fact, the contribution shall be
returned to the Employer within one year after the payment of the
contribution.
(c) If a contribution which is intended to be
<PAGE>
deductible for Federal income tax purposes is determined to not
be deductible and part or all of the deduction is disallowed, the
contribution, to the extent disallowed, shall be returned to the
Employer within one year after the disallowance of the deduction.
(d) Earnings attributable to any mistaken or non-
deductible contribution may not be returned to the Employer, but
losses attributable thereto must reduce the amount to be so
returned.
(e) If the withdrawal of the amount attributable to
the mistaken or nondeductible contribution would cause the
balance of the individual Account of any Participant to be
reduced to less than the balance which would have been in the
Account had the mistaken or nondeductible amount not been
contributed, then the amount to be returned to the Employer must
be limited so as to avoid such reduction. In the case of a
reversion due to initial disqualification of the Plan, the entire
assets of the Plan attributable to Employer contributions may be
returned to the Employer.
(f) A contribution may be returned to the Employer or
an Employee, whichever is applicable, in order to satisfy the
requirements of Section 3.06.
3.12 Rollover Contributions.
(a) Direct Inter
-Plan Transfers.
Any Employee
(including Employees who are not yet Eligible Employees) may, no
less than 15 days following written notification to the Plan
<PAGE>
Administrator of such action, direct the appropriate funding
agency of any qualified retirement plan of the Employer, a former
employer, or of an Individual Retirement Account (IRA) which was
established solely as a repository for a distribution from a
qualified plan of a former employer (provided the Employee
certifies that he made no contributions to such IRA) to
distribute directly to the Trustee such Participant's entire
interest in the distributing plan or IRA, exclusive of any after-
tax contributions made by the Participant as an employee or
participant thereunder, provided that the transferor plan or IRA
is not subject to the requirements of Section 401(a)(11) of the
Code. Any amount presented by a Participant to the Trustees
within sixty (60) days of the receipt shall be treated, upon
receipt by the Trustee, as having been received directly from the
appropriate officer or fiduciary of the distributing plan or IRA.
(b) Cash Transfers.
Only cash may be transferred in
accordance with paragraph (a) of this Section. Property other
than cash cannot be transferred.
(c) Investment of Rollover Contribution Accounts.
Rollover Contribution Accounts shall be invested as provided
under Section 4.01 of the Plan.
(d) Direct Rollovers.
This paragraph applies to
distributions made on or after January 1, 1993. Notwithstanding
any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this paragraph, a
<PAGE>
distributee may elect, at the time and in the manner prescribed
by the Plan Administrator, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover. Such
distribution may commence less than 30 days after the notice
required under Section 1.411(a)-1(k) of the Income Tax
Regulations is given, provided that (i) the Plan Administrator
clearly informs the Participant that the Participant has a right
to a period of at least 30 days after receiving the notice to
consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and (ii)
the Participant, after receiving the notice, affirmatively elects
a distribution.
For purposes of this Section, the following definitions
shall apply:
Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible
rollover distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined
<PAGE>
without regard to the exclusion for net unrealized appreciation
with respect to employer securities).
Eligible retirement plan: An eligible retirement plan
is an individual retirement account described in Section 408(a)
of the Code, an individual retirement annuity described in
Section 408(b) of the code, an annuity plan described in Section
403(a) of the Code, or a qualified trust described in Section
401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
Distributee: A distributee includes an Employee or
former employee. In addition, the Employee's or former
employee's surviving spouse and the Employee's or former
employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Section
414(p) of the Code, are distributees with regard to the interest
of the spouse or former spouse.
Direct rollover: A direct rollover is a payment by the
plan to the eligible retirement plan specified by the
distributee.
<PAGE>
ARTICLE IV ADMINISTRATION OF FUNDS ADMINISTRATION OF
FUNDS ADMINISTRATION OF FUNDS ADMINISTRATION OF FUNDS
ADMINISTRATION OF FUNDS ADMINISTRATION OF FUNDS
ADMINISTRATION OF FUNDS ADMINISTRATION OF FUNDS
ADMINISTRATION OF FUNDS ADMINISTRATION OF FUNDS
ADMINISTRATION OF FUNDS ADMINISTRATION OF FUNDS
ADMINISTRATION OF FUNDS ADMINISTRATION OF FUNDS
ADMINISTRATION OF FUNDS
ADMINISTRATION OF FUNDS
4.01 Investment of Funds.
Participant Accounts will be invested as determined by
the Plan Trustee, unless the Plan Administrator elects to permit
Plan Participants to direct the investment of all or a portion of
their Accounts and directs the Trustees accordingly, in which
event such Participant Accounts will be invested as described
below and in Section 4.02 and 4.03. Should individual investment
elections be permitted under the Plan, then the available
investment alternatives may include any or all of the
alternatives described below:
(a) Common or capital stocks (including
shares of qualifying employer securities within
<PAGE>
the meaning of Section 407(d)(5)), bonds,
convertible debentures or preferred stocks, money
market investments and other short term corporate
and government investments and fixed debt
obligations of corporations and of the Federal,
state and local government, or any pooled or
mutual fund invested in such instruments.
(b) One or more guaranteed interest funds
which shall be invested under a contract (or
contracts) with a bank, or an insurance company
licensed in the state in which an office of the
Employer is domiciled and whereby terms of such
contract guarantee both the repayment of
principal and the payment of interest at a pre-
determined minimum rate for a fixed period of
time. Any such contract is subject to approval
of the Plan Administrator and may be renewed or
discontinued in its discretion. Should such
contract be discontinued and should the Plan
Administrator not enter into or instruct the
Trustee to enter into a successor contract
providing similar guarantees as to principal and
interest, then any Participant whose Account was
invested under the contract shall be given the
opportunity to make a new investment election.
(c) Any other managed fund which the Plan
Administrator deems appropriate for investment of
<PAGE>
plan assets.
(d) A fund invested in shares of common
stock of the Company. Any dividends received on
such shares shall be reinvested in this fund.
Contributions designated for the fund, or
dividends paid on shares held in the fund, shall
be temporarily invested in a short-term
investment fund while the Trustee awaits the
opportunity to purchase additional shares. The
shares of common stock of the Company from time
to time required to be acquired for the purposes
of this Plan shall be acquired by the Trustees by
purchase in the open market at prevailing prices,
or, if directed by the Company, by contribution
in kind or by purchase privately from the Company
or any other person at a price per share equal to
the closing market price per share at which the
shares of common stock of the Company were sold
on the last business day preceding the day of the
purchase; it being understood that shares
purchased from the Company may be either treasury
shares or authorized but unissued shares, if the
Company shall make such shares available for that
purpose.
The Plan Administrator may, in its discretion,
discontinue the use of any investment alternatives maintained
<PAGE>
under the Plan, without obligation to substitute new
alternatives, provided that Participants with Accounts invested
in a discontinued investment alternative are given an opportunity
to make an election to transfer the affected portion of their
Accounts to another investment alternative permitted under the
Plan.
The Plan Administrator may, in its discretion, offer a
mechanism with respect to transfers out of a fund invested in
Employer Securities, provided that such rights are made available
and applicable in a non-discriminatory manner to all Participants
in similar circumstances.
4.02 Investment Elections.
If investment elections are permitted, then each
Participant will designate in which investment alternative or
combination of alternatives he desires his Account and
Contributions to be invested; provided, however, that the portion
invested in any alternative which he elects shall be 1% or any
multiple thereof, or such other percentage as designated by the
Plan Administrator, subject to the maximum of 100%.
4.03 Change of Elections.
Changes in investment elections shall (subject to
Section 4.04) be permitted effective as of the first day of any
quarter in each calendar year or such other period as specified
by the Plan Administrator, in the manner described below:
<PAGE>
(a) Any Participant may, by written request filed with
the Plan Administrator by a specified number of days prior to the
effective date of the change, or under any other method as
prescribed by the Plan Administrator, alter his election with
respect to the investment of his future contributions.
(b) Any Participant may, by written request filed with
the Plan Administrator by a specified number of days prior to the
effective date of the change, or under any other method as
prescribed by the Plan Administrator, alter his election with
respect to the investment alternatives in which his prior
contributions have been invested and may direct the Trustee to
transfer all or any portion of the balance in his Account to any
investment alternative or combination of alternatives.
4.04 Restrictions on Changes.
The Plan Administrator may, in its sole discretion,
establish restrictions, limitations or prohibitions with respect
to changes in investment elections, or transfers, permitted under
the Plan. Any such restrictions, limitations or prohibitions
which may apply to elections related to, or transfers among, any
or all investment funds maintained under the Plan, shall be
communicated in advance of their applicability to Plan
Participants, and shall apply in a non-discriminatory manner to
all Participants in similar circumstances.
4.05 Allocation of Contributions.
<PAGE>
As of each Valuation Date, the Plan Administrator shall
allocate the Salary Deferral Contributions, Matching Employer
Contributions, Discretionary Employer Contributions and After-Tax
Contributions to the Account of each Participant.
4.06 Valuation of Assets.
As of each Valuation Date, the assets of the Trust
shall be valued at fair market value and any gains or losses
shall be allocated to the same investment alternatives in which
they arose.
4.07 Voting of Shares.
Before each annual or special meeting of shareholders
of the Company, the Company shall cause the Trustee to send to
each Participant whose Account is invested in common stock of the
Company, a copy of the proxy solicitation material therefor,
together with a form providing confidential instructions to the
Trustee on how to vote the shares of Company stock held within
the Participant's Account. Upon receipt of such instructions in
conformance with said proxy solicitation material, the Trustee
shall vote the shares of Company stock as instructed.
Instructions received from individual Participants by the Trustee
shall be held in strictest confidence and shall not be divulged
or released to any person, including officers or Employees of an
<PAGE>
Employer. The Trustees shall vote the shares of the Company
stock for which no instructions have been received in the same
proportion as the shares for which instructions have been
received.
4.08 Tender Offer Procedure.
In the event an offer is received by the Trustee
(including, but not limited to, a tender offer or exchange offer)
to purchase any shares of Company stock held by the Trustee in
the Trust, the Company shall cause the Trustee to send to each
Participant whose Account is invested in Company stock such
information as will be distributed to shareholders of the Company
in connection with such offer, and to notify each Participant in
writing of the number of shares of Company stock which are then
credited to such Participant's Account. The Trustee shall
provide to each Participant a form requesting confidential
directions as to the manner in which the Trustee is to respond to
the offer with respect to shares of Company stock allocated to
such Participant's Account. Upon timely receipt of such
directions, the Trustee shall respond as directed with respect to
the tender or exchange of such shares. Instructions received
from individual Participants by the Trustee shall be held in the
strictest confidence and shall not be divulged or released to any
person, including officers or Employees of an Employer. The
Trustee shall not tender or exchange shares of Company stock
allocated to a Participant's Account for which the Trustee has
<PAGE>
not received directions from the Participant.
A Participant who has directed the Trustee to tender or
exchange shares of Company stock allocated to such Participant's
Account may, at any time prior to the offer withdrawal date,
direct the Trustee to withdraw such shares from the offer prior
to the withdrawal deadline, in which case the Trustee shall carry
out such directive.
In the event that shares of Company stock held in a
Participant's Account are tendered or exchanged pursuant to this
Section 4.08, the proceeds received upon the acceptance of such
tender or exchange shall be credited to such Participant's
Account, and shall be invested in the manner determined by the
Company or as otherwise provided in the Plan.
4.09 ERISA Section 404(c) Plan.
The Plan is intended to constitute a plan described in
Section 404(c) of ERISA and shall be administered in accordance
with such intent with respect to all Contributions other than
Matching Employer Contributions if such Contributions are
invested in Employer Securities by the Trustee. The Plan shall
be administered in compliance with Department of Labor
Regulations Section 2550.440c-1.
4.10 Confidentiality.
Information relating to the purchase, holding, and sale
of Company stock in a Participant's Account and the exercise of
<PAGE>
voting, tender, and similar rights with respect to such stock by
Participants and their beneficiaries shall be maintained in
accordance with such procedures as the Administrator shall
establish designed to safeguard the confidentiality of such
information, except to the extent necessary to comply with
Federal laws or state laws not preempted by ERISA.
4.11 Fiduciary Designation.
The Administrator is designated as the Plan fiduciary
responsible for ensuring that the procedures implemented pursuant
to Section 4.10 are sufficient to safeguard the confidentiality
of information described in that Section, that such procedures
are being followed, and that an independent fiduciary is
appointed to carry out activities which the Administrator
determines involve a potential for undue influence by any
Employer upon Participants and beneficiaries with regard to the
direct or indirect exercise of shareholder rights with respect to
Company stock.
<PAGE>
ARTICLE V RETIREMENT BENEFITS RETIREMENT BENEFITS RETIREMENT
BENEFITS RETIREMENT BENEFITS RETIREMENT BENEFITS RETIREMENT
BENEFITS RETIREMENT BENEFITS RETIREMENT BENEFITS RETIREMENT
BENEFITS RETIREMENT BENEFITS RETIREMENT BENEFITS RETIREMENT
BENEFITS RETIREMENT BENEFITS RETIREMENT BENEFITS RETIREMENT
BENEFITS
RETIREMENT BENEFITS
5.01 Normal Retirement Benefit and Early Retirement Benefit.
A Normal Retirement Benefit shall be payable with
respect to any Participant retiring at his Normal Retirement
Date, and shall be equal to the Participant's Account as of the
Valuation Date coincident with or next following the
Participant's Normal Retirement Date. Payment shall commence no
later than sixty (60) days following the last day of the Plan
Year in which the Participant's Normal Retirement Date occurs.
5.02 Deferred Retirement Benefit.
A Deferred Retirement Benefit shall be payable with
respect to any Participant retiring after his Normal Retirement
Date and shall be equal to the Participant's Account as of the
Valuation Date coincident with or immediately following the
<PAGE>
Participant's actual retirement. Any Contribution to such
Participant's Account after he has attained age 70 1/2 shall be
taken into consideration in determining the minimum distribution
requirements of Section 5.04.
5.03 Disability Retirement Benefit.
A Disability Retirement Benefit shall be payable with
respect to any Participant who has suffered a Disability and who
retires from service of the Employer by reason of such
Disability, and shall be equal to the Participant's Account as of
the Valuation Date coincident with or next following the date of
the Participant's termination due to Disability. Such a
Participant may also elect to be paid in accordance with the
provisions of Section 7.02.
5.04 Payment of Benefits.
Any benefit under this Article shall be made in a lump
sum payment no later than sixty days following the close of the
Plan Year in which the Participant's retirement occurs.
If, after a Participant terminates employment, the
total value of his vested Account is $3,500 or less, the
Administrator shall direct the Trustees to cash-out the
Participant's benefit in a single lump sum after any Valuation
Date coincident with or following the date of his or her
termination of employment, without any requirement for the
consent of a Participant or a Qualified Spouse.
<PAGE>
For Active Participants, benefit payments as mandated
by Code Section 401(a)(9) shall not commence later than the April
1st following the calendar year in which the Participant attains
age 70 1/2 or such later date as permitted under the Code, unless
the Participant was over age 70 1/2 before January 1, 1988 and
was not a 5% owner of the Employer during the Plan Year ending
within the calendar year in which the Participant attained age 66
1/2, or any subsequent year, in which event benefit payments may
commence after the April 1st following the calendar year in which
the Participant reaches age 70 1/2, but as soon after the
Participant terminates employment as is practical.
All distributions required under this Section shall be
determined and made in accordance with the proposed or, if
applicable, final regulations under Code Section 401(a)(9),
including the minimum distribution incidental benefit requirement
of Section 1.401(a)(9)-2 of the proposed or final regulations.
Pension benefits shall be payable over a period equal
to (i) the life of the Participant, (ii) the lives of the
Participant and his spouse or his other named Beneficiary, if
any, (iii) a fixed period not extending beyond the life
expectancy of the Participant, or (iv) a fixed period not
extending beyond the joint life expectancy of the Participant and
his spouse or other named Beneficiary, if any.
Life expectancy may be recalculated no more frequently
than annually, but the life expectancy of a non-spouse
Beneficiary or contingent annuitant may not be recalculated.
<PAGE>
5.05 Additional Allocations on Retirement.
Any allocation for a Participant, made as of a
Valuation Date subsequent to the date of his retirement shall be
paid to such Participant, or his beneficiary, as soon after such
Valuation Date as is practical.
5.06 Crediting of Investment Earnings.
Investment earnings shall be credited to a
Participant's Account through the Valuation Date coincident with
or preceding the date that distribution of the Account is made.
No earnings shall be credited after such Valuation Date.
5.07 Company Stock.
A Participant may elect to have the portion, if any, of
his vested Account attributable to a fund invested in common
stock of the Company distributed all in cash or all in kind. In
the case of an in-kind distribution, the value of fractional
shares shall be paid in cash. Shares of Shared Technologies
Cellular, Inc. common stock shall be valued, to the extent
practicable, as of the date of distribution.
<PAGE>
ARTICLE VI DEATH BENEFITS DEATH BENEFITS DEATH BENEFITS
DEATH BENEFITS DEATH BENEFITS DEATH BENEFITS DEATH BENEFITS
DEATH BENEFITS DEATH BENEFITS DEATH BENEFITS DEATH BENEFITS
DEATH BENEFITS DEATH BENEFITS DEATH BENEFITS DEATH BENEFITS
DEATH BENEFITS
6.01 Death Benefits.
In the event of the death of an Active Participant or
of a Terminated Vested Participant who has not yet received
payment of his Account, the Account shall be paid to his
Beneficiary in a single lump sum. Any payment under this Section
shall be paid as soon as practicable at the Beneficiary's
election and no later than five (5) years after the Participant's
death. The distribution shall be equal to the Participant's
vested Account as of the Valuation Date coincident with or
immediately preceding the date of payment.
6.02 Additional Allocations on Death.
Any allocation for a Participant, made as of a
Valuation Date subsequent to the date of his death, shall be paid
to such Participant's Beneficiary as soon after such Valuation
Date as is practical.
<PAGE>
6.03 Beneficiary Designation.
"Beneficiary" shall mean the person or persons named to
receive any death benefits which may become payable under the
Plan, and shall include any contingent beneficiary.
If a Participant has a Qualified Spouse, then such
spouse shall automatically be the Beneficiary eligible to receive
the Account of the Participant pursuant to the Participant's
death, unless the Participant names an alternate Beneficiary, and
the Qualified Spouse consents in writing to the Participant's
naming of an alternate Beneficiary, which consent must
acknowledge the effect of such designation and be witnessed by a
representative of the Plan Administrator, or attested to by a
notary public. Each Participant shall have the right by written
notice to the Plan Administrator, in the form prescribed by the
Plan Administrator, to designate, and from time to time to change
the designation of, one or more Beneficiaries and contingent
beneficiaries to receive any benefit which may become payable
under the Plan pursuant to his death, provided his Qualified
Spouse, if any, consents to the designation of an alternate
Beneficiary as set forth in the preceding sentence. A Qualified
Spouse may also expressly permit a Participant to subsequently
change an alternative beneficiary designation without any further
spousal consent.
If it is established to the satisfaction of a Plan
representative that there is no Qualified Spouse or that such
spouse cannot be located, an alternative beneficiary designation
<PAGE>
will be deemed a proper election without any spousal consent.
Any consent by a Qualified Spouse obtained under this
provision (or establishment that the consent of a Qualified
Spouse may not be obtained) shall be effective only with respect
to such spouse. A consent that permits designations by the
Participant without any requirement of further consent by the
Qualified Spouse must acknowledge that such spouse has the right
to limit consent to a specific beneficiary, and a specific form
of benefit where applicable, and that the spouse voluntarily
elects to relinquish either or both of such rights. A revocation
of a prior beneficiary designation may be made by a Participant
without the consent of the Qualified Spouse at any time before
the commencement of benefits. The number of revocations shall
not be limited.
In the event that a Participant who does not have a
Qualified Spouse as described above fails to designate a
Beneficiary to receive a benefit under the Plan that becomes
payable pursuant to his death, or in the event that the
Participant is pre-deceased by all automatic or designated
primary and contingent beneficiaries, the death benefit shall be
payable to the Participant's estate.
<PAGE>
ARTICLE VII VESTING AND SEPARATION FROM SERVICE
VESTING AND SEPARATION FROM SERVICE VESTING AND
SEPARATION FROM SERVICE VESTING AND SEPARATION FROM SERVICE
VESTING AND SEPARATION FROM SERVICE VESTING AND
SEPARATION FROM SERVICE VESTING AND SEPARATION FROM SERVICE
VESTING AND SEPARATION FROM SERVICE VESTING AND
SEPARATION FROM SERVICE VESTING AND SEPARATION FROM SERVICE
VESTING AND SEPARATION FROM SERVICE VESTING AND
SEPARATION FROM SERVICE VESTING AND SEPARATION FROM SERVICE
VESTING AND SEPARATION FROM SERVICE VESTING AND
SEPARATION FROM SERVICE
VESTING AND SEPARATION FROM SERVICE
7.01 Vesting of Accounts.
A Participant shall at all times be fully (100%) vested
in his Salary Deferral Contribution Account, After-Tax
Contribution Account, Rollover Contribution Account and in any
restoration contributions made pursuant to Section 7.03.
A Participant shall be vested in his Matching Employer
Contribution Account and his Discretionary Employer Contribution
<PAGE>
Account based on his Years of Service in accordance with the
following table:
Years of Service Vesting Percentage
Less than 1 0%
1 but less than 2 33 1/3%
2 but less than 3 66 2/3%
3 or more 100%
Notwithstanding the foregoing, an Active Participant
shall be 100% vested in his Account at his Normal Retirement
Date, the date of his retirement due to Disability or the date of
his death.
7.02 Payment of Benefits.
An Active Participant who is vested in his Account and
terminates employment prior to his Normal Retirement Date shall
be deemed a Terminated Vested Participant. Payment of his vested
Account shall be made in a single lump sum no later than sixty
(60) days following the Valuation Date coincident with or next
following the Participant's Normal Retirement Date. However, any
such Participant may elect that payment of his vested Account be
made as of any Valuation Date coincident with or following the
date of his termination of employment, provided that he makes
such election on or before the applicable Valuation Date. The
failure of a Participant to waive distribution of a benefit prior
to his Normal Retirement date is deemed to be an election to
defer commencement of benefits.
A Terminated Vested Participant's Account shall
<PAGE>
continue to be credited with investment earnings through the last
Valuation Date coincident with or immediately preceding the date
that payment of the Account is made. No earnings shall be
credited after such Valuation Date.
If, after a Participant terminates employment, the
total value of his vested Account is $3,500 or less, the
Administrator may direct the Trustee to cash-out the
Participant's benefit in a single lump sum after the Valuation
Date coincident with or following the date of his or her
termination of employment, without any requirement for such
Participant's consent.
7.03 Reemployment After Distribution and Restoration
Contributions.
Any former Participant who once again qualifies as an
Active Participant and who has received a distribution of any
portion of his vested Account attributable to his prior
participation in this Plan may restore to the Trustee the full
amount of the distribution he previously received which was
derived from Employer Contributions. In order to reinstate his
full Matching or Discretionary Employer Contribution Account, a
reemployed Participant must repay the full amount of the
distribution from such Accounts prior to the earlier of (i) the
fifth anniversary of the date such participant is reemployed or
(ii) five consecutive one year Breaks-in-
Service after the date of distribution. Any Participant who
<PAGE>
fails to make his restoration contribution within such time
period shall waive his right to the portion of his Account which
was not vested when he received his distribution.
<PAGE>
ARTICLE VIII WITHDRAWALS AND LOANS WITHDRAWALS AND
LOANS WITHDRAWALS AND LOANS WITHDRAWALS AND LOANS
WITHDRAWALS AND LOANS WITHDRAWALS AND LOANS
WITHDRAWALS AND LOANS WITHDRAWALS AND LOANS
WITHDRAWALS AND LOANS WITHDRAWALS AND LOANS
WITHDRAWALS AND LOANS WITHDRAWALS AND LOANS
WITHDRAWALS AND LOANS WITHDRAWALS AND LOANS
WITHDRAWALS AND LOANS
WITHDRAWALS AND LOANS
8.01 Withdrawals While Employed.
In-service withdrawals shall be made upon 15 days
written notice in the following order:
(a) A Participant may withdraw all or any portion of
his After-Tax Contribution Account. Such withdrawal shall come
first from After-Tax Contributions made prior to January 1, 1987.
Next, such withdrawal shall be allocated proportionately between
the Participant's After-Tax Contributions made after December 31,
1986 and the investment earnings on such Contributions. A
Participant may then withdraw the investment earnings on his
After-Tax Contributions made prior to January 1, 1987.
(b) A Participant may withdraw any portion of his
<PAGE>
Rollover Contribution Account upon attainment of Age 59/ or in
the event of a financial hardship as described below.
(c) A Participant may withdraw his Salary Deferral
Contribution Account for any reason after he has attained Age
59/ and prior to Age 59/ solely in the event of a financial
hardship, and solely to the extent required to satisfy the
hardship. The amount that may be distributed due to a hardship
may include the amount necessary to pay income taxes or penalties
resulting from the distribution. Such hardship must be an
immediate and heavy financial need of the Participant where such
Participant lacks other available resources. The following
conditions would automatically be deemed an immediate and heavy
financial need:
( i) medical expenses as described under
Code Section 213(d) incurred by the Participant,
his spouse or his dependents;
( ii) costs directly related to the
purchase of a primary residence (excluding
mortgage payments);
(iii) payment of tuition or related
educational fees for the next twelve months of
post-secondary education for the Employee, his
spouse or his dependents;
( iv) payment to prevent eviction of the
Participant from a primary residence or
foreclosure of mortgage on his primary residence;
and
<PAGE>
( v) any other occurrence as authorized
by the IRS through Regulations, Rulings, Notices
and other documents of general applicability.
A Participant must submit a written certification on
the form prescribed by the Plan Administrator that the hardship
distribution is necessary to satisfy an immediate and heavy
financial need. The written certification must indicate that the
need cannot reasonably be relieved through reimbursement or
compensation by insurance or otherwise, by liquidation of the
employee's assets, by cessation of Salary Deferral Contributions
or After-Tax Contributions (if applicable) under the Plan or by
other distributions or nontaxable loans from plans maintained by
the Employer or any other employer, or by borrowing from
commercial sources on reasonable commercial terms in an amount
sufficient to satisfy the need. The Employer must not have
actual knowledge to the contrary that the need cannot reasonably
be relieved as described above.
A Participant may not withdraw any investment earnings
included in his Salary Deferral Contribution Account which were
accumulated after December 31, 1988, or any Qualified Non-
elective Contributions (including investment earnings), unless he
has attained Age 59/.
A Participant may not withdraw any portion of his
Matching Employer Contribution Account or Discretionary Employer
Contribution Account for any reason prior to his retirement or
other termination of employment.
In no event will any hardship withdrawal of Salary
<PAGE>
Deferral Contributions be granted until any applicable
distributions and loans have been taken from this Plan and from
all other qualified retirement plans of the Employer.
8.02 Loans.
(a) Upon 30 days written notice, loans to Active
Participants may be made from their Accounts (excluding balances
invested in common stock of the Company) in amounts of not less
than $1,000. No more than one Plan loan may be outstanding to
each Participant at any time.
(b) No Participant shall, under any circumstances, be
entitled to loans in excess of the lesser of (i) 50% of his
vested Account as of the Valuation Date coincident with or
immediately preceding the date on which the loan is made, and
(ii) $50,000 less the highest outstanding loan balance over the
12-month period immediately preceding the issuance of the loan.
For purposes of this paragraph, all outstanding loans to a
Participant under this Plan or any other qualified retirement
plan of the Employer shall be aggregated.
(c) Any loan to a Participant shall be evidenced by
the Participant's promissory note and secured by the pledge of
the Participant's Account in the Trust Fund and by the pledge of
such further collateral as the Trustee deems necessary or
desirable to assure repayment of the borrowed amount and all
interest payable thereon in accordance with the terms of the
loan. Notwithstanding the foregoing, the amount of a
<PAGE>
Participant's Account that may be used as security shall be
limited to fifty (50%) of such Participants vested Account
balance.
(d) Interest shall be charged at an annual rate equal
to the prime interest rate in effect as of the first day of the
month in which the loan is processed, plus two percent (2%). The
Administrator shall have sole discretion in determining the
interest rate, and its decision shall be final and binding.
Principal repayments and interest payments shall be credited to
the Account of the Participant to whom the loan was made in
accordance with his investment elections as in effect at such
time as the loan repayments are made.
(e) Loans shall be for such term as the Participant
elects, except that loans shall not be for a period in excess of
five (5) years unless they are made for the purposes of
purchasing the primary residence of the Participant in which case
such loans can be made for a period not in excess of ten (10)
years.
(f) Loans shall be repaid in approximately level
installments made no less frequently than quarterly. The Plan
Administrator may require that loans be repaid by payroll
deduction or any other convenient manner. The manner and
frequency of payment shall be determined by the Plan
Administrator. A loan may be repaid in full at any time.
(g) If not repaid in full, the unpaid portion of any
outstanding loans (including interest thereon) shall be deducted
at retirement, death, disability or other termination of
<PAGE>
employment from any benefit to which a Participant (or his
beneficiary) is entitled under this Plan, and any other security
pledge shall be sold as soon as is practicable after such default
by the Trustee at private or public sale. The proceeds of such
sale shall be applied first to pay the expenses of conducting the
sale, including reasonable attorney's fees, and then to pay any
sums due from the borrower to the Trust Fund, with such payment
to be applied first to accrued interest and then to principal.
The Participant shall remain liable for any deficiency, and any
surplus remaining shall be paid to the Participant.
(h) If a required periodic payment is not made within
90 days of the date it was due, this shall be deemed a default
and foreclosure on the note and attachment of security will not
occur until a distributable event occurs in the Plan.
<PAGE>
ARTICLE IX ADMINISTRATION ADMINISTRATION ADMINISTRATION
ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION
ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION
ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION
ADMINISTRATION
9.01 Plan Administrator.
The Plan shall be administered by the Employer in ac-
cordance with its provisions and for purposes of such Plan
administration the Employer is hereby deemed to be Plan
Administrator within the meaning of ERISA. All aspects of Plan
administration shall be the responsibility of the Plan
Administrator except those specifically delegated to the Trustees
or other parties in accordance with provisions of the Plan or
Trust Agreement.
9.02 Administrative Procedures.
The Administrator shall have discretionary authority
based on a reasonable interpretation of the Plan to determine the
eligibility for benefits and the benefits payable under the Plan,
and shall have discretionary authority to construe all terms of
the Plan, including uncertain terms, to determine questions of
fact and law arising under the Plan and make such rules as may be
<PAGE>
necessary for the administration of the Plan. Any determination
by the Plan Administrator shall be given deference in the event
it is subject to judicial review, and shall be overturned only if
it is arbitrary and capricious or an abuse of discretion. The
Administrator may require Participants to apply in writing for
benefits hereunder and to furnish satisfactory evidence of their
date of birth and such other information as may from time to time
be deemed necessary.
The Plan Administrator shall appoint the Trustees, in-
vestment managers, or any other professional advisors as the
Administrator, in its sole discretion, deems necessary or
appropriate.
9.03 Other Plan Administrator.
Anything to the contrary notwithstanding, the Employer
may appoint a committee or an individual or individuals, whether
or not employed by the Employer, to carry out any of the duties
of the Plan Administrator. Such duties may include, but are not
limited to, determining the eligibility of any Employee for any
benefits and the amount of such benefits under the Plan, main-
taining custody of all documents and elections made by an
Employee, directing the investment of any payment made by an
Employer within any limits which may be imposed by the Employer,
and retaining suitable agents and advisors. Any committee or
individual shall be considered an agent of the Employer with
respect to the Plan and shall be indemnified by the Employer
<PAGE>
against any and all claims, losses, damages, expenses and
liabilities arising from any action or failure to act, except
when the same is determined to be due to the gross negligence or
willful misconduct of such individual or a member of a committee.
9.04 Claims Procedures.
(a) If a Participant or Beneficiary (hereinafter
referred to as "Claimant") is denied any vested benefits under
this Plan, either partially or in total, the Plan Administrator
shall advise the Claimant of the method of computation of his
benefit, if any, and the specific reason for the denial. The
Administrator shall also furnish the Claimant at that time with:
( i) a specific reference
to pertinent Plan provisions,
( ii) a description of any
additional material or information
necessary for the Claimant to perfect his
claim, if possible, and an explanation of
why such material or information is
needed, and
(iii) an explanation of the
Plan's claim review procedure.
(b) Within 60 days of receipt of the information
stated in (a) above, the Claimant shall, if he desires further
review, file a written request for reconsideration with the
Administrator.
<PAGE>
(c) So long as the Claimant's request for
review is pending (including the 60 day period in (b) above), the
Claimant or his duly authorized representative may review
pertinent Plan documents and may submit issues and comments in
writing to the Administrator.
(d) A final and binding decision shall be made by the
Administrator within 60 days of the filing by the Claimant of his
request for reconsideration, provided, however, that if the
Administrator, in its discretion, determines that a hearing with
the Claimant or his representative present is necessary or
desirable, this period shall be extended an additional 60 days.
(e) The Administrator's decision shall be conveyed to
the Claimant in writing and shall include specific reasons for
the decision, written in a manner calculated to be understood by
the Claimant, with specific references to the pertinent Plan
provisions on which the decision is based.
9.05 Expenses.
Expenses of the Plan shall be paid from the Trust Fund
unless the Employer elects to pay such expenses.
<PAGE>
ARTICLE X AMENDMENT, TERMINATION AND MERGERS AMENDMENT,
TERMINATION AND MERGERS AMENDMENT, TERMINATION AND MERGERS
AMENDMENT, TERMINATION AND MERGERS AMENDMENT, TERMINATION
AND MERGERS AMENDMENT, TERMINATION AND MERGERS AMENDMENT,
TERMINATION AND MERGERS AMENDMENT, TERMINATION AND MERGERS
AMENDMENT, TERMINATION AND MERGERS AMENDMENT, TERMINATION
AND MERGERS AMENDMENT, TERMINATION AND MERGERS AMENDMENT,
TERMINATION AND MERGERS AMENDMENT, TERMINATION AND MERGERS
AMENDMENT, TERMINATION AND MERGERS AMENDMENT, TERMINATION
AND MERGERS
AMENDMENT, TERMINATION AND MERGERS
10.01 Amendment.
The provisions of this Plan may be amended at any time
and from time to time by the Board of Directors, provided,
however, that:
(a) no amendment shall increase the duties or
liabilities of the Plan Administrator or of the Trustee without
the consent of such party;
(b) no amendment shall deprive any Participant or
beneficiary of a deceased Participant of any of the benefits to
<PAGE>
which he is entitled under this Plan with respect to
contributions previously made, nor shall any amendment decrease
the balance in any Participant's Account. For purposes of this
paragraph, a plan amendment which has the effect of decreasing
the balance of a Participant's Account or eliminating an optional
form of benefit with respect to benefits attributable to service
before the amendment shall be treated as reducing an accrued
benefit;
(c) no amendment shall provide for the use of funds or
assets held to provide benefits under this Plan other than for
the benefit of Employees and their beneficiaries or provide that
funds may revert to the Employer except as permitted by law; and
(d) no amendment may change the vesting schedule with
respect to any Participant, unless each Participant with three or
more Years of Service is permitted to elect to have the vesting
schedule which was in effect before the amendment used to
determine his vested benefit. The period during which the
election may be made shall commence with the date the amendment
is adopted or deemed to be made and shall end on the latest of:
(1) 60 days after the amendment is adopted;
(2) 60 days after the amendment
becomes effective; or
(3) 60 days after the Participant is issued
written notice of the amendment by the Employer or Plan
Administrator.
In the case of an Employee who is a Participant as of
the later of the date such amendment is adopted or the date it
<PAGE>
becomes effective, the nonforfeitable percentage (determined as
of such date) of such Employee's right to his Employer-derived
accrued benefit will not be less than his percentage computed
under the Plan without regard to such amendment.
Each amendment shall be approved by the Board of
Directors by resolution and shall be filed with the Trustee.
10.02 Plan Termination.
(a) Right Reserved
. While it is the Employer's
intention to continue the Plan indefinitely the right is,
nevertheless, reserved to terminate the Plan in whole or in part
by action of the Board of Directors. Termination or partial
termination of the Plan shall result in full and immediate
vesting of each affected Participant in his entire Account, and
there shall not thereafter be any forfeitures with respect to any
Participant for any reason. Notwithstanding any other provision
of this Plan, complete or partial termination of the Plan shall
not be conditioned solely upon any resolution or other action of
the Company, the Board of Directors or any other party.
(b) Effect on Retired Persons, etc
. Termination of
the Plan shall have no effect upon payment of benefits due to
former Participants, their beneficiaries and their estates. The
Trustee shall retain sufficient assets to complete any such
payments due and shall have the right, upon direction by the
Employer, to make such payments as of the effective date of the
<PAGE>
Plan termination.
(c) Effect on Remaining Participants, etc
. The
Employer shall instruct the Trustees either (i) to continue to
manage and administer the assets of the Trust for the benefit of
the Participants and their beneficiaries pursuant to the terms
and provisions of the Trust Agreement, or (ii) to pay over to
each Participant (and vested former Participant) the value of his
vested account, and to thereupon dissolve the Trust.
Upon termination of this Plan, if the Employer or any
entity within the same controlled group as the employer does not
maintain another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of
the Code), the Participant's Account may, without the
Participant's consent, be distributed to the Participant.
However, if any entity within the same controlled group as the
Employer maintains another defined contribution plan (other than
an employee stock ownership plan as defined in Section 4975(e)(7)
of the Code), then the Participant's Account will be transferred,
without the Participant's consent, to the other plan if the
Participant does not consent to an immediate distribution.
10.03 Complete Discontinuance of Employer Contributions.
While it is the Employer's intention to make
substantial and recurrent contributions to the Trust Fund
pursuant to the provisions of this Plan, the right is,
nevertheless, reserved to at any time completely discontinue
<PAGE>
Employer contributions. Such complete discontinuance shall be
established by resolution of the Board of Directors and shall
have the effect of a termination of the Plan, except that the
Trustee shall not have authority to dissolve the Trust Fund
except upon adoption of a further resolution by the Board of
Directors to the effect that the Plan is terminated and upon
receipt from the Employer of instructions to dissolve the Trust
Fund pursuant to Section 10.02(c) hereof.
10.04 Suspension of Employer Contributions.
The Employer shall have the right at any time, and from
time to time, to suspend Employer contributions to the Trust Fund
pursuant to this Plan. Such suspension shall have no effect on
the operation of the Plan unless the Board of Directors
determines by resolution that such suspension shall be permanent.
A permanent discontinuance of contributions will be deemed to
have occurred as of the date of such resolution or such earlier
date as is therein specified.
10.05 Mergers and Consolidations of Plans.
In the event of any merger or consolidation with, or
transfer of assets or liabilities to, any other plan, each Parti-
cipant shall have a benefit in the surviving or transferee plan
(determined as if such plan were then terminated immediately
after such merger, etc.) that is equal to or greater than the
benefit he would have been entitled to receive immediately before
<PAGE>
such merger, etc., in the Plan in which he was then a Participant
(had such Plan been terminated at that time). For the purposes
hereof, former Participants and beneficiaries shall be considered
Participants.
<PAGE>
ARTICLE XI MISCELLANEOUS PROVISIONS MISCELLANEOUS
PROVISIONS MISCELLANEOUS PROVISIONS MISCELLANEOUS PROVISIONS
MISCELLANEOUS PROVISIONS MISCELLANEOUS PROVISIONS
MISCELLANEOUS PROVISIONS MISCELLANEOUS PROVISIONS
MISCELLANEOUS PROVISIONS MISCELLANEOUS PROVISIONS
MISCELLANEOUS PROVISIONS MISCELLANEOUS PROVISIONS
MISCELLANEOUS PROVISIONS MISCELLANEOUS PROVISIONS
MISCELLANEOUS PROVISIONS
MISCELLANEOUS PROVISIONS
11.01 Non-Alienation of Benefits.
None of the payments, benefits or rights of any Parti-
cipant or beneficiary shall be subject to any claim of any cre-
ditor, and in particular, to the fullest extent permitted by law,
all such payments, benefits and rights shall be free from attach-
ment, garnishment, trustee's process, or any other legal or equi-
table process available to any creditor of such Participant or
beneficiary. Notwithstanding the foregoing, the Plan Administra-
tor shall assign or recognize an alternate payee with respect to
all or a portion of a Participant's benefit, as may be required
in accordance with a Qualified Domestic Relations Order, as such
term is defined and as such action by the Plan Administrator may
<PAGE>
be required under Section 414 of the Code and regulations issued
pursuant thereto. The Administrator shall develop such
guidelines and procedures as it deems appropriate to determine,
in accordance with Section 414 of the Code, and regulations
issued pursuant thereto, whether, and in what manner, to comply
with any document it receives which is intended to be a Qualified
Domestic Relations Order. No Participant or beneficiary shall
have the right to alienate, anticipate, commute, pledge, encumber
or assign any of the benefits or payments which he may expect to
receive, contingently or otherwise, under this Plan, except the
right to designate a beneficiary or beneficiaries as hereinbefore
provided.
11.02 No Contract of Employment.
Neither the establishment of the Plan, nor any
modification thereof, nor the creation of any fund, trust or
account, nor the payment of any benefits shall be construed as
giving any Participant or Employee, or any person whomsoever, the
right to be retained in the service of the Employer, and all
Participants and other Employees shall remain subject to
discharge to the same extent as if the Plan had never been
adopted.
11.03 Severability of Provisions.
If any provision of this Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not
<PAGE>
affect any other provisions hereof, and this Plan shall be
construed and enforced as if such provisions had not been
included.
11.04 Heirs, Assigns and Personal Representatives.
This Plan shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties, including
each Participant and beneficiary, present and future.
11.05 Headings and Captions.
The headings and captions herein are provided for refe-
rence and convenience only, shall not be considered part of the
Plan, and shall not be employed in the construction of the Plan.
11.06 Gender and Number.
Except where otherwise clearly indicated by context,
the masculine and the neuter shall include the feminine and the
neuter, the singular shall include the plural, and vice-versa.
11.07 Funding Policy.
The Plan Administrator, in consultation with the
Employer, shall establish and communicate to the Trustees a
funding policy consistent with the objectives of this Plan and of
the corresponding Trust. Such policy shall reflect due regard
for the emerging liquidity needs of the Trust. Such funding
<PAGE>
policy shall also state the general investment objectives of the
Trust and the philosophy upon which maintenance of the Plan is
based.
11.08 Title to Assets.
No Participant or beneficiary shall have any right to,
or interest in, any assets of the Trust Fund upon termination of
his employment or otherwise, except as provided from time to time
under this Plan, and then only to the extent of the benefits
payable under the Plan to such Participant out of the assets of
the Trust Fund. All payments of benefits as provided for in this
Plan shall be made from the assets of the Trust Fund, and neither
the Employer nor any other person shall be liable therefor in any
manner.
11.09 Payment to Minors, etc.
Any benefit payable to or for the benefit of a minor,
an incompetent person or other person incapable of receipting
therefor shall be deemed paid when paid to such person's guardian
or to the party providing or reasonably appearing to provide for
the care of such person, and such payment shall fully discharge
the Trustees, the Plan Administrator, the Employer and all other
parties with respect thereto.
11.10 Situs.
<PAGE>
This Plan shall, to the extent not pre-empted by ERISA
or other Federal law, be construed according to the laws of the
state where the principal office of the Company is domiciled,
where such state statutes may be applicable to an employee
benefit plan.
<PAGE>
ARTICLE XII TOP-HEAVY PROVISIONS TOP-HEAVY PROVISIONS
TOP-HEAVY PROVISIONS TOP-HEAVY PROVISIONS TOP-HEAVY
PROVISIONS TOP-HEAVY PROVISIONS TOP-HEAVY PROVISIONS
TOP-HEAVY PROVISIONS TOP-HEAVY PROVISIONS TOP-HEAVY
PROVISIONS TOP-HEAVY PROVISIONS TOP-HEAVY PROVISIONS
TOP-HEAVY PROVISIONS TOP-HEAVY PROVISIONS TOP-HEAVY
PROVISIONS
TOP-HEAVY PROVISIONS
12.01 Top-Heavy Plan.
For any Plan Year commencing in 1984 or thereafter,
the Plan shall be a Top-Heavy Plan, as such term is defined under
Section 416 of the Internal Revenue Code, if the Value of
Accumulated Benefits for Key Employees under all Aggregated Plans
exceeds 60% of the Value of Accumulated Benefits for all Group
Participants under all Aggregated Plans, determined as of the
Determination Date immediately preceding such Plan Year. If the
Plan is a Top-Heavy Plan for a Plan Year and, as of the
Determination Date immediately preceding such Plan Year, the
Value of Accumulated Benefits for Key Employees under all
Aggregated Plans exceeds 90% of the Value of Accumulated Benefits
for all Group Participants under all Aggregated Plans, then the
<PAGE>
Plan shall be a Super Top-Heavy Plan for such Plan Year. For
such purposes, the terms "Key Employees" and "Group Participants"
shall include all persons who are or were Key Employees or Group
Participants during the Plan Year ending on such Determination
Date or during any of the four (4) immediately preceding Plan
Years.
The value of Accounts and the present value of accrued
benefits will be determined as of the most recent Valuation Date
that falls within or ends with the 12-month period ending on the
Determination Date, except as provided in Section 416 of the Code
for the first and second plan years of a defined benefit plan.
The Accounts and accrued benefits of a Participant (1) who is not
a Key Employee but who was a Key Employee in a prior year, or (2)
who has not been credited with at least one Hour of Service with
any Employer maintaining the Plan at any time during the 5-year
period ending on the Determination Date will be disregarded. The
calculation of the top-heavy ratio, and the extent to which
distributions, rollovers, and transfers are taken into account
will be made in accordance with Section 416 of the Code.
Deductible employee contributions will not be taken into account
for purposes of computing the top-heavy ratio. When aggregating
plans the value of Accounts and accrued benefits will be
calculated with reference to the determination dates that fall
within the same calendar year.
The accrued benefit of a participant other than a Key
Employee shall be determined under (a) the method, if any, that
uniformly applies for accrual purposes under all defined benefit
<PAGE>
plans maintained by the Employer, or (b) if there is no such
method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional rule of
Section 411(b)(1)(c) of the Code.
For purposes of this Article, the following definitions
shall apply in addition to those set forth in Article I:
"Affiliated Employer Group" shall mean the Employer and
each other employer which must be aggregated with the Employer
for purposes of Sections 414(b), 414(c) or 414(m) of the Code.
"Aggregated Plans" shall mean (i) all plans of the
Employer or an Affiliated Employer Group which are required to be
aggregated with the Plan, and (ii) all plans of the Employer or
an Affiliated Employer Group which are permitted to be aggregated
with the Plan and which the Plan Administrator elects to
aggregate with the Plan, for purposes of determining whether the
Plan is a Top-Heavy Plan. A plan shall be required to be
aggregated with the Plan if such plan includes as a participant a
Key Employee (and the beneficiary of such employee) or if such
plan enables any plan of the Employer or of a member of the
Affiliated Employer Group in which a Key Employee participates to
qualify under Section 401(a)(4) or Section 410 of the Code. A
plan of the Employer or the Affiliated Employer Group shall be
permitted to be aggregated with the Plan if such plan satisfies
the requirements of Sections 401(a)(4) and 410 of the Code, when
considered together with the Plan and all plans which are
required to be aggregated with the Plan. No plan shall be
aggregated with the Plan unless it is a qualified plan under
<PAGE>
Section 401 of the Code. The required aggregation group shall
include plans terminated within the five year period ending on
the Determination Date.
"Annual compensation" shall mean compensation as
defined in Section 415(c)(3) of the Code but including amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the Employee's gross income
under Section 125, Section 402(a)(8), Section 402(h) or Section
403(b) of the Code.
"Determination Date" shall mean the date as of which it
is determined whether a plan is a Top-Heavy Plan or Super
Top-Heavy Plan for the Plan Year immediately following such
Determination Date. The Determination Date for the Plan shall
be:
(a) in the case of a defined benefit plan,
the date as of which the actuarial valuation of
the Plan, as used for determination of minimum
funding standards under Section 412 of the Code,
is performed; and
(b) in the case of a defined contribution
plan, the last day of the Plan Year.
"Group Participant" shall mean anyone who is or was a
participant in any plan included in the Aggregated Plans during
the Plan Year which includes the Determination Date or any of the
four (4) immediately preceding Plan Years, and who received
compensation from an Employer during the five (5) year period
ending on the Determination Date. Any beneficiary of a Group
<PAGE>
Participant who has received, or is expected to receive, a
benefit from a plan included in the Aggregated Plans shall be
considered a Group Participant solely for purposes of determining
whether the Plan is a Top-Heavy Plan or Super Top-Heavy Plan.
"Key Employee" shall mean any employee or former
employee of the Employer or of an Affiliated Employer Group who
during the Plan Year which includes the Determination Date, or
during any of the four (4) Plan Years immediately preceding such
Plan Year, was:
(a) an officer of the Employer whose
compensation is at least $45,000 (or such higher
amount as is permitted in accordance with the
Code); or
(b) a five percent (5%) owner of the Employer; or
(c) a one percent (1%) owner of the Employer
whose total annual compensation from the
Affiliated Employer Group exceeds $150,000; or
(d) an employee whose compensation equals or
exceeds $30,000 (or such higher amount as may be
defined under Section 415(c)(1)(A) of the Code),
and whose ownership interest in the Affiliated
Employer Group is among the ten largest.
In no event shall a partner of an unincorporated
employer be considered an officer under paragraph (a) above.
Further, the number of officers counted under (a) above as of
any Determination Date shall not exceed the lesser of:
(1) the greater of (i) ten percent (10%) of
<PAGE>
the total number of employees of the Affiliated
Employer Group, and (ii) three (3); and
(2) fifty (50).
If the application of the preceding paragraph results
in a reduction in the number of officers to be included as Key
Employees, then individuals who are officers shall be eliminated
from the group of Key Employees beginning with the individual who
had the lowest one-year compensation in the five (5) year period
including the Plan Year which includes the Determination Date,
and the four (4) immediately preceding Plan Years, and
eliminating each individual with the next higher one-year
compensation in such period, until the maximum number of officers
remain in the Key Employee group.
In addition, the beneficiary of a Key Employee shall be
deemed to be a Key Employee.
"Non-Key Employee" shall mean an Employee who is not a
Key Employee. An Employee who was a Key Employee in a previous
Plan Year but who is no longer a Key Employee in the current Plan
Year, shall not be considered a Non-Key Employee for the current
Plan Year.
"Value of Accumulated Benefits" shall mean
(a) in the case of a Group Participant or
beneficiary covered under a defined
benefit plan, the sum of
( i) the present value of the accrued pension
benefit (as such term is defined under the
applicable plan) of the Group Participant or
<PAGE>
beneficiary determined as of the Determination
Date using reasonable actuarial assumptions as to
interest and mortality, and taking into account
any non-proportional subsidies in accordance with
regulations issued by the Secretary of the
Treasury; plus
(ii) the sum of any amounts distributed to
the Group Participant and his beneficiary during
the plan year ending on the Determination Date and
during the four (4) immediately preceding plan
years.
<PAGE>
(b) in the case of a Group Participant or
beneficiary covered under a defined
contribution plan, the sum of the accounts of the
Group Participant or beneficiary under the plan as
of the plan's Determination Date derived from:
(1) employee contributions
credited to such accounts and investment
earnings thereon; and
(2) employer contributions
credited to such accounts and investment
earnings thereon; and
(3) rollover contributions made
prior to January 1, 1984, and investment
earnings thereon; and
(4) any contributions which would
have been credited to such accounts on or
before the Determination Date, but which were
waived as provided under the Code and
resulted in a funding deficiency; and
(5) any amount distributed from
the accounts described in (1) through (4)
above during the Plan Year ending on the
Determination Date, and the four (4)
immediately preceding Plan Years.
If the Plan is determined to be a Top-Heavy Plan or
Super Top-Heavy Plan as of any Determination Date, then it shall
<PAGE>
be subject to the rules set forth in the remainder of this
Article for the Plan Year next following such Determination Date.
If, as of a subsequent Determination Date, the Plan is determined
to no longer be a Top-Heavy Plan or Super Top-Heavy Plan, then
the rules set forth in the remainder of this Article shall no
longer apply, except where expressly indicated otherwise.
Notwithstanding the foregoing, if the Plan changes from being a
Super Top-Heavy Plan to a Top-Heavy Plan, the rules applicable to
a Top-Heavy Plan shall apply.
"Year of Super Top-Heavy Service" shall mean a Year of
Service of a Participant which commenced in a Plan Year during
which the Plan was a Super Top-Heavy Plan.
"Year of Top-Heavy Service" shall mean a Year of
Service of a Participant which commenced in a Plan Year during
which the Plan was a Top-Heavy Plan.
12.02 Minimum Contributions or Benefits.
For any Plan Year in which the Plan is a Top-Heavy Plan
the minimum rate of contributions and forfeitures allocated to
the account of any Participant shall be the lesser of:
( i) The highest rate of employer
contributions and forfeitures (determined as a
percentage of compensation as defined under
Section 415 of the Code) allocated to the account
of any Key Employee; and
<PAGE>
(ii) 3% of such compensation.
Notwithstanding the above paragraph, if a Participant
is also a participant in another defined contribution plan of the
Affiliated Employer Group, all or a portion of the minimum
allocation described above may be provided under such other plan
and the minimum allocation provided under this Plan shall be
eliminated or reduced accordingly. If the Employee is a
Participant in one or more defined benefit plans of the
Affiliated Employer Group, all or a portion of the minimum
required benefits or allocations under Section 416 of the Code
may be provided under such plans as set forth in regulations
issued by the Secretary of the Treasury, and the minimum
allocation provided in the preceding paragraph shall be
eliminated or reduced accordingly. Employer contributions
resulting from a salary reduction election by an Employee shall
not be counted toward meeting the minimum required allocations
under this Section. Matching Employer Contributions may be used
to satisfy the minimum required allocations under this Section,
if such contributions are not counted under the ACP test
described in Section 3.06.
Participants who are Non-Key Employees and who are not
separated from service as of the last day of the Plan Year, and
who have (1) failed to complete 1000 Hours of Service (or the
equivalent), (2) declined to make mandatory contributions to the
Plan, or (3) been excluded from the Plan because such
individual's compensation is less than a stated amount, are
<PAGE>
considered Participants solely for purposes of this Section.
The minimum allocation required [to the extent required
to be nonforfeitable under Section 416(b)] may not be forfeited
under Section 411(a)(3)(B) or 411 (a)(3)(D).
12.03 Adjustment to Maximum Benefits.
If the Plan is a Top-Heavy Plan for any Plan Year, then
the maximum benefit which can be provided under Section 3.10
shall be determined by substituting "1.00" for "1.25" in the
applicable fractions. However, if the Plan is not a Super
Top-Heavy Plan for such Plan Year, than the preceding sentence
shall not apply provided that "4%" (or such higher rate as is
required by Internal Revenue Service Regulations) is substituted
for "3%" in the first paragraph of Section 12.02, and a paired
defined benefit plan provides an additional minimum accrual of 1%
per year up to an additional 10% or this Plan provides a minimum
allocation of 7.5% of compensation.
12.04 Minimum Vesting
If the Plan is determined to be a Top-Heavy Plan for
any Plan Year, then an Active Participant's vested interest in
his Account determined as of the first day of such Plan Year, and
determined as of any future date while the Plan continues to be a
Top-Heavy Plan, shall be no less than as determined under the
following Table:
<PAGE>
Years of Service Vesting Percentage
Less than 2 years None
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 years or more 100%
If the Plan subsequently is determined to no longer be
a Top-Heavy Plan, then the above minimum vesting schedule shall
not apply to any portion of a Participant's Account which is
accrued after the first day of the first Plan Year in which the
Plan is no longer a Top-Heavy Plan, provided that the Account for
any Participant with three (3) or more Years of Service as the
first date as of which the Plan is no longer a Top-Heavy Plan
shall continue to be vested in accordance with a schedule not
less than the minimum vesting schedule applicable during the
period that the Plan was a Top-Heavy Plan.
The minimum vesting schedule applies to all benefits
within the meaning of Section 411(a)(7) of the Code except those
attributable to employee contributions, including benefits
accrued before the effective date of Section 416 and benefits
accrued before the Plan became top-heavy.
12.05 Discontinuance of Article.
In the event that the provisions of this Article are no
longer required to qualify the Plan under the Code, then this
<PAGE>
Article XII shall thereupon be void without the necessity of
further amendment of the Plan.
IN WITNESS WHEREOF, and as evidence of the adoption of the
foregoing, the Company has caused this instrument to be executed
by a duly authorized officer as of this_________________day
of________________, 1996.
SHARED TECHNOLOGIES CELLULAR, INC.
By: ____________________________________
____________________________________
Title
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