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EXHIBIT 10.17
Let's Talk Cellular of America, Inc.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
Dated as of June 25, 1996
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INDEX
Page
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ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Preferred Stock .................................1
1.2 The Conversion Shares ................................................1
1.3 Initial Closing ......................................................1
1.4 Release of Funds From Escrow .........................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE PRINCIPAL SHAREHOLDERS
2.1 Organization and Corporate Power .....................................3
2.2 Authorization ........................................................3
2.3 Government Approvals .................................................4
2.4 Authorized and Outstanding Stock .....................................4
2.5 Subsidiaries .........................................................4
2.6 Financial Information ................................................5
2.7 Events Subsequent to the Date of the Financial
Statements ...........................................................5
2.8 Litigation ...........................................................6
2.9 Compliance with Laws and Other Instruments ...........................6
2.10 Taxes ................................................................7
2.11 Property .............................................................7
2.12 Governmental and Industrial Approvals ................................8
2.13 Contracts and Commitments ............................................8
2.14 Securities Act .......................................................8
2.15 Insurance Coverage ...................................................9
2.16 Employee Matters .....................................................9
2.17 No Brokers or Finders ...............................................10
2.18 Transactions with Affiliates ........................................10
2.19 Assumptions, Guarantees, etc. of Indebtedness of
Other Persons .......................................................10
2.20 Restrictions on Subsidiaries ........................................10
2.21 Disclosures .........................................................10
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
3.1 Accounts and Reports ................................................11
3.2 Payment of Taxes ....................................................12
3.3 Maintenance of Key Man Insurance ....................................12
3.4 Compliance with Laws, etc ...........................................12
3.5 Inspection ..........................................................13
(i)
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3.6 Corporate Existence; Ownership of Subsidiaries ......................13
3.7 Board Of Directors ..................................................13
3.8 Use of Proceeds .....................................................13
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
4.1 Investments in Other Persons ........................................14
4.2 Distributions .......................................................14
4.3 Dealings with Affiliates ............................................15
4.4 Merger ..............................................................15
4.5 Option Shares .......................................................15
4.6 Indebtedness ........................................................16
4 7 Limitation on Restrictions on Subsidiary Dividends
and Other Distributions .............................................16
4.8 No Conflicting Agreements ...........................................16
4.9 Compensation; Consulting and Other Agreements .......................16
4.10 Fundamental Changes .................................................16
4.11 Capital Expenditures ................................................17
ARTICLE V
PREEMPTIVE RIGHT
5.1 Right of Purchase ...................................................17
5.2 Definition of New Securities ........................................17
5.3 Notice from the Company .............................................17
5.4 Sale by the Company .................................................18
5.5 Termination of Rights ...............................................18
ARTICLE VI
PURCHASER'S REPRESENTATIONS
6.1 Representations and Warranties ......................................18
6.2 Permitted Sales; Legends ............................................19
ARTICLE VII
REGISTRATION RIGHTS
7.1 Certain Definitions .................................................19
7.2 Requested Registrations .............................................20
7.3 "Piggy Back" Registrations ..........................................21
7.4 Expenses of Registration ............................................22
7.5 Registration on Form S-3 ............................................22
7.6 Registration Procedures .............................................22
7.7 Indemnification .....................................................23
7.8 Limitations on Registration Rights ..................................26
7.9 Rule 144 Reporting ..................................................26
7.10 Listing Application .................................................26
(ii)
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7.11 Damages .............................................................27
ARTICLE VIII
CONDITIONS OF THE PURCHASER'S OBLIGATION
8.1 Effect of Conditions ................................................27
8.2 Representations and Warranties ......................................27
8.3 Performance .........................................................27
8.4 Board Election ......................................................27
8.5 Certified Documents, etc ............................................27
8.6 Amendment to Articles of Incorporation ..............................27
8.8 Redemption Agreement ................................................28
8.9 Opinion of Counsel ..................................................28
8.10 Employment Agreements ...............................................28
8.11 Consulting Agreement ................................................28
8.12 Shareholder Indebtedness ............................................28
ARTICLE IX
CONDITIONS OF THE COMPANY'S OBLIGATION ................28
ARTICLE X
CERTAIN DEFINITIONS ............................29
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations .........................................31
11.2 Parties in Interest .................................................31
11.3 Shares Owned by Affiliates ..........................................31
11.4 Amendments and Waivers ..............................................31
11.5 Notices .............................................................32
11.6 Expenses ............................................................32
11.7 Counterparts ........................................................32
11.8 Effect of Headings ..................................................33
11.9 Adjustments .........................................................33
11.10 Governing Law .......................................................33
(iii)
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June 25, 1996
HIG Fund V, Inc.
c/o HIG Capital Management, Inc.
1001 South Bayshore Dr.
Suite 2310
Miami, Florida 33131
Re: Series A Preferred Stock
Gentlemen:
Let's Talk Cellular of America, Inc., a Florida corporation {the
"Company"), Nick Molina and Brett Beveridge (individually a "Principal
Shareholder" and collectively, the "Principal Shareholders") hereby agree with
you as follows (terms used herein and not otherwise defined shall have the
meanings as set forth in Article X hereof):
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Preferred Stock. At the Closing, the Company
will sell to you (the "Purchaser") an aggregate of 100,000 shares of the
Company's Series A Preferred Stock, par value $30 per share (the "Preferred
Stock"), at a price of $32.95 per share, for an aggregate purchase price of
$3,295,000 payable as provided in Section 1.3. The Preferred Stock shall have
the rights, terms and privileges set forth on Exhibit A attached hereto. The
shares of Preferred Stock purchased pursuant to this Section 1.1 are referred to
herein as the "Purchased Shares."
1.2 The Conversion Shares. The Company has authorized and reserved and
hereby covenants that it will continue to reserve, free of any preemptive rights
or encumbrances, a sufficient number of its authorized but previously unissued
shares of Common Stock to satisfy the rights of conversion of the holders of the
Purchased Shares. The shares of Common Stock issued or issuable upon conversion
of the Purchased Shares are referred to herein as the "Conversion Shares."
1.3 Initial Closing. Subject to the satisfaction or waiver of the
conditions set forth in Articles VIII and IX hereof, the purchase of the
Purchased Shares shall be made at a closing (the "Closings") to be held at the
offices of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221
Brickell Avenue, Miami, Florida, at 10:00 A.M. on June 25, 1996, or at such
other time and on such other date as the Purchaser and the Company may mutually
agree. Payment at the Closing for the Purchased Shares shall be by wire transfer
payable in immediately available federal
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funds. At the Closing, (a) the Company shall deliver a certificate representing
33,334 shares of Preferred Stock to the Purchaser and two certificates, each
representing 33,333 shares of Preferred Stock issued in the name of the
Purchaser, to the Escrow Agent subject to the Escrow Agreement, and (b) the
Purchaser shall deliver $1,285,000 in immediately available funds to the Company
and deposit $2,000,000 in the escrow account subject to the Escrow Agreement.
For purposes of this Agreement and the Escrow Agreement, the $2,000,000 shall be
the property of the Company and the Escrowed Shares shall be validly issued,
fully paid and nonassessable shares of Preferred Stock issued in the name of the
Purchaser, in each case, subject only to the conditions subsequent of the
release of the escrowed funds set forth in Section 1.4 hereof.
1.4 Release of Funds From Escrow.
(a) The Company shall have the right at any time after the Closing
to draw the first and second $1 million held in the Escrow Account upon the
occurrence of each of the following events: (i) the Company shall have used
substantially all of the previous amounts funded at closing or at the first draw
from the Escrow Account in accordance with Schedule 3.8 or as otherwise agreed
to by the Purchaser in writing (ii) there shall have been no material adverse
change in the Company's condition or prospects which would result in a disaster,
(iii) the representations and warranties in Article II shall be true and correct
in all material respects such that the breach thereof has a disasterous effect
on the Company, (iv) the Company shall have complied in all material respects
with the covenants set forth in Articles III and IV and the Related Agreements
as of the date of the Draw Certificate, and (v) there shall have been no fraud
or embezzlement at the Company. The Company shall effect the second and third
draw by delivering (i) a certificate confirming the foregoing and showing the
use of the funds to the Purchaser, executed by one or more of the Principal
Shareholders in their capacity as officers of the Company (the "Draw
Certificate") and (ii) disbursement instructions to the Escrow Agent releasing
the corresponding certificate representing shares of Preferred Stock to the
Purchaser. Within two (2) business days of receiving the Draw Certificate, the
Purchaser shall confirm its contents and upon such confirmation issue
disbursement instructions to the Escrow Agent releasing the second or third $1
million to the Company. In each case, the disbursement instructions shall be in
the form provided for in the Escrow Agreement.
(b) The Purchaser shall have the unilateral right to release all
or a portion of the funds in the Escrow Account and receive the corresponding
number of shares of Preferred Stock (1 share for each $30 released) without any
action or notice required by the Company.
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(c) The Company and the Purchaser can agree in writing to any
other alternative arrangement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE PRINCIPAL SHAREHOLDERS
In order to induce the Purchaser to purchase the Purchased Shares, the
Company and the Principal Shareholders, acting jointly and severally, make the
following representations and warranties which shall be true, correct and
complete in all respects as of the Closing and on the date of each Draw
Certificate.
2.1 Organization and Corporate Power. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own its properties and to carry on
its business as presently conducted. The Company and each of its Subsidiaries is
duly licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on the operations or financial conditions of the Company and its
Subsidiaries, taken as a whole.
2.2 Authorization. The Company has all necessary corporate power
and has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement, the
Shareholders' Agreement referred to in Section 8.7, the Redemption Agreement
referred to in Section S.8, the Employment Agreements referred to in Section
8.10 and the Consulting Agreement referred to in Section 8.11 (collectively, the
"Related Aqreements"), and any other agreements or instruments executed by the
Company in connection herewith or therewith and the consummation of the
transactions contemplated herein or therein, and for the due authorization,
issuance and delivery of the Purchased Shares and the Conversion Shares issuable
upon conversion of the Purchased Shares. Sufficient shares of authorized but
unissued Common Stock have been reserved for issuance upon conversion of the
Purchased Shares. The issuance of the Purchased Shares hereunder does not, and
the issuance of the Conversion Shares upon conversion of the Purchased Shares
will not, require any further corporate action and is not and will not be
subject to any preemptive right, right of first refusal or the like. Assuming
the due execution and delivery by the Purchaser, this Agreement, the Related
Agreements and the other agreements and instruments executed by the Company in
connection herewith or therewith will each be a valid and binding obligation of
the Company enforceable in accordance with its respective terms. Based on the
representations made by the Purchaser in Article VI of this Agreement, the offer
and sale of the Purchased Shares will be
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exempt from the registration or qualification requirements of applicable federal
and state securities laws.
2.3 Government Approvals. No consent, approval, license or
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of the Company in
connection with the execution, delivery and performance by the Company of this
Agreement, any of the Related Agreements and any other agreements or instruments
executed by the Company in connection herewith or therewith, or in connection
with the issuance of the Purchased Shares or the issuance of the Conversion
Shares upon conversion of the Purchased Shares, except for (i) those which have
already been made or granted and (ii) the filing of registration statements with
the Securities and Exchange Commission (the "Commission") and any applicable
state securities commission as specifically provided for in Article VII hereof.
2.4 Authorized and Outstanding Stock. The authorized capital stock
of the Company consists of (i) 50,000,000 shares of Common Stock, of which
650,000 shares are validly issued and outstanding on the date hereof and are
held of record and owned beneficially as set forth in Schedule 2.4 hereto; and
(ii) 150,000 shares of Preferred Stock, all of which have been designated as
Series A Preferred Stock with the rights, terms and privileges set forth in
Exhibit A, and of which no shares are issued or outstanding. There are no
treasury shares held by the Company. All issued and outstanding shares of
capital stock are, and when issued in accordance with the terms hereof, all
Purchased Shares and Conversion Shares issued upon conversion of the Purchased
Shares will be, duly and validly authorized, validly issued and fully paid and
non-assessable and free from any restrictions on transfer, except for
restrictions imposed by federal or state securities or "blue-sky" laws and
except for those imposed pursuant to this Agreement or any Related Agreement.
Except as set forth on Schedule 2.4 hereto, there are no outstanding warrants,
options, commitments, preemptive rights, rights to acquire or purchase,
conversion rights or demands of any character relating to the capital stock or
other securities of the Company.
2.5 Subsidiaries. Except as set forth in Schedule 2.5 hereto, the
Company has no Subsidiaries nor any investment or other interest in, or any
outstanding loan or advance to or from, any Person, including, without
limitation, any officer, director or shareholder. Except as set forth on
Schedule 2.5 hereto, (a) the Company owns of record and beneficially, free and
clear of all liens, charges, restrictions, claims and encumbrances of any
nature, all of the issued and outstanding capital stock of each of its
Subsidiaries and (b) no shares of capital stock of any subsidiary was redeemed
in violation of any laws or statutes or contract or other rights of any person.
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2.6 Financial Information. Attached hereto as Exhibit 2.6 are true
and complete copies of (x) the audited financial statements of the Company for
each of the fiscal years ended July 31, 1994 and July 31, 1995, certified by
Deloitte & Touche LLP, Company's independent certified public accountants, and
(y) the unaudited balance sheet of the Company at April 30, 1996, and the
related statements of income, retained earnings and statements cash flows for
the nine-months then ended (all of such financial statements being collectively
referred to herein as the "Financial Statements"). The Financial Statements are
complete and correct, are in accordance with the books and records of the
Company and present fairly in accordance with generally accepted account
principles applied on a basis consistent with prior periods the financial
condition and results of operations of the Company as of the dates and for the
periods shown except that the unaudited financial statements in (y) above have
no notes thereto and do not have any year end adjustments (all of which
adjustments are nonrecurring in nature). The Company does not have any
liability, contingent or otherwise, which is not adequately reflected in
reserved against in the Financial Statements that could materially and adversely
affect the financial or condition of the Company. Since the date of the
Financial Statements, (i) there has been no change in the business, assets,
liabilities, condition (financial or otherwise) or operations of the Company
except for changes in the ordinary course of business which, individually or in
the aggregate, have not been materially adverse, and (ii) none of the business,
prospects, condition (financial or otherwise), operations property or affairs of
the Company has been materially adversely affected by any occurrence or
development, individually or in the aggregate, whether or not insured against.
2.7 Events Subsequent to the Date of the Financial Statements.
Except as set forth on Schedule 2.7 hereto, since April 30, 1996, neither the
Company nor any Subsidiary has (i) issued any stock, bond or other corporate
security, (ii) borrowed any amount or incurred or become subject to any
liability (absolute, accrued or contingent), except liabilities under contracts
entered into in the ordinary course of business, (iii) discharged or satisfied
any lien or encumbrance or incurred or paid any obligation or liability
(absolute, accrued or contingent) other than current liabilities shown on the
Financial Statements and current liabilities incurred since July 31, 1995 in the
ordinary course of business, (iv) declared or made any payment or distribution
to stockholders or purchased or redeemed any shares of its capital stock or
other securities, (v) sold, assigned or transferred any of its tangible assets
or cancelled any debt or claim, in each case, except in the ordinary course of
business, (vi) sold, assigned, transferred or granted any license with respect
to any Intellectual Property (as defined in Section 2.11), except pursuant to
license or other agreements entered into in the ordinary course of business,
(vii) suffered any loss of property or waived any right of substantial value
whether or not in the
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ordinary course of business, (viii) made any change in officer compensation,
(ix) entered into any transaction except in the ordinary course of business or
as otherwise contemplated hereby or (x) entered into any commitment (contingent
or otherwise) to do any of the foregoing.
2.8 Litigation. Except as otherwise set forth on Schedule 2.8
hereto, there is no litigation or governmental proceeding or investigation
pending or, to the knowledge of the Company and the Principal Shareholders,
threatened, against the Company or any Subsidiary or affecting any of the
Company's or such Subsidiary's properties or assets, or against any officer,
employee or shareholder of the Company or any Subsidiary in his capacity as
such, which litigation, proceeding or investigation may have any substantial
chance of recovery where such recovery would likely have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, nor, to the
knowledge of the Company and the Principal Shareholders, has there occurred any
event or does there exist any condition on the basis of which any litigation,
proceeding or investigation might properly be instituted with any substantial
chance of recovery where such recovery would likely have a material adverse
effect on the Company and its Subsidiaries, taken as a whole. Neither the
Company nor any Subsidiary, nor any officer, employee, or shareholder of the
Company or any Subsidiary in his capacity as such is, to the knowledge of the
Company and the Principal Shareholders, in default with respect to any order,
writ, injunction, decree, ruling or decision of any court, commission, board or
other government agency which may materially and adversely affect the business
or assets of the Company and its Subsidiaries, taken as a whole.
2.9 Compliance with Laws and Other Instruments. The Company and
its Subsidiaries are in compliance with all of the provisions of this Agreement
and of its charter and by-laws and the agreements set forth in Schedule 2.13
hereto and to the knowledge of the Company and the Principal Shareholders is in
compliance, in all material respects, with the provisions of each other
mortgage, indenture, lease, license, other agreement or instrument, judgment,
decree, judicial order, statute, law, and/or regulation by which any of them is
bound or to which any of them or any of their respective properties are subject.
Neither the execution, delivery or performance of this Agreement and the Related
Agreements, nor the offer, issuance, sale or delivery of the Purchased Shares,
or the Conversion Shares upon conversion of the Purchased Shares, or the
transactions contemplated hereby (including the use of the proceeds in the
manner contemplated by Section 3.8), with or without the giving of notice or
passage of time, or both, will violate, or result in any breach of, or
constitute a default under, or result in the imposition of any encumbrance upon
any asset of the Company or any Subsidiary pursuant to any provision of the
Company's or such Subsidiary's charter or by-laws, or any statute, rule or
regulation, material contract, judgment, decree or, to the
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knowledge of the Company and its Principal Shareholders, other document or
instrument by which the Company or any Subsidiary is bound or to which the
Company or any Subsidiary or any of their respective Properties are subject.
2.10 Taxes. The Company and each of its Subsidiaries has filed all
tax returns (including statements of estimated taxes owed) required to be filed
within the applicable periods for such filings and has paid all taxes required
to be paid, and has established adequate reserves (net of estimated tax payments
already made) for the payment of all taxes payable in respect to the period
subsequent to the last periods covered by such returns. No deficiencies for any
tax in excess of $1,000 are currently assessed against the Company or any
Subsidiary, and no tax returns of the Company or any Subsidiary have ever been
audited, and, to the knowledge of the Company and the Principal Shareholders,
there is no such audit pending or contemplated. There is no tax lien, whether
imposed by any federal, state or local taxing authority, outstanding against the
assets, properties or business of the Company. For the purposes of this
Agreement, the term "tax" shall include all federal, state and local taxes,
including income, franchise, property, sales, withholding, payroll and
employment taxes.
2.11 Property. (a) Schedule 2.11(a)(i) hereto sets forth the
addresses of all real property that the Company or any Subsidiary owns, leases
or subleases, and any material lien or encumbrance on any such owned real
property or the Company's or Subsidiary's leasehold interest therein. Except as
set forth on Schedule 2.11(a)(ii) hereto, the Company or its Subsidiary, as the
case may be, has good and marketable title to, and owns free and clear of all
liens and encumbrances, all real and personal, tangible and intangible property
shown as owned by the Company or any Subsidiary on the Financial Statements
except for such property as sold in the ordinary course of business. Except as
set forth on Schedule 2.11(a)(iii) hereto, there are no defaults by the Company
or any Subsidiary or, to the knowledge of the Company and the Principal
Shareholders, by any other party thereto, which might curtail in any material
respect the present use of the Company's and such Subsidiary's real and
personal, tangible and intangible property. The performance by the Company of
this Agreement and the Related Agreements will not result in the termination of,
or in any increase of any amounts payable under, any lease listed on Schedule
2.11 hereto.
(b) Set forth on Schedule 2.11(b) hereto is a list and brief
description of all material patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications
trade names and copyrights, and all applications for such that are in the
process of being prepared, owned by or registered in the name of the Company or
any Subsidiary, or of which the Company or any Subsidiary is a licensor
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or licensee or in which the Company or any Subsidiary has any right
(collectively, the "Intellectual Property"). The Company and its Subsidiaries
own or possess adequate licenses or other rights to use all Intellectual
Property necessary or desirable to the conduct of their businesses as conducted
and as proposed to be conducted, and has taken all actions reasonably necessary
to protect the Intellectual Property and no claim is pending or, to the
knowledge of the Company and the Principal Shareholders, threatened to the
effect that the operations of the Company infringe upon or conflict with the
asserted rights of any other person under any Intellectual Property, which
claim, if successfully asserted, could have a material adverse effect on the
business of the Company or its Subsidiaries.
2.12 Governmental and Industrial Approvals. The Company and
each of its Subsidiaries has all the material permits, licenses, orders,
franchises and other rights and privileges of all federal, state, local or
foreign governmental or regulatory bodies necessary for the Company and such
Subsidiaries to conduct their respective businesses, the absence of which would
have a material adverse effect on the Company or its Subsidiaries. None of such
permits, licenses, orders, franchises or other rights and privileges will be
affected by the consummation of the transactions contemplated in this Agreement
and the Related Agreements.
2.13 Contracts and Commitments. Except as set forth on
Schedule 2.13 hereto, neither the Company nor any Subsidiary has any contract,
obligation or commitment which is material or which involves a potential
material commitment or any stock redemption or stock purchase agreement,
financing agreement, management agreement, services agreement, license, lease,
or stock option plan. For purposes of this Section 2.13, a contract, obligation
or commitment shall be deemed material if it requires future expenditures by the
Company or any Subsidiary in excess of $10,000 or might result in payments to
the Company or any Subsidiary in excess of $10,000. To the knowledge of the
Company and the Principal Shareholders, the Company and its Subsidiaries and
each other party to such agreement have performed all the obligations required
to be performed by them to date, have received no notice of default and are not
in default (with due notice or lapse of time or both) under the contracts,
obligations and commitments listed on Schedule 2.13 hereto which would have a
material adverse effect on the Company or its Subsidiaries, and such contracts,
obligations and commitments are in full force and effect on the date hereof.
2.14 Securities Act. The Company has complied and will comply
with all applicable federal or state securities laws in connection with the
issuance and sale of the Purchased Shares and the issuance of the Conversion
Shares upon conversion of the Purchased Shares. Neither the Company nor anyone
acting on its behalf has offered any of the Purchased Shares, or similar
securities, or solicited any offers to purchase any of such
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securities, so as to bring the issuance and sale of the Purchased Shares under
the registration provisions of the Securities Act. The Company has not granted
any rights relating to registration of its capital stock under the Securities
Act or state securities laws other than those contained in this Agreement.
2.15 Insurance Coverage. Schedule 2.15 hereto contains an accurate
summary of the insurance policies currently maintained by the Company and its
Subsidiaries. Except as described on Schedule 2.15, there are currently no
material claims pending against the Company or any Subsidiary under any
insurance policies currently in effect and covering the property, business or
employees of the Company and its Subsidiaries, and all premiums due and payable
with respect to the policies maintained by the Company and its Subsidiaries has
been paid to date.
2.16 Employee Matters. Except as set forth on Schedule 2.16 hereto,
neither the Company nor any Subsidiary has in effect any employment agreements,
consulting agreements, deferred compensation, pension or retirement agreements
or arrangements, bonus, incentive or profit-sharing plans or arrangements, or
labor or collective bargaining agreements, written or oral. Schedule 2.16 hereto
sets forth a true and complete list of the compensation paid to the Company's
three highest compensated employees for the two years ended July 31, 1994 and
1995. The Company and the Principal Shareholders have no knowledge that any of
the officers or other key employees of the Company or any Subsidiary presently
intends to terminate his employment. The Company and its Subsidiaries are in
compliance in all material respects with all applicable laws and regulations
relating to labor, employment, fair employment practices, terms and conditions
of employment, and wages and hours. The Company and each Subsidiary is in
material compliance with the terms of all plans, programs and agreements listed
on Schedule 2.16, and each such plan, program or agreement is in compliance with
all of the requirements and provisions of the Employee Retirement Income
Security Securities Act of 1974, as amended ("ERISA"). No such plan or program
has engaged in any "prohibited transaction" as defined in Section 4975 of the
Internal Revenue Code of 1986 (the "Code"), or has incurred any "accumulated
funding deficiency" as defined in Section 302 of ERISA, nor has any reportable
event as defined in Section 4043(b) of ERISA occurred with respect to any such
plan or program. Neither the Company nor any Subsidiary has or has maintained
any group health plan subject to Section 4980B of the Code or Section 162(i) or
(k) of the Code as amended by the Consolidated Omnibus Budget Reconciliation
Securities Act of 1985, as amended by the Technical and Miscellaneous Revenue
Securities Act of 1988. With respect to each plan listed on Schedule 2.16
hereto, to the knowledge of the Company and its Principal Shareholders all
required filings, including all filings required to be made with the United
States Department of Labor and Internal Revenue Service, have been timely filed.
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2.17 No Brokers or Finders. No person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company or any of its Subsidiaries for any commission, fee
or other compensation as a finder or broker because of any act or omission by
the Company or and of its Subsidiaries.
2.18 Transactions with Affiliates. Except as set forth on Schedule 2.18
hereto, there are no loans, leases or other continuing transactions between the
Company or any Subsidiary on the one hand, and any officer or director of the
Company or any Subsidiary or any person owning five percent (5%) or more of the
Common Stock of the Company or any respective family member or affiliate of such
officer, director or shareholder on the other hand.
2.19 Assumptions. Guarantees etc. of Indebtedness of Other Persons.
Neither the Company nor any Subsidiary has assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on or for any indebtedness of
any other Person, except guarantees by endorsement of negotiable instruments For
deposit or collection or similar transactions in the ordinary course of
business.
2.20 Restrictions on Subsidiaries. There are no restrictions on the
Company or any of its Subsidiaries which prohibit or otherwise restrict the
transfer of cash or other assets between the Company and any of its Subsidiaries
or between any Subsidiaries of the Company.
2.21 Disclosures. Neither this Agreement, any schedule or exhibit to this
Agreement, the Related Agreements, the Financial Statements, nor any other
agreement, document or written statement made by the Company or the Principal
Shareholders and furnished by the Company or the Principal Shareholders to the
Purchaser or the Purchaser's special counsel in connection with the transactions
contemplated hereby, contains any untrue statement of material fact or omits to
state any material fact necessary to make the statements contained herein or
therein not materially misleading. There is no material fact known to the
Company or the Principal Shareholders that has not been disclosed herein or in
any other material agreement, document or written statement furnished by the
Company or any of its Subsidiaries to the Purchaser or its special counsel in
connection with the transactions contemplated hereby which materially adversely
affects the business, properties, assets or financial condition of the Company
or any of its Subsidiaries.
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ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants on and after
the date hereof and until the consummation of the first Qualified Public
Offering:
3.1 Accounts and Reports. The Company will, and will cause each of its
Subsidiaries to, maintain a standard system of accounts in accordance with
generally accepted accounting principles consistently applied and the Company
will, and will cause each of its Subsidiaries to, keep full and complete
financial records. The Company will furnish to the Purchaser the information set
forth in this Section 3.1.
(a) Within ninety (90) days after the end of each fiscal year, a
copy of the consolidated and consolidating balance sheet of the Company and its
Subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and its Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all in
reasonable detail and duly certified by a "big six" independent public
accountant of national recognition selected by the Board of Directors of the
Company.
(b) Within thirty (30) days after the end of each calendar month,
a preliminary consolidated and consolidating balance sheet of the Company and
its Subsidiaries as of the end of such month and preliminary consolidated and
consolidating statements of income, shareholders, equity and cash flow for such
month and for the period commencing at the end of the previous fiscal year and
ending with the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail.
(c) Prior to the end of each fiscal year, a copy of the operating
plan and budget for the next fiscal year required under Section 3.7, in form
consistent with good business practice.
(d) Promptly upon receipt thereof, any written report, so called
"management letter", and any other communication submitted to the Company or
any Subsidiary by its independent public accountants relating to the business,
prospects or financial condition of the Company and its Subsidiaries.
(e) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instru-
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mentality, domestic or foreign, affecting the Company (or any Subsidiary) which,
if successful, could have a material adverse effect on the Company and its
Subsidiaries, taken as a whole; (ii) all material defaults by the Company or any
Subsidiary (whether or not declared) under any agreement for money borrowed; and
(iii) any action, event or circumstance that is reasonably likely to have a
material adverse effect on the Company or any Subsidiary, taken as a whole.
(f) Promptly upon sending, making available, or filing the same,
all reports and financial statements as the Company (or any Subsidiary) shall
send or make available generally to the shareholders of the company as such or
to the commission.
(g) Such other information with regard to the business, properties
or the condition or operations, financial or otherwise, of the Company or its
Subsidiaries as the Purchaser may from time to time reasonably request.
3.2 Payment of Taxes. The Company will pay and discharge (and cause any
Subsidiary to pay and discharge) all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company (or any Subsidiary), provided that neither the Company
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if the Company or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto.
3.3 Maintenance of Key Man Insurance. The Company will, at its expense,
within sixty (60) days of the Closing Date maintain a life insurance policy with
a responsible and reputable insurance-company payable to the Company on the life
of each of Nick Molina and Brett Beveridge, each in the face amount of $2
million. The Company will maintain such policies and will not cause or permit
any assignment of the proceeds of such policies and will not borrow against such
policies. The Company will add one designee of the Purchaser as a notice party
to such policies, and will request that the issuer of such policies provide such
designee with ten (10) days, notice before either of such policy is terminated
(for failure to pay premium or otherwise) or assigned, or before any change is
made in the designation of the beneficiary thereof.
3.4 Compliance with Laws, etc. The Company will comply (and cause each
of its Subsidiaries to comply) with all applicable laws, rules, regulations and
orders of any governmental authority, the noncompliance with which could
materially adversely affect the
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business or condition, financial or otherwise, of the Company and its
Subsidiaries, taken as a whole.
3.5 Inspection. At any reasonable time during normal business hours and
from time to time upon five (5) days written notice, the Company (and each of
its Subsidiaries) will permit the Purchaser who then owns, of record or
beneficially, or has the right to acquire, at least twenty-five percent (25%) of
the Conversion Shares, or any transferee of a Purchaser who owns, of record or
Beneficially, or has the right to acquire, at least five percent (at) of the
then outstanding Common Stock, or any of the agents or representatives of the
foregoing Persons, to examine and make copies of and extracts from the records
and books of account of and visit the properties of the Company (and any of its
Subsidiaries) and to discuss the Company's affairs, finances and accounts with
any of its officers or directors. If the Purchaser or its transferee or any of
their agents or representatives exercise their inspection rights under this
Section 3.5, then such Person shall agree to execute an acceptable
confidentiality agreement with the Company or its Subsidiaries regarding the
matters or materials to Le reviewed pursuant to such inspection.
3.6 Corporate Existence: Ownership of Subsidiaries. The Company will,
and will cause its Subsidiaries to, at all times preserve and keep in full force
and effect their corporate existence, and rights and franchises material to the
business of the Company and its Subsidiaries, taken as a whole, and will
qualify, and will cause each of its Subsidiaries to qualify, to do business as a
foreign corporation in any jurisdiction where the failure to do so would have a
material adverse effect on the business, condition (financial or other), assets,
properties or operations of the Company and its Subsidiaries, taken as a whole.
3.7 Board Of Directors. Prior to the end of each fiscal year, the
Company will prepare and submit to its Board of Directors for its approval prior
to such year end an operating plan and budget, cash flow projections and profit
and loss projections, all itemized in reasonable month by month detail for the
immediately following year. The budget shall be in form and substance
satisfactory to a majority of the Board of Directors. The Directors shall
schedule regular meetings not less frequently than once every sixty days.
3.8 Use of Proceeds. The Company shall use the proceeds from the sale
of the Purchased Shares in the manner and for the purposes set forth in Schedule
3.8 hereto and for no other manner or purpose.
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ARTIVLE IV
NEGATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and divisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary to
comply) with each of the provisions of this Article IV on and after the date
hereof and until the consummation of the first Qualified Public Offering;
provided, however, that the provisions of Section 4.2 shall continue in force
only so long as there are Purchased Shares outstanding.
4.1 Investments in Other Persons. The Company will not make or permit
any Subsidiary to make any loan or advance to any Person, or purchase, otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, the capital
stock, assets comprising the business of, obligations of, or any interest in,
any Person, except:
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America
and having a maturity of not more than one year from the date of
acquisition;
(ii) investments by the Company or a Subsidiary in certificates of
deposit, notes, acceptances and repurchase agreements having a maturity of
not more than one year from the date of acquisition issued by (A) a bank
organized in the United States having capital, surplus and undivided
profits of at least $250,000,000 or (B) Republic National Bank;
(iii) loans or advances from a Subsidiary to the Company or from a
Subsidiary to another Subsidiary;
(iv) investments by the Company or a Subsidiary in A-rated or
better commercial paper having a maturity of not more than one year from
the date of acquisition;
(v) investments by the Company or a Subsidiary in "money market"
fund shares, or in "money market" accounts fully insured by the Federal
Deposit Insurance Corporation and sponsored by banks and other financial
institutions, provided that such Money market fund or "money market"
accounts invest principally in investments of the types described in
clauses (i), (ii) or (iv) of this subsection 4.1; and
(vi) loans to employees in the aggregate amount of up to $7,500 for
any individual employee and up to $50,000 to all employees at any one
time.
4.2 Distributions. The Company will not declare or pay any dividends,
purchase, redeem, retire, or otherwise acquire for value
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any of its capital stock (or rights, options or warrants to purchase such
shares) now or hereafter outstanding, return any capital to its shareholders as
such, or make any distribution of assets to its shareholders as such, or permit
any Subsidiary to do any of the foregoing, except that the Subsidiaries may
declare and make payment of cash and stock dividends, return capital and make
distributions of assets to the Company and except that nothing herein contained
shall prevent the Company from: (i) effecting a stock split or declaring or
paying any dividend consisting of shares of any class of capital stock to the
holders of shares of such class of capital stock; (ii) complying with any
specific provision of the terms of the Preferred Stock as contained in Exhibit A
hereto relating to the payment of dividends, liquidation preferences or
redemption payments on or with respect to the Preferred Stock or redemption of
the Preferred Stock; or (iii) repurchasing the Purchased Shares or shares of
Common Stock from the Purchaser in accordance with the Redemption Agreement
attached as Exhibit C hereto.
4.3 Dealings with Affiliates. Except for the Consulting Agreement with
HIG Capital Management, Inc., the Company will not enter into (or permit any
Subsidiary to enter into) any transaction including, without limitation, any
loans or extensions of credit or royalty or services agreements with any officer
or director of the Company or any Subsidiary or holder of any class of capital
stock of the Company, or any member of their respective immediate families or
any corporation or other entity directly or indirectly controlled by one or more
of such officers, directors or shareholders or members of their immediate
families.
4.4 Merger. The Company shall not, and shall not permit any Subsidiary
to, merge or consolidate with any other corporation, or sell, assign, lease or
otherwise dispose of or voluntarily part with the control of (whether in one
transaction or in a series of transactions) all, or substantially all, of its
assets (whether now owned or hereinafter acquired) or sell, assign or otherwise
dispose of (whether in one transaction or in a series of transactions) any of
its accounts receivable (whether now in existence or hereinafter created) at a
discount or with recourse, to any Person, or permit any Subsidiary to do any of
the foregoing, (i) except for sales or other dispositions of assets in the
ordinary course of business, and (ii) except that (a) any wholly owned
Subsidiary may merge into or consolidate with or transfer assets to any other
wholly owned Subsidiary and (b) any wholly owned Subsidiary may merge into or
transfer assets to the Company.
4.5 Option Shares. The Company will not issue shares of its capital
stock and will not grant any options, rights or warrants to acquire its capital
stock to employees and directors of, and consultants to, the Company and its
Subsidiaries, except that not more than 50,000 shares of Common Stock, which
number includes options previously granted, may be issued to employees of
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20
the Company (other than the Principal Shareholders), which options granted after
the date hereof have an exercise price per share that is not less than the
greater of (a) fair market value of the Common Stock on the date of grant and
(b) the purchase price for the Purchased Shares. Each grant of stock options
shall be approved by the Compensation Committee of the Company's Board of
Directors established pursuant to the Shareholders' Agreement.
4.6 Indebtedness. The Company shall not (a) be liable for Indebtedness
in excess of the amounts set forth on Schedule 4.6 hereto at any time, (b) issue
additional capital stock, in each case, without the prior written consent of the
Purchaser and (c) repay or prepay any Indebtedness owed the Principal
shareholders except as set forth in Exhibit hereto.
4.7 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions. The Company shall not permit any of its Subsidiaries, directly or
indirectly, to create or suffer to exist or become effective any encumbrances or
restrictions on the ability of any of its Subsidiaries to (i) pay dividends or
make any other distributions on its capital stock or any other interest or
participation in its profit owned by any of the Company or any of its
Subsidiaries, or pay any indebtedness owed by any of the Subsidiaries, (ii) make
loans or advances to the Company, or (iii) transfer any of its properties or
assets to the Company.
4.8 No Conflicting Agreements. The Company agrees that neither it nor
any Subsidiary will, without the consent of the Purchaser, enter into or amend
any agreement, contract, commitment or understanding which would restrict or
prohibit the exercise by the Purchaser of any of their rights under this
Agreement or any of the Related Agreements.
4.9 Compensation; Consulting and Other Agreements. The Company shall not
pay to its management or consultants compensation in excess of that compensation
determined by the Compensation Committee of the Board of Directors established
pursuant to the Shareholders' Agreement.
4.10 Fundamental Changes. Without the consent of a majority of its Board
of Directors, the Company shall not (a) engage in any businesses other than the
businesses in which it is presently engaged or currently proposes to engage in
(including without limitation the business contemplated by the Kiosk Staffing
Agreement by and between Cellular Telephone Company and LTC Kiosk Corporation),
(b) sell, distribute, lease, manufacture or otherwise engage in the business of
new forms of wireless communications systems (including personal communications
systems) and (c) change cellular carriers within an existing geographic area
from the cellular carrier it is using as of the date of this Agreement in such
area Without the prior written consent of the Purchaser, the Company shall not
engage in any other business other than the sale
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and display of retail of communication devices and equipment including but not
limited to all types of cellular and mobile telephones, personal communicators,
long and short range cordless telephones, beepers and other types of paging
devices, radar detectors, facsimile machines, video and novelty telephones, any
device that transmits, receives or stores any type of data and any other types
of electronic devices and accessories related to all such devices and equipment;
provided, that any retail store may sell any other electric devices and
equipment so long as the sales of such other electric devices and equipment do
not exceed ten percent (10%) of such store's gross sales.
4.11 Capital Expenditures. The Company shall not make capital
expenditures in excess of the amounts set forth on Schedule 4.11 hereto without
the prior written consent of the Purchaser.
ARTICLE V
PREEMPTIVE RIGHT
5.1 Right of Purchase. The Company hereby grants to the Purchaser so
long as it shall own, of record or beneficially, or have the right to acquire,
any Purchased Shares, Conversion Shares or Common Stock, the right to purchase
all or part of its pro rata share of New Securities (as defined in Section 5.2)
which the Company, from time to time, proposes to sell and issue. A Purchaser's
pro rata share, for purposes of this preemptive right, is the ratio of the
number of Purchased Shares, Conversion Shares and shares of Common Stock which
such Purchaser owns or has the right to acquire to the total number of Purchased
Shares, Conversion Shares and shares of Common Stock then outstanding.
5.2 Definition of New Securities. "New Securities" shall mean any
capital stock of the Company whether now authorized or not, and rights, options
or warrants to purchase capital stock, and securities of any type whatsoever
that are, or may become convertible into or exchangeable for capital stock,
issued on or after the date hereof; provided that the term "New Securities" does
not include (I) securities purchased under this Agreement or Conversion Shares
issued upon conversion of the Purchased Shares, (ii) Common Stock issued as a
stock dividend to holders of Common Stock or upon any stock split, subdivision
or combination of shares of Common Stock, (iii) Preferred Stock issued as a
dividend to holders of Preferred Stock or upon any stock split, subdivision or
combination of Preferred Stock, (iv) the aggregate number of shares of Common
Stock issued upon exercise of options permitted under Section 4.5 hereof, and
(v) Common Stock issued to a new chief executive officer or President selected
by the Board of Directors and approved by the holders of a majority of the
Preferred Shares.
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5.3 Notice from the Company. In the event the Company proposes to
undertake an issuance of New Securities, it shall give the Purchaser written
notice of its intention, describing the type of New Securities and the price and
the terms upon which the Company proposes to issue the same. The Purchaser shall
have twenty (20) business days from the date of receipt of any such notice to
agree to purchase up to the Purchaser's pro rata share of such New Securities
for the price and upon the terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
5.4 Sale by the Company. In the event the Purchaser fails to exercise in
full its preemptive right, the Company shall have sixty (60) days thereafter to
sell the New Securities with respect to which and to the extent the Purchaser's
option was not exercised at a price and upon terms no more favorable to the
purchasers thereof than specified in the Company's notice. To the extent the
Company does not sell all the New Securities offered within said 60 day period,
the Company shall not thereafter issue or sell such New Securities without first
again offering such securities to the Purchaser in the manner provided above.
5.5 Termination of Rights. The rights granted to the Purchaser under
this Article V shall expire immediately prior to, and shall not apply in
connection with, the consummation of the first Qualified Public Offering.
ARTICLE VI
PURCHASER'S REPRESENTATIONS
6.1 Representations and Warranties. The Purchaser has all necessary
corporate power and has taken all necessary corporate action required for the
due authorization, execution, delivery and performance by the Purchaser of this
Agreement and the Related Agreements, and any other agreements or instruments
executed by the Purchaser in connection herewith or therewith and the
consummation of the transactions contemplated herein or therein. The Purchaser
hereby represents and warrants to the Company that, assuming due execution and
delivery by the Company of the Agreement and the Related Agreements, this
Agreement and the Related Agreements to which the Purchaser is a party
constitute legal, valid and binding obligations of the Purchaser, enforceable
against such Purchaser in accordance with their respective terms; the Purchaser
has been advised and understands that the Purchased Shares have not been
registered under the Securities Act, on the grounds that no distribution or
public offering of the Purchased Shares is to be effected, and that in this
connection, the Company is relying in part on the representations of the
Purchaser set forth in this Article VI; the Purchaser has been further advised
and understands that no public market now exists for any of the securities
issued
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23
by the Company and that a public market may never exist for the Purchased Shares
or Conversion Shares; the Purchaser is purchasing the Purchased Shares for
investment purposes, for its own account and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof; and by reason of its business or
financial experience, the Purchaser has the capacity to protect its own interest
in connection with the transactions contemplated hereunder.
6.2 Permitted Sales; Legends. Notwithstanding the foregoing
representations, the Company agrees that it will permit a distribution of
Purchased Shares or Conversion Shares by the Purchaser to one or more of its
affiliates and Qualified Institutional Buyers, as defined in Rule 144A of the
Securities Act, if (i) the transfer is in accordance with the Shareholders
Agreement, (ii) the transferee agrees in writing to be subject to the terms
hereof and the Shareholders Agreement to the same extent as if it were an
original Purchaser hereunder and (iii) a sale or other transfer of any of the
Purchased Shares or Conversion Shares upon obtaining an opinion of counsel
satisfactory to the Company that such transaction is exempt from the
registration requirements of, or is covered by an effective registration
statement under, the Securities Act and applicable state securities or
"blue-sky" laws.
6.3 Current Shareholder Guaranties. HIG Fund V, Inc., so long as it is a
holder of Purchased Shares, shall use all reasonable efforts (other than the
extension of money or credit accommodations) to assist the Principal
Shareholders in removing themselves as guarantors of the Company's outstanding
indebtedness and leases; provided, however, that nothing in this Section 6.3
shall result in any liability to HIG Fund V, Inc. in the event the Principal
Shareholders are unable to remove themselves as sureties for the Company's
obligations.
ARTICLE VII
REGISTRATION RIGHTS
7.1 Certain Definitions. As used in this Article VII, the following
terms shall have the following respective meanings:
"Holder" means the person who is then the record owner of Registrable
Securities, which have not been sold to the public.
"Initiating Holders" means any Purchaser or its assignee who in the
aggregate are holders of at least twenty-five percent (25%) of the Registrable
Securities.
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"Registrable Securities" means (i) all of the Conversion Shares owned by
the Purchaser, (ii) all other shares of Common Stock now owned or hereafter
acquired by the Purchaser; (iii) all shares of Common Stock issuable with
respect to securities of the Company convertible into or exercisable for shares
of Common Stock now owned or hereafter acquired by the Purchaser; and (iv) any
Common Stock issued in respect of the shares described in clauses (i) through
(iii) upon any stock split, stock dividend, recapitalization other similar
event.
The term "registers" means to register under the Securities Act and
applicable state securities laws for the purpose of effecting a public sale of
securities.
"Registration Expenses" means all expenses incurred by the Company in
compliance with Sections 7.2, 7.3 or 7.5 hereof, including, without limitation,
all registration and filing fees, printing expenses, transfer taxes, fees and
disbursements of counsel for the Company, blue sky fees and expenses, reasonable
fees and disbursements of one counsel for all the selling Holders and other
security holders, and the expense of any special audits incident to or required
by any such registration.
"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
7.2 Requested Registrations.
(a) If after the earlier of (i) the fourth anniversary of the date
hereof and (ii) the consummation of a public offering by the Company, the
Company shall receive from one or more Initial Holders a written request that
the Company effect the registration of Registrable Securities representing at
least twenty five percent (25%) of the Registrable Securities then outstanding
or issuable and the reasonably anticipated aggregate price to the public of the
Registrable Securities to be included in such registration would exceed $5
million, in connection with a firm commitment underwriting financed by a
nationally recognized underwriter, the Company shall:
(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration as may be so requested and as would permit or facilitate the
sale and distribution of such portion of such Registrable Securities as
are specified in such request, together with such portion of the
Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request given within thirty (30) days after
receipt of such written notice from the Company. If
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the underwriter managing the offering advises the Holders who have
requested inclusion of their Registrable Securities in such registration
that marketing considerations require a limitation on the number of shares
offered, such limitation shall be imposed pro rata among such Holders who
requested inclusion of Registrable Securities in such registration
according to the number of Registrable Securities each such Holder
requested to be included in such registration. Neither the Company nor any
other shareholder may include shares in a registration effected under this
Section 7.2 without the consent of the Holders holding a majority of the
Registrable Securities sought to be included in such registration if the
inclusion of shares by the Company or the other shareholders would limit
the number of Registrable Securities sought to be included by the Holders
or reduce the offering price thereof. No registration initiated by
Initiating Holders hereunder shall count as a registration under this
Section 7.2 unless and until it shall have been declared effective.
(iii) the Holders of the Purchased Shares and the Conversion Shares
shall have the right to demand registration twice under this Section
7.2(a).
(b) Selection of Underwriter. The underwriter of any underwriting
requested under this Section 7.2 shall be selected by the Holders holding a
majority of the Registrable Securities included therein; provided that such
underwriter must be acceptable to the Company.
7.3 "Piggy Back" Registrations.
(a) If the Company shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders exercising their registration rights, other than a registration relating
solely to employee benefit plans, or a registration on any registration form
which does not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company shall:
(i) Promptly give to each Holder of Registrable Securities written
notice thereof (which shall include the number of shares the Company or
other security holder proposes to register and, if known, the name of the
proposed underwriter); and
(ii) Use its best efforts to include in such
registration all the Registrable Securities specified in a written request
or requests, made by any Holder within ten (10) days after the date of
delivery of the written notice from the Company described in clause (I)
above. If the
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underwriter advises the Company that marketing considerations require a
limitation on the number of shares offered pursuant. to any registration
statement, then the Company may offer all of the Securities it proposes to
register for its own account or the maximum amount that the underwriter
considers saleable and such limitation on any remaining securities that
may, in the opinion of the underwriter, be sold will be imposed pro rata
among all Shareholders who are entitled to include shares in such
Registration Statement according to the number of Registrable Securities
each such shareholder requested to be included In such registration
statement.
(b) The Company shall select the underwriter for an offering made
pursuant to this Section 7.3.
7.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 7.2, 7.3 or 7.5 shall be paid by the Company. All Selling Expenses
incurred in connection with any such registration, qualification or compliance
shall be borne by the holders of the securities registered, pro rata on the
basis of the number of their shares so registered.
7.5 Registration on Form S-3. The Company shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Securities Exchange Act of 1934 (the "Exchange Act)
in Accordance with the provisions of the Exchange Act following the effective
date of the first registration of any securities of the Company on Form S-1 or
any comparable or successor form. After the Company has qualified for the use of
Form S-3, in addition to the rights contained in the foregoing provisions of
this Article VII, the Holders of Registrable Securities shall have the right to
request registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended methods of disposition of such shares by such Holder or Holders);
provided that in no event shall the Company be required to register shares with
an aggregate market value of less than $500,000.
7.6 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Article VII, the Company shall keep each Holder
of Registrable Securities included in such registration advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense, the Company shall do the following for the benefit of such Holders:
(a) Use its best efforts to keep such registration effective for a
period of one hundred twenty (120) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first
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occurs, and amend or supplement such registration statement and the prospectus
contained therein from time to time to the extent necessary to comply with the
Securities Act and applicable state securities laws;
(b) Use its best efforts to register or qualify the Registrable
Securities covered by such registration under the applicable securities or "blue
sky" laws of such jurisdictions as the selling shareholders may reasonably
request; provided, that the Company shall not be obligated to qualify to do
business in any jurisdiction where it is not then so qualified or otherwise
required to be so qualified or to take any action which would subject it to the
service of process in suits other than those arising out of such registration;
(c) Furnish such Number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
(d) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 7.2 hereof, the Company shall
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by the Holders and
provided further that, if the underwriter so requests, the underwriting
agreement shall contain customary indemnification and contribution provisions on
the part of the Company;
(e) To the extent then permitted under applicable professional
guidelines and standards, obtain a comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters and an opinion from the Company's counsel
in customary form and covering such matters of the type customarily covered in a
public issuance of securities, in each case addressed to the Holders, and
provide copies thereof to the Holders; and
(f) Permit the counsel to the selling shareholders to inspect and
copy such corporate documents as he may reasonably request.
7.7 Indemnification.
(a) The Company shall, and hereby does, indemnify each Holder,
each of its officers and stockholders, and each person controlling such Holder
within the meaning of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Article VII, and
each underwriter, if any, and each person who controls such underwriter within
the meaning of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or
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based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or: other document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein of
necessary to make the statements therein not misleading, or an, violation by the
Company of the Securities Act or the Exchange Act or the securities act of any
state or any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and shall reimburse each such
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, whether or not resulting in any liability, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement (or alleged untrue statement) or omission (or alleged omission)
based upon written information furnished to the Company by such Holder or
underwriter and stated to be specifically for use therein.
(b) Each Holder shall, if Registrable Securities held by him are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act and the rules and
regulations thereunder, each other such Holder and each of their officers,
directors and partners, and each person controlling such Holder, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
Holder's directors, officers, partners, persons, underwriters or control persons
for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
whether or not resulting in liability, in each case to the extent, but only to
the extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in Conformity with
written information furnished to the Company by such Holder and stated to be
specifically for use therein;
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provided, however, that the obligations of each Holder hereunder shall be
limited to an amount equal to the net proceeds received by such Holder upon sale
of his securities.
(c) Each party entitled to indemnification under this Section 7.7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought, but
the failure of any Indemnifying Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Section 7.7 (except and to the
extent the Indemnifying Party has been prejudiced as a consequence thereof). The
Indemnifying Party shall be entitled to participate in, and to extent that it
may elect by written notice delivered to the Indemnified Party promptly after
receiving the aforesaid notice from such Indemnified Party, at its expense to
assume, the defense of any such claim or any litigation resulting therefrom,
with counsel reasonably satisfactory to such Indemnified Party, provided that
the Indemnified Party may participate in such defense at its expense,
notwithstanding the assumption of such defense by the Indemnifying Party, and
provided, further, that if the defendants in any such action shall include both
the Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be legal defenses available to it
and/or other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, the Indemnified Party or Parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
Indemnified Party or Parties and the fees and expenses of such counsel shall be
paid by the Indemnifying Party. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall (i) furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom and
(ii) shall reasonably assist the Indemnifying Party in any such defense,
provided that the Indemnified Party shall not be required to expend its funds in
connection with such assistance.
(d) No Holder shall be required to participate in a registration
pursuant to which it would be required to execute an underwriting agreement in
connection with a registration effected under Section 7.2 or 7.3 which imposes
indemnification or contribution obligations on such Holder more onerous than
those imposed hereunder; provided, however, that the Company shall not be deemed
to breach the provisions of Section 7.2 or 7.3 if a Holder
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is not permitted to participate in a registration on account of his refusal to
execute an underwriting agreement on the basis of this subsection (d).
7.8 Limitations on Registration Rights. From and after the date of
this Agreement, the Company shall not enter into any agreement with any holder
or prospective holder of any securities of the Company giving such holder or
prospective holder (a) the right to require the Company, upon any registration
of any of its securities, to include, among the securities which the Company is
then registering, securities owned by such holder, unless under the terms of
such agreement, such holder or prospective holder may include such securities in
any such registration only to the extent that the inclusion of its securities
will not limit the number of Registrable Securities sought to be included by the
Holders of Registrable Securities or reduce the offering price thereof; or (b)
the right to require the Company to initiate any registration of any securities
of the Company.
7.9 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of restricted securities (as that term is used in Rule 144 under the
Securities Act) to the public without registration, the Company agrees to use
its best efforts to:
(a) make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times from and after ninety days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as a Purchaser owns any restricted securities,
furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Purchaser may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Purchaser to sell any such
securities without registration.
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7.10 Listing Application. If shares of any class of stock of the Company
shall be listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the shares of the listed
class then owned by any Purchaser.
7.11 Damages. The Company recognizes and agrees that the holder of
Registrable Shares shall not have an adequate remedy if the Company fails to
comply with the provisions of this Article VII, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Holder of Registrable Shares shall be entitled to seek specific
performance of the Company's obligations hereunder and that the Company will not
oppose an application seeking such specific performance.
ARTICLE VIII
CONDITIONS OF THE PURCHASER'S OBLIGATION
8.1 Effect of Conditions. The obligation of the Purchaser to purchase
and pay for the Purchased Shares at the Closing shall be subject to the
satisfaction of each of the conditions stated in the following Sections of this
Article.
8.2 Representations and Warranties. The representations and warranties
of the Company and the Principal Shareholders Contained in this Agreement shall
be true and correct on the date of the Closing, and the Purchaser shall have
received a certificate dated as of such Closing and signed on behalf of the
Company and the Principal Shareholders to that effect.
8.3 Performance. The Company and the Principal Shareholders shall have
performed and complied with all of the agreements, covenants and conditions
contained in this Agreement required to be performed or complied with by it and
him at or prior to the Closing, and the Purchaser shall have received a
certificate dated as of such Closing and signed on behalf of the Company and by
the Principal Shareholders to that effect.
8.4 Board Election. Concurrently with the Closing, the Board of
Directors of the Company shall have been expanded to comply with the provisions
of the Shareholders' Agreement.
8.5 Certified Documents. etc. Counsel for the Purchaser shall have
received a copy of the Company's Articles of Incorporation, as amended,
certified by the Secretary of State of the State of Florida and copies of the
Company's By-Laws certified by its Secretary, as well as any and all other
documents, including certificates as to votes adopted and incumbency of officers
and certificates from appropriate authorities as to the legal existence
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and tax good standing of the Company and its Subsidiaries, which the Purchaser
or its counsel may reasonably request.
8.6 Amendment to Articles of Incorporation. The Articles of
Incorporation of the Company shall have been amended to provide for the
authorization of the Preferred Stock with the terms set forth in Exhibit A
hereto.
8.7 Shareholders' Agreement. A Shareholders' Agreement in the form of
Exhibit B attached hereto shall have been executed by he Company and the
shareholders named therein.
8.8 Redemption Agreement. A Redemption Agreement in the form of Exhibit
C attached hereto shall have been executed by the Company.
8.9 Opinion of Counsel. The Purchaser shall have received an opinion,
dated the date of the Closing, from Steel, Hector & Davis, counsel to the
Company, substantially in the form attached as Exhibit D hereto.
8.10 Employment Agreements. The Principal Shareholders shall have
executed an Employment Agreement in the form of Exhibit E hereto.
8.11 Consulting Agreement. A Consulting Agreement in the form of Exhibit
F attached hereto shall have been executed by the Company.
8.12 Shareholder Indebtedness. The Company and the Principal Shareholders
shall have amended and restated all of the Company's indebtedness to the
Principal Shareholders on the terms and the conditions as set forth in the form
of promissory note attached as Exhibit G hereto.
8.13 Side Letters. Mr. Sorenson and Ms. Gozlan, Republic National Bank
and AT&T shall have executed their respective side letters as set forth in
Exhibit H hereto.
ARTICLE IX
CONDITIONS OF THE COMPANY'S OBLIGATION
The obligations of the Company under this Agreement are subject to the
fulfillment, or the waiver, of the following conditions on or before the
Closing:
(a) The representations and warranties of the Purchaser contained in
Article VI shall be true and correct on and as of the date of Closing with the
same effect as though such representations and warranties had been made on and
as of that date.
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(b) The Purchaser shall have performed and complied with all agreements
and conditions contained in this Agreement required to be performed or complied
with by the Purchaser prior to or at the Closing.
ARTICLE X
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Agreement" means this Series A Preferred Stock Purchase Agreement as from
time to time amended and in effect between the parties.
"Applicable Conversion Value" shall mean the Applicable Conversion Value
of the Preferred Stock under Section 5(c) of Exhibit A.
"Closing" shall have the meaning set forth in Section 1.3.
"Commission" shall have the meaning set forth in Section 2.3.
"Common Stock" will include (a) the Company's Common Stock, par value
$1.00 per share, as authorized on the date of this Agreement, (b) any other
capital stock of any class or classes of the Company authorized on or after the
date hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and (c) any other securities of the Company into
which or for which any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
"Company" means and shall include Let's Talk Cellular of America, Inc., a
Florida corporation, and its successors and assigns.
"Conversion Shares" shall have the meaning set forth in Section 1.2.
"Escrow Accounts" shall mean the account established in the Custody of the
Escrow Agent pursuant to the Escrow Agreement.
"Escrow Agents" shall mean Greenberg, Traurig and its permitted successors
and assigns.
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"Escrow Agreement" shall mean that certain escrow agreement by and among
the Company, the Purchaser and the Escrow Agent in the form of Exhibit H hereto.
"Holders" shall have the meaning set forth in Section 7.1.
"Indebtedness" means all obligations, contingent and otherwise, for
borrowed money which are required to be reflected an indebtedness on a balance
sheet prepared in accordance with generally accepted accounting principles
including, without limitation, any current portion of long-term indebtedness,
capitalized leases and all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
"Indemnified Party" shall have the meaning set forth in Section 7.7.
"Indemnifying Party" shall have the meaning set forth in Section 7.7.
"Initiating Holders" shall have the meaning set forth in Section 7.1.
"New Securities" shall have the meaning set forth in Section 5.2.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Preferred Stock" shall have the meaning set forth in Section 1.1
"Purchased Shares" shall have the meaning set forth in Section 1.1.
"Purchaser" shall have the meaning set forth in Section 1.1.
"Qualified Public Offerings" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the Securities Act covering the offer and sale of Common Stock
for the account of the Company in which the aggregate net proceeds to the
Company equal at least $10,000,000 and in which the price per share of Common
Stock equals or exceeds one point seven five (1.75) times the then Applicable
Conversion Value of the Preferred Stock under Section 5(c) of Exhibit A.
"Registrable Securities" shall have the meaning set forth in Section 7.1.
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"Registration Expense" shall have the meaning set forth in Section 7.1.
"Related Agreements" shall have the meaning set forth in Section 2.2.
"Securities Acts" means the Securities Act of 1933, as amended.
"Selling Expenses" shall have the meaning set forth in Section 7.1.
"Subsidiary" or "Subsidiaries" means any corporation, association or other
business entity of which the Company and/or any of its other Subsidiaries tan
herein defined) directly or indirectly owns at the time more than fifty percent
(50~) of the outstanding voting shares of every class of such corporation or
trust other than directors' qualifying shares.
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations. The representations, warranties,
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby for a period of six (6)
months from the date of Closing, or to the extent otherwise specifically set
forth herein.
11.2 Parties in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto (including transferees
of any of the Purchased Shares or Conversion Shares); provided, however, that
the Company may not assign interests hereunder without the consent of the
Purchaser.
11.3 Shares Owned by Affiliates. For the purpose. of applying all
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares, the shares owned of record by any affiliate of a
Purchaser shall be deemed to be owned by such Purchaser. For the purpose of this
Agreement, the term "affiliate" shall mean any Person controlling, controlled by
or under common control with, a Purchaser.
11.4 Amendments and Waivers. Amendments or additions to this Agreement
may be made, agreements with any decision of the
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Company may be made, and compliance with any term, covenant, agreement,
condition or provision net forth herein may be omitted or waived (either
generally or in a particular instance and either retroactively or prospectively)
upon the written consent of the company and the holders of a majority of the
issued and issuable conversion Shares. Prompt notice of any such amendment or
waiver shall be given to any Person who did not consent thereto. This Agreement
(including the schedules and exhibits annexed hereto, which are an integral part
of this Agreement) constitutes the full and complete agreement of the parties
with respect to the subject matter hereof.
11.5 Notices. All notices, requests, consents, reports and demands shall
be in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or mailed, postage prepaid, to the Company or to the Purchaser at the
address net forth below or to such other address as may be furnished in writing
to the other parties hereto:
The Company: Let's Talk Cellular of America, Inc.
5200 N.W. 77th Court
Miami, Florida 33166
Attention: Mr. Nick Molina
with copy to: Steel, Hector & Davis
200 South Biscayne Blvd.
Miami, Florida
Attention: Harvey Goldman, Esquire
The Purchaser: HIG Fund V, Inc.
c/o HIG Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, Florida 33131
Attn: Mr. Anthony Tamer
with copy to: Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Guentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Jorge L. Freeland, Esquire
11.6 Expenses. The Company will pay its own expenses and the legal fees
and legal expenses of the Purchaser in connection with the transactions
contemplated hereby.
11.7 Counterparts. This Agreement and any exhibit hereto may be executed
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument.
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11.8 Effect of Headings. The article and section headings herein are for
convenience only and "hall not affect the construction hereof
11.9 Adjustments. All provisions of thin Agreement shall be automatically
adjusted to reflect any stock dividend, stock split or other such form of
recapitalization.
11.10 Governing Law. This Agreement shall be deemed a contract made under
the internal laws of the State of Florida and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such State.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.
Very truly yours,
PRINCIPAL SHAREHOLDERS: Let's Talk Cellular of America,
Inc.
/s/ Nick Molina
- ------------------------------- /s/ Nick Molina
Nick Molina -------------------------------
By: Nick Molina
----------------------------
/s/ Brett Beveridge Name:
- ------------------------------- Title: President
Brett Beveridge
PURCHASER:
HIG Fund V, Inc.
/s/ Anthony Tamer
-------------------------------
By: Anthony Tamer
----------------------------
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CONVERSION AGREEMENT, dated as of the 27th day of June, 1997, by and
between Let's Talk Cellular & Wireless, Inc., a Florida corporation f/k/a Let's
Talk Cellular of America Inc. ("LTC"), HIG Fund V, Inc., a Cayman Islands
corporation ("HIG"), and Texas Cellular Partners, L.P., a Delaware limited
partnership ("TCP").
WHEREAS, HIG currently owns 100,000 shares of Series A Preferred Stock of
LTC (the "Preferred Stock"), purchased pursuant to that certain Series A
Preferred Stock Purchase Agreement, dated as of June 25, 1996 (the "Purchase
Agreement"), by and between LTC and HIG.
WHEREAS, LTC has requested that HIG convert the Preferred Stock into
Common Stock of LTC, par value $.001 per share (the "Common Stock");
WHEREAS, LTC is willing to provide HIG with additional shares of Common
Stock as consideration for HIG's agreement to convert the Preferred Stock prior
to LTC's optional redemption date and for giving up certain rights and
privileges granted to HIG incident thereto;
WHEREAS, HIG has agreed to convert the Preferred Stock into Common Stock
and LTC has agreed to issue Common Stock to HIG on the terms and subject to the
conditions set forth herein; and
WHEREAS, the parties hereto have agreed to terminate certain provisions of
the Purchase Agreement and amend the Purchase Agreement to provide TCP with
registration rights equivalent to those of HIG.
NOW, THEREFORE, the parties hereby agree as follows:
1. Agreement to Convert. HIG agrees to convert its 100,000 shares of
Preferred Stock in return for 650,000 shares of Common Stock, and hereby
delivers to LTC HIG's stock certificates representing the Preferred Stock.
2. Issuance of Shares. LTC hereby agrees to issue to HIG on the date
hereof 650,000 shares of Common Stock as consideration for HIG's conversion of
its Preferred Stock on the date hereof and HIG's agreement to give up the rights
and privileges incident thereto prior to LTC's optional redemption date.
3. Termination of Purchase Agreement Provisions. Articles III, IV and V
of the Purchase Agreement are hereby terminated in their entirety.
4. Registration Rights. The definition of Registrable Securities in
Section 7.1 of the Purchase Agreement is hereby amended and restated in its
entirety as follows:
"Registrable Securities" means (i) all of the Conversion Shares owned by
the Purchaser, (ii) all other shares of Common Stock now owned or hereafter
acquired by the Purchaser or TCP; (iii) all shares of Common Stock issued with
respect to securities of the Company convertible into or exercisable for shares
of Common Stock now owned or hereafter acquired by
39
the Purchaser or TCP; and (iv) any Common Stock issued in respect of shares
described in clauses (i) through (iii) upon any stock split, stock dividend,
recapitalization or other similar event.
40
IN WITNESS WHEREOF, the undersigned have execute this Agreement as of the
date first above written.
LETS TALK CELLULAR & WIRELESS, INC.
By: /s/Nick Molina
---------------------------------
Name: Nick Molina
Title: Chief Executive Officer
HIG FUND V,INC.
By: /s/Anthony Tamer
---------------------------------
Name: Anthony Tamer
Title: President
TEXAS CELLULAR PARTNERS, L.P.
By: HIG TEXAS CELLULAR COMPANY
By: /s/Douglas Berman
---------------------------------
Name: Douglas Berman
Title: Vice President
41
Exhibit A
Let's Talk Cellular of America, Inc.
DESCRIPTION OF SERIES A PREFERRED STOCK
1. Designation. The 150,000 shares of Series A Convertible
Preferred Stock, par value $30.00 per share (the "Preferred Stock"), shall have
the following rights, terms and privileges:
2. Dividends. In the event the Company shall make or issue, or
shall fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution with respect to the Common
Stock payable in (i) securities of the Company other than shares of Common Stock
or (ii) assets, then and in each such event the holders of Preferred Stock shall
receive, at the same time such distribution is made with respect to Common
Stock, the number of securities or such other assets of the Company which they
would have received had their Preferred Stock been converted into Common Stock
immediately prior to the record date for determining holders of Common Stock
entitled to receive such distribution.
3. Liquidation, Dissolution or Winding Up
(a) Treatment at Liquidation, Dissolution or Winding Up.
In the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary (collectively, a "Liquidation"), before any
distribution may be made with respect to the Common Stock or any other series of
capital stock, holders of each share of Preferred Stock shall be entitled to be
paid out of the assets of the Company available for distribution to holders of
the Company's capital stock of all classes, whether such assets are capital,
surplus, or capital earnings, an amount equal to $30 per share of Preferred
Stock (which amount shall be subject to equitable adjustment whenever there
shall occur a stock split, combination, reclassification or other similar event
involving the Preferred Stock) (the "Liquidation Amount").
If the assets of the Company available for distribution to its
shareholders shall be insufficient to pay the holders of shares of Preferred
Stock the full amount of the Liquidation Amount to which they shall be entitled,
the holders of shares of Preferred Stock shall share ratably in any distribution
of assets according to the amounts which would be payable with respect to the
shares of Preferred Stock held by them upon such distribution if all amounts
payable on or with respect to said shares were paid in full.
After the payment of the Liquidation Amount shall have been
made in full to the holders of the Preferred Stock or funds necessary for such
payment shall have been set aside by the Company
A-1
42
in trust for the account of holders of the Preferred Stock so as to be available
for such payments, the holders of the Preferred Stock shall be entitled to no
further participation in the distribution of the assets of the Company, and the
remaining assets of the Company legally available for distribution to its
shareholders shall be distributed among the holders of other classes of secur
ities of the Company in accordance with their respective terms.
(b) Treatment of Reorganizations. Any Reorganization (as
such term is defined in Section 5(f)), shall be regarded as a liquidation,
dissolution or winding up of the affairs of the Company within the meaning of
this Section 3; provided, however, that each holder of Preferred Stock shall
have the right to elect the benefits of the provisions of Section 5(h) hereof,
if applic able, in lieu of receiving payment of amounts payable upon liquid
ation, dissolution or winding up of the Company pursuant to this Section 3.
(c) Distributions in Cash. The Liquidation Amount shall
in all events be paid in cash. Whenever a distribution provided for in this
Section 3 is payable in property other than cash, the value of such distribution
shall be the fair market value of such property as determined in good faith by
the Company's Board of Directors.
4. Voting Power. Except as otherwise expressly provided in
Section 8 hereof, or as required by law, each holder of Preferred Stock shall be
entitled to vote on all matters and shall be entitled to that number of votes
equal to the largest number of whole shares of Common Stock into which such
holder's shares of Preferred Stock could be converted, pursuant to the
provisions of Section 5 hereof, at the record date for the determination of
shareholders entitled to vote on such matter or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholders is solicited. Except as otherwise expressly provided herein or as
required by law, the holders of shares of Preferred Stock and Common Stock shall
vote together as a single class on all matters.
5. Conversion Rights for the Preferred Stock. The holders of the
Preferred Stock shall have following rights with respect to the conversion of
the Preferred Stock into shares of Common Stock:
(a) General. Subject to and in compliance with the
provisions of this Section 5, any share of the Preferred Stock may, at the
option of the holder, be converted at any time into fully-paid and
non-assessable shares of Common Stock. The number of shares of Common Stock to
which a holder of Preferred Stock shall be entitled upon conversion shall be the
product obtained by multiplying the Applicable Conversion Rate (determined as
provided in Section 5(b)) by the number of shares of Preferred Stock being
converted.
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(b) Applicable Conversion Rate. The conversion rate in
effect at any time (the "Applicable Conversion Rate") shall be the quotient
(rounded to the hundredth) obtained by dividing $30.00 by the Applicable
Conversion Value, calculated as provided in Section 5(c); provided, however, if
on the date the conversion is proposed, (i) a Triggering Event has occurred or
can reasonably be expected to occur within the next thirty (30) days, and (ii)
the Preferred Stock Valuation (based upon an Applicable Conversion Rate of
$30.00 divided by the Applicable Conversion Value) is less than the Hurdle Rate,
then the Applicable Conversion Rate applicable at all times thereafter shall be
the quotient obtained by dividing $45.60 by the Applicable Conversion Value,
calculated as provided in Section 5(c). For purposes of this Section 5, the
following terms shall have the following meanings:
(i) "Hurdle Rate" shall mean the amount equal to
$30.00 plus an amount accruing thereon at a compounded rate of twenty
percent (20%) per annum commencing from the Closing Date until the date
of determination of the Applicable Conversion Rate (which amount shall
be subject to equitable adjustment whenever there shall occur a stock
split, combination, reclassification or other similar event involving
the Preferred Stock).
(ii) "Triggering Event" shall mean the earlier to
occur of (A) a Public Offering, (B) a Reorganization, (C) a
Liquidation, or (D) June 25, 2001.
(iii) "Preferred Stock Valuation" shall mean the
per share fair market value of the consideration received or receivable
by a Holder upon the sale or exchange of a share of the Preferred Stock
in connection with, or at the time of, a Triggering Event (which amount
shall be subject to equitable adjustment whenever there shall occur a
stock split, combination, reclassification or other similar event
involving the Preferred Stock).
(c) Applicable Conversion Value. The Applicable
Conversion Value shall be $8.57, except that such amount shall be adjusted from
time to time in accordance with this Section 5.
(d) Adjustments to Applicable Conversion Values.
(i) (A) Upon Sale of Common Stock. If the
Company shall, while there are any shares of Preferred Stock
outstanding, issue or sell (or in accordance with Section 5(d)(i)(B)
below is deemed to have issued or sold) shares of its Common Stock
without consideration or at a price per share less than the Applicable
Conversion Value in effect immediately prior to such issuance or sale,
then in each such case such Applicable Conversion Value for the
Preferred Stock, upon each such issuance or sale, except as hereinafter
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provided, shall be lowered so as to be equal to an amount determined by
multiplying the Applicable Conversion Value by a fraction:
(1) the numerator of which shall be (a)
the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares of Common Stock, plus (b) the
number of shares of Common Stock which the net aggregate consideration,
if any, received by the Company for the total number of such additional
shares of Common Stock so issued would purchase at the Applicable
Conversion Value in effect immediately prior to such issuance, and
(2) the denominator of which shall be
(a) the number of shares of Common Stock outstanding immediately prior
to the issuance of such additional shares of Common Stock plus (b) the
number of such additional shares of Common Stock so issued.
(B) Upon Issuance of Warrants, Options and
Rights to Common Stock.
(1) For the purposes of this Section
5(d)(i), the issuance of any warrants, options, subscriptions, or
purchase rights with respect to shares of Common Stock and the issuance
of any securities convertible into or exchangeable for shares of Common
Stock (or the issuance of any warrants, options or any rights with
respect to such convertible or exchangeable securities) shall be deemed
an issuance of such Common Stock at such time if the Net Consideration
Per Share (as hereinafter determined) which may be received by the
Company for such Common Stock shall be less than the Applicable
Conversion Value at the time of such issuance. Any obligation,
agreement, or undertaking to issue warrants, options, subscriptions, or
purchase rights at any time in the future shall be deemed to be an
issuance at the time such obligation, agreement or undertaking is made
or arises. No adjustment of the Applicable Conversion Value shall be
made under this Section 5(d)(i) upon the issuance of any shares of
Common Stock which are issued pursuant to the exercise of any warrants,
options, subscriptions, or purchase rights or pursuant to the exercise
of any conversion or exchange rights in any convertible securities if
any adjustment shall previously have been made or deemed not required
hereunder, upon the issuance of any such warrants, options, or
subscription or purchase rights or upon the issuance of any convertible
securities (or upon the issuance of any warrants, options or any rights
therefor) as provided above.
Should the Net Consideration Per Share of any such warrants, options,
subscriptions, or purchase rights or convertible
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securities be decreased from time to time, then, upon the effectiveness
of each such change, the Applicable Conversion Value shall be adjusted
to such Applicable Conversion Value as would have obtained (1) had the
adjustments made upon the issuance of such warrants, options, rights,
or convertible securities been made upon the basis of the decreased Net
Con sideration per share of such securities, and (2) had adjust ments
made to the Applicable Conversion Value since the date of issuance of
such securities been made to the Applicable Conversion Value as
adjusted pursuant to (1) above.
(2) For purposes of this paragraph, the "Net
Consideration Per Share" which may be received by the Company shall be
determined as follows:
(i) The "Net Consideration Per Share"
shall mean the amount equal to the total amount of con sideration, if
any, received by the Company for the issuance of such warrants,
options, subscriptions, or other purchase rights or convertible or
exchangeable securities, plus the minimum amount of consideration, if
any, payable to the Company upon exercise or conversion thereof,
divided by the aggregate number of shares of Common Stock that would be
issued if all such warrants, options, subscriptions, or other purchase
rights or convertible or exchangeable securities were exercised,
exchanged, or converted.
(ii) The "Net Consideration Per Share"
which may be received by the Company shall be determined in each
instance as of the date of issuance of warrants, options,
subscriptions, or other purchase rights or convertible or exchangeable
securities without giving effect to any possible future upward price
adjustments or rate adjustments which may be applicable with respect to
such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities.
(C) Stock Dividends. In the event the Company
shall make or issue a dividend or other distribution payable in Common
Stock or securities of the Company convertible into or otherwise
exchangeable for the Common Stock of the Company, then such Common
Stock or other securities issued in payment of such dividend shall be
deemed to have been issued without consideration (except for dividends
payable in shares of Common Stock payable pro rata to holders of
Preferred Stock and to holders of any other class of stock).
(D) Consideration Other than Cash. For purposes
of this Section 5(d), if a part or all of the consideration received by
the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this
Section 5(d) consists of
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property other than cash, such consideration shall be deemed to have a
fair market value as is reasonably determined in good faith by the
Board of Directors of the Company.
(E) Exceptions. This Section 5(d)(i) shall not
apply under any of the circumstances which would constitute an
Extraordinary Common Stock Event (as hereinafter defined in Section
5(d)(ii)). Further, the provisions of this Section 5(d) shall not apply
to (i) shares issued upon conversion of the Preferred Stock, or (ii)
options (and the shares issuable upon exercise thereof) to purchase up
to an aggregate of 50,000 shares of Common Stock (including options
outstanding on the date hereof) issued to employees of the Company, as
provided in Section 4.5 of that certain Series A Preferred Stock
Purchase Agreement, dated as of June 25, 1996 (the "Purchase
Agreement") as amended from time to time. The number of shares in this
Section (E) shall be proportionately adjusted to reflect any stock
dividend, stock split or other form of recapitalization occurring after
the date hereof.
(ii) Upon Extraordinary Common Stock Event. Upon
the happening of an Extraordinary Common Stock Event (as hereinafter
defined), the Applicable Conversion Value for the Preferred Stock
shall, simultaneously with the happening of such Extraordinary Common
Stock Event, be adjusted by multiplying the then effective Applicable
Conversion Value with respect to the Preferred Stock by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such Extraordinary Common Stock Event
and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such Extraordinary Common Stock
Event, and the product so obtained shall thereafter be the Applicable
Conversion Value. The Applicable Conversion Value for the Preferred
Stock shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (i) the issue of
additional shares of Common Stock as a dividend or other distribution
on outstanding Common Stock or on any class or series of preferred
stock, unless made pro rata to holders of Preferred Stock, (ii) a
subdivision of outstanding shares of Common Stock into a greater number
of shares of Common Stock, or (iii) a combination of outstanding shares
of the Common Stock into a smaller number of shares of Common Stock.
(e) Capital Reorganization or Reclassification. If the
Common Stock issuable upon the conversion of the Preferred Stock shall be
changed into the same or different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or
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combination of shares or stock dividend provided for elsewhere in this Section 5
or by a Reorganization), then and in each such event, the holder of each share
of Preferred Stock shall have the right thereafter to convert such share into
the kind and amount of shares of stock and other securities and property
receivable upon such capital reorganization, reclassification or other change by
holders of the number of shares of Common Stock into which such shares of
Preferred Stock might have been converted immediately prior to such capital
reorganization, reclassification or other change.
(f) Capital Reorganization, Merger or Sale of Assets. If
at any time or from time to time there shall be (i) a capital reorganization of
the Common Stock (other than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Section 5), (ii) a merger or
consolidation of the Company with or into another corporation, (iii) the sale of
all or substantially all of the Company's properties and assets to any other
person, or (iv) any transaction or series of related transactions in which the
Principal Shareholders (as defined in the Purchase Agreement) cease to own at
least fifty percent (50%) of the outstanding common stock of the Company (any of
which events is herein referred to as a "Reorganization"), then as a part of
such Reorganization, provision shall be made so that the holders of the
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Preferred Stock, the number of shares of stock or other securities or property
of the Company, or of the successor corporation resulting from such
Reorganization, to which such holder would have been entitled if such holder had
converted its shares of Preferred Stock immediately prior to such
Reorganization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of the Preferred Stock after the Reorganization, to the end that the
provisions of this Section 5 (including adjustment of the Applicable Conversion
Value then in effect and the number of shares issuable upon conversion of the
Preferred Stock) shall be applicable after that event in as nearly equivalent a
manner as may be practicable.
Except as otherwise provided in Section 3(b), upon the
occurrence of a Reorganization, under circumstances which make the preceding
paragraph applicable, each holder of Preferred Stock shall have the option of
electing treatment for his shares of Preferred Stock under either this Section
5(f) or Section 3 hereof, notice of which election shall be submitted in writing
to the Company at its principal offices no later than five (5) business days
before the effective date of such event.
(g) Certificate as to Adjustments; Notice by Company. In
each case of an adjustment or readjustment of the Applicable Conversion Rate,
the Company at its expense will furnish each holder of Preferred Stock with a
certificate, executed by the
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president and chief financial officer (or in the absence of a person designated
as the chief financial officer, by the treasurer) showing such adjustment or
readjustment, and stating in detail the facts upon which such adjustment or
readjustment is based.
(h) Exercise of Conversion Privilege. To exercise its
conversion privilege, a holder of Preferred Stock shall surrender the
certificate or certificates representing the shares being converted to the
Company at its principal office, and shall give written notice to the Company at
that office that such holder elects to convert such shares. Such notice shall
also state the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock issuable upon such
conversion shall be issued. The certificate or certificates for shares of
Preferred Stock surrendered for conversion shall be accompanied by proper
assignment thereof to the Company or in blank. The date when such written notice
is received by the Company, together with the certificate or certificates
representing the shares of Preferred Stock being converted, shall be the
"Conversion Date." As promptly as practicable after the Conversion Date, the
Company shall issue and shall deliver to the holder of the shares of Preferred
Stock being converted, or on its written order, such certificate or certificates
as it may request for the number of whole shares of Common Stock issuable upon
the conversion of such shares of Preferred Stock in accordance with the
provisions of this Section 5, and cash, as provided in Section 5(j), in respect
of any fraction of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Preferred Stock shall cease and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Common Stock represented
thereby. The Company shall pay any taxes payable with respect to the issuance of
Common Stock upon conversion of the Preferred Stock, other than any taxes
payable with respect to income by the holders thereof.
(i) Partial Conversion. In the event some but not all of
the shares of Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Company shall execute and deliver to
or on the order of the holder, at the expense of the Company, a new certificate
representing the number of shares of Preferred Stock which were not converted.
(j) Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effect ing the conversion of the shares
of the Preferred Stock, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
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the Preferred Stock, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Preferred Stock, the Company shall take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(k) Minimum Adjustment. Any provision of this Section 5
to the contrary notwithstanding, no adjustment in the Applicable Conversion
Value shall be made if the amount of such adjustment would be less than 1% of
the Applicable Conversion Value then in effect, but any such amount shall be
carried forward and an adjustment with respect thereto shall be made at the time
of and together with any subsequent adjustment which, together with all amounts
so carried forward, aggregates 1% or more of the Applicable Conversion Value
then in effect.
6. No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the Company shall be
authorized to issue. The Company may from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of the Preferred Stock accordingly.
7. Redemption
(a) Optional Redemption by the Company Upon a Qualified
Public Offering. Effective upon the closing of a Qualified Public Offering (as
hereinafter defined), all but not less than all of the then outstanding
Preferred Stock shall be subject to redemption by the Company, at its election,
at a redemption price (the "Company Redemption Price") for each share of
Preferred Stock redeemed pur suant to this Section 7(a) equal to the Liquidation
Amount (includ ing all accrued but unpaid dividends, whether or not declared)
with the amount of accrued dividends due thereon to be calculated and paid
through the date payment is actually made to the holders of the Preferred Stock
with respect to such redemption. The Company shall give the holders of the
Preferred Stock thirty (30) days' written notice of the pendency of a Qualified
Public Offering and, if it so elects, of its election to redeem under this
Section 7(a). Such notice shall be mailed by the Company, postage prepaid, to
each holder of record of Preferred Stock at its address shown on the records of
the Company. If the Company elects to redeem the Preferred Stock, such election
shall be irrevocable on the part of the Company unless such Qualified Public
Offering shall not occur. The Company Redemption Price shall be paid at the
closing of the Qualified Public Offering and shall be paid in cash. For purposes
hereof, the term "Qualified Public Offering" shall mean an under written public
offering pursuant to an effective registration
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statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering the offer and sale of Common Stock for the account of the Company in
which the aggregate net proceeds to the Company equal at least $10,000,000 and
in which the price per share of Common Stock is at least one point seven five
(1.75) times the then applicable Conversion Value of the Preferred Stock.
(b) Optional Redemption by the Holders Upon a Public
Offering. Effective upon the closing of a Public Offering (as hereinafter
defined) (other than a Qualified Public Offering) in which the Company does not
elect to redeem all of the-Preferred Stock as provided above, the holders of at
least fifty-one percent (51%) of the then outstanding shares of Preferred Stock
(the "Requesting Holders") may request the Company to redeem any or all of the
Preferred Stock then held by such holders. Such request (the "Redemption
Request") shall be submitted to the Company in writing within twenty (20) days
after the receipt by the holders of the Preferred Stock of the notice of the
pendency of a Public Offering from the Company and shall contain the same
information as the notice of the pendency of the Public Offering required to be
delivered pursuant to the immediately succeeding paragraph. The Redemption
Request shall be irrevocable on the part of the Requesting Holders unless the
Public Offering shall not occur. The redemption price of each share of Preferred
Stock redeemed pursuant to this paragraph shall be equal to the Company
Redemption Price provided for in Section 7(a) above. Upon receipt of a
Redemption Request, the Company shall promptly give notice thereof (the "Holder
Redemption Notice") to each holder of Preferred Stock. Such Holder Redemption
Notice shall specify the number of shares of Preferred Stock covered by the
Redemption Request and the Company Redemption Price to be paid with respect
thereto. Any holder of Preferred Stock who wishes to join in the Redemption
Request may do so by so advising the Company in writing within fifteen (15) days
after receipt of the Holder Redemption Notice specified in the preceding
sentence. No holder of Preferred Stock shall be required to participate in such
redemption. The Company shall redeem all shares of Preferred Stock covered by
the Redemption Request (including those held by holders who have requested a
redemption following receipt of the Holder Redemption Notice) at a closing to be
held upon the closing of the Public Offering. At the closing, the Company shall
pay for the shares of Preferred Stock so redeemed in an amount equal to the
Redemption Price, payable in cash. For purposes hereof, the term "Public
Offering" shall mean an underwritten public offering pursuant to an effective
registration statement under the Securities Act covering the offer and sale of
Common Stock of the Company. If the Public Offering will not constitute a
Qualified Public Offering, the Company shall give the holders of the Preferred
Stock thirty (30) days' written notice of the pendency of the Public Offering.
Such notice shall be mailed by the Company, postage prepaid, to each holder of
record of Preferred Stock at its address shown on the records of the Company.
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Nothing contained in Section 7(a) or 7(b) shall in any way restrict or prohibit
the holders of the Preferred Stock from exercising their conversion rights
pursuant to Section 5 hereof prior to the effective date of the redemption to be
effected hereunder; provided, however, that any such conversion under Section
7(a) or 7(b) may be subject to the closing of the Qualified Public Offering.
(c) Optional Redemption by the Holder Following Default.
(i) In the event the Company becomes in default
of one or more of the covenants contained in Article III or Article IV
of the Purchase Agreement, any of such events referred to herein as a
"Default," and such Default continues for thirty (30) days after notice
is sent to the Company (during which time the Company may cure such
default), in addition to any other rights the holders of the Preferred
Stock may have in equity or law (including specific performance which
is hereby agreed to), then the holders of at least fifty-one percent
(51%) of the then outstanding shares of Preferred Stock may request the
Company to (A) redeem any or all of the shares of Preferred Stock then
held by such holders and (B) pay in cash any and all sums payable to
HIG Capital Management, Inc. pursuant to the Consulting Agreement. Such
request (the "Default Redemption Request") shall be submitted to the
Company in writing within thirty (30) days after the thirty-first day
following the commencement of the Default. The right to cure such
Default shall expire on the date the Default Redemption Request is
submitted to the Company, then the Default Redemption Request shall be
null and void. If such a Default Redemption Request is not so made
within such thirty (30) day period, holders of Preferred Stock may not
again request redemption under this Section 7(c) unless and until there
shall have occurred another Default which remains uncured for a period
of thirty consecutive days.
(ii) The price (the "Holder Default Redemption
Price") for each share of Preferred Stock redeemed pursuant to this
Section 7(c) shall be equal to the Liquidation Amount.
(iii) Upon receipt of a Default Redemption
Request, the Company shall promptly give notice thereof (the "Default
Redemption Notice") to each holder of Preferred Stock. Such Default
Redemption Notice shall specify the number of shares of Preferred Stock
covered by the Default Redemption Request and the Holder Default
Redemption Price to be paid with respect thereto. Any holder of
Preferred Stock who wishes to join in the Default Redemption Request
may do so by so advising the Company in writing within 15 days after
receipt of the Default Redemption Notice specified in the preceding
sentence. No holder of Preferred Stock shall be required to participate
in such redemption. The Company shall
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redeem all shares of Preferred Stock covered by the Default Redemption
Request (including those held by holders who have requested a
redemption following receipt of the Default Redemption Notice) at a
closing to be held not more than thirty (30) days after the date of the
Default Redemption Request. At the closing, the Company shall pay for
the shares of Preferred Stock so redeemed in an amount equal to the
Holder Default Redemption Price, payable in cash.
(d) Optional Redemption by the Holders. At the election
of the holders of at least fifty-one percent (51%) of the then outstanding
shares of Preferred Stock, the Company shall, to the extent it may do so under
applicable law, redeem all shares pro rata from all holders of Preferred Stock
on June 25, 2001 of the shares of Preferred Stock outstanding on the date of
such redemption (the "Final Redemption Date"). The Company shall give the
holders of the Preferred Stock at least ninety (90) days' notice of the Final
Redemption Date (the "Final Redemption Notice"). In the event that the Company
does not provide the Final Redemption Notice, the option of the holders of the
Preferred Stock to require the Company to redeem the remaining shares of
Preferred Stock on the Final Redemption Date shall be extended beyond the Final
Redemption Date to a date which is ninety (90) days from the date that the
Company elects to mail the Final Redemption Notice. In the event shares of
Preferred Stock scheduled for redemption are not redeemed because of a
prohibition under applicable law, such shares shall be redeemed as soon as such
prohibition no longer exists. The redemption price (the "Holder Redemption
Price") for each share of Preferred Stock redeemed pursuant to this Section 7(d)
shall be equal to the Liquidation Amount.
In the event that the holders of the Preferred Stock do not elect to
have the Preferred Stock redeemed pursuant to this Section 7(d), the shares of
Preferred Stock shall remain outstanding and subject to the rights and
preferences contained herein.
(e) Redemption Notice. If an election is made pursuant to
Section 7(d) hereof, written notice of such election shall be mailed, postage
prepaid, to the Company, not later than sixty (60) days before the date fixed
for redemption pursuant to Section 7(d) or, in the event the Company does not
provide the Final Redemption Notice pursuant to Section 7(d) hereof, not later
than sixty (60) days before the date that the Final Redemption Date has been
extended as provided in Section 7(d) (each of the dates fixed for redemption and
the extended redemption date is hereinafter referred to as a "Redemption Date").
If such election is made and appropriate notice is given then, at least
forty-five (45) days before the Redemption Date, written notice (hereinafter
referred to as the "Redemption Notice") shall be mailed by the Company, postage
prepaid, to each holder of record of Preferred Stock at its address shown on the
records of the Company; provided, however, that the Company's failure to give
such Redemption Notice shall in no way
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affect its obligation to redeem the shares of Preferred Stock or the obligation
of the holders to redeem their shares of Preferred Stock as provided in Section
7(d) hereof. The Redemption Notice shall contain: (i) the number of shares of
Preferred Stock held by the holder and the total number of shares of Preferred
Stock held by all holders subject to redemption as of such Redemption Date; and
(ii) the Redemption Date and the applicable Holder Redemption Price. Any holder
of Preferred Stock who wishes to do so may, by giving notice to the Company
prior to the Redemption Date, convert into Common Stock any or all of the shares
of Preferred Stock held by him and scheduled for redemption on such Redemption
Date.
(f) Surrender of Certificates. Each holder of shares of
Preferred Stock to be redeemed under this Section 7 shall surrender the
certificate or certificates representing such shares to the Company at the place
designated in the Redemption Notice, and thereupon the Company Redemption Price
or Holder Redemption Price, as the case may be, for such shares as set forth in
this Section 7 shall be paid to the order of the person whose name appears on
such certificate or certificates. Irrespective of whether the certifi cates
therefor shall have been surrendered, all shares of Preferred Stock which are
the subject of a Redemption Notice shall be deemed to have been redeemed and
shall be cancelled effective as of the Redemption Date, unless the Company shall
default in the payment of the applicable Redemption Price.
8. Restrictions and Limitations.
(a) Corporate Securities Action. Except as expressly
provided herein or as required by law, so long as any shares of Preferred Stock
remain outstanding, the Company shall not, and shall not permit any subsidiary
(which shall mean any corporation, association or other business entity which
the Company and/or any of its other subsidiaries directly or indirectly owns at
the time more than fifty percent (50%) of the outstanding voting shares of such
corporation or trust, other than directors' qualifying shares) to, without the
approval by vote or written consent by the holders of at least a majority of the
then outstanding shares of Preferred Stock, voting as a separate class:
(i) redeem, purchase or otherwise acquire for value (or
pay into or set aside for a sinking fund for such purpose), or declare
and pay or set aside funds for the payment of any dividend with respect
to, any share or shares of capital stock, except as required or
permitted hereunder or under the terms of Section 4.2 of the Purchase
Agreement;
(ii) authorize or issue, or obligate itself to authorize
or issue, additional shares of Preferred Stock;
(iii) authorize or issue, or obligate itself to authorize
or issue, any equity security senior to or on parity
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with the Preferred Stock as to liquidation preferences, dividend
rights, or voting rights;
(iv) merge or consolidate with any other corporation or
sell, assign, lease or otherwise dispose of or voluntarily part with
the control of (whether in one transaction or in a series of
transactions) all, or substantially all, of its assets (whether now
owned or hereinafter acquired), or consent to any liquidation,
dissolution or winding up of the Company, or permit any subsidiary to
do any of the foregoing, except for (1) any wholly-owned subsidiary may
merge into or consolidate with or transfer assets to any other
wholly-owned subsidiary, and (2) any wholly-owned subsidiary may merge
into or transfer assets to the Company; or
(v) amend, restate, modify or alter the by-laws of the
Company in any way which adversely affects the rights of the holders of
the Preferred Stock.
(b) Amendments to Charter. The Company shall not amend
its Articles of Incorporation without the approval, by vote or written consent,
by the holders of at least a majority of the then outstanding shares of
Preferred Stock, if such amendment would amend any of the rights, preferences,
privileges of or limitations provided for herein for the benefit of any shares
of Preferred Stock. Without limiting the generality of the preceding sentence,
the Company shall not amend its Articles of Incorporation without the approval
by the holders of at least a majority of the then outstanding shares of
Preferred Stock if such amendment would:
(i) change the relative seniority rights of the holders
of Preferred Stock as to the payment of dividends in relation to the
holders of any other capital stock of the Company, or create any other
class or series of capital stock entitled to seniority as to the
payment of dividends in relation to the holders of Preferred Stock;
(ii) reduce the amount payable to the holders of Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Company, or change the relative seniority of the
liquidation preferences of the holders of Preferred Stock to the rights
upon liquidation of the holders of other capital stock of the Company,
or change the dividend rights of the holders of Preferred Stock;
(iii) cancel or modify the conversion rights of the holders
of Preferred Stock provided for in Section 5 herein;
(iv) cancel or modify the redemption rights of the holders
of the Preferred Stock provided for in Section 7 herein; or
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(v) cancel or modify the rights of the holders of the
Preferred Stock provided for in this Section 8.
9. No Dilution or Impairment. The Company shall not, by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of the Preferred Stock set forth herein, but shall at all times
in good faith assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate in order to protect the
rights of the holders of the Preferred Stock against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
shall not increase the par value of any shares of stock receivable on the
conversion of the Preferred Stock above the amount payable therefor on such
conversion, (b) shall take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the conversion of all Preferred Stock from time
to time outstanding, and (c) shall not consolidate with or merge into any other
person or permit any such person to consolidate with or merge into the Company
(if the Company is not the surviving person), unless such other person shall
expressly assume in writing and will be bound by all of the terms of the
Preferred Stock set forth herein.
10. Notices of Record Date. In the event of:
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger of the Company, or any transfer of all or substantially all of the assets
of the Company to any other corporation, or any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation
or winding up of the Company,
then and in each such event the Company shall mail or cause to be mailed to each
holder of Preferred Stock a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right
and a description of such dividend, distribution or right, (ii) the date on
which any such reorganization, reclassification, recapitalization, transfer,
merger, dissolution, liquidation or winding up is expected to become effective
and (iii) the time, if any, that is to be fixed,
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as to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, merger, dissolution, liquidation
or winding up. Such notice shall be mailed at least ten (10) business days prior
to the date specified in such notice on which such action is to be taken.
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EXHIBIT B
SHAREHOLDERS' AGREEMENT
AGREEMENT, made as of the 25th day of June, 1996, by and among Let's
Talk Cellular of America, Inc., a Florida corporation (the "Company"), those
persons listed on the signature page hereto under Current Shareholders (the
"Current Shareholders") and the person listed on the signature page hereto under
Investor (together with its permitted transferees, the "Investor" and, with the
Current Shareholders, the "Shareholders").
WHEREAS, the Investor is acquiring an aggregate of 100,000 shares of
Series A Preferred Stock, par value $30.00 per share (the "Preferred Stock"), of
the Company, pursuant to the terms of a Series A Preferred Stock Purchase
Agreement dated as of June 25, 1996 among the Company, the Investor and the
Current Shareholders (the "Purchase Agreement"); and
WHEREAS, it is a condition to the obligations of the Current
Shareholders and the Investor under the Purchase Agreement that this Agreement
be executed by the parties hereto, and the parties are willing to execute this
Agreement and to be bound by the provisions hereof.
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company to further the interests of the Company and its present and future
shareholders, the parties hereby agree with each other as follows:
1. Definition of Shares. As used in this Agreement, "Shares"
shall mean and include all shares of the Preferred Stock or the Common Stock,
now owned or hereafter acquired by the Investor and all shares of Common Stock
now owned or hereafter acquired by a Current Shareholder. Other terms used as
defined terms herein and not otherwise defined shall have the meanings set forth
in the Purchase Agreement.
2. Prohibited Transfers. No Shareholder shall sell, assign,
transfer, pledge, hypothecate, mortgage, encumber or dispose of all or any of
his Shares except in compliance with the terms of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, (a) any
Current Shareholder may transfer without the necessity of prior approval all or
any of his Shares by way of gift to his spouse, to any of his lineal descendants
or ancestors, or to any trust for the benefit of any one or more of such Current
Shareholder, his spouse or his lineal descendants or ancestors, (b) any Current
Shareholder may transfer all or any of his Shares by will or the laws of descent
and distribution, (c) any Current Shareholder may transfer his Shares to the
Investor or to another
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Current Shareholder; (d) HIG Fund V, Inc. may transfer up to thirty five percent
(35%) of the number of Shares it holds as of the date hereof (as adjusted for
stock splits, stock dividends, recapitalizations and similar corporate events)
to any Qualified Institutional Buyer (as defined under Rule 144A of the
Securities Act of 1933, and (e) any Investor may transfer its Shares to an
affiliate (as defined under the Securities Exchange Act of 1934) of such
Investor; provided that in the event such transferee under this Section 2 is not
already a party to this Agreement, such transferee shall agree in writing with
the Company and the other Shareholders, as a condition to such transfer, to be
bound by all of the provisions of this Agreement to the same extent as if such
transferee were the Shareholder transferring such Shares.
3. Right of First Refusal on Dispositions.
(a) Except for the transfers permitted in Section 2, if at any
time a Current Shareholder (a "Selling Current Shareholder") desires to sell or
otherwise transfer all or any part of his Shares pursuant to a bona fide offer
from a third party (the "Proposed Transferee"), the Selling Current Shareholder
shall submit a written offer (the "Offer") by delivering the Offer to the
Company and the other Shareholders (the "Other Shareholders"), to sell such
Shares (the "Offered Shares") to the Other Shareholders on terms and conditions,
including price, not less favorable than those on which the Selling Current
Shareholder proposes to sell such Offered Shares to the Proposed Transferee. The
Offer shall disclose the identity of the Proposed Transferee, the number of
Offered Shares proposed to be sold, the total number of Shares owned by the
Selling Current Shareholder, the terms and conditions, including price, of the
proposed sale, and any other material facts relating to the proposed sale. The
Offer shall further state (i) that the Other Shareholders may acquire, in
accordance with the provisions of this Agreement, any of the Offered Shares for
the price and upon the other terms and conditions set forth therein and (ii)
that if all such Offered Shares are not purchased by the Other Shareholders, the
Other Shareholders may exercise their rights provided pursuant to Section 5
hereof.
(b) Each Other Shareholder shall have the right to purchase
that number of Offered Shares as shall be equal to the number of Offered Shares
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock then owned by such Other Shareholder (including shares issuable
upon conversion of Preferred Stock held by such person) and the denominator of
which shall be the aggregate number of shares of Common Stock (including shares
issuable upon conversion of Preferred Stock) then owned by all of the Other
Shareholders who elect to purchase the Offered Shares. The amount of such
Offered Shares that each Other Shareholder is entitled to purchase under this
Section 3(b) shall be referred to as its "Pro Rata Fraction."
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(c) The Other Shareholders shall have a right of
oversubscription such that if any Other Shareholder fails to accept the Offer as
to its full Pro Rata Fraction, the remaining Other Shareholders shall, among
them, have the right to purchase up to the balance of such Offered Shares not so
purchased.
(d) Those Other Shareholders who desire to purchase all or any
part of the Offered Shares shall communicate in writing their election to
purchase to the Selling Current Shareholder, which communication shall state the
number of Offered Shares said Other Shareholders desire to purchase and shall be
provided to the Selling Current Shareholder within 20 days of the date the Offer
was made. Such communication shall, when taken in conjunction with the Offer, be
deemed to constitute a valid, legally binding and enforceable agreement for the
sale and purchase of such Offered Shares (subject to the aforesaid limitations
as to the right of the Other Shareholders to purchase more than their Pro Rata
Fraction). Sales of such Offered Shares to be sold to the Other Shareholders
pursuant to this Section 3 shall be made at the offices of the Company within
sixty (60) days following the date the Offer was made.
(e) If the Other Shareholders do not purchase all of the
Offered Shares, the remaining Offered Shares may be sold by the Selling Current
Shareholder at any time within ninety (90) days after the date the Offer was
made, subject to the provisions of Section 5. Any such sale shall be to the
Proposed Transferee, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those
specified in the Offer. Any remaining Offered Shares not sold within such ninety
(90) day period shall continue to be subject to the requirements of a prior
offer pursuant to this Section 3. If Offered Shares are sold pursuant to this
Section 3 to any purchaser who is not a party to this Agreement, the purchaser
of such Offered Shares shall execute a counterpart of this Agreement as a
precondition of the purchase of such Offered Shares and any Offered Shares sold
to such purchaser shall continue to be subject to the provisions of this
Agreement.
4. Right of First Offer on Investor Dispositions.
(a) Except for the transfers permitted in Section 2, if at any
time an Investor (a "Selling Investor") desires to sell or otherwise transfer
all or part of its Shares to a third party, the Selling Investor shall notify
the Other Shareholders in writing (the "Investor Offer") of the number of Shares
proposed to be sold or transferred (the "Investor Offered Shares") and the name
of any proposed transferee who has made a written offer for such Shares, if
applicable. Each Other Shareholder shall have the right to offer to acquire the
Offered Shares by submitting a proposal in writing to the Selling Investor
within twenty (20) days of delivery of the Investor Offer. The proposal shall
state the number of
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Investor Offered Shares proposed to be purchased, the terms and conditions,
including price, of the proposed purchase and any other material facts relating
to such proposed purchase.
(b) The Selling Investor may within twenty (20) days of
delivery of the proposals select the best proposal(s) from one or more Other
Shareholders or a portion of one or more proposals from several Other
Shareholders (if permitted by such proposals) and sell the Investor Offered
Shares to the Other Shareholders who have the highest and best offer(s) as
determined by the Selling Investor (collectively, the "Best Offer"). The Best
Offer shall constitute an irrevocable, valid, legally binding and enforceable
offer for the sale and purchase of the Investor Offered Shares which shall
remain outstanding for twenty (20) days after the delivery of the Best Offer
(calculated using the date the last proposal was submitted to the Selling
Investor). Sales of Investor Offered Shares to be sold to the Other Shareholders
pursuant to this Section 4(b) shall be made at the offices of the Company within
sixty (60) days following acceptance by the Selling Investor of the Best Offer.
(c) The Selling Investor may elect not to sell the Investor
Offered Shares to the Other Shareholders pursuant to the Best Offer and proceed
to offer to sell or transfer the Offered Shares to a third party. In such event,
the Selling Investor may sell its shares to a third party provided that (a) the
aggregate cash consideration to be received at the closing of such sale exceeds
the aggregate cash consideration to be received pursuant to the Best Offer, (b)
the Selling Investor must sell the Offered Shares to any third party prior to
the six month anniversary of the date of the Offer or the Selling Investor must
allow the Other Shareholders to propose new offers in accordance with Section
4(a) hereof and (c) such third party agrees to be bound by the terms hereof.
5. Right of Participation in Sales.
(a) If at any time a Current Shareholder desires to sell all
or any part of the Shares owned by him to a Proposed Trans feree, and those
Shares to be transferred have not been purchased by the Investor under Section
3, the Investor (unless it has elected to purchase Shares pursuant to Section 3)
shall have the right to sell to the Proposed Transferee, as a condition to such
sale by the Selling Current Shareholder, at the same price per share and on the
same terms and conditions as involved in such sale by the Selling Current
Shareholder, a pro rata portion of the amount of Shares proposed to be sold to
the Proposed Transferee. The "pro rata portion" of Shares which the Investor
shall be entitled to sell to the Proposed Transferee shall be that number of
Shares as shall equal the number of Offered Shares proposed to be sold to the
Proposed Transferee multiplied by a fraction, the numerator of which is the
aggregate of all shares of Common Stock
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(including shares issuable upon conversion of Preferred Stock held by such
person) which are then held by the Investor, and the denominator of which is the
aggregate of all shares of Common Stock (including shares issuable upon
conversion of Preferred Stock) which are then held by the Selling Current
Shareholder and all Investors wishing to participate in any sale under this
Section 5.
(b) Each Current Shareholder who wishes to make a sale to a
Proposed Transferee which is subject to this Section 5 shall, after complying
with the provisions of Section 3, give to each Investor notice of such proposed
sale, and stating that all Offered Shares were not purchased pursuant to the
Offer as discussed in Section 3. Such notice shall be given at least 20 days
prior to the date of the proposed sale to the Proposed Transferee. Each Investor
wishing to so participate in any sale under this Section 5 shall notify the
Selling Current Shareholder in writing of such intention within 15 days after
such Investor's receipt of the notice described in the preceding sentence.
(c) The Selling Current Shareholder and each participating
Investor shall sell to the Proposed Transferee all, or at the option of the
Proposed Transferee, any part of the Shares proposed to be sold by them at not
less than the price and upon other terms and conditions, if any, not more
favorable to the Proposed Transferee than those in the notice provided by the
Selling Current Shareholder under subparagraph (b) above; provided, however,
that any purchase of less than all of such Shares by the Proposed Transferee
shall be made from the Selling Current Shareholder and each participating
Investor pro rata based upon the relative number of the Shares that the Selling
Current Shareholder and each participating Investor is otherwise entitled to
sell pursuant to Section 5(a).
(d) If any Shares are sold pursuant to this Section 5 to any
purchaser who is not a party to this Agreement, the purchaser of such Shares
shall execute a counterpart of this Agreement as a precondition to the purchase
of such Shares and such Shares shall continue to be subject to the provisions of
this Agreement.
6. Board of Directors.
(a) At each annual meeting of the shareholders of the Company,
and at each special meeting of the shareholders of the Company called for the
purpose of electing directors of the Company, and at any time at which
shareholders of the Company shall have the right to, or shall, vote for
directors of the Company, then, and in each event, the Shareholders shall vote
all Shares owned by them for the election of a Board of Directors as follows:
(i) Except as provided in Section 6(a)(ii), the Board of
Directors shall consist of not more than four directors, designated as
follows:
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(A) one director shall be designated by
HIG Fund V, Inc. (which designee shall initially be Anthony Tamer); and
(B) three directors shall be designated
by the holders of a majority of the Common Stock (which designees shall
initially be Nick Molina, Brett Beveridge and Allan Sorenson).
In addition, HIG Fund V, Inc. shall be entitled to have an observer
present at all Board meetings.
(ii) if the Company's EBIT (as hereinafter
defined) for the preceding applicable months is less than the Minimum
EBIT Target (as defined in Section 6(c)) on any Determination Date (as
defined in Section 6(c)) (an "EBIT Default"), the Board of Directors
shall consist of not more than five directors designated as follows:
(A) three directors shall be designated
by HIG Fund V, Inc.; and
(B) two directors shall be designated
by the holders of a majority of the Common Stock.
For purposes of this Agreement "EBIT" shall mean the Company's earnings
before interest and taxes, (excluding extraordinary gains and losses
and consulting fees paid or payable to HIG Capital Management, Inc.)
calculated based upon generally accepted accounting principles
consistently applied ("EBIT"). EBIT shall exclude charges for inventory
reserves mandated by the Company's outside auditors up to 2.5% of the
value of the inventory provided such reserve only relates to year end
adjustments which are not caused by a realized loss in the value of the
inventory.
(b) The Company shall calculate its EBIT for purposes of this
Section 6 within 30 days following a Determination Date and shall deliver a copy
of such calculations to the Shareholders within two business days thereafter. If
Section 6(a)(ii) shall cause a change in the rights of any Stockholder to elect
a majority of the Board of Directors, the Chief Executive Officer of the Company
shall within five (5) business days of delivery of the calculation of the EBIT,
send notice of a special telephonic or other meeting of the Shareholders to be
held as soon as allowed by Florida law after such Determination Date to elect a
new Board of Directors as required by Section 6(a)(ii). The Company shall not be
required to follow the procedures in this Section 6(b) if the new Board of
Directors is elected in a more expedient manner (i.e., by written Shareholder
consent executed within 40 days of the Determination Date). The rights of HIG
Fund V, Inc. to elect a
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majority of the members of the Board of Directors may be exercised at any time
after an EBIT Default, subject to the following:
(i) the Current Shareholders shall have the
right to cure an EBIT Default and elect a majority of the members of
the Board of Directors pursuant to Section 6(a)(i) on any two occasions
if the Company earns an EBIT equal to or greater than the six month
Minimum EBIT Target for the six months immediately following the
Determination Date in which the EBIT Default occurred; provided, that
the right to cure an EBIT Default shall only exist if there shall not
have been an EBIT Default in either of the two preceding Determination
Dates (the six month period during which the Company has the right to
cure an EBIT Default is referred to herein as the "Cure Period");
(ii) The Company shall not terminate the
employment of any executive officer of the Company during a Cure
Period; and
(iii) Section 6(a)(i) shall have no further force
or effect after an EBIT Default.
(c) The following schedule reflects the Minimum EBIT
Targets corresponding with the applicable Determination Dates:
NUMBER OF TRAILING
MINIMUM EBIT MONTHS USED TO
DETERMINATION DATE TARGET CALCULATE EBIT
- ---------------------- -------------- -------------------
January 31, 1997 $ 185,790 6
April 30, 1997 289,871 6
July 31, 1997 283,937 6
July 31, 1997 548,015 12
October 31, 1997 306,016 6
October 31, 1997 695,202 12
January 31, 1998 650,170 6
January 31, 1998 1,089,791 12
April 30, 1998 854,926 6
April 30, 1998 1,354,432 12
July 31, 1998 777,364 6
July 31, 1998 1,665,456 12
October 31, 1998 668,605 6
October 31, 1998 1,657,252 12
January 31, 1999 1,101,027 6
January 31, 1999 2,098,597 12
April 30, 1999 1,360,723 6
April 30, 1999 2,435,194 12
July 31, 1999 1,244,532 6
July 31, 1999 2,814,670 12
October 31, 1999 1,165,264 6
October 31, 1999 3,031,184 12
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NUMBER OF TRAILING
MINIMUM EBIT MONTHS USED TO
DETERMINATION DATE TARGET CALCULATE EBIT
- ---------------------- -------------- -------------------
January 31, 2000 1,755,121 6
January 31, 2000 3,599,583 12
April 30, 2000 2,169,097 6
April 30, 2000 4,001,232 12
July 31, 2000 1,983,879 6
July 31, 2000 4,486,799 12
(d) In the event HIG Fund V, Inc. elects a majority of
the members of the Board of Directors pursuant to Section 6(a)(ii), the Company
shall not, without the approval of the holders of fifty one percent (51%) of the
outstanding voting securities of the Company, take any of the actions described
in Section 8 of Exhibit A to the Purchase Agreement or engage in any business
activity not in conformity with Section 4.10 of the Purchase Agreement.
7. Compensation Committee. There shall be established at all
times during the term of this Agreement a Compensation Committee of the Board of
Directors (the "Compensation Committee") which shall be comprised of two
directors as follows: one of whom shall be the director designated by the
Principal Shareholders so long as they are in the employment of the Company (and
by the Board of Directors if they are no longer in the employment of the
Company); and one of whom shall be one of the directors designated HIG Fund VI,
Inc. The Compensation Committee shall determine the compensation of all senior
employees and consultants of the Company (including salary, bonus, equity
participation and benefits) as well as the nomination of officers to be
appointed by the Board of Directors. The decisions of the Compensation Committee
must be unanimous.
8. Term. This Agreement shall terminate immediately prior to (a)
the consummation of the first Qualified Public Offering or (b) the tenth
anniversary of the date of this Agreement, whichever occurs first.
9. Failure to Deliver Shares. If a Current Shareholder becomes
obligated to sell any Shares to another Shareholder under this Agreement and
fails to deliver such Shares in accordance with the terms of this Agreement, the
Other Shareholders may, at their option, in addition to all other remedies they
may have, send to the defaulting Current Shareholder the purchase price for such
Shares as is herein specified. Thereupon, the Company, upon written notice to
the defaulting Current Shareholder, (a) shall cancel on its books the
certificate or certificates representing the Shares to be sold and (b) shall
issue, in lieu thereof, in the name of such other Shareholder, a new certificate
or certificates
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representing such Shares, and thereupon all of the defaulting Current
Shareholder's rights in and to such Shares shall terminate.
10. Specific Enforcement. Each Shareholder and the Company
expressly agrees that the other Shareholders and the Company may be irreparably
damaged if this Agreement is not specifically enforced. Upon a breach or
threatened breach of the terms, covenants and/or conditions of this Agreement by
any Shareholder, the other Shareholders and the Company shall, in addition to
all other remedies, each be entitled to apply for a temporary or permanent
injunction, and/or a decree for specific performance, in accordance with the
provisions hereof.
11. Legend. Each certificate evidencing any of the Shares now
owned or hereafter acquired by the Current Shareholders shall bear a legend in
addition to any other required legend, substantially as follows:
"ANY SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF
THE SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED
BY, AND SUBJECT TO, THE TERMS AND PROVISIONS OF A CERTAIN
SHAREHOLDERS' AGREEMENT DATED AS OF JUNE 25, 1996. A
COPY OF SAID AGREEMENT IS ON FILE WITH THE SECRETARY OF
THE CORPORATION."
12. Notices. Notices given hereunder shall be deemed to have been
duly given on the date of personal delivery or on the date of postmark if mailed
by certified or registered mail, return receipt requested, to the party being
notified at his or its address specified on the applicable schedule hereto or
such other address as the addressee may subsequently notify the other parties of
in writing.
13. Entire Agreement and Amendments. This Agreement con stitutes
the entire agreement of the parties with respect to the subject matter hereof
and neither this Agreement nor any provision hereof may be waived, modified,
amended or terminated except by a written agreement signed by the parties
hereto; provided, however, that Investor owning at least a majority of the
Shares owned by all Investors may effect any such waiver, modification,
amendment or termination on behalf of all of the Investors and 80% of the Shares
owned by all Current Shareholders may effect any such waiver, modification,
amendment or termination on behalf of all of the Current Shareholders. Each of
the Shareholders represents that he or it is not a party to any other agreement
which would prevent him or it from performing his or its obligations hereunder.
No waiver of any breach or default hereunder shall be considered valid unless in
writing, and no such waiver shall be deemed a waiver of any subsequent breach or
default of the same or similar nature.
14. Governing Law; Successors and Assigns. This Agreement shall be
governed by the internal laws of the State of Florida
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without giving effect to the conflicts of laws principles thereof and, except as
otherwise provided herein, shall be binding upon the heirs, personal
representatives, executors, administrators, successors and assigns of the
parties.
15. Severability. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein. This Agreement
supersedes any and all agreements between (a) the Company on the one hand and
any Shareholder on the other hand (other than the Purchase Agreement and the
agreements which are exhibits thereto) and (b) any two or more Shareholders.
Each Shareholder represents and warrants that he is not subject to any agreement
which may conflict with or violate the terms of this Agreement and covenants
that he will not enter into any such agreement.
16. Captions. Captions are for convenience only and are not deemed
to be part of this Agreement.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
CURRENT SHAREHOLDERS: COMPANY:
- ---------------------------- Let's Talk Cellular of America,
Nick Molina Inc.
- ----------------------------
Brett Beveridge By:
-------------------------
Name:
Title:
- ---------------------------- INVESTOR:
Allan Sorenson
HIG Fund V, Inc.
By:
- ---------------------------- -------------------------
Ann Gozlan Name:
Title:
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EXHIBIT C
REDEMPTION AGREEMENT
This Redemption Agreement (the "Agreement") is dated as of the 25th day
of June, 1996 by and between Let's Talk Cellular of America, Inc., a Florida
corporation (the "Company"), and HIG Fund V, Inc. (together with its permitted
assigns, each an "Investor" and collectively the "Investors").
As of the date of this Agreement, the Investor has purchased an
aggregate of 100,000 shares of the Series A Preferred Stock, par value $30 per
share, of the Company (the "Preferred Stock"), pursuant to a Series A Preferred
Stock Purchase Agreement dated as of June 25, 1996 (the "Purchase Agreement").
The shares of Series A Preferred Stock, together with the shares of Common
Stock, par value $1.00 per share of the Company (the "Common Stock") issuable
upon conversion of the Series A Preferred Stock and any other Common Stock now
owned or hereafter acquired by the Investors (together with any shares issued
with respect thereto pursuant to any stock split, stock dividend or the like)
are referred to herein as the "Shares." Capitalized terms used herein and not
otherwise defined in this Agreement shall have the meanings assigned to them in
the Purchase Agreement.
In consideration of the execution and delivery of the Purchase
Agreement and the agreements set forth below, the parties agree with each other
as follows:
1. Option to Sell Shares to Company. (a) In the event that prior
to the earlier to occur of (i) the liquidation, dissolution or winding up of the
Company, (ii) the merger or consolidation of the Company with any Person, or the
sale or other disposition of all or substantially all of the Company's
properties and assets to any Person, or the transfer of ownership of any voting
shares of the Company to any Person as a consequence of which those Persons who
held all of the voting shares of the Company immediately prior to such transfer
do not hold a majority of the voting shares of the Company after the
consummation of such transfer (the "Control Sale"), (iii) a default by the
Company under the Purchase Agreement or (iv) June 25, 2001 ((i), (ii) and
(iii) being referred to herein as "Exercise Events"), the Company shall not have
consummated a Qualified Public Offering, the Investors may require the Company
to redeem the Shares then held by them on the terms herein provided. In such
event any Investor or Investors holding an aggregate of not less than twenty
percent (20%) of the total Shares held by the Investors may notify the Company
that it or they intend to offer to the Company any or all of the Shares then
held by him or them for purchase by the Company. The Company shall promptly give
notice of such intention to all other Investors who own Shares, and any Investor
may, within ten (10) days of such
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notice, give the Company notice that he intends to offer to the Company any or
all of the Shares then held by him. The Company shall repurchase all Shares so
offered under this Agreement as set forth below, provided that the amount of
Shares so offered equals or exceeds twenty percent (20%) of the total Shares
held by the Investors. The option to sell Shares pursuant to this Section 1
shall be referred to as the "Option."
(b) The Company agrees to provide each Investor thirty (30) days'
written notice of the pendency of an Exercise Event and each Investor shall have
the right to exercise this Option in the manner provided in Section 1(a) above.
If the Exercise Event giving rise to the exercise of the Option is a
liquidation, dissolution or winding up of the Company or a Control Sale, the
Option may be exercised immediately prior to, or concurrently with, the
effective date of the liquidation, dissolution or winding up of the Company or
Control Sale, as the case may be. The Company agrees that the transaction giving
rise to the Exercise Event shall not be consum mated until it has satisfied its
obligation to repurchase the Shares as provided herein. In all other
circumstances, the Investors holding at least twenty percent (20%) of the Shares
held by the Investors which remain outstanding from time to time may exercise
the right to require the Company to purchase the Shares hereunder. In the event
that an Investor elects to exercise the Option in connection with a liquidation,
dissolution or winding up of the Company or Control Sale, any such election
shall be contingent upon the consummation of such event.
2. Price.
(a) The price to be paid by the Company for the Shares to
be sold under the Option shall be the fair market value thereof, as of the date
of such proposed repurchase, as agreed upon in good faith by the Company and the
Representative (who shall be a Person selected by the Investors owning a
majority of the Shares to be redeemed hereunder and who shall be hereinafter
referred to as the "Representative"), taking into account, in valuing such
Shares, all relevant facts and circumstances; provided, however, that (i) there
shall be no discount to reflect the fact that the Shares represent a minority
interest in the Company and (ii) in no event (whether by agreement of the
parties or after appraisal as described below) shall the aggregate purchase
price to be paid for such Shares being redeemed be less than the original
purchase price paid by the Investors therefor (as adjusted to reflect any stock
split, stock dividend or other form of recapitalization). If no such agreement
is reached within thirty (30) days after notice is given to the Company of the
Investors' exercise of the Option, the fair market value shall be determined by
appraisal as set forth below.
(b) All appraisals shall be undertaken by two appraisers,
one selected by the shareholders (other than HIG Fund V, Inc. and its
transferees) of the Company and one selected by the
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Representative. No Director whose Shares are being appraised or who is
affiliated with a person whose Shares are being appraised shall vote on the
selection of the appraiser chosen by the Company. The fair market value shall be
the fair market value arrived at by those appraisers within thirty (30) days
following the appointment of the last appraiser to be appointed. In the event
that the two appraisers agree in good faith on such fair market value within
such a period of time, such agreed value shall be used for these purposes. If
the appraisers cannot agree but their valuations are within ten percent (10%) of
each other, the fair market value shall be the mean of the two valuations. If
the appraisers cannot agree and the differences in the valuations are greater
than ten percent (10%), the appraisers shall select a third appraiser who will
calculate fair market value independently, and, except as provided in the next
sentence, the fair market value of the Shares shall be the average of the two
fair market values arrived at by the appraisers who are closest in amount. If
one appraiser's valuation is the mean of the other two valuations, such mean
valuation shall be the fair market value. In the event that the two original
appraisers cannot agree upon a third appraiser within ten (10) days following
the end of the thirty (30) day period referred to above, then the third
appraiser shall be appointed by the American Arbitration Association in Miami,
Florida. If, following the final determination of the purchase price for the
Shares, any Investor previously offering his Shares for repurchase shall choose
not to sell any or all of its Shares, then such Investor shall so notify the
Company within ten (10) days following receipt of the results of the appraisal
and may do so by paying the fees of such appraisal and up to $5,000 of other
documented expenses. The expenses of the appraiser chosen by the Company will be
borne by it, the expenses of the appraiser chosen by the Investors will be borne
by them, pro rata based on the number of Shares being redeemed, and the expenses
of the third appraiser will be borne fifty percent (50%) by the Company and
fifty percent (50%) by the Investors, pro rata based on the number of Shares
being redeemed.
3. Payment.
(a) Within forty-five (45) days following either the
agreement, as provided above, of the Company and the Representative concerning
the fair market value of the Shares or the receipt of the results of the last of
the appraisals referred to above, the Company shall purchase the Shares tendered
to it at the price established by this Agreement (the "Redemption Price"), and
the Investors shall deliver to the Company, upon receipt of payment therefor,
the certificates for the Shares duly endorsed by them for transfer.
(b) Notwithstanding the other provisions of this Agree
ment, the Company shall not be obligated to repurchase any Shares to the extent
such repurchase would violate applicable law, as determined by an opinion of
counsel to the Company, which opinion
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and counsel shall be reasonably satisfactory to the Representative; provided,
however, that the Company shall use its best efforts to comply with such
restriction. In the event a repurchase is delayed on account of the preceding
sentence, it shall be made at the first time it would not violate such law and
the Redemption Price shall bear interest at a rate equal to fifteen percent(15%)
per annum, until such time as the redemption is completed. If on account of the
first sentence of this subparagraph (b) the Company may purchase fewer than all
of the Shares offered for redemption, the Company shall repurchase all Shares
when permitted, allocated pro rata among those who requested that their Shares
be redeemed, in proportion to the amount which would have been paid to such
holder had all Shares as to which it requested redemption been redeemed. If on
account of the first sentence of this subparagraph (b) the Company may purchase
fewer than all of the Shares offered for redemption, the holders of the Shares
not redeemed shall continue to receive the benefit of the rights and privileges
afforded the Shares under the Purchase Agreement and the Related Agreements.
(c) Payment shall be made by check or wire transfer of
funds to such bank account as each Investor shall direct.
4. Termination of Option. The obligations of the Company to
purchase the Shares as provided in this Agreement shall terminate upon the
consummation of a Qualified Public Offering or a sale of all of the Common Stock
of the Company.
5. Notices. All notices or other communications required or
permitted to be delivered hereunder shall be in writing signed by the party
giving the notice and sent by telecopier, express delivery service, or regular
or certified mail to the address specified in the Purchase Agreement.
6. Entire Agreement. This Agreement and the agreements referred
to herein constitute the entire agreement of the parties with respect to the
matters contemplated herein. This Agreement and such other agreements supersede
any and all prior understand ings as to the subject matter of this Agreement.
7. Amendments, Waivers and Consents. Any provision in this
Agreement to the contrary notwithstanding, changes in or additions to this
Agreement may be made, and compliance with any covenant or provision herein set
forth may be omitted or waived, if the Company shall obtain consent thereto in
writing from Persons holding an aggregate of at least a majority of the Shares
owned by the Investors.
8. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the respective
parties hereto.
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9. General; Definitions. The headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. In this Agreement the singular includes the
plural, the plural the singu lar, the masculine gender includes the neuter,
masculine and feminine genders. This Agreement shall be governed by and con
strued under the laws of the State of Florida. Terms used as defined terms
herein and not otherwise defined shall have the meanings set forth in the
Purchase Agreement.
10. Severability. If any provision of this Agreement shall be
found by any court of competent jurisdiction to be invalid or unenforceable, the
parties hereby waive such provision to the extent that it is found to be invalid
or unenforceable. Such pro vision shall, to the maximum extent allowable by law,
be modified by such court so that it becomes enforceable, and, as modified,
shall be enforced as any other provision hereof, with all the other provisions
hereof continuing in full force and effect.
11. Counterparts. This Agreement may be executed in counter parts,
all of which together shall constitute one and the same instrument.
* * * * * *
Let's Talk Cellular of America, Inc.
By:
-----------------------------------
HIG Fund V, Inc.
By:
-----------------------------------
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EXHIBIT D
[Letterhead of Steel, Hector & Davis]
___________, 1996
HIG Fund V, Inc.
c/o H.I.G. Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, Florida 33131
Re: Let's Talk Cellular America, Inc.
Gentlemen:
This opinion is furnished to you pursuant to Section 8.9 of the Series
A Preferred Stock Purchase Agreement, dated as of June __, 1996 (the "Purchase
Agreement"), between Let's Talk Cellular America, Inc., a Florida corporation
(the "Company"), the stockholders of the Company and HIG Fund V, Inc. (the
"Purchasers"). Terms not otherwise defined herein shall have the meanings as set
forth in the Purchase Agreement.
We have acted as counsel for the Company in connection with the
negotiation, execution and delivery of the Purchase Agreement and consummation
of the transactions contemplated thereby. Whenever our opinion with respect to
the existence or absence of facts is indicated to be based on our knowledge or
awareness, we are referring solely to the actual knowledge of the particular
attorneys within our firm who represented the Company in connection with the
Purchase Agreement.
As to the various questions of fact material to our opinion, we have
relied without independent verification upon the representations made in the
Agreement and upon certificates of officers of the Company. We have also
examined such certificates of public officials, corporate documents and records
and other certificates and instruments as we have deemed necessary in connection
with the opinions set forth herein.
We have assumed the genuineness of all signatures and the authenticity
of all items submitted to us as originals, the legal capacity of natural
persons, and the conformity with originals of all items submitted to us as
copies. In making our examination of documents executed by entities other than
the Company, we have assumed that each such entity had the power, authority and
legal right to enter into and perform all its obligations thereunder and we have
also assumed the due authorization, execution and delivery of such documents by
each such entity.
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With respect to the opinion expressed in paragraph 6 below, we have
relied upon the representations contained in Section 6.1 of the Purchase
Agreement. Our opinions expressed herein are limited to the laws of the State of
Florida and applicable Federal law in effect on the date hereof and we do not
express any opinion herein concerning any other law.
Based upon and subject to the foregoing, we are of the opinion that:
(1) The Company is duly incorporated and validly existing
corporation in good standing under the laws of the State of Florida, and is
qualified to do business and is in good standing in each jurisdiction in which
it has its principal place of business. The Subsidiaries are each an existing
corporation in good standing under the laws of the jurisdictions in which they
are incorporated and are each qualified to do business and are in good standing
in each jurisdiction in which it has its principal place of business. The
Company has the corporate power and authority to enter into and perform its
obligations under the Purchase Agreement and each Related Agreement and to issue
and deliver the Preferred Stock pursuant to the Purchase Agreement.
(2) The Company has all necessary corporate power and has taken
all necessary corporate action required for the due authorization, execution,
delivery and performance by the Company of the Purchase Agreement and the
Related Agreements and the consummation of the transactions contemplated
thereby, and for the due authorization, issuance and delivery of the Purchased
Shares and the Conversion Shares issuable upon conversion of the Purchased
Shares. Sufficient shares of authorized but unissued Common Stock have been
reserved for issuance upon conversion of the Purchased Shares, based on the
conversion rates in effect on the date hereof. The sale and issuance of the
Purchased Shares does not, and the issuance of the Conversion Shares upon
conversion of the Purchased Shares will not, require any further corporate
action (other than execution and delivery of the certificates relating thereto),
and is not and will not be subject to any statutory or, to our knowledge,
preemptive rights of stockholders or rights of first refusal to purchase shares.
The Purchase Agreement and each of the Related Agreements have been duly
authorized, executed and delivered by the Company. The Purchase Agreement and
the Related Agreements constitute the legal, valid and binding obligations of
the Company enforceable against the Company in accordance with their respective
terms.
(3) Assuming the consummation of the Purchase Agreement, (a) the
Company's authorized capital stock consists of (i) ________ shares of common
stock, par value $____ per share, and (ii) ________ shares of Preferred Stock,
all of which have been designated as Series A Convertible Preferred Stock and
(b) based solely on an officer's certificate, there are ________ shares of
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common stock issued and outstanding and held of record by the individuals set
forth on Schedule 2.4 to the Agreement and there will be ________ shares of
Preferred Stock issued and outstanding. The Purchased Shares have been duly
authorized by the Company under the Business Corporation Act of the State of
Florida for issuance pursuant to the Purchase Agreement and, when issued and
delivered against payment therefor in accordance with the terms of the Purchase
Agreement, will be validly issued, fully paid and nonassessable.
(4) The execution and delivery of the Purchase Agreement and the
Related Agreements, the performance by the Company of its obligations
thereunder, the issuance of the Purchased Shares and the consummation of the
transactions contemplated thereby do not conflict with the Articles of
Incorporation or By-Laws of the Company or any Affiliate, any material
agreements of the Company or any Florida or Federal statute, rule or regulation.
(5) No approval, authorization or other action by any governmental
authority is required for the execution, delivery and performance by the Company
of the Purchase Agreement or the Related Agreements and the consummation of the
transactions contemplated thereby (including the sale and issuance of the
Purchased Shares or the issuance of the Conversion Shares upon conversion of the
Purchased Shares) or in connection with the consummation of the transactions
contemplated thereby except for (i) those which have already been made or
granted, and (ii) the filing of registration statements with the Commission and
any applicable state securities commission as specifically provided for in
Article VII of the Purchase Agreement.
(6) It is not necessary in connection with the issuance and
delivery of the Purchased Shares under the circumstances contemplated by the
Purchase Agreement to register the issuance of the Purchased Shares under the
Securities Act of 1933 or any Florida securities or blue sky laws.
(7) The amendment and restatement of the Company's Articles of
Incorporation containing the provisions set forth in Exhibit A to the Purchase
Agreement has been duly adopted by the requisite vote of the Board of Directors
and the Shareholders of the Company, has been transmitted for filing with the
Secretary of State of the State of Florida and upon acceptance for filing shall
become effective under the laws of the State of Florida.
(8) To our knowledge, no action or proceeding before any court or
government body is pending or threatened against the Company wherein an
unfavorable judgment, decree or order would prevent the consummation of the
Purchase Agreement or any of the transactions contemplated thereby, declare
unlawful the transactions contemplated thereby, or cause such transactions to be
rescinded. Without any independent investigation other than
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inquiry of the Company's officers, in the course of our representation of the
Company in connection with the Purchase Agreement, nothing has come to our
actual attention which would lead us to believe that the Company or any
Subsidiary is involved in any litigation or government proceeding or
investigation other than as set forth in the schedules to the Purchase
Agreement.
The opinions set forth above are subject to the following
qualifications:
(a) Our opinion in paragraph (2) above is subject to the effect of
any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar law affecting creditors' rights generally and to the
effect of general principles of equity, including (without limitation) concepts
of materiality, reasonableness, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law) and public policy
considerations or court decisions which may limit rights to obtain
indemnification or contribution. In addition, provisions of the Purchase
Agreement and Related Documents which permit the Purchasers, the Company or the
Principal Shareholders to take action or make determinations may be subject to a
requirement that such action be taken or such determinations be made in a
commercially reasonable manner and in good faith.
(b) We call your attention to the following matters as to which we
express no opinion: (i) the Company's and the Principal Stockholders' agreements
in the Purchase Agreement and Related Documents to indemnify you against any
cost, expense or liability arising out of or related to any Federal, state or
other securities laws: (ii) fraudulent transfer laws, (iii) title to property;
(iv) any order of any court or other authority directed specifically to any
party to the Purchase Agreement and Related Documents of which we do not have
knowledge; (v) disposition of securities under any Purchase Agreement or Related
Document may be subject to federal or state securities laws; (vi) the
enforceability of (A) rights of debtors, lessees or others that may not be
waived or that may be waived only under certain circumstances under applicable
law, and (B) provisions of the Purchase Agreement and Related Documents to the
extent, if any, purporting to compensate any party in excess of actual loss or
reasonable expenses.
This opinion is solely for your benefit and may not be relied upon by
any other person without our prior written consent or used for any other
purpose.
Very truly yours,
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EXHIBIT E
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the __ day of June, 1996,
by and between Let's Talk Cellular of America, Inc., a Florida corporation (the
"Company"), and ______________, an individual residing at ____________________
(the "Executive").
WITNESSETH THAT:
WHEREAS, the Company desires to employ the Executive in the capacity
hereinafter stated, and the Executive desires to enter into the employ of the
Company in such capacity for the period and on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, it is hereby covenanted and agreed by the Company and the
Executive as follows:
1. Employment Period. The Company hereby agrees to continue to
employ the Executive as its __________________ and the Executive, in such
capacity, agrees to provide services to the Company for the period beginning on
the date first above written (the "Commencement Date") and ending on the third
anniversary of the Commencement Date (the "Employment Period"); provided,
however, that this Agreement shall automatically be extended for an additional
year on each anniversary of the Commencement Date unless the Company provides
the Executive notice of non-extension at least sixty (60) days prior to such
anniversary.
2. Performance of Duties. The Executive agrees that during the
Employment Period, while he is employed by the Company, he shall devote his full
time, energies and talents exclusively to serving in the capacity of ________ of
the Company in the best interests of the Company, and to perform the duties
assigned to him by the Board faithfully, efficiently and in a professional
manner; provided that, without the Board's consent (which consent shall not be
unreasonably withheld), the Executive shall not:
(a) serve as or be a consultant to or employee, officer,
agent or director of any competing corporation,
partnership or other entity other than the Company
(other than civic, charitable, or other public
service organizations or as a consultant or director
for a company in an industry outside the Business for
up to five hours in any calendar month); or
(b) have more than a three percent (3%) ownership
interest in any enterprise other than the Company
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if such ownership interest would have a material
impact upon the ability of the Executive to perform
his duties hereunder.
3. Compensation. Subject to the terms and conditions of this
Agreement, during the Employment Period, the Executive shall be
compensated by the Company for his services as follows:
(a) He shall receive, for each 12-consecutive month
period beginning on the Commencement Date and each
anniversary thereof, a rate of salary which is not
less than $200,000 per year (as adjusted annually
for the greater of (i) for the increase in the
Consumer Price Index as published by the U.S.
Department of Labor or (ii) five percent (5%),
payable in substantially equal monthly or more
frequent installments, plus any additional
discretionary bonus approved by unanimous consent
of the Compensation Committee.
(b) He shall be entitled to receive the following
perquisites which shall not be less favorable to the
Executive than the perquisites provided by the
Company immediately prior to the Employment Period:
Nick:
Auto Lease (1 car)
Auto Insurance
Health Insurance
Country Club-Dues
Life Insurance
Disability Insurance
401(K)
Brett:
Auto Lease (1 car)
Auto Insurance
Health Insurance
Country Club-Dues
Life Insurance
Disability Insurance
401(K)
(c) He shall be reimbursed by the Company for all
reasonable business, promotional, travel and
entertainment expenses incurred or paid by him during
the employment period in the performance of his
services under this Agreement provided that the
Executive furnishes to the Company appropriate
documentation in a timely fashion required by the
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Internal Revenue Code in connection with such
expenses and shall furnish such other documentation
and accounting as the Company may from time to time
reasonably request.
4. Compensation Due Upon Termination. Except as otherwise
provided under the executive benefit plans maintained by the Com pany in which
the Executive participates in accordance with sub paragraph 3(b), the
Executive's right to compensation for periods after the date his employment with
the Company terminates shall be determined in accordance with the following:
(a) Discharge Without Cause. In the event the Company
terminates the Executive's employment under this
Agreement without cause, the Executive shall be
entitled to receive $10,416.66 per month (less
applicable taxes) for the twenty four (24) months
following the date of termination, payable in
accordance with the Company's payroll procedures
and prorated for periods less than a full month.
(b) Voluntary Resignation. The Company shall have no
obligation to make payments to the Executive in
accordance with the provisions of paragraph 3 for
periods after the date on which the Executive's
employment with the Company terminates due to the
Executive's voluntary resignation; provided,
however, that the Company shall be obligated to pay
the amount set forth in Section 4(a) of this
Agreement if the Executive voluntarily resigns due
to Constructive Termination (as hereinafter
defined).
For purposes of this Agreement, "Constructive Termination" shall mean any one or
more of the following: (i) a significant change in the nature or scope of the
Executive's authority or duties or title against the will of the Executive or
(ii) the relocation of the Executive's office outside Dade County or to a site
other than the Company's headquarters against the will of the Executive.
(c) Discharge for Cause. The Company shall have no
obligation to make payments to the Executive in
accordance with the provisions of paragraph 3 for
periods after the Executive's employment with the
Company is terminated on account of the Executive's
discharge for cause. For purposes of this
subparagraph 4(c), in addition to the right to
terminate the Executive's employment for fraud, the
Executive shall be considered discharged for
"cause" if he is discharged by the Company on
account of the occurrence of one or more of the
following events:
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(i) the Executive becomes habitually addicted to
drugs or alcohol;
(ii) the Executive discloses material
confidential information in violation of
paragraph 6;
(iii) the Executive engages in competition in
violation of paragraph 7;
(iv) the Company is directed by regulatory or
governmental authorities to terminate the
employment of the Executive or the Executive
engages in activities that cause actions to
be taken by regulatory or governmental
authorities that have a material adverse
effect on the Company;
(v) the Executive is convicted of a felony
(other than a felony resulting from a
traffic violation or minor tax disputes); or
(vi) The Executive flagrantly disregards his
duties under this Agreement after (A) notice
has been given to the Executive by the Board
of Directors of the Company that it views
the Executive to be flagrantly disregarding
his duties under this Agreement and (B) the
Executive has been given a period of 15 days
after such notice to cure such misconduct.
(d) Disability. The Company shall have no obligation
to make payments to the Executive in accordance
with the provisions of paragraph 3 at any time six
months after the date the Executive's employment
with the Company terminates on account of
disability. For purposes of this subparagraph 4(d),
determination of whether the Executive is disabled
shall be determined in accordance with the
Company's long term disability plan.
(e) Death. The Company shall have no obligation to make
payments to the Executive in accordance with the
provisions of paragraph 3 for periods after the
date of the Executive's death.
5. Tax Limitations. If any payments under this Agreement, after
taking into account all other payments to which the Executive is entitled from
the Company, or any affiliate thereof, are more likely than not to result in a
loss of a deduction to the Company
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by reason of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor provision to that section, such payments shall be
reduced by the least amount required to avoid such loss of deduction. If the
Executive and the Company shall disagree as to whether a payment under this
Agreement is more likely than not to result in the loss of a deduction, the
matter shall be resolved by a written opinion of tax counsel chosen by the
Company's independent auditors. The Company shall pay the fees and expenses of
such counsel, and shall make available such information as may be reasonably
requested by such counsel to prepare the opinion. If, by reason of the
limitations of this paragraph 5, the maximum amount payable to the Executive
under subparagraph 4(a) above cannot be determined prior to the due date of
payment, the Company shall pay on such due date the minimum amount which it in
good faith determines to be payable and shall pay the difference, with interest
calculated at the rate prescribed by section 1274(b)(2)(B) of the Code, as soon
as such difference is determined in accordance with this paragraph 5; provided,
however, that the Company shall used its best efforts to determine the amount of
the difference within six months after the due date for such payment.
6. Confidential Information. Except as may be required by the
lawful order of a court or agency of competent jurisdiction, the Executive
agrees to keep secret and confidential for a period of two (2) years all
non-public information concerning the Company and its affiliates which was
acquired by or disclosed to the Executive during the course of his employment by
the Company, any of its affiliates, including information relating to customers
(including, without limitation, credit history, repayment history, financial
information and financial statements), costs, and operations, financial data and
plans, whether past, current or planned and not to disclose the same, either
directly or indirectly, to any other person, firm or business entity, or to use
it in any way; provided, however, that the provisions of this paragraph 6 shall
not apply to information which is in the public domain or that was disclosed to
the Executive by independent third parties who were not bound by an obligation
of confidentiality; and provided further, that the Company recognizes that the
Executive shall, during the course of his employment with the Company, acquire
certain general information regarding the financial condition, and borrowing
trends of the Company's customers and agrees that the provisions of this
paragraph 6 shall not apply to the use of such general information provided the
use thereof does not violate applicable Federal or state laws or the provisions
of paragraph 7 hereof. The Executive further agrees that he will not make any
statement or disclosure which would be prohibited by applicable Federal or state
laws and, during the Employment Period while he is employed by the Company, he
will not make any statement or disclosure which is intended or reasonably likely
to be detrimental to the Company or any of its subsidiaries or affiliates.
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7. Non-competition. The Executive agrees that for the
Non-competition Period, the Executive agrees not to directly or indirectly serve
as or be a consultant to or employee, officer, agent, director or owner of more
than three percent (3%) of another corporation, partnership or other entity
which engages in the business of selling cellular or wireless communication
services or products (the "Business") in the Restricted Area. The "Restricted
Area" shall include any metropolitan area or proposed metropolitan area in which
the Company is doing or will do business within six months of the date of
termination of the Executive's employment (the "Termination Date"). The
"Noncompetition Period" shall mean the period commencing on the Commencement
Date and terminating on (i) the second anniversary of the Termination Date if
the Executive resigns or otherwise leaves the Company's employment on his own
accord (excluding Construction Termination), or (ii) the first anniversary of
the Termination Date if the Executive's employment terminates for any reason
other than (i) above. The Executive further agrees that for the Non-competition
Period, he will not solicit for employment or endeavor to entice away from
employment with the Company or its affiliates any employee of the Company or its
affiliates who is an officer or a manager of any department.
8. Successors. This Agreement shall be binding on, and inure to
the benefit of, the Company and its successors and assigns and any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of the Company's assets and business.
9. Nonalienation. The interests of the Executive under this
Agreement are not subject to the claims of his creditors, other than the
Company, and may not otherwise be voluntarily or involun tarily assigned,
alienated or encumbered.
10. Remedies. The Executive acknowledges that the Company would be
irreparably injured by a violation of paragraphs 6 or 7, and agrees that the
Company shall be entitled to an injunction restraining the Executive from any
actual or threatened breach of paragraph 6 or 7, or to any other appropriate
equitable remedy.
11. Waiver of Breach. The waiver by either the Company or the
Executive of a breach of any provision of this Agreement shall not operate as or
be deemed a waiver of any subsequent breach by either the Company or the
Executive.
12. Notice. Any notice to be given hereunder by a party hereto
shall be in writing and shall be deemed to have been given when received or,
when deposited in the U.S. mail, certified or registered mail, postage prepaid:
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(a) to the Executive addressed as follows:
(b) to the Company addressed as follows:
Let's Talk Cellular of America, Inc.
5200 N.W. 77th Court
Miami, Florida 33166
Attention: Board of Directors
13. Amendment. This Agreement may be amended or cancelled by
mutual agreement of the parties in writing without the consent of any other
person and, so long as the Executive lives, no person, other than the parties
thereto, shall have any rights under or interest in this Agreement or the
subject matter hereof.
14. Applicable Law. The provisions of this Agreement shall be
construed in accordance with the internal laws of the State of Florida.
15. Termination. All of the provisions of this Agreement shall
terminate after the expiration of the Employment Period, except that paragraph 6
shall only terminate upon the expiration of the Confidentiality Period and
paragraph 7 shall terminate upon the expiration of the later of Non-competition
Period or the Nonsolicitation Period.
* * *
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IN WITNESS WHEREOF, the Executive and the Company have executed this
Employment Agreement as of the day and year first written above.
[Executive]
-------------------------------------
Let's Talk Cellular of America,
Inc.
By:
----------------------------------
Its:
----------------------------------
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EXHIBIT F
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into as of
the 25th day of June, 1996, by and between Let's Talk Cellular of America, Inc.,
a Florida corporation (the "Company"), and H.I.G. Capital Management, Inc. (the
"Consultant").
1. Appointment of Consultant. The Company appoints the Consultant
and the Consultant accepts appointment on the terms and conditions provided in
this Agreement as a consultant to the Company's business, including any other
corporations hereafter formed or acquired by the Company to engage in any
business.
2. Board of Directors Supervision. The activities of the
Consultant to be performed under this Agreement shall be subject to the
supervision of the Board of Directors of the Company (the "Board") to the extent
required by applicable law or regulation and subject to reasonable policies not
inconsistent with the terms of this Agreement adopted by the Board and in effect
from time to time. Where not required by applicable law or regulation, the
Consultant shall not require the prior approval of the Board to perform its
duties under this Agreement.
3. Authority of Consultant. Subject to any limitations imposed by
applicable law or regulation or by the Board, the Consultant shall render
management, consulting and financial services to the Company, at the Company's
sole discretion, which services shall include advice and assistance in
connection with the planning and effectuation of a Triggering Event (as defined
in the Company's Description of Series A Preferred Stock in its articles of
incorporation). The Consultant will use its best efforts to cause its employees
and agents to give the Company the benefit of their special knowledge, skill and
business expertise to the extent relevant to the Company's business and offers.
4. Reimbursement of Expenses; Independent Contractor. The
Consultant shall not be obligated to make any advance to or for the account of
the Company or to pay any sums, except out of funds held in accounts maintained
by the Company nor shall the Consultant be obligated to incur any liability or
obligation for the account of the Company without assurance that the necessary
funds for the discharge of such liability or obligation will be provided. The
Consultant shall be an independent contractor, and nothing obtaining in this
Agreement shall be deemed or construed (i) to create a partnership or joint
venture between the Company and the Consultant, or (ii) to cause the Consultant
to be responsible in any way for the debts, liabilities or obligations of the
Company or
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85
any other party, or (iii) to constitute the Consultant or any of its employees
as employees, officers or agents of the Company.
5. Other Activities of Consultant; Investment Opportunities. The
Company acknowledges and agrees that neither the Consultant nor any of the
Consultant's employees, officers, directors, affiliates or associates shall be
required to devote full time and business efforts to the duties of the
Consultant specified in this Agreement, but instead shall devote only so much of
such time and efforts as the Consultant reasonably deems necessary. The Company
further acknowledges and agrees that the Consultant and its affiliates are
engaged in the business of investing in, acquiring and/or managing businesses
for the Consultant's own account, for the account of unaffiliated parties, and
understands that the Consultant plans to continue to be engaged in such
businesses (and other business or investment activities) during the term of this
Agreement. No aspect or element of such activities shall be deemed to be engaged
in for the benefit of the Company or any of its subsidiaries nor to constitute a
conflict of interest. Furthermore, notwithstanding anything herein to the
contrary, the Consultant shall be required to bring only such investments and/or
business opportunities to the attention of the Company as the Consultant, in its
sole discretion, deems appropriate.
6. Compensation of Consultant. In consideration of Consultant's
agreement to provide the management services described herein, the Company will
pay to the Consultant a consulting and management fee upon the occurrence of the
earlier of (i) a Triggering Event or (ii) a default under the Series A Preferred
Stock Purchase Agreement (the "Payment Date"). The consulting fee shall be equal
to the product of (A) the number of months that have passed between the Payment
Date and June 1996 divided by 12 and (B) at the option of the Company, (i)
$240,000 or (ii) 8,000 shares of Series A Preferred Stock (as equitably adjusted
from time to time to reflect stock splits combinations, recapitalizations or
other similar event affecting the Preferred Stock); provided that the fair
market value of the 8,000 shares equals or exceeds $240,000.
7. Term. This Agreement shall commence as of the date hereof and
shall remain in effect through the occurrence of a Triggering Event.
8. Termination Upon Breach. Either the Company or the Consultant
may terminate this Agreement in the event of the breach of any of the material
terms or provisions of this Agreement by the other party, which breach is not
cured within 30 business days after notice of the same is given to the party
alleged to be in breach by the other party.
9. Standard of Care. The Consultant (including any person or
entity acting for or on behalf of the Consultant) shall not be liable for any
mistakes of fact, errors of judgment, for losses
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86
sustained by the Company or for any acts or omissions of any kind (including
acts or omissions of the Consultant), unless caused by intentional misconduct of
the Consultant.
10. Indemnification of Consultant. The Company hereby agrees to
indemnify and hold harmless the Consultant and its present and future officers,
directors, affiliates, employees and agents ("Indemnified Parties") to the
fullest extent permitted by law. The Company further agrees to reimburse the
Indemnified Parties on a monthly basis for any cost of defending any action or
investigation (including attorneys' fees and expenses), subject to an
undertaking from such Indemnified Party to repay the Company if such party is
determined not to be entitled to such indemnity.
11. No Assignment. Without the consent of the Consultant, the
Company shall not assign, transfer or convey any of its rights, duties or
interest under this Agreement, nor shall it delegate any of the obligations or
duties required to be kept or performed by it hereunder. Without the prior
written consent of the Company, the Consultant shall not assign, transfer or
convey any of its rights, duties or interests under this Agreement, nor shall it
delegate any of the obligations or duties required to be kept or performed by it
under this Agreement.
12. Notices. All notices, demands, consents, approvals and
requests given by either party to the other hereunder shall be in writing and
shall be personally delivered or sent by registered or certified mail, return
receipt requested, postage prepaid, to the parties at the following addresses:
If to the Company: Let's Talk Cellular of America,
Inc.
5200 NW 77th Court
Miami, Florida 33166
Attention: Nick Molina,
Chief Executive Officer
If to the Consultant: H.I.G. Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, Florida 33131
Attention: Anthony Tamer
Any party may at any time change its respective address by sending written
notice to the other party of the change in the manner hereinabove prescribed.
13. Severability. If any term or provision of this Agreement or
the application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or
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87
enforceable, shall not be affected thereby, and each term or provision of this
Agreement shall be valid and be enforced to the fullest extent permitted by law.
14. No Waiver. The failure by any party to exercise any right,
remedy or elections herein contained or permitted by law shall not constitute or
be construed as a waiver or relinquishment for the future exercise of such
right, remedy or election, but the same shall continue and remain in full force
and effect. All rights and remedies that any party may have at law, in equity or
otherwise upon breach of any term or condition of this Agreement, shall be
distinct, separate and cumulative rights and remedies and no one of them,
whether exercised or not, shall be deemed to be in exclusion of any other right
or remedy.
15. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the matters herein contained and any
agreement hereafter made shall be ineffective to effect any change or
modification, in whole or in part, unless such agreement is in writing and
signed by the party against whom enforcement of the change or modification is
sought.
16. Governing Laws. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida without reference
to the laws of any other state.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Consulting
Agreement to be duly exercised by their authorized representatives as of the
date first above written.
LET'S TALK CELLULAR OF AMERICA, INC.
By:
---------------------------
Nick Molina, President
H.I.G. CAPITAL MANAGEMENT, INC.
By:
---------------------------
Anthony Tamer, President
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EXHIBIT G
RENEWAL PROMISSORY NOTE
$129,050.00
Dated as of June 25, 1996
FOR VALUE RECEIVED, the undersigned, LET'S TALK CELLULAR OF AMERICA,
INC. a Florida corporation (the "Borrower"), hereby promises to pay to the order
of BRETT BEVERIDGE, a Florida resident ("Lender"), the principal sum of One
Hundred and Twenty-Nine Thousand and Fifty and no/100 Dollars ($129,050.00),
together with interest on the unpaid principal balance hereof from time to time
outstanding, from the date hereof until the principal hereof shall have become
due and payable (whether by acceleration, maturity or otherwise) at a fixed rate
equal to eight percent (8%) per annum. Said principal and interest shall be
payable in lawful money of the United States of America and in immediately
available funds, computed on a daily basis, based upon a 360-day year. All
payments shall be made to the Lender at the Borrower's principal office at 5200
N.W. 77th Court, Miami, Florida 33166, or at such other place as the holder
hereof may, from time to time, designate in writing.
All outstanding principal shall be due and payable in full to the
Lender on the earlier to occur of (a) a Qualified Public Offering (as that term
is defined in that certain Series A Preferred Stock Purchase Agreement, dated as
of the date hereof, by and among the Borrower, the Lender, HIG Fund V, Inc.
("HIG") and Nick Molina) or (b) October 1, 2001 (each a "Final Payment Date").
All accrued and unpaid interest under this Note shall be due and payable monthly
in arrears, commencing on July 1, 1996 and continuing monthly on the first day
of each month thereafter until this Note is paid in full, and at maturity.
This Note evidences the outstanding balance of any and all prior loans
made by the Lender to the Borrower (the "Shareholder Loan"), the outstanding
principal balance of which Shareholder Loan as of the date hereof equals the
original principal balance of this Note. As of the date hereof, no interest
which has heretofore accrued with respect to the Shareholder Loan remains
unpaid. All principal outstanding pursuant to the Shareholder Loan as of the
date hereof shall, as of the date hereof and without any action on the part of
any party, be deemed to be outstanding under this Note. Acceptance by the Lender
of this Note shall not be deemed or construed as payment or satisfaction of the
Shareholder Loan, which shall continue to remain outstanding although the
indebtedness represented thereby is consolidated herein. This Note represents
any and all amounts that are currently owed by the Borrower to the Lender.
If the principal of this Note or any portion hereof and, to the extent
permitted by law, interest hereon shall not be paid when due, whether by
acceleration or otherwise, the same shall, or in the event of the occurrence of
an Event of Default (as hereinafter defined), the outstanding principal balance
of this Note shall at the option
90
of the Lender, thereafter bear interest for any period during which the same
shall be overdue, or during the pendency of any such Event of Default, at a rate
per annum equal to the lower of (a) the maximum rate permitted by applicable
law, or (b) a rate of fourteen percent (14%) per annum, and payable on demand.
Upon the happening of any of the following events, each of which shall
constitute a default hereunder (herein referred to as an "Event of Default"),
all liabilities of the Borrower to the Lender, whether or not evidenced by this
Note, shall thereupon or thereafter, at the option of the Lender, without notice
or demand become due and payable (the "Acceleration Rights"):
(a) failure of the Borrower to perform any agreement hereunder
or under any other instrument or agreement evidencing, securing and/or
guaranteeing the obligations and indebtedness of the Borrower to the
Lender evidenced by this Note, or to pay in full, when due, any
liability whatsoever or any principal installment of this Note or
interest installment hereon, when the same shall become due and
payable;
(b) the Borrower shall at the direction of the Board of
Directors (excluding the vote of the Lender);
(i) make an assignment for the benefit of creditors,
petition or apply to any court or other tribunal for the appointment of
a custodian, receiver or any trustee or shall commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or if there shall have been filed
any such petition or application, or any such proceeding shall have
been commenced against the Borrower in which an order for relief is
entered or which remains undismissed for a period of thirty (30) days
or more; the Borrower, by any act or omission shall indicate consent
to, approval of or fail to timely object to any such petition,
application or proceeding or order for relief or the appointment of a
custodian, receiver or any trustee or shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for
a period of thirty (30) days or more;
(ii) generally not pay its debts as such debts become
due or admit in writing its inability to pay its debts as they mature;
or
(iii) have concealed, removed or permitted to be
concealed or removed any part of its properties or assets, with intent
to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or shall
have made any transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly situated have not
been paid; or
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91
(iv) be "insolvent", as such term is defined in the
federal bankruptcy code;
(c) the taking of possession of any substantial part of the
property of the Borrower at the instance of any governmental authority;
Notwithstanding the foregoing paragraph, the Lender's Acceleration
Rights shall not be exercisable prior to a Final Payment Date if at the time of
the Event of Default the Lender and Nick Molina are in control of the Borrower's
Board of Directors pursuant to the terms of that certain Shareholders Agreement,
dated as of the date hereof (the "Shareholders Agreement"), by and among the
Borrower, HIG, the Lender, Nick Molina, Allan Sorensen and Anne Gozlan. If HIG
is in control of the Board of Directors pursuant to the terms of the
Shareholders Agreement, then the Lender's Acceleration Rights shall be
exercisable immediately upon an Event of Default; provided, however, that in the
event that an Event of Default is due to a failure to make a payment of interest
when due hereunder and such missed payment is not cured within fifteen (15) days
after the failure to make such payment, then the Lender shall stay the exercise
of its Acceleration Rights for a period of six months from the date that the
Borrower failed to make a payment of interest when due.
The Borrower agrees to pay all reasonable costs incurred by any holder
hereof, including reasonable attorneys' fees and costs (including those for
appellate proceedings), incurred in connection with any Event of Default, or in
connection with the collection or attempted collection or enforcement hereof
whether or not legal proceedings may have been instituted.
All parties to this Note, including the Borrower and any sureties,
endorsers or guarantors, hereby waive presentment for payment, demand, protest,
notice of dishonor, notice of acceleration of maturity, and all defenses on the
ground of extension of time for payment hereof, and agree to continue and remain
bound for the payment of principal, interest and all other sums payable
hereunder, notwithstanding any change or changes by way of release, surrender,
exchange or substitution of any security for this Note or by way of any
extension or extensions of time for payment of principal or interest; and all
such parties waive all and every kind of notice of such change or changes and
agree that the same may be made without notice to or consent of any of them. The
rights and remedies of the holder as provided herein shall be cumulative and
concurrent and may be pursued singularly, successively or together at the sole
discretion of the holder, and may be exercised as often as occasion therefor
shall occur, and the failure to exercise any such right or remedy shall in no
event be construed as a waiver or release of the same.
The Borrower does not intend or expect to pay, nor does the Lender
intend or expect to charge, accept or collect any interest which, when added to
any commitment fee or any other charge upon the principal, shall be in excess of
the highest lawful rate allowable under the laws of the State of Florida or the
United States of America, whichever is higher or unlimited. Should acceleration,
prepayment
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92
or any other charges upon the principal or any portion thereof result in the
computation or earning of interest in excess of the highest lawful rate
allowable under the laws of the State of Florida or the United States of
America, whichever is higher or unlimited, any and all such excess is hereby
waived and shall be credited to the outstanding principal balance and/or, to the
extent such excess exceeds such outstanding principal balance, returned to the
Borrower.
The unpaid balance of this Note may be prepaid at any time and from
time to time without premium or penalty. All prepayments made hereunder shall be
credited first to accrued interest and then to principal; however, in the event
of default hereunder, the Lender may, in its sole discretion, and in such order
as it may choose, apply any payments(s) to interest, principal and/or lawful
charges and expenses then accrued.
No delay or omission on the part of the holder of this Note in
exercising any right hereunder shall operate as a waiver of such right or any
other right under this Note, nor shall any waiver on one occasion be construed
as a bar to or waiver of any such right on any future occasion. No waiver shall
be effective unless in writing and signed by the holder of this Note.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Florida. In the event the Lender
determines it necessary to institute suit to collect on this Note, the action
may be maintained in Miami, Florida and the Borrower does hereby consent to the
institution of action in that jurisdiction and waive any and all defenses it may
have to the maintenance of the suit in Miami, Florida. This Note is binding upon
the Borrower and its personal representatives, successors and assigns.
THE BORROWER HEREBY, AND THE LENDER BY ITS ACCEPTANCE OF THIS NOTE,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT, DOCUMENT OR INSTRUMENT
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO MAKE CERTAIN MODIFICATIONS
TO THE SHAREHOLDER LOAN AS EVIDENCED BY THIS NOTE.
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93
IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed and delivered as of the day and year first written above.
LET'S TALK CELLULAR OF AMERICA, INC.
By: /s/ Nick Molina
-----------------------------------------
Print Name: Nick Molina
------------------------------
Its: PRESIDENT
-------------------------------------
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EXHIBIT G
RENEWAL PROMISSORY NOTE
$129,050.00
Dated as of June 25, 1996
FOR VALUE RECEIVED, the undersigned, LET'S TALK CELLULAR OF AMERICA,
INC. a Florida corporation (the "Borrower"), hereby promises to pay to the order
of NICK MOLINA, a Florida resident ("Lender"), the principal sum of One Hundred
and Twenty-Nine Thousand and Fifty and no/100 Dollars ($129,050.00), together
with interest on the unpaid principal balance hereof from time to time
outstanding, from the date hereof until the principal hereof shall have become
due and payable (whether by acceleration, maturity or otherwise) at a fixed rate
equal to eight percent (8%) per annum. Said principal and interest shall be
payable in lawful money of the United States of America and in immediately
available funds, computed on a daily basis, based upon a 360-day year. All
payments shall be made to the Lender at the Borrower's principal office at 5200
N.W. 77th Court, Miami, Florida 33166, or at such other place as the holder
hereof may, from time to time, designate in writing.
All outstanding principal shall be due and payable in full to the
Lender on the earlier to occur of (a) a Qualified Public Offering (as that term
is defined in that certain Series A Preferred Stock Purchase Agreement, dated as
of the date hereof, by and among the Borrower, the Lender, HIG Fund V, Inc.
("HIG") and Brett Beveridge) or (b) October 1, 2001 (each a "Final Payment
Date"). All accrued and unpaid interest under this Note shall be due and payable
monthly in arrears, commencing on July 1, 1996 and continuing monthly on the
first day of each month thereafter until this Note is paid in full, and at
maturity.
This Note evidences the outstanding balance of any and all prior loans
made by the Lender to the Borrower (the "Shareholder Loan"), the outstanding
principal balance of which Shareholder Loan as of the date hereof equals the
original principal balance of this Note. As of the date hereof, no interest
which has heretofore accrued with respect to the Shareholder Loan remains
unpaid. All principal outstanding pursuant to the Shareholder Loan as of the
date hereof shall, as of the date hereof and without any action on the part of
any party, be deemed to be outstanding under this Note. Acceptance by the Lender
of this Note shall not be deemed or construed as payment or satisfaction of the
Shareholder Loan, which shall continue to remain outstanding although the
indebtedness represented thereby is consolidated herein. This Note represents
any and all amounts that are currently owed by the Borrower to the Lender.
If the principal of this Note or any portion hereof and, to the extent
permitted by law, interest hereon shall not be paid when due, whether by
acceleration or otherwise, the same shall, or in the event of the occurrence of
an Event of Default (as hereinafter defined), the outstanding principal balance
of this Note shall, at the option
95
of the Lender, thereafter bear interest for any period during which the same
shall be overdue, or during the pendency of any such Event of Default, at a rate
per annum equal to the lower of (a) the maximum rate permitted by applicable
law, or (b) a rate of fourteen percent (14%) per annum, and payable on demand.
Upon the happening of any of the following events, each of which shall
constitute a default hereunder (herein referred to as an "Event of Default"),
all liabilities of the Borrower to the Lender, whether or not evidenced by this
Note, shall thereupon or thereafter, at the option of the Lender, without notice
or demand, become due and payable (the "Acceleration Rights"):
(a) failure of the Borrower to perform any agreement hereunder
or under any other instrument or agreement evidencing, securing and/or
guaranteeing the obligations and indebtedness of the Borrower to the
Lender evidenced by this Note, or to pay in full, when due, any
liability whatsoever or any principal installment of this Note or
interest installment hereon, when the same shall become due and
payable;
(b) the Borrower shall at the direction of the Board of
Directors (excluding the vote of the Lender):
(i) make an assignment for the benefit of creditors,
petition or apply to any court or other tribunal for the appointment of
a custodian, receiver or any trustee or shall commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or if there shall have been filed
any such petition or application, or any such proceeding shall have
been commenced against the Borrower in which an order for relief is
entered or which remains undismissed for a period of thirty (30) days
or more; the Borrower, by any act or omission shall indicate consent
to, approval of or fail to timely object to any such petition,
application or proceeding or order for relief or the appointment of a
custodian, receiver or any trustee or shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for
a period of thirty (30) days or more;
(ii) generally not pay its debts as such debts become
due or admit in writing its inability to pay its debts as they mature;
or
(iii) have concealed, removed or permitted to be
concealed or removed any part of its properties or assets, with intent
to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or shall
have made any transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly situated have not
been paid; or
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96
(iv) be "insolvent", as such term is defined in the
federal bankruptcy code;
(c) the taking of possession of any substantial part of the
property of the Borrower at the instance of any governmental authority;
Notwithstanding the foregoing paragraph, the Lender's Acceleration
Rights shall not be exercisable prior to a Final Payment Date if at the time of
the Event of Default the Lender and Brett Beveridge are in control of the
Borrower's Board of Directors pursuant to the terms of that certain Shareholders
Agreement, dated as of the date hereof (the "Shareholders Agreement"), by and
among the Borrower, HIG, the Lender, Brett Beveridge, Allan Sorensen and Anne
Gozlan. If HIG is in control of the Board of Directors pursuant to the terms of
the Shareholders Agreement, then the Lender's Acceleration Rights shall be
exercisable immediately upon an Event of Default; provided, however, that in the
event that an Event of Default is due to a failure to make a payment of interest
when due hereunder and such missed payment is not cured within fifteen (15) days
after the failure to make such payment, then the Lender shall stay the exercise
of its Acceleration Rights for a period of six months from the date that the
Borrower failed to make a payment of interest when due.
The Borrower agrees to pay all reasonable costs incurred by any holder
hereof, including reasonable attorneys' fees and costs (including those for
appellate proceedings), incurred in connection with any Event of Default, or in
connection with the collection or attempted collection or enforcement hereof
whether or not legal proceedings may have been instituted.
All parties to this Note, including the Borrower and any sureties,
endorsers or guarantors, hereby waive presentment for payment, demand, protest,
notice of dishonor, notice of acceleration of maturity, and all defenses on the
ground of extension of time for payment hereof, and agree to continue and remain
bound for the payment of principal, interest and all other sums payable
hereunder, notwithstanding any change or changes by way of release, surrender,
exchange or substitution of any security for this Note or by way of any
extension or extensions of time for payment of principal or interest; and all
such parties waive all and every kind of notice of such change or changes and
agree that the same may be made without notice to or consent of any of them. The
rights and remedies of the holder as provided herein shall be cumulative and
concurrent and may be pursued singularly, successively or together at the sole
discretion of the holder, and may be exercised as often as occasion therefor
shall occur, and the failure to exercise any such right or remedy shall in no
event be construed as a waiver or release of the same.
The Borrower does not intend or expect to pay, nor does the Lender
intend or expect to charge, accept or collect any interest which, when added to
any commitment fee or any other charge upon the principal, shall be in excess of
the highest lawful rate allowable under the laws of the State of Florida or the
United States of America, whichever is higher or unlimited. Should acceleration,
prepayment
3
97
or any other charges upon the principal or any portion thereof result in the
computation or earning of interest in excess of the highest lawful rate
allowable under the laws of the State of Florida or the United States of
America, whichever is higher or unlimited, any and all such excess is hereby
waived and shall be credited to the outstanding principal balance and/or, to the
extent such excess exceeds such outstanding principal balance, returned to the
Borrower.
The unpaid balance of this Note may be prepaid at any time and from
time to time without premium or penalty. All prepayments made hereunder shall be
credited first to accrued interest and then to principal; however, in the event
of default hereunder, the Lender may, in its sole discretion, and in such order
as it may choose, apply any payments(s) to interest, principal and/or lawful
charges and expenses then accrued.
No delay or omission on the part of the holder of this Note in
exercising any right hereunder shall operate as a waiver of such right or any
other right under this Note, nor shall any waiver on one occasion be construed
as a bar to or waiver of any such right on any future occasion. No waiver shall
be effective unless in writing and signed by the holder of this Note.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Florida. In the event the Lender
determines it necessary to institute suit to collect on this Note, the action
may be maintained in Miami, Florida and the Borrower does hereby consent to the
institution of action in that jurisdiction and waive any and all defenses it may
have to the maintenance of the suit in Miami, Florida. This Note is binding upon
the Borrower and its personal representatives, successors and assigns.
THE BORROWER HEREBY, AND THE LENDER BY ITS ACCEPTANCE OF THIS NOTE,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT, DOCUMENT OR INSTRUMENT
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO MAKE CERTAIN MODIFICATIONS
TO THE SHAREHOLDER LOAN AS EVIDENCED BY THIS NOTE.
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98
IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed and delivered as of the day and year first written above.
LET'S TALK CELLULAR OF AMERICA, INC.
By: /s/ Brett Beveridge
-----------------------------------------
Print Name: Brett Beveridge
---------------
Its: Vice President
----------------------------------------
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EXHIBIT H
ESCROW AGREEMENT
June 25, 1996
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Jorge L. Freeland, Esq.
Gentlemen:
Your firm has agreed to act as the escrow agent (the "Escrow Agent") in
connection with certain of the transactions contemplated by and pursuant to the
provisions of that certain Series A Preferred Stock Purchase Agreement, dated as
of June 25, 1996, (the "Purchase Agreement"), among Let's Talk Cellular of
America, Inc., a Florida corporation and HIG Fund V, Inc. (the "Purchaser"),
Let's Talk Cellular of America, Inc. (the "Company") and the shareholders of the
Company listed on the signature pages thereto (the "Principal Shareholders").
Terms used herein and not otherwise defined shall have the same meaning as used
in the Purchase Agreement.
Pursuant to Section 1.3 of the Purchase Agreement, the Purchaser and
the Company are to deposit 66,666 shares of the Company's Series A Preferred
Stock, par value $30 per share (the "Escrowed Shares") and $2 million (the
"Escrowed Funds" and together with the Escrowed Shares, the "Escrowed Assets")
with you to be held in escrow pending the consummation of the transactions
contemplated by Sections 1.3 and 1.4 of the Purchase Agreement. The placement of
the Escrowed Assets with you in escrow is a condition precedent to the
Purchaser's investment in the Company pursuant to the Purchase Agreement.
The Escrowed Assets shall be held by you in a place of safe keeping
until the Purchaser and the Company shall have instructed you to deliver the
Escrowed Assets to the persons described in their disbursement instructions.
In the event the Escrow Agent shall have received a claim as to the
Escrowed Assets, the Escrow Agent may, at any time and from time-to-time in its
sole discretion, take either of the following actions:
A. Continue to hold the Escrowed Assets until the dispute is settled
between the parties and it receives (i) written instructions signed by the
Company and the Purchaser as to the delivery of the Escrowed Assets or (ii) a
final nonappealable order from a court of
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Greenberg, Traurig, Hoffman
Lipoff, Rosen & Quentel, P.A.
June 25, 1996
Page 2
competent jurisdiction stating to whom and in what amounts the Escrowed Assets
should be released and delivered; or
B. Commence an interpleader action in any court of competent
jurisdiction whereupon it shall be relieved of any further obligations pursuant
hereto.
In the event that any other claim or claims are made against you or if
there is any other dispute in respect of the Escrow Assets, you shall have the
power and authority, in your sole discretion, to hold such Escrow Assets until
such claims are resolved, either through judicial process or otherwise, and/or
to file an interpleader action with respect to such claim or claims in any court
of competent jurisdiction.
Except in the case of willful misconduct or gross negligence, you shall
have no liability whatsoever for any loss sustained as a result of this Escrow
Agreement. You shall have no duties or obligations except as set forth in this
Escrow Agreement, and you shall not be required to take any action or actions
other than in accordance with the terms hereof. Without limiting the generality
of the foregoing, this Escrow Agreement imposes no duty or obligation on you.
In the event you incur any costs, losses, liabilities, damages or
expenses, including reasonable attorneys' fees, in connection with your
activities as Escrow Agent, your holding of the Escrow Assets or your filing of
any interpleader action, it is understood and agreed by all of the parties to
the Purchase Agreement that you may, after giving a 3 day notice, set-off
against any and all amounts held by you and retain for your own account the full
amount of any and all such costs, losses, liabilities, damages or expenses.
Each of the Company, the Principal Shareholders and the Purchaser
jointly and severally agree to indemnify and hold you harmless from and against
the full amount of any and all claims, costs, damages, judgments, fees,
expenses, obligations, taxes, assessments, liabilities, actions, suits, or
charges, including reasonable attorneys' fees and expenses, made against you or
incurred by you by reason of any act or omission to act by you as Escrow Agent
hereunder or in connection with any of the transactions referred to herein or
contemplated hereby or your holding of the Escrow Shares or your filing of any
interpleader action and against any loss you may sustain in carrying out the
terms of this Escrow Agreement, other than as a result of your gross negligence
or willful misconduct.
Each of the Company and the Principal Shareholders understands that the
Escrow Agent is counsel to the Purchaser and agrees that the Escrow Agent shall
not be precluded
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Greenberg, Traurig, Hoffman
Lipoff, Rosen & Quentel, P.A.
June 25, 1996
Page 3
from continuing to represent the Purchaser in any controversy or litigation
arising in connection with this Escrow Agreement by reason of acting as the
Escrow Agent.
The Company, the Purchaser and the Principal Shareholders are
beneficiaries to this Escrow Agreement, and its terms may not be changed without
their written consent and the consent of the Escrow Agent. No third party shall
be deemed a beneficiary of this Agreement and no such party shall have the right
to commence or maintain any suit or action with respect to this Agreement;
provided that this provision shall not be deemed a waiver of any of the rights
which the Purchaser has under the Purchase Agreement. This Agreement may be
executed in one or more counterparts, all of which will be deemed to be the same
original agreement.
Please acknowledge your Agreement to the foregoing terms and provisions
by executing the enclosed copy of this Escrow Agreement and returning it to the
undersigned.
HIG FUND V, INC.
By:
-------------------------------------
(Signatures continue on next page)
Accepted this 25th day
of June, 1996
GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.
By:
-------------------------------
102
Escrow Agreement
Signature Page
Let's Talk Cellular of America, Inc.
By:
-----------------------------------------
Nick Molina
By:
-----------------------------------------
Brett Beveridge
103
Schedule 2.4 to the Series A Preferred Stock Agreement
Ownership of shares at closing:
- -------------------------------
HIG Fund V, Inc. 350,000(1)
Brett Beveridge 282,750(2)
Nick Molina 282,750(2)
Al Sorensen 65,000
Anne Gozlan 19,500(2)
---------
1,000,000
(1) Assumes full conversion of 100,000 shares of Series A preferred stock
(2) Assumes full vesting of Anne Gozlan's bonus shares of common stock, which
will occur on second and third anniversary of employment (6,500 shares vesting
on each anniversary date). As of closing, 289,250 shares are owned by Brett
Beveridge and Nick Molina, respectively, and 6,500 shares are owned by Anne
Gozlan.
Employment agreement with Anne Gozlan - May 1995
Right of first refusal: see description in Shareholders' Agreement (Exhibit B to
Series A Preferred Stock Agreement)
104
Schedule 2.5 to the Series A Preferred Stock Agreement
Subsidiaries:
- - Let's Talk Cellular, Inc.
- - Let's Talk Cellular of Aventura, Inc.
- - Let's Talk Cellular of Bayside, Inc.
- - Let's Talk Cellular of Florida Mall, Inc.
- - Let's Talk Cellular of Lenox Square, Inc.
- - LTC Kiosk Management Corporation
Loans from shareholders:
- - Loan from Brett Beveridge in the amount of $129,050, bearing interest at 8%
- - Loan from Nick Molina in the amount of $129,050, bearing interest at 8%
105
LET'S TALK CELLULAR OF AMERICA, INC.
FINANCIAL STATEMENTS
APRIL 30, 1996
106
LET'S TALK CELLULAR OF AMERICA, INC.
BALANCE SHEET
APRIL 30, 1996
April
CURRENT ASSETS:
Cash $ 175,612
Trade accounts receivable 45,575
Carriers receivable 664,177
Inventory 1,197,687
Prepaid expenses 45,246
Other current assets 34,967
-----------
Total current assets 2,163,264
-----------
Fixed assets, cost 1,694,145
Accumulated depreciation (335,855)
-----------
Fixed assets, net 1,358,290
-----------
Preopenings - cost 80,970
Accumulated amortization (62,866)
-----------
Preopenings, net 18,104
Deposits 19,250
Other non-current assets 18,540
-----------
Other non-current assets 55,894
-----------
TOTAL $ 3,577,448
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payabl $ 828,948
Line of credit 865,800
Accrued expenses and other liabilities 284,680
Capital lease obligations 76,955
Customer deposits 88,022
Income taxes payable 62,264
-----------
Total current liabilities 2,206,669
-----------
Loans from shareholders 258,100
Bank term loan 265,000
Deferred revenue 105,056
Other liabilities 36,652
-----------
Total other liabilities 664,808
-----------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 1,000 shares
authorized, issued and outstanding 1,000
Additional paid-in capital 257,250
Retained earnings 447,721
-----------
Total shareholders' equity 705,971
-----------
TOTAL $ 3,577,448
===========
107
LET'S TALK CELLULAR OF AMERICA
FISCAL YEAR ENDING JULY 31, 1996
April 1996 YTD
---------- ----------
NET REVENUE - CELLULAR $ 990,355 $9,410,229
NET REVENUE - PAGER 60,711 518,099
TOTAL REVENUE 1,051,066 9,928,328
COST OF GOODS SOLD 475,351 4,714,601
GROSS PROFIT 575,715 5,213,727
CELLULAR OPERATING EXP 369,928 3,421,158
PAGER OPERATING EXP 7,117 73,383
GENERAL AND ADMINIST. 185,709 1,328,744
TOTAL EXPENSES 562,754 4,823,285
OPERATING INCOME 12,961 390,442
DEPRECIATION/AMORTIZATION 24,416 195,981
INTEREST EXPENSE 13,626 117,737
EARNINGS BEFORE TAXES (25,081) 76,724
INCOME TAXES 0 27,000
NET INCOME/(LOSS) $ (25,081) $ 49,724
April 1996 YTD
---------- ----------
NET REVENUE - CELLULAR 94.22% 94.78%
NET REVENUE - PAGER 5.78% 5.22%
TOTAL REVENUE 100.00% 100.00%
COST OF GOODS SOLD 45.23% 47.49%
GROSS PROFIT 54.77% 52.51%
CELLULAR OPERATING EXP. 35.20% 34.46%
PAGER OPERATING EXP. 0.68% 0.74%
GENERAL AND ADMINISTRATIVE 17.67% 13.38%
TOTAL EXPENSES 53.54% 48.58%
OPERATING INCOME 1.23% 3.93%
DEPRECIATION/AMORTIZATION 2.32% 1.97%
INTEREST EXPENSE 1.30% 1.19%
EARNINGS BEFORE TAXES (-2.39)% 0.77%
INCOME TAXES .00% 0.27%
NET INCOME: (-2.39)% 0.50%
108
LET'S TALK CELLULAR OF AMERICA, INC.
STATEMENT OF CASH FLOWS
PERIOD ENDED APRIL 30, 1996
April YTD
CASH FROM OPERATING ACTIVITIES
Net income/(loss) $ (25,081) $ 49,724
Income tax expense 0 27,000
Gain/Loss on disposal 22,065 22,065
Depreciation and amortization 19,918 155,034
Preopening amortization 4,498 40,947
(Increase)/Decrease in:
Carrier receivables 285,099 (192,049)
Inventory (69,972) (6,336)
Prepaid expenses 10,010 125,208
Trade receivables (c/c) 43,695 (7,061)
Other assets 3,132 75,242
Increase/(Decrease) in: 0
Trade accounts payable (83,408) (402,655)
Accrued expenses and other liab (167,029) (41,576)
Customer deposits (8,957) 41,144
Cash provided by/(used in) --------- ---------
operating activities 33,970 (113,313)
--------- ---------
CASH FROM INVESTING ACTIVITIES
Fixed assets acquisitions (49,945) (535,891)
Store preopening costs 2,320 (8,168)
Proceeds from disposals 63,750 63,750
Cash provided by/(used in) --------- ---------
investing activities 16,125 (480,309)
--------- ---------
CASH FROM FINANCING ACTIVITIES
OTHER THAN LINE OF CREDIT
Capital lease (4,214) (39,996)
Term Loan RNB (5,000) 265,000
Due to shareholders 0 (100,897)
Proceeds from capital contributions
Citibank LOC 0 (462,493)
RNB LOC 101,800 865,800
Cash provided by/(used in)
financing activities other --------- ---------
than line of credit 92,586 527,414
--------- ---------
Net increase/(decrease) in cash 142,681 (66,208)
Cash, beginning 32,931 241,820
Cash, ending $ 175,612 $ 175,612
109
Schedule 2.7 to the Series A Preferred Stock Agreement
First amendment to stock purchase agreement with Al Sorensen - May 1996
First amendment to consulting agreement with Al Sorensen - May 1996
Pay off of loan from Al Sorensen - September 1995
Termination of escrow agreement with Al Sorensen - May, 1996
Increase in Brett Beveridge's and Nick Molina's salary from $150,000 to
$198,000, effective August 16, 1995
Sale of the store located at Brandon Town Center, FL on March 29, 1996
Kiosk staffing agreement with AT&T dated June 1, 1996
Closing of the store located at Roosevelt Field, NY - June 1996
Credit facility agreements with Republic National Bank dated September 5, 1995:
- - Letter agreement
- - Master promissory note
- - Term note
- - Security agreement
Credit facility agreements with republic National Bank dated December 4, 1995:
- - Amendment to letter agreement
- - Renewal note
- - Incremental note
- - Combined note
110
Schedule 2.8 to the Series A Preferred Stock Agreement
U.S. Equal Employment Opportunity Commission charge #10960012
Demand by St. George Productions dated April 25, 1996
Complaint filed by Jay Wasserman - March 1996
Judgment relative to the Westchester Mall, White Plains NY - September 1995
(filed-in City Court of White Plains, County of Westchester, State of New York,
Index No. SP5542/95)
Lawsuit filed by The O'Connor Group against Let's Talk Cellular of America, Inc.
(filed in Dade County, Case No.96-5267, not served as of June 14, 1996)
111
Schedule 2.11(a)(i) to the Series A Preferred Stock Agreement
Corporate office 5200 NW, 77 Court. Miami, FL 33166
Dadeland Mall 7565 N. Kendall Drive. Miami, FL 33156
Aventura Mall 19501 Biscayne Blvd. North Miami Beach, FL 33180
Bayside Market Place #1 401 Biscayne Blvd. Miami, FL 33132
Florida Mall 8001 S. Orange Blossom Trail. Orlando, FL 32809
Lenox Square 3393 Peachtree Road NE. Atlanta, GA 30326
Manhattan Mall 901 Avenue of the Americas. New York NY 10001
Town Center at Boca 6000 West Glades Road Boca Raton, FL 33431
Westland Mall 1695 West 49 Street. Hialeah, FL 33012
Cutler Ridge Mall 20505 South Dixie Hwy. Miami, FL 33189
Miami International Mall 1455 NW 107 Avenue. Miami, FL 33172
Altamonte Springs 451 Altamonte Ave. Altamonte Springs, FL 32701
Tysons Corner 7903 Tysons Corner Center. Mclean, VA 22102
Montgomery Mall 7111 Democracy Blvd. Bethesda, MD 20817
St. Charles Towne Center 11110 Mall Circle. Waldorf, MD 20603
Annapolis Mall 2002 Annapolis Mall. Annapolis, MD 21401
Potomac Mills 2700 Potomac Mill Circle. Woodbridge, VA 22192
Union Station 50 Massachusetts Ave. Washington, DC 20002
Fashion Center at Pentagon City 1100 South Hayes Street. Arlington, VA 22202
Mall of the Americas 7795 West Flagler. Miami, FL 33144
Pembroke Lakes Mall 11401 pines Boulevard, FL 33026
Bayside Market Place #2 401 Biscayne Blvd. Miami, FL 33132
Orlando Airport 9341 Airport Blvd #A. Orlando, FL 32827
Sawgrass Mills 12801 W. Sunrise Blvd. Sunrise, FL 33323
Seminole Town Center 183 Town Center Circle. Sanford, FL 32771
Coral Square Mall 9345 West Atlantic Blvd. Coral Springs, FL 33065
112
Schedule 2.11(a)(ii) to the Series A Preferred Stock Agreement
Security interest in accounts receivable, inventory, equipment, general
intangibles, chattel paper, instruments and documents granted to Republic
National Bank in connection with credit facility agreements entered into on
September 5, and December 4. 1995, respectively (see Schedule 2.7). For a more
complete description of the security interest, please refer to the security
agreement.
113
Schedule 2.11(a)(iii) to the Series A Preferred Stock Agreement
None
114
Schedule 2.11(b) to the Series A Preferred Stock Agreement
Service Mark Reg. No. 1,816,162 - Jan. 11, 1994 - Let's Talk Cellular - for
communications services
Service Mark Reg. 1,821,719 - Feb. 15, 1994 - Let's Talk Cellular (special
logo) - for communications services
Trademark Reg. No. 1,931,056 - Oct. 31, 1995 - Let's Talk Cellular - for
communications apparatus
Pending Service and Trademark - Let's Talk Wireless - filed Aug. 1995 - for
communications services and apparatus
Pending Service and Trademark - Let's Talk - Misc design (rainbow) - filed Dec.
1995 - for communication services and apparatus - Serial No. 012,369
Pending Service and Trademark - Let's Talk - logo (as displayed on company's
business cards) - for Dec. 1995 - for communication services and apparatus -
Serial No. 012,370
115
Schedule 2.13 to the Series A Preferred Stock Agreement
Retail representative agreement between BellSouth Cellular National Marketing,
Inc. and Let's Talk Cellular of America, Inc. dated April 12, 1995
Authorized agency agreement between Bell Atlantic Mobile Systems of Washington,
Inc., Atlantic Mobile Systems of Baltimore, Inc. and Let's Talk Cellular of
America. Inc. Agency dated December 22, 1994
Agency agreement between Cellular Telephone Company and Let's Talk Cellular of
America, Inc. dated December 30, 1993
Stores and corporate office leases (see Schedule 2.11(a)(i))
Credit facility agreements Republic National Bank (see Schedule 2.7)
Capital lease agreement with Panasonic Communications (corporate office
telephone system)
Capital lease agreements with Citicorp Leasing (eight stores point-of-sales
systems)
Capital lease agreement with Minolta Business Systems (one copier)
Capital lease agreements with Heritage Financial Services (two stores
point-of-sales systems)
Insurance policies (see Schedule 2.15)
Stock purchase agreement with Al Sorensen - October 1994
First amendment to stock purchase agreement with Al Sorensen May 1996
Consulting agreement with Al Sorensen - October 1994
First amendment to consulting agreement with Al Sorensen - May 1996
Kiosk staffing agreement with AT&T dated June 1, 1996
Loan from Nick Molina in the amount of $129.050. bearing interest at 8%
Loan from Brett Beveridge in the amount of $129,050, bearing interest at 8%
Employment agreement with Anne Gozlan - May, 1995
116
Schedule 2.15 to the Series A Preferred Stock Agreement
Coverage Carrier
- -------- -------
Property Atlantic Mutual
General liability Atlantic Mutual
Automobile Atlantic Mutual
Inland Marine Atlantic Mutual
Excess umbrella liability Atlantic Mutual
Workers' compensation - FL Riscorp
Workers' compensation - NY The State Insurance Fund
Workers' compensation - VA & DC Employers Insurance of WAUSAU
Workers' compensation - GA Georgia Casualty & Surety Co
Workers' compensation - MD The Injured Workers' Insurance Fund
Workers' Compensation Claims Pending
- - Four reports of injury filed in NY. all relative to the Roosevelt Field Mall
store
117
Schedule 2.16 to the Series A Preferred Stock Agreement
Consulting agreement with Al Sorenson - October 1994
First amendment to consulting agreement with Al Sorensen - May 1996
Employment agreement with Anne Gozlan - May 1995
Employment agreements with automatic annual renewals unless written notice is
given 90 days prior to the respective expiration dates of the annual terms:
(i) Fully executed:
- - Warehouse manager - April 20, 1995
- - Controller - June 26, 1995
- - Training manager - April 17, 1995
- - District manager, North Dade, FL - January 3, 1994
- - District manager, New York - December 3, 1993
- - District manager, South Dade, FL - April 21, 1994
- - District manager, Washington, DC - August 5, 1994
- - Store manager - January 3, 1994
- - Sales associate - October 3, 1994
- - Sales associate - December 5, 1994
- - Sales associate - October 21, 1994
- - Sales associate - April 6, 1994
- - Store manager - February 20, 1995
- - Store manager - March 28, 1994
- - Sales associate - March 13, 1995
- - Store manager - February 20, 1995
- - Store manager - February 6, 1994
(ii) Witnessed and signed by employee only, not executed by company and
therefore not legally binding:
- - Pager department clerk - June 29, 1995
- - Staff accountant - September 26, 1994
- - Pager department manager - May 1, 1995
- - District Manager, Central Florida - June 5, 1995
- - Store manager - September 27, 1994
- - Sales associate - November 17, 1994
- - Sales associate - November 9, 1994
- - Store manager - January 16, 1996
- - Store manager - January 3, 1994
- - Store manager - October 12, 1994
- - Sales associate - January 17, 1996
- - Store manager - October 5, 1994
- - Store manager - January 3, 1994
- - Store manager - December 6, 1994
The highest paid employees during the years ended July 31 1994 and 1995,
respectively, were:
Compensation paid during the year ended
---------------------------------------
Employee's Name July 31, 1994 July 31, 1995
--------------- ------------- -------------
Nick Molina $221,234 $210,000
Brett Beveridge $220,415 $210,000
Robert Ortega $ 49,570 $ 63,488
118
Schedule 2.18 to the Series A Preferred Stock Agreement
Loan from Nick Molina in the amount of $129,050, bearing interest at 8%
Loan from Brett Beveridge in the amount of $129,050, bearing interest at 8%
Long-term disability policy in the name of Brett Beveridge
Long-term disability policy in the name of Nick Molina
Term life insurance policy in the name of Brett Beveridge
Term life insurance policy in the name of Nick Molina
Lease payments relative to Brett Beveridge's and Nick Molina's vehicles
Insurance payments relative to Brett Beveridge's and Nick Molina's vehicles
119
Schedule 3.8 to the Series A Preferred Stock Agreement
Proceeds in the amount of $3,295,000 from the sale of the Purchased Shares shall
be used consistently with the following:
- - $295,000 shall be used to pay HIG Fund V, Inc.'s accounting, brokers and other
transaction expenses, excluding legal expenses;
- - to pay all legal expenses incurred in connection with the Series A Preferred
Stock Agreement
- - up to $350,000 shall be used to purchase an MIS system:
- - the balance shall be used to fund capital expenditures in accordance with
Schedule 4.11 to the Series A Preferred Stock Agreement:
- - the balance shall not be used to repay the shareholders' notes:
- - the balance shall not be used to pay down the line of credit to less than
$800,000 or the applicable borrowing base until after the final $1 million is
drawn.
120
Schedule 4.6
Indebtedness
The Company shall not be liable for Indebtedness at any one time (other
than for the Principal Shareholder Notes which shall not exceed the aggregate
principal amount of $258,100) in excess of the following amounts:
PERMITTED
FISCAL YEAR INDEBTEDNESS
-------------------- ------------------------
1997 $1,300,000
1998 $2,200,000
1999 $1,500,000
2000 $ 70,000
In addition to the foregoing, the Company may be liable at any one time for up
to $600,000 of additional Indebtedness to fund the opening of new AT&T stores
until July 31, 1998. After July 31, 1998, the Company may be liable for the
total additional Indebtedness set forth below to fund the opening of new AT&T
stores so long as the Company has exceeded the EBIT Target (as defined in the
Shareholders Agreement) on each Determination Date (as defined in the
Shareholders Agreement) since June 1996 by at least $10,000 per AT&T store open
for at least 12 months as of such Determination Date. The maximum amount of such
additional indebtedness shall be $25,000 per AT&T store open for at least 12
months as of such Determination Date up to the follwoing aggregate amounts:
PERMITTED
ADDITIONAL
FISCAL YEAR INDEBTEDNESS
-------------------- ------------------------
1998 $480,000
1999 $360,000
2000 $240,000
121
Schedule 4.11
Capital Expenditures
The Company shall not fund or become obligated to fund capital
expenditures in any calendar year in excess of (i) $2 million in the aggregate,
(ii) $1.85 million for new stores, and (iii) $150,000 for remodeling existing
stores or for other general corporate purposes. Notwithstanding the foregoing,
the Company shall be permitted to fund or become obligated to fund more than an
aggregate of $350,000 of capital expenditures relating to management information
systems prior to December 31, 1997.