-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BzrJihPP9YqAVQhtDPO4J9PDUU+Hpd3uOvf0kasqQUTHAQFLkzu3ldpCFKz2ZAMo jwbJyXZwesA2xs8X9nY3ng== 0000933583-98-000003.txt : 19980401 0000933583-98-000003.hdr.sgml : 19980401 ACCESSION NUMBER: 0000933583-98-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHARED TECHNOLOGIES CELLULAR INC CENTRAL INDEX KEY: 0000933583 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 061386411 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13558 FILM NUMBER: 98583358 BUSINESS ADDRESS: STREET 1: 100 GREAT MEADOW RD STREET 2: SUITE 102 CITY: WETHERSFIELD STATE: CT ZIP: 06109 BUSINESS PHONE: 8602582500 MAIL ADDRESS: STREET 1: C/O SHARED TECHNOLOGIES CELLULAR INC STREET 2: 100 GREAT MEADOW ROAD SUITE 102 CITY: WETHERSFIELD STATE: CT ZIP: 06109 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K _ X _ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 _ _ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _ _ _ TO _ _ Commission File Number 1-13732 SHARED TECHNOLOGIES CELLULAR, INC. (Exact name of registrant as specified in its charter) Delaware 06-1386411 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Great Meadow Road, Suite 102 Wethersfield, Connecticut 06109 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (860) 258-2500 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes_ _X_ _ No _ _ _ _ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the registrant's Common Stock held by nonaffiliates as of March 26, 1998 was approximately $6,513,000 based on the average of the closing bid and asked prices as reported on such date in the over-the-counter market. Indicate the number of shares outstanding of each of the registrant's classes of Common Stock, as of March 26, 1998 7,236,564 shares of Common Stock $.01 par value The following document is hereby incorporated by reference into Part III of this Form 10-K: The registrant's Proxy Statement for its Annual Meeting of Stockholders to be held on May 22, 1998 to be filed with the Securities and Exchange Commission in definitive form on or before April 28, 1998. PART I Item 1. Business (a) General Development of Business - Shared Technologies Cellular, Inc. ("STC" or the "Company"), a Delaware corporation incorporated in 1989, is a national cellular service provider offering rental, prepaid and activation services in over 640 of approximately 950 Cellular Geographical Service Areas ("CGSA") within the United States. The Company rents portable cellular telephones to business and leisure travelers, the press, attendees, and participants at conventions, sporting events and government agencies. As a reseller or agent for cellular and PCS carriers, the Company offers cellular service to approximately 94% of the U.S. population. STC also performs nationwide cellular activation services through a variety of retail and commercial outlets. The Company is expanding the scope of its prepaid (debit) cellular service to include a national activation, customer service and collection service operation through major mass merchants. Through the acquisitions of certain assets from Road and Show Cellular East, Inc., Road and Show South Ltd. and Road and Show Pennsylvania, Inc. (collectively "Road and Show"), in December 1993, the Company obtained a national distribution network, including relationships with national car rental companies and hotels, which the Company has significantly expanded since that date. Immediately following the Road and Show acquisitions, the Company had approximately 1,300 portable cellular telephones available to rent at approximately 60 distribution outlets. As of December 31, 1997, the Company had approximately 4,000 cellular telephones available to rent at approximately 300 distribution outlets. In April 1995, the Company completed its initial public offering. Prior to the offering, the Company was an approximately 86%-owned subsidiary of Shared Technologies Fairchild Inc., ("STFI"). The Company sold 950,000 shares of its common stock, $0.01 par value ("Common Stock") for $5.25 per share, which generated net proceeds of approximately $3,562,000 after underwriters' commissions and offering expenses. In conjunction with the Company's initial public offering, $1,184,000 of the amount due to STFI was contributed to the Company's capital in excess of par value. In May 1995, the Company commenced management of, and subsequently acquired the outstanding capital stock of Cellular Hotline, Inc., ("Hotline"), a cellular telephone activation service provider. The purchase price was $1,329,000 comprised of $217,000 in cash, the assumption of $712,000 of accounts payable, the issuance of a promissory note of $150,000 and the balance through the issuance of 50,000 shares of the Company's Common Stock, valued at $5.00 per share. The Company used a portion of the proceeds from its April 21, 1995 public offering for the cash portion of the purchase. At the discretion of the former Hotline stockholders, in September 1995, STC was required to repurchase all of the Common Stock issued to the former Hotline stockholders for $5.00 per share. The Common Stock was subsequently retired. Additionally, at closing, STC issued options to purchase 50,000 additional shares, excersizable at $7.50 per share for three years. In November 1995, the Company completed its acquisition of substantially all of the assets of PTC Cellular, Inc. ("PTCC"), one of the largest in-car cellular telephone providers in the United States. The purchase price was $3,725,000, comprised of $300,000 in cash, $1,200,000 in assumed accounts payable, a five-year promissory note in the principal amount of $2,000,000 and the issuance of 100,000 shares of Common Stock, valued at $2.25 per share. In December 1995, the Company sold its resale business to SNET Mobility, Inc. The sale included the Company's customer accounts relating to the resale business and the corresponding accounts receivable, for approximately $1.1 million in cash. In December 1995, the Company completed a $3 million private placement of equity with International Capital Partners, Inc., ("ICP"), a Stamford, Connecticut based investment firm, two of whose principals are currently directors of the Company. The $3 million offering proceeds, net of commissions, was used primarily for the acquisition of certain assets of PTCC and to provide additional working capital. Under the terms of the offering, STC issued 300,000 shares of its Series A Convertible Preferred Stock, $.01 par value per share (the "Series A Stock"). Each preferred shareholder is entitled to receive dividends equal to 10% per annum for the first twelve month period, payable in additional shares of Series A Stock. In addition, the Company issued to ICP a five-year warrant to purchase 150,000 shares of the Company's Common Stock at an exercise price of $2.50. In May 1996, all of the outstanding Series A Stock, including 11,260 shares received as dividends, were converted into 1,146,450 shares of Common Stock. In August 1996 the Companys' stockholders voted to cancel the Companys' authority to issue additional shares of the Series A Stock. In April 1996, the Company completed its acquisition of substantially all of the assets of its only franchisee, Summit Assurance Cellular, Inc. and certain other parties (collectively "Summit") The purchase price was approximately $3,563,000 comprised of $335,000 in cash, the assumption of $669,000 of accounts payable and $656,000 of notes payable, the issuance of a promissory note for $953,000, and the issuance of 300,000 shares of Common Stock, valued at $3.125 per share and three-year warrants each to purchase 100,000 shares of the Company's Common Stock at prices of $3.00, $4.00 and $5.00 per share, respectively. These warrants were valued at $13,000. In August 1996, the Company completed a $5 million private placement with ICP and STFI for 500,000 shares of Series B Preferred Stock, $.01 par value per share (the "Series B Stock"). The Company received gross proceeds from the offering of $5 million, including the cancellation of $1,200,000 of preexisting debt to STFI. A commission of $125,000 was paid to ICP. In August 1997, all of the outstanding Series B Stock was converted into 1,666,666 shares of the Company's Common Stock and the shareholders received warrants to purchase an equal number of Common Stock at an exercise price of $3.00 per share. Separately, the Company engaged the services of ICP to provide certain financial advisory services to the Company for a period of one year. In consideration for such services, the Company issued a five-year Common Stock Warrant to ICP for the purchase of 240,000 shares of Common Stock at an exercise price of $3.00 per share and on terms substantially the same as those provided for in the Common Stock Warrants issued to the purchasers of the Series B Stock. In December 1996, the Company entered into an agreement (the "Purchase Agreement") with RHI Holdings, Inc. ("RHI") pursuant to which the Company sold to RHI 500,000 common stock units ("Units") with each Unit consisting of one share of Common Stock, and one warrant to purchase an additional share of Common Stock at $3.00 per share. The Company received proceeds of $1,469,000, net of certain transactional expenses, from the sale of such Units. The Purchase Agreement provided for STC to use its best efforts to cause the Board of Directors of STC to include at least one member designated by RHI so long as RHI owns capital stock (or the rights to purchase capital stock) comprising 5% or more of the voting power in STC, and at least two members designated by RHI so long as RHI owns capital stock (or the rights to purchase capital stock) comprising 10% or more of the voting power in STC. To date, no RHI-designated directors have joined the Board of Directors. The Company used the proceeds received from the sale of the Units for working capital. In August and September 1997, the Company sold an additional 406,667 Units through a private placement that included various members of the Company's management. The sale generated proceeds of $1,220,000. (b) Financial Information about Industry Segments - The Company is engaged in one industry segment, the telecommunications industry, providing a wide range of services including, short-term cellular telephone rentals, activation of cellular phones and debit cellular phone systems. (c) Narrative Description of Business (1) (i) Products and Services Cellular Phone Rentals The Company markets its cellular telephone rental services principally through car rental agencies, international airlines and hotels. The Company has agreements with the Hertz Corporation ("Hertz"), National Car Rental System, Inc., ("National"), Budget Rent a Car Corporation ("Budget"), Avis Rent a Car Systems, Inc. ("Avis"), and Alamo Rent a Car, Inc. ("Alamo"), as well as significant car rental company licensees, to offer its portable cellular telephones at designated car rental locations. The Company's phones are located primarily at airport terminals, in approximately 70 cities throughout the United States. In addition, during 1996, the Company developed an airline cellular rental program designed to market to international customers in-bound to the United States. These travelers typically do not utilize the car rental companies, and require the communication convenience of renting a cellular phone. Through contracts with two major airlines, STC coordinates cellular phone rentals in most major cities, utilizing its centralized reservation/customer service and fulfillment center. In addition, the Company markets its cellular telephone services at conventions and sporting events. For example, the Company has rented cellular telephones at the NCAA basketball tournament for the last three years, the 1996 Summer Olympics in Atlanta, and the 1996 and 1995 New York Marathon. The Company also rents cellular telephones on site following emergency and disaster situations through arrangements with telecommunications carriers, the Federal Emergency Management Agency and other governmental agencies. Debit Services The growth of the cellular industry has been accompanied by significant amounts of bad debt. Cellular carriers have responded to the bad debt problem by imposing stringent credit requirements on potential customers which have resulted in approximately 35% of the subscribers who apply for cellular service being rejected. To allow these customers to enjoy the advantages of cellular communications, STC is developing programs that allow subscribers easy, pay-in-advance options for cellular service. Debit, or prepaid, cellular service is presented as a solution for credit issues and for businesses requiring more control over the cellular expenses in their organizations. Cellular debit services open a substantial and relatively untapped segment of the cellular marketplace, which STC intends to aggressively pursue. The Company provides the necessary tracking, customer service, collection services, and reporting functions required to support its prepaid cellular service. The Company currently has an agreement with a national retailer, Thorn Americas, Inc. ("Rent A Center") for whom the Company is performing these functions. As of December 31, 1997, the Company had activated approximately 13,000 lines for Rent A Center throughout the United States. The Company has also established an end-user program where the retailer acts as an agent for the debit service and receives on-going commissions from the revenue without on-going responsibilities. This product is marketed under the CellEase brand name. All customers of CellEase debit service are customers of STC, effectively establishing a direct and on-going relationship with the end-user. The customer purchases the phone from an authorized retailer, then calls STC using a toll-free number to activate the phone. At a minimum, customers must purchase $30 of pre- paid usage every 30 days, customers can make pre-paid usage purchases from authorized retailers or directly from STC in increments of $30, $50, or $100. Activation Services With the acquisition of Hotline, STC became one of the largest providers of nationwide cellular phone activation services. The Company acts as an agent linking retail points of sale to more than 690 cellular markets, using its 1,200 individual carrier contracts nationwide. In addition, STC offers its activation services to the cellular carriers under its "MOVE/Customer Retention Program". The Company maintains contracts and relationships with most cellular carriers in the United States, and can provide the necessary administrative services to permit a customer in a store within the United States to purchase a phone with activated cellular service. In addition to charging a service fee to the national distribution partner, the Company also derives revenues from the cellular carrier in the form of commissions, residual payments, and other revenue sharing. The Company is currently exploring a retail activation program with a national retailer. The program offers mass merchants two alternatives to traditional cellular phone programs from local carriers. The first uses freestanding, retail kiosks located in high volume stores. These kiosks are fully staffed by STC employees, removing the retailer from the complex cellular sales transaction. For lower volume stores, STC can use similar displays to offer a Phone-In-Box program. The retailer's sales transactions and administration are simplified because service activation occurs by having the customer call a toll-free number at STC's National Activation Center. (iv) Patents, Trademarks, Licenses, Franchises, Concessions "Shared Technologies Cellular" is a registered trademark, which is licensed to the Company by STFI. The Company filed for a registration of the servicemark "CellEase" which is used in connection with the Company's debit cellular business. The Company utilizes proprietary technology that is licensed from third party software developers. (v) Seasonality The Company has experienced a reduction of revenues in the winter months due to the reduction in business travel during the holiday season and inclement weather. (vi) Working Capital Since its inception as a subsidiary of STFI, and through its initial public offering in April 1995, the Company's losses were substantially funded by STFI. In addition, STFI funded the purchase price paid for the Company's Road and Show acquisitions. In January 1997 and in April 1996, STFI contributed to the Company's capital in excess of par value approximately $1,700,000 and $1,184,000, respectively, of the Company's indebtedness to STFI. See Item 1(a) - "General Development of Business", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Notes to Consolidated Financial Statements" herein. (vii) Dependence on Certain Customers Approximately 26%, 24%, 13% and 11% of the Company's revenues for 1997 were attributable to Rent A Center, Hertz, Avis, and National, respectively. The Company has enjoyed its relationship with Hertz, Avis and National for several years, and has been working with Rent A Center for over one year. Nevertheless, the longevity of these relationships is generally subject to contractual termination provisions that are effective upon relatively short notice. (viii) Backlog At any given time the Company maintains approximately 4,000 portable cellular telephones available for short- term rentals. Due to the varying utilization of the telephones, backlog information for the portable rental business cannot be quantified. (ix) Government Regulation From time to time, legislation and regulations that could potentially affect the Company, either beneficially or adversely, have been proposed by federal and state legislators and regulators. Management is not aware of any current pending or proposed legislation or regulations which, if adopted, would have a material adverse impact on the Company's operations. (x) Competition The telecommunications industry in general, and the cellular telephone industry in particular, are highly competitive. Competitive factors include price, customer service, geographical coverage and the ability to increase revenues through marketing. The Company's short-term portable service competes with both regional and national cellular service companies, some of which have substantially more experience and greater financial, technical and other resources than the Company. Other cellular providers in the debit market include: World Wide Cellular, Boston Communications Group, USCI, Inc., national carriers such as MCI, GTE, AT&T, and local resellers. In addition, Topp Telecom, Inc., an alternative technology provider, offers a turn-key solution similar to the STC CellEase program. In the activation business, the Company faces competition mainly from other resellers, mass merchants, carriers and agents, many of which may have substantially more experience and greater financial, marketing, technical and other resources than the Company. (xiii) Employees As of March 26, 1998, the Company had approximately 204 employees; 10 in management, 44 in administration, 142 in sales and service and 8 in technical positions. The Company's employees are not represented by a labor union. The Company believes its relations with its employees are satisfactory. Item 2. Property The Company does not own any real estate and has no present plans to purchase any real estate. The Company's principal executive office is leased and is located at 100 Great Meadow Road, Suite 102, Wethersfield, Connecticut 06109. The Company's executive office currently occupies approximately 6,300 square feet pursuant to a five-year lease agreement expiring in 1999 (the "Term"). The Company pays a monthly rent of approximately $8,100 during the remainder of the Term. In addition, the Company leases an aggregate of approximately 15,000 square feet in various locations nationwide for the purpose of direct sales by its sales force, for a total monthly rent of approximately $13,000. Each of the leased properties is, in management's opinion, generally well maintained and is suitable to support the Company's business. The Company is anticipating an expansion of its current leased space at the executive office in the first quarter of 1998 to approximately 18,400 square feet, with a rental rate and terms substantially the same as those under the current lease. Item 3. Legal Proceedings The Company is not involved in any litigation which, individually or in the aggregate, if resolved against the Company, would be likely to have a material adverse effect on the Company's financial condition, results of operations or cash flows. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the Company's security holders during the fiscal quarter ended December 31, 1997. PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters The Company's shares of common stock (trading symbol: STCL) have been quoted and traded in the over-the-counter market since April 21, 1995. Over-the-counter market quotations reflect interdealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. During 1997 and 1996, the quarterly high and low closing prices were as follows: Market for Registrant's Common Stock
1997 1997 1996 1996 High Low High Low First Quarter 2 21/32 1 3/8 4 1/8 1 5/8 Second Quarter 2 3/8 1 3/16 6 1/8 2 3/4 Third Quarter 6 1/4 1 15/16 4 1/4 1 15/16 Fourth Quarter 5 3/4 3 1/8 3 1 1/2
Number of beneficial holders of the Company's common stock as of March 26, 1998 was 719. Item 6. Selected Financial Data The following table sets forth the selected financial data of the Company for each of the last five years. Financial statements for 1994 and 1993 are not presented in this filing. Such selected financial data were derived from audited financial statements not included herein. The selected financial data of the Company should be read in conjunction with the Consolidated Financial Statements and related notes appearing elsewhere in this Form 10-K. All amounts, except per share amounts, are in thousands. Selected Financial Data
1997 1996 1995 1994 1993 Statement of Operations-Data: Revenues 24,198 20,914 13,613 10,217 2,200 Gross margin 10,667 7,285 5,026 4,923 596 Total operating expenses 14,120 14,173 8,015 4,272 1,463 Income (loss) from operations (3,453) (6,888) (2,989) 651 (867) Gain on sale of Division 689 Loss on discontinued Affiliate 364 Loss on contract Cancellation (980) Interest expense (income) net 232 906 136 49 (8) Net income (loss) before income taxes(3,685) (8,774) (2,800) 602 (859) Income taxes (10) (22) (48) Net income (loss) (3,695) (8,796) (2,848) 602 (859) Preferred stock Dividends (113) Net income (loss) applicable to common stock (3,695) (8,909) (2,848) 602 (859) Basic and diluted income (loss) per common share (0.63) (2.18) (1.04) 0.28 (0.39) Weighted average number of shares outstanding 5,900 4,082 2,748 2,185 2,185 Balance Sheet Data: Working capital Deficit (6,956) (8,975) (1,851) (920) (301) Total assets 11,535 14,262 14,378 5,452 3,173 Notes payable (including current Portion) 1,487 2,579 2,000 Obligations under capital leases (including current portion) 190 Other liabilities 7,832 8,767 6,290 2,449 687 Indebtedness to STFI 1,052 59 985 2,434 4,153 Accumulated deficit (16,709) (13,013) (4,105) (1,256)(1,858) Stockholders' equity(deficit) 1,165 2,857 5,102 569 (1,857)
See accompanying notes to consolidated financial statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations: Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 Revenues for 1997 were $24,198,000, an increase of $3,284,000 (16%) over revenues for 1996. This increase was primarily due to the expansion of the debit business and the April 1996 purchase of the operations of the Company's sole franchisee, both of which were partially offset by the elimination of the in-car cellular rental operations. The loss from operations, excluding non-recurring charges, was $1,416,000 in 1997 and $6,888,000 in 1996. The net loss for 1997 was $3,695,000, compared to a net loss of $8,796,000 for 1996. The improvement was a result of the change in the revenue mix to more profitable lines of business and a reduction in operating expenses. The net loss per common share was $0.63 for 1997, compared to $2.18 for 1996. Revenues The cellular telephone rental operations had revenues of $15,242,000 for 1997, compared to $16,339,000 for 1996. The decrease of $1,097,000 (7%) was attributable to two non-recurring sources of revenue in 1996. In 1996, the in-car operation generated revenues of $3,143,000; such line of business was discontinued in 1997. In the third quarter of 1996, the Company generated revenues of $1,434,000 from the summer's Olympic Games. These decreases for 1997 were offset by $2,259,000 in additional revenues in 1997 from the Summit acquisition. The remaining balance of the increase was mainly due to the addition of Avis, which allowed the Company to increase its penetration within existing portable cellular rental market areas. The debit operations had revenues of $6,299,000 for 1997, compared to $1,516,000 for 1996. This significant increase was due to the rapid expansion into the debit business in the first quarter of 1997. The Company increased the number of cellular prepaid lines with Rent A Center from 5,000 to 15,000 during that period. The activation operations had revenues of $2,657,000 for 1997, compared to $3,059,000 for 1996. This decrease was mainly due to a reduction in activation revenues by the Company's Texas location that was closed in November 1997. In addition, several national retailers ceased to offer cellular telephone activations through the Company in 1996. These revenue losses were offset by activations done at various retail locations. Gross Margin Gross margin increased to 44% of revenues for 1997, from 35% of revenues for 1996. This improvement was mainly due to significant changes in revenue mix. The in-car operations represented 15% of 1996 revenues but had no gross margin, compared to no revenues in 1997. As previously discussed, the in-car operations were discontinued in 1997. The gross margin for both the portable cellular rental and the debit operations improved due to a reduction in carrier costs as a result of better line management and lower carrier usage costs. As a percentage of revenue, the debit business increased from 7% in 1996 to 26% in 1997. The activation operations had a small reduction in gross margin due to lower activation commissions received from carriers. Selling, General and Administrative Expenses Selling, general and administrative expenses ("SG&A") decreased $2,090,000 (15%), to $12,083,000 for 1997 from $14,173,000 for 1996. As a percentage of revenues, SG&A decreased to 50% for 1997, compared to 68% for 1996. This decrease was due to several factors. In the latter part of fiscal year 1996, the Company made a concerted effort to reduce its operating expenses. The Company consolidated its Special Events operation into its portable rental business, it transitioned its in-car cellular telephone rental operation to its portable cellular telephone rental business, and implemented other cost- cutting measures, such as staff reductions, office closings and travel restrictions that resulted in an overall decrease in SG&A. The Company was also able to include the revenues from the Summit acquisition with minimal amounts of additional SG&A, which helped to reduce SG&A as a percentage of revenues. Loss on Discontinued Product Line During 1997, the Company completed the transition of its in-car rental accounts to portable rentals. In conjunction with this transition, the Company attempted to develop alternate uses for the in-car cellular telephones, as well as the capitalized software development costs associated with the in-car cellular rental business. Although management believes that there are viable uses for such assets, the probability that such usage will be successful is not known. As a result, the Company recognized a $2,037,000 writedown to reduce the in-car cellular phones and the capitalized software development costs to net realizable value and classified them on the balance sheet as assets held for disposition. Interest Expense Interest expense, was $232,000 for 1997, compared to $906,000 for 1996. Interest expense in 1997 was mainly due to debt relating to the PTCC acquisition in November 1995 and the Summit acquisition in April 1996. Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 Revenues The Company's revenues rose to $20,914,000 for 1996, an increase of $7,301,000 (54%) over 1995. Such revenue increase was due to acquisitions and the expansion of the Company's existing businesses. The portable rental operations had a $5,825,000 (79%) revenue increase due to several factors: In April 1996, the Company purchased the portable cellular telephone business of Summit, completing the Company's ability to provide portable cellular phones on a nationwide basis. This acquisition enabled the Company to generate $2,399,000 (33%) in additional revenues in 1996. The Company also generated approximately $1,434,000 (19%) revenues at the 1996 Summer Olympics in Atlanta. The balance of the increase ($1,992,000 or 27%) in the portable rental operation was due to the transition of some of the in-car accounts and improved penetration at existing locations. As a result of the acquisition of certain in-car cellular telephone assets of PTCC as of November 1, 1995, the Company generated $2,171,000 (223%) more in-car rental revenues in 1996 than in 1995. The debit cellular telephone operations were started in late 1995 and generated $1,516,000 in revenues in 1996, versus $33,000 in 1995. In 1996, the Company signed an agreement with Rent A Center that was principally responsible for this significant revenue growth. The activation operations had revenues of $3,059,000 in 1996, compared to $5,238,000 in 1995. This decrease was due to several national retailers ceasing to offer cellular telephone activations through the Company. The agency activation operations had a $665,000 revenue decrease from 1995. The decrease was due to the conversion of the 1996. Connecticut location from a resale operation to an agency operation. In December 1995, the Company sold its resale business to SNET Mobility, Inc. (See Gain on Sale of Assets). Gross Margin Gross margin increased $2,259,000, or 45%, from 1995 to 1996. As a percentage of revenues, gross margin decreased slightly in 1996 to 35% of revenues, from 37% of revenues in 1995. The decrease was the result of significant changes in the Company's revenue mix as a result of various acquisitions, the sale of its resale business and the rapid growth of the debit business. In addition, the in-car rental operations showed a dramatic decrease in its gross margin as a result of decreasing revenues offset by fixed costs and significant amounts of fraudulent phone usage, which the Company was forced to absorb. Operating Expenses Operating expenses increased to $14,173,000 for the year ended December 31, 1996, compared to $8,015,000 for the year ended December 31, 1995. As a percentage of revenues, operating expenses increased to 68% for the year ended 1996, from 59% for the year ended 1995. Part of this increase as a percentage of revenue was due to the conversion of the resale operation into an agency operation at the beginning of 1996. Although operating expenses for this group were similar for the two years, as a percentage of revenues, the expenses went from 19% in 1995 to 47% in 1996. However, due to better margins in the agency operations, the group generated more operating profits in 1996 than in 1995. Overall, had the Company not had several extraordinary operating expenses in 1996, the 1996 percentage would have dropped to approximately 52%. The following are the extraordinary operating expenses incurred by the Company in 1996. The Company's former events division rented cellular telephones on a short-term basis at special events such as conventions and sporting events. Due to the significant overhead requirements for this division, the Company decided to consolidate the division into its existing portable rental operations at mid year. Operating expenses for the events division were approximately $1,300,000 in 1996, representing over 120% of the revenues generated. Prior to the consolidation, the events division had approximately 30 employees, most of which were terminated in the consolidation. Operating expenses in 1996 included over $1,000,000 related to the in-car operations. As previously discussed, the Company began transitioning the existing in-car accounts to portable rentals and eventually discontinued offering in-car rentals and terminated the approximately 20 employees and substantially all of the related expenses associated with the in-car operations. The Company also invested approximately $600,000 in the expansion of the portable rental operations into the international airlines business. These expenses were incurred in an effort to start-up and market its rental services through various worldwide airlines, primarily focusing on international travelers who cannot use their cellular phones in the United States. The Company was successful in obtaining contracts with two major international airlines during 1996. Operating expenses in 1996 included approximately $500,000 related to the start up and expansion of debit cellular services. Due to the dramatic sales growth from these operations, 5,000 lines were activated through the end of 1996, with an additional 9,000 lines on backorder. The Company has created an infrastructure to accommodate significant revenue growth without the addition of significant operating costs. Another significant operating expense incurred by the Company was the provision for bad debt. Bad debt expense was $1,772,000 in 1996 and $1,249,000 in 1995. As a percentage of revenues, the provision was 8% in 1996 and 9% in 1995. The significant amount of bad debt was due to a change in the Company's marketing approach. The Company negotiated with various car rental companies to allow the car rental company employees to deal directly with the Company's customers. This allowed the Company to significantly expand the number of locations renting its cellular telephones, thereby increasing the Company's revenues. However, as a result of the change in the marketing approach, the Company was exposed to an increased level of credit risk that resulted in an increase in bad debt realized during 1996 and 1995. The Company continues to work closely with its car rental company partners to improve the integration of specific information between the Company and the car rental companies' computer systems, in an effort to reduce credit risk. Interest Expense Interest expense increased significantly to $906,000 for the year ended December 31, 1996, compared to $136,000 for the year ended December 31, 1995. This increase was mainly due to debt incurred as a result of the acquisition of certain assets from PTCC and Summit. In addition, the Company recorded a $491,000 accrual for certain estimated interest charges. Loss on Contract Cancellation As part of the acquisition of certain assets of PTCC, the Company made a commitment to make an investment in new telephone technology for the in-car business. Consequently, the Company entered into a contract with a vendor to build new in-car cellular telephones with improved technology. When the Company determined that the in-car business could not justify the significant investment needed to purchase the next generation of in-car cellular telephones, the Company negotiated with the vendor to terminate the contract. Gain on Sale of Assets Effective December 26, 1995, the Company sold its resale business to SNET Mobility, Inc. ("Mobility"). The sale included the Company's customer accounts relating to the resale business and the corresponding accounts receivable for approximately $1.1 million in cash. The Company realized a gain on the sale of approximately $689,000. Subsequent to the sale of the resale business, the Company entered into an agreement with a local cellular carrier to serve as an agent, providing cellular activations as well as mobile equipment sales and service. Loss of Discontinued Affiliate In December 1995, the Company's affiliate, SafeCall, Inc., ceased its operations. Amounts previously advanced to the affiliate were written off. Preferred Stock Dividends In 1996, the Company issued preferred stock dividends totaling $112,603 to the shareholders of the Series A Convertible Preferred Stock, payable in 11,260 additional shares of Series A Convertible Preferred Stock. All outstanding shares of Series A Convertible Preferred Stock as of May 14, 1996 were converted into 1,146,450 shares of the Company's Common Stock. Liquidity and Capital Resources: The Company had a working capital deficit of $6,955,000 at December 31, 1997, compared to a deficit of $8,975,000 at December 31, 1996. Stockholders' equity at December 31, 1997 was $1,165,000, compared to $2,857,000 at December 31, 1996. Net cash used in operations for the year ended December 31, 1997 was $1,413,000. The Company used a portion of the proceeds from the sale of Common Stock units (discussed below) to improve the timeliness of its payments to carriers and other vendors. Net cash used in investing activities for the year ended December 31, 1997 was $271,000. This was mainly attributable to the purchase of portable cellular equipment and accessories as well as the updating of computer equipment. Financing activities were focused primarily on raising capital to meet obligations relating to the PTCC and Summit acquisitions and for working capital. During the year ended December 31, 1997, the Company raised cash of $1,932,000, net of expenses, through the sale of 250,000 units in January 1997 and an aggregate of 406,667 units in August 1997 and September 1997. Each unit consisted of one share of the Company's Common Stock and one warrant to purchase an additional share of such Common Stock. The units were priced at $3.00 each, and the warrants had an exercise price of $3.00 per share. The Company used a portion of the proceeds to make payments of $1,091,000 on various notes payable relating to the PTCC and Summit acquisitions. The Company also borrowed $993,000 from its former parent, Shared Technologies Fairchild Inc. (STFI). The Company will require additional funds in order to satisfy existing obligations arising from completed acquisitions, and to fund current expansion plans. In March 1998, the Company received $1,000,000 of long-term debt financing from the Chairman and Chief Executive Officer of the Company. In addition, on March 31, 1998, he committed to fund an additional $2,000,000 of long- term debt financing if the Company is unsuccessful in raising additional third-party financing by April 30, 1998. Management believes that ongoing operations, together with the debt financing, will provide the Company with sufficient funds to finance operations and planned expansion for at least the next 12 months, and long-term liquidity will depend on the Company's ability to obtain long-term financing and attain profitable operations. Year 2000 The Company believes that its computer systems are properly adapted to avoid a Year 2000 problem, and therefore does not anticipate any material adverse effect to the operations of the Company with respect to such issue. Many of the systems used by the Company were developed internally within the last few years and are Year 2000 compliant. The Company is currently working with outside vendors to obtain assurances that they are Year 2000 compliant. 1998 Company Outlook The Company expects to show revenue growth in each of its operations in 1998. The wireless industry continues to diversify and expand with abundant opportunities. PCS, GSM and other wireless carriers are now entering the marketplace. Subscription growth continues to be double-digit as new products and services, such as pre-paid cellular, have been launched. The Company believes it is positioned to take advantage of these opportunities; offering travelers a communication device throughout the United States, offering pre-paid cellular and activation services through national retailers, and working with wireless carriers to offer their customers, who are relocating, a more economical activation process. The portable cellular rental operations are expected to have moderate revenue growth in 1998. To achieve this, STC intends to refocus the car rental partners' efforts in soliciting more customers through training and improved policies and procedures, by improving awareness through marketing programs, and by penetrating the premiere traveler programs (e.g. Avis Preferred, Hertz Gold). Also, with the addition of Alamo in August 1997, the Company expects to improve the utilization of its cellular inventory since it will have up to five car rental company partners in most of its market areas across the United States. The debit operations are expected to show considerable revenue growth with the introduction of the CellEase prepaid cellular program. In October 1997, the Company signed an agreement appointing Worldwide Direct, Inc. ("WWD") and DTR Associates LP ("DTR") as its exclusive distributors of CellEase. WWD will develop, produce, and maintain a national television marketing campaign supporting CellEase using a short-form (60 to 90 seconds) TV advertising format. In addition, DTR will offer CellEase to national retail accounts under the "As Seen On TV" banner. Both of these programs are expected to begin late in the first quarter of 1998. The CellEase program utilizes proprietary technology, some of which is developed internally and other technology that is licensed from third-party software developers. The activation operations are expected to have moderate revenue growth. The Company is working with various carriers to implement its MOVE/Customer Retention Program, which provides activation services for carriers' customers who are in the process of relocating. The Company has recently automated the activation process by establishing an activation Internet site, which should make the Program more attractive to carriers. In addition, the Company is currently testing a retail activation program with a national retailer at four of its locations within Virginia. If the test is successful, the Company may expand the program. The CellEase program, and to a smaller degree, the program with the national retailer, will require significant initial investments. The success of either program is partially dependent on the ability of the Company to raise adequate capital. In June 1997, the Financial Accounting Standard Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income". This statement establishes standards for the reporting and display of comprehensive income and its components in the Company's financial statements. This statement will not have an impact on the Company's consolidated financial position, results of operations, or cash flows. Also in June 1997, the FASB issued SFAS No.131, "Disclosures about segments of a business and related information". This statement established revised standards for the reporting of financial information about a Company's operating segments for both interim and annual financial statements. Since the Company currently operates in one industry segment, this statement will not effect the Company. "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: The Management's Discussion and Analysis may include forward-looking statements with respect to the Company's future financial performance. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those in any forward- looking statement. Such risks and uncertainties may include, without limitation, technological obsolescence, price and industry competition, financing capabilities, and dependence on major customers and relationships. Item 8. Financial Statements and Supplementary Data Attached. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE (ITEM 8) Page Financial Statements: Independent Auditors' Report F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Stockholders' Equity F-5 Consolidated Statements of Cash Flows F-6-7 Notes to Consolidated Financial Statements F-8-21 Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts for the Years Ended December 31, 1997, 1996 and 1995 S-1 Note: (a) All other schedules are not submitted because they are not applicable, not required or the required information is included in the consolidated financial statements or notes thereto. F-1 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Shared Technologies Cellular, Inc. We have audited the accompanying consolidated balance sheets of Shared Technologies Cellular, Inc. and Subsidiary as of December 31, 1997 and 1996 and the related consolidated statements of operations, stockholders' equity, cash flows and financial statement schedule for each of the three years in the period ended December 31, 1997. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Shared Technologies Cellular, Inc. and Subsidiary as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Also in our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. ROTHSTEIN, KASS & COMPANY, P.C. Roseland, New Jersey March 10, 1998, except for Notes 3 and 20, as to which the date is March 31, 1998. SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS December 31, 1997 and 1996
1997 1996 ASSETS Current assets: cash $294,000 $144,000 Accounts receivable, less allowance for doubtful accounts of $991,000 in 1997 and $1,392,000 in 1996 $1,637,000 $1,621,000 Carrier commissions receivable, less unearned income $163,000 $53,000 Inventories $131,000 $80,000 Current portion of note receivable $107,000 $39,000 Prepaid expenses and Other current assets $127,000 $133,000 Total current assets $2,459,000 $2,070,000 Telecommunications and office equipment, net $985,000 $2,131,000 Other assets: Intangible assets, net $7,551,000 $9,322,000 Deposits $326,000 $373,000 Note receivable, less current portion $62,000 $119,000 Assets held for disposition $153,000 $247,000 $8,092,000 $10,061,000 $11,536,000 $14,262,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of notes payable $530,000 $2,218,000 Accounts payable and other current liabilities $7,666,000 $8,719,000 Commissions payable $166,000 $49,000 Due to former parent $1,052,000 $59,000 Total current liabilities $9,414,000$11,045,000 Notes payable, less Current portion $957,000 $360,000 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 Par value, Series B Convertible, authorized 1,250,000 shares, issued and outstanding none in 1997 and 500,000 shares in 1996 $5,000 Common stock, $.01 par value, authorized 20,000,000 shares, issued and outstanding 7,216,000 shares in 1997 and 4,863,000 shares in 1996 $72,000 $49,000 Capital in excess of par Value $17,801,000 $15,816,000 Accumulated deficit ($16,708,000)($13,013,000) Total stockholders' equity $1,165,000 $2,857,000 $11,536,000 $14,262,000
See accompanying notes to consolidated financial statements SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995 Revenues $24,198,000 $20,914,000 $13,613,000 Cost of revenues $13,531,000 $13,629,000 $8,587,000 Gross margin $10,667,000 $7,285,000 $5,026,000 Selling, general and administrative expenses $12,083,000 $14,173,000 $8,015,000 Loss on discontinued product line $2,037,000 $14,120,000 $14,173,000 $8,015,000 Loss from operations ($3,453,000)($6,888,000)($2,989,000) Other income (expense): Interest expense ($232,000) ($906,000) ($136,000) Gain on sale of assets $689,000 Loss on discontinued Affiliate ($364,000) Loss on contract Cancellation ($980,000) ($232,000)($1,886,000) $189,000 Loss before income taxes ($3,685,000)($8,774,000)($2,800,000) Income taxes ($10,000) ($22,000) ($48,000) Net loss ($3,695,000)($8,796,000)($2,848,000) Preferred stock dividends ($112,000) Net loss applicable to Common Stock ($3,695,000)($8,908,000)($2,848,000) Basic and diluted loss per common share ($0.63) ($2.18) ($1.04) Weighted average number of common shares outstanding 5,900,000 4,082,000 2,748,000
See accompanying notes to consolidated financial statements SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended December 31, 1997, 1996 and 1995
Series A Series A Series B Series B Preferred Preferred Preferred Preferred Stock Stock Stock Stock Shares Amount Shares Amount Balances, January 1, 1995 - - - - Issuance of common stock Issuance of preferred stock 300,000 3,000 Contribution to capital by parent Issuance of common stock for acquisitions Acquisition of common stock Net loss Balances, December 31, 1995 300,000 3,000 - - Issuance of common stock Issuance of preferred stock 500,000 5,000 Preferred stock dividend 11,000 Conversion of preferred stock (311,000) (3,000) Issuance of common stock for acquisitions Common stock subscription Net loss Balances, December 31, 1996 500,000 5,000 Issuance of common stock Conversion of preferred stock (500,000) (5,000) Net loss Balances, December 31, 1997 - - - -
See accompanying notes to consolidated financial statements SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY CONTINUED Years Ended December 31, 1997, 1996 and 1995
Common Common Common Capital in Stock Stock Stock Excess of Shares Amount Subscription Par Value Balances, January 1, 1995 2,070,000 $21,000 $5,000 $1,805,000 Issuance of common stock 950,000 $9 ,000 $3,400,000 Issuance of preferred stock $2,685,000 Contribution to capital by parent $1,184,000 Issuance of common stock for acquisition 150,000 $2,000 $473,000 Acquisition of common stock (81,000) ($1,000) ($374,000) Net loss Balances, December 31, 1995 3,089,000 $31,000 $5,000 $9,173,000 Issuance of common stock 264,000 $3,000 $760,000 Issuance of preferred stock $4,828,000 Preferred stock dividend $112,000 Conversion of preferred stock 1,147,000 $11,000 ($8,000) Issuance of common stock for acquisition 300,000 $3,000 $947,000 Common stock subscription 63,000 $1,000($5,000) $4,000 Net loss Balances, December 31, 1996 4,863,000 $49,000 $15,816,000 Issuance of common stock 686,000 $7,000 $1,996,000 Conversion of preferred stock 1,667,000 $16,000 ($11,000) Net loss Balances, December 31, 1997 7,216,000 $72,000 - $17,801,000
See accompanying notes to consolidated financial statements SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY CONTINUED Years Ended December 31, 1997, 1996 and 1995
Total Accumulated Note Stockholders' Deficit Receivable Equity Balances, January 1, 1995 ($1,257,000) ($5,000) $569,000 Issuance of common stock $3,409,000 Issuance of preferred stock $2,688,000 Contribution to capital by parent $1,184,000 Issuance of common stock for acquisitions $475,000 Acquisition of common stock ($375,000) Net loss ($2,848,000) ($2,848,000) Balances, December 31, 1995 ($4,105,000) ($5,000) $5,102,000 Issuance of common stock $763,000 Issuance of preferred stock $4,833,000 Preferred stock dividend ($112,000) Conversion of preferred stock Issuance of common stock for acquisitions $950,000 Common stock subscription $5,000 $5,000 Net loss ($8,796,000) ($8,796,000) Balances, December 31, 1996 ($13,013,000) $2,857,000 Issuance of common stock $2,003,000 Conversion of preferred stock Net loss ($3,695,000) ($3,695,000) Balances, December 31, 1997 ($16,708,000) $1,165,000
See accompanying notes to consolidated financial statements F-5 SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1997, 1996 and 1995
1997 1996 1995 Cash flows from operating activities: Net loss ($3,695,000)($8,796,000) ($2,848,000) Adjustments to reconcile net loss to net cash used in operating activities: Loss on discontinued product line $2,037,000 Depreciation and amortization $1,292,000 $1,684,000 $1,086,000 Common stock issued for compensation and services $71,000 $40,000 Accrued interest, note receivable ($11,000) Accretion of interest on notes payable $30,000 Gain on sale of assets ($689,000) Loss on discontinued affiliate $364,000 Changes in assets and liabilities, net of effect of acquisitions: Accounts receivable ($16,000) ($429,000) ($161,000) Carrier commissions receivable ($110,000) $400,000 $13,000 Inventories ($51,000) ($31,000) ($52,000) Prepaid expenses and other current assets $6,000 $339,000 ($239,000) Accounts payable and other current liabilities ($1,053,000) $2,124,000 $1,749,000 Commissions payable $117,000 ($404,000) ($21,000) Net cash used in operating activities ($1,413,000)($5,043,000) ($798,000) Cash flows from investing activities: Acquisitions of businesses ($336,000) ($1,047,000) Purchases of equipment ($318,000) ($953,000) ($341,000) Payments for intangible assets ($514,000) ($612,000) (Increase) decrease in deposits $47,000 ($231,000) ($53,000) Collection of receivable from sale of assets $1,078,000 Collections of note receivable $45,000 $18,000 Net cash used in investing activities ($271,000) ($911,000) ($2,035,000) Cash flows from financing activities: Payments on notes payable ($1,091,000)($1,080,000) Advances from (payments to) former parent $993,000 $274,000 ($266,000) Payments to affiliate ($273,000) Issuance of common and preferred stock $1,932,000 $4,362,000 $6,279,000 Acquisition of common stock ($375,000) Net cash provided by financing activities $1,834,000 $3,556,000 $5,365,000 Net increase (decrease) in cash $150,000 ($2,398,000) $2,532,000 Cash, beginning of year $144,000 $2,542,000 $10,000 Cash, end of year $294,000 $144,000 $2,542,000
See accompanying notes to consolidated financial statements SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED Years ended December 31, 1997, 1996 and 1995
1997 1996 1995 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $379,000 $280,000 $76,000 Income taxes $10,000 $20,000 $48,000 Supplemental schedules of noncash investing and financing activities: Contribution to capital in excess of par value of due to parent - - $1,184,000 Cost of intangible assets included in accounts payable - $88,000 $203,000 Note received for sale of assets - - $1,078,000 Issuance of common stock for acquisitions - $950,000 $475,000 Note payable incurred for acquisition of assets - $1,139,000$2,000,000 Issuance of Series B Convertible Preferred Stock in exchange for amount due to parent - $1,200,000 - Preferred stock issued for preferred stock dividend - $112,000 -
See accompanying notes to consolidated financial statements NOTE 1 - Nature of Operations Shared Technologies Cellular, Inc. (STC) together with its subsidiary (collectively the "Company") is a nationwide provider of short-term cellular telephone services, activation services and debit telephone services in the United States. The Company's operations are subject to regulation by the Federal Communications Commission (FCC), which has generally preempted the regulatory jurisdiction of state agencies with respect to the business in which the Company is engaged. NOTE 2 - Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of STC and its wholly-owned subsidiary. All material intercompany accounts and transactions have been eliminated in consolidation. Cash The Company maintains its cash in bank deposit accounts which at times may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not subject to any significant credit risk on cash. Fair Value of Financial Instruments The fair value of the Company's assets and liabilities which qualify as financial instruments under Statement of Financial Accounting Standards No. 107 approximates the carrying amounts presented in the consolidated balance sheets. Carrier Commissions Receivable Carrier commissions receivable are due from cellular carriers for new cellular telephone line activations done by the Company for third parties. The commissions are earned only after the cellular telephone user has remained on the cellular telephone network for a specified period of time (vesting period). The Company records an allowance, as a reduction to carrier commissions receivable, for estimated cancellations of cellular service by the user prior to the end of the aforementioned vesting period. Although there is a short-term vesting period for which the Company must wait in order to receive its commission, the Company believes that the revenue process has been completed. Inventories Inventories, consisting of telecommunications equipment and parts expected to be sold to customers, are valued at the lower of cost, on the first-in, first-out (FIFO) method, or market. NOTE 2 - Summary of Significant Accounting Policies (Continued) Impairment of Long-Lived Assets The Company reviews its long-lived assets, such as telecommunications and office equipment, identifiable intangibles and goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows will be less than the carrying amount of the assets. Impairment is the amount by which the carrying value of the asset exceeds its fair value. Telecommunications and Office Equipment Telecommunications and office equipment are stated at cost. The Company records depreciation on the straight-line method over the estimated useful lives of the assets as follows: Telecommunications equipment 2-5 years Office equipment 3-5 years Intangible Assets Goodwill represents the excess of cost over the fair market value of net assets of acquired businesses and is amortized over periods ranging from 15 to 20 years from the respective acquisition dates. The Company monitors the cash flows of the acquired operations to assess whether any impairment of recorded goodwill has occurred. Deferred start-up costs relate to costs associated with the opening of new cellular telephone rental locations throughout the United States. These costs are amortized on a straight-line basis over 12 months. The number of new locations opened in 1997 and 1996 was none and 18, respectively. The Company amortizes the cost to obtain exclusive agreements to provide cellular telephone rentals at specific locations on the straight-line basis over the life of the respective agreements, generally five to six years. Capitalized software development costs, including significant product enhancements incurred subsequent to establishing technological feasibility in the process of software production, are capitalized according to Statement of Financial Accounting Standards No. 86. Costs incurred prior to the establishment of technological feasibility are charged to research, product development, and support expenses. Capitalized software costs relate to developing a system in which the cellular telephones physically located in the rental cars can regularly communicate with the corporate offices. This software, in conjunction with the cellular telephone, was to be used for customer billing and other monitoring functions. In 1997, these capitalized software development costs were written off with the discontinuation of the in-car product line (Note 14). NOTE 2 - Summary of Significant Accounting Policies (Continued) Advertising Costs The Company expenses costs of advertising and promotions as incurred. Advertising expenses included in selling, general and administrative expenses for the years ended December 31, 1997, 1996 and 1995 were approximately $132,000 $153,000 and $137,000, respectively. Income Taxes The Company filed its federal income tax returns on a consolidated basis with its former parent through April 1995, the date of its initial public offering ("IPO"). Subsequent to April 1995, the Company's income tax returns are being filed separately. The Company complies with Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes", which requires an asset and liability approach to financial reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce the deferred tax assets to the amount expected to be realized. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Loss Per Common Share Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings Per Share". SFAS No. 128 requires dual presentation of basic and diluted earnings per share for all periods presented. Basic earnings per share excludes dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Prior period loss information has been restated as required by SFAS No. 128. Diluted loss per common share is the same as basic loss per common share for the years ended December 31, 1997, 1996 and 1995. Unexercised employee stock options to purchase 365,000, 281,000 and 231,000 shares of the Company's common stock as of December 31, 1997, 1996 and 1995, respectively, were not included in the computations of diluted earnings per share because their effect would have been antidilutive as a result of the Company's losses. NOTE 3 - Liquidity The Company has incurred cumulative net losses of approximately $16,700,000 through December 31, 1997 and has a working capital deficit of approximately $7,000,000 at December 31, 1997. Management plans are to raise debt or equity financing and the Company has received $1,000,000 of long-term debt financing from an executive/stockholder of the Company on March 19, 1998. In addition, on March 31, 1998, the executive/stockholder has committed to fund an additional $2,000,000 of long-term debt financing if the Company is unsuccessful in raising additional third-party financing by April 30, 1998. Long-term liquidity is dependent on the Company's ability to obtain additional long-term financing and attain profitable operations. NOTE 4 - Acquisitions In April 1996, the Company completed its acquisition of substantially all of the assets of its only franchisee, Summit Assurance Cellular Inc. and subsidiaries and affiliates (Summit). The purchase price was $3,563,000, comprised of $335,000 in cash, the assumption of $669,000 of accounts payable and $656,000 of notes payable, the issuance of a promissory note for $953,000, the issuance of 300,000 shares of the Company's common stock valued at fair market value of $3.125 per share and warrants to purchase an aggregate of 300,000 shares of the Company's common stock at prices of $3.00, $4.00 and $5.00 per share, respectively, for each 100,000 shares. These warrants were valued at $13,000, which represents the excess of the fair market value of the common stock over the exercise price on the date of issuance. The warrants vest immediately and expire in three years (Note 20). In November 1995, STC completed its acquisition of substantially all of the assets of PTC Cellular, Inc. (PTCC). The purchase price was $3,725,000, comprised of $300,000 in cash, the assumption of $1,200,000 of accounts payable, the issuance of a promissory note of $2,000,000 and the issuance of 100,000 shares of the Company's common stock valued at fair market value of $2.25 per share. In May 1995, the Company commenced management of, and subsequently acquired the outstanding capital stock of, Cellular Hotline, Inc. (Hotline), a cellular telephone activation service provider. The purchase price was $1,329,000, comprised of $217,000 in cash, the assumption of $712,000 of accounts payable, the issuance of a promissory note of $150,000 and the balance through the issuance of 50,000 shares of the Company's common stock (Shares) valued at fair market value of $5.00 per share. The former Hotline stockholders had the right to require the Company to repurchase all or a portion of the Shares for $5.00 per share. In September 1995, the former Hotline stockholders exercised their put option and the Company purchased all the Shares and subsequently retired them. In connection with the acquisition, the Company issued the former Hotline stockholders a three-year option to purchase an aggregate of 50,000 shares of the Company's common stock at a price of $7.50 per share. NOTE 4 - Acquisitions (Continued) These acquisitions were accounted for as purchases, and the purchase prices were determined as follows: Note 4 Continued
Hotline PTCC Summit Cash $217,000 $300,000 $335,000 Notes payable $150,000 $2,000,000 $953,000 Common stock $250,000 $225,000 $937,000 Warrants: 50,000 @ $7.50 100,000 @ $3.00 $13,000 100,000 @ $4.00 100,000 @ $5.00 Liabilities assumed $712,000 $1,200,000 $1,325,000 Total purchase price $1,329,00 $3,725,000 $3,563,000 The purchase prices were allocated on the basis of the relative fair market values of the assets acquired and the liabilities assumed, as follows: Cash $19,000 - - Accounts receivable $13,000 $20,000 Commissions receivable $466,000 Prepaid expenses and other current assets $71,000 $62,000 Equipment $50,000 $1,806,000 $170,000 Intangibles $520,000 Goodwill $710,000 $1,337,000 $3,373,000 Total purchase price $1,329,00 $3,725,000 $3,563,000 The following unaudited pro forma condensed consolidated statement of operations for 1996 gives effect to the acquisition of Summit as if it had occurred on January 1, 1996: Revenues $21,784,000 Net loss ($9,269,000) Net loss applicable to common stockholders ($9,382,000) Basic and diluted loss per common share ($2.25)
NOTE 5 - Telecommunications and Office Equipment Telecommunications and office equipment consist of the following at December 31, 1997 and 1996:
1997 1996 Telecommunications equipment $2,341,000 $3,298,000 Office equipment $835,000 $636,000 $3,176,000 $3,934,000 Accumulated depreciation $2,191,000 $1,803,000 $985,000 $2,131,000 Depreciation expense for the years ended December 31, 1997, 1996 and 1995 was $650,000, $902,000 and $537,000,respectively. NOTE 6 - Intangible Assets Intangible assets consist of the Following at December 31, 1997 and 1996: Goodwill $8,426,000 $8,426,000 Deferred start-up costs $903,000 Covenant not to compete $142,000 $142,000 Rental car agreement $520,000 $520,000 Capitalized software development costs $890,000 $9,088,000 $10,881,00 Accumulated amortization $1,537,000 $1,559,000 $7,551,000 $9,322,000 Amortization expense for the years ended December 31, 1997, 1996 and 1995 was $642,000, $782,000 and $549,000 respectively. NOTE 7 - Note Receivable In connection with the acquisition of Summit (Note 4), the unpaid balance of a note receivable from Summit of $180,000 was renegotiated to a three - -year noninterest. bearing note due in monthly installments of $5,000 through February 2000. In discounting the note to $158,000 interest has been imputed at 10% per annum (Note 20)
NOTE 8 - Assets Held For Disposition In connection with the Company's discontinuance of providing In-Car cellular phone services, the Company has recorded, as assets held for disposition, certain telecommunications equipment at an amount which approximates fair market value. NOTE 9 - Accounts Payable and Other Current Liabilities Accounts payable and other current liabilities consist of the following at December 31, 1997 and 1996:
1997 1996 Trade $3,876,000 $6,227,000 Sales and other taxes $3,174,000 $1,685,000 Payroll and payroll taxes $137,000 $194,000 Other $479,000 $613,000 $7,666,000 $8,719,000 NOTE 10 - Notes Payable Notes payable consist of the following At December 31, 1997 and 1996: Promissory note, $2,000,000 original Face amount, bearing interest at 8% per annum and payable in semi-annual principal installments of $225,000 through May 2000. The note is collateralized by substantially all of the assets acquired from PTCC $1,125,000 $1,800,000 Promissory note for the purchase of Summit, noninterest-bearing and payable in installments through February 1997 - $292,000 Promissory notes, bearing interest at 10% per annum and payable in monthly installments aggregating $12,000 through March 2002 $362,000 $486,000 $1,487,000 $2,578,000 Less current portion $530,000 $2,218,000 $957,000 $360,000 NOTE 10 - Notes Payable (Continued) Aggregate future principal payments for the next five years are as follows: Year Ending December 31: 1998 $530,000 1999 $528,000 2000 $310,000 2001 $94,000 2002 $25,000 NOTE 11 - Stockholders' Equity The Company has reserved for issuance 3,518,000 shares of its common stock relating to common stock purchase warrants outstanding as of December 31, 1997 at exercise prices ranging from $2.75 to $7.09. In August and September 1997, the Company sold an aggregate of 406,667 units, at $3.00 per unit, through a private placement that included various members of the Company's management. Each unit consists of one share of common stock and one warrant to purchase one share of common stock at $3.00 per share. During December 1996, the Company entered into an agreement to sell an aggregate of 500,000 units, at $3.00 per unit, through a private placement. In December 1996, 250,000 units were sold, and the remaining 250,000 units were sold in January 1997. In August 1996, the Company's certificate of incorporation was amended whereby the authorized number of shares of the Company's common stock was increased to 20,000,000. In addition, the Company was authorized to issue 5,000,000 shares of preferred stock at $.01 par value, issuable from time to time in one or more series with such rights, preferences, privileges and restrictions as determined by the Board of Directors. In August 1996, the Company sold 500,000 shares of Series B Convertible Preferred Stock (Series B) for $10 per share through a private placement, including 250,000 shares purchased by its former parent, Shared Technologies Fairchild Inc. (STFI). Each share of Series B was convertible into a minimum of 2.50 shares and a maximum of 3.33 shares of the Company's common stock, subject to certain adjustments, and pays no dividends. During 1997, the Series B stockholders converted their shares into an aggregate of 1,667,000 shares of the Company's common stock. Upon conversion of the Series B shares, the holders received one warrant per common share to purchase an additional share of the Company's common stock at an exercise price of $3.00 per share. In addition, in 1996, the Company paid an advisory fee of $125,000 and issued warrants to purchase 240,000 shares of common stock, at an exercise price of $3.00 per share. The advisory firm in which two of its principals are directors of the Company, was a party to the sale of 250,000 shares of Series B. NOTE 11 - Stockholders' Equity (Continued) In December 1995, the Company sold 300,000 shares of Series A Convertible Preferred Stock (Series A) at $10 per share through a private placement. Each preferred stockholder was entitled to receive dividends equal to 10% per annum per share for the first twelve month period, payable in additional shares of Series A. For 1995, the dividend applicable to these shares, and the impact on the loss to the common stockholders, were deemed to be insignificant. The Company paid an advisory fee of $300,000 and issued warrants to purchase 150,000 shares of common stock, at an exercise price of $2.50, to a firm in which two of its principals are directors of the Company. During 1996, the Series A stockholders converted all their shares, including 11,000 shares received as dividends, into 1,147,000 shares of the Company's common stock. In June 1995, in connection with a consulting agreement, the Company issued warrants to purchase 95,000 shares of its common stock, at an exercise price of $6.00 per share, subject to certain anti-dilution provisions. In May 1995, the Company purchased 31,000 shares of its common stock for $125,000 from a consultant and subsequently retired the shares. In April 1995, the Company completed its initial public offering of 950,000 shares of its common stock at $5.25 per share. In March 1995, the Board of Directors adopted a resolution to effect a reverse stock split of two for three. Accordingly, all number of shares and per share data presented in these consolidated financial statements have been restated to reflect this reverse stock split. NOTE 12 - Stock Option Plans The Board of Directors adopted, and the Company's stockholders approved, a stock option plan (the Plan) pursuant to which 525,000 shares of the Company's common stock were reserved for issuance upon the exercise of options granted to officers, employees, consultants and directors of the Company. Options issued under the Plan are nonqualified stock options (NSO's) and the Board of Directors (Committee) will grant NSO's at an exercise price which is not less than the fair market value on the date such options are granted. The Plan further provides that the maximum period in which stock options may be exercised will be determined by the Committee, except that they may not be exercisable after ten years from the date of grant. At December 31, 1997, options to purchase 339,000 shares of common stock are outstanding. The Board of Directors adopted, and the stockholders approved, the Company's 1994 Director Option Plan (the Director Plan) pursuant to which 33,000 shares of the Company's common stock are reserved for issuance upon the exercise of options to be granted to non- employee directors of the Company. Under the Director Plan, an eligible director will automatically receive, at the commencement of the Director's one year term, nonstatutory options to purchase 2,000 shares of the Company's common stock at an exercise price equal to the fair market value of such shares at the time of grant. Each such option is immediately exercisable within the ten years from the date of grant, but generally may not be exercised more than 90 days after the date the director ceases to serve as a director of the Company. At December 31, 1997, options to purchase 26,000 shares of the Company's common stock were outstanding under the Director Plan.
The activity in the Plan and the Director Plan are as follows:
Exercise Price Per Share Per Share Number of Weighted Options Range Average Balance outstanding, January 1, 1995 171,000 $3.68 $3.68 Granted 95,000 1.63-5.0 $3.15 Expired (35,000) $3.68 $3.68 Balance outstanding, December 31, 1995 231,000 1.63-5.0 $3.45 Granted 55,000 2.75-4.7 $3.69 Expired (5,000) $3.68 $3.68 Balance outstanding, December 31, 1996 281,000 1.63-5.0 $3.33 Granted 93,000 2.13-2.5 $2.15 Expired (9,000) 3.68-5.0 $4.22 Balance outstanding, December 31, 1997 365,000 1.63-4.7 $3.01 Exercisable, December 31, 1997 225,000 1.63-4.7 $3.36
NOTE 12 - Stock Option Plans (continued) The Company has adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation". The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its plans. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates, consistent with SFAS No. 123, the Company's net loss and loss per share would have been adjusted to the pro forma amounts indicated below:
1997 1996 1995 Net loss applicable to common stockholders: As reported ($3,695,000)($8,909,000) ($2,848,000) Pro forma ($3,770,000)($8,920,000) ($2,854,000) Basic and diluted loss per common share: As reported ($0.63) ($2.18) ($1.04) Pro forma ($0.64) ($2.19) ($1.04)
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 1997, 1996 and 1995, respectively: risk-free interest rate of 6%; no dividend yield; expected lives of 3 to 10 years; and expected volatility of 64%, 62% and 62%, respectively. NOTE 13 - Related Party Transactions The Company entered into an agreement, effective January 1, 1996, to pay a fee of $25,000 per month not to exceed $200,000 annually, for certain services to be performed by STFI. The fee is not payable in any month in which there is a pre-tax loss and cannot exceed pre-tax profit prior to the fee. No payments were due under the agreement for the years ended December 31, 1997 and 1996. In addition, STFI agrees to provide telecommunications services, as may be requested, including local access and long distance service, at a price not to exceed STFI's cost for such services plus 20%. This agreement is cancelable by the Company on thirty days notice to STFI. Amounts due to former parent are due on demand, unsecured and noninterest-bearing. NOTE 14 - Loss on Discontinued Product Line During 1997, the Company completed the transition of the existing in-car rental accounts to portable rentals. In conjunction with this transition, the Company attempted to develop alternate uses for the in-car cellular telephones as well as the capitalized software associated with the in-car cellular rental business. Although management believes that there are viable uses for such assets, the probability that such uses will be successful is not known. As a result, the Company reduced the in-car cellular phones and the capitalized software to net realizable value and classified them on the balance sheet as assets held for disposition. NOTE 15 - Savings and Retirement Plan In June 1996, the Company formed a savings and retirement plan (the Plan), which covers substantially all eligible employees. Participants in the Plan may elect to make contributions up to a maximum of 20% of their compensation. For each participant, the Company will make a matching contribution of one-half of the participant's contributions, up to 5% of the participant's compensation. Matching contributions may be made in the form of the Company's common stock and are vested at the rate of 33% per year. Prior to the formation of the Plan, the Company participated in a plan maintained by STFI. Matching contributions in STFI's plan were made in STFI common stock. For the years ended December 31, 1997, 1996 and 1995, the Company's matching contributions were $71,000, $40,000 and $25,000, respectively. NOTE 16 - Income Taxes
A reconciliation of income tax benefit, to the federal statutory rate follows: Years Ended December 31, 1997 1996 1995 Income tax benefit on reported pretax loss at federal statutory rate (34.0%) (34.0%) (34.0%) State income tax, net of federal benefit 1.7% Net operating loss carryforward not recognized 34.0% 34.0% 34.0% Income taxes 0% 0% 1.7%
At December 31, 1997 and 1996, the Company recorded net deferred tax assets of approximately $5,511,000 and $4,400,000, respectively, and valuation allowances in the same amounts. The valuation allowances were increased by $1,111,000, $3,296,000 and $994,000, respectively, for the years ended December 31, 1997, 1996 and 1995. SFAS No. 109 requires that the Company record a valuation allowance when it is "more likely than not that some portion or all of the deferred tax asset will not be realized". The ultimate realization of the deferred tax asset depends on the Company's ability to generate sufficient taxable income. NOTE 16 - Income Taxes Continued
The net deferred tax assets and liabilities as of December 31, 1997 and 1996 are as follows: 1997 1996 Deferred tax assets: Net operating loss carryforwards $5,164,000 $3,940,000 Allowance for doubtful accounts $390,000 $550,000 Asset basis difference, intangible assets $10,000 $5,554,000 $4,500,000 Deferred tax liabilities, asset basis difference, fixed and intangible assets ($43,000) ($100,000) Deferred tax asset, net $5,511,000 $4,400,000 Valuation allowance for deferred tax ($5,511,00)($4,400,000) - -
At December 31, 1997, the Company has federal net operating loss carryforwards of approximately $13,140,000, which can be utilized against future taxable income and expire through the year 2012. Net operating losses available for state income tax purposes are less than those for federal purposes and generally expire earlier. NOTE 17 - Commitments and Contingencies The Company leases office facilities, which expire in various years through December 2001. Future aggregate minimum annual rental payments as of December 31, 1997 are as follows: Year Ending December 31 1998 $192,000 1999 164,000 2000 63,000 2001 35,000 Rent expense for the years ended December 31, 1997, 1996 and 1995 was approximately $352,000, $418,000 and $256,000, respectively. The Company is a party to various legal actions, the outcome of which, in the opinion of management, will not have a material adverse effect on results of operations, cash flows or financial position of the Company. NOTE 17 - Commitments and Contingencies (Continued) In October 1997, the Company entered into an agreement with a promotion company relating to the marketing of a certain product line. In addition to certain commission arrangements and upon obtaining specified sales levels, the Company has agreed to issue warrants to purchase shares of the Company's common stock at $6.00 per share. This agreement will remain in force for a two-year period with automatic renewal periods of one year unless terminated. NOTE 18 - Dependence Upon Key Relationships and Major Customers Approximately 26%, 24%, 13% and 11% of the Company's revenues for 1997 were attributable to Thorn Americas, Inc. (a national retailer), Hertz Corporation ("Hertz"), Avis Rent-A-Car Systems, Inc. ("Avis") and National Car Rental System, Inc. ("National"), respectively. Approximately 21%, 16% and 13% of the Company's revenues for 1996 and 14%, 0%, and 11% of the Company's revenues for 1995 were attributable to Hertz, Avis and National, respectively. The agreements with these companies are terminable with cause and require written notification, typically effective upon relatively short notice. The termination of any one of these agreements would have a material adverse effect on the Company. NOTE 19 - Loss on Contract Cancellation In 1996, in connection with the transition of the In-Car cellular phone service to portable rentals, the Company recognized a loss of approximately $980,000 relating to the cancellation of a certain contract for the production of certain in-car telecommunications equipment. NOTE 20 - Subsequent Event In March 1998, the Company and Summit reached an agreement in principle whereby the Company will receive from Summit 100,000 shares of the Company's common stock, previously issued in connection with the acquisition (Note 4). The stock received is in exchange for the payment by the Company of $150,000 to a vendor on behalf of Summit, a one year extension of the expiration date of the warrants issued in connection with the acquisition, additional warrants to purchase 100,000 shares of the Company's common stock at a price of $5.00 per share, and forgiveness of all amounts due, including accrued interest, on the note receivable. VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1997, 1996 and 1995
Balance at Charged to Balance Beginning Costs and at End Description of Year Expenses Deductions (of Year December 31, 1997: Allowance for Doubtful accounts and discounts $1,392,000 $1,341,000 $1,742,000 $991,000 December 31, 1996: Allowance for Doubtful accounts and discounts $685,000 $1,772,000$1,065,000$1,392,000 December 31, 1995: Allowance for Doubtful accounts and discounts $243,000 $1,249,000 $807,000 $685,000 (1) Represents write off of uncollectible accounts, net of recoveries.
SHARED TECHNOLOGIES CELLULAR, INC. 100 Great Meadow Road Suite 102 Wethersfield, CT 06109 PART III Item 10 Directors and Executive Officers of the Registrant Item 11 Executive Compensation Item 12 Security Ownership of Certain Beneficial Owners and Management Item 13 Certain Relationships and Related Transactions. The Company incorporates by reference items 10, 11, 12, and 13 in its Proxy Statement for its Annual Meeting of Stockholders to be held on May 22, 1998 (to be filed with the Securities and Exchange Commission on or before April 28, 1998). PART IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 10-K (a) Financial Statements Report of Independent Public Accountants Consolidated Balance Sheets as of December 31, 1997 and 1996. Consolidated Statements of Operations for the years ended December 31, 1997, 1996, and 1995. Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995. Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995. Notes to Consolidated Financial Statements. Financial Statement Schedules: Schedule II. (b) Reports on Form 8-K none (c) Exhibits Exhibit No. Description of Exhibit 3. (i) Amended and Restated Certificate of Incorporation. Incorporated by reference from Exhibit 3.1 of the Company's Registration Statement on Form SB-2 dated December 8, 1994. 3. (ii) By-laws. Incorporated by reference from Exhibit 3.1 of the Company's Registration Statement on Form SB-2 dated December 8, 1994. 4.1 Specimen of Common Stock Certificate. Incorporated by reference from exhibit 4.2 of the Company's Registration Statement of Form SB-2 filed with Amendment No. 3 to such Registration Statement dated January 27, 1995. 4.2 Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock of Shared Technologies Cellular, Inc. dated August 19, 1996. Incorporated by Reference from Exhibit 4.1 of the Company's Form 8-K dated August 19, 1996 and filed September 5, 1996. 4.3 Series B Convertible Preferred Stock Purchase Agreement by and between International Capital Partners, Inc. and the Company dated August 19, 1996 (agreement between STFI and the Company is substantially the same), including form of Common Stock Warrant. Incorporated by Reference from Exhibit 4.2 of the Company's Form 8-K dated August 19, 1996 and filed September 15, 1996. 4.4 Equity Holders Agreement by and among International Capital Partners, Inc. Zeisiger Capital Group, LLC and Shared Technologies Fairchild, Inc. dated August 19, 1996. Incorporated by Reference from Exhibit 4.3 of the Company's Form 8-K dated August 19, 1996 and filed September 15, 1996. 4.5 Purchase Agreement, Common Stock Warrant Certificate and Option Agreement by and among RHI Holdings, Inc., and the Company dated December 27, 1996. Incorporated by Reference from Exhibit 4.1, 4.2, 4.3 respectively of the Company's Form 8-K dated December 27, 1996, and filed January 22, 1997. 10.1 Agreement by and between the Hertz Corporation and the Company dated October 1, 1996. Incorporated by reference from Exhibit 10.1 of the Company's Form 10-K dated March 27, 1997. 10.2 Agreement by and between National Car Rental System, Inc. and the Company dated July 1, 1996. Incorporated by reference from Exhibit 10.2 of the Company's Form 10-K dated March 27, 1997. 10.3 Lease Agreement by and between Putnam Park Associated and the Company dated January 1, 1995. Incorporated by reference from Exhibit 10.10 of the Company's Registration Statement on Form SB-2 filed with Amendment No. 1 to such Registration Statement dated January 4, 1995. 10.4 1994 Director Option Plan, as amended. Incorporated by reference from Exhibit 10.5 of the Company's Form 10-K dated March 27, 1997. 10.5 Management Agreement by and between the Company and Shared Technologies Fairchild Inc., dated January 1, 1996. Incorporated by reference from Exhibit 10.13 of the Company's Form 10-K dated March 23, 1996 10.6 Employment Agreement by and between Sean P. Hayes and the Company dated October 1, 1994. Incorporated by reference from Exhibit 10.14 of the Company's Registration Statement on Form SB-2 filed with Amendment No. 1 to such Registration Statement dated January 4, 1995. 10.7 Sample Customer Service Agreement. Incorporated by reference from Exhibit 10.15 of the Company's Registration Statement on Form SB-2 filed with Amendment No. 1 to such Registration Statement dated January 4, 1995. 10.8 Sample Customer Service Agreement. Incorporated by reference from Exhibit 10.16 of the Company's Registration Statement on Form SB-2 filed with Amendment No. 1 to such Registration Statement dated January 4, 1995. 10.9 Stock Purchase Agreement by and between the stockholders of The Cellular Hotline, Inc. and the Company dated June 11, 1995. Incorporated by reference from Exhibit 10.1 of the Company's Form 8-K dated June 19, 1995 and filed June 30, 1995. 10.10 Asset Purchase Agreement by and between Peoples Telephone Company, Inc., PTC Cellular, Inc. and the Company dated November 1, 1995. Incorporated by reference from Exhibit 10.1 of the Company's Form 8-K dated November 13, 1995 and filed November 22, 1995. 10.11 Consulting Agreement between Vertical Financial Holding and the Company dated June 21, 1995. Incorporated by reference from Exhibit 10.19 of the Company's Form 10-K dated March 28, 1996. 10.12 Employment Agreement by and between Jon Sorenson and the Company dated October 1, 1996. Incorporated by reference from Exhibit 10.13 of the Company's Form 10-K dated March 27, 1997 10.13 Asset Purchase Agreement by and between Summit, et al. the Company dated April 27, 1996. Incorporated by reference from Exhibit 10.1 of the Company's Form 8-K dated April 27, 1996 and filed May 9, 1996. 10.14 Shared Technologies Cellular, Inc. Savings and Retirement Plan, Effective as of April 1, 1996. Incorporated by reference from Exhibit 10.15 of the Company's Form 10-K dated March 27, 1997. 10.15 1994 Stock Option Plan, as amended, dated May 23, 1997. 10.16 Agreement by and between Budget Rent A Car Corporation and the Company dated July 28, 1997. 10.17 Agreement by and between Thorn Americas, Inc. and the Company dated December 1, 1996. 21 List of subsidiaries of the registrant. 27 Financial Data Schedule SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SHARED TECHNOLOGIES CELLULAR, INC. (Registrant) By ---------------------------------- Anthony D. Autorino Chief Executive Officer and Director March 30, 1997 By ---------------------------------- Vincent DiVincenzo Chief Financial Officer and Director Date: March 30, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/Anthony D. Autorino By: /s/ William A. DiBella Anthony D. Autorino William A. DiBella Chief Executive Officer Director and Director Date:________________ Date:_________________ By: /s/ Ajit G. Hutheesing By: /s/ Thomas H. Decker Ajit G. Huthessing Thomas H. Decker Director Director Date:_________________ Date:________________ By: /s/ Vincent DiVincenzo By: /s/ Nicholas E. Sinacori Vincent DiVincenzo Nicholas E. Sinacori Chief Financial Officer Director and Director Date:________________ Date:_________________ By:___________________ Craig A. Marlar Director Date:_________________ Exhibit 10.5 SHARED TECHNOLOGIES CELLULAR, INC. 1994 STOCK OPTION PLAN 1. Purpose. The Shared Technologies Cellular, Inc. 1994 Stock Option Plan (the "Plan") is intended to encourage the ownership of stock of Shared Technologies Cellular, Inc., a Delaware corporation (the "Company"), by qualified and competent persons who are key to the success of the Company and its direct and indirect subsidiaries (the "Subsidiaries") and to provide additional incentive for them to promote the growth, development and financial success of the Company and its Subsidiaries business as determined by a committee consisting of two or more members of the Board of Directors of the Company (the "Board"), as appointed pursuant to Section 2 hereof, by offering them an opportunity to increase their proprietary interest in the Company through the grant of nonqualified stock options (the "Options") to purchase shares of Common Stock of the Company, par value $0.01 per share (the "Common Stock"). Consistent with these objectives, the Plan authorizes the granting of Options to acquire shares of Common Stock pursuant to the terms and conditions hereinafter set forth. The Options are not intended to qualify as "Incentive Stock Options" within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Administration of the Plan. a. Members of the Committee. The Plan shall be administered by a committee (the "Committee") duly appointed by the Board which shall consist of at least two members of the Board, each of whom shall be a "disinterested person" as defined in subsection (c)(2)(i) of Rule 16b-3 ("Rule 16b-3") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Members of the Committee shall serve at the pleasure of the Board of Directors of the Company. b. Authority of the Committee. The Committee shall adopt such rules as it may deem appropriate in order to carry out the purposes of the Plan. Subject to the provisions of this Plan, the Committee shall have the complete authority, in its discretion, to make the following determinations with respect to each Option to be granted by the Company: (A) the person to receive the Option; (B) the time of granting the Option; (C) the number of shares subject thereto; (D) the Option Price (as defined in Section 5(b) hereof); and (E) the Option Period (as defined in Section 5(d) hereof). In making such determinations the Committee may take into account the nature of the services rendered by the person, their present and potential contributions to the success of the Company and its Subsidiaries, and such other factors as the Committee in its discretion shall deem relevant. Subject to the provisions of this Plan, all questions of interpretation, administration, and application of the Plan shall be determined by a majority of the members of the Committee then in office, except that the Committee may authorize any one or more of its members, or any officer of the Company, to execute and deliver documents on behalf of the Committee. The determination of such majority shall be final and binding in all matters relating to the Plan or all persons concerned. No member of the Committee shall be liable for any act done or omitted to be done by such member or by any other member of the Committee in connection with the Plan, except for such member's own willful misconduct or as expressly provided by statute. 3. Persons to Whom Options May be Granted. Options may be granted, at the discretion of the Committee: a. To one or more persons who are employees or employees and directors of the Company or of any of its present or future Subsidiaries, or any employee of a Parent Corporation (within the meaning of Code Section 424(e)) (collectively, an "Employee"); b. To one or more persons who provides services to the Company or of any of its present or future Subsidiaries as a consultant or otherwise in the capacity of an independent contractor and who is not otherwise an Employee. 4. Stock Subject to the Plan. The shares subject to the Plan shall consist of 400,000 shares of Common Stock, subject to adjustment pursuant to Section 5(h) hereof, which shares may be either authorized but unissued shares or previously issued shares of Common Stock reacquired and held by the Company as treasury shares, not reserved for any other purpose. The Company shall at all times during the term of this Plan and of the Options granted hereunder reserve and keep available such number of shares of the Company's stock as will be sufficient to satisfy the requirements of this Plan and shall pay all fees and expenses necessarily incurred by the Company in connection therewith. If any outstanding Option under the Plan for any reason expires or is canceled or otherwise terminated without having been exercised in full, the shares of Common Stock allocable to the unexercised portion of such Option shall (unless the Plan shall have been terminated) become available for subsequent grants of Options under the Plan. 5. Terms and Conditions of Options. Each Option granted pursuant to the Plan shall be evidenced by a written agreement (the "Option Agreement") between the Company and the person to whom such Option is awarded (the "Optionee"), which Option Agreement shall comply with and be subject to the following terms and conditions: a. Number of Shares. Each Option Agreement shall state the number of shares of Common Stock to which the Option relates. b. Option Price. Each Option Agreement shall state the option price, which shall not be less than seventy percent (70%) of the Fair Market Value (as defined below) of the shares of Common Stock on the date of grant of the Option (the "Option Price"). The term "Fair Market Value" of a share of Common Stock shall mean (i) if the shares of Common Stock are then traded on an over-the-counter market, the average of the closing bid and asked prices for the shares of Common Stock in such over-the-counter market for the last preceding date on which there was a sale of such Common Stock in such market, (ii) in the shares of Common Stock are then listed on a national securities exchange, the closing sales price per share for the last preceding date on which there was a sale of such Common Stock on such exchange, or (iii) if the shares of Common Stock are not then traded in an over-the-counter market or listed on a national securities exchange, such value as the Committee in its discretion may determine. The Option Price shall be subject to adjustment as provided in Section 5(h) hereof. c. Payment of Option Price. i) Shares of Common Stock shall be issued to the Optionee upon payment in full either in cash (or cash equivalent) or by an exchange of shares of Common Stock of the Company previously owned by the Optionee, or a combination of both, in an amount or having a combined value equal to the aggregate purchase price for the shares subject to the Option or portion thereof being exercised. The value of the previously owned shares of Common Stock exchanged in full or partial payment for the shares purchased upon the exercise of an Option shall be equal to the aggregate Fair Market Value of such shares on the date of the exercise of such Option. ii) Whenever shares of Common Stock are to be issued under the Plan, the Company shall have the power to require the recipient of the Common Stock to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to issuance of the certificate for shares of Common Stock. The Option Agreement may provide that an Optionee shall be entitled to elect to pay all or a portion of all federal, state or local withholding taxes arising in connection with the exercise of an Option by electing to (1) have the Company withhold shares of Common Stock, or (2) deliver other shares of Common Stock previously owned by the Optionee having a Fair Market Value equal to the amount to be withheld; provided, however, that the amount to be withheld shall not exceed the Optionee's estimated total federal, state and local tax obligations associated with the transaction. The election shall be made in writing and shall be made according to such rules and in such form as the committee shall from time to time determine. The Fair Market Value of fractional shares remaining after payment of the withholding taxes shall be paid to the Optionee in cash. d. Terms and Exercise of Options. Options shall be exercisable over the exercise period as and at the times and upon such conditions as the committee may determine, as reflected in the Option Agreement, including the authority to accelerate the exercisability of any outstanding Option at such time and under such circumstances as it, in its sole discretion, deems appropriate (the "Option Period"), provided however, that the Option period shall not exceed ten (10) years from the date of grant of such Option. The Option Period shall be subject to earlier termination as provided in Sections 5(e) and 5(f) hereof. An Option may be exercised, as to any or all full shares of Common Stock as to which the Option has become exercisable, by giving written notice of such exercise to the Committee or to such individual(s) as the Committee may from time to time designate. e. Termination of Employment Other than for Death, Disability or Retirement In the event that the employment of an Optionee shall terminate (other than by reason of death, disability or retirement), all Options of such Optionee that are exercisable at the time of such termination may, unless earlier terminated in accordance with their terms, be exercised within three (3) months after such termination; provided, however, that if the employment of an Optionee shall terminate for Cause (as defined herein), all options theretofore granted to such Optionee shall, to the extent not theretofore exercised, terminate immediately. The term "Cause" means for purposes of whether and when an Optionee has incurred a termination of employment for Cause any act or omission which permits the Company or the Parent Corporation to terminate the written agreement or arrangement between such Optionee and the Company or the Parent Corporation, as the case may be; Cause as defined in such agreement or arrangement, or in the event there is no such agreement or arrangement or the agreement or arrangement does not define the term "Cause", than Cause shall mean (a) the conviction of the Optionee for committing a felony under Federal law or the law of the state in which such action occurred or (b) the willful or negligent failure on the part of such Optionee to perform his duties to the Company or the Parent Corporation, as the case may be. f. Termination of Employment Due to Death, Disability or Retirement of Optionee. If an Optionee shall die while employed by the Company, its Subsidiaries or the Parent Corporation, or within three (3) months after the termination of such Optionee's employment other than for Cause, or if the Optionee's employment shall terminate by reason of Disability (within the meaning of Section 22(e)(3) of the Code) or retirement, all Options theretofore granted to such Optionee (to the extent otherwise exercisable at the time of death or termination of employment) may, unless earlier terminated in accordance with their terms, be exercised by the Optionee or by the Optionee's estate or by a person who acquired the right to exercise such Option by bequest or inheritance or otherwise by reason of death or disability of the Optionee, at any time within six months (or such longer period as may be determined by the Committee in its sole discretion) after the date of any such death, disability or retirement of the Optionee. g. Nontransferability of Options. Options granted under the Plan shall not be transferable otherwise than by will or by the laws of descent and distribution, and Options may be exercised, during the lifetime of the Optionee, only by the Optionee or by his guardian or legal representative. h. Effect of Certain Changes. (i) If there is any change in the number or class of shares of Common Stock through the declaration of stock or cash dividends, or, recapitalization resulting in stock splits, or combinations or exchanges of such shares, the number or class of shares of Common Stock available for Options, the number or class of such shares covered by outstanding Options, and the exercise price per share of such Options may be proportionately adjusted by the Committee in its sole discretion to reflect any such change in the number or class of issued shares of Common Stock; provided, however, that any fractional shares resulting from any such adjustment shall be eliminated. In the event of any other extraordinary corporate transaction, including but not limited to distributions of cash or other property to the Company's shareholders, the Committee may equitably adjust outstanding Options as it deems appropriate in its sole discretion. (ii) in the event of the proposed dissolution or liquidation of the Company, in the event of any corporate separation or division, including, but not limited to, split-up, split-off or spin-off, or in the event of a merger or consolidation of the Company with another corporation, the Committee may provide that the holder of each Option then exercisable shall have the right to exercise such Option (at its then Option Price) solely for the kind and amount of shares of stock and other securities, property, cash or any combination thereof receivable upon such dissolution, liquidation or corporate separation or division, or merger or consolidation by a holder of the number of shares of Common Stock for which such option might have been exercised immediately prior to such dissolution, liquidation, or corporate separation or division, or merger or consolidation. (iii) Paragraph (ii) of this Section 5(h) shall not apply to a merger or consolidation in which the Company is the surviving corporation and shares of Common Stock are not converted into or exchanged for stock, securities of any other corporation, cash or any other thing of value. Notwithstanding the preceding sentence, in case of any consolidation or merger of another corporation into the Company in which the Company is the surviving corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination, but including any change in such shares into two or more classes or series of shares), the Committee may provide that the holder of each Option then exercisable shall have the right to exercise such Option solely for the kind and amount of shares of stock and other securities (including those of any new direct or indirect parent of the Company), property, cash or any combination thereof receivable upon such reclassification, change, consolidation or merger by the holder of the number of shares of Common Stock for which such Option might have been exercised. (iv) In the event of a change in the Common Stock of the Company as presently constituted, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of the Plan. (v) To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. (vi) Except as expressly provided in this Section 5(h), the Optionee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation; and any issue by the Company of shares of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to the Option. The grant of any Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassification, reorganizations or changes of its capital or business structures or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or part of its business or assets. i. Rights as a Stockholder. An Optionee or a transferree of an Option shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of a stock certificate to him or her for such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distribution of other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 5(h) hereof. j. Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Optionee's employment at any time, nor confer upon any Optionee any right to continue in the employ of the Company, nor will anything in the Plan require an Optionee to continue in the employ of the Company. k. Other Provisions. The Option Agreements authorized under the Plan shall contain such other provisions not inconsistent with this Plan, including, without limitation, the imposition of restrictions upon the exercise of an Option as the Committee shall deem advisable. 6. Term of Plan. Options under this Plan may be granted pursuant to the Plan from time to time within a period of ten (10) years from the date the Plan is adopted by the Board, or the date the Plan is approved by the stockholders of the Company, whichever is earlier. 7. Amendment. The Board may at the time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part; provided, however, that no amendment which requires shareholder approval in order for the exemptions available under Rule 16b-3 to be applicable to the Plan and the Optionees, shall be effective unless the same shall be approved by the stockholders of the Company entitled to vote thereon on or before the effective date of the amendment. Such approval shall be obtained in such manner as is required by the Company's Certificate of Incorporation, its By-Laws, and the laws of the State of Delaware as in effect at the time of such approval. Notwithstanding the foregoing, no amendment shall affect adversely any of the rights or obligations of any Optionee, without such Optionee's consent, under any Option theretofore granted under the Plan. 8. Headings. The headings of sections and subsections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of the Plan. 9. Governing Law. The Plan and all rights hereunder shall be construed in accordance with and governed by the laws of the State of Delaware. 10.15 Exhibit 10.16 MASTER CELLULAR SERVICE AGREEMENT BETWEEN SHARED TECHNOLOGIES CELLULAR, INC. AND BUDGET RENT A CAR CORPORATION This Master Cellular Service Agreement (the "Agreement") is made as of the 1st day of May, 1997 (the "Effective Date"), by and among Shared Technologies Cellular, Inc., a Delaware corporation, having offices at 100 Great Meadow Road, Wethersfield, CT 06109, ("STC"), Budget Rent a Car Corporation, a Delaware corporation, having offices at 4225 Naperville Road, Lisle, IL 60532 ("BRACC"), and Budget Rent A Car Systems, Inc., a Delaware corporation and a wholly-owned subsidiary of BRACC, having offices at 4225 Naperville Road, Lisle, IL 60532 ("BRACSI"). BRACC and BRACSI shall hereinafter be referred to collectively as "Budget". WHEREAS, Budget is in the business of renting vehicles without drivers to the traveling public from various locations throughout the United States; and WHEREAS, STC is in the business of renting portable cellular telephones including all accessories (the "Equipment") to customers for short-term use; and WHEREAS, STC and Budget desire to enter into this Agreement to allow STC access to certain vehicle rental locations in order for STC to rent Equipment directly to Budget customers. NOW THEREFORE, in consideration of the promises and covenants contained herein, the receipt and adequacy of which are acknowledged, the parties agree as follows. 1. Appointment. (a) Budget hereby grants to STC the exclusive right to rent Equipment to Budget customers at the corporate locations owned and operated by Budget in the United States, which locations are identified in the location schedule (the "Location Schedule") attached hereto as Exhibit A. The Location Schedule may be modified by mutual written agreement of the parties hereto. (b) Upon request by STC, Budget agrees to approach any third party who operates a car rental business pursuant to a grant of a franchise or license from Budget (a "Budget Licensee") to promote STC as Budget's preferred cellular phone rental services provider and to assist STC in securing an agreement with such Budget Licensee for a cellular phone rental program. STC agrees to offer Budget Licensees a commission which is at least as favorable as the commission provided to Budget in Paragraph 5(a) and Paragraph 5(b) of this Agreement. (c) In the event that during the term of this Agreement Budget desires to expand the Equipment rental program to additional Budget corporate locations within the United States other than the locations identified in the Location Schedule, Budget shall notify STC in writing and STC shall have a right of first refusal to provide Equipment rentals to Budget customers at the locations designated by Budget in such written notice on the same terms and conditions set forth herein. STC shall have up to thirty (30) days to exercise such right of first refusal. If STC exercises such right of first refusal, STC shall have up to thirty (30) days from the date STC exercises the right of first refusal to implement an Equipment rental program at the locations identified in such notice. In the event that STC does not exercise such right of first refusal as provided above, Budget may contract with third parties to provide cellular phone rentals at the locations designated by Budget in its written notice to STC. 2. Term and Termination. (a) This Agreement shall have a term of two (2) years, commencing as of the date first written above, subject to the following. Thereafter, this Agreement shall be renewed only by written mutual agreement of the parties. (b) Notwithstanding anything contained in this Agreement to the contrary, STC will have the right to immediately terminate this Agreement upon written notice to Budget, if the Federal Communications Commission or any other regulatory agency promulgates any rule, regulation, or order which) in effect or application substantially impedes STC from fulfilling its obligations hereunder, or ii) materially or adversely affects STC's ability to conduct its business. (c) Notwithstanding anything contained in this Agreement to the contrary, upon furnishing Budget with reasonable evidence that the continuation of the Equipment rental program at any Budget location identified in the Location Schedule is not or is not likely to become a profitable business in the then foreseeable future, STC may terminate the Equipment rental program at such location(s). In such event, Budget shall have the right to engage a third party to replace STC as provider of Equipment rentals at such location(s). (d) Notwithstanding anything contained in this Agreement to the contrary, upon furnishing Budget with reasonable evidence that STC's losses due to fraud or Equipment theft are so great that it is no longer economically practical to operate at a location identified in the Location Schedule, STC may terminate the Equipment rental program at such location(s). In such event, Budget shall have the right to engage a third party to replace STC as provider of Equipment rentals at such location(s). 3. Responsibilities of Budget. (a) Budget acknowledges that all Equipment delivered under this Agreement is the property of STC. Upon termination of this Agreement for any reason whatsoever or the termination of the rental program at any individual Budget location, STC may remove its Equipment from Budget's premises. (b) With respect to each location identified on the Location Schedule, Budget agrees to: i) Provide a safe and secure area for the storage and recharging of Equipment; ii) Designate a responsible individual who will communicate with a designated representative of STC on a regular basis regarding the Equipment rental business; iii) Inform its customers at the time of car rental of the Equipment rental program and the opportunity to rent a portable cellular telephone from STC; iv) Use its reasonable efforts to solicit orders for Equipment rentals by asking Budget customers at the time the customer reserves a vehicle from Budget if such customer wants to rent Equipment from STC; v) Display at rental counters (where not prohibited by local airport rules and regulations) point-of-sale materials provided by either Budget or STC and previously approved by both parties; vi) Report all known malfunctions, improper operation, damage, theft or other loss of Equipment to STC; vii) Be responsible for the Equipment rental, turn around (e.g. battery charging and phone kit preparation), return and administrative functions during STC's unstaffed hours of operation; and viii) Develop independent and/or cooperative marketing programs and promotional materials with STC to maximize revenue potential at all locations on the Location Schedule. All promotional materials developed on a cooperative basis will require the prior approval of both Budget and STC and each party will mutually agree to its share of the cost of such cooperative marketing materials in advance. All promotional materials developed on an independent basis will require the prior approval of each party, to the extent that such materials refer to the Equipment rental program conducted hereunder or to the other party. (c) Budget shall be solely responsible for obtaining any permits, licenses, consents or other authorizations (collectively, "Authorizations") as required by any federal, state or local law or by any airport authority or other governmental entity having jurisdiction over Budget's operations at any location identified on the Location Schedule to conduct the Equipment rental program with STC. In the event that Budget is unable to obtain an Authorization for a location on the Location Schedule, such location will be deemed to be deleted from the Location Schedule. 4. Responsibilities of STC. (a) For those locations identified on the Location Schedule, STC agrees to maintain a supply of Equipment that is sufficient to meet customer demand. STC shall introduce upgrades to its Equipment as technology advances. (b) STC, at its sole cost, will provide staff ranging from full time rental agents, who will complete the entire Equipment rental process, to support staff only, who will train and assist Budget employees in completing the Equipment rental process, as more fully described in the attached Exhibit C. For those locations where STC provides Equipment rental agents during peak hours agreed to by Budget and STC, the STC Equipment rental agents shall be responsible for completing the entire Equipment rental process during those peak hours. STC phone rental agents should be dressed in a professional manner and conduct themselves appropriately. (c) STC will provide the following monthly management reports for each location identified on the Location Schedule: i) a detailed revenue and Equipment utilization analysis by location; ii) commission reports by location; iii) a rental agreement report which indicates the Budget car rental agreement number of each customer who rents STC's Equipment at a particular Budget location; and iv) itemized list of deductions (including uncollected revenue) from revenue d) With respect to each location identified on the Location Schedule, STC agrees to: i) Train local Budget personnel in the use of the Equipment, STC's pre-packaged telephone kits, and STC's sales materials. STC will inform all Budget employees that they are not authorized to use Equipment without completing an STC rental agreement and paying all normal charges for such use. Budget employees will be billed directly by STC for any charges for such use; ii) Establish call restrictions and all rates to be charged for Equipment rental and metered airtime usage. STC has the right to offer special promotions or rate changes as it deems proper. Such promotions or rate changes will remain competitive with the portable cellular rental industry. STC will provide Budget with collateral materials and point of sales materials such as quick contracts and rate cards which are previously approved by Budget (except for Equipment rental and usage charges) and which reflect such promotions or rate changes; iii) Be responsible for billing all charges to each customer for the rental of Equipment and the provision of service; iv) Be responsible for resolving all customer billing inquiries. In the event of an irreconcilable billing dispute between STC and a customer, STC will notify Budget promptly. Upon such notification, Budget will have the right but not the obligation to intervene in the dispute and attempt to bring about a reasonable solution; and v) Be responsible for administrative paperwork, battery charging, equipment maintenance, and inventories associated with the Equipment rental program. All repairs and maintenance of the Equipment will be at the expense of STC, except any repairs for damage caused by the negligence of Budget employees or agents that STC can clearly demonstrate shall be at the expense of Budget. STC shall make all repairs and necessary replacements of Equipment as soon as practical after notification by Budget. (e) STC shall allow Budget, upon reasonable prior notice and at the sole cost and expense of Budget, to inspect the books and records of STC during normal business hours, as such records pertain to Budget and this Agreement. 5. Compensation. (a) STC agrees to pay Budget a monthly commission ("Commission") at the rates set forth in Exhibit A. Commissions due Budget are based on the applicable percentage of Gross Revenues (as hereinafter defined) received by STC in connection with Equipment rentals for the applicable month at each Budget location identified on the Location Schedule. For the purposes of determining Commission hereunder, the term "Gross Revenues" shall mean the total amount of airtime revenues, theft protection charges and equipment rental charges received by STC for Equipment rentals at the applicable Budget location; provided, however, Gross Revenues shall exclude all taxes collected on behalf of any federal, state or local taxing authority, customer credits and bad debt write-offs (as determined in accordance with generally accepted accounting principles). Such Commissions shall be payable to Budget by STC forty-five (45) days after the end of each month in which such compensation is earned. This Agreement may be amended by mutual written agreement of the parties hereto to include additional products that complement the Equipment rentals. In such event, the definition of Gross Revenues will be modified by mutual written agreement of the parties to include revenues collected by STC in connection with additional products offered by STC at applicable Budget locations. (b) In addition to the Commissions payable by STC pursuant to Paragraph 5(a), STC agrees to pay incentives to Budget employees as provided by the STC Commission Incentive Program attached hereto as Exhibit B and made a part hereof. (c) STC agrees to pay Budget an annual bonus ("Annual Bonus") in accordance with the following schedule, based on the indicated percentage of total Gross Revenues received by STC during each Contract Year (as hereinafter defined) for Equipment rentals provided by STC for the applicable Contract Year at all Budget locations identified on the Location Schedule. STC agrees that the aggregate monthly gross revenues received by STC during an applicable Contract Year pursuant to an agreement between STC and a Budget Licensee for the provision of Equipment rentals at car rental locations owned and operated by a Budget Licensee (a "Budget Licensee Service Agreement") shall be included in the calculation of the Annual Bonus payable by STC hereunder. In addition, STC agrees that the aggregate monthly gross revenues received by STC during an applicable Contract Year pursuant to that certain Agreement between STC and Budget Group, Inc., successor-in-interest to Team Rental Group, Inc., dated August 26, 1996 shall be included in the calculation of the Annual Bonus payable by STC hereunder. Contract Year shall mean each successive period of one (1) year during the term of this Agreement, ending on the same day and month, but not year, as the day and month on which the Effective Date occurs. Once a higher percentage becomes applicable, it applies to lower threshold levels. The Annual Bonus shall be payable by STC within sixty (60) days of the end of each Contract Year. Total Gross Revenues Percentage of Received by STC During Total Gross Applicable Contract Year Revenue 0 - $2,750,000 0% $2,750,000.01 - $3,250,000 1% $3,250,000.01 - $3,750,000 2% $3,750,000.01 - $4,250,000 3% $4,250,000.01 - $4,750,000 4% $4,750,000 and greater 5% (d) The parties hereto agree that any Commission or Annual Bonus payments payable by STC to Budget hereunder shall be made solely to BRACC. 6. Indemnification. (a) Budget shall defend, indemnify and hold STC, its parent and subsidiaries, and each of their officers, directors, employees and agents harmless from and against all claims, damages and liabilities arising from Budget's negligence or Budget's other wrongful acts or omissions arising in any way out of this Agreement or Budget's performance hereunder. (b) STC shall defend, indemnify and hold Budget, its parent and subsidiaries, and each of their officers, directors, employees and agents harmless from and against all claims, damages and liabilities arising from STC's negligence or STC's other wrongful acts or omissions arising in any way out of this Agreement or STC's performance hereunder. 7. Risk of Loss. Budget understands that all Equipment provided to it in connection with the performance of this Agreement is the personal property of STC. Budget shall be responsible for the safekeeping of all Equipment delivered to it by STC and shall bear the risk of loss or damage to, or theft of, such Equipment (only to the extent that STC can clearly demonstrate that such loss or damage was caused by the negligence or wrongful conduct of a Budget employee). In those instances where Budget is responsible for lost, damaged or stolen equipment, Budget will reimburse STC for the replacement cost of the Equipment and for all charges attributable to the use of the Equipment, subject to the following. STC agrees that the replacement cost of the Equipment shall be the actual wholesale value of the Equipment less applicable depreciation calculated on a straight line basis (assuming an estimated useful life of three (3) years and an estimated salvage value of zero), such amount not to exceed $500 per cellular phone rental kit (which includes one cellular phone, one overnight battery charger, two rechargeable batteries, a cigarette lighter adapter and a custom carrying case) and that the usage charges shall be billed to Budget on the basis of STC's actual cost for cellular airtime, not to exceed $1000 for airtime charges per phone line. In addition, STC agrees that Budget shall not be responsible for cellular usage charges after one (1) business day has elapsed from the date STC receives a report from Budget (either a copy of a police report or a completed missing equipment report form in the format provided by STC from time to time) of the loss or theft of a cellular phone. In the event that Budget incurs any payment obligation to STC for lost, damaged or stolen Equipment, then STC shall have the right to withhold such amounts from any commission owed to Budget hereunder. 8. Confidentiality. Each party shall maintain the confidentiality of, and shall not disclose to any third party, any confidential or proprietary information concerning the other party, including, without limitation, customer lists and financial information. This Paragraph shall remain in effect for a period of two (2) years following the termination of this Agreement. 9. Trademarks. Neither party shall use any trademarks or trade names, service marks, copyrights, logos, corporate names, other proprietary information or intellectual property of the other party in any manner, except as expressly authorized by the other party. Upon termination of this Agreement, Budget shall return to STC all marketing and sales materials then in the possession of Budget that refer to this Agreement or to STC or contain any trade name, trademarks, service marks, logos or other proprietary information or intellectual property of STC. 10. Default. In the event either party fails to perform any of its obligations under this Agreement and such failure continues for more than thirty (30) days following written notice of such default, then the non-defaulting party shall have the right to terminate this Agreement with written notice to the other party, without limiting any other remedies available hereunder or at law or equity. However, if such breach cannot be cured within said thirty (30) day period, then, if the breaching party has commenced to cure within such period and diligently pursues the cure, such party shall not be in default hereunder as long as it continues to diligently pursue such cure, but in no event for a period in excess of sixty (60) days from the initial notice date. 11. Relationship of the Parties. (a) STC shall at all times hereunder be deemed to be an independent contractor of Budget. Nothing in this Agreement is intended to constitute either party as a joint venturer, partner, agent, dealer, franchisee or employee of the other for any purpose whatsoever. (b) Each party's employees will not be or be deemed to be employees or joint employees of the other party. Each party assumes full responsibility for the acts of its employees and for their supervision, daily direction and control. Each party will not be responsible for workers compensation premiums, disability benefits, withholding taxes, social security, unemployment insurance or any other taxes or benefits of the other party's employees. (c) Neither party shall have any authority to enter into or bind the other party in contract, nor make any unauthorized representations or warranties concerning the other party's products or services. 12. Notice. All notices required or permitted to be given hereunder shall be deemed to have been given when deposited in the mail (certified and postage prepaid) or delivered in hand to the applicable address set forth below. Either party may change its notice address by notifying the other in writing. If to STC: Shared Technologies Cellular, Inc. 100 Great Meadow Road Suite 102 Wethersfield, CT 06109 Attn: Legal Department If to Budget: Budget Rent a Car Corporation 4225 Naperville Road Lisle, IL 60532 Attn: Jill Di Franco, Marketing Department 13. Limitation of Liability. Notwithstanding any other provision of this Agreement, neither party shall be liable to the other, either directly or through the operation of any indemnification or hold harmless provision of this Agreement, for any consequential (including lost profits), incidental, indirect, special or punitive damages arising in any way out of this Agreement. 14. Insurance. STC shall maintain a commercial general liability insurance policy which policy shall provide coverage of a minimum of $1,000,000 combined single limit, which shall name Budget as additional insured thereunder, and such coverage shall include broad form contractual liability covering this Agreement. STC shall provide thirty (30) days prior written notice to Budget prior to cancellation, modification or expiration of such insurance policy. STC shall also maintain adequate Workers' Compensation insurance providing coverage for its employees engaged in work related activities at each location. Certificates of insurance evidencing the foregoing shall be provided to Budget at its request. 15. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld or unduly delayed. Notwithstanding anything contained in this Agreement to the contrary, Budget may assign this Agreement to Budget Group, Inc. ("BGI") without the consent of STC, but with notice to STC. In the event of any such assignment, STC agrees to use good faith efforts, for a period of 120 days from the notice of assignment, to renegotiate the provisions of this Agreement with BGI. This Agreement shall remain in full force and effect during such 120- day period. Further, in the event that STC and BGI are unable to reach a mutually agreeable definitive amendment to this Agreement, then this Agreement shall expire on the first anniversary of the assignment of this Agreement from Budget to BGI, notwithstanding anything contained in Section 2(a) to the contrary. 16. Special Provision. At its sole discretion, Budget may elect to implement the terms of this Special Provision Paragraph: (a) Budget agrees to use its best efforts to incorporate the Equipment rental and return process into Budget's automated car rental reservation system in accordance with functional specifications mutually agreed to by the parties. The date that the Equipment rental and return process is automated by Budget shall be referred to herein as the "Cutover Date." (b) STC shall reimburse Budget all reasonable and necessary costs of incorporating the Equipment rental and return process into Budget's automated car rental reservation system, so long as such costs do not exceed $50,000 and provided that Budget provides STC with receipts or documentation sufficient to prove such expenses were incurred with respect to automating the Equipment rental and return process. (c) In the event that the aggregate Commission payments made to Budget pursuant to Paragraph 5(a) during the twelve (12) month period from the Cutover Date do not exceed the aggregate Commission payments made by STC for the twelve (12) month period prior to the Cutover Date by $50,000, then STC agrees to pay Budget the lesser of (i) $50,000 or (ii) $50,000 less the difference between the aggregate Commission payments made by STC for the twelve (12) month period from the Cutover Date and the aggregate Commission payments made by STC for the twelve (12) month period prior to the Cutover Date (taking into consideration payments made under this Agreement and, if necessary, payments that were made under that Master Cellular Service Agreement dated February 10, 1995 between STC and BRACC, which was terminated prior to the Effective Date of this Agreement). Example. Assume that the Cutover Date is January 1, 1998 and that the aggregate Commission payments made to Budget during the calendar year 1997 are $220,000. If the aggregate commission payments made to Budget during the calendar year 1998 are $240,000, then the amount due Budget would be $30,000 calculated as follows: $50,000 - ($240,000 - $220,000). 17. General. (a) Each party hereto represents and warrants to the other that this Agreement will not conflict with or violate any prior commitment, agreement or understanding that it has with any third party and that the person signing this Agreement on its behalf has been properly authorized and empowered to enter into this Agreement. (b) This Agreement shall be governed by the laws of the State of Connecticut. (c) This Agreement constitutes the entire understanding between the parties relating to the subject matter hereof and supersedes any and all prior discussions, proposals or agreements, whether oral or written. No modification, waiver or addition to this Agreement shall be valid unless in writing signed by the parties hereto. (d) The section headings of this Agreement are for reference purposes only and shall not constitute a part hereof or affect the meaning or interpretation of this Agreement. (e) In the event of a dispute arising out of this Agreement, the prevailing party shall be entitled to recovery of its reasonable legal fees and expenses. (f) The waiver of any provision of this Agreement shall not be construed as a continuing waiver of such breach or of other breaches of the same or of other provisions hereof. All provisions of this Agreement are severable. The invalidity, unenforceability or illegality of any provision in this Agreement shall not affect any other provision. (g) The parties acknowledge that they have each read this Agreement in its entirety, understand it and agree to be bound by the terms and conditions contained herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. Shared Technologies Cellular, Inc. Budget Rent a Car Corporation By:_________________________ By:___________________________ Its:_________________________ Its:___________________________ Date:_______________________ Date:_________________________ Budget Rent A Car Systems, Inc. By:____________________________ Its:____________________________ Date:___________________________ Exhibit B STC Incentive Program 1. STC agrees to pay a one-time commission in the amount of Four Dollars ($4) for each Equipment rental order that is procured solely by the efforts of a Budget customer service representative employee, subject to the following. The basis for the one-time commission payable to an individual Budget customer service representative employee will be the receipt by STC of an Equipment rental application completed by the Budget customer service representative employee. Such application must be signed by the customer and must designate the Budget location and the Budget customer service representative employee as the source of the sale. Generally, the one-time commission will be paid by STC to individual Budget customer service representative employees on a weekly basis. STC will issue individual Budget customer service representative employees a Form 1099 in accordance with applicable IRS requirements. 2. Notwithstanding anything contained in Paragraph 1 above, if a Budget bus driver employee assists a Budget customer service representative employee in procuring an Equipment rental order, then the one-time commission payable by STC pursuant to Paragraph 1 above shall be shared and paid on an equal basis between such Budget employees. Exhibit 10.17 AGREEMENT BETWEEN SHARED TECHNOLOGIES CELLULAR, INC. AND THORN AMERICAS FOR THE PROVISION OF DEBIT CELLULAR SERVICES This Agreement (the "Agreement") is made as of the 1st day of December, 1996, by and between Shared Technologies Cellular, Inc., a Delaware corporation, having offices at 100 Great Meadow Road, Wethersfield, CT 06109, ("STC"), and Thorn Americas, Inc., a Delaware corporation, having a place of business at 8200 Thorn Drive, Wichita, KS 67226 ("Thorn"). WHEREAS, Thorn rents and occasionally sells Debit Phones (as defined in Section 1 below) that will require cellular service; and WHEREAS, STC provides cellular activation and debit services and Thorn desires to utilize such services for the Debit Phones; WHEREAS, Thorn, in addition to renting Debit Phones to End Users, desires to market and bill STC's Debit Cellular Service sold to End Users who are also renting Debit Phones from Thorn. NOW, THEREFORE, in consideration of the promises and covenants contained herein, the receipt and adequacy of which are acknowledged, the parties agree as follows. 1. Definitions. The following terms when used herein shall have the following meanings: (a) "ACC" shall mean an airtime control code supplied by STC which must be entered on the keypad of a Debit Phone to allow an End User to redeem a particular Debit Code to make and receive calls with the Debit Phone until the units of airtime associated with such Debit Code have been depleted. (b) "Carrier" shall mean a person or entity authorized by the Federal Communications Commission to construct and operate a cellular system within a specific CGSA. (c) "CGSA" shall mean a cellular geographic service area, which is a region within the United States in which a Carrier is authorized to provide cellular telephone service. (d) "Debit Code" shall mean a multi-digit number assigned by STC to identify a specific block of airtime units provided to Thorn by STC for sale to End Users. Airtime units will be available in blocks consisting of 30 and 60 units and each block will be identified by a unique Debit Code. (e) "Debit Cellular Service" shall mean prepaid cellular service using wireless technology that will allow an End User to make and receive calls with a Debit Phone for a predetermined period of time (measured in units of airtime). (f) "Debit Phone" shall mean a mobile phone that contains software and firmware to permit the phone to track the airtime usage of an End User. (g)"End User" shall mean a person or entity that buys or rents a Debit Phone from Thorn. (h)"MIN" shall mean the ten digit cellular telephone number provided by STC to Thorn for a particular Debit Phone. 2. Term. This Agreement shall have a term of two (2) years, commencing as of the date first written above, subject to the following. The term hereof shall automatically renew for successive one (1) year terms unless notice of termination is given by either party at least thirty (30) days prior to the end of the initial term or any term then in effect. 3. Responsibilities of Thorn and STC. (a) Thorn agrees to use STC as the exclusive provider of Debit Cellular Service for all Debit Phones which are rented or sold by Thorn to End Users at all rental store locations owned and operated by Thorn in the cities dentified in Exhibit A (the "Territory"), which is attached hereto and made a part hereof. (b) Thorn shall be solely responsible for the rental or sale of Debit Phones to End Users and STC shall have no obligations with respect thereto, other than as provided in this Agreement. For each Debit Phone that Thorn purchases for distribution within the Territory, Thorn agrees to purchase such phones with the technology and configuration identified in Exhibit B, and as may be supplemented from time to time by mutual consent of the parties. Both parties acknowledge that Thorn shall not be obligated, either expressly or implied, to conduct or refrain from any activity when the same would constitute a restraint of trade or would otherwise be unlawful. Both parties further acknowledge that STC is not receiving a commission, royalty or other payments from any equipment vendor with respect to the sale of Debit Phones and that STC is solely licensing certain software from the debit technology vendor to integrate the Debit Phone technology with the Debit Cellular Services. (c) STC shall use its best efforts to cause its Carriers to promptly (i) provide Debit Cellular Service to End Users renting Debit Phones who purchase STC's Cellular Services, and (ii) disconnect Debit Cellular Service for certain Debit Phones, at Thorn's request, subject to the rights of End Users. If Debit Cellular Service is disconnected, then Thorn shall be responsible for applicable termination charges in accordance with Exhibit E. In addition, STC shall perform all reasonable and necessary tasks to ship Debit Phones to Thorn's stores and provide Debit Cellular Service to such Debit Phones pursuant to a roll-out schedule to be mutually agreed upon by the parties. Lastly, STC shall pay its Carrier's invoices for Debit Cellular Services ultimately provided to End Users in the normal course of business. (d) STC shall provide all necessary and reasonable assistance to End Users related to cellular service questions, hardware issues, billings, and on any other matters arising in the normal course of End Users' usage of STC's Debit Cellular Service. (e) STC represents and warrants to Thorn that to the best of its knowledge it has secured or filed any tariffs, permits or other authorizations, and will file or maintain as appropriate, regardless of its knowledge, tariffs, permits or other authorizations as may hereafter be required for the cellular phone service. Thorn agrees to cooperate with STC in establishing such tariffs in order to assure that Thorn may obtain a commission in the amount as provided in this Agreement for marketing and billing of STC's services to End Users. STC shall comply with all laws applicable to its business, its obligations and duties to End Users and Thorn arising out of this Agreement including but not limited to the payment of all applicable taxes. (f) STC shall provide assistance to Thorn for the training of Thorn's employees regarding the use of Debit Phones, activation and deactivation of Debit Phones, marketing of STC's Debit Cellular Service, and marketing of cellular services in the ordinary course of business. (g) Notwithstanding anything in the Agreement, in the event of the total outage of cellular telephone service for a period of twenty-four (24) hours or more in any specific CGSA or any outage or material loss of cellular telephone service which does not constitute a total outage of cellular telephone service in a specific CGSA, a credit allowance will be made by STC to End Users to be administered by Thorn, in the form of a pro- rata adjustment of the monthly recurring access charges billed by STC for any period of such outage; provided that such outage is caused by the negligence or intentional misconduct of STC, or STC's failure to perform its obligations under this Agreement. (h) STC agrees to be solely responsible for filing all tax returns, and paying the related taxes due related to End Users' purchase of Debit Cellular Service except for sales tax applicable at point of sale in Iowa, Missouri, Pennsylvania or Washington, subject to any future changes by applicable taxing authorities. These taxes include, but are not limited to Federal state and local excise and communication taxes, and state and local sales or use taxes, which are levied at the time of sale of Debit Cellular Services. Except to the extent that Thorn is responsible for filing tax returns and paying the related sales taxes due in Iowa, Missouri, Pennsylvania and Washington, STC shall indemnify and hold harmless Thorn in connection with liability for such taxes including any expense in the event of governmental audits of such returns (but not including liability which is attributable to the act or omission, negligent or otherwise, of Thorn in the collection of, or failure to collect taxes included in the retail prices paid by End Users for STC's account pursuant to Section 6 (a) (iii) below). STC represents and warrants the tax information contained in Exhibit D is true and accurate to the best of its knowledge. STC shall promptly notify Thorn in writing of any changes in the tax rates in any jurisdiction referenced in Exhibit D, so that Thorn may have at least forty-five (45) days advance notice of any tax rate changes. 4. MIN Assignment. (a) At the time Thorn purchases Debit Phones for distribution to its rental stores in the Territory, Thorn will notify STC, in a format and according to the procedures specified by STC from time to time, of the number of MINs required for such phones, the electronic serial number ("ESN") and the manufacturer's shipping date for each Debit Phone and the address of the rental store that will stock each Debit Phone. STC will use its best efforts to obtain, by the manufacturer's shipping date, a MIN from the applicable Carrier under a reseller agreement for each Debit Phone. Thorn acknowledges that STC will obtain a MIN for a particular Debit Phone from a Carrier that provides cellular service for the CGSA where such Debit Phone will be stocked and that the ESN for each Debit Phone will be required to order a MIN for such Debit Phone. If STC must cancel all or a portion of an order for MINs that STC places with a Carrier as a result of Thorn canceling an order for Debit Phones, then Thorn shall be responsible for the applicable Deactivation Fees identified in Paragraph 2(c) of Exhibit E, attached hereto and made a part hereof. STC shall deliver to Thorn all MINs required within ten (10) business days following its receipt of Thorn's purchase order and STC's receipt of Debit Phones at the address in Section 5 (a) below to satisfy Thorn reorders for its stores already served by STC, or thirty (30) days for any stores not already served by STC. Any order not shipped within thirty (30) days following STC's receipt of Thorn's purchase order and STC's receipt of Debit Phones at the address in Section 5 (a) below will incur a penalty of $100.00 per MIN, to be deducted from STC's next invoice. Notwithstanding anything contained herein to the contrary, and except as provided in Exhibit F attached hereto STC will not be obligated to activate more than 2,500 MINs in each consecutive 30-day period during the term of this Agreement; and provided further, STC will use its best efforts to activate in excess of 2,500 MINs in a thirty (30) day period in the event of unusual circumstances such as acquisition by Thorn of a large rental company. (b) Thorn shall notify STC whenever the inventory of Debit Phones stocked by Thorn at a particular rental store location in the Territory is reassigned to another rental store location. If such reassignment results in the movement of the Debit Phones to a new CGSA, then STC shall obtain new MINs for such Debit Phones and Thorn shall be responsible for any Extraordinary Charges in accordance with Section 7(a) below . In addition, Thorn shall reprogram such Debit Phones in accordance with the instructions provided by STC. (c) Thorn agrees to pay all charges set forth in Section 7(a) below for each MIN provided by STC for use with a Debit Phone. (d) Thorn acknowledges and agrees that STC is the customer of record with all Carriers, is solely responsible for paying all charges billed by such Carriers to STC, and retains all rights associated with the use of the MINs and access codes assigned to STC and provided for use with the Debit Phones. Neither Thorn nor any End User shall acquire any proprietary interest in any specific MIN or access code provided by STC for use with a Debit Phone. 5. Debit Phone Programming. (a) After Thorn notifies STC, pursuant to Section 4(a) above, that MINs are required for certain Debit Phones, Thorn shall ship, at its sole cost and expense, including appropriate freight insurance, such Debit Phones to STC at the following address (or such other address as provided by STC from time to time): Shared Technologies Cellular, Inc. 149 Weldon Road, Suite 109 Maryland Heights, MO 63043 Attn: Fulfillment Department Thorn shall include with each shipment a custom carrying case and any hardware accessories required for each Debit Phone. (b) STC will program each Debit Phone with the MIN previously reserved by STC for a particular Debit Phone pursuant to Section 4(a) above. STC will verify that cellular service has been initiated by the applicable Carrier for each MIN prior to the shipment of the Debit Phone. (c) STC will program each Debit Phone with the airtime unit settings described in Section 6(a)(i) below. (d) After each Debit Phone has been programmed by STC, STC will package each Debit Phone with the custom carrying case and hardware accessories supplied by Thorn. STC shall then ship each Debit Phone, at Thorn's cost and expense, including appropriate freight insurance, to each store location that Thorn has identified, pursuant to Section 4(a) above, as the location responsible for stocking such phones. (e) Thorn shall pay STC a service charge in accordance with Section 7(c) below for each Debit Phone that is programmed by STC. Such charges shall be due and payable pursuant to Section 7 (c) below. 6. Debit Cellular Service. (a) STC resells the cellular service of various Carriers throughout the United States. STC will be solely responsible for relationships with such Carriers and will rely on such relationships to provide Debit Cellular Service for each Debit Phone which is distributed by Thorn to an End User. STC will be solely responsible for the provision of Debit Cellular Service to End Users,. Debit Cellular Service will be activated for the Debit Phones. in accordance with the following procedures: (i) At the time an End User purchases or rents a Debit Phone from Thorn, Thorn will inform the End User that in order to access the Debit Cellular Services, the End User must purchase a Debit Code from STC. Thorn will inform End User that Debit Codes are available for a block of 30 and 60 units of airtime, at the retail rates identified in Exhibit C, attached hereto and made a part hereof. Such rates shall be established by STC, and may be modified by STC from time to time in accordance with the provisions of Section 7(b) below. Thorn will inform the End User that each time a call is made or received with the Debit Phone, units of airtime will be reduced in accordance with the type and duration of the call in accordance with the following parameters: (a) one (1) unit of airtime will allow an End User to make or receive a local call for one (1) minute; (b) two (2) units of airtime will allow an End User to make a domestic long distance or toll call for one (1) minute; (c) one (1) unit of airtime will allow an End User to receive a domestic long distance or toll call for one (1) minute; and (d) three (3) units of airtime will allow End User to make or receive a roaming call for one (1) minute. Thorn shall inform End Users that the account balance of airtime units will be debited for partial minutes in sixty (60) second increments. For example, if the duration of a roaming call is forty-five (45) seconds, then three (3) units will be debited from the End User's account balance of airtime units. Thorn will also inform the End User that 911 and 611 calls can be placed without charge even if the airtime balance is $0 and that the Debit Phone is restricted from making international calls (01+) and from making calls to local directory assistance (411) and "Dial It Services" such as 900 and 976 area codes. (ii) Whenever a Debit Code is sold to an End User, Thorn or the End User must contact STC and provide STC with the Debit Code and the MIN assigned to the Debit Phone. STC will redeem the Debit Code by generating an ACC, which will be entered into the Debit Phone by Thorn or the End User. Such ACC provided by STC will allow the End User to make and receive calls for a predetermined period of time in accordance with the Debit Code for the number of units of airtime purchased by End User (as identified by a particular Debit Code associated with a certain ACC). Each time a call is made or received with the Debit Phone, units of airtime will be reduced in accordance with type and duration of the call pursuant to the parameters indicated in Section 6(a)(i) above. Once the units of airtime have been depleted, the Debit Phone will prompt the End User to purchase additional units of airtime to regain access to Debit Cellular Service. (iii) For each Debit Code that is purchased by an End User at a particular rental store location of Thorn in the Territory, Thorn shall collect the established retail rate for such location, as identified in Exhibit C for each unit of airtime purchased by End User. Thorn and STC agree to share revenues received from the sale of Debit Codes to End Users in accordance with the schedule set forth in Exhibit C. Thorn shall collect from each End User applicable federal, state or local telecommunications tax and state and local sales and use taxes (collectively, the "Taxes") included in the retail prices paid by each End User at the total per unit rates set forth in Exhibit D, attached hereto and made a part hereof, for Debit Codes sold to each End User at the applicable rental store location. Thorn shall retain its share of the revenues (as identified in Exhibit C ) for marketing and billing services in connection with the sale of Debit Codes. Thorn shall remit to STC the applicable Taxes and STC's share of the revenues received from End Users for the sale of Debit Codes, in accordance with the provisions of Section 7(b) below. (b) Debit Codes will be distributed in accordance with the following procedures: (i) Thorn will contact STC in writing or by means of electronic mail (e.g. Verifone equipment) with requests for Debit Codes for a specific rental store location in the Territory. (ii) STC will supply Debit Codes in the quantities specified by Thorn for each rental store location in the Territory, within five (5) business days of STC's receipt of Thorn's purchase order for Debit Codes. STC will supply such Debit Codes by means of registered U.S. Mail, second day courier or electronic mail transmission (e.g. Verifone equipment). STC will be responsible for all freight expenses incurred. (iii) Whenever an End User purchases a Debit Code in order to access STC's Debit Cellular Services, Thorn shall provide the End User with a receipt from Thorn's point of sale terminal. Such receipt shall identify the Debit Code purchased by the End User, Thorn will also supply to End Users STC's toll-free customer service phone number, which number can be used by the End User to redeem the Debit Code for an ACC. STC will use its best efforts to provide such ACCs to End Users as soon as reasonably possible, which will not exceed four (4) business hours. Notwithstanding the foregoing, Thorn may call STC to redeem the Debit Code for the End User at the time of sale. If STC cannot provide an ACC for a particular MIN within four (4) business hours of a request, then Thorn, at its discretion, may terminate such MIN within five (5) business days thereafter without any payment of any Deactivation Fees identified in Paragraph 2 (c) of Exhibit E attached hereto. 7. Pricing and Payment Terms. (a) Recurring and Extraordinary Charges. For each MIN provided by STC for each Debit Phone that is stocked by Thorn in the Territory, Thorn shall bill to End Users and remit to STC the monthly recurring access charges identified in Exhibit E. Such monthly recurring access charges shall be payable in advance, on the first of each month. STC reserves the right to increase or decrease such charges any time after the 13-month anniversary of this Agreement. Any such changes shall be effective ninety (90) days after issuance of notice to Thorn. In addition, Thorn shall bill to End Users at its discretion and remit to STC any extraordinary charges identified in Exhibit E ("Extraordinary Charges") for each MIN provided by STC to Thorn for use with a Debit Phone in the Territory. Notwithstanding anything contained herein to the contrary, Thorn shall be liable for any charges identified in Exhibit E, regardless of whether Thorn bills or collects such charges from End Users. Such charges shall be due and payable within twenty (20) days after Thorn's receipt of STC's invoice. A late payment charge will apply as stated in Section (d) below. (b) Airtime Charges and Taxes for Debit Codes. Within fifteen (15) days of the end of each month, STC shall send a statement ("Settlement Statement") to Thorn for the Debit Cellular Services provided by STC in the prior month. The Settlement Statement will identify the number of Debit Codes redeemed by STC in the prior month for sales of Debit Codes made at each rental store location in the Territory, along with a statement for Taxes applicable to such sales. For such Debit Codes redeemed by STC, Thorn shall remit to STC all amounts indicated on the Settlement Statement due STC for its share of the revenues, as specified in Exhibit C , for the sale of Debit Codes to End Users (as determined by the rates in effect on the date the Debit Code is redeemed by an End User) as well as the Taxes collected by Thorn from End Users for such Debit Codes redeemed by STC in the prior month. STC reserves the right to increase or decrease the retail rates identified in Exhibit C anytime after the 13-month anniversary of this Agreement. Any such changes shall be effective ninety (90) days after issuance notice to Thorn. In such event, the parties will mutually agree upon the future commission retained by Thorn for each Debit Code purchased by an End User . Notwithstanding anything contained in this Agreement to the contrary, Thorn acknowledges that STC shall be compensated on the basis of Debit Codes redeemed by STC pursuant to this Agreement regardless of customer credits issued and uncollected revenue in connection with the sale of Debit Codes to End Users. STC acknowledges that Thorn will not be liable for charges for any Debit Code activated for an End User more than four hours after STC is contacted by Thorn or End User pursuant to paragraph 8(c) below. c) Debit Phone Programming Charges. Thorn shall pay STC a service charge in the amount of $10 for each Debit Phone that is programmed by STC pursuant to this Agreement. Such charges shall be due and payable within twenty (20) days after Thorn's receipt of STC's invoice. A late payment charge will apply as stated in Section 7 (d) below. (d) Settlement Statements shall be due and payable within twenty (20) days after Thorn's receipt thereof. Payment shall be made to STC at the address set forth on the Settlement Statement or at such other address as may be designated in writing from time to time by STC. A late payment charge, at the rate of 1-1/2% per month or the highest lawful rate, whichever is lower, shall be charged on any amount which is not paid within thirty (30) days after receipt of STC's invoice. (e) Upon request by Thorn, STC will provide Thorn monthly Settlement Statements in electronic format. However, Thorn shall be responsible for all delivery costs associated with the transmission of such electronic reports. (f) During the term of this Agreement or any extension thereof, STC shall not sell or make available Debit Cellular Service, including Debit Codes, to any competitor of Thorn in the household durable goods rental industry, for prices that are lower than those applicable to this Agreement. 8. Fraud/Cloning. (a) In the event that a Debit Phone is lost, stolen or otherwise absent from the possession of Thorn for any reason other than the sale or rental of the Debit Phone to an End User, then Thorn shall only be liable for charges attributable to the Debit Codes purchased for such Debit Phone until the loss, theft or absence has been reported to STC and the MIN assigned to such Debit Phone has been deactivated by STC. (b) STC shall be liable for all charges attributable to the cloning of any MIN or ESN , or any combination thereof, except to the extent that such cloning can be attributed to Thorn's employees or agents. Thorn agrees to use its best efforts to assist STC and any Carrier or governmental authority in the investigation or detection of any cloning or other fraudulent activity. (c) Thorn shall bear the risk of loss or theft of any Debit Code provided by STC pursuant to this Agreement after it has been received in one of Thorn's rental stores, until receipt by STC, in a form reasonably prescribed by STC, of notice from Thorn to disable any such Debit Code. STC shall bear such risks, if any, that may occur prior to the delivery of Debit Codes to Thorn's rental stores. 9. Confidentiality. (a) Each party shall maintain the confidentiality of, and shall not disclose to any third party, any confidential or proprietary information concerning the other party obtained pursuant to this Agreement, including, without limitation, customer lists, financial information, reports and all nonpublic business information. (b) This Section 9 shall remain in effect for a period of two (2) years following the termination of this Agreement. The receiving party shall safeguard proprietary and confidential information in the same manner as it protects its own proprietary or confidential information, shall use such information solely for the purposes contemplated by this Agreement and shall not in any way disclose such information to any third parties, unless and until such time as the proprietary or confidential information: (i) is within the public domain; or (ii) is already in the possession of the receiving party without restriction, as evidenced by adequate documentation; or (iii) is or has been lawfully disclosed to the receiving party by a third party without an obligation of confidentiality upon the receiving party; or (iv) is independently developed by the receiving party, as evidenced by adequate documentation. (c) Upon termination of this Agreement for any reason, all confidential and proprietary information, including any and all copies thereof, shall be returned to the disclosing party. 10. Trademarks. (a) Thorn shall not use the name, tradenames, service marks, trademarks, trade dress or logos of STC or any of its affiliates in any manner, except as expressly authorized in writing by STC. Upon termination of this Agreement, Thorn shall immediately cease any and all use of the name, tradenames, service marks, trademarks, trade dress or logos of STC or any of its affiliates. (b) STC shall not use the name, tradenames, service marks, trademarks, trade dress or logos of Thorn in any manner, except as expressly authorized in writing by Thorn. Upon termination of this Agreement, STC shall immediately cease any and all use of the name, tradenames, service marks, trademarks, trade dress or logos of Thorn. 11. Relationship of the Parties. (a) Thorn shall at all times hereunder be deemed to be an independent contractor of STC for the purpose of marketing STC's Debit Cellular Service as provided herein. Nothing in this Agreement is intended to constitute either party as a joint venturer, partner, general agent, dealer, franchisee or employee of the other for any purpose whatsoever. (b) Thorn shall not have any authority to enter into or bind STC in contract, nor shall Thorn make any unauthorized representations or warranties concerning STC's products or services, except as provided herein or otherwise in writing by STC. (c) In no event shall Thorn's employees be considered employees of STC. Thorn assumes full responsibility for the acts of its employees and for their supervision, daily direction and control. Under no circumstances shall STC be responsible for workers compensation premiums, disability benefits, withholding taxes, social security, unemployment insurance or any other taxes or benefits with respect to Thorn or Thorn's employees. 12. Indemnification. (a) Thorn shall defend, indemnify and hold STC and its affiliates harmless from and against any and all claims, damages and liabilities arising out of or resulting from (i) the lease and sale of Debit Phones to End Users and (ii) any negligent or intentional act or omission on the part of Thorn, its employees, officers, directors or agents, in the performance of or failure to perform the activities contemplated by this Agreement. (b) STC shall defend, indemnify and hold Thorn harmless from and against any and all claims, damages and liabilities arising out of or resulting from any negligent or intentional act or omission on the part of STC, its employees, officers, directors, agents or affiliates, in the performance of or failure to perform the activities contemplated by this Agreement. 13. Limitations of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER, EITHER DIRECTLY OR THROUGH THE OPERATION OF ANY INDEMNIFICATION OR HOLD HARMLESS PROVISION HEREOF, FOR INCIDENTAL, CONSEQUENTIAL (INCLUDING LOST PROFITS), INDIRECT, PUNITIVE OR SPECIAL DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT. 14. Warranties. STC warrants to Thorn that the services provided hereunder will be performed in a workmanlike manner. STC's liability and Thorn's remedy are limited to correction within a reasonable time of the services which do not comply with this warranty, provided that written notice of such non-compliance shall have been given to STC by Thorn within thirty (30) days after such services are performed. THE WARRANTIES CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND ARE GIVEN IN LIEU OF ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 15. Default. (a) Either party shall be deemed to be in default of this Agreement if it: (i) fails to make any payment when due and such failure has not been cured within ten (10) days from the receipt of written notice thereof; (ii) materially breaches any provision of this Agreement and such breach continues beyond thirty (30) days from the receipt of written notice thereof. However, if such breach cannot reasonably be cured within said 30-day period, then, if the breaching party has commenced to cure within such period and diligently pursues the cure, such party shall not be held in default hereunder as long as it diligently continues to pursue such cure, but in no event for a period in excess of sixty (60) days beyond the initial notice date; (iii) has appointed on its behalf a trustee, receiver or liquidator by a court of competent jurisdiction and such trustee, receiver or liquidator is not dismissed within thirty (30) days of appointment; or (iv) shall file a petition in bankruptcy of for an arrangement or reorganization pursuant to the Federal Bankruptcy Code or any similar law, federal or state, or if, by decree of a court of competent jurisdiction the defaulting party shall be adjudicated a bankrupt or be declared insolvent, or the defaulting party shall admit in writing its inability to pay its debts generally when they become due. (b) In the event of a default by a party hereto, the non- defaulting party may upon three (3) days' written notice, at its option and in addition to other remedies available hereunder, at law or in equity, terminate this Agreement. Termination regardless of cause or nature shall be without prejudice to any other rights or remedies of the parties. (c) STC shall send by express overnight delivery to Thorn, within three (3) business days of STC's receipt thereof, a complete copy of any termination notice it receives from any of its Carriers supplying Debit Cellular Service to End Users. 16. Notice. (a) Whenever any notice is required to be given hereunder, such notice shall be given in writing and personally delivered or sent by certified or registered mail, return receipt requested. Notice shall be deemed to have been given at the time of receipt, if personally delivered, or upon mailing if sent by certified or registered mail. (b) If sent by Thorn to STC, such notice shall be addressed to: Shared Technologies Cellular, Inc. 100 Great Meadow Road, Suite 102 Wethersfield, CT 06109 Attention: Legal Department (c) If sent by STC to Thorn, such notice shall be addressed to: Thorn Americas, Inc. 8200 Thorn Drive Wichita, KS 67226 Attention: General Counsel (d) Either party may change the address at which it is to receive notice by giving notice of the change to the other party pursuant to this Section 16. 17. Assignment. Either party may assign this Agreement with the prior written consent of the other, such consent not to be unreasonably withheld. Notwithstanding the foregoing, either party may assign this Agreement without the consent of the other to a parent corporation or subsidiary. 18. Excuse of Performance. Either party shall be relieved from liability for non-performance due to an act of God or the public enemy, riots, labor disputes, delays of suppliers or subcontractors, severe weather, fire, flood or any act or omission of a Carrier or any cause beyond the reasonable control of the party to be excused. In the event of such cause for delay, the party so affected shall take all commercially reasonable steps to avoid or remove such cause of non-performance and both parties shall recommence performance as soon as such cause is removed or ceases. The party claiming such delay shall give the other party notice of the delay as soon as practicable, such time not to exceed thirty (30) days. 19. General. (a) This agreement shall be governed by the laws of the State of Connecticut. (b) This Agreement, including any exhibits or addenda attached hereto, constitutes the entire understanding between the parties relating to the subject matter hereof and supersedes any and all prior discussions, proposals or agreements, whether oral or written. No modification or addition to this Agreement shall be valid unless in writing signed by the parties hereto. (c) In the event of a dispute arising out of this Agreement, the prevailing party shall be entitled to recovery of its reasonable legal fees and expenses. (d) Each party shall be responsible for all expenses incurred by each of them, respectively, unless otherwise agreed in writing. (e) The waiver of any provision of this Agreement shall not be construed as a continuing waiver of such breach or of other breaches of the same or of other provisions hereof. (f) The section headings of this Agreement are for reference purposes only and shall not constitute a part hereof or affect the meaning or interpretation of this Agreement. (g) The parties acknowledge that they have each read this Agreement in its entirety, understand it and agree to be bound by the terms and conditions contained herein. IN WITNESS WHEREOF, an authorized representative of the parties hereto have executed this Agreement as of the date first written above. Shared Technologies Cellular, Inc. Thorn Americas, Inc. By:_________________________ By:_______________________ Its:_____________________ Its:___________________ Date:_______________________ Date:_____________________ Exhibit A
Count of store STATUS ADI City State CGSA CURRENT NEW GRAND TOTAL 2701Fall River MA 76 0 1 1 Middletown RI 38 0 1 1 New Bedford MA 76 0 1 1 Pawtucket RI 38 0 1 1 Providence RI 38 0 2 2 South Attleboro MA 76 0 1 1 Tauton MA 76 0 1 1 Warwick RI 38 0 1 1 West Warwick RI 38 0 1 1 Woonsocket RI 38 0 1 1 2701Total 0 11 11 2702Greenfield MA 470 0 1 1 Holyoke MA 63 0 1 1 Springfield MA 63 0 3 3 2702Total 0 5 5 2703Albany NY 44 2 0 2 Amsterdam NY 44 1 0 1 Bennington VT 680 1 0 1 East Greenbush NY 44 1 0 1 Gloversville NY 977 1 0 1 Hudson NY 564 1 0 1 North Adams MA 213 1 0 1 Pittsfield MA 213 1 0 1 Rotterdam NY 44 1 0 1 Schenectady NY 44 1 0 1 Troy NY 44 2 0 2 Watervliet NY 44 1 0 1 2703Total 1 4 0 14 2704Auburn NY 562 1 0 1 Ithaca NY 562 1 0 1 Mattydale NY 53 1 0 1 Oneida NY 53 1 0 1 Oswego NY 53 1 0 1 Rome NY 115 1 0 1 Syracuse NY 53 3 0 3 Watertown NY 559 1 0 1 2704Total 1 0 0 10 2705Binghamton NY 122 1 0 1 Endicott NY 122 1 0 1 2705Total 2 0 2 2706East StroudsbPA 56 0 1 1 Edwardsville PA 56 0 1 1 Hazleton PA 56 0 1 1 Pottsville PA 619 0 1 1 Scranton PA 56 0 1 1 Williamsport PA 251 0 1 1 2706Total 0 6 6 2707Erie PA 130 0 2 2 2707Total 0 2 2 2708Gates NY 34 1 0 1 Geneva NY 34 1 0 1 Newark NY 34 1 0 1 Rochester NY 34 3 0 3 2708Total 6 0 6 2709Batavia NY 561 1 0 1 Blasdell NY 25 1 0 1 Buffalo NY 25 1 0 0 10 Jamestown NY 561 1 0 1 Lackawanna NY 25 1 0 1 Lockport NY 25 1 0 1 Niagara Falls NY 25 2 0 2 Olean NY 561 1 0 1 Tonawanda NY 25 1 0 1 Yorkshire NY 561 1 0 1 2709Total 2 0 0 20 2710Dayton OH 40 5 0 5 Huber Heights OH 40 1 0 1 Piqua OH 40 1 0 1 Richmond IN 408 1 0 1 Springfield OH 180 1 0 1 Xenia OH 40 1 0 1 2710Total 1 0 0 10 2712Benton HarborMI 193 0 1 1 Elkhart IN 223 0 1 1 Mishawaka IN 129 0 1 1 Niles MI 193 0 1 1 South Bend IN 129 0 1 1 Warsaw IN 404 0 1 1 2712Total 0 6 6 2715Decatur AL 307 1 0 1 Florence AL 226 1 0 1 Huntsville AL 120 2 0 2 2715Total 4 0 4 2716Guthrie OK 598 1 0 1 Guymon OK 596 1 0 1 Midwest City OK 45 1 0 1 Norman OK 45 1 0 1 Oklahoma City OK 45 4 0 4 Warr Acres OK 45 1 0 1 Woodward OK 597 1 0 1 2716Total 1 0 0 10 2717Coffeyville KS 442 1 0 1 Muskogee OK 601 1 0 1 Sand Springs OK 57 1 0 1 Tulsa OK 57 3 0 3 2717Total 6 0 6 2718Marshall TX 206 0 1 1 Shreveport LA 100 0 1 1 Texarkana TX 240 0 1 1 2718Total 0 3 3 2720Bay City MI 94 0 1 1 Bridgeport MI 94 0 1 1 Flint MI 68 0 3 3 Mt. Morris MI 68 0 1 1 Owosso MI 68 0 1 1 Saginaw MI 94 0 3 3 2720Total 0 10 10 2722Council BluffIA 65 0 1 1 Omaha NE 65 0 3 3 2722Total 0 4 4 2723Bloomington IL 250 0 1 1 Pekin IL 103 0 1 1 Peoria IL 103 0 2 2 2723Total 0 4 4 2724Des Moines IA 102 2 0 2 2724Total 2 0 2 2725Milwaukee WI 21 1 0 0 10 Racine WI 189 1 0 1 Sheboygan WI 277 1 0 1 West Allis WI 21 1 0 1 2725Total 1 3 0 13 2726Alton IL 11 1 0 1 Arnold MO 11 1 0 1 Breckenridge Hil MO 11 1 0 1 Cahokia IL 11 1 0 1 Collinsville IL 11 1 0 1 Country Club Hil MO 11 1 0 1 East St. Louis IL 11 1 0 1 Fairmont City IL 11 1 0 1 Farmington MO 516 1 0 1 Festus MO 11 1 0 1 Florissant MO 11 1 0 1 Granite City IL 11 2 0 2 Maplewood MO 11 2 0 2 O'Fallon MO 11 1 0 1 St. Ann MO 11 1 0 1 St. Charles MO 11 1 0 1 St. Louis MO 11 1 1 0 11 University City MO 11 1 0 1 2726Total 3 0 0 30 2728Colorado SpriCO 117 0 3 3 Pueblo CO 241 0 2 2 2728Total 0 5 5 2729Audubon NJ 4 0 1 1 Bensalem PA 4 0 1 1 Burlington NJ 4 0 1 1 Claymont DE 69 0 1 1 Clementon NJ 4 0 1 1 Dover DE 359 0 2 2 Easton PA 58 0 1 1 Ewing NJ 121 0 1 1 Folcroft PA 4 0 1 1 Glassboro NJ 4 0 1 1 New Castle DE 69 0 1 1 Newark DE 69 0 1 1 Norristown PA 4 0 1 1 Pennsauken NJ 4 0 1 1 Philadelphia PA 4 0 5 5 Pleasantville NJ 134 0 1 1 Pottstown PA 4 0 1 1 Reading PA 118 0 1 1 Rio Grande NJ 134 0 1 1 Salem NJ 69 0 1 1 Thorndale PA 4 0 1 1 Upper Darby PA 4 0 1 1 Vineland NJ 228 0 1 1 Whitehall PA 58 0 1 1 Wilmington DE 69 0 2 2 Woodlyn PA 4 0 1 1 2729Total 0 32 32 2730Anderson SC 227 0 1 1 Asheville NC 183 0 2 2 Elberton GA 374 0 1 1 Greenville SC 67 0 2 2 Greenwood SC 626 0 1 1 Hendersonville NC 568 0 1 1 Spartanburg SC 67 0 2 2 2730Total 0 10 10 2731Cincinnati OH 23 9 0 9 Covington KY 23 2 0 2 Florence KY 23 1 0 1 Hamilton OH 145 1 0 1 Middletown OH 145 1 0 1 Newport KY 23 1 0 1 2731Total 1 5 0 15 2733Auburn WA 20 0 1 1 Bellingham WA 270 0 1 1 Bremerton WA 212 0 1 1 Centralia WA 698 0 1 1 Everett WA 20 0 2 2 Kent WA 20 0 1 1 Lynnwood WA 20 0 1 1 Olympia WA 242 0 1 1 Renton WA 20 0 1 1 Seattle WA 20 0 4 4 Tacoma WA 82 0 3 3 Wenatchee WA 694 0 1 1 2733Total 0 18 18 2737Chalmette LA 29 1 0 1 Gretna LA 29 1 0 1 Hammond LA 460 1 0 1 Houma LA 184 1 0 1 Laplace LA 461 1 0 1 Marrero LA 29 1 0 1 Metairie LA 29 1 0 1 New Orleans LA 29 4 0 4 2737Total 1 1 0 11 2740Aurora CO 19 0 5 5 Commerce City CO 19 0 1 1 Denver CO 19 0 6 6 Edgewater CO 19 0 1 1 Englewood CO 19 0 1 1 Federal Heights CO 19 0 2 2 Greeley CO 243 0 1 1 Lakewood CO 19 0 1 1 Wheatridge CO 19 0 1 1 2740Total 0 19 19 2741Beverly MA 6 0 1 1 Boston MA 6 0 1 1 Brockton MA 6 0 1 1 Chelsea MA 6 0 1 1 Concord NH 549 0 1 1 Dorchester MA 6 0 1 1 East Boston MA 6 0 1 1 Fitchburg MA 55 0 1 1 Framingham MA 6 0 1 1 Franklin NH 549 0 1 1 Haverhill MA 6 0 1 1 Hyannis MA 471 0 1 1 Hyde Park MA 6 0 1 1 Jamaica Plain MA 6 0 1 1 Keene NH 548 0 1 1 Laconia NH 549 0 1 1 Lawrence MA 6 0 2 2 Leominster MA 55 0 1 1 Lowell MA 6 0 2 2 Lynn MA 6 0 1 1 Manchester NH 133 0 1 1 Nashua NH 133 0 1 1 Portsmouth NH 156 0 1 1 Quincy MA 6 0 1 1 Revere MA 6 0 1 1 Rochester NH 156 0 1 1 Roslindale MA 6 0 1 1 Somersworth NH 156 0 1 1 Somerville MA 6 0 1 1 South Boston MA 6 0 1 1 Waltham MA 6 0 1 1 Webster MA 55 0 1 1 Worcester MA 55 0 2 2 2741Total 0 36 36 2742Clinton TownsMI 5 0 1 1 Detroit MI 5 0 16 16 Ferndale MI 5 0 1 1 Hamtramck MI 5 0 1 1 Inkster MI 5 0 1 1 Lincoln Park MI 5 0 1 1 Madison Heights MI 5 0 1 1 Madison Township MI 480 0 1 1 Monroe MI 48 0 1 1 Pontiac MI 5 0 2 2 Redford MI 5 0 1 1 Roseville MI 5 0 1 1 Taylor MI 5 0 1 1 Warren MI 5 0 1 1 Wayne MI 5 0 1 1 Ypsilanti MI 5 0 1 1 2742Total 0 32 32 2747Boardman OH 66 1 0 1 Calcutta OH 66 1 0 1 Hermitage PA 238 1 0 1 Niles OH 66 1 0 1 Warren OH 66 1 0 1 Youngstown OH 66 1 0 1 2747Total 6 0 6 2748Bridgeport OH 178 1 0 1 Steubenville OH 199 1 0 1 2748Total 2 0 2 2749Utica NY 115 1 0 1 2749Total 1 0 1 2750Aberdeen MD 14 0 1 1 Annapolis MD 14 0 1 1 Baltimore MD 14 0 18 18 Cambridge MD 468 0 1 1 Catonsville MD 14 0 1 1 Chestertown MD 468 0 1 1 Denton MD 468 0 1 1 Easton MD 468 0 1 1 Elkton MD 69 0 1 1 Essex MD 14 0 2 2 Glen Burnie MD 14 0 1 1 Laurel MD 8 0 1 1 Northeast MD 69 0 1 1 2750Total 0 31 31 2751Baton Rouge LA 80 2 0 2 2751Total 2 0 2 2752Bessemer AL 41 1 0 1 Birmingham AL 41 4 0 4 Fairfield AL 41 1 0 1 Gadsden AL 272 1 0 1 2752Total 7 0 7 2753Champaign IL 196 0 1 1 Danville IL 400 0 1 1 Decatur IL 230 0 1 1 Jacksonville IL 397 0 1 1 Springfield IL 176 0 1 1 2753Total 0 5 5 2754Columbus OH 31 6 0 6 Heath OH 590 1 0 1 Lancaster OH 31 1 0 1 Marion OH 589 1 0 1 Zanesville OH 957 1 0 1 2754Total 1 0 0 10 2756Arlington TX 9 2 0 2 Athens TX 913 1 0 1 Dallas TX 9 1 5 0 15 Denton TX 9 1 0 1 Ft. Worth TX 9 7 0 7 Garland TX 9 2 0 2 Grand Prairie TX 9 2 0 2 Haltom City TX 9 1 0 1 Halton City TX 9 1 0 1 Irving TX 9 2 0 2 Mesquite TX 9 1 0 1 Richardson TX 9 1 0 1 Sherman TX 292 1 0 1 2756Total 3 7 0 37 2757Bloomfield NJ 1 1 0 1 Bridgeport CT 42 1 0 1 Bronx NY 1 4 0 4 Danbury CT 42 1 0 1 East Orange NJ 1 1 0 1 Elizabeth NJ 1 1 0 1 Irvington NJ 1 1 0 1 Jersey City NJ 1 1 0 1 Mount Vernon NY 1 1 0 1 Neptune City NJ 70 1 0 1 New Brunswick NJ 62 1 0 1 New Rochelle NY 1 1 0 1 Newark NJ 1 1 0 1 Passaic NJ 1 1 0 1 Paterson NJ 1 1 0 1 Peekskill NY 1 1 0 1 Perth Amboy NJ 62 1 0 1 Plainfield NJ 62 1 0 1 Spring Valley NY 1 1 0 1 Stamford CT 42 1 0 1 Staten Island NY 1 1 0 1 Union City NJ 1 1 0 1 Yonkers NY 1 1 0 1 2757Total 2 6 0 26 2759Georgetown DE 359 0 1 1 Milford DE 359 0 2 2 Millsboro DE 359 0 1 1 Ocean City MD 468 0 1 1 Onley VA 692 0 1 1 Pocomoke City MD 468 0 1 1 Salisbury MD 468 0 3 3 Seaford DE 359 0 1 1 2759Total 0 11 11 2762Alexandria VA 8 0 2 2 Arlington VA 8 0 1 1 Capitol Heights MD 8 0 1 1 Chambersburg PA 909 0 1 1 Coral Hills MD 8 0 1 1 Forestville MD 8 0 1 1 Forrestville MD 8 0 1 1 Frederick MD 469 0 1 1 Fredericksburg VA 691 0 1 1 Gaithersburg MD 8 0 1 1 Hagerstown MD 257 0 1 1 Hyattsville MD 8 0 1 1 Landover MD 8 0 2 2 Langley Park MD 8 0 1 1 Lavale MD 269 0 1 1 Lexington Park MD 468 0 1 1 Manassas VA 8 0 1 1 Martinsburg WV 704 0 1 1 Ne Washington DC 8 0 1 1 Oxon Hill MD 8 0 1 1 Washington DC 8 0 3 3 Winchester VA 960 0 1 1 Woodbridge VA 8 0 1 1 2762Total 0 27 27 2767Ansonia CT 49 0 1 1 Bloomfield CT 32 0 1 1 East Hartford CT 32 0 1 1 Hamden CT 49 0 1 1 Hartford CT 32 0 2 2 Meriden CT 49 0 1 1 New Britain CT 32 0 1 1 New Haven CT 49 0 1 1 New London CT 154 0 1 1 Norwich CT 154 0 1 1 Orange CT 49 0 1 1 Torrington CT 357 0 1 1 Waterbury CT 49 0 1 1 2767Total 0 14 14 2768Barre VT 679 1 0 1 Burlington VT 248 1 0 1 Claremont NH 548 1 0 1 Littleton NH 548 1 0 1 North Walpole NH 547 1 0 1 Plattsburgh NY 560 1 0 1 Rutland VT 905 1 0 1 St. Albans VT 679 1 0 1 West Lebanon NH 548 1 0 1 2768Total 9 0 9 2769Elmira NY 284 1 0 1 Horseheads NY 284 1 0 1 2769Total 2 0 2 2770Kennewick WA 214 1 0 1 Sunnyside WA 191 1 0 1 Walla Walla WA 700 1 0 1 Yakima WA 191 2 0 2 2770Total 5 0 5 2771Spokane WA 109 2 0 2 2771Total 2 0 2 2772Albany OR 609 1 0 1 Beaverton OR 30 1 0 1 Longview WA 698 1 0 1 Portland OR 30 3 0 3 Salem OR 148 1 0 1 Vancouver WA 30 1 0 1 2772Total 8 0 8 2775Montgomery AL 139 2 0 2 Selma AL 310 1 0 1 2775Total 3 0 3 2776Longview TX 206 0 1 1 Nacogdoches TX 662 0 1 1 Tyler TX 237 0 1 1 2776Total 0 3 3 2778Murray UT 39 0 1 1 Ogden UT 39 0 2 2 Orem UT 159 0 1 1 Provo UT 159 0 1 1 Salt Lake City UT 39 0 4 4 South Ogden UT 39 0 1 1 Taylorsville UT 39 0 1 1 West Valley UT 39 0 2 2 2778Total 0 13 13 2788Aliquippa PA 13 0 1 1 Beaver Falls PA 13 0 1 1 Belle Vernon PA 620 0 1 1 Fairmont WV 703 0 1 1 Greensburg PA 13 0 1 1 Mckees Rocks PA 13 0 1 1 Mckeesport PA 13 0 1 1 Morgantown WV 703 0 1 1 New Castle PA 924 0 1 1 New Kensington PA 13 0 1 1 Pittsburgh PA 13 0 4 4 Washington PA 13 0 1 1 Wilkinsburg PA 13 0 1 1 2788Total 0 16 16 2789Fond Du Lac WI 944 1 0 1 Green Bay WI 186 2 0 2 Manitowoc WI 277 1 0 1 Menasha WI 125 1 0 1 Oshkosh WI 125 1 0 1 2789Total 6 0 6 2791Bullhead CityAZ 318 0 1 1 Casa Grande AZ 322 0 1 1 Chandler AZ 26 0 2 2 Glendale AZ 26 0 1 1 Mesa AZ 26 0 3 3 Phoenix AZ 26 0 11 11 Scottsdale AZ 26 0 1 1 Tempe AZ 26 0 1 1 2791Total 0 21 21 2792Albuquerque NM 86 0 3 3 Espanola NM 553 0 1 1 Farmington NM 553 0 1 1 Los Lunas NM 553 0 1 1 Roswell NM 917 0 1 1 Santa Fe NM 556 0 1 1 2792Total 0 8 8 2793Sierra Vista AZ 323 1 0 1 Tucson AZ 77 3 0 3 2793Total 4 0 4 2798Duluth MN 141 0 1 1 2798Total 0 1 1 2799Columbia HeigMN 15 0 1 1 Maplewood MN 15 0 1 1 Minneapolis MN 15 0 3 3 St. Paul MN 15 0 2 2 2799Total 0 7 7 2801Citrus HeightCA 35 1 0 1 Fairfield CA 111 1 0 1 Modesto CA 142 2 0 2 North Highlands CA 35 1 0 1 Sacramento CA 35 5 0 5 Stockton CA 107 2 0 2 West Sacramento CA 35 1 0 1 Yuba City CA 274 1 0 1 2801Total 1 4 0 14 2804Tuscaloosa AL 222 1 0 1 2804Total 1 0 1 2805Cheyenne WY 721 0 1 1 2805Total 0 1 1 2806Anniston AL 249 1 0 1 2806Total 1 0 1 2808Columbia PA 105 0 1 1 Hanover PA 99 0 1 1 Harrisburg PA 84 0 1 1 Lancaster PA 105 0 1 1 Lebanon PA 623 0 1 1 York PA 99 0 1 1 2808Total 0 6 6 2812Ardmore OK 604 1 0 1 2812Total 1 0 1 2813Columbia SC 95 1 0 1 Sumter SC 630 1 0 1 West Columbia SC 95 1 0 1 2813Total 3 0 3 2817Hilo HI 387 0 2 2 Honolulu HI 50 0 2 2 Kahului HI 386 0 1 1 Kailua-Kona HI 387 0 1 1 Kamuela HI 387 0 1 1 Kaneohe HI 50 0 1 1 Lihue HI 385 0 1 1 Wahiawa HI 50 0 1 1 Waianae HI 50 0 1 1 Waipahu HI 50 0 1 1 2817Total 0 12 12 2818Beloit WI 216 1 0 1 Janesville WI 216 1 0 1 2818Total 2 0 2 2819Cedar Rapids IA 195 1 0 1 Dubuque IA 286 1 0 1 Waterloo IA 201 1 0 1 2819Total 3 0 3 2820Clinton IA 964 0 1 1 Davenport IA 98 0 1 1 East Moline IL 98 0 1 1 Muscatine IA 415 0 1 1 Rock Falls IL 394 0 1 1 Rock Island IL 98 0 1 1 2820Total 0 6 6 2826Bakersfield CA 97 1 0 1 2826Total 1 0 1 2827Indio CA 2 1 0 1 2827Total 1 0 1 2829Florence SC 264 1 0 1 2829Total 1 0 1 2833Commerce CA 2 1 0 1 Compton CA 2 1 0 1 El Monte CA 2 1 0 1 Highland Park CA 2 1 0 1 Inglewood CA 2 2 0 2 Long Beach CA 2 1 0 1 Los Angeles CA 2 2 0 2 Oxnard CA 73 1 0 1 Pacoima CA 2 1 0 1 Panorama City CA 2 1 0 1 Paramount CA 2 1 0 1 Pasadena CA 2 1 0 1 Reseda CA 2 1 0 1 Wilmington CA 2 1 0 1 2833Total 1 6 0 16 2834Aurora IL 3 0 2 2 Bedford Park IL 3 0 1 1 Berwyn IL 3 0 1 1 Bolingbrook IL 3 0 1 1 Bradley IL 273 0 1 1 Bridgeview IL 3 0 1 1 Chicago IL 3 0 24 24 Chicago Heights IL 3 0 1 1 Cicero IL 3 0 1 1 Dolton IL 3 0 2 2 East Dundee IL 3 0 1 1 Elgin IL 3 0 1 1 Gary IN 54 0 3 3 Hammond IN 54 0 1 1 Hanover Park IL 3 0 1 1 Highland IN 54 0 1 1 Joliet IL 3 0 2 2 Kankakee IL 273 0 1 1 Kenosha WI 244 0 1 1 Markham IL 3 0 1 1 Melrose Park IL 3 0 2 2 Merrillville IN 54 0 1 1 Michigan City IN 959 0 1 1 Niles IL 3 0 1 1 Norridge IL 3 0 1 1 Round Lake Beach IL 3 0 1 1 S. Chicago Heigh IL 3 0 1 1 Schaumburg IL 3 0 1 1 Villa Park IL 3 0 1 1 Waukegan IL 3 0 2 2 Wheeling IL 3 0 1 1 2834Total 0 61 61 2835Aiken SC 108 1 0 1 Augusta GA 108 3 0 3 SC 108 1 0 1 Thomson GA 108 1 0 1 Washington GA 17 1 0 1 2835Total 7 0 7 2836Columbus GA 153 1 0 1 Phenix City AL 153 1 0 1 2836Total 2 0 2 2837Savannah GA 155 0 1 1 2837Total 0 1 1 2838Acworth GA 17 1 0 1 Athens GA 234 2 0 2 Atlanta GA 17 6 0 6 Calhoun GA 371 1 0 1 Cartersville GA 373 1 0 1 College Park GA 17 2 0 2 Commerce GA 234 1 0 1 Decatur GA 17 2 0 2 Doraville GA 17 2 0 2 Douglasville GA 17 1 0 1 Forest Park GA 17 2 0 2 Griffin GA 376 1 0 1 Jonesboro GA 17 1 0 1 Lawrenceville GA 17 1 0 1 Monroe GA 17 1 0 1 Rome GA 373 1 0 1 Smyrna GA 17 2 0 2 Stone Mountain GA 17 2 0 2 Summerville GA 373 1 0 1 Winder GA 372 1 0 1 2838Total 3 2 0 32 2839Macon GA 138 1 0 1 2839Total 1 0 1 2847Albany GA 261 1 0 1 2847Total 1 0 1 2848Eau Claire WI 232 1 0 1 2848Total 1 0 1 2851North CharlesSC 90 1 0 1 2851Total 1 0 1 2852Amityville NY 1 1 0 1 Astoria NY 1 1 0 1 Bayshore NY 1 1 0 1 Brooklyn NY 1 1 0 1 Cambria Heights NY 1 1 0 1 Central Islip NY 1 1 0 1 East Patchogue NY 1 1 0 1 Freeport NY 1 1 0 1 Hempstead NY 1 1 0 1 Hollis NY 1 1 0 1 Inwood NY 628 1 0 1 Jackson Heights NY 1 2 0 2 Richmond Hill NY 1 1 0 1 Ridgewood NY 1 1 0 1 2852Total 1 5 0 15 2853Johnston PA 143 0 1 1 2853Total 0 1 1 2854El Centro CA 342 0 1 1 Yuma AZ 321 0 1 1 2854Total 0 2 2 2869Dothan AL 246 0 1 1 2869Total 0 1 1 2874CharlottesvilVA 256 0 1 1 2874Total 0 1 1 2876Medford OR 229 0 1 1 2876Total 0 1 1 2877Chico CA 215 0 1 1 Redding CA 254 0 1 1 2877Total 0 2 2 Gran d Total 38 7 455 842
Exhibit B JRC 830 configured for debit cellular with Omni Telecommunications software Exhibit C 1. Revenue Sharing. STC and Thorn agree to share revenue from Debit Code sales to End Users on the following basis: For the sale of Debit Codes at all stores owned and operated by Thorn in the Territory, End Users shall be initially charged a retail rate ("Retail Rate") of $0.75 per airtime unit (which includes applicable Taxes). STC shall receive $0.48 for each airtime unit redeemed plus applicable Taxes (at the per unit rate set forth in the last column in Exhibit D) for the applicable store location. Thorn shall retain as its commission, for marketing and billing services, the Retail Rate less (i) STC's share of the revenues ($0.48 per airtime unit) and (ii) Taxes for each airtime unit redeemed by STC. Example: If an End User purchases a Debit Code in Philadelphia, PA for 120 airtime units at a Retail Rate of $0.75 per unit, then Thorn will collect $90 from the End User (which will include applicable Taxes at the per unit rate set forth in the last column of Exhibit D). Thorn will remit to STC $57.60 (120 units x $0.48 per unit) for STC's share of the revenues for such sale, plus Taxes in the amount of $11.74 (120 units x $0.0978 per unit). Thorn shall retain as its commission $20.66 [$90 - ($57.60 + $11.74)] for such sale. 2. Additional Commission: STC and Thorn further agree that the revenues that Thorn is required to remit to STC for STC's share of Debit Codes sales pursuant to Paragraph 1 of this Exhibit C shall decline or increase as the monthly volume of units sold increases or decreases for a given month, in accordance with the following schedule: Airtime Units Sold Revenue due STC (for a given month) (per airtime unit) 0 - 208,333 $0.48 208,334 - 520,833 0.46 520,834 - 1,041,666 0.45 1,041,667 and greater 0.43 Example. In a particular month, STC redeems Debit Codes for a total of 500,000 airtime units. The airtime unit revenues Thorn is required to remit to STC is $230,000( 500,000 units x $0.46)for the sale of such Debit Codes, plus all applicable Taxes. If in the following month STC redeems Debit Codes for a total of 95,000 airtime units then Thorn would remit $45,600 (95,000 units x $0.48) for the sale of such Debit Codes, plus all applicable Taxes. Exhibit D
TaxIDCGS A City TelcTelcTelcTelcoTotalStatLocaMCDTTotaGTotal Tax 1249Anniston AL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 "3310Bibb,Selma,AL" 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 4041Birmingham AL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 "6313Butler,TroyAL" 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 7940Chambers coAL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 "8311Cleburne,TaAL" 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 "9906Coosa,TallaAL" 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 11307Decatur/FraAL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 13246Dothan AL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 14226Florence AL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 15272Gadsden AL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 17120Huntsville AL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 "19308Jackson,Ft.AL" 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 20083Mobile AL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 21139Montgomery AL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 22222Tuscaloosa AL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 24314Tuskegee AL 3.0%6.700.000.00%9.7000.000.000.000.009 0.0663 25329CleburnePraAR 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 26182FayettevillAR 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 27328ForrestCityAR 3.0%0.000.000.00%3.0007.500.000.007.501 0.0713 28165Fort Smith AR 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 "29333Garland,HotAR" 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 30327Jonesboro AR 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 31092Little RockAR 3.0%0.000.000.00%3.0007.000.000.007.001 0.0682 32324MadisonEureAR 3.0%0.000.000.00%3.0007.500.000.007.501 0.0713 33330MorriltonRuAR 3.0%0.000.000.00%3.0007.000.000.007.001 0.0682 34331Ozark AR 3.0%0.000.000.00%3.0007.000.000.007.001 0.0682 "731323Benson,SierAZ" 3.0%2.350.000.00%5.3507.000.000.007.001 0.0824 "35319Coconio,FlaAZ" 3.0%2.350.000.00%5.3505.500.000.005.501 0.0734 "36322Gila,CasaGrAZ" 3.0%2.350.000.00%5.3508.000.000.008.001 0.0883 37320Navajo/WinsAZ 3.0%2.350.000.00%5.3505.000.000.005.001 0.0703 38026Phoenix AZ 3.0%2.350.000.00%5.3505.752.700.008.451 0.0909 39077Tucson AZ 3.0%2.350.000.00%5.3505.752.000.007.751 0.0869 40321Yuma AZ 3.0%2.350.000.00%5.3505.000.000.005.001 0.0703 41097BakersfieldCA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 43215Chico CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 "44336DelNorte,EuCA" 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 45074Fresno CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 46345GrassValleyCA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 "47347Kings,LemooCA" 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 48002Los AngelesCA 3.0%0.7210.00.00%13.720.000.000.000.001 0.0905 49344Mendocino CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 "51339Merced,MadeCA" 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 52142Modesto CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 "53337Modoc,SusanCA" 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 "55341Mono,BishopCA" 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 57144Orange CounCA 3.0%0.721.500.00%5.2200.000.000.000.005 0.0372 58073Oxnard/VentCA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 59254Redding CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 60035Sacramento CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 61126Salinas-MonCA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 62018San Diego CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 63007San FrancisCA 3.0%0.725.500.00%9.2200.000.000.000.009 0.0633 64027San Jose CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 65340SanBenitoSaCA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 66124Santa BarbaCA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 67175Santa Cruz CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 68123Santa Rosa-CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 69107Stockton CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 70343Tehama CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 71111Vallejo/NapCA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 72150Visalia CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 73274Yuba City CA 3.0%0.720.000.00%3.7200.000.000.000.003 0.0269 74354Alamosa CO 3.0%0.000.000.00%3.0003.004.300.007.301 0.07 75117Colorado SpCO 3.0%0.000.000.00%3.0003.004.300.007.301 0.07 76019Denver CO 3.0%0.000.000.00%3.0003.004.300.007.301 0.07 77210Fort CollinCO 3.0%0.000.000.00%3.0003.004.300.007.301 0.07 78243Greeley CO 3.0%0.000.000.00%3.0003.004.300.007.301 0.07 "79355LaMar,LaJunCO" 3.0%0.000.000.00%3.0003.004.300.007.301 0.07 80352Limon CO 3.0%0.000.000.00%3.0003.004.300.007.301 0.07 81241Pueblo CO 3.0%0.000.000.00%3.0003.004.300.007.301 0.07 82356Trinidad CO 3.0%0.000.000.00%3.0003.004.300.007.301 0.07 83350VailAspenDiCO 3.0%0.000.000.00%3.0003.004.300.007.301 0.07 84042Bridgeport CT 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 85032Hartford CT 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 86357Litchfield CT 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 87049New Haven CT 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 88154New London-CT 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 89358Windham CT 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 90008Washington DC 3.0%0.000.000.00%3.0005.750.000.005.758 0.0603 91069Wilmington DE 3.0%0.000.000.00%3.0004.250.000.004.257 0.0507 92211Bradenton FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 "93931Citrus,HernFL" 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 94360Collier couFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 "95365Dixie,GilchFL" 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 97364Flagler couFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 98164Fort Myers FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 100208Fort PierceFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 101265Fort WaltonFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 102192GainesvilleFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 104932Glades counFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 "106362Hardee,DeSoFL" 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 "107901Hendry,ClewFL" 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 "108367Jefferson,MFL" 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 110370Keys FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 111952Lafayette cFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 113363Lake countyFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 114366LakeCityLivFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 115114Lakeland FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 "116369Marianna,ChFL" 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 118012Miami/Ft. LFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 119937Monroe FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 120245Ocala FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 "121060Orlando,AltFL" 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 122283Panama CityFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 123127Pensacola FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 124368Port Saint FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 126951Putnam counFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 128167Sarasota FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 129949Sumter counFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 130168TallahasseeFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 132022Tampa FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 133361VeroBeach FL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 134976Walton CounFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 136072West Palm BFL 3.0%2.500.000.00%5.5007.000.000.007.001 0.0833 137261Albany GA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 138380Ashburn GA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 139234Athens GA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 141017Atlanta GA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 143108Augusta/AikGA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "144382Brunswick,SGA" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 145373ChattoogaRoGA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 146153Columbus GA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 147379CrispClayTeGA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "148372Dawson,GainGA" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "149383Early,BainbGA" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "150374Jasper,EatoGA" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 152138Macon-WarneGA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 153933Preston GA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 154155Savannah GA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "155376Spalding,GrGA" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 156942TaylorTalboGA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 157381Toombs/WaycGA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "159378Warren,StatGA" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 160371Whitfield/DGA 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "161979Wilkes,LincGA" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "162384Worth,Tift,GA" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 164050Honolulu HI 3.0%5.880.000.00%8.8854.500.000.004.501 0.0885 165387Kailua KonaHI 3.0%5.880.000.00%8.8854.500.000.004.501 0.0885 167386Kalawao/MauHI 3.0%5.880.000.00%8.8854.500.000.004.501 0.0885 168385Kauai HI 3.0%5.880.000.00%8.8854.500.000.004.501 0.0885 "169421Ames,Boone,IA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "171418Atlantic,CaIA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 173195Cedar RapidIA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 175424CharlesCityIA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 177964ClintonJackIA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 178098Davenport IA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 179102Des Moines IA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 181286Dubuque IA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "183417Grinnell,NeIA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "184422Hardin,MarsIA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "185420Ida,Sac,CalIA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 186423IndependnceIA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 187296Iowa City IA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 189416Jones countIA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "191425Kossuth,MasIA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 192427Lyon/LeMarsIA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "193412Mills,Red" OIA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 194419Monona/OnawIA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "195414Monroe,OttuIA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 197415Muscatine/BIA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 198253Sioux City IA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "199413Union,OsceoIA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 201201Waterloo IA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 203190Boise City ID 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 204393Clark/PocatID 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 205388Coeurd'AlenID 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "206391Elmore,NampID" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 207390Lemhi ID 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "209389Payette,EmmID" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "211392SunValley,CID" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 213935TwinFallsBuID 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "214397Adams,QuincIL" 3.0%5.000.000.00%8.0000.000.000.000.008 0.0556 215303Aurora-ElgiIL 3.0%5.000.000.00%8.0000.000.000.000.008 0.0556 "217395Bureau,LaSaIL" 3.0%5.000.000.00%8.0000.000.000.000.008 0.0556 218003Chicago IL 3.0%5.005.000.00%13.000.000.000.000.001 0.0863 220394FreeportDekIL 3.0%5.000.000.00%8.0000.000.000.000.008 0.0556 221304Joliet IL 3.0%5.000.000.00%8.0000.000.000.000.008 0.0556 223273Kankakee IL 3.0%5.000.000.00%8.0000.000.000.000.008 0.0556 225943Logan countIL 3.0%5.000.000.00%8.0000.000.000.000.008 0.0556 "226396Macomb,GaleIL" 3.0%5.000.000.00%8.0000.000.000.000.008 0.0556 228103Peoria IL 3.0%5.000.000.00%8.0000.000.000.000.008 0.0556 230217Anderson IN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 231282BloomingtonIN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 232223Elkhart-GosIN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 233119Evansville IN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 234054Gary IN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 236028IndianapoliIN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 238271Kokomo IN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 "239404Kosciusko,WIN" 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 240247Lafayette-WIN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 241959LaPorte/MicIN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 "242406Miami,LoganIN" 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 243236Muncie IN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 244409OwenJasperVIN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 "245408Randolph,RiIN" 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 247403Rensselaer IN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 248129South Bend IN 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 "249407Warren,CrawIN" 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 "737432Brown,LeaveKS" 3.0%0.000.000.00%3.0005.900.000.005.908 0.0613 "250428Cheyenne,GoKS" 3.0%0.000.000.00%3.0006.900.000.006.909 0.0676 "251440Edwards,PraKS" 3.0%0.000.000.00%3.0005.900.000.005.908 0.0613 252442Elk KS 3.0%0.000.000.00%3.0005.900.000.005.908 0.0613 "254437Franklin,IoKS" 3.0%0.000.000.00%3.0006.400.000.006.409 0.0644 "256438Hamilton,GaKS" 3.0%0.000.000.00%3.0005.400.000.005.408 0.0581 "257439Hodgeman,DoKS" 3.0%0.000.000.00%3.0006.400.000.006.409 0.0644 "258430Jewell,ConcKS" 3.0%0.000.000.00%3.0005.900.000.005.908 0.0613 260301Lawrence KS 3.0%0.000.000.00%3.0006.900.000.006.909 0.0676 261431MarshallJunKS 3.0%0.000.000.00%3.0007.150.000.007.151 0.0691 "263436Morris,EmpoKS" 3.0%0.000.000.00%3.0005.900.000.005.908 0.0613 "265429Norton,StocKS" 3.0%0.000.000.00%3.0005.400.000.005.408 0.0581 "266441Reno,HutchiKS" 3.0%0.000.000.00%3.0005.900.000.005.908 0.0613 "268435Salina,EalsKS" 3.0%0.000.000.00%3.0005.900.000.005.908 0.0613 270179Topeka KS 3.0%0.000.000.00%3.0006.150.000.006.159 0.0629 "271434Trego,Hays" KS 3.0%2.350.000.00%5.3505.900.000.005.901 0.0758 "272433Wallace,OakKS" 3.0%0.000.000.00%3.0005.900.000.005.908 0.0613 273089Wichita KS 3.0%0.000.000.00%3.0006.900.000.006.909 0.0676 "274453Clay,MiddleKY" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "275451Elliott,PikKY" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 276449Frankfort KY 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "277443Fulton,PaduKY" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 278116Lexington-FKY 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 279037Louisville KY 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "281445Meade,BowliKY" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 282293Owensboro KY 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "283452Powell,HazaKY" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "284444Union,MadisKY" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 285956WilliamstowKY 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 287080Baton RougeLA 3.0%0.000.000.00%3.0003.000.000.003.006 0.0425 289461Destrehan/LLA 3.0%0.000.000.00%3.0003.000.000.003.006 0.0425 290458EvangelineALA 3.0%0.000.000.00%3.0003.000.000.003.006 0.0425 291184Houma-ThiboLA 3.0%0.000.000.00%3.0003.000.000.003.006 0.0425 292459IbervilleMoLA 3.0%0.000.000.00%3.0003.000.000.003.006 0.0425 293460Kentwood/HaLA 3.0%0.000.000.00%3.0003.000.000.003.006 0.0425 294174Lafayette LA 3.0%0.000.000.00%3.0003.000.000.003.006 0.0425 295029New OrleansLA 3.0%0.000.000.00%3.0003.000.000.003.006 0.0425 296100Shreveport LA 3.0%0.000.000.00%3.0003.000.000.003.006 0.0425 297471Barnstable/MA 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 298006Boston MA 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 "299470Franklin,GrMA" 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 300076New BedfordMA 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 301213Pittsfield MA 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 302063SpringfieldMA 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 303055Worcester MA 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 304014Baltimore MD 3.0%2.000.000.00%5.0005.000.000.005.001 0.0682 305269Cumberland MD 3.0%2.000.000.00%5.0005.000.000.005.001 0.0682 "306467Garrett,McHMD" 3.0%2.000.000.00%5.0005.000.000.005.001 0.0682 307257Hagerstown MD 3.0%2.000.000.00%5.0005.000.000.005.001 0.0682 308224Bangor ME 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "309465Kennebec,AuME" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 310279Lewiston-AuME 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "311463Oxford,RumfME" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 312464Somerset ME 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "313466Washington,ME" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 314005Detroit MI 3.0%0.005.000.00%8.0006.000.000.006.001 0.0921 315068Flint MI 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 316141Duluth/SupeMN 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 "317485Lake,TwoHarMN" 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 318015MinneapolisMN 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 733288Rochester MN 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 319482Thief RiverMN 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 "734504Atchison,MaMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "320517Aurora,MoneMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "321512Bates,HenryMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "322511Callaway,JoMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 323507Cameron MO 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "324915Collins,OscMO" 3.0%0.000.000.00%3.0006.100.000.006.109 0.0626 326278Columbia MO 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "327505Harrison,BeMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 328514Jeff.City MO 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 329239Joplin MO 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 330024Kansas CityMO 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "331519Laclede,LebMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "333508Linn,MoberlMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "334515Maries,RollMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "335509Marion,HannMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "336513OsageBeach,MO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "337521Perry,CapeGMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "338506Schuyler,KiMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "340520Shannon,FreMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 341163SpringfieldMO 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 342275St. Joseph MO 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 343011St. Louis MO 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "344522Stoddard,SiMO" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 345518StoneW.PlaiMO 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 347516WashingtonFMO 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "349530Beaverhead,MT" 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 350268Billings MT 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 351528Butte MT 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 352531CarbonHardiMT 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 "353526Daniels,GleMT" 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 354297Great FallsMT 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 "355523Kalispell,LMT" 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 "356529Lewistown,BMT" 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 "357527Missoula,HeMT" 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 "358525Phillips,GlMT" 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 "359532Prairie,MilMT" 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 "360524Toole,HavreMT" 3.0%1.800.000.00%4.8000.000.000.000.004 0.0344 "361567Ashe,Mount" NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 362183Asheville NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 "363972Bladen,RobeNC" 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 365280Burlington NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 "367573Camden,ElizNC" 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 369061Charlotte NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 370149FayettevillNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 "372577Greene,New" NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 374047Greensboro/NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 376568HendersonviNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 377166Hickory NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 378258JacksonvillNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 380569Laurinburg NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 "381973Lee,ChathamNC" 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 383566LenoirCaldwNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 384904LincolnClevNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 385579MocksvilleDNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 "386570Moore,SouthNC" 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 388572NorthamptonNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 390578Pitt/GreenvNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 392071Raleigh-DurNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 394571Reidsville NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 396948Rockingham NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 397975RoxboroHendNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 "399576Sampson,CliNC" 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 401574Smithfield/NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 "403926Stanly,CabaNC" 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 404971StatesvilleNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 405575WhitevilleCNC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 407218Wilmington NC 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 "409908Yancey,MitcNC" 3.0%3.220.000.00%6.2206.500.000.006.501 0.0846 410298Bismarck/MaND 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 411581Devils LakeND 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 412583Dickinson ND 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "413580Divide,MinoND" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 414221Fargo-MoorhND 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "416582Grafton,MayND" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 418276Grand ForksND 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 420584Jamestown ND 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 421537BooneColumCNE 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "422542Cass,BeatriNE" 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 "423540Chase,McCooNE" 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 "424534Cherry,ValeNE" 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 "425536Grant,St." PNE 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 426539HallSewardYNE 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "427541Hasting,AdaNE" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "428535Knox,NorfolNE" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 429172Lincoln NE 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 430065Omaha NE 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 431538PlatteKeyKeNE 3.0%0.000.000.00%3.0005.000.000.005.008 0.0556 "432548Coos," LebanNH 3.0%5.500.000.00%8.5000.000.000.000.008 0.0588 433133Manchester-NH 3.0%5.500.000.00%8.5000.000.000.000.008 0.0588 434134Atlantic CiNJ 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 435070Long BranchNJ 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 436062New BrunswiNJ 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 437086AlbuquerqueNM 3.0%0.000.000.33%3.3305.560.000.005.568 0.0612 "438554Colfax,SpriNM" 3.0%0.000.000.33%3.3306.190.000.006.189 0.0652 439934Curry CountNM 3.0%0.000.000.33%3.3305.380.000.005.378 0.0601 "440557Grant,DeminNM" 3.0%0.000.000.33%3.3306.440.000.006.439 0.0667 441558HobbsRoswelNM 3.0%0.000.000.33%3.3306.000.000.006.009 0.064 "442917Lea,Chaves,NM" 3.0%0.000.000.33%3.3305.940.000.005.939 0.0636 443553San "Juan,FaNM" 3.0%0.000.000.33%3.3305.940.000.005.939 0.0636 444556Sante "Fe,LoNM" 3.0%0.000.000.33%3.3306.250.000.006.259 0.0656 446543Humboldt/WiNV 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "447544Lander,ElkoNV" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 448093Las Vegas NV 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "449546Mineral,HawNV" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 450171Reno NV 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "451545Storey,GardNV" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "452547WhitePine,ENV" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 453044Albany NY 3.0%3.502.500.00%9.0008.000.000.008.001 0.109 454122Binghamton NY 3.0%3.502.500.00%9.0008.000.000.008.001 0.109 455025Buffalo NY 3.0%3.502.500.00%9.0008.000.000.008.001 0.109 456561ChautauquaFNY 3.0%3.502.500.00%9.0007.000.000.007.001 0.1034 457564Columbia NY 3.0%3.502.500.00%9.0008.000.000.008.001 0.109 458151Dutchess coNY 3.0%3.502.500.00%9.0007.250.000.007.251 0.1048 459284Elmira NY 3.0%3.502.500.00%9.0007.000.000.007.001 0.1034 460560FranklinPlaNY 3.0%3.502.500.00%9.0007.000.000.007.001 0.1034 461977Fulton counNY 3.0%3.502.500.00%9.0007.000.000.007.001 0.1034 462266Glens FallsNY 3.0%3.502.500.00%9.0007.000.000.007.001 0.1034 463562Ithaca NY 3.0%3.502.500.00%9.0008.000.000.008.001 0.109 "464559Jefferson,WNY" 3.0%3.502.500.00%9.0007.000.000.007.001 0.1034 465001New York NY 3.0%3.502.500.00%9.0008.250.000.008.251 0.1103 466900Orange CounNY 3.0%3.502.500.00%9.0007.250.000.007.251 0.1048 "467563Ostego,DelaNY" 3.0%3.502.500.00%9.0007.000.000.007.001 0.1034 468034Rochester NY 3.0%3.502.500.00%9.0008.000.000.008.001 0.109 469053Syracuse NY 3.0%3.502.500.00%9.0007.000.000.007.001 0.1034 470115Utica-Rome NY 3.0%3.502.500.00%9.0008.000.000.008.001 0.109 471052Akron OH 3.0%0.000.000.00%3.0005.750.000.005.758 0.0603 472587Ashtabula OH 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 473594Athens OH 3.0%0.000.000.00%3.0006.250.000.006.259 0.0635 474087Canton OH 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 475023Cincinnati OH 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 476016Cleveland OH 3.0%0.000.000.00%3.0007.000.000.007.001 0.0682 477595Columbiana OH 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 478031Columbus OH 3.0%0.000.000.00%3.0005.750.000.005.758 0.0603 479040Dayton OH 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 480145Hamilton OH 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 481589HancockFindOH 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 482158Lima OH 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 483958Logan OH 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 484136Lorain-ElyrOH 3.0%0.000.000.00%3.0005.750.000.005.758 0.0603 485231Mansfield OH 3.0%0.000.000.00%3.0005.750.000.005.758 0.0603 "486588Mercer,SidnOH" 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 487590NewarkWoostOH 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "488591Noble,MonroOH" 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 489593RossJacksonOH 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 490586Sandusky OH 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 491180SpringfieldOH 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 492199SteuebenvilOH 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 493048Toledo OH 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 494592WashingtonCOH 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "495585Williams,DeOH" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 496066Youngstown-OH 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 497957Zanesville OH 3.0%0.000.000.00%3.0006.500.000.006.509 0.0651 "498604Garvin,ArdmOK" 3.0%0.000.000.00%3.0004.502.000.006.509 0.0651 "500598Grant,StillOK" 3.0%0.000.000.00%3.0004.503.000.007.501 0.0713 "501907Harmon,GreeOK" 3.0%0.000.000.00%3.0004.501.000.005.508 0.0588 502936HugoAntlersOK 3.0%0.000.000.00%3.0004.504.000.008.501 0.0774 "504603Jackson," DuOK 3.0%0.000.000.00%3.0004.502.500.007.001 0.0682 505260Lawton OK 3.0%0.000.000.00%3.0004.503.250.007.751 0.0728 506605McCurtain OK 3.0%0.000.000.00%3.0004.502.000.006.509 0.0651 "507599Nowata,BartOK" 3.0%0.000.000.00%3.0004.504.000.008.501 0.0774 508045Oklahoma CiOK 3.0%0.000.000.00%3.0004.503.870.008.371 0.0766 "509601Seminole,HeOK" 3.0%0.000.000.00%3.0004.503.500.008.001 0.0743 510057Tulsa OK 3.0%0.000.000.00%3.0004.503.000.007.501 0.0713 "511609Albany,CorvOR" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "512606Clatsop,AstOR" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "513611Crook,Bend,OR" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 514135Eugene-SpriOR 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "515610GrantsPass,OR" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 516607Hood "River,OR" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 517229Medford OR 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 518030Portland OR 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 519148Salem OR 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "520608Umatilla,PeOR" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 522225Altoona PA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 523621Bedford couPA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 "524615Bradford,SaPA" 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 525909ChambersburPA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 526130Erie PA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 527084Harrisburg PA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 528143Johnstown PA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 529925Juniata CouPA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 530105Lancaster PA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 531924Lawrence coPA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 532623Lebanon PA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 "533619Lewisburg,SPA" 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 534004PhiladelphiPA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 535013Pittsburgh PA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 "536614Potter,ClinPA" 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 "537056Scranton,WiPA" 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 538238Sharon PA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 539259State CollePA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 540612TitusvilleMPA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 "541616Wayne,HonesPA" 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 543251WilliamsporPA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 544099York PA 3.0%5.000.000.00%8.000N/A 0.000.000.008 0.0556 545624Newport RI 3.0%0.000.000.00%3.0007.000.000.007.001 0.0682 546038Providence RI 3.0%0.000.000.00%3.0007.000.000.007.001 0.0682 "547626Abbeville,GSC" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 548227Anderson SC 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "549631Calhoun,OraSC" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 550921Camden SC 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 552090Charleston SC 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 553627CherokeeCheSC 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 554630ClarendonSuSC 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 555095Columbia SC 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "556628Darlington,SC" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 558264Florence SC 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 559067GreenvilleSSC 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "560632HiltonHead,SC" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "561633Lancaster,YSC" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 562629Myrtle BeacSC 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "563625Oconee,WalhSC" 3.0%0.000.000.00%3.0006.000.000.006.009 0.0619 "564641Brookings,HSD" 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 "565635Corson,MobrSD" 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 "566638Custer,Hot" SD 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 "567639Haakon,Ft." SD 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 "568634Harding,SpeSD" 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 "569637Marshall,WaSD" 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 570636McPherson/ASD 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 571289Rapid City SD 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 572267Sioux FallsSD 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 "573640Sully,ChambSD" 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 574642Vermillion SD 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 575643BentonCarroTN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 576649BledsoeRheaTN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "577644Cannon,MancTN" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 578088ChattanoogaTN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 579209ClarksvilleTN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "580647Fayette," JaTN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "581648Giles,FayetTN" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "583646Hamblen,GreTN" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 584910JeffersonCoTN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "585650Johnson,MouTN" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 586079Knoxville TN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "588903Lake,DyersbTN" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "589645Macon,CookeTN" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 591651Maury/ColumTN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 592911McMinnPolkMTN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 593036Memphis TN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 594046Nashville TN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 595085Tri-Cities/TN 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 597220Abilene TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "598663Alpine,Van" TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "599913Anderson,HoTX" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "600670Atascosa,KiTX" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 601075Austin TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 602101Beaumont-PoTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 603666BoerneFredeTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "604655Briscoe,ChiTX" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 605672Chambers CoTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "606912Concho,MenaTX" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 608112Corpus ChriTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 609009Dallas TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 610920DeltaHopkinTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "611669Dilley,HondTX" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "612659Gaines,Big" TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 613170Galveston TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "614656Hardeman,VeTX" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 615928Hillsboro TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 616010Houston TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 618160Killeen-TemTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 619281Laredo TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 620914LimestoneFaTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 621206Longview-MaTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "622665Loving,MonaTX" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 623161Lubbock TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 624295Midland TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 735668Newton/HuntTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 625255Odessa TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "626654Parmer,LittTX" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "627664Pecos,Ft.StTX" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 "628918Rusk,PanolaTX" 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 629294San Angelo TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 630292Sherman-DenTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 631237Tyler TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 632919UpshurMarioTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 633300Victoria TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 634194Waco TX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 635233Wichita FalTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 636671WilsonBVillTX 3.0%0.000.000.00%3.0008.250.000.008.251 0.0758 637673BrighamCityUT 3.0%0.000.000.00%3.0005.880.000.005.878 0.0611 "638674DeerValley,UT" 3.0%0.000.000.00%3.0005.880.000.005.878 0.0611 639159Provo-Orem UT 3.0%0.000.000.00%3.0005.880.000.005.878 0.0611 640039Salt Lake CUT 3.0%0.000.000.00%3.0005.880.000.005.878 0.0611 "641688Amelia,BrodVA" 3.0%0.000.000.00%3.0004.500.000.004.507 0.0523 "642685Bath,CovingVA" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "643947Bedford,FraVA" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "644687Buckingham,VA" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 646930Caroline coVA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 647256CharlottesvVA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "649922Culpepper,MVA" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 650262Danville VA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "651682Grayson,SmyVA" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 653689GreensvilleVA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 655923Louisa counVA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 656203Lynchburg VA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 658684MartinsvillVA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 660686Nelson counVA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 661104Newport NewVA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 663043Norfolk-VA VA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 665235Petersburg-VA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 667929Prince EdwaVA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 669059Richmond VA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 670157Roanoke VA 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "671974Tazewell,BlVA" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "672681Wise,NortonVA" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 738927Barre VT 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 673680BenningtonWVT 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 674248Burlington VT 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "675679Franklin,MoVT" 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 676905RutlandAddiVT 3.0%0.000.000.00%3.0000.000.000.000.003 0.0218 "677693Anacortes,BWA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 678270Bellingham WA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 679212Bremerton WA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "680695Ferry,CheweWA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 681697Kittitas WA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "682694Okanogan,WeWA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 683242Olympia WA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "684698Pacific,LonWA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 685214Richland-KeWA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 686020Seattle-EveWA 3.0%0.006.000.00%9.000N/A 0.000.000.009 0.0619 687696SheltonAberWA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 "689699Skamania,UnWA" 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 690109Spokane WA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 691082Tacoma WA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 692700Walla WallaWA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 693191Yakima WA 3.0%0.000.000.00%3.000N/A 0.000.000.003 0.0218 694125Appleton WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 "695717Door,ManitoWI" 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 696232Eau Claire WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 697944Fond du LacWI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 698186Green Bay WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 699216Janesville-WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 700244Kenosha WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 701290LaCrosse WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 702113Madison WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 703711Marinette WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 704021Milwaukee WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 "705712Pierce,MenoWI" 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 706716Portage-LakWI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 707189Racine WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 708277Sheboygan WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 709713TrempealeauWI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 "710715Vernon,PlatWI" 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 712263Wausau WI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 "713714Wood," SteveWI 3.0%0.000.000.00%3.0005.500.000.005.508 0.0588 714140Charleston WV 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 715704GrantBerk.HWV 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 716110Huntington-WV 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 "717706Lincoln,LogWV" 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 "718701Mason,RipleWV" 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 719703Morgantown WV 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 720200ParkersburgWV 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 "721707Raleigh,BecWV" 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 "722705Tucker,ElkiWV" 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 "736702Wetzel,WestWV" 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 723178Wheeling WV 3.0%4.000.000.00%7.0000.000.000.000.007 0.0491 724299Casper WY 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 "726721Cheyenne,LaWY" 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 "728722Converse,DoWY" 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491 730719Sheridan WY 3.0%0.000.000.00%3.0004.000.000.004.007 0.0491
Exhibit E 1. Monthly Access Charges Thorn shall pay to STC a monthly access charge of $25 for each MIN that is provided by STC for use with a Debit Phone in the Territory plus applicable Taxes at the rates set forth in the column labeled: "Grand Total Tax" in -Exhibit D, subject to the following. Charges for a partial month will be pro-rated on the basis of a thirty (30) day month The access charges paid by Thorn shall be reduced as described below based on utilization ("Utilization") by End Users during each month during the term of this Agreement. Utilization will be calculated in accordance with the following formula: Number of MINs in service for End Users in a particular month for which STC has redeemed at least one Debit Code during such month, divided by Total MINs, as hereinafter defined. Total MINs shall mean the number of MINs in service on the first day of the applicable month plus fifty percent (50%) of any MINs activated by STC during such month and less fifty percent (50%) of any MINs that are deactivated by STC during such month. The credit for access charges based on Utilization is as follows: Credit Utilization 0 Up to 49.9 % $1.00 per MIN 50% up to 59.9 % $3.00 per MIN 60% up to 69.9 % $5.00 per MIN 70% and greater 2. Extraordinary Charges The following Extraordinary Charges apply to each MIN provided by STC for use with a Debit Phone in the Territory: (a) Activation Fee: This is a one-time charge to initiate service for each MIN. STC will not charge an Activation Fee for each MIN. However, Thorn shall reimburse STC for any Activation Fees assessed by a Carrier for a particular MIN reserved by STC for use by End Users pursuant to this Agreement. (b) Suspension Fee: This is a charge to temporarily suspend service for a MIN. STC will charge a Suspension Fee in the amount of $20 whenever Thorn notifies STC to suspend service for a particular MIN. While service is suspended for a particular MIN, the monthly access charges identified in Paragraph 1 above will not apply. Notwithstanding the foregoing, Thorn shall reimburse STC for any monthly access charges assessed by a Carrier while a particular MIN is under suspension. (c) Deactivation Fee: This is a charge to terminate service for a MIN. STC will charge a Deactivation Fee in the amount of $15 for each MIN and Thorn will pay such fees to STC. In addition, Thorn will reimburse STC for any charges assessed by a Carrier in connection with the termination of a MIN. (d) Reconnect Fee: This is a charge to initiate service for a suspended MIN. STC will charge a Reconnect Fee in the amount of $30 per MIN and Thorn will pay such fees to STC (e) ESN/MIN Swap Fee: This is a charge to change the MIN assigned to the ESN associated with a particular Debit Phone. STC will charge an ESN/MIN Swap Fee in the amount of $15 per Debit Phone for each request and Thorn will pay such fees to STC. (f) Stolen Phone Report Fee: STC will charge this fee to process a stolen phone report with a Carrier. STC will charge a Stolen Phone Report Fee in the amount of $15 per Debit Phone for each request and Thorn will pay such fees to STC. Exhibit 21 Subsidiaries of Shared Technologies Cellular, Inc. 1. Cellular Hotline, Inc. 2. STC Europe, Ltd. Operations of this subsidiary were immaterial for fiscal 1997 and were discontinued in the first quarter of 1998. [TYPE] EX-27 [DESCRIPTION] ART. 5 FDS FOR YEAR END 10-K [ARTICLE] 5 [MULTIPLIER] 1000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1997 [PERIOD-START] JAN-01-1997 [PERIOD-END] DEC-31-1997 [CASH] 294 [SECURITIES] 0 [RECEIVABLES] 2628 [ALLOWANCES] 991 [INVENTORY] 131 [CURRENT-ASSETS] 2459 [PP&E] 3176 [DEPRECIATION] 2191 [TOTAL-ASSETS] 11536 [CURRENT-LIABILITIES] 9414 [BONDS] 0 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [COMMON] 72 [OTHER-SE] 0 [TOTAL-LIABILITY-AND-EQUITY] 11536 [SALES] 24198 [TOTAL-REVENUES] 24198 [CGS] 13531 [TOTAL-COSTS] 14120 [OTHER-EXPENSES] 0 [LOSS-PROVISION] 0 [INTEREST-EXPENSE] 232 [INCOME-PRETAX] (3685) [INCOME-TAX] 10 [INCOME-CONTINUING] (3695) [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] (3695) (0.63) [EPS-DILUTED] (0.63) -----END PRIVACY-ENHANCED MESSAGE-----