Exhibit 10.1
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April 8, 2003
GTS PREPAID, INC.
00 XXXX XXXX XXXX, XXXXX 000
XXXXXXX, XX 00000
Re: Consignment and Agency Agreement
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Dear Sir/Madam:
Reference is made to that certain Consignment and Agency Agreement
(the "Agreement"), dated December 11, 2002, between Cellular Technical Services
Company, Inc. ("CTS") and GTS Prepaid, Inc. ("GTS"). Unless otherwise defined in
this letter, all capitalized terms used in this letter shall have the meanings
ascribed to them in the Agreement.
Intended to be legally bound, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, CTS
and GTS hereby agree as follows:
1. Pursuant to the Agreement, CTS originally consigned to GTS a total
of $153,567.89 of Inventory. Of this amount, $94,435.35 of Inventory has been
sold by GTS and will be paid to CTS pursuant to the terms set forth in Section 3
of this letter. The balance of $59,132.54 of consigned Inventory is still on
hand as consigned Inventory and, pursuant to the terms of Section 6 of this
letter, will either be paid to CTS within 30 days after it has been sold or will
be returned to CTS within 5 days of CTS's written request therefor. GTS hereby
confirms and acknowledges that CTS is and shall remain the sole owner of all of
the Inventory and has retained and shall retain all right, title and interest in
and to the Inventory. Upon the sale of any Inventory to a customer in the
ordinary course of GTS's business, title to such Inventory so sold shall pass to
such customer upon full payment for such Inventory sold.
2. Pursuant to the Agreement, CTS originally assigned to GTS for
collection a total of $512,797.36 of Accounts Receivable. Of this amount,
$307,911.65 has been collected by GTS and $48,862.55 of which has been paid to
CTS. The net amount of $259,049.10 will be paid to CTS pursuant to the terms set
forth in Section 3 of this letter. CTS hereby acknowledges and agrees that, as
of the date of this letter, all uncollected Accounts Receivable ($204,885.79)
are owned by and in the possession of CTS. GTS hereby acknowledges that it has
no right, title or interest in any such Accounts Receivable.
3. You have requested and we have agreed to convert the unpaid
proceeds of the consignment into a loan. The loan is in the sum of $353,484.45
(such amount together with
GTS Prepaid, Inc.
April 8, 2003
Page 2
interest as described below hereinafter, the "Financed Amount") (which
represents the sum of $94,435.35 plus $259,049.10), together with interest at
the rate of 15% per annum accruing from March 1, 2003, will be paid to CTS in 49
consecutive weekly installments beginning on the first Tuesday after the date of
this letter until such amount is paid in full. The first payment will include
any accrued but unpaid interest incurred since March 1, 2003. An amortization
schedule showing the amounts of said weekly installments is attached hereto as
Schedule "A".
4. A. As security for the timely and full payment and satisfaction
of the Financed Amount, as and when due, GTS hereby grants to CTS a
continuing security interest in and to all to GTS' right, title and
interest in and to any and all of its assets and properties, wherever
located, and any and all accounts, books and record, instruments,
documents, goods, chattel, paper, inventory, equipment, contract
rights, payment intangibles and other general intangibles, investment
property, commercial tort claims, deposit accounts, fixtures, letters
of credit, letter-of-credit rights, software, financial assets, money,
supporting obligations, litigation claims and rights and insurance
policies and rights of GTS arising out of or related directly or
indirectly to all such assets and properties, in each case whether now
existing or hereafter acquired or created, whether owned beneficially
or of record and whether owned individually, jointly or otherwise,
together with the products and proceeds thereof (including, without
limitation, all insurance proceeds), all supporting obligations,
payments and other distributions with respect thereto, and any and all
substitutions for or replacements of any of the foregoing
(collectively, the "COLLATERAL"). In connection herewith, GTS hereby
irrevocably authorizes CTS in its ---------- discretion: (i) to file
without the signature of GTS any and all financing statements,
modifications and continuations with respect to the Collateral; (ii)
to sign any such statement, modification or continuation on behalf of
GTS if CTS determines such signature necessary or desirable under
applicable law; and (iii) to file a carbon, photographic or other
reproduction of any financing statement or modification of any
financing statement or modification if CTS determines such filing
necessary or desirable under applicable law. GTS shall reimburse CTS
on demand for all costs and expense incurred in connection with the
preparation and filing of any such document. GTS hereby represents
that the foregoing security interest and lien created in favor of it
hereby is subject only to the security interest and lien in favor of
Wilmington Trust Company. Upon the full payment and satisfaction in
full of the Financed Amount upon the request, and at the expense, of
GTS, CTS will authorize the filing of any and all termination
statements reasonably necessary to effectuate the release of its
security interest and lien created hereby, provided that GTS shall be
solely responsible for the filing of all such termination statements
in any applicable jurisdictions.
GTS Prepaid, Inc.
April 8, 2003
Page 3
B. Upon the failure of GTS to make any payments, or to perform any
of its obligations, when due hereunder, CTS may (i) demand immediate
payment of all obligations hereunder, (ii) take any action with
respect to the offer, sale or other disposition of one or more items
of Collateral permitted under applicable law, and (iii)exercise or
enforce any and all of the rights, powers, privileges, remedies and
interests afforded to a secured party and/or seller of goods under any
and all provisions of applicable law (including the UCC). If the net
proceeds (after expenses) received with respect to and in liquidation
of the Collateral shall be insufficient to fully pay and satisfy all
of GTS's obligations hereunder, GTS acknowledges and agrees that it
shall remain liable for any deficiency. GTS shall reimburse CTS on
demand for any and all costs and expenses incurred in connection with
the enforcement or adjudication of this Agreement or the exercise
and/or enforcement of any of the rights, power, privileges, remedies
and interest of CTS under this Agreement, including (without
limitation) the disbursement, expenses and fees of attorneys and
others.
5. GTS may prepay, in whole or in part, the principal balance of the
Financed Amount at any time or from time to time without premium or penalty but
with interest on the amount prepaid to the date of prepayment.
6. During the eight-week period following the date hereof, GTS agrees
to use commercially reasonable efforts to sell for cash the remaining $59,132.54
of consigned Inventory on hand. The proceeds of any and all sales of such
consigned Inventory, whether or not in accordance with this Agreement, are and
shall be and remain the property of CTS and shall be held in trust for CTS until
delivery to CTS in accordance with the provisions of paragraphs 6 and 7 hereof.
Within 5 days after its receipt of any cash proceeds of the sale of such
Inventory, but in no event later than 30 days after the sale of such Inventory
regardless of when GTS receives the cash proceeds from such sale, GTS will pay
an amount equal to such cash proceeds to CTS. In the event of a credit for any
such Inventory, GTS will, within 10 days of receiving replacement products from
the vendor granting such credit, pay to CTS the dollar amount of such credit. If
at the end of such eight-week period, either the Inventory remains unsold or,
despite GTS's commercially reasonable efforts, a credit has not been granted and
used by GTS, GTS will return all remaining Inventory to CTS. GTS hereby confirms
and ratifies the security interest and lien granted by it in favor of CTS in and
to any and all rights of GTS in such Inventory pursuant to the Agreement. GTS
hereby represents and warrants that such security interest and lien is a
continuing, first priority, perfected security interest subject to no other
security interests, liens or other encumbrances.
7. All payments hereunder shall be made by GTS to CTS at the office of
CTS at 00 Xxxx Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxx Xxxxxx, XX 00000, or at such
other place as CTS may designate to GTS in writing.
GTS Prepaid, Inc.
April 8, 2003
Page 4
8. Except for the obligations provided herein each of the parties
hereto hereby fully releases the other party hereto from any and all liabilities
or obligations either party may have had to the other party prior to the date
hereof.
9. Except as otherwise provided herein each of the parties hereto will
bear its own respective fees and expenses (including, without limitation, all
legal fees and expenses) related to the execution, delivery and performance of
this letter.
10. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey without giving effect to its principles
of conflicts of law. The parties agree that any action hereunder shall be
brought in the federal or state courts located in New Jersey and waive any
defense of forum non conveniens. This Agreement may be executed in counterparts,
each of which shall be an original, but all of such counterparts shall
constitute one and the same instrument. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision. This Agreement
expresses the entire understanding of the parties with respect to the subject
matter hereof. All terms defined in the UCC, and not otherwise defined herein
shall have the meanings respectively assigned to them in the UCC. For purposes
hereof, "UCC" shall mean the Uniform Commercial Code, as in effect from time or
time in the State of New Jersey or any other applicable jurisdiction. No failure
to delay by CTS in exercising any right, power or remedy under this letter shall
operate as a waiver thereof; nor shall any single or partial exercise of any
other right, power or remedy hereunder. No amendment, modification, termination
or waiver of any provision hereunder or consent to any departure by GTS there
from or release of any security shall be effective unless the same shall be in
writing and signed by CTS, and then such waiver shall be effective only in the
specific instance and for the specific purpose for which given. This letter
shall be binding upon and inure to the benefit of GTS and CTS and their
respective successors and assigns, except that the parties may not assign their
rights hereunder without the prior written consent of the other party.
The parties waive any right to trial by jury in any action or proceeding based
on or pertaining to this letter or any other agreement between the parties with
respect to the subject matter hereof.
GTS Prepaid, Inc.
April 8, 2003
Page 5
If you are in agreement with the foregoing, please so indicate by
signing in the space provided below, whereupon this letter shall become a
legally binding agreement.
Very truly yours,
CELLULAR TECHNICAL SERVICES
COMPANY, INC.
By: /s/ Xxxxxxx Xxxx
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Name: Xxxxxxx Xxxx
Title: Chairman and Chief
Executive Officer
ACCEPTED AND AGREED TO:
GTS PREPAID, INC.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: President
