Exhibit 10.19 CELLULAR PREPAID PRODUCTS DISTRIBUTION AGREEMENT

 

 

 

             CONFIDENTIAL INFORMATION OF Q COMM INTERNATIONAL, INC.

 

[*Confidential treatment has been requested as to certain portions of this

document. Each such portion, which has been omitted herein and replaced with an

asterisk [***], has been filed separately with the Securities and Exchange

Commission.]

 

 

                                                                   Exhibit 10.19

 

                CELLULAR PREPAID PRODUCTS DISTRIBUTION AGREEMENT

 

 

         THIS CELLULAR PREPAID PRODUCTS DISTRIBUTION AGREEMENT (this

"Agreement"), effective as of March 1, 2005 (the "Effective Date"), sets forth

the mutual covenants and obligations of CRICKET COMMUNICATIONS, INC., a Delaware

corporation, with offices at 10307 Pacific Center Court, San Diego, CA 92121

("Cricket"), and Q COMM INTERNATIONAL INC., a Utah corporation, with offices at

510 East Technology Ave., Building C, Orem, Utah 84097, (hereinafter referred to

as "Distributor").

 

                                    RECITALS

 

         WHEREAS, Cricket is a provider of wireless telecommunications services

and wireless phones via Cricket's network of direct-owned stores ("Cricket

Locations") and authorized third party dealers or payment locations that

contract directly with Cricket ("Dealers") in the markets identified on Exhibit

A attached hereto (the "Area"). Cricket desires to sell Wireless Services

(defined below) on a prepaid basis by means of selling electronic Pins under the

registered trademark Cricket(R) and the trademark Jump by CricketTM, pursuant to

which Consumers may, by purchasing such Pins, have access to such fixed amounts

of Cricket's Wireless Services as are designated and encoded by Cricket to

correspond with such pins.

 

         WHEREAS, Distributor is in the business of, among other things,

providing order processing, pin distribution, delivery, management, marketing

and merchandising services, and selling a variety of prepaid products and

services to end-users through Distributor's electronic point-of-sale activation

terminal, trademarked as the q xpress 200(TM), or through other terminals or

devices Distributor may provide to dispense prepaid products and services (the

"POS Terminal"), which is the front end of Distributor's full-range electronic

activation, pin distribution, and reporting system for prepaid products.

 

         WHEREAS, Cricket desires to authorize Distributor to implement and

manage the distribution of POS Terminals to certain Cricket-designated stores

and to sell Pins (as defined below) via such POS Terminals in accordance with

the terms and conditions hereinafter set forth.

 

         NOW THEREFORE, in consideration of the mutual promises and obligations

contained in this Agreement, the parties agree as follows:

 

1.        DEFINITIONS.

         ------------

 

         1.1       "Area" shall mean the markets set forth on Exhibit A to this

Agreement as amended from time to time.

 

         1.2       "Cricket" shall have the meaning set forth in the first

paragraph of this Agreement.

 

         1.3       "Cricket Locations" shall have the meaning set forth in the

first Recital above, and specifically shall include only Cricket-owned retail

stores in the Area.

 

         1.4       "Consumer" means any end-user who purchases or otherwise

receives a Pin sold or distributed under this Agreement.

 

 

<PAGE>

 

 

             CONFIDENTIAL INFORMATION OF Q COMM INTERNATIONAL, INC.

 

[*Confidential treatment has been requested as to certain portions of this

document. Each such portion, which has been omitted herein and replaced with an

asterisk [***], has been filed separately with the Securities and Exchange

Commission.]

 

 

         1.5       "Contracted Dealer" means any Dealer or other third party that

has a contractual relationship with Distributor to possess a POS Terminal and

sell Pins.

 

          1.6       "Cricket Functionality" shall mean programs for the POS

Terminals that are specific to and that facilitate the sale of Cricket Pins or

Wireless Services.

 

         1.7       "Dealers" shall have the meaning set forth in the Recitals of

this Agreement.

 

         1.8       "Distributor" shall have the meaning set forth in the first

paragraph of this Agreement.

 

         1.9       "Distribution Fees" shall have the meaning as set forth in

Exhibit D hereto.

 

         1.10      "Due Date" shall have the meaning set forth in Section 5.1 of

this Agreement.

 

         1.11      "Effective Date" shall have the meaning set forth in the first

paragraph of this Agreement.

 

         1.12      "Indemnifying Party" shall have the meaning set forth in

Section 16.1 of this Agreement.

 

         1.13      "Information" shall have the meaning set forth in Section 10.1

of this Agreement.

 

         1.14      "Loss Event" shall have the meaning set forth in Section 7.4

of this Agreement.

 

         1.15      "Marks" shall mean any and all trademarks, service marks,

trade names, insignia, symbols, logos, decorative designs, and/or other

identifying insignia that either Cricket or the Distributor owns or is licensed

or sublicensed to use in connection with its services or products relating

thereto, and which each party, in its sole discretion, with respect to its

marks, determines from time to time that the other party is authorized to use.

 

         1.16      "Owning Party" shall have the meaning set forth in Section

11.2 of this Agreement.

 

         1.17      "Pins" shall refer to electronic prepaid pin numbers provided

by Cricket that correspond to and grant the end-user holder thereof access to

such fixed amounts of Cricket's Wireless Services as are designated and encoded

by Cricket to correspond with such pins.

 

         1.18      "POS Terminal" shall have the meaning set forth in the

Recitals of this Agreement.

 

         1.19      "3rd Party Products and Services" shall mean the products and

services offered from service providers other than Cricket.

 

         1.20      "Unit Denomination" shall refer to the dollar value

measurement specified by Cricket for the Wireless Services represented by a Pin,

equal to the "face value" of the Pin. Current Unit Denominations are $15, $25,

$35, and $50. Each Pin purchased by Consumers shall contain a specified Unit

Denomination as the suggested retail value, not including taxes, equal to the

face value of the Pin. The Unit Denomination of Pins under this Agreement may

vary from market to market and from time to time during the term of this

Agreement, as determined by Cricket, provided, however, that in no instance will

 

 

                                      -2-

<PAGE>

 

 

             CONFIDENTIAL INFORMATION OF Q COMM INTERNATIONAL, INC.

 

[*Confidential treatment has been requested as to certain portions of this

document. Each such portion, which has been omitted herein and replaced with an

asterisk [***], has been filed separately with the Securities and Exchange

Commission.]

 

 

this Agreement cover the distribution of Pins with a face value of less than $15

unless Cricket so decides in its sole discretion. Cricket shall determine and

disclose to Distributor the per minute rates associated with local and long

distance calling and roaming charges equating to the Unit Denomination, which

may vary from market to market and from time to time during the term of this

Agreement, as determined by Cricket.

 

         1.21      "Wireless Services" shall refer to all wireless services

offered by Cricket to its customers, including without limitation voice

telecommunications (local, long distance and international calling) and the sale

of ringtones and other data for use with wireless phones.

 

 

2.        TERM OF AGREEMENT

         -----------------

 

         This Agreement shall become effective on the Effective Date and shall

continue in full force and effect for two (2) years (the "Initial Term"), unless

otherwise terminated pursuant to the provisions of this Agreement. Thereafter,

this Agreement shall automatically renew for successive one (1) year periods (or

any other term to which the parties mutually agree in writing) unless one party

gives the other party written notice of its intention to terminate this

Agreement at least sixty (60) days prior to the expiration of the Initial Term

or any subsequent annual term.

 

 

3.        GENERAL PROVISONS APPLICABLE TO DISTRIBUTION ARRANGEMENT

         --------------------------------------------------------

 

         3.1       General Description of Distribution Arrangement. Cricket shall

provide Pins electronically in various quantities and denominations to

Distributor for distribution and sale through the POS Terminals. Distributor

shall provide POS Terminals with Cricket Functionality only to locations

approved in advance by Cricket and set forth specifically on Exhibit C hereto

("Approved Locations"). Cricket may unilaterally designate Approved Locations

and add them to Exhibit C, and Distributor shall have no right to refuse to

place a POS Terminal in Approved Locations, subject to Distributor's standard

credit checks; provided however, that if an Approved Location is not acceptable

to Distributor for any reason, then Distributor shall only be required to place

a POS Terminal at that Approved Location if Cricket agrees in writing to assume

any credit risk of such Approved Location. Distributor shall in all cases

contract directly with the owner/operators of all Approved Locations (other than

Cricket Locations), whereupon they shall become Contracted Dealers hereunder.

Such contract shall provide for the terms of leasing the POS Terminal, selling

the Pins to Consumers only, remittance of amounts collected from the sale of

Pins, and for the rights of Cricket as a third party beneficiary and to require

termination of the Cricket Functionality on the POS Terminal in Cricket's sole

discretion exercised only after giving prior notice to Distributor and at least

30 days to the applicable Contract Dealer to cure any problems that Cricket

believes are giving rise to its request to terminate. Upon any termination of

Cricket Functionality on a POS Terminal, Distributor shall take prompt action to

remove the green POS Terminal bearing Cricket's Mark(s) and replace such POS

Terminal with Distributor's red POS Terminal not bearing any Cricket Marks. To

the extent such contract is with an existing Dealer, such contract shall not in

any way prohibit Cricket from contracting directly with such Dealer to place

other methods of selling Wireless Services in their locations. To the extent

that Cricket introduces Distributor in writing to any Contracted Dealer with

whom Distributor had no prior relationship pertaining to prepaid products,

Distributor shall not require such Contracted Dealer to sell prepaid products or

services exclusively through Distributor. Distributor shall enable the POS

Terminals to print the Pins on thermally printable cards bearing the Cricket

trademark and such other terms, conditions or provisions as are reasonably and

technologically feasible and specified by Cricket from time-to-time. Distributor

 

 

                                      -3-

<PAGE>

 

 

             CONFIDENTIAL INFORMATION OF Q COMM INTERNATIONAL, INC.

 

[*Confidential treatment has been requested as to certain portions of this

document. Each such portion, which has been omitted herein and replaced with an

asterisk [***], has been filed separately with the Securities and Exchange

Commission.]

 

 

shall provide full management of Contracted Dealers, including without

limitation, contract management, credit approval and management, collection of

Pin purchase price, training on POS Terminal use, and services required for the

placement, activation, maintenance and deactivation of POS Terminals and Cricket

Functionality.

 

         3.2       Independent Contractor. Distributor is an independent

contractor and is not Cricket's agent, partner, employee or legal representative

for any purpose. Nothing herein shall be construed in such a manner so as to

constitute Distributor an agent, partner, employee or legal representative of

Cricket. Distributor shall not make any warranty or representation or incur any

obligation, liability or indebtedness whatsoever on Cricket's behalf or on

behalf of any affiliate of Cricket. It is agreed that the relationship of the

parties hereto is that of a vendor and a vendee. Distributor shall conduct its

business for its own interest and all persons employed in the conduct of

Distributor's business shall be Distributor's employees or agents. Distributor

shall be solely responsible for the withholding and payment of all federal,

state, and local taxes, social security, unemployment, sickness, disability, and

worker's compensation insurance and other payroll taxes with respect to its

business, employees and agents. Each of Distributor and Cricket respectively

will retain sole responsibility for directing their own respective day-to-day

business operations. Each party shall pay its own business expenses. Neither

party, nor any of their respective employees, shall be entitled to any employee

benefits from the other party.

 

         3.3       Distributor Appointment; Non-Exclusive Nature of Agreement.

Cricket hereby appoints Distributor as a non-exclusive distributor to distribute

Pins within the Area pursuant to this Agreement. Distributor's appointment shall

continue until the termination or expiration of this Agreement. During the term

of this Agreement and thereafter, Cricket reserves the right without obligation

or liability to Distributor to market Wireless Services, Pins and related

services and products, prepaid or otherwise, in the same geographical areas

served by Distributor, whether through Cricket own representatives or through

others including, but not limited to authorized agents, limited agents,

retailers, resellers and distributors. Therefore, it is expressly understood and

agreed by Distributor that this Agreement does not grant Distributor an

exclusive privilege to sell Cricket Wireless Services or the Pins, and Cricket

may, in its sole discretion, appoint other dealers or distributors of the

Wireless Services and Pins in the Area. Distributor acknowledges that Cricket

actively markets and sells Cricket's Wireless Services and Pins directly and

indirectly in the Area, in other geographic locations, via the Internet, or

otherwise in Cricket's sole discretion. Distributor shall have no power or

authority to appoint any other person or firm as a distributor or dealer of the

Wireless Services or Pins, except as specifically authorized by Cricket.

 

         3.4       No Franchise or Joint Venture. Distributor acknowledges and

agrees that Cricket has not required Distributor to pay any direct or indirect

franchise fee or other payment, or to commit to pay any such fee or other

payment as a condition of the execution of this Agreement, and that the laws and

regulations, whether federal, state or local, pertaining to a franchises do not

govern the interpretation, enforceability or termination of this Agreement in

any manner whatsoever. Distributor represents and warrants to Cricket that

Distributor does not and shall not deem or claim itself to be a franchisee of

Cricket under any applicable law or regulation. Nothing in this Agreement shall

be deemed to establish or otherwise create a relationship of

franchisor/franchisee between Cricket and Distributor, nor does this Agreement

create any joint venture or partnership between Cricket and Distributor.

 

         3.5       Ownership of POS Terminals. The parties to this Agreement

acknowledge and agree that all of the right, title and interest to POS Terminals

shall remain with Distributor, and Cricket specifically agrees that it has no

 

 

                                      -4-

<PAGE>

 

 

             CONFIDENTIAL INFORMATION OF Q COMM INTERNATIONAL, INC.

 

[*Confidential treatment has been requested as to certain portions of this

document. Each such portion, which has been omitted herein and replaced with an

asterisk [***], has been filed separately with the Securities and Exchange

Commission.]

 

 

interest in the POS Terminals (except in the intellectual property of Cricket

contained in or on the POS Terminals).

 

 

4.        SPECIFIC DUTIES AND OBLIGATIONS OF THE PARTIES

         ----------------------------------------------

 

         4.1       During the term of this Agreement, Cricket shall:

 

                  (a) supply Distributor with Pins electronically in quantities

                      and denominations or types as mutually agreed by the

                      parties, and shall coordinate with Distributor regarding

                      the activation of the Pins following sale to Consumers;

 

                  (b) provide Distributor with all required packaging (i.e.,

                      receipt or card holders), Cricket-specific point of

                      purchase materials, including, without limitation, copies

                      of applicable terms and conditions of service, which

                      Distributor acknowledges shall be subject to change in

                      form and substance from time to time at the discretion of

                       Cricket);

 

                  (c) provide to Consumers the Wireless Services corresponding

                      to Pins sold by Distributor and subject to this Agreement

                      and the terms and conditions of service established by

                       Cricket, which terms and conditions of service may vary

                      from market to market within the Area and from time to

                      time during the term of this Agreement;

 

                  (d) provide necessary support to Consumers to facilitate the

                      activation and reasonably required customer service

                      support and training;

 

                  (e) at the reasonable discretion of Cricket, provide regional

                       and/or market level sales support in accordance with any

                      mutually agreed upon prepaid launch program or market

                      maintenance program;

 

                  (f) pay Distributor the Distribution Fees as set forth in

                       Exhibit D hereto as Distributor's sole compensation for

                      all of the products and services provided by Distributor

                      hereunder. Such payment may be accomplished by permitting

                       Distributor to retain the appropriate percentage

                      Distribution Fee as set forth on Exhibit D and thereafter

                      to remit the balance to Cricket;

 

                  (g) permit Distributor to sell 3rd Party Products and Services

                      via POS Terminals with Cricket Functionality, but only in

                      non-Cricket Locations and non-Dealer locations, and

                      subject to Distributor's prompt payment to Cricket of the

                       fees described in Section 4.2(s) below and on Exhibit B.

 

                  (h) materially comply with all applicable federal, state and

                      local laws and regulations of the respective regulatory

                      bodies having jurisdiction over the Wireless Services,

                      Cricket and the sale of the Pins.

 

         4.2       During the term of this Agreement, Distributor shall:

 

                  (a) use its reasonable best efforts to promote, market and

                       sell the Pins in the Area via the POS Terminals pursuant

 

 

                                      -5-

<PAGE>

 

 

             CONFIDENTIAL INFORMATION OF Q COMM INTERNATIONAL, INC.

 

[*Confidential treatment has been requested as to certain portions of this

document. Each such portion, which has been omitted herein and replaced with an

asterisk [***], has been filed separately with the Securities and Exchange

Commission.]

 

 

                      to the terms and conditions of this Agreement and as

                      otherwise established by Cricket;

 

                  (b) submit all promotional, marketing, sales and informational

                      materials regarding the Pins or Cricket Wireless Services,

                      or bearing any Cricket trademarks, to Cricket for its

                      written approval prior to public release, except that

                      prior written approval shall not be required for any

                      preauthorized Cricket promotional materials approved by

                      Cricket for general use from time-to-time, subject to any

                      Cricket-designated expiration date thereof;

 

                  (c) deliver the POS Terminals and associated collateral and

                       promotional material as directed by Cricket to the Cricket

                      Locations and other authorized locations that constitute

                      Contracted Dealers as set forth on Exhibit C hereto;

 

                  (d) permit the POS Terminals in Cricket Locations to sell only

                      the Pins for Cricket's Wireless Services, unless Cricket

                      agrees otherwise in writing, and permit Dealer locations

                      to sell only the Pins for Cricket's Wireless Services

                      unless (i) Distributor was already selling other pre-paid

                      products or services through one or more POS Terminals at

                      the applicable Dealer location prior to the date of this

                      Agreement, or (ii) Cricket agrees otherwise in writing;

 

                  (e) customize Distributor's standard POS Terminal in

                      accordance with Cricket's previously approved

                      specifications for color, design and logos, which Cricket

                      acknowledges that Distributor has already accomplished;

 

                  (f) provide telephone training to employees at the Cricket

                      Locations and Contracted Dealers in the proper operation

                      of the POS Terminals;

 

                  (g) provide first-line customer support for all POS Terminal

                      issues and questions via a toll free line available to

                      Cricket and Contracted Dealers from 7am-6pm MST on Monday

                      through Friday and from 9am-3pm MST on Saturday. In

                      addition, Distributor will provide after-hours technical

                      support seven days a week during all hours other than

                      those set forth above;

 

                  (h) provide information to Consumers as supplied by Cricket on

                      how to use the Pins and on how to contact Cricket's

                      customer service for additional Pins and account balance;

 

                  (i) assume all of Distributor's costs associated with its

                      obligations hereunder, including costs of soliciting for

                      locations to place POS Terminals, and marketing and

                      distributing POS Terminals and cards in the Area pursuant

                      to this Agreement. Distributor shall not solicit orders,

                      market or distribute the POS Terminals with Cricket

                      Functionality outside of the Area. Cricket reserves the

                      right to prohibit the placement by Distributor of Cricket

                      Functionality on POS Terminals to any distribution channel

                       not in the Area, that may be inconsistent with Cricket'

                      goals or corporate ethics, or that is otherwise designated

                      by Cricket as ineligible to sell Pins in Cricket's sole

                      discretion;

 

                  (j) remit to Cricket daily via ACH transaction a sum equal to

                      the Unit Denomination of Pins supplied by Cricket to

 

 

                                      -6-

<PAGE>

 

 

             CONFIDENTIAL INFORMATION OF Q COMM INTERNATIONAL, INC.

 

[*Confidential treatment has been requested as to certain portions of this

document. Each such portion, which has been omitted herein and replaced with an

asterisk [***], has been filed separately with the Securities and Exchange

Commission.]

 

 

                      Distributor that are either activated on the Cricket

                      network or sold via the POS Terminals since the most

                      recent remittance required by Cricket, without regard to

                       how any such Pin is activated or whether the Contracted

                      Dealer remits sums collected therefore from Consumer to

                      Distributor, less Distribution Fees. Distributor

                      acknowledges and agrees that it shall be solely

                      responsible for noncollection of amounts remitted or

                      indicated by POS Terminals as remitted by Consumers

                      (whether such noncollection is caused by loss of cash,

                       NSF, chargeback, fraud, etc.), and Cricket shall be

                      indemnified from such losses by Distributor and shall have

                      no responsibility for the collection of any amounts due

                      from third parties to Distributor;

 

                  (k) use commercially reasonable efforts at all times to give

                      prompt, courteous and efficient service and deal with

                      third party purchases of Pins with the highest standards

                      of honesty, integrity and fair dealing, and do nothing

                      which would be likely to discredit, dishonor, reflect

                      adversely upon or in any manner injure the reputation and

                       goodwill of Cricket and/or of the Wireless Services;

 

                  (l) train its staff and account representatives in the sale of

                      the Wireless Services, pursuant to information provided to

                      Distributor by Cricket;

 

                  (m) use commercially reasonable efforts to cause each

                      Contracted Dealer that sells Pins to promote, market and

                      sell the Pins only to Consumers under the terms and

                       conditions established by Cricket and Distributor. If

                      Distributor learns that any Pin sales locations are (i)

                      not abiding by any of the provisions of this section or

                      the contract between it and Distributor, (ii) not at all

                      times giving prompt, courteous and efficient service to

                      the Consumers and dealing with Consumers with the highest

                      standards of honesty, integrity and fair dealing, and

                      doing nothing that would tend to discredit, dishonor,

                      reflect adversely upon or in any manner injure the

                      reputation and goodwill of Cricket and/or of the Wireless

                       Services, and/or (iii) not abiding by Sections 11 and 12

                      of this Agreement, relating to the use and return of

                      Cricket's Information and Marks, as if the sales location

                      itself was a party to this Agreement, Distributor shall

                      promptly give notice of such non-compliance to Cricket. At

                      Cricket's option, Distributor shall use commercially

                      reasonable efforts to remove any POS Terminal and

                      promotional materials associated therewith from such

                      locations;

 

                  (n) maintain detailed and accurate books and records of

                      account with respect to activities undertaken in respect

                      of this Agreement for a period of three (3) years beyond

                      the expiration or termination of this Agreement, and

                      provide daily online reports to Cricket in the ATG APL

                      Sales Feed Specification format provided by Cricket prior

                      to the execution of this Agreement;

 

                  (o) at the request of Cricket during the term of this

                      Agreement, such request to be made with at least 30 days'

                      prior written notice to Distributor, Distributor will

                      terminate the Cricket Functionality on such specific POS

                      Terminals as shall be designated by Cricket in its sole

                      discretion. Upon termination of this Agreement for any

                      reason or upon expiration of this Agreement, Distributor

                      will terminate the Cricket Functionality on all POS

                       Terminals;

 

 

                                      -7-

<PAGE>

 

 

             CONFIDENTIAL INFORMATION OF Q COMM INTERNATIONAL, INC.

 

[*Confidential treatment has been requested as to certain portions of this

document. Each such portion, which has been omitted herein and replaced with an

asterisk [***], has been filed separately with the Securities and Exchange

Commission.]

 

 

                  (p) provide all services and obligations hereunder with

                      workmanship and skill reasonably required by the industry

                      and in accordance with such additional provisions and

                      service level agreements set forth on Exhibit E hereto.

 

                  (q) be at all times responsible for (and shall bear the risk

                      of loss of) the Pins following transmission thereof from

                      Cricket to Distributor, title to the Pins t