Amp'd Mobile Affidavit

In the United States Bankruptcy Court for the District of Delaware

In re: Chapter 11AMP'D MOBILE, INC., Debtor.Case No. 07-10739 (BLS)

Affidavit of Bill Stone in Support of First Day Motions and Applications

State of CaliforniaCounty of Los Angeles

Bill Stone, being duly sworn, deposes and says:

1. On June 1, 2007 (the "Petition Date"), Amp'd Mobile, Inc. ("Amp'd Mobile" or "Amp'd"), debtor in possession (the "Debtor"), commenced a case under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the "Bankruptcy Code") in this Court. I am the President of Amp'd Mobile, Inc. As such, I am familiar with the day-to-day operations, business and financial affairs of the Debtor.

2. The Debtor continues to operate its business and manage its properties as debtor in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.

3. I submit this affidavit to assist the Court and other parties in interest in understanding the circumstances that compelled the commencement of these chapter 11 cases and in support of the first day motions and applications (the "First Day Motions"). Except as otherwise indicated, all facts set forth in this affidavit are based upon my personal knowledge, information provided to me by certain of the Debtor's employees, my review of relevant documents or my opinion based upon my experience, knowledge and information concerning the operations and financial affairs of the Debtor. If I were called upon to testify, I would testify competently to the facts set forth in this affidavit. I am authorized to submit this affidavit.

Background and Events Leading to the Commencement of the Chapter 11 Cases

A. The Debtor's Business

4. The Debtor was incorporated on December 18, 2003 in Delaware and is in the business of mobile entertainment, providing voice, text and entertainment content to subscribers who contract with the Debtor for cellular telephone service. The Debtor is a Mobile Virtual Network Operator, or MVNO. An MVNO does not build or own its own cellular telephone network. It enters into an agreement with a cellular telephone company that does own such a network, agrees to purchase minutes and megabytes from such network operator on a wholesale basis, and then resells such capacity to individual subscribers on a retail basis. The Debtor entered into a certain Wholesale Agreement with Cellco Partnership d/b/a Verizon Wireless ("Verizon"), the network carrier of the Debtor's MVNO business, on June 1, 2005.

5. The Debtor is the first integrated mobile entertainment company for youth, young professionals and early adopters, and the only third-generation (3G) carrier in the US specifically targeting that demographic. The Debtor distinguishes itself from other cellular providers on the basis of an edgy, irreverent brand image and by providing a large body of entertainment content delivered to the subscriber's handset. The Company's target demographic is 18-25 year olds. By leveraging the power of broadband wireless (EVDO), the Debtor offers traditional services such as voice and text within a completely fresh user interface and 3G technology designed specifically for the "mobile graduate." With a myriad of customizable options to meet each person's individual needs, as well as strategic alliances with top entertainment properties, such as MTV Networks and Universal Music Group, the Debtor brings a more relevant, personal experience to the wireless lifestyle with unique music, video, community, entertainment, sports and gaming offerings divided into various channels for quick and easy access. EVDO combines clarity and coverage with the fastest download speeds in North America.

6. The Debtor's users consumed more than four million videos, songs and mobile games in the first quarter of 2007, doubling the fourth quarter of 2006 figure of two million, with a total of more than six million downloads to date.

In addition, the Debtor's subscribers are downloading more over-the-air music downloads than ringtones.

7. The Debtor operates nationwide and has successfully expanded to Japanese and Canadian markets (through non-debtor affiliates) with the deployment of Amp'd Live, which reaches nearly 30 million mobile users in North America and Asia and creates a cross-cultural creative exchange for youth worldwide.

B. The Events Leading to the Bankruptcy Filing

8. Initially, in 2004, the Debtor's founder financed the Debtor personally. Later, in 2005, a group of investors including Highland Capital Partners, Columbia Capital Equity Partners and Redpoint Ventures invested in the Company. The Company continued development activities throughout 2005, including the design of the proposed customer experience through a unique user interface allowing access to entertainment content, licensing of content from licensors such as MTV Networks, the Ultimate Fighting Championship, a professional motocross racing association, Playboy Enterprises, major record labels, video game companies and others, and explored distribution strategies that would ultimately see the Debtor's service sold through retail outlets such as Best Buy, Circuit City, and a host of independent cellular dealers.

9. The Debtor was also successful in attracting investment from major strategic partners such as MTV Networks, Vivendi/Universal Music Group (the largest single investor), Intel, Qualcomm and Best Buy. Through the date of filing of its Chapter 11 petition, the Debtor raised approximately $350 million in equity investment and approximately $31 million of secured and unsecured debt investments.

10. The Debtor launched its services to consumers in December 2005. Throughout the first half the 2006, customer acquisition remained extremely low. In the second half of 2006, the Debtor aggressively advertised its service through television advertisements on MTV Networks and other promotional avenues.

11. By the end of 2006, the Debtor had approximately 100,000 subscribers to its service. From November 2006 through February 2007, the Debtor experienced an unprecedented growth of subscribers.

12. Unfortunately, in early 2007, the Debtor also began to experience customer collection problems at rates that were higher than industry norms. Approximately 90% of the Debtor's customers were on 18 month service contracts, meaning the Company essentially extended customers credit and billed customers for monthly service charges. The Debtor began to find a host of credit and collections problems and contributed ultimately to a liquidity crisis.

13. The Debtor moved quickly to remedy each of the issues it identified but its business model could not sustain such revenue collections problems, but by May 2007, the Debtor came to the realization that the number of its customers who were likely to be non-paying customers approached 80,000.

14. The Debtor attempted to raise additional investment funds from its existing equity and debt holders throughout May 2007. Those efforts appeared to be successful even as late as the day of the Debtor's filing on June 1, 2007. Unfortunately, the Debtor's existing investors ultimately declined to further fund the business.

15. Further compounding the liquidity crisis at the Debtor was the fact that Verizon, which provides the network carrier services that are integral to the delivery of the Debtor's services to its customers, had declared a default of the Wholesale Agreement and provided the Debtor with ten (10) days to make a $4.5 million cure payment. Faced with no other viable alternative, the Debtor's board of directors resolved to seek bankruptcy protection on an emergency basis on the evening of June 1, 2007.

16. On the evening of June 1, 2007, and in direct contravention of the Wholesale Agreement and the Default Notice sent on May 22, 2007, Verizon prematurely sent a letter to the Debtor purporting to terminate the Wholesale Agreement "effective immediately" and asserting its right to disconnect the network carrier services to the Debtor's customers.

The Debtor will be seeking an appropriate legal adjudication from this Court that the Wholesale Agreement remains in full force and effect.

Facts in Support of First Day Motions

17. Concurrently with the filing of its chapter 11 petition, the Debtor filed the First Day Motions. The Debtor requests that the relief requested in each of the First Day Motions described below be granted, as each request for relief constitutes a critical element in achieving the successful rehabilitation and reorganization of the Debtor for the benefit of all parties in interest.

Emergency Motion of Debtor for Interim and Final Orders (I) Authorizing the Use of Cash Collateral Pursuant to Sections 105, 361, 362, 363 and 364 of the Bankruptcy Code and Federal Rule Of Bankruptcy Procedure 4001(B), (II) Granting Adequate Protection to the Prepetition Secured Lender and (III) Scheduling and Approving Form and Manner of Notice of Final Hearing

18. As of the Petition Date (as defined below) the Debtor was indebted and liable to Kings Road Investment Ltd. (the "Lender") pursuant to a Convertible Secured Promissory Note (the "Note") dated April 2, 2007, in the principal amount of $30,000,000. The Debtor believes that the Lender's liens and security interests are valid, perfected, enforceable and constitute first priority liens and security interests in all of the Debtor's assets except the Debtor's intellectual property.

19. Prior to obtaining the financing from the Lender, the Debtor, since its inception in 2003, had raised approximately $350,000,000 from a group of equity investors, including Highland Capital Partners, Columbia Capital Equity Partners and Redpoint Ventures. In addition, as part of the effort to raise equity funding, the Debtor was successful in attracting investments from strategic partners such as MTV Networks, Vivendi/Universal Music Group (the largest single investor), Intel, Qualcomm and Best Buy.

20. Unfortunately, at a time when the Debtor began to experience unprecedented growth in the number of its subscribers, it also encountered a myriad of problems, including a large number of non-paying customers, which led to a serious liquidity crisis in the spring of 2007. Unable to sustain the business model in the face of mounting debts, and faced with a default notice received from Cellco Partnership d/b/a Verizon Wireless ("Verizon") on May 22, 2007 (the "Default Notice") in connection with a Wholesale Agreement entered into in April, 2005 that permitted the Debtor to purchase the minutes and megabytes necessary to serve its customer base, the Debtor began in earnest to attempt to raise additional funds from its existing equity and debt holders.

21. As late as the morning of June 1, 2007, the Debtor believed that a resolution would be reached but those hopes were dashed and the Debtor was forced to seek protection under the Bankruptcy Code later that same evening. While preparing the emergency filing, the Debtor was in communications and negotiations with the Lender concerning an interim debtor in possession financing facility and, in fact, had received a term sheet that would have provided the Debtor with sufficient additional liquidity to make a smooth transition into chapter 11.

22. Unfortunately, and as the direct result of the Debtor having received a purported termination letter (1) (the "Termination Letter") from Verizon late in the evening of June 1, 2007, the Lender has made a determination to not provide immediate funding to the Debtor but has instead indicated its willingness to consent to the use of cash collateral on certain terms and for the primary purpose of allowing the Debtor to negotiate and/or litigate the purported termination of the Wholesale Agreement between Verizon and the Debtor.

23. Currently, the Debtor has no available cash or assets readily convertible to cash that are not subject to the Lender's liens and security interests.

As a result, the Debtor requires, pursuant to sections 105(a), 361, 362, and 363 of the Bankruptcy Code, the use of the Lender's cash collateral (the "Cash Collateral") to pay its necessary operating expenses, and to preserve and increase the value of its assets for the benefit of all creditors and parties-in-interest, including the Lender.

24. If this Court approves the Debtor's use of Cash Collateral, the Debtor will be in a position to fund its operating expenses as a going concern for the immediate future until a determination can be made with respect to the Verizon contract dispute. The Debtor needs to use the Cash Collateral in order to, inter alia, fund payroll in order to satisfy employee obligations, pay vendors and suppliers and meet other on-going business obligations. Without the authority to use Cash Collateral, the Debtor will not be able to satisfy its payroll obligations or fund its business operations in a manner that will allow the Debtor to continue to operate as a going concern, all to the detriment of all creditors of the Debtor.

25. A denial of the use of the Cash Collateral to fund the Debtor's continuing day-to-day operations would severely damage not only the Debtor and its current employees and customers, but also the Lender and other creditors of the Debtor. Further, the denial of the use of Cash Collateral will cause immediate and irreparable harm to the reputation, goodwill, and public confidence in the Debtor, a consequence that can only translate into a drastic loss of value as a going concern.

26. Moreover, the Lender will benefit from approval of the request to use Cash Collateral because the Debtor intends to resolve its existing dispute with Verizon and then move forward to preserve the Lender's collateral through a reorganization or sale of the Debtor's business.

27. Perhaps most importantly, and in an effort to provide the Lender with a level of protection commensurate with the risk being taken by permitting the continued use of cash collateral in the midst of an uncertain legal outcome with Verizon, the Debtor believes that the adequate protection being provided to the Lender, in the form of replacement liens, avoidance actions, a lien on the Debtor's intellectual property, and a superpriority claim pursuant to section 364 (c)(1) is necessary and represents the sound business judgment of the Debtor.

Debtor's Motion for Order Pursuant to 11 U.S.C. §§ 345 and 363 and Local Rule 2015-2 (i) Authorizing Continued Use of Existing (a) Cash Management System and Bank Accounts and (b) Business Forms; and (ii) Waiving Investment and Deposit Requirements

28. As is typical with most corporate enterprises, the Debtor has established a system for the collection of receipts and the disbursement of funds. A list of all of the Debtor's bank accounts (the "Bank Accounts"), which together comprise the cash management system (the "Cash Management System"), is set forth on Exhibit "A" attached to the motion. Receipts the Debtor receives from its credit card servicer are deposited into the Debtor's "Merchant" account. Receipts the Debtor receives from its general retailers, including but not limited to Best Buy and Circuit City, are deposited into the Debtor's "Amp'd Mobile Retail" account. Funds deposited into "Merchant" account and the "Amp'd Mobile Retail" account are swept into the Debtor's "General" account. Cash and check receipts received directly from customers are also deposited into the General account. Payments by the Debtor are made from the General account. The Debtor's regulatory payments are made from its "Amp'd Regulatory Filing" account which is funded through the General account when regulatory payments need to be made. The Debtor maintains an additional "Investment" account in which deposits from its investors are deposited.

29. In addition, the Debtor requests permission to use its existing business forms and stationery without alteration.

Local Rule 2015-2(a) provides that "[w]here the debtor uses pre-printed checks, upon motion of the debtor, the Court may, without notice and hearing, permit the debtor to use its existing checks without the designation 'Debtor-in-Possession' [until] the debtor's existing checks have been used." Parties doing business with the Debtor undoubtedly will be aware of the Debtor's status as a chapter 11 debtor in possession. Additionally, the Debtor does not print its own business forms and stationery. Thus, substantial time and expense would be required if the Debtor were required to print new business forms and stationery merely to indicate "debtor in possession." Changing the business forms at this critical, early stage of its chapter 11 cases would be expensive and burdensome to the Debtor's estate and present an unnecessary distraction, extremely disruptive to the Debtor's business operations.

30. Additionally, the Debtor requests a waiver of the strict application of the requirements of section 345 of the Bankruptcy Code. All of the Debtor's Bank Accounts are federally insured, but may on occasion exceed the federally insured limit of $100,000. Given that these are business accounts, however, and considering the stability of the Debtor's bank, such funds are not at risk. The Debtor respectfully requests authority to maintain its cash in the Bank Accounts in a safe and prudent manner, in accordance with its existing practices. Local Rule 2015-2(b) provides that if a motion for a waiver under section 345 of the Bankruptcy Code is filed on the first day of the case, and there are more than 200 creditors, the court may grant an interim waiver. The Debtor seeks an interim order, and upon notice and a hearing (if any objections thereto), the entry of a final order.

31. By preserving business continuity and avoiding the operational and administrative paralysis that changing the cash management system, bank accounts, and business forms would necessarily entail, all parties in interest will be best served and the Debtor will benefit considerably from the relief requested in the motion.

Debtor's Motion for Authority to Pay Prepetition Wages, Compensation and Employee Benefits

32. The Debtors seek authority to pay certain prepetition obligations owing to the Debtors' employees, including, but not limited to, (i) amounts owed to employees for wages and salaries; (ii) reimbursement of employee business expenses incurred in the ordinary course, such as travel, meals and lodging; (iii) maintenance of employee health and welfare plans, workers' compensation, 401(k), and other similar benefits; and (iv) other miscellaneous employee expenses and benefits (collectively, the "Prepetition Employee Obligations"). The Debtors seek authority to honor Prepetition Employee Obligations as payment of such obligations is critical and essential to employee morale and future business needs.

33. The Debtor employs approximately 229 employees in the United States. The Debtor seeks to be authorized, but not directed, to honor all outstanding payroll obligations. The Debtor's employees are paid bi-monthly on a current basis. The Debtor's bi-monthly payroll averages approximately $987,000 in the aggregate. The Debtor's last regular payroll date was May 31 (the "Last Payroll"). The Debtor estimates that approximately 80% of its employees have direct deposit. The remaining employees are paid on checks issued through ADP, a third-party provider. The Debtors pay ADP prior to the issuance of payroll checks to the Debtor's employees. ADP then pays the Debtor's employees from ADP's accounts. The Debtors anticipate that, due to the large number of employees receiving direct deposit and the issuance of payroll checks from ADP's accounts, that its employees will experience no interruption in payroll. Moreover, no payroll amounts are past due. However, the Debtor seeks relief to pay any pre-petition payroll amounts in the abundance of caution.

A. Vacation, Paid Time Off, and Sick Leave

34. In addition to wages and salary, certain of the Debtor's employees accrue paid vacation time, paid time off, and/or paid sick time based on length of service. The Debtor intends to permit remaining employees to continue to use any such accrued but unused time off in the ordinary course.

Employees who are terminated, however, would normally be entitled to receive cash in lieu of accrued but unused vacation or paid time off upon separation. The Debtor seeks to pay all accrued and unused vacation and paid time off to terminated employees upon separation, which they estimate will cost approximately $4,000 per employee.

B. Independent Contractors

35. The Debtor employs independent contractors (the "Independent Contractors"). The Debtor believes that the Independent Contractors may terminate services if they are not paid amounts owing to them. This would be significantly detrimental to the Debtor's business, and accordingly the Debtor requests authority to pay prepetition amounts owing to these Independent Contractors.

C. Reimbursable Business Expenses

36. Prior to the Petition Date and in the ordinary course of its business, the Debtor reimbursed employees for certain business expenses incurred in the scope of their employment. Based upon historical averages, approximately 50-60% of employees incur expenses monthly aggregating on average $175,000 to $200,000, relating to, among other things, business related travel expenses, business meals, car rentals and a variety of miscellaneous expenses (collectively, the "Reimbursable Expenses"). All of the Reimbursable Expenses were incurred on the Debtor's behalf in connection with employment by the Debtor and in reliance upon the understanding that such expenses would be reimbursed. The Debtor estimates that, as of the Petition Date, the total amount owed for Reimbursable Expenses is no more than $69,900, with no one employee estimated to receive in excess of $10,000.

D. Employee Benefits

37. In the ordinary course of its business, and as is customary for most large companies, the Debtor has established various employee benefit plans and policies that provide employees with medical, dental, vision, disability, flexible spending accounts, life insurance, 401(k) savings plans, and other similar benefits (collectively, the "Employee Benefits"). The Employee Benefits are generally described below:

i. Health Insurance

38. An important element of the Employee Benefits is medical, dental, vision and similar health insurance (the "Health Benefits"). The Debtor maintains programs with an average monthly cost of approximately $119,000.

39. The Debtor currently owes $12,500 for outstanding dental and vision insurance. To the extent that any premiums remain unpaid as of the Petition Date, or any portion of the current month's payment may be characterized as a prepetition obligation, the Debtor seeks to be authorized, but not directed, to pay such amounts.

ii. Life, AD&D, Short and Long Term Disability Insurance

40. The Debtor provides their employees with fully insured life, accidental death and dismemberment, and long term disability insurance. The average monthly cost to the Debtor is $5,000. The Debtor currently owes $10,000 for such benefits, and the Debtor seeks to be authorized, but not directed, to pay such amounts.

iii. 401(k) Contributions

41. The Debtor offers all eligible employees (2) an opportunity to participate in a 401(k) plan (the "401(k) Plan"). The Debtor does not contribute to the 401(k) Plan and pays only a nominal fee for plan administration. All of the payments made by the debtor to the 401(k) Plan provider consist solely of employee funds. As of the Petition Date, $37,340 in funds were scheduled to be wired to the plan provider. Accordingly, the Debtor seeks authority to pay such amounts. Additionally, the Debtor seeks authority to continue the 401(k) plan. The Debtor submits that it is essential for the morale and maintenance of trust of the employees that necessary steps are taken to protect the employees' 401(k) Plan.

iv. Workers' Compensation

42. The Debtor is liable to employees under various workers' compensation policies. Each workers' compensation policy is designed to provide coverage to the Debtor's employees for injuries which are sustained by such employees during the policy year.

43. The Debtor maintains a premium-based workers' compensation insurance plan, with a monthly premium of $24,000. The coverage is current to date.

To the extent that the Debtor has amounts owing due to prepetition workers' compensation obligations or to the extent that a portion of the current payments may be characterized as prepetition obligations, the Debtor seeks authority to pay such amounts.

v. Flexible Spending Accounts

44. The Debtors offer their employees an opportunity to save for insurance expenses through flexible spending accounts. The funds in the flexible spending accounts are solely employees funds. Presently, payroll deductions totaling $3,200 and a re-issued check for $2,000 that was lost in the mail are pending. To the extent that the flexible spending contributions may be characterized as prepetition obligations, the Debtor seeks authority to pay such amounts.

vi. Administrative Service Providers

45. As is customary in the case of most large companies in the ordinary course of their business, the Debtor utilizes certain third-party providers to administer employee benefit plans and payroll services (the "Administrative Service Providers"). The average monthly cost of these services is approximately $2,000 in the aggregate. The continued support of the Administrative Service Providers is crucial to the Debtor's ability to maintain accurate and meaningful books and records, including, but not limited to, books and records reflecting the Debtor's Employee Benefit and payroll obligations. The Debtor believes that they are current with respect to amounts owing to Administrative Service Providers; however, to the extent that any such amounts remain unpaid or may be characterized as prepetition obligations, the Debtor seeks to be authorized, but not directed, to pay such amounts.

vii. Withholdings From Employee Paychecks

46. The Debtor deducts certain amounts from their employees' paychecks for the payment of the employee portion of health insurance premiums, flexible medical spending amounts, 401(k) deductions, and other miscellaneous amounts (collectively, the "Employee Deductions"). The Employee Deductions comprise property of the Debtor's employees and are forwarded by the Debtor to appropriate third-party recipients at varying times.

47. The Debtor may also be in possession of various withholdings, such as payroll taxes, social security, garnishments, child support payments, etc. (together with the Employee Deductions, the "Deductions"). It is likely that funds have been deducted from employee wages but have not yet been forwarded to the appropriate third-party recipients. The Debtor seeks authority to forward the Deductions to the appropriate parties. Without such authority, the Debtor exposes their officers and directors to personal liability.

viii. Miscellaneous

48. The Debtor may determine that there are additional de minimis prepetition obligations, which have not been identified in the Motion. Accordingly, the Debtor requests authority to pay any such additional obligations up to an aggregate amount of $100,000 upon five (5) business days' prior written notice to counsel to any statutory creditors' committee appointed herein and counsel to the Office of the United States Trustee, setting forth the nature and amount of the additional obligation sought to be paid. If an objection is interposed within such five-day period, and such objection is not resolved consensually, the Debtor will be required to seek authority from this Court to make such payment. The Debtor also reserves their right to seek authority from the Court to pay any obligations in excess of the aforementioned limit.

Debtor's Motion for Authority to Pay Prepetition Trust Fund Taxes in the Ordinary Course of Business

49. In the ordinary course of its business, the Debtor collects sales, use and other trust fund type taxes from its employees, customers, subcontractors and other third parties, and subsequently remits such taxes to the appropriate Taxing Authorities. For example, the Debtor withholds certain taxes (including regulatory taxes such as excise taxes and 911 taxes) from its customers, which amounts are remitted periodically to the appropriate federal, state and local Taxing Authorities.

The process by which the Debtor remits the Trust Fund Taxes varies, depending on the nature of the tax at issue and the Taxing Authority to which the relevant tax is to be paid.

50. Furthermore, there is often a lag-time between the time when the Debtor incurs an obligation to pay Trust Fund Taxes and the date when payment of such Trust Fund Taxes are due. Various governmental units may therefore have claims against the Debtor for Taxes that have accrued, but are unpaid and not yet due, as of the Petition Date. The relevant Taxing Authority may also make retrospective adjustments to determine any payment deficiency or surplus for a particular period resulting in a demand for further payment from or refund to the taxpayer. The Debtor estimates that, in the aggregate, no less than $6,000,000 in accrued but unpaid Trust Fund Taxes may be owing as of the Petition Date.

51. The Debtor believes that granting the relief requested in the motion is appropriate and in the best interest of the Debtor, its estate and its creditors.

Debtor's Motion Pursuant to 11 U.S.C. § 366(b) for an Order (i) Prohibiting Utility Companies from Altering, Refusing or Discontinuing Service to the Debtors, and (ii) Establishing Procedures for Determining Requests for Additional Adequate Assurance

52. The Debtor seeks entry of an order (i) prohibiting the Utility Companies from altering, refusing or discontinuing service to debtor, and (ii) establishing procedures for determining requests for additional adequate assurance.

53. In order to provide adequate assurance of payment for future services to the Utility Companies, the Debtor proposes to make a deposit (a "Utility Deposit") to each of the Utility Companies equal to 50% of the Debtor's estimated cost of monthly utility consumption for each such Utility Company, which totals approximately $108,611.46 in aggregate deposits for the Utility Companies. The Debtor proposes to make Utility Deposits to each of the Utility Companies within fifteen (15) days after the entry of an order granting this Motion for the purpose of providing each Utility Company with adequate assurance of payment of postpetition services to the Debtor.

54. The Debtor submits that granting the relief requested in the motion is both necessary and appropriate. It will afford the Debtor an opportunity to successfully reorganize and will not prejudice the rights of the Utility Companies.

Debtor's Motion for Authority to Continue to Customer Programs

55. The Debtor seeks entry of an order authorizing the Debtors in their business judgment to continue to honor certain customer programs, which are essential to maintaining strong relationships with customers and to generate additional business, thereby increasing revenue.

56. The Debtor has a number of Customer Programs that involve minimal cost for the Debtor, but generate significant benefits. Such Customer Programs are essential to the Debtor's market share and revenues and are designed to (a) market the Debtor's merchandise and services; (b) increase the traffic of new and existing customers to retail locations marketing the Debtor's products and the Debtor's website; (c) enhance and reward customer loyalty; and (d) sustain the Debtor's reputation in the marketplace.

57. The Debtor's primary Customer Programs are as follows:

Returns/Service Cancellations. The Debtor's general policy (3) is to offer customers 30 days to cancel the Debtor's services without the customer incurring a termination charge. If the customer cancels a service plan within the requisite 30-day period, the customer receives a refund of the phone purchase price if a copy of a receipt is provided with the return. The customer is responsible for fees and usage charges.

Pre-Paid Plans. The Debtor offers pre-paid service programs that allow customers to purchase airtime and bank airtime minutes for future use. As of the Petition Date, the Debtor held $992,000 worth of unused airtime on behalf of customers participating in the prepaid plans


The Debtor offers rebate programs from time to time to customers who purchase wireless equipment and service plans. As of the Petition Date, the Debtor estimates that they are holding approximately $778,000 in rebates that have not yet been remitted to its customers.

Product Protection and Replacement Plan. The Debtor provides a product protection and replacement plan to its customers that protects against loss, theft, damage, or any malfunction that occurs after the manufacturer's warranty expires on equipment sold by the Debtor. Customers pay a monthly fee to participate in this program. As of the Petition Date, approximately $2,000,000 in prepetition amounts were outstanding for this program. The Debtor spends on average $500,000 per month on the program.

Contests. The Debtor is currently offering existing and potential customers a chance to win a DUB Edition Kawasaki KFX450R four-wheel vehicle. The approximate retail value of the Kawasaki is $7,599.00. From time to time, the Debtor will offer additional contests with prizes of comparable value to subscribers and potential customers.

58. The Debtor's customers are the backbone of its business. The Debtor's ability to honor and perform its obligations to continue the Customer Programs is critical to the Debtor's goodwill toward its customers. Such Customer Programs have allowed the Debtor to develop and sustain a positive reputation in the marketplace for its service plans, coverage, website and merchandise. The Debtor's operations and, ultimately, the success of these chapter 11 cases depend largely on maintaining the loyalty of its customer base and attracting new customers.

59. Unless the Debtor can take the measures requested by the motion to alleviate customer concerns, the Debtor believes that the bankruptcy filing itself may have some negative impact on customers' attitudes towards the Debtor's products and services. In particular, if customers perceive that the Debtor is unable or unwilling to fulfill its prepetition obligations under and/or continue the Customer Programs, the Debtor's goodwill and ongoing business relationships may erode. To prevent any such occurrence, the Debtor desires to honor and perform its prepetition obligations and to continue during the postpetition period those Customer Programs that were beneficial to its business and cost-effective during the prepetition period. Such relief is necessary to preserve the Debtor's critical customer relationships and goodwill for the benefit of the estate.


The Debtor hopes to confirm a plan of reorganization and emerge from chapter 11 in as short a time as is necessary. The Debtor believes that the protections afforded by chapter 11 will enable it to develop, implement and consummate a financial restructuring that will provide for the equitable treatment of all claims and interests, and preserve the value of its assets for the benefit of creditors and equity security holders alike.



Sworn to before me on this Name: Bill Stone

____ day of June, 2007 Title: President

Notary Public

Footnotes:1. The Debtor disputes the validity of the termination letter and will seek an adjudication from this Court that the Wholesale Agreement remains in full force and effect.2. An employee is eligible to participate in the 401(k) upon hire.3. In certain states, applicable law requires different policies.

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