U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
_________________________________________________________________
iMALL, INC.
(Exact name of registrant as specified in its charter)
NEVADA 59-2544687B
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1185 South Mike Jense Circle, Provo, Utah 84601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 373-1717
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered Each class is to be registered
________________ _______________________
________________ _______________________
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock $.001 par value
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(Title of class)
Not Applicable
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(Title of Class)
PART I
Item 1. DESCRIPTION OF BUSINESS
Overview of the Company's Business
---------------------------------
iMall, Inc., a Nevada corporation (the "Company"), is an Internet
commerce and services company that maintains an Internet web site called the
"iMall". The iMall offers goods and services for sale from a variety of
merchants, each of which has a web site within the iMall, and also through
iMall-posted advertisements from merchants and other service providers. In
1996, which was the Company's first year of business as it is presently
constituted, the Company concentrated its efforts on Internet commerce
seminars, workshops and other consulting services with the objective of
increasing its base of iMall merchants and advertisers. Consequently, the
Company has to date derived most of its revenue from these activities. In the
event that the number of iMall merchants and advertisers continues to
increase, the Company expects a larger share of its revenues to derive from
sales of advertisements, sales of iMall web sites, rental and maintenance fees
from iMall merchants, web site design, and other Internet technology related
services. The Company is also seeking to develop within the iMall a number of
professional and business services sites, such as career planning services,
and other professional and business information sites. The Company believes
that by combining professional and business services and information with a
wide variety of high quality retail goods and services, the iMall will become
one of the primary sites for Internet commerce.
Forward-Looking Information
---------------------------
This registration statement contains certain forward-looking
statements and information relating to the Company that are based on the
beliefs of the Company's management as well as assumptions made by and
information currently available to the Company's management. When used in
this registration statement, the words "anticipate", "believe", "estimate",
"expect" and similar expressions, as they relate to the Company or the
Company's management, are intended to identify forward-looking statements.
Such statements reflect the current view of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated or expected.
The Company does not intend to update these forward-looking statements.
Internet Commerce
------------------
The Internet is a world wide series of interconnected electronic
and/or computer networks. Individuals and companies have recently recognized
that the technological capabilities of the Internet provide a medium for not
only the promotion and communication of ideas and concepts, but also for the
presentation and sale of information, goods and services. An estimated 38.7
million people now use the Internet in the United States at least occasionally
according to a survey conducted in the third quarter of 1996 by Find/SVP in
conjunction with Jupiter Communications. This survey concluded that
approximately nine million adult Americans logged onto the Internet's World
Wide Web daily, while approximately twenty million logged on every week.
Further, an Odyssey survey indicated that the Internet continues to enjoy a
growth rate of 20% per month.
Historically, the Internet has been accessible through personal
computers. Recently, several companies have announced "Web TV" products
designed for attachment to television sets for the purpose of allowing access
to the Internet without the need for a personal computer. Although these
products do not permit the full range of functions provided by personal
computers, they do permit many of the features of the Internet to be viewed on
television sets. While no assurance can be given, these new Web TV products
are expected to increase the number of people who access the Internet.
The term "Internet commerce" encompasses the use of the Internet for
marketing, advertising and selling goods and services. The ability to use the
Internet for marketing and advertising results from the power to communicate
information through the Internet to a large number of individuals, businesses
and other entities. The ability to use the Internet to consummate sales and
other commercial transactions results from the power to conduct through the
Internet two-way communication, from merchant to buyer and from buyer to
merchant.
The cost of marketing goods and services on the Internet is
significantly lower than traditional methods of marketing, such as catalog
sales, direct mail or television advertising. Marketing on the Internet can
be especially advantageous for smaller companies because it removes several
physical and capital barriers to entry and serves to level the competitive
playing field, by allowing smaller companies to effectively compete with
larger companies.
How Commerce is Tracked
-----------------------
There are three different methods to measure Internet activity for a
particular web site. The first method is to count the number of "hits" on the
site. "Hits" refers to the total number of files retrieved from a web page.
These files can either be text documents, executable files (i.e. downloaded
programs), or graphic images. A file is deemed retrieved whether it is simply
accessed, or actually downloaded. Depending on how much activity is
generated, a single visitor to a site could add hundreds of hits to a given
web site.
A second method of measuring activity is to count the number of
"visitors" to a web site. Visitors (or accesses to a site) are the total
number of unique people coming to a particular web site. The degree of
difficulty in using this method to track commerce on a web site increases with
the number of entry points into the site.
The third method of measuring activity on a web site is to count
"impressions". Impressions usually refer to the total number of banners or
pages (pieces of information) imposed into a user's line of site. Because
items creating impressions may change while a viewer is still viewing a single
page, more impressions than visitors may be generated by a web page.
Internet Security
--------------------
Currently, one of the largest barriers to a potential customer's
willingness to conduct commerce over the Internet is the perceived ability of
unauthorized persons to access and use personal information about the user,
such as credit card account numbers, social security number and bank account
information. Concerns about the security of the Internet include concerns
over the authenticity of the user (ie, is the user who they say they are),
verification and certification methods of who these users are, and privacy
protection for access to private information transmitted over the Internet.
However, recent advances in this area have greatly reduced the possibility of
any such unauthorized access or use. For a discussion of the methods of
security employed by the Company, see "-- iMall Security".
The iMall
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The Company maintains an Internet web site called the "iMall". Upon
accessing the iMall site, an Internet user is shown the iMall home page. This
home page displays several of the key merchants and sponsors of the iMall and
provides users with access to each of iMall's approximately 750 storefronts,
9,000 advertisements, and the iMall directory. The iMall's key merchants
currently include Checker Auto, Leggs, Hanes, Big Dog Sportswear, Breath
Assure, Circus Circus, MGM Grand, and Amazing Discoveries. The iMall
currently is receiving over ten million "hits" per month.
The iMall directory lists sites by product or service categories and
allows users to perform global searches of the entire iMall. Users may also
use a "power shopping" function to narrow their search to a specific area of
the iMall, a specific product, or even merchants or products from a particular
region of the country. A viewer who wishes to purchase items offered on the
iMall can do so simply by submitting an order online and entering a credit
card number.
In addition to the traditional search options, the iMall offers a
special function called the Deals of the Day. This service is updated daily
and alerts iMall users to special manufacturer discounts on first quality name
brand merchandise.
The iMall is also currently hosting a $250,000 sweepstakes sponsored
by AT&T. Contestants may visit the iMall to enter and to see if they are the
winner of a daily prize. This sponsorship has helped increase the number of
hits to the iMall site by over 30%.
In addition to well known merchandisers, several radio stations
including KABC talk radio and KMPC radio (each a Los Angeles based radio
station) maintain sites on the iMall. Maintaining sites on the iMall allows
these stations greater exposure due to the high volume of traffic on the
iMall. These stations post sports information, texts of interviews on their
stations, traffic and other information, as well as sell promotional products.
iMall Security
--------------
The Company's current electronic commerce service includes the use
of CyberCash's Secure Internet Payment Service. This service incorporates an
RSA encryption method between a shopper on the iMall and a CyberCash enabled
merchant on the iMall wherein the iMall shopper is prompted by their "personal
wallet" which they have established on their personal computer. This
personal wallet then negotiates with the merchant's bank through CyberCash for
authorization. The transaction between the iMall shopper and the Company is
also secured by a customized Apache server. Upon shipment of the purchased
product, the merchant then negotiates with their bank through CyberCash for a
capture of funds. These security methods provide a high level of encryption
protection for user's credit card numbers, bank account numbers, and other
personal information.
iMall Products and Services
---------------------------
The Company derives substantially all of its revenue from the
following sources:
Educational Seminars
The principal marketing methods employed by the Company today are
its preview and workshop seminars. These seminars target individuals and
businesses interested in marketing their products and services on the
Internet, or simply learning about business opportunities relating to the
Internet. The Company uses infomercials, 60 second radio advertising,
directed mailings to targeted audiences, as well as print advertisements to
attract attendees to its preview seminars. The preview seminars are conducted
free of charge for attendees and are designed to showcase the value of the
Internet workshop.
The Company also conducts Internet workshops at a cost of $2,995.00
per person. These seminars include extensive instruction about the Internet
and are taught by various instructors who have experience in areas such as
direct marketing, business development, Internet commerce, and web site
design.
In addition to the Internet instruction, seminar participants
receive two web sites, each consisting of up to five web pages, and ten
classified advertisements on the iMall, all designed by the Company.
The Company also offers information "home study" products priced at
$1,495 and $995 for those who are interested in learning about the Internet
but choose not to attend the workshop.
The Company has also created a program whereby a few independent
companies have been allowed to offer their clients the Company's home study
products directly. The most significant reseller is National Direct
Corporation, which is currently selling between two and four thousand of these
home study products per month. These sales currently account for a net return
to the Company of approximately $200,000 per month.
Site Fees
The Company charges most of its stores a monthly maintenance fee for
maintaining their site on the iMall. The basic fee is $59.00 per month. This
fee pays for "space" on the iMall servers and technical support from the
Company. The Company plans to expand its maintenance fee offerings to include
more advanced maintenance services including technology updates, periodic
design updates and data gathering services during 1997. However, there can be
no assurance that the Company will be successful with this program.
Custom Web Site Development and Maintenance Services
The Company has a technology staff that performs billable services
such as design and development work for current iMall web sites, as well as
full corporate site development.
The Company's Internet publishing service employs the Company's
proprietary web site development tool which is called "iStore". iStore
facilitates the development of basic web sites, enhanced web sites, and fully
customized web sites. iStore also supports basic electronic commerce
components which merchants may employ on their iMall sites. Basic web sites
contain text of various fonts and font sizes as well as simple images.
Enhanced sites contain more advanced text, images, forms and tables that are
generated through the use of Java applets, JavaScripting and similar tools.
iStore provides several stylized templates for basic web site designs and a
more limited number for enhanced web site designs. Fully customized web sites
contain features similar to those contained in enhanced web sites but require
several sophisticated design and programming resources that are not currently
provided in iStore. The Company anticipates that as demand grows for the more
sophisticated features found in enhanced and fully customized sites, the
Company will integrate the tools for creating these features into iStore.
There can be no assurance, however, that the Company will be successful in
expanding and upgrading iStore.
Royalties from Sales on the iMall
Merchants generally agree to having a site on the iMall for a one
year period. The Company is currently requiring all merchants who renew their
sites on the iMall to agree to pay the Company a negotiated royalty based on
sales through their iMall site. All merchants establishing new iMall sites are
required to agree to such an arrangement. Revenues from this program have
thus far been insignificant. This program was recently introduced by the
Company, and the Company has not to date encountered any resistance to its
implementation. However, the Company can make no assurance that resistance
from merchants will not arise in the future.
The Company recently implemented technology which will allow it to
closely meter all types of transactions on the iMall. This new technology
allows the Company to track a particular merchant's sales, thereby
facilitating the Company's charging a percentage of sales. The Company
expects that this revenue stream will grow substantially in the future.
Banner Advertising
The Company currently is recording an average of over ten million
hits on its site each month. This rate continues to increase at an average
rate of 10% per month. As a result of this increasing activity, the Company
believes it will be able to command significant advertising rates from
advertisers on the iMall. The Company has completed a new system that will
generate consecutive banner advertisements at various points on the iMall site
based on the number of hits or impressions purchased by the advertiser. The
Company anticipates that such advertising revenue could represent up to ten
percent of the Company's anticipated revenues for 1997. Because of the lack
of operating history with respect to this revenue stream, it is very difficult
to predict what the actual future revenues will be.
Research and Data
The Company requires purchasers of goods and services to complete a
user profile form which the Company then stores in a database. The Company
plans to encourage each visitor to its site to complete such a form. The
Company believes that this information will be of value to businesses of all
types moving to the Internet. Therefore, the Company plans to develop
technology that will enable it to package and sell such information. However,
there can be no assurance that the Company will be successful in packaging and
selling this information.
Technical Infrastructure
--------------------------
The Company's World Wide Web servers include the latest release
Stronghold secure webservers produced by C2Net. These servers are based on
Apache's version 1.1.1 base server. Apache is run on over 40% of all the web
servers in the world and has been the most popular in the world for more than
six months (based on the November World Wide Web server site survey conducted
by Netcraft).
The Company's Central Processing Unit server infrastructure includes
four high-end web servers, running BSD compliant UNIX operating systems. Load
(made up of traffic and the activities of the traffic) is distributed across
these machines through round-robin domain name service which maximizes the
capacity of the systems. Internet service to these machines consists of
multiple DS3 (45Mb/sec) backbone service providers including MCI, Sprint, and
UUNET/Alternet. The Company estimates that the current iMall system has
capacity to handle in excess of 1.5 million hits per day. File system backups
are written across machines to protect against a catastrophic system failure
on any one given machine.
Sales and Marketing Resources
------------------------------
Several of the officers of the Company have been conducting seminars
and marketing informational products for the past five years. The Company
plans to continue its seminar marketing program but also plans to market to
the current or future business owner/operator more aggressively. The Company
plans to extend this program into select markets in professional services and
business and professional information. In each case the Company plans to
expand and focus its direct marketing and mail campaigns to select demographic
profiles.
The Company plans to undertake a public relations and print
advertising effort targeted at the business and consumer sectors to promote
the concept of electronic commerce on the Internet, and to enhance the name
recognition of the iMall. However, there can be no assurance that the Company
will be successful in expanding its sales and marketing efforts.
Strategic Alliances
--------------------
The Company's growth is also dependent upon the continued
development of strategic alliances and partnerships such as the Company's
alliance with AT&T. The AT&T relationship has not only increased the number
of users visiting the iMall, but, in the opinion of the Company's management,
it has also added significant credibility to the Company. Relationships such
as this will be key to building the acceptance and the revenue base of the
Company. However, there can be no assurance that the Company will be
successful in developing additional strategic alliances or maintaining
existing strategic alliances in the future.
The Company, in partnership with Positive Response T.V., has
produced two thirty minute infomercials centered around the opportunity to
become an iMall consultant and Internet opportunities in general. The first
infomercial is entitled "Super Highway to Riches" and offers a basic
information package on the Internet in general for $89.85. These purchasers
are then offered opportunities to attend the Company's seminar and/or to
purchase home study products. This infomercial has recently completed running
in certain test markets and has exceeded the Company's expectations. The
infomercial has produced profits of approximately $100 per order for the
Company. Positive Response T.V. expects budgets for this infomercial to be
approximately $500,000 per month, all of which is paid for by Positive
Response T.V.
The second infomercial is entitled "The iMall Opportunity" and
invites viewers to attend a free preview in their area. At the preview, the
attendee is offered the opportunity to attend the $2,995 seminar discussed
herein. Budgets for this infomercial are expected to be approximately
$10,000.
The Company has entered into a joint venture with Softbank
Interactive, to bring per inquiry to the Internet. Through Softbank's
representation of large Internet Web sites such as Commonwealth, Yahoo and
Lycos, this venture has secured, and is securing, millions of free banner
advertisements. These banners will be used to offer impulse buy products. A
share of the revenue produced by such banners will be paid to the banner
provider for each product sold. The remainder, minus expenses, will then be
distributed through the joint venture. This joint venture has already
received commitments for over ten million banners per month.
Industry and Competitive Considerations
----------------------------------------
Nature of Market. There is a lack of proven business models
with respect to the generation of revenues from the sale of commercial or
informational sites on the Internet. It is impossible to predict whether the
Company will be successful in establishing itself as a viable sales outlet, or
that consumers will purchase products from sites on the iMall in sufficient
quantities for the Company to maintain a positive cash flow.
Changing Technology. Internet advertising and commerce is a
new, intensely competitive, rapidly evolving industry which is subject to
rapid technological change. The success of the Company will depend, in part,
upon the ability of the Company to keep abreast of technological changes that
are evolving with the Internet and electronic commerce in general.
Other Internet Malls. There are currently several hundred
"malls" on the Internet, ranging from simple link sites to independently
developed mall sites similar to the iMall. Fewer than five of these malls are
currently considered substantial and significant from a competitive
perspective by the Company. However, some of the Company's competitors may
have greater financial and marketing resources than the Company, and may in
the future offer additional services to its customers at rates equal to or
more favorable than those offered by the Company.
The Company's Competitive Advantages
------------------------------------
Seminar Education System. The Company's management believes
that the Company currently is one of only three Internet malls that have
established a seminar education system. Not only is this an effective
marketing and sales tool, it is also a very effective customer service tool.
Furthermore, the flexibility inherent in this program permits the Company to
tailor the approach to myriad markets and vertical niches.
Consultant Program. Through the Company's seminars and home
study products, the Company has amassed a network of independent consultants,
each of whom may purchase the Company's products and services at wholesale
prices for themselves or for resale.
Number of Storefronts. The Company believes that the iMall has
the largest number of independent storefronts of any Internet mall. Although
there are other malls that claim more storefronts than the Company, those
storefronts are actually only "links", rather than independent storefronts
maintained on a closed site. An independent survey conducted by Jupiter
Communications found that the average mall on the Internet contained only 19
"stores". The iMall currently is home to over 750 storefronts.
Amortization of Web Site Building Costs. The Company's
proprietary web site development tools and process allow it to amortize the
cost of building and enhancing the web sites on the iMall. This amortization
allows for the development of additional development tools.
Reselling Data. The Company's independent storefront approach
and its sophisticated database allow it to capture and assimilate demographic
data, shopping and navigation habits and other very pertinent marketing
information from the users that visit the iMall. This data can be provided to
the iMall merchants and information providers, as well as packaged and sold to
companies interested in marketing on the Internet.
Relationships with Merchants. The Company believes its
independent mall approach creates a more intimate relationship with the
merchant, which, the Company believes, translates into better service to the
customer and increased quality of product or service offering. This approach
allows for more detailed and accurate tracking of store visits and sales,
resulting in more revenue to the Company, and ensures better search and
navigation performance since the Company has complete control over its
servers. On the other hand, a linked mall exposes the end-user to the
performance problems and the inherent unpredictability of the Internet.
Employees
As of January 27, 1997, the Company and its subsidiaries had a total
of approximately 115 full-time employees. Sixty-five full-time employees are
located in Provo, Utah, 30 are located in Studio City, California, and 25 are
located in Woodland Hills, California. None of the Company's employees are
covered by an ongoing collective bargaining agreement with the Company and the
Company believes that its relationship with its employees is very good.
History of the Company
-----------------------
The Company's predecessor for accounting purposes is Madison, York,
Inc., a Utah corporation ("Madison"), which was incorporated on November 2,
1994. On January 16, 1996, Madison engaged in a share exchange with iMall,
Inc., a Nevada corporation, which had been the surviving company in a merger
with Natures Gift, Inc., a Utah corporation ("Natures Gift"), on January 8,
1996. Natures Gift was incorporated under the laws of the State of Utah on
February 9, 1984 as Brickland, Corporation, and changed its name to Natures
Gift, Inc. on May 23, 1991. Natures Gift did not transact any significant
business from the date of its inception until January, 1996. As a result of
this share exchange between Madison and iMall, Inc., Madison became a wholly
owned subsidiary of the Company. For accounting purposes this share exchange
is considered a reverse acquisition and Madison is considered the predecessor
of the Company because it had operations at the time of the share exchange.
In this share exchange, the shareholders of Madison received 16,400,000 shares
of common stock of the Company in exchange for all of the issued and
outstanding shares of common stock of Madison.
On January 16, 1996, the Company also entered into share exchange
agreements with Cabot, Richards & Reed, Inc., a Utah corporation ("Cabot") and
R&R Advertising, Inc., a California corporation ("R&R") wherein the
shareholders of Cabot received 11,200,000 shares of common stock of the
Company in exchange for all of the outstanding shares of common stock of Cabot
and the shareholders of R&R received 4,800,000 shares of common stock of the
Company in exchange for all of the outstanding shares of common stock of R&R.
Each of Cabot and R&R became wholly owned subsidiaries of the Company. On
March 5, 1996, the Company entered into a share exchange agreement with Inter-
Active Marketing Group, Inc., a Utah corporation ("IMG") wherein the
shareholders of IMG received 420,500 shares of common stock of the Company in
exchange for all of the outstanding shares of common stock of IMG, and IMG
became a wholly owned subsidiary of the Company. On April 26, 1996, the
Company entered into a share exchange agreement with e.m.a.N.a.t.e., Inc., a
California corporation ("e.m.a.N.a.t.e.") wherein the shareholders of
e.m.a.N.a.t.e. received 1,600,000 shares of common stock of the Company in
exchange for all of the outstanding shares of common stock of e.m.a.N.a.t.e.,
and e.m.a.N.a.t.e. became a wholly owned subsidiary of the Company. Certain
additional information concerning these transactions is set forth in Section 7
hereof, "Certain Relationships and Related Transactions" and in the
consolidated financial statements of the Company -- Note 2, which are attached
hereto.
Madison was incorporated in 1994 and commenced business in 1995
providing consulting services to Internet entrepreneurs. Madison developed
the Internet specific techniques used by the Company today in its educational
seminars.
Cabot was incorporated in December 1992 and became a well known
educational seminar company. Cabot developed the marketing and training
techniques used by the Company today in its educational seminars.
R&R was formed in January 1991 in California. R&R was an
advertising agency that catered to small businesses. Services included
commercial and infomercial production, art and graphics design, as well as
print, television and radio advertising. The television department placed its
clients' advertisements on hundreds of network, cable, and independent
stations throughout the United States. R&R has contributed to iMall Services,
Inc. ("iMall Services"), a wholly owned subsidiary of the Company, its
computer advertising expertise.
IMG recently changed its name to "Internet Yellow Pages, Inc." IMG
maintained an "Internet yellow pages" are similar to regular yellow pages and
also allow for different types of sponsorships which businesses can purchase
for greater exposure. IMG has not yet generated any revenue for the Company.
e.m.a.N.a.t.e. was formed by three individuals who worked on
Department of Defense and NASA contracts using state-of-the-art computer and
Internet technology. The founders were involved with the Internet since its
infancy and recently began to focus on generating revenue from the Internet by
designing web sites. Thus, while e.m.a.N.a.t.e. currently has contracts with
or has recently completed projects for Lockheed-Martin, United Defense, and
NASA, most of the personnel are involved with creating Internet web pages and
programming advanced features such as Java, Shockwave and Virtual Reality
applications for customers.
On May 22, 1996, the Company effected a four for one forward stock
split. All references in this registration statement take such split into
effect when referring to the number of shares of the Company's common stock or
per share data.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's and the
Company's predecessor's financial condition as of September 30, 1996 and
December 31, 1995 and the Company's and the Company's predecessor's results of
operations for the nine month periods ended September 30, 1996 and 1995 and
the years ended December 31, 1995 and 1994 should be read in conjunction with
the Company's financial statements and notes thereto included elsewhere in
this Registration Statement.
Results of Operations
The Company's current operations consist of the operation of various
entities which only recently became part of the consolidated group. Results
of prior periods do not reflect the current mix of the Company's operations.
Because Madison is the only predecessor of the Company, comparisons of
historical results of operations may therefore not be meaningful.
Comparison of Nine-Month Periods Ended September 30, 1996 and 1995
Revenues. Revenues for the first nine months of 1996 were
$12,601,116, compared to $258,561 for the first nine months of 1995. This
increase was due primarily to increased workshop attendance at the Company's
Internet seminars and acquisitions of new businesses.
Cost of Sales. Total direct cost of sales for the first nine months
of 1996 were $6,383,369, compared to $155,137 for the first nine months of
1995. This increase was due primarily to increased workshop attendance and
higher sales volume.
General and Administrative Expenses. General and administrative
expense for the first nine months of 1996 were $4,520,875, compared to $84,727
for the first nine months of 1995. This increase was due primarily to a
dramatic increase in the extent of the Company's operations.
Financing
---------
The Company did not engage in any debt financing, but its
subsidiary, Cabot, did enter into a capital lease arrangement during the first
nine months of 1995. Consequently, no long-term debt was incurred or
reported. Growth was funded from internal cash flow within the entities and
through private placements.
Comparison of Fiscal 1995 and 1994
------------------------------------
Because Madison did not engage in any operations prior to 1995,
comparisons between 1995 and 1994 are relatively meaningless in their
relationship to the Company's current operations.
Revenues. Revenues for the fiscal year ended December 31, 1996 were
$1,003,965, compared to $0 for the fiscal year ended December 31, 1995. This
increase was due primarily to increased attendance at the Company's Internet
seminars.
Cost of Sales. Cost of sales for the fiscal year ended December 31,
1996 were $437,035, compared to $0 for the fiscal year ended December 31,
1995. This increase was due primarily to increased workshop attendance and
higher sales volume.
General and Administrative Expenses. General and Administrative
expenses for the fiscal year ended December 31, 1996 were $588,454, compared
to $0 for the fiscal year ended December 31, 1995. This increase was due
primarily to a dramatic expansion of the Company's businesses and operations.
Depreciation and Amortization. Depreciation and amortization costs
for the fiscal year ended December 31, 1996 were $132,599, compared to $2,919
for the fiscal year ended December 31, 1995. This increase was due primarily
to the acquisition of property and equipment in 1996.
Liquidity and Capital Resources
--------------------------------
The Company has funded its cash requirements primarily through cash
flows from its operating activities. However, the Company has borrowed
$500,000 from an affiliated party, which amount is due and payable on or
before March 31, 1997, plus interest in the amount of $12,500. In addition,
the Company is seeking a line of credit in the amount of $500,000 from Zions
First National Bank. The Company believes its current funds, along with cash
provided by ongoing operating activities will be sufficient to finance its
cash requirements for at least the next twelve months.
The Company is currently incurring cash expenses in the amount of
approximately $1,000,000 per month, of which fixed costs account for
approximately $450,000. The Company anticipates capital expenditures will be
approximately $600,000 for the current fiscal year.
Item 3. DESCRIPTION OF PROPERTIES
The Company maintains offices in Provo, Utah, Studio City,
California, and Woodland Hills, California. The Company leases its executive
offices at 1185 South Mike Jense Circle, Provo, Utah 84601 on a month-to-month
basis for $9,076 per month from a related party. See Item 7 "Certain
Relationships and Related Transactions". The Company leases office space at
4400 Coldwater Canyon Blvd., Studio City, California 91604 for a total of
$12,973 per month, which lease expires partially in December 1997 and
partially in November 1998. The Company also leases office space at 22020
Clarendon, Suite 200, Woodland Hills, California 91367 for $4,290 per month,
which lease expires in April 1999.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the
Company as of January 30, 1997 with respect to the beneficial ownership of the
outstanding shares of the Common Stock by the Company's directors and
executive officers and the directors and executive officers of the Company as
a group. The Company is aware of no shareholders other than certain directors
and executive officers of the Company who beneficially own more than five
percent of the outstanding shares of the Company's common stock. Each person
listed below has personal and sole beneficial ownership of the shares of
common stock listed with their name.
Name and Address of Number of Percentage (1)
Beneficial Owner Shares
- -------------------------- ------------- -------------------
Craig R. Pickering 13,200,000 21.8%
1185 South Mike Jense Circle
Provo, Utah 84601
Tracy Scott 0 0.0%
185 South Mike Jense Circle
Provo, Utah 84601
Richard Rosenblatt 13,200,000 21.8%
4400 Coldwater Canyon Blvd.
Suite 200
Studio City, California 91604
Mark R. Comer 13,200,000 21.8%
1185 South Mike Jense Circle
Provo, Utah 84601
Martin Rosenblatt 1,353,333 2.2%
22020 Clarendon, Suite 200
Woodland Hills, California
91367
Craig Lewis 14,000 0.1%
1185 South Mike Jense Circle
Provo, Utah 84601
David M. Rees 0 0.0%
215 South State Street
Suite 1100
Salt Lake City, Utah 84111
Total of Directors 40,967,333 67.7%
and Executive
Officers as a group
____________
(1) Based on 60,493,827 shares of common stock outstanding as of January 30,
1997.
Item 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The following table sets forth the names, ages and positions with
the Company as of the date of this Registration Statement of all of the
executive officers and directors of the Company. Also set forth below is
information as to the principal occupation and background for each named
person in the table.
Name Age Position
- -------- --------- -----------------
Craig R. Pickering 38 President; Chairman of the
Board of Directors
Tracy W. Scott 36 Chief Executive Officer;
Director
Richard Rosenblatt 27 Executive Vice President;
Director
Mark R. Comer 30 Executive Vice President;
Director
Martin Rosenblatt 53 Vice President; Director
Craig Lewis 32 Secretary/Treasurer
David M. Rees 30 Director
Craig R. Pickering. Mr. Pickering is the President and Chairman of the
Board of Directors of the Company. Mr. Pickering has over 16 years of
business experience including work in venture capital, sales, mergers and
acquisitions and as a seminar speaker for American Business Seminars. In 1992
he formed Cabot, and in 1994 he founded Madison. He has held his present
position with the Company since January 1996.
Tracy W. Scott. Mr. Scott has been Chief Executive Officer and a director
of the Company since October 1996. From 1995 to October 1996 he worked as
Vice President of Electronic Information Strategy at Reed Elsevier, Inc., a
large British/Dutch publishing company. He was President of Folio
Corporation, a division of Reed Elsevier from 1993 to 1995. From 1992 to 1993
Mr. Scott was Senior Vice President, Account Management and Services at
Merkley, Neuman, Harty, an advertising company in New York City. Mr. Scott
received his Bachelor of Science and his Masters of Business Administration
degrees from Brigham Young University in 1985 and 1990, respectively.
Richard Rosenblatt. Mr. Rosenblatt is an Executive Vice President and a
director of the Company. In 1991, Mr. Rosenblatt formed R&R Advertising,
Inc. which specialized in advertising for small businesses, and founded
Madison in 1994. Mr. Rosenblatt is the son of Martin Rosenblatt. Mr.
Rosenblatt has held his present position with the Company since January 1996.
Mr. Rosenblatt received his Bachelor of Arts degree in political science from
the University of California at Los Angeles, where he graduated Magna Cum
Laude and Phi Beta Kappa in 1991. He received his Juris Doctorate from the
University of Southern California, where he graduated with honors in 1994.
Mark R. Comer. Mr. Comer is an Executive Vice President and a director of the
Company. Mr. Comer has over seven years experience in marketing and in the
business seminar industry. In 1992 he formed Cabot and in 1994 he founded
Madison. He has held his present position with the Company since January
1996. Mr. Comer attended Brigham Young University in 1984 and 1985 as a
business major.
Martin Rosenblatt. Mr. Rosenblatt is a Vice President and a director of
the Company. Mr. Rosenblatt has successfully managed a group of 20 scientists
in developing and applying sophisticated physics based computer programs. He
has been using the Internet regularly since its infancy, as a communications
tool to reach and remotely operate the most advanced government computers in
the country. Mr. Rosenblatt worked for Titan Corporation as Vice President of
the Titan Research and Technology Division from 1985 to 1994. In 1994 Mr.
Rosenblatt founded e.m.a.N.a.t.e. Mr. Rosenblatt is the father of Richard
Rosenblatt. He has held his present position with the Company since April
1996. Mr. Rosenblatt received a Bachelor of Arts degree and a Masters of
Science degree from the University of California at Los Angeles in 1964 and
1966, respectively.
Craig Lewis. Mr. Lewis is the Secretary/Treasurer of the Company. Mr.
Lewis worked for the accounting firm of Deloitte & Touche in St. Louis from
1989 through 1991. He became the Controller for AeroTrans Corporation in Salt
Lake City in 1991 and in 1992 became the Controller and Corporate
Secretary/Treasurer for Mountainland Support Corporation in Provo, Utah. Mr.
Lewis joined the Company in 1995 as the Secretary/Treasurer. He has held his
present position with the Company since July 1996. Mr. Lewis received his
Bachelor of Science degree in accounting in 1988 and his Master of Accounting
degree in 1989, each from Brigham Young University.
David M. Rees. Mr. Rees is a director of the Company. From 1993 through
1995 he was an associate in the Mergers and Acquisitions and Corporate Finance
departments at the law firm of Skadden, Arps, Slate, Meagher & Flom in New
York. Mr. Rees is an attorney and performs various services as the Company's
regular outside counsel. He has been a director of the Company since July
1996. Mr. Rees received his Bachelor of Arts degree in history from Weber
State University in 1990 and his Juris Doctorate from New York University in
1993.
Item 6. EXECUTIVE COMPENSATION
The following table sets forth certain information as to the
Company's Chief Executive Officer and each of the Company's officers who
received compensation in amounts equal to or exceeding $100,000 for the year
ended December 31, 1996. No person received any compensation from the Company
or its predecessor in any fiscal year prior to 1996. Figures listed below do
not include automobile and entertainment allowances for certain executive
officers of the Company which total, in the aggregate, $100,746 for the year
ended December 31, 1996.
Summary Compensation Table
------------------------------------------
Name of Individual Capacities in Which Served Cash
Compensation
- ------------------------ --------------------------- --------------
Tracy W. Scott (1) Chief Executive Officer $37,019
Craig R. Pickering President $125,000
Richard R. Rosenblatt Executive Vice President $125,000
Mark R. Comer Executive Vice President $125,000
____________
(1) Tracy W. Scott began working for the Company in October 1996, as Chief
Executive Officer.
The Company pays no fees to members of the Company's Board of Directors
for the performance of their duties as directors. The Company has not yet
established committees of the Board of Directors, but is in the process of
establishing an Audit Committee and a Compensation Committee.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company pays certain related parties for advertising, rent and
computer graphic design. Sierra Advertising received $923,399 for advertising
expenses, all of which is distributed directly for advertising costs, and is
owned by officers of the Company. The sole purpose for the existence of
Sierra Advertising is to pass through certain costs of advertising at reduced
rates. No officers of the Company receive any monetary compensation from the
Company through Sierra Advertising. Sierra Advertising makes no profit. All
funds paid to Sierra Advertising are used by Sierra Advertising for the
purchase of air time for advertising.
The share exchanges described in Part I, Item 1 "Description of
Business -- History of the Company" involved certain executive officers of the
Company. At the time of the share exchanges described therein, the
shareholders of Madison were Craig Pickering, Richard Rosenblatt, Mark Comer,
JCH Trust, MJB Trust, CSW Trust, Ross Jardine, Phil Windley and Michael Beck;
the shareholders of Cabot were Craig Pickering, Mark Comer and JCH Trust; and
the sole shareholder of R&R was Richard Rosenblatt.
The Company's principal executive offices in Provo, Utah are leased
from RDR Properties, which is owned by certain executive officers of the
Company, for $9,076 per month.
e.m.a.N.a.t.e., which is a wholly owned subsidiary of the Company,
received $167,200 from the Company in 1995 for computer graphic design work.
The Company owes Martin Rosenblatt, Vice President of the Company,
$99,398, arising from the settlement of certain indebtedness owed to Mr.
Rosenblatt from e.m.a.N.a.t.e. prior to the Company's share exchange with
e.m.a.N.a.t.e. This amount bears interest at the rate of ten percent per
annum, and is unsecured.
On January 3, 1997, the Company borrowed $500,000 from an affiliated
party. This loan accrues interest at ten percent per annum, is personally
guaranteed by Craig Pickering, the Company's President, and Richard Rosenblatt
and Mark Comer, each an Executive Vice President of the Company. This loan is
due in full on March 31, 1997.
On May 22, 1996, the Company effected a four for one forward stock
split. All references in this registration statement take such split into
effect when referring to the number of shares of the Company's common stock or
per share data.
Item 8. DESCRIPTION OF SECURITIES
The Company's Articles of Incorporation, as amended, authorize the
issuance of 300,000,000 shares of common stock, $.001 par value per share, of
which 60,493,827 shares were outstanding as of January 30, 1997, and held by
448 shareholders of record. As of January 30, the Company had issued warrants
to purchase 500,000 shares of common stock at exercise prices of between $1.31
and $7.00 per share. These warrants are exercisable at various dates from the
present through the year 2001. Holders of shares of the Company's common
stock are entitled to one vote for each share on all matters to be voted on by
the stockholders, including the election of members of the Company's Board of
Directors, who are each elected annually for one year terms. There are no
provisions in the Company's Articles of Incorporation, as amended, or the
Company's Bylaws, as amended, which would delay, defer or prevent a change in
control of the Company. Holders of the Company's common stock have no
cumulative voting rights. Holders of shares of the Company's common stock are
entitled to share ratably in dividends, if any, as from funds legally
available therefor. In the event of a liquidation, dissolution or winding up
of the Company, the holders of shares of the Company's common stock are
entitled to share pro rata all assets remaining after payment in full of all
liabilities. Holders of the Company's common stock have no preemptive rights
to purchase the Company's common stock. There are no conversion rights or
redemption or sinking fund provisions with respect to the Company's common
stock. All of the outstanding shares of the Company's common stock are fully
paid and non-assessable.
PART II
Item 1. MARKET PRICE OF AND DIVIDENDS On THE REGISTRANT'S COMMON EQUITY
AND OTHER STOCKHOLDER MATTERS
The Company's common stock is traded on the OTC Bulletin Board under
the symbol "IIML." The following table sets forth, on a per share basis, and
for the periods indicated, the high and low sales prices of the Company's
common stock as reported on the OTC Bulletin Board. No dividends have been
declared or paid on the Company's common stock, nor does the Company intend to
declare or pay any dividends on the Company's common stock in the near future.
All sales prices are set forth taking into effect all stock splits, exclusive
of commissions or discounts of any nature. As of January 30, 1997, there were
approximately 448 shareholders of record of the Company's common stock. The
average daily trading volume of the Company's common stock since January 1996
is approximately 65,600 shares per day. The Company did not exist in its
present form prior to January 1996, therefore stock prices prior to that time
are not applicable.
Price Range
---------------------------------
High Low
----------- -----------
1996:
First Quarter $ 3.25 $ 2.25
Second Quarter 14.00 2.19
Third Quarter 12.13 4.28
Fourth Quarter 5.88 2.00
1997:
First Quarter
(through January 30, 1997) 2.81 1.87
Item 2. LEGAL PROCEEDINGS
The Securities and Exchange Commission (the "SEC") informed the
Company in June, 1996 that it was conducting an informal investigation of the
Company. The focus of that investigation appears to the Company to be (i) the
removal of restrictive legends from shares of the Company's stock prior to the
share exchange transactions that occurred in January 1996; (ii) the sale of
shares by prior affiliates of the Company; (iii) the purchase and sale of
shares by persons that bought stock prior to the share exchange transactions
that occurred in January, 1996; and (iv) the trading activity in the Company's
stock in the first and second quarter of 1996. The SEC has requested and
received copies of documents from the Company's transfer agent and has
interviewed special outside counsel for the Company in connection with the
investigation. The Company does not know the current status of the
investigation and has not had any formal or informal communication with the
SEC since August 1996.
The Company is involved in various other legal proceedings in the
ordinary course of business, but is aware of no other legal proceedings which
appear at this time as if the might have a material impact on its business.
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS On ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Item 4. RECENT SALES OF UNREGISTERED SECURITIES
The following list shows all sales of unregistered securities consisting
of common stock of the Company in the past three years. All such sales were
of shares of the Company's common stock, and the information has been adjusted
to take into account all stock splits, including a one for nineteen reverse
split in January, 1996, and the four for one forward split in May, 1996. No
underwriters were involved in any of the transactions described below. All
shares of common stock issued in these transactions bear restrictive legends.
The consideration given in each of the share exchanges was all of the
outstanding common stock of the other constituent company. Each share
exchange was exempt from registration under Section 4(2) of the Securities Act
of 1933, as amended (the "Securities Act"). The consideration in the
International Marketing Associates private placement was services in the
nature of promotional work at industry conventions. Each private placement
was exempt from registration pursuant to Regulation D of the Securities Act.
All persons receiving shares in the transactions described below were allowed
access to the Company's books and records and made representations to the
Company that they were acquiring shares of the Company's common stock for
their own account and for investment purposes only.
Share Exchange with Madison York & Associates, Inc. January 15, 1996
Number of shares issued: 16,824,900
Share Exchange with Cabot Richards & Reed, Inc. January 15, 1996
Number of shares issued: 11,200,000
Share Exchange with R & R Advertising, Inc. January 15, 1996
Number of shares issued: 4,800,000
Share Exchange with Inter-Active Marketing Group, Inc. March 5, 1996
Amount of shares issued: 1,634,800
International Marketing Associates Private Placement July 17, 1996
Amount of shares issued: 4,000
These shares of the Company's common stock were issued in exchange for
International Marketing Associates agreeing to perform certain services for
the Company including promotional services at trade shows. The Company
intends to cancel these shares due to lack of performance by International
Marketing Associates.
The Company has issued warrants to purchase an aggregate of 500,000
shares of common stock at various exercise prices which are exercisable at
various dates from the date hereof through the year 2001. All of these
warrants were issued for services rendered on behalf of the Company, were not
registered under the Securities Act and were exempt from any such registration
under Section 4(2) of the Securities Act.
Item 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 78.751 of the Nevada General Corporation
Law, the Company may indemnify its officers and directors against expenses
incurred by such persons in connection with any threatened, pending or
completed action, suit or proceedings, whether civil, criminal, administrative
or investigative, involving such persons in their capacities as officers and
directors, so long as such persons acted in good faith and in a manner which
they reasonably believed to be in the best interests of the Company. If the
legal proceeding, however, is by or in the right of the Company, the director
or officer may not be indemnified in respect of any claim, issue or matter as
to which he is adjudged to be liable for negligence or misconduct in the
performance of his duty to the Company unless a court determines otherwise.
Under Nevada law, corporations may also purchase and maintain
insurance or make other financial arrangements on behalf of any person who is
or was a director or officer (or is serving at the request of the corporation
as a director or officer of another corporation) for any liability asserted
against such person and any expenses incurred by him in his capacity as a
director or officer. These financial arrangements may include trust funds,
self insurance programs, guarantees and insurance policies.
Article 6.E of the Articles of Incorporation of the Company and
Article 5 of the Bylaws of the Company provide that, to the fullest extent
permitted by law, directors of the Company will not be liable for monetary
damages to the Company or its stockholders for breaches of their fiduciary
duties.
The Company maintains Director and Officer liability insurance with
an aggregate coverage amount of $1,000,000.
<PAGE>
PART F/S FINANCIAL STATEMENTS
The following is a list of the financial statements filed herewith:
Unaudited Financial Statements of iMall, Inc. as of September 30, 1996 and for
the nine month period then ended, Audited Financial Statements as of June 30,
1996 and for the six month period then ended, and Audited Financial Statements
as of December 31, 1995 and for the twelve month period then ended:
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
Audited Financial Statements of Madison, York & Associates, Inc. as of
December 31, 1995 and for the twelve month period then ended:
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
Audited Financial Statements of Cabot, Richards & Reed, Inc. as of December
31, 1995 and 1994 and for the twelve month periods then ended:
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
Audited Financial Statements of R & R Advertising, Inc. as of December 31,
1995, 1994 and 1993 and for the twelve month periods then ended:
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
<PAGE>
Audited Financial Statements of Physicomp Corporation (d.b.a. e.m.a.N.a.t.e.)
as of December 31, 1995 and for the twelve month period then ended, and as of
April 30, 1996 and for the four month period then ended.
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
iMall, Inc.
(Formerly Natures Gift, Inc.)
Financial Statements
September 30, 1996, June 30, 1996 and December 31, 1995
C O N T E N T S
Accountants' Report 3
Consolidated Balance Sheets 4
Consolidated Statements of Operations 6
Consolidated Statements of Stockholders' Equity 7
Consolidated Statements of Cash Flows 8
Notes to the Consolidated Financial Statements 10
<Letterhead of Crouch, Bierwolf & Chisholm, Certified Public Accountants,
appears here>
CROUCH, BIERWOLF & CHISHOLM
Certified Pubic Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of iMall, Inc.:
We have audited the accompanying consolidated balance sheet of iMall, Inc.
(formerly Nature's Gift, Inc.) as of June 30, 1996 and December 31, 1995 and
the related consolidated statements of operations, stockholders' equity and
cash flows for six months ended June 30, 1996 and the year ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The financial statements as of
September 30, 1996 were not audited by us and, accordingly, we do not express
an opinion on them.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial position of iMall,
Inc. as of June 30, 1996 and December 31, 1995 and the results of its
operations and cash flows for the six months ended June 30, 1996 and the year
ended December 31, 1995 in conformity with generally accepted accounting
principles.
/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
October 1, 1996
iMall Inc.
Consolidated Balance Sheets
ASSETS
------
September 30, June 30, December 31,
1996 1996 1995
-------------- ----------- ------------
(unaudited)
CURRENT ASSETS
Cash $ 321,514 $ 741,285 $ 41,696
Accounts receivable
(net of allowance of
$43,833, $43,379
and $0, respectively) 218,641 673,405 -
Accounts receivable -
related party (Note 5) 2,039 1,896 183,995
Employee receivable 19,011 - -
Inventory (Note 1) 142,259 158,277 -
Prepaid Expenses 352,511 182,930 81,952
------------- ----------- ----------
Total Current Assets 1,055,975 1,757,793 307,643
----------- ----------- ----------
PROPERTY &
EQUIPMENT (Note 1)
Office equipment 331,749 301,020 -
Furniture & fixtures 93,627 89,043 -
Computer hardware 475,014 308,386 62,088
Computer software 151,297 32,459 -
Leased equipment 121,760 121,760 -
Leasehold improvements 196,867 183,765 -
----------- ----------- ----------
1,370,314 1,036,433 62,088
Less:
Accumulated depreciation (225,212) (172,017) (2,853)
Accumulated depreciation -
leased equipment (29,595) (29,206) -
----------- ----------- ----------
Total Property & Equipment 1,115,507 835,210 59,235
----------- ----------- ----------
OTHER ASSETS
Notes receivable 250,000 - -
Deposits 20,396 20,796 -
Organization costs
(Note 1) 1,511 1,626 934
----------- ----------- ---------
Total Other Assets 271,907 22,422 934
----------- ----------- ---------
TOTAL ASSETS $ 2,443,389 $ 2,615,425 $ 367,812
=========== =========== =========
The accompanying notes are an integral part of these financial statements.
iMall, Inc.
Consolidated Balance Sheets
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30, June 30, December 31,
1996 1996 1995
-------------- ------------- ------------
CURRENT LIABILITIES (unaudited)
Accounts payable $ 453,243 $ 476,261 $ 65,290
Payroll taxes payable 6,310 33,883 -
Accrued commissions 54,921 119,940 -
Accrued vacation 13,820 5,000 -
Accrued bonuses 18,500 10,800 -
Accrued payroll 97,624 54,827 -
Accrued interest -
related party (Note 5) 6,968 9,406 -
Tax liability - current 148,711 290,785 5,821
Tax liability - deferred
(Note 1) 8,956 8,956 -
Current portion of
long-term liabilities (Note 3) 195,842 155,171 52,420
-------------- ------------- ------------
Total Current Liabilities 1,004,895 1,165,029 123,531
-------------- ------------- ------------
LONG TERM LIABILITIES
Note payable (Note 3) 12,500 12,500 -
Note payable-related party
(Note 3) 145,082 145,082 52,420
Capital lease obligations
(Note 3) 80,494 89,848 -
Less current portion (195,842) (155,171) (52,420)
-------------- ------------- ------------
Total long term Liabilities 42,234 92,259 -
TOTAL LIABILITIES 1,047,129 1,257,288 123,531
-------------- ------------ ------------
STOCKHOLDERS' EQUITY
Common stock par value $.001
100,000,000 shares authorized
60,489,827, 60,489,827 and
38,453,631 shares issued and
outstanding respectively 60,489 60,489 38,453
Paid-in-capital 369,714 394,714 226,359
Retained earning (deficit) 966,057 902,934 (20,531)
------------- ----------- ------------
Total Stockholders' Equity 1,396,260 1,358,137 244,281
------------- ----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,443,389 $ 2,615,425 $ 367,812
============= =========== ============
The accompanying notes are an integral part of these financial statements.
iMall, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the nine For the nine For the year
months ended months ended For the six ended
September September months ended December 31,
30, 1995 30, 1995 June 30, 1996 1995
-------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 12,601,116 $ 258,561 $ 8,842,497 $ 1,003,965
COST OF GOODS SOLD 4,807,244 94,488 3,648,370 195,903
COST OF GOODS SOLD -
RELATED PARTY (Note 5) 1,576,125 60,649 1,024,985 241,132
-------------- -------------- -------------- --------------
GROSS PROFIT 6,217,747 103,424 4,169,142 566,930
-------------- -------------- -------------- --------------
GENERAL &
ADMINISTRATIVE EXPENSES 4,520,875 84,727 2,603,366 588,454
RELATED PARTY
EXPENSES (Note 5) 79,548 - 52,320 -
-------------- -------------- -------------- --------------
Operating Income 1,617,324 18,697 1,513,456 (21,524)
-------------- -------------- -------------- --------------
OTHER INCOME
AND (EXPENSES)
Miscellaneous income 136,112 - 87,391 3,912
Interest income 6,125 - 3,330 -
Depreciation (122,396) (880) (72,778) (2,853)
Bad debt (33,835) - (28,835) -
Interest (5,014) - (7,836) -
Loss on disposal of asset (6,342) - - -
Amortization (10,203) - (530) (66)
-------------- -------------- -------------- --------------
Total other income and
expenses (35,553) (880) (19,258) 993
-------------- -------------- -------------- --------------
Income before income taxes 1,581,771 17,817 1,494,198 (20,531)
-------------- -------------- -------------- --------------
Provision for income taxes
(Note 1):
Current 586,227 - 561,777 -
Deferred 8,956 - 8,956 -
-------------- -------------- -------------- --------------
Net income $ 986,588 $ 17,817 $ 923,465 $ (20,531)
============== =============== ============== ==============
Net income (loss) per share $ .017 $ .00 $ 0.016 $ (0.00)
============== =============== ============== ==============
Weighted average of common
shares outstanding 58,283,999 38,333,591 57,181,086 38,396,766
============== =============== ============== ==============
</TABLE>
The accompanying notes are integral part of these financial statements.
iMall, Inc.
Consolidated Statements of Stockholders' Equity
From January 1, 1995 through June 30, 1996
Additional Retained
Common Stock Paid-in Earnings
Shares Amount Capital (Deficit)
----------- ----------- ----------- -----------
Balance at
January 1, 1995 - $ - $ - $ -
Stock issued for
cash at $1.50 3,000 2 1,998 -
Stock issued in
acquisition of
EMS, Inc. (Note 2) 750 1 12,811 -
Stock issued in
private placement
(Note 2) 62,500 63 249,937 -
Net loss from inception
of operations on
September 1, 1995
through
December 31, 1995 - - (20,531)
----------- ----------- ----------- -----------
Balances,
December 31, 1995 66,250 $ 66 $ 264,746 $(20,531)
Adjustment for
fractional share
on stock split (Note 2) 1,396 - - -
Reorganization
adjustment due to
reverse acquisition
(Note 1) 38,387,381 38,388 (40,734) -
Shares issued for
acquisition of
Cabot, Richards &
Reed, Inc. (Note 2) 11,200,000 11,200 (131,216) -
Shares issued for
acquisition of
R&R Advertising, Inc.
(Note 2) 4,800,000 4,800 283,000 -
Shares issued for
services (Note 2) 2,800,000 2,800 25,200 -
Shares issued for
acquisition of
Physicomp, Inc.
(EmaNate, Inc.)
(Note 2) 1,600,000 1,600 (66,107) -
Shares issued for
acquisition of
Interactive Marketing,
Inc. (Note 2) 1,634,800 1,635 59,825 -
Net income for six
months ended June 30,
1996 - - - 923,465
----------- ----------- ----------- -----------
Balances at June 30,
1996 60,489,827 $ 60,489 $ 394,714 $ 902,934
Distribution of S-Corp
earnings (Note 2) - - (25,000) -
Net income for the
three months
ended September
30, 1996 63,123
----------- ----------- ----------- -----------
Balances at
September 30, 1996 60,489,827 $ 60,489 $ 369,714 $ 966,057
========== =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
iMall, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine For the nine For the year
months ended months ended For the six ended
September September months ended December 31,
30, 1995 30, 1995 June 30, 1996 1995
-------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash Flows From Operating
Activities
Net income (loss) $ 986,588 $ 17,817 $ 923,465 $ (20,531)
Non-cash items:
Depreciation & amortization 132,599 880 73,308 2,919
Bad debt 33,835 - 28,835 -
Stock issued for services 28,000 - 28,000 -
Loss on disposal of assets 6,342 - - -
Changes in current assets
and liabilities:
Accounts receivable (124,088) - (559,387) -
Accounts receivable-related
party (2,039) - (1,896) (22,375)
Prepaid Expenses (191,676) (44,880) (22,095) (81,952)
Deposits 2,930 - 2,530 -
Inventory (62,969) - (78,987) -
Accounts payable 159,971 37,721 182,989 65,290
Accrued liabilities 79,276 - 112,551 5,820
Accrued interest-related
party (20) - 2,418 -
Tax liability - current 148,481 - 290,555 -
Tax liability - deferred 8,950 - 8,950 -
-------------- -------------- -------------- --------------
Net Cash Provided (Used)
by Operating Activities 1,206,180 11,538 991,236 (50,829)
-------------- -------------- -------------- --------------
Cash Flows from Investing
Activities
Cash received on acquisition
of subsidiaries 152,046 - 152,046 -
Purchase of property and
equipment (725,855) - (375,494) (49,275)
Cash paid for other assets - - - (1,000)
Cash paid for notes receivable (250,000) - - (250,000)
Cash received on notes
receivable - - - 88,380
-------------- ------------- --------------- --------------
Net Cash Provided (Used)
by Investing Activities (823,809) - (223,448) (211,895)
-------------- ------------- --------------- --------------
Cash Flows from Financing
Activities
Cash received from stock
issuance - 2,000 - 252,000
Proceeds from debt financing - - - 137,002
Cash paid for undistributed
S-corp earnings (25,000) - - -
Cash paid on long term debt (35,857) - (26,503) (84,582)
-------------- -------------- -------------- --------------
Net Cash Provided (Used)
by Financing Activities (60,857) 2,000 (26,503) 304,420
-------------- -------------- -------------- --------------
Increase in Cash 321,514 13,538 741,285 41,696
Cash and Cash Equivalents
at Beginning of Period - - - -
-------------- -------------- ------------- --------------
Cash and Cash Equivalents
at End of Period $ 321,514 $ 13,538 $ 741,285 $ 41,696
============== ============== ============== ==============
</TABLE>
iMall, Inc.
Consolidated Statements of Cash Flows
(Continued)
<TABLE>
<CAPTION>
For the nine For the nine For the year
months ended months ended For the six ended
September September months ended December 31,
30, 1995 30, 1995 June 30, 1996 1995
-------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Supplemental Cash Flow
Information:
Cash paid for interest $ 5,014 $ - $ 7,386 $ -
Cash paid for income taxes $ 413,066 $ - $ 270,992 $ -
Non-cash financing
transaction:
Purchase of equipment with
lease obligations $ 40,759 $ - $ 40,759 $ -
Stock issued for equipment $ - $ - $ - $ 12,812
</TABLE>
The accompanying notes are an integral part of these financial statements.
iMall, Inc.
Notes to Consolidated Financial Statements
June 30, 1996 and December 31, 1995
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
The financial statements presented are those of iMall, Inc. (formerly
Natures Gift, Inc.) (the Company). The Company was incorporated under the
laws of the State of Utah on February 9, 1984 as Brickland Corporation. On
May 31, 1991 the Company changed its name to Nature's Gift, Inc., but remained
inactive. On January 8, 1996 the Company entered an agreement to acquire
Madison, York & Associates, Inc. (a Utah Corporation) through a reverse
acquisition. The recapitalized company then acquired Cabot, Richards & Reed,
Inc. (a Utah Corporation) and R&R Advertising, Inc. (a California
Corporation). The Company issued 16,736,399 shares for all the outstanding
stock of Madison, York & Associates, Inc. (Madison) , 4,800,000 shares for R&R
Advertising, Inc. (R&R) and 11,200,000 shares for Cabot, Richards & Reed, Inc.
(Cabot). The acquisition of Madison was accounted for as a purchase with a
recapitalization (reverse acquisition). The historical financial information
prior to the acquisition is that of Madison York (the acquirer) and the
stockholders' equity was retroactively restated on the December 31, 1995
balance sheet for the equivalent number of shares received in the merger after
giving effect to the difference in par value. The acquisitions of R&R and
Cabot were accounted for under the purchase method of a business combination.
Subsequent to the acquisitions, the Company changed its name to iMall,
Inc. The Companies acquired are in the seminar, advertising and Internet
business. Their main focus is on building the "iMall" which is an electric
shopping mall on the Internet. During the first quarter 1996, the Company
changed the name of its subsidiary Madison York & Associates to iMall
Consulting, Inc. On January 17, 1996, the Company created another subsidiary
by organizing a corporation in Nevada named iMall Services, Inc. Various
assets of R&R were transferred over to iMall Services at the recorded book
values and the customer service function previously done by iMall Consulting
was thereafter done through iMall Services. The assets and operations of
iMall Services are consolidated with all other subsidiaries in these financial
statements.
The Company acquired two companies involved in Internet technology during
the second quarter. On May 1, 1996, the Company acquired Physicomp, Inc.
(EmaNate), a company specializing in information systems and Internet
consulting, in a business combination accounted for as a purchase. On April
1, 1996, the Company acquired Inter-Active Marketing Group, Inc., a company
specializing in yellow-page advertising on the Internet, in a business
combination accounted for as a purchase (Note 2).
The Company's headquarters are in Provo, Utah with offices in Studio
City, California and Woodland Hills, California.
b. Recognition of Revenue
The Company has several types of revenue generated from six activities.
The different types of revenue and the timing of the revenue recognition is
listed below:
SEMINAR REVENUE
The Company stages seminars to businesses and individuals introducing
them to the Internet and the iMall, a shopping mall on the Internet. The
attendees pay a fee for the seminar. Recognition of the revenue occurs at the
completion of the seminar.
NOTE 1 - Summary of Significant Accounting Policies (Continued)
HOMESTUDY REVENUE
The Company offers homestudy courses on the same material discussed in
seminars. The customer pays the homestudy fee before receiving the materials.
Recognition of the revenue occurs when an order is placed.
MAINTENANCE FEE
The Company maintains web sights for customers for a monthly fee. The
fee is collected monthly. Recognition of revenue occurs when a customer is
billed for said fees.
WEB SITE DESIGN REVENUE
The Company designs and upgrades web sights for customers. The customer
is provided bids on the designs. Recognition of the revenue occurs when the
customer is billed for the design or upgrade.
WORKSHOP REVENUE
The Company offers several different seminars that relate to information
systems and Internet technology. The attendees pay a fee for the seminars.
Recognition of the revenue occurs at the completion of the seminar.
COMMERCE REVENUE
The Company participates in the commerce generated by the businesses on
the iMall. A percentage of some of the revenue generated is recognized when
the sale is made to the buyer.
All revenues except the homestudy revenues are considered service
revenues. Homestudy revenues are generated from sale of physical goods, ie
study manuals. However, the revenues generated from homestudy is less than 1%
of total revenues, therefore separate classifications for revenue and cost of
sales are not presented.
The Company recognizes all revenue and expenses on the accrual basis of
accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements.
d. Provision for Income Taxes
The Company files a consolidated income tax return for iMall, Inc. and
its subsidiaries. The provision for income taxes includes a deferred and
current portion.
Deferred income taxes arise from timing differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or noncurrent,
depending on the classification of the assets and liabilities to which they
relate. Deferred taxes arising from timing differences that are not related
to an asset or liability are classified as current or noncurrent, depending on
the periods in which the timing differences are expected to reverse.
NOTE 1 - Summary of Significant Accounting Policies (Continued)
The principal source of timing differences are due to different
depreciation methods used for financial accounting and tax reporting. The
balance of deferred tax liabilities at June 30, 1996 is $8,956. No deferred
taxes existed at December 31, 1995 because Madison was an S Corporation
which passed all taxes through to its shareholders. Due to the acquisition,
Madison, R&R and Cabot lost their S-Corp status. There were no undistributed
S-Corp earnings in Madison, therefore, no adjustment to retained earnings was
necessary.
The deferred tax liability and the provision for income taxes is
calculated as follows at June 30, 1996 and December 31, 1995:
1996 1995
-------- --------
Current provision for income taxes:
Federal $ 472,558 $ -
State 89,219 -
Deferred 8,956 -
Total provision for income taxes $ 570,733 $ -
Deferred tax liability arising from:
Excess of tax over financial
accounting depreciation $ 8,956 $ -
A reconciliation of the income tax expenses at the statutory rate to income
tax expense at the Company's effective rate is as follows:
1996 1995
-------- --------
Computed tax at the expected statutory rate $ 508,028 $ -
State income tax-net of federal tax benefits 58,885 -
Means and entertainment expenses not deductible 3,820 -
Income tax expense $ 570,733 $ -
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
f. Property and Equipment
Expenditures for property and equipment and for renewals and
betterments, which extend the originally estimated economic life of assets or
convert the assets to a new use, are capitalized at cost. Expenditures for
maintenance, repairs and other renewals of items are charged to expense. When
items are disposed of, the cost and accumulated depreciation are eliminated
from the accounts, and any gain or loss is included in the results of
operations.
The provision for depreciation is calculated using the straight-line
method over a five to seven year life. The leasehold improvements are
depreciated over thirty years. The Company changed the leasehold improvement
period to ten years on June 30, 1996. The depreciation expense for the
periods ended June 30,
1996 and December 31, 1995 was $72,778 and $2,853 respectively.
g. Inventory
Inventory consists of the following at June 30, 1996 and December 31,
1995:
1996 1995
-------- --------
Preproduced commercials $ 79,290 $ -
Seminar literature 75,852 -
Computers 3,135 -
Inventory consists of pre-produced commercials, seminar literature and
computer equipment. Pre-produced commercials are regularly sold to the
Company's clients with minor editing. The Company capitalized the costs paid
to outside sources to produce the commercials. The market value is regularly
evaluated by management based on the industry demand to determine if an
adjustment to lower the carrying value is necessary. Seminar literature is
the materials used in conjunction with seminar presentation and home-study
courses. Computer equipment is available to sell to customers or to
employees. Inventory is stated at the lower of cost or market.
h. Organization Costs
Costs incurred to organized the Company have been capitalized and will
be amortized over a 60 month period.
i. Consolidation policy
These consolidated financial statements include the books of iMall,
Inc., Cabot, Richards & Reed, Inc., R&R Advertising, Inc. iMall Consulting,
Inc., iMall Services, Inc., Physicomp, Inc. (EmaNate, Inc.) and Inter-Active
Marketing, Inc. All intercompany accounts and transactions have been
eliminated in the consolidation.
j. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. In these financial
statements, assets, liabilities and earnings involve extensive reliance on
management's estimates. Actual results could differ from those estimates.
NOTE 2 - Stock Transactions
The Company entered into an agreement on September 27, 1995 with EMS,
Inc. and its principals to acquire the assets of EMS, Inc. which consists of
computer equipment, software and a web site on the Internet called the iMall.
The Company issued 750 shares of common stock in exchange for 100% of the
stock of EMS, Inc. The acquisition was valued at $12,812 and accounted for as
a purchase.
On December 10, 1995, the board of directors authorized the issuance of
200,000 shares to qualified investors in a private placement. At December 31,
1995, 62,500 shares were issued at a price per share of $4.00. Proceeds of
$250,000 were received by the Company.
On January 8, 1996 the Company effected a reverse split of 1 for 19
shares and on March 22, 1996 the Company effected a forward stock split of 4
for 1. All per share amounts for have been retroactively restated to reflect
the stock split. The Company also changed its authorized common stock to
40,000,000 shares with a par value of $.001.
Per the stock exchange agreement and merger previously mentioned, the
Company issued 4,800,000 shares to R&R Advertising for all their outstanding
stock. R&R's net book value of $287,000 was recorded as the value of the
acquisition. 11,200,000 shares were issued to Cabot, Richards & Reed for all
their outstanding stock, with a net book value of $(120,016). Because the
fair market value of the stock issued to Cabot at the time of the acquisition
could not be determined, no goodwill was recognized in the transaction and the
net asset value was used to value the acquisition. 16,824,900 shares were
issued to Madison, York Associates for all their outstanding stock. The net
book value of Madison of $244,281 was recorded as the value of this
acquisition. The Company also issued 2,800,000 shares to an investment
banking firm for services valued at $28,000 which were rendered in connection
with the acquisition. No relationship existed between the Company and the
investment banking firm prior to the services performed.
Subsequent to the acquisition, the retained earnings of iMall, Inc.
were cleared and the history of the Madison (iMall Consulting) was recorded.
The merger was treated as a reverse acquisition and reorganization. The
stockholders' equity on the December 31, 1995 financial statements were
retroactively restated for the equivalent number of shares received in the
merger after giving effect to the difference in par value, plus the shares
outstanding in Nature's Gift at the time of the acquisition. The adjustment
makes the stockholders' equity at December 31, 1995 comparable with that June
1996.
On May 1, 1996, the Company acquired Physicomp, Inc. (EmaNate), a
company specializing in information systems, Internet consulting and front-
page creations for web sites on the Internet, in a business combination
accounted for as a purchase. The results of operations of Physicomp are
included in the accompanying financial statements since the date of
acquisition. Physicomp exchanged all outstanding shares of common stock for
1,600,000 shares of common stock in the Company. The acquisition was recorded
at the net asset value of Physicomp of $(64,507), because the value of the
Company stock could not be determined.
On April 1, 1996 the Company acquired Inter-Active Marketing Group,
Inc., (Inter-Active) a company specializing in yellow-page advertising on the
Internet, in a business combination accounted for as a purchase. The results
of operations of Inter-Active are included in the accompanying financial
statements since the date of acquisition. Inter-Active exchanged all
outstanding shares of common stock for 1,634,800 shares of common stock in the
Company. The purchase was recorded at the net asset value of Inter-Active of
$61,460.
NOTE 3 - Long-Term Liabilities
Long-term liabilities consist of capital lease obligations, notes payable and
notes payable-related party. Capital lease obligations are detailed in the
following schedule as of June 30, 1996 and December 31, 1995:
June 30, December 31,
1996 1995
-------------- --------------
Capital lease obligation to a
corporation for computer
equipment, lease payments
due monthly of $632 through
June 1999, bears interest at
18% secured by computer
equipment $ 8,742 $ -
Capital lease obligation to a
corporation for copy machines,
lease payments due monthly
of $1,166 through August 1999,
bears interest at 10%, secured
by copy machines 37,844 -
Capital lease obligation to a
corporation for computer equipment,
lease payments due monthly of $1,941
through February, 1998, bears interest
at 16%, secured by computer equipment 33,946 -
Capital lease obligation to a corporation
for computer equipment, lease payments due
monthly of $354 through November 1997,
bears interest at 16%, secured by computer
equipment 4,238 -
Capital lease obligation to a
corporation for computer equipment,
lease payments due monthly of $191
through February 1998, bears interest
at 14.5%, secured by computer equipment 5,078 -
-------------- --------------
Total Capital Lease Obligations 89,848 -
-------------- --------------
Notes payable are detailed in the following schedule as of June 30, 1996 and
December 31, 1995:
June 30, December 31,
1996 1995
------------- ---------------
Note payable to a corporation due
in June 1997 12,500 -
Total notes payable 12,500 -
Note 3 - Long Term Liabilities (Continued)
Notes payable - related party are detailed in the following schedule as of
June 30, 1996 and December 31, 1995:
June 30, December 31,
1996 1995
------------- ---------------
Note payable to a shareholder, bears
interest at 10%, interest due monthly
with principal due upon demand 13,346
Note payable to a shareholder, bears
interest at 10%, interest due monthly
with principal due upon demand 15,000 -
Note payable to a shareholder, bears
interest at 10%, interest due monthly
with principal due upon demand 16,053 -
Note payable to a shareholder, bears
interest at 10%, interest due monthly
with principal due upon demand 12,607 -
Note payable to a shareholder, bears
interest at 10%, interest due monthly
with principal due upon demand 3,076 -
Note payable to a shareholder, bears
interest at 10%, interest due monthly
with principal due May 1996 10,000 -
Note payable to a shareholder, bears
interest at 10%, interest due monthly
with principal due May 1996 5,000 -
Note payable to a shareholder, bears
interest at 10%, interest due monthly
with principal due June 1996 20,000 -
Note payable to a shareholder, bears
interest at 10%, interest due monthly
with principal due May 1998 15,000 -
Note payable to a shareholder, bears
interest at 10%, interest due monthly
with principal due August 1998 25,000 -
Note payable to a corporation owned
by an officer of the Company, interest
accrues at 10%, due upon demand - 52,420
-------------- --------------
Total Notes Payable-Related Party 145,082 52,420
-------------- --------------
Total Long Term Liabilities $ 247,430 $ 52,420
-------------- --------------
Less current portion of:
Capital lease obligations (37,589) -
Notes payable (12,500) -
Notes payable - related party (105,082) ( 52,420)
-------------- --------------
Net Long Term Liabilities $ 92,259 $ -
============== ==============
Future minimum capital lease payments are as follows:
1997 $ 47,620
1998 37,038
1999 18,166
2000 2,332
--------------
105,156
Less portion representing interest (15,308)
--------------
Total $ 89,848
Future minimum payments for notes payable are as follows:
1997 $ 12,500
--------------
Total $ 12,500
--------------
Future minimum payments for notes payable - related party are as follows:
1997 $105,082
1998 40,000
Total $145,082
NOTE 4 - Commitments and Contingencies
During August 1995, the Company entered a lease agreement with RDR Properties
to lease office space. The terms of the lease are on a month to month basis,
and rent payments are $8,720 per month. The rent expense for the periods
ended June 30, 1996 and December 31, 1995 was $52,320 and $0 respectively.
The Company leases office space in its California offices for $2,294 and
$6,446 per month. The lease started May of 1995 and ends November 30, 1996.
The future minimum lease payment for 1997 total $43,700. The rent expense for
the periods ended June 30, 1996 and December 31, 1995 was $52,440, and $10,168
respectively. The total rent expense was $104,760 and $10,168 for 1996 and
1995 respectively.
Note 4 - Commitments and Contingencies (Continued)
The Company entered into a consulting agreement with an individual. The
agreement states $5,000 will be paid per month as long as the consultant
provides twenty hours of service per month. No ending date of the agreement
is stated.
NOTE 5 - Related Party Transactions
The Company paid various related parties for advertising, rent and computer
graphic design. During 1996 and 1995 Sierra Advertising received $1,460,723
and $147,555 respectively for advertising expenses. Sierra is owned by Craig
Pickering and Mark Comer, officers of the Company. The advertising expenses
are included in cost of goods sold.
The Company has a lease agreement for office space with RDR Properties (RDR)
which is also owned by Craig Pickering and Mark Comer. The Company pays
$8,720 per month to RDR. The rent paid as of June 30, 1996 and December 31,
1995 was $52,320 and $0 respectively.
The Company paid expenses for Richard Rosenblatt, an officer/shareholder of
$1,896. A receivable of $1,896 is due from the officer at June 30, 1996.
During 1995, prior to the acquisition of Cabot and R&R, Madison had several
transactions with Cabot and R&R who were owned by officers and shareholders of
Madison. At December 31, 1995 the Company had a payable of $52,420 to R&R for
advertising expenses. Total advertising expenses paid to R&R during 1995 was
$93,410. The Company advanced R&R $115,785 for these expenses having a
receivable balance of $22,375 at December 31, 1995.
The Company received $84,583 from Cabot for operating expenses. By the end of
December 31, 1995, the Company paid the loan and advanced $250,000 to Cabot
for operating expenses, leaving a receivable balance of $161,620.
Note 6 - Fair Values of Financial Instruments
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107, "Disclosure
about Fair Value of Financial Instruments". The carrying amounts and fair
value of the Company's financial instruments at June 30, 1996 and December 31,
1995 are as follows:
June 30, 1996 December 31, 1995
--------------------- -----------------------
Carrying Fair Carrying Fair
Amounts Values Amounts Values
-------- ------ -------- ------
Cash and cash
equivalents $ 741,285 $ 741,285 $ 41,696 $ 41,696
Long-term debt including
current maturities 247,430 249,402 52,420 51,131
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments.
Cash and Cash Equivalents
The carrying amounts reported on the balance sheet for cash and cash
equivalents approximate their fair value.
Note 6 - Fair Values of Financial Instruments (Continued)
Long-term Debt
The fair values of long-term debt are estimated using discounted cash flow
analyses based on the Company's incremental borrowing rate as the discount
rate.
Note 7 - Pro forma Statement of Operations
On January 8, 1996, the Company acquired all outstanding stock of Madison, R&R
and Cabot. On April 1, and May 1, 1996 the Company acquired all the
outstanding common stock of Inter-Active and Physicomp, respectively. For
accounting purposes, the acquisition of Madison has been treated as a
recapitalization of Madison, with Madison as the acquirer (reverse
acquisition). The historical financial statements prior to January 8, 1996
are those of Madison. Pro forma information giving effect to the acquisitions
as if the acquisitions took place January 1, 1995 is as follows:
September 30, December 31,
1996 1995
------------- ------------
Revenues $12,722,232 $13,179,710
Cost of goods sold 6,465,470 8,120,336
------------- ------------
Gross profit 6,256,762 5,059,374
General & administrative 4,649,609 3,910,618
Other income (expenses) (52,434) 28,934
------------- ------------
Income from continuing operations 1,554,719 1,177,690
Provision for income taxes 584,574 442,811
------------- ------------
Net income $ 970,145 $734,879
============= ============
Net income per share $ .016 $.012
============= ============
Weighted average of common shares
outstanding 60,489,827 60,429,660
============= ============
Pro forma assumptions and adjustments
- -------------------------------------
The pro forma statement of operations assumes the acquisition of all
subsidiaries occurred at January 1, 1995. Earnings per share assumes the
recapitalization and stock issuances occurred at January 1, 1995. The only
adjustments to the pro forma statement of operations is the elimination of
intercompany revenues and expenses. The elimination totals decreased sales
and cost of sales by $870,217 and $74,352 for the periods September 30, 1996
and December 31, 1995, respectively.
Note 8 - Unaudited Interim Financial Statements
The Company has elected to omit substantially all footnotes to the financial
statements for the three months ended September 30, 1996, since there have
been no material changes (other than indicated in other footnotes) to the
information reported above. The information furnished herein was taken from
the books and records of the Company without audit. However, such information
reflects all adjustments which are, in the opinion of management, necessary to
properly reflect the results of the interim period presented. The information
presented is not necessarily indicative of the results from operations
expected for the full fiscal year.
Madison, York & Associates, Inc.
Financial Statements
December 31, 1995
<PAGE>
C O N T E N T S
Accountants' Report 3
Balance Sheet 4
Statement of Operations 5
Statement of Stockholders' Equity 6
Statement of Cash Flows 7
Notes to the Financial Statements 9
<Letterhead of Crouch, Bierwolf & Chisholm, Certified Public Accountants
appears here>
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Madison, York & Associates, Inc.:
We have audited the accompanying balance sheet of Madison, York & Associates,
Inc. as of December 31, 1995, and the related statements of operations,
stockholders' equity and cash flows from inception of operations on September
1, 1995 through the four months ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Madison, York & Associates,
Inc. as of December 31, 1995 and the results of its operations and cash flows
from inception of operations on September 1, 1995 through December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
February 23, 1996
<PAGE>
Madison, York & Associates, Inc.
Balance Sheet
December 31, 1995
Assets
------
Current Assets
Cash $ 41,696
Accounts receivable - related party (Note 4) 22,375
Prepaid expenses 81,952
Notes receivable - related party (Note 4) 161,620
----------
Total Current Assets 307,643
----------
Property and Equipment (Net) (Note 2) 59,235
----------
Other Assets
Organization costs (Note 1) 934
----------
Total Assets $ 367,812
===========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Accounts payable $ 65,290
Accrued expenses 5,821
Notes payable - related parties (Note 4) 52,420
------------
Total Current Liabilities 123,531
------------
Total Liabilities 123,531
------------
Stockholders' Equity
Common stock, no par value;
10,000 shares authorized;
66,250 shares issued and outstanding 264,812
Retained deficit (20,531)
------------
Total Stockholders' Equity 244,281
------------
Total Liabilities and Stockholders' Equity $ 367,812
============
The accompanying notes are an integral part of these financial statements.
<PAGE>
Madison, York & Associates, Inc.
Statement of Operations
From Inception of Operations on September 1, 1995 through December 31, 1995
For the year
ended
December 31,
1995
------------
REVENUES $ 1,003,965
COST OF SALES 437,035
------------
GROSS PROFIT 566,930
------------
GENERAL & ADMINISTRATIVE EXPENSES 588,454
------------
Operating Income (Loss) (21,524)
------------
OTHER INCOME AND (EXPENSES)
Depreciation (2,853)
Amortization (66)
Miscellaneous income 3,912
-------------
Total Other Income and (Expenses) 993
-------------
LOSS BEFORE INCOME TAXES (20,531)
PROVISION FOR INCOME TAXES -
-------------
NET LOSS $ (20,531)
=============
NET LOSS PER SHARE $ (2.18)
=============
WEIGHTED AVERAGE OUTSTANDING SHARES $9,385
=============
The accompanying notes are an integral part of these financial statements.
Madison, York & Associates, Inc.
Statement of Stockholders' Equity
December 31, 1995
Common Stock Retained
----------------------- --------
Shares Amount Earnings
---------- ---------- --------
Balance at November 4, 1994 - $ - $ -
stock issued for cash 3,000 2,000 -
Stock issued in
acquisition of EMS, Inc.
(Note 3) 750 12,812 -
Stock issued in private
placement 62,500 250,000 -
(Note 6)
Net loss from inception
of operations
on September 1, 1995
through December 31, 1995 - - (20,531)
---------- ---------- ---------
Balances - December 31,
1995 66,250 $264,812 $(20,531)
========== ========== =========
The accompanying notes are an integral part of these financial statements.
Madison, York & Associates, Inc.
Statement of Cashflows
From Inception of Operations on September 1, 1995 through December 31, 1995
Cash Flows From Operating Activities:
Net loss $ (20,531)
Less non-cash items:
Depreciation & amortization 2,919
Decrease/(Increase) in assets:
Accounts receivable-related party (22,375)
Prepaid expenses (81,952)
Increase/(decrease) in liabilities:
Accounts payable & accrued expenses 124,908
-----------
Net cash provided by operating activities 2,969
-----------
Cash Flows From Investing Activities:
Purchase of property & equipment (49,275)
Cash paid for other assets (1,000)
Cash paid for notes receivable (250,000)
------------
Net cash used by investing activities (300,275)
------------
Cash Flows From Financing Activities:
Contribution by shareholders 252,000
Cash paid on long-term debt (50,000)
Proceeds from debt financing 137,002
----------
Net cash provided by financing activities 339,002
----------
Increase in Cash 41,696
Cash and Cash Equivalents at Beginning of Period -
-----------
Cash and Cash Equivalents at End of Period $ 41,696
==========
Madison, York & Associates, Inc.
Statement of Cashflows
From Inception of Operations on September 1, 1995 through December 31, 1995
(Continued)
Additional Cash-flow information:
Net Cash Paid For:
Income Taxes $ -
==========
Interest $ -
==========
Non-cash financing transaction:
Stock issued for equipment (Note 3) $ 12,812
=========
The accompanying notes are an integral part of these financial statements.
Note 1 - Summary of Significant Accounting Policies
Organization
- ------------
Madison, York & Associates, Inc. (The Company) was incorporated under the laws
of the state of Utah on November 4, 1994. However, the Company did not begin
operations until September 1, 1995. The Company currently operates three
divisions; a division which provides seminars to businesses and individuals on
how to get set up on the Internet, a world wide web computer network, to
advertise their products and services, a division which assists businesses and
individuals place advertisements on the Internet, and a division that operates
a web site called the "I-MALL", where businesses can advertise and sell their
products or services in the electronic shopping mall. The Company's
headquarters is located in Provo, Utah with an office in Studio City,
California.
Cash and Cash Equivalents
- -------------------------
Cash equivalents include short-term highly liquid investments with maturities
of three months or less at the time of acquisition.
Income Per Share of Common Stock
- --------------------------------
The income per share of common stock is based on the weighted average number
of shares issued and outstanding at the date of the financial statements.
Provision for Taxes
- -------------------
Madison, York & Associates, Inc. has elected to file federal and state income
taxes under corporation subchapter S. Therefore no state or federal income tax
liability exists for the Company.
Organization Costs
- ------------------
The Company has capitalized costs related to the organization of the Company.
These costs are being amortized over a period of 60 months on the straight-
line basis.
Note 1 - Summary of Significant Accounting Policies (Continued)
Recognition of Revenue
- ----------------------
The Company has several types of revenue generated from four activities. The
different types of revenue and the timing of the revenue recognition is listed
below:
SEMINAR REVENUE
The Company stages seminars to businesses and individuals introducing them to
the Internet and the iMall, a shopping mall on the Internet. The attendees
pay a fee for the seminar. Recognition of the revenue occurs at the
completion of the seminar.
HOMESTUDY REVENUE
The Company offers homestudy courses on the same material discussed in
seminars. The customer pays the homestudy fee before receiving the materials.
Recognition of the revenue occurs when an order is placed.
MAINTENANCE FEE
The Company maintains web sights for customers for a monthly fee. The fee is
collected monthly. Recognition of revenue occurs when a customer is billed
for said fees.
WORKSHOP REVENUE
The Company offers several different seminars that relate to information
systems and Internet technology. The attendees pay a fee for the seminar.
Recognition of the revenue occurs at the completion of the seminar.
All revenues except the homestudy revenues are considered service revenues.
Homestudy revenues are generated from sales of physical goods, ie study
manuals. However, the revenues generated from homestudy is less than 1% of
total revenues, therefore separate classifications for revenue and cost of
sales are not presented.
Note 2 - Property and Equipment
Property and equipment consist of the following at December 31, 1995:
Office Equipment $ 62,088
Less Accumulated Depreciation (2,853)
-----------
Total Property & Equipment $ 59,235
Depreciation expense is computed on the straight-line method over the
estimated useful lives of the assets. Depreciation expense for the period
ended December 31,1995 is $2,853.
Note 3 - Acquisition of EMS, Inc./Stock Issuance
The Company entered into an agreement on September 27, 1995 with EMS, Inc. and
its principals to acquire the assets of EMS, Inc. which consists of computer
equipment, software and a web site on the Internet. The Company issued 750
shares of common stock in exchange for 100% of the stock of EMS, Inc. The
acquisition was valued at $12,812, and accounted for as a purchase.
Note 4 - Related Parties
R&R Advertising, Inc. (R&R) is an advertising company owned by Richard
Rosenblatt, one of the principal owners of the Company. Currently, Richard
Rosenblatt serves on the Board of Directors and as vice-president of the
Company. The Company had a payable of $52,420 to R&R as of December 31, 1995.
R&R Advertising paid various advertising and operating expenses of the Company
during the year in the amount of $93,410. The Company advanced R&R $115,785
for these expenses leaving a receivable balance of $22,375 at December 31,
1995.
Cabot, Richards, & Reed, (Cabot) Inc. is a seminar company owned by Mark Comer
and Craig Pickering, two of the six principal owners of the Company's common
stock. Currently, Craig Pickering serves as President and member of the Board
of Directors for the Company. Mark Comer serves as the Treasurer/Secretary
and member of the Board of Directors for the Company. The Company received
$84,583 from Cabot for operating expenses. By the end of December 31, 1995,
the Company paid the loan and advanced $250,000 to Cabot for operating
expenses, leaving a receivable balance of $161,620.
The Company paid Sierra Advertising hte sum of $147,535 for advertising during
1995. Sierra is also owned by Mr. Pickering and Mr. Comber.
Note 5 - Contingencies and Commitments
The Company leases office space in its California office for $2,294 per month.
The lease started May of 1995 and ends November 30, 1996. The future minimum
lease payments for 1996 total $25,229.
Note 6 - Stock Issuances
The Company issued 750 shares of common stock on September 27, 1995 to EMS,
Inc.. The Company acquired all of the assets valued at $12,812. Note 3
contains the details of the transactions.
On December 10, 1995, the board of directors authorized the issuance of
200,000 shares to qualified investors in a private placement. At December 31,
1995, 62,500 shares were issued at a price per share of $4.00. Proceeds of
$250,000 were received by the Company.
Note 7 - Subsequent Events
On January 8, 1996, the Company entered into a share exchange agreement with
iMall Inc. (iMall) (formerly Natures Gift, Inc.) a publicly held company.
iMall issued shares of its common stock for all the outstanding shares of the
Company. iMall has no assets or liabilities and no operations, therefore the
merge will be treated as a reverse acquisition. Cabot and R&R were also
acquired by iMall on the same date. The merge will be effective January 1,
1996 for accounting and bookkeeping purposes, and the Company will consolidate
it's financial information with iMall and it's other subsidiaries. There was
no change in the management or operation of the Company as a result of the
acquisition.
CABOT, RICHARDS & REED, INC.
Financial Statements
December 31, 1995 and 1994<PAGE>
C O N T E N T S
Accountants' Report 3
Balance Sheets 4
Statements of Operations 6
Statements of Stockholders' Equity 7
Statements of Cash Flows 8
Notes to the Financial Statements 9
<PAGE>
[Letterhead]
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
---------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Cabot, Richards & Reed, Inc.:
We have audited the accompanying balance sheets of Cabot, Richards & Reed,
Inc. as of December 31, 1995 and 1994 and the related statements of
operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Cabot, Richards & Reed, Inc.
as of December 31, 1995 and 1994 and the results of its operations and cash
flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
February 23, 1996
<PAGE>
Cabot, Richards & Reed, Inc.
Balance Sheets
ASSETS
-------
December 31 December 31
1995 1994
-------------- --------------
CURRENT ASSETS
Cash $ - $ -
Accounts receivable - 7,600
Accounts receivable-
related party (Note 2) - 300,000
Prepaid Expenses 50,440 -
-------------- --------------
Total Current Assets 50,440 307,600
-------------- --------------
PROPERTY & EQUIPMENT (Note 1)
Furniture & fixtures 25,434 21,869
Leasehold improvements 109,906 2,200
Leased equipment 54,878 54,878
Office equipment 117,531 83,711
--------------- -------------
307,749 162,658
Less:
Accumulated depreciation (63,358) (37,904)
Accumulated depreciation -
leased equipment (14,635) (3,659)
--------------- -------------
Total Property & Equipment 229,756 121,095
-------------- -------------
TOTAL ASSETS $ 280,196 $ 428,695
============== =============
The accompanying notes are an integral part of these financial statements.
Cabot, Richards & Reed, Inc.
Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31 December 31
1995 1994
---------------- ---------------
CURRENT LIABILITIES
Bank overdraft $ 40,170 $ 321,206
Accounts payable 149,925 14,061
Accounts payable-
related party (Note 2) 161,620 -
Accrued expenses 5,696 -
Current portion of long-term
liabilities (Note 3) 13,992 13,992
---------------- ---------------
Total Current Liabilities 371,403 349,259
---------------- ---------------
LONG TERM LIABILITIES (Note 3)
Capital lease obligations 42,802 52,008
Less current portion (13,992) (13,992)
---------------- ---------------
Total long term Liabilities 28,810 38,016
---------------- ---------------
TOTAL LIABILITIES 400,213 387,275
---------------- ---------------
STOCKHOLDERS' EQUITY
Common stock, authorized
10,000 shares issued and
outstanding 2,000 shares
respectively 2,070 2,070
Retained earnings (122,087) 39,350
---------------- ---------------
Total Stockholders' Equity (120,017) 41,420
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 280,196 $ 428,695
================ ===============
The accompanying notes are an integral part of these financial statements.
<PAGE>
Cabot, Richards & Reed, Inc.
Statements of Operations
For the years ended December 31
----------------------------------------
1995 1994 1993
------------- ------------- -------------
REVENUES $ 6,603,988 $ 5,994,022 $ 3,235,785
COST OF SALES 3,776,763 3,495,408 1,708,537
------------- ------------- -------------
GROSS PROFIT 2,827,225 2,498,614 1,527,248
------------- ------------- -------------
GENERAL & ADMINISTRATIVE EXPENSES 2,009,309 2,178,795 1,483,586
------------- ------------- -------------
Operating Income 817,916 319,819 43,662
------------- ------------- -------------
OTHER INCOME AND (EXPENSES)
Miscellaneous workshop income 111,980 - -
Inerest expense (4,786) (2,168) (3,147)
Loss on disposal of assets (953) (1,743) -
Depreciation (37,677) (36,116) (7,796)
Total Other Income and
(Expenses) 68,564 (40,027) (10,943)
------------- ------------- -------------
INCOME BEFORE INCOME TAXES 886,480 79,792 32,719
PROVISION FOR INCOME TAXES - - -
------------- ------------- ------------
NET INCOME $ 886,480 $ 279,792 $ 32,719
============= ============== ==============
NET INCOME PER SHARE $ 443.24 $ 139.89 $ 16.36
============= ============== ==============
WEIGHTED AVERAGE OUTSTANDING
SHARES 2,000 2,000 2,000
============= ============== ==============
The accompanying notes are an integral part of these financial statements.
Cabot, Richards & Reed, Inc.
Statements of Stockholders' Equity
From January 1, 1993 through December 31, 1995
Common Stock Retained
--------------------------- Earnings
Shares Amount (Deficit)
-------------- -------------- --------------
Balance on January 1, 1993 - $ - $ -
-------------- -------------- --------------
Issuance of stock for cash 2,000 2,070 -
Net income for the year ended
December 31, 1993 - - 32,719
-------------- -------------- --------------
Balance on December 31, 1993 2,000 2,070 32,719
Dividends paid during 1994 (273,162)
Net income for the year
ended December 31, 1994 - - 279,793
-------------- -------------- --------------
Balance on December 31, 1994 2,000 2,070 39,350
Dividends paid during 1995 - - (1,047,917)
Net income for the year
ended December 31, 1995 - - 886,480
-------------- -------------- --------------
Balance on December 31, 1995 2,000 $ 2,070 $ 122,087
============== =============== ===============
The accompanying notes are an integral part of these financial statements.
Cabot, Richards & Reed, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the years ended December 31
------------------------------------------------
1995 1994 1993
-------------- --------------- ---------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net gain (loss) $ 886,480 $ 279,792 $ 32,719
Non-cash items:
Depreciation & amortization 37,677 36,116 7,796
Loss on disposal of assets 953 1,743 -
Changes in current assets and liabilities:
Accounts receivable 7,600 (700) -
Accounts receivable - related party 300,000 - -
Prepaid Expenses (50,440) - -
Accounts payable (159,099) 222,822 108,354
Accrued liabilities 5,696 - -
-------------- --------------- ---------------
Net Cash Provided (Used) by Operating
Activities 1,028,867 539,773 148,869
-------------- --------------- ---------------
Cash Flows from Investing Activities
Purchase of property and equipment (137,161) (34,511) (73,269)
Cash paid for notes receivable (84,583) (229,230) (77,670)
-------------- --------------- ---------------
Net Cash Provided (Used) by Investing
Activities (221,744) (263,741) (150,939)
-------------- --------------- ---------------
Cash Flows from Financing Activities
Dividends paid (1,047,917) (273,162) -
Cash paid on long term debt (9,206) (2,870) -
Cash received from debt financing 250,000 - -
Issuance of common stock - - 2,070
-------------- ---------------- --------------
Net Cash Provided (Used) by
Financing Activities (807,123) (276,032) 2,070
-------------- --------------- ---------------
Increase in Cash - - -
Cash and Cash Equivalents at Beginning
of Period - - -
-------------- ---------------- ---------------
Cash and Cash Equivalents at End of Period $ - $ - $ -
============== ================= ================
Supplemental Cash Flow Information:
Cash paid for interest $ 4,786 $ 2,168 $ 3,147
Cash paid for income taxes $ - $ - $ -
Non-cash financing transaction:
Purchase of equipment with lease
obligations $ - $ 54,878 $ 7,830
The accompanying notes are an integral part of these financial statements.
</TABLE>
Cabot, Richards & Reed, Inc.
Notes to the Financial Statements
December 31, 1995 and 1994
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
The financial statements presented are those of Cabot, Richards & Reed,
Inc. (The Company). The Company was incorporated under the laws of the State
of Utah on December 21, 1992. The Company provides workshops for businesses
and individuals on 900 telephone services. The Company's headquarters are
located in Provo, Utah.
b. Recognition of Revenue
The Company has two types of revenue generated from different activities.
The different types of revenue and the timing of the revenue recognition is
listed below:
Seminar Revenue
- ----------------
The Company stages seminars to businesses and individuals introducing
them to the 900 telephone services. The attendees pay a fee for the seminar.
Recognition of the revenue occurs at the completion of the seminar.
Homestudy Revenue
- ------------------
The Company offers homestudy courses on the same material discussed in
seminars. The customer pays the homestudy fee before receiving the materials.
Recognition of the revenue occurs when an order is placed.
Homestudy revenues are generated from sale of physical goods, ie study
manuals. However, the revenues generated from homestudy is less than 5% of
total revenues, therefore separate classifications for revenue and cost of
sales are not presented.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements.
d. Provision for Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S
of the Internal Revenue Code. Under those provisions, the Company does not pay
corporate income taxes on its taxable income. Instead, the stockholders are
liable for individual
Cabot, Richards & Reed, Inc.
Notes to the Financial Statements
December 31, 1995 and 1994
Note 1 - Summary of Significant Accounting Policies (Continued)
income taxes on their respective shares of the Company's net operating income
in their individual income tax returns. Therefore, no income tax expense
appears on these financial statements.
e. Cash and Cash Equivalents
The company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
f. Property and Equipment
Expenditures for property and equipment and for renewals and betterments,
which extend the originally estimated economic life of assets or convert the
assets to a new use, are capitalized at cost. Expenditures for maintenance,
repairs and other renewals of items are charged to expense. When items are
disposed of, the cost and accumulated depreciation are eliminated from the
accounts, and any gain or loss is included in the results of operations.
The provision for depreciation is calculated using the straight-line
method over a five to seven year life.
g. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. In these financial
statements, assets, liabilities and earnings involve extensive reliance on
management's estimates. Actual results could differ from those estimates.
NOTE 2 - Related Party Transactions
During 1993 and 1994, the Company paid various companies for
telemarketing, consulting, rent, and advertising services performed. These
companies were owned by the owners of the Company. Sierra Advertising received
$239,649 in 1993, $877,138 in 1994 and $812,452 in 1995. Ambridge Holding
Company received $131,500 in 1993, $761,619 in 1994 and $300,000 in 1995.
Answer Now, Inc. received $114,653 in 1993 and $599,957 in 1994. Success
Systems, Inc. received $37,869 in 1993. SCM, Inc. received $177,735 in 1994,
and Ambridge Report received $50,010 in 1994.
Cabot, Richards & Reed
Notes to the Financial Statements
December 31, 1995 and 1994
Note 2 - Related Party Transactions (Continued)
During 1995, the Company entered a lease agreement for office space with
RDR Properties, L.L.C. (RDR). RDR is also owned by the owners of the Company.
The Company pays $8,720 per month to RDR beginning in August 1995.
During 1995, the Company advanced $84,583 in loans to Madison York
Associate (Madison) a company with common ownership. Also during 1995 the
company received $250,000 from Madison leaving a payable balance as of
December 31, 1995 of $161,120. The loan is non-interest bearing and payable
upon demand.
The Company advanced Ambridge Holding $300,000 in 1994. The balance at
1995 was $0.
NOTE 3 - Long-Term Liabilities
Capital lease obligations are detailed in the following schedule as of
December 31, 1995 and 1994:
December 31, December 31,
1995 1994
--------------- --------------
Capital lease obligation to a
corporation for copy machines,
lease payments due monthly
of $1,166 through August 1999,
bears interest at 10%, secured
by copy machines. $ 42,802 $ 52,008
--------------- ---------------
Total Lease Obligations $ 42,802 $ 52,008
--------------- ---------------
Total long term liabilities 204,422 52,008
Less current portion of:
Capital lease obligations 13,992 13,992
--------------- ---------------
Total current portion 175,612 13,992
--------------- ---------------
Net Long Term Liabilities $ 28,810. $
38,016
=============== ================
Future minimum lease payments are
as follows:
1996 $ 13,992
1997 13,992
1998 13,992
1999 9,328
---------------
51,304
Less portion representing interest (8,502)
---------------
Total $ 42,802
===============
NOTE 4 - Commitments and Contingencies
During August 1995, the Company entered a lease agreement with RDR
Properties to lease office space. The terms of the lease are on a month to
month basis, and rent payments are $8,720 per month.
NOTE 5 - Subsequent Events
On January 8, 1996, the Company entered into a share exchange agreement
with iMall Inc. (iMall) (formerly Natures Fits, Inc.) a publicly held company.
iMall issued shares of its common stock for all the outstanding shares of the
Company. iMall has no assets or liabilities and no operations, therefore the
merge will be treated as a reverse acquisition. Madison and R&R Advertising
Inc., an advertising company in Studio City, California were also acquired by
iMall on the same date. The merge will be effective January 1, 1996 for
accounting and bookkeeping purposes, and the Company will consolidate it's
financial information with iMall and it's other subsidiaries. There was no
change in the management or operation of the Company as a result of the
acquisition.
Note 6 - Fair Values of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments". The carrying amounts
and fair value of the Company's financial instruments at June 30, 1996 and
December 31, 1995 are as follows:
June 30, 1996 December 31, 1995
---------------------- ----------------------
Carrying Fair Carrying Fair
Amounts Values Amounts Values
----------- --------- ------------ ----------
Cash and cash equivalents $ - $ - $ - $ -
Long-term debt including
current maturities 42,802 40,772 52,008 49,573
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
Cash and Cash Equivalents
-------------------------
The carrying amounts reported on the balance sheet for cash and cash
equivalents approximate their fair value.
Long-term Debt
----------------
The fair values of long-term debt are estimated using discounted cash
flow analyses based on the Company's incremental borrowing rate as the
discount rate.
R&R ADVERTISING, INC.
Financial Statements
December 31, 1995, 1994 and 1993<PAGE>
C O N T E N T S
Accountants' Report......................... 3
Balance Sheets.............................. 4
Statements of Operations.................... 6
Statements of Stockholders' Equity.......... 7
Statements of Cash Flows.................... 8
Notes to the Financial Statements........... 9
<PAGE>
[Letterhead of Crouch, Bierwolf & Chisolm]
CROUCH, BIERWOLF & CHISHOLM
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
- --------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of R&R Advertising, Inc.:
We have audited the accompanying balance sheets of R&R Advertising, Inc. as of
December 31, 1995 and December 31, 1994, and the related statements of
operations, stockholders' equity and cash flows for the years ended December
31, 1995, 1994 and 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of R&R Advertising, Inc. as of
December 31, 1995 and 1994, and the results of its operations and cash flows
for the years ended December 31, 1995, 1994 and 1993 in conformity with
generally accepted accounting principles.
/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
February 28, 1996
<PAGE>
R&R Advertising, Inc.
Balance Sheets
ASSETS
----------
December 31 December 31
1995 1994
CURRENT ASSETS ----------------- --------------
Cash $ 115,863 $ 184,153
Accounts receivable (net allowance
Of $5,000 and $0 respectively 94,368 97,285
Accounts receivable-related party (Note 2) 52,420 -
Prepaid expenses 17,723 28,716
Inventory (Note 1) 79,290 15,900
---------------- --------------
Total Current Assets 359,664 326,054
---------------- --------------
PROPERTY & EQUIPMENT (Note 1)
Furniture & fixtures 15,735 10,125
Office equipment 44,073 31,660
---------------- --------------
59,808 41,785
Less: accumulated depreciation 15,097 5,677
---------------- --------------
Total Property & Equipment 44,711 36,108
OTHER ASSETS
Deposits 15,506 13,212
Organization costs (net) (Note 1) 180 240
---------------- --------------
Total Other Assets 15,686 13,452
---------------- --------------
TOTAL ASSETS $ 420,061 $ 375,614
================ ==============
The accompanying notes are an integral part of these financial statements.
R&R Advertising, Inc.
Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------
December 31 December 31
1995 1994
CURRENT LIABILITIES ---------------- ----------------
Accounts payable $ 78,066 $ 47,599
Accounts payable - related party (Note 2) 22,375 -
Accrued expenses 6,649 16,310
Deferred income (Note 1) 25,172 57,810
---------------- ----------------
Total Current Liabilities 132,262 121,719
---------------- ----------------
LONG TERM LIABILITIES - -
TOTAL LIABILITIES 132,262 121,719
---------------- ----------------
STOCKHOLDERS' EQUITY
Common stock, authorized 1,000 shares;
issued and outstanding 200 shares
respectively 25,417 25,417
Retained earnings 262,382 228,478
---------------- ----------------
Total Stockholders' Equity 287,799 253,895
---------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 420,061 $ 375,614
================ ================
The accompanying notes are an integral part of these financials statements.
R&R Advertising, Inc.
Statements of Operations
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------
1995 1994 1993
-------------- -------------- ---------------
<S> <C> <C> <C>
REVENUES $ 5,404,505 $ 4,485,204 $ 1,710,150
COST OF SALES 3,754,110 3,103,168 1,412,703
-------------- -------------- ---------------
GROSS PROFIT 1,650,395 1,382,036 297,447
-------------- -------------- ---------------
GENERAL & ADMINISTRATIVE EXPENSES 1,138,996 796,650 209,107
-------------- -------------- ---------------
Operating Income 511,399 585,386 88,340
-------------- -------------- ---------------
OTHER INCOME AND (EXPENSES)
Interest income 87 - -
Depreciation (9,419) (4,783) (894)
-------------- -------------- ---------------
Total Other Income and (Expenses) (9,332) (4,783) (894)
-------------- -------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES 502,067 580,603 87,446
PROVISION FOR INCOME TAXES - - -
-------------- -------------- ----------------
NET INCOME $ 502,067 $ 580,603 $ 87,446
============== =============== =================
NET INCOME PER SHARE $ 2,510.34 $ 2,903.02 $ 437.23
============== =============== =================
AVERAGE OUTSTANDING SHARES 200 200 200
============== =============== =================
The accompanying notes are an integral part of these financial statements
</TABLE>
R&R Advertising, Inc.
Statements of Stockholders' Equity
From January 1, 1993 through December 31, 1995
Common Stock Retained
------------------------- Earnings
Shares Amount (Deficit)
------------ ------------ --------------
Balance on January 1, 1993 - $ 4,000 $ 83,090
------------ ------------ --------------
Distributions to proprietor (149,118)
Net income (loss) for the year
ended December 31, 1993 - - 87,446
------------ ------------ --------------
Balance on March 31, 1993 - 4,000 21,418
Issuance of common stock for
cash and assets of sole
proprietorship 200 21,417 (21,418)
Dividends paid - - (352,125)
Net income for the year ended
December 31, 1994 - - 580,603
------------ ------------ --------------
Balance on December 31, 1994 200 25,417 228,478
Dividends paid - - (468,163)
Net income for the year ended
December 31, 1995 - - 502,067
------------ ------------ --------------
Balance on December 31, 1995 200 $ 25,417 $ 262,382
============ ============= ===============
The accompanying notes are an integral part of these financial statements.
R&R Advertising, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the years ended December 31
---------------------------------------
1995 1994 1993
------------ ------------ --------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net gain (loss) $ 502,067 $ 580,603 $ 87,446
Less non-cash items:
Depreciation & amortization 9,479 4,783 894
Bad debt 5,000 - -
Changes in current assets and liabilities:
Accounts and accrued interest receivable (2,083) (97,285) -
Accounts receivable - related party (52,420) - -
Prepaid expenses 10,993 (28,716) -
Accounts payable & accrued expenses 10,543 121,780 -
Inventory (63,390) (3,900) (12,000)
------------ ------------- -------------
Net Cash Provided (Used) by
Operating Activities 420,189 577,265 76,340
------------ ------------ ------------
Cash Flows from Investing Activities
Purchase of property and equipment (18,022) (31,992) (8,898)
Deposits (2,294) (9,387) (3,825)
Organization costs - - (300)
------------ ------------- -------------
Net Cash Provided (Used) by
Investing Activities (20,316) (41,379) (13,023)
------------ ------------- -------------
Cash Flows from Financing Activities
Dividends paid (468,163) (352,125) (149,118)
------------- ------------ -------------
Net Cash Provided (Used) by
Financing Activities (468,163) (352,125) (149,118)
------------- ------------ -------------
Increase (Decrease) in Cash (68,290) 183,761 (85,801)
------------- ------------ -------------
Cash and Cash Equivalents at Beginning
of Period 184,153 392 86,193
------------- ------------ -------------
Cash and Cash Equivalents at End of Period $ 115,863 $ 184,153 $ 392
============= ============= =============
Supplemental Cash Flow Information:
Cash paid for interest $ - $ - $ -
Cash paid for income taxes $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
</TABLE>
R&R Advertising
Notes to the Financial Statements
December 31, 1995, 1994 and 1993
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
The financial statements presented are those of R&R Advertising, Inc.
(The Company). The Company was incorporated under the laws of the State of
California on January 5, 1994. The Company is engaged in advertising
activities, providing advertising in newspaper, TV, radio and magazines around
the country.
b. Recognition of Revenue
The Company generates revenue through placing advertisements for its
clients in newspapers, radio spots and magazines. The recognition of the
revenue occurs when the Company places the advertisements for its clients.
The Company also sells to it's customers, the right to air a commercial which
is preproduced with minor editing to bear the client information. The costs
to edit the commercial is minimal and the revenues generated are less than 1%
of the total revenues, therefore, separate classification of these revenues
and cost of sales are not presented.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements.
d. Provision for Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S
of the Internal Revenue Code. Under those provisions, the Company does not pay
corporate income taxes on its taxable income. Instead, the stockholders are
liable for individual income taxes on their respective shares of the Company's
net operating income in their individual income tax returns. Therefore, no
income tax expense appears on these financial statements.
e. Cash and Cash Equivalents
The company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
R&R Advertising, Inc.
Notes to the Financial Statements
December 31, 1995, 1994 and 1993
NOTE 1 - Summary of Significant Accounting Policies (Continued)
f. Property and Equipment
Expenditures for property and equipment and for renewals and betterments,
which extend the originally estimated economic life of assets or convert the
assets to a new use, are capitalized at cost. Expenditures for maintenance,
repairs and other renewals of items are charged to expense. When items are
disposed of, the cost and accumulated depreciation are eliminated from the
accounts, and any gain or loss is included in the results of operations.
The provision for depreciation is calculated using the straight-line method
over a five to seven year life.
g. Inventories
Inventory consists of pre-produced commercials which are regularly
resold to the Company's clients with minor editing. The Company capitalized
the costs paid to outside sources to produce the commercials. The market
value is regularly evaluated by management based on the industry demand to
determine if an adjustment to lower the carrying value is necessary.
h. Deferred Revenues/Revenue Recognition
Various customers place deposits with the Company before their
advertising has run. The Company records the deposits as deferred revenue
until the advertisements have been booked and paid, at such time the Company
records the revenue.
i. Organization Costs
Costs incurred to organize the Company have been capitalized and will be
amortized over a 60 month period.
j. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. In these financial
statements, assets, liabilities and earnings involve extensive reliance on
management's estimates. Actual results could differ from those estimates.
R&R Advertising, Inc.
Notes to the Financial Statements
December 31, 1995, 1994 and 1993
NOTE 2 - Related Party Transactions
During 1995, the Company paid $20,806 to Liaison Customer Services, a
company under common control, for services to the Company.
The Company paid for various advertising and operating expenses of
Madison York, Inc. a company partially owned by the President of the Company.
Total expenses paid during the year equal $93,410. Madison reimbursed the
Company the amount of $115,785 leaving a payable balance of $22,375 at
December 31, 1995.
During 1995, the Company advanced $52,420 to Madison, York and
Associates, Inc. for the purchase of equipment and operating capital. The
balance due from Madison at December 31, 1995 is $52,420.
NOTE 3 - Commitments and Contingencies
During 1994 the Company entered into a lease agreement for office space.
The Company pays monthly lease payments of $6,446 through November 30, 1996.
Future minimum lease payments are as follows at December 31, 1995:
1996 $70,906
========
NOTE 4 - Stockholder Equity
For the years prior to 1994, the Company was operating as a sole
proprietorship. At January 5, 1994, the Company incorporated and the net
equity of the Company at that time was recorded as the consideration received
for the common stock issued. Retained earnings were reclassified at that time
to common stock, leaving a zero balance for the newly organized corporation.
NOTE 5 - Subsequent Events
On January 8, 1996, the Company entered into a share exchange agreement
with iMall Inc. (iMall) (formerly Natures Gift, Inc.) a publicly held company.
iMall issued shares of its common stock for all the outstanding shares of the
Company. iMall has no assets or liabilities and no operations, therefore the
merge will be treated as a reverse acquisition. Cabot, Richards & Reed, a
seminar company in Provo, Utah and Madison were also acquired by iMall on the
same date. The merge will be effective January 1, 1996 for accounting and
bookkeeping purposes, and the Company will consolidate it's financial
information with iMall and it's other subsidiaries. There was no change in
the management or operation of the Company as a result of the acquisition.
PHYSICOMP CORPORATION
(DBA EmaNate, Inc.)
Financial Statements
April 30, 1996 and December 31, 1995<PAGE>
C O N T E N T S
Accountants' Report .................................................... 3
Balance Sheets.......................................................... 4
Statements of Operations ................................................6
Statements of Stockholders' Equity.......................................7
Statements of Cash Flows ................................................8
Notes to the Financial Statements .......................................9
<PAGE>
[Letterhead}
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
--------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Physicomp Corporation (DBA EmaNate, Inc.):
We have audited the accompanying balance sheets of Physicomp Corporation as of
April 30, 1996 and December 31, 1995, and the related statements of
operations, stockholders' equity and cash flows for the four months ended
April 30, 1996 and the year ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Physicomp Corporation as of
April 30, 1996 and December 31, 1995 and the results of its operations and
cash flows for the four months ended April 30, 1996 and the year ended
December 31, 1995 in conformity with generally accepted accounting principles.
/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
July 3, 1996
<PAGE>
Physicomp Corporation
(DBA EmaNate, Inc.)
Balance Sheets
ASSETS
-----------
April 30, December 31,
1996 1995
--------------- --------------
CURRENT ASSETS
Cash $ 31,963 $ 12,497
Accounts receivable
(net of allowance of $7,739 and
2,937 respectively) 50,290 55,800
Prepaid expenses 10,748 11,615
--------------- ---------------
Total Current Assets 93,001 79,912
--------------- ----------------
PROPERTY & EQUIPMENT (Note 1)
Computer equipment 77,866 61,909
Leased Equipment 15,996 15,996
Office equipment 22,975 14,151
Leasehold improvements 1,712 -
--------------- ----------------
118,549 92,056
Less: accumulated depreciation (24,827) (17,125)
Accumulated depreciation -
leased equipment (3,932) (3,552)
---------------- ----------------
Total Property & Equipment 89,790 71,379
---------------- ----------------
OTHER ASSETS
Deposits 7,820 3,530
Organization costs (net) (Note 1) 675 741
---------------- ----------------
Total Other Assets 8,495 4,271
---------------- ---------------
TOTAL ASSETS $ 191,286 $ 155,562
================ ================
The accompanying notes are an integral part of these financial statements.
Physicomp Corporation
(DBA EmaNate, Inc.)
Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------------
April 30, December 31,
1996 1995
--------------- ----------------
CURRENT LIABILITIES
Payroll tax payables $ 39,930 $ 3,599
Accrued expenses 27,571 12,305
Interest payable related party 6,988 4,097
Customer deposits 1,060 650
Current portion of long-term debt (Note 2) 119,331 96,750
--------------- ----------------
Total Current Liabilities 194,880 117,401
--------------- ----------------
Long-Term Debt (Note 2)
Notes payable 25,000 25,000
Notes payable - related party 145,082 135,082
Capital lease obligations 10,162 12,017
Less current portion (Note 2) (119,331) (96,750)
---------------- ----------------
Total Long-Term Debt 60,913 75,349
--------------- ----------------
Total Liabilities 255,793 192,750
--------------- ----------------
Stockholders' Equity
Common stock, no par value;
75,000 shares authorized;
75,000 shares issued and outstanding 120,000 120,000
Retained earnings (184,507) (157,188)
---------------- --------------
Total Stockholders' Equity (64,507) (37,188)
----------------- --------------
Total Liabilities and
Stockholders' Equity $ 191,286 $ 155,562
================ =============
The accompanying notes are an integral part of these financial statements.
Physicomp Corporation
(DBA EmaNate, Inc.)
Statements of Operations
For the four For the year
months ended ended
April 30, December 31,
1996 1995
-------------- --------------
REVENUES $ 334,791 $ 241,604
COST OF SALES 295,776 226,780
-------------- --------------
GROSS PROFIT 39,015 14,824
-------------- --------------
MARKETING EXPENSES 12,477 60,327
GENERAL & ADMINISTRATIVE EXPENSES 36,709 79,519
-------------- --------------
Operating Loss (10,171) (125,022)
OTHER INCOME AND (EXPENSES)
Bad debt (4,995) (2,937)
Amortization (208) (198)
Interest expense (3,661) (5,813)
Tax expense (245) (2,045)
Interest income 168 179
Depreciation (7,940) (20,267)
------------- -----------------
Total Other Income and (Expenses) (16,881) (31,081)
-------------- ------------------
INCOME (LOSS) BEFORE INCOME TAXES (27,052) (156,103)
PROVISION FOR INCOME 267 800
-------------- -----------------
NET INCOME $ (27,319) $ (156,903)
============== =================
NET INCOME PER SHARE $ (0.36) $ (2.09)
============== =================
AVERAGE OUTSTANDING SHARES 75,000 75,000
============== =================
The accompanying notes are an integral part of these financial statements.
Physicomp Corporation
(DBA EmaNate, Inc.)
Statements of Stockholders' Equity
From December 31, 1994 through April 30, 1996
Common Stock Retained
----------------------------- Earnings
Shares Amount (Deficit)
-------------- ------------- -------------
Balance on December 31, 1994 75,000 $ 75,000 $ (285)
Capital contribution - 45,000 -
Net income (loss) for the year ended
December 31, 1995 - - (156,903)
--------------- -------------- ------------
Balance on December 31, 1995 75,000 120,000 (157,188)
Net income (loss) for the four
months ended April 30, 1996 - - (27,319)
--------------- -------------- -------------
Balance on April 30, 1996 75,000 $ 120,000 $ (184,507)
=============== =============== =============
The accompanying notes are an integral part of these financial statements.
<PAGE>
Physicomp Corporation
(DBA EmaNate, Inc.)
Statements of Cash Flows
For the four For the
months ended year ended
April 30, December 31,
1996 1995
----------------- ---------------
Cash Flows from Operating Activities
Net gain (loss) $ (27,319) $ (156,903)
Less non-cash items:
Depreciation & amortization 8,148 20,465
Bad debt 4,802 2,937
Changes in current assets and liabilities:
Accounts receivable 708 (53,741)
Prepaid expenses 867 (10,765)
Accounts payable & accrued expenses 54,488 20,001
Customer deposits 410 650
Lawsuit losses - 25,000
----------------- ----------------
Net Cash Provided (Used) by
Operating Activities 42,104 (152,356)
----------------- ----------------
Cash Flows from Investing Activities
Purchase of property and equipment (26,493) (56,981)
Deposits 4,290 (2,530)
----------------- ----------------
Net Cash Provided (Used) by
Investing Activities (30,783) (59,511)
----------------- ----------------
Cash Flows from Financing Activities
Capital contribution from shareholder - 45,000
Principal payments on leased equipment (1,855) (2,526)
Cash received from note payable - related
party 10,000 135,082
----------------- ----------------
Net Cash Provided (Used) by
Financing Activities 8,145 177,556
----------------- ----------------
Increase (Decrease) in Cash 19,466 (34,311)
Cash and Cash Equivalents at Beginning
of Period 12,497 46,808
---------------- ----------------
Cash & Cash Equivalents at End of Period $ 31,963 $ 12,497
================ ================
Supplemental Cash Flow Information:
Cash paid for interest $ 537 $ 1,446
Cash paid for income taxes $ - $ -
The accompanying notes are an integral part of these financial statements.
Physicomp Corporation
(DBA EmaNate, Inc.)
Notes to the Financial Statements
April 30, 1996 and December 31, 1995
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
The financial statements presented are those of Physicomp Corporation
(DBA EmaNate, Inc.) (The Company). The Company was incorporated under the laws
of the State of California on September 20, 1994, and is engaged in computer
engineering specializing in information systems, internet consulting and
front-page design for webb sites on the internet.
b. Recognition of Revenue
The Company has two types of revenue from two service activities. The
different types of revenue and the timing of the revenue are listed below:
Maintenance Fee
- ---------------
The Company maintains web sights for customers for a monthly fee. The
fee is collected monthly. Recognition of revenue occurs when a customer is
billed for said fees.
Web Sight Design Revenue
- -------------------------
The Company designs and upgrades web sights for customers. The customer
is provided bids on the designs. Recognition of the revenue occurs when the
customer is billed for the design or upgrade.
The two revenue activities are service revenue, therefore separate
classifications for revenue and cost of sales are not presented.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements.
d. Provision for Income Taxes
No provision for income taxes have been recorded due to net operating
loss carryforwards totalling approximately $184,224, that will be offset
against future taxable income. These NOL carryforwards begin to expire in the
year 2008. No tax benefit has been reported in the financial statements
because the Company believes there is a 50% or greater chance the carryforward
will expire unused.
Physicomp Corporation
(DBA EmaNate, Inc.)
Notes to the Financial Statements
April 30, 1996 and December 31, 1995
NOTE 1 - Summary of Significant Accounting Policies (Continued)
e. Cash and Cash Equivalents
The company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
f. Property and Equipment
Expenditures for property and equipment and for renewals and betterments,
which extend the originally estimated economic life of assets or convert the
assets to a new use, are capitalized at cost. Expenditures for maintenance,
repairs and other renewals of items are charged to expense. When items are
disposed of, the cost and accumulated depreciation are eliminated from the
accounts, and any gain or loss is included in the results of operations.
The provision for depreciation is calculated using the straight-line
method over a five to seven year life. Leasehold improvements are depreciated
over the life of the lease of four years.
g. Organization Costs
Costs incurred to organize the Company have been capitalized and will be
amortized over a 60 month period.
h. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. In these financial
statements, assets, liabilities and earnings involve extensive reliance on
management's estimates. Actual results could differ from those estimates.
Physicomp Corporation
(DBA EmaNate, Inc.)
Notes to the Financial Statements
April 30, 1996 and December 31, 1995
NOTE 2 - Long-Term Debt
Notes payable, notes payable - related party and capital lease
obligations are detailed in the following schedules as of April 30, 1996 and
December 31, 1995. Notes payable is detailed as follows:
1995 1996
------------- ---------------
Note payable to a corporation
two installments due of $12,500
on June 1, 1996 and June 1, 1997 $ 25,000 $ 25,000
------------- ---------------
Total Notes Payable 25,000 25,000
------------- ---------------
Notes payable - related party is detailed as follows:
Note Payable to an officer/
shareholder, bears interest
at 10%, interest due monthly
with principal due upon demand 13,346 13,346
Note payable to an officer/
shareholder, bears interest at
10%, interest due monthly with
principal due upon demand 15,000 15,000
Note payable to an officer/
shareholder, bears interest at
10%, interest due monthly with
principal due upon demand 16,053 16,053
Note payable to an officer/
shareholder, bears interest at
10%, interest due monthly with
principal due upon demand 12,607 2,607
Note payable to an officer/
shareholder, bears interest at
10%, interest due monthly with
principal due upon demand 13,076 13,076
Physicomp Corporation
(DBA EmaNate, Inc.)
Notes to the Financial Statements
April 30, 1996 and December 31, 1995
NOTE 2 - Long Term Debt (continued)
Note payable to an officer/
shareholder, bears interest at
10%, interest due monthly with
principal due May 1996 10,000 10,000
Note payable to an officer/
shareholder, bears interest at
10%, interest due monthly with
principal due May 1996 5,000 5,000
Note payable to an officer/
shareholder, bears interest at
10%, interest due monthly with
principal due June 1996 20,000 20,000
Note payable to an officer/
shareholder, bears interest at
10%, interest due monthly with
principal due May 1998 15,000 15,000
Note payable to an officer/
shareholder, bears interest at
10%, interest due monthly with
principal due August 1998 25,000 25,000
------------- ----------------
Total Notes Payable -
Related Party 145,082 135,082
Capital Lease Obligations are detailed as follows:
1996 1995
------------- ----------------
Lease payable to a corporation,
bears interest at 16%, monthly
lease payments due of $354
through October 1997, secured
by computer and printing
equipment 5,651 6,975
Physicomp Corporation
(DBA EmaNate, Inc.)
Notes to the Financial Statements
April 30, 1996 and December 31, 1995
NOTE 2 - Long Term Debt (continued)
Lease payable to a corporation
bears interest at 14.5%, monthly
lease payments due of $191
through August 1999, secured
by printing equipment 4,511 5,042
----------- ---------------
Total Capital Lease Obligations 10,162 12,017
----------- ---------------
Total Long-Term Debt 180,245 172,099
----------- ---------------
Less Current Portion of:
Note Payable 12,500 -
Note Payable - Related Party 105,082 95,082
Capital Lease Obligations 1,749 1,668
----------- ---------------
Total Current Portion 119,331 96,750
Net Long-Term Debt $ 60,914 $ 75,349
=========== ===============
Future minimum principal payments on notes payable are as follows:
1997 $ 117,582
1998 12,500
1999 40,000
2000 -
-----------
Total $ 170,082
Future minimum lease payments on capital lease obligations are as follows at
April 30, 1996:
1997 6,543
1998 4,063
1999 764
2000 -
----------
Total 11,370
Less portion representing interest 1,207
-----------
Total $ 10,163
===========
Physicomp Corporation
(DBA EmaNate, Inc.)
Notes to the Financial Statements
April 30, 1996 and December 31, 1995
NOTE 3 - Commitments and Contingencies
During 1994 the Company entered into a lease agreement for office space. The
Company pays monthly lease payments of $4,290 through May 1, 1999. Future
minimum lease payments are as follows at April 30, 1996:
1997 $ 51,480
1998 51,480
1999 51,480
--------------
Total Commitment $ 154,440
==============
NOTE 4 - Subsequent Events
On April 26, 1996, the Company entered into a share exchange agreement
with iMall Inc. (iMall) (formerly Natures Gift, Inc.) a publicly held company.
iMall issued shares of its common stock for all the outstanding shares of the
Company. The merge will be effective May 1, 1996 for accounting and
bookkeeping purposes and the Company will consolidate it's financial
information with iMall and it's other subsidiaries. There was no change in
the management or operation of the Company as a result of the acquisition.
NOTE 5 - Lawsuit Losses
The officers and directors of the Company previously worked for the same
corporation. Subsequent to their departure from this employer, a lawsuit was
filed against the officers for violations of trade secrets. A settlement of
$25,000 was achieved out of court and has been recorded as a note payable
based on the terms of the agreement.
NOTE 6 - Stockholders' Equity
During 1995 the shareholders of the Company contributed additional
capital in the amount of $45,000. No additional shares were issued in this
transaction.
Physicomp Corporation
(DBA EmaNate, Inc.)
Notes to the Financial Statements
April 30, 1996 and December 31, 1995
Note 7 - Fair Values of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments". The carrying amounts
and fair value of the Company's financial instruments at April 30, 1996 and
December 31, 1995 are as follows:
April 30, 1996 December 31, 1995
-------------------- ---------------------
Carrying Fair Carrying Fair
Amounts Values Amounts Values
--------- ---------- ---------- ----------
Cash and cash equivalents $ 31,963 $ 31,963 $ 12,497 $ 12,497
Long-term debt including
current maturities 180,244 180,481 172,099 172,281
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
Cash and Cash Equivalents
- --------------------------
The carrying amounts reported on the balance sheet for cash and cash
equivalents approximate their fair value.
Long-term Debt
- ---------------
The fair values of long-term debt are estimated using discounted cash flow
analyses based on the Company's incremental borrowing rate as the discount
rate.
PART III
Item 1: INDEX TO EXHIBITS
2.1 Share Exchange Agreement between the Company and
Madison, York, Inc.
2.2 Share Exchange Agreement between the Company and Cabot,
Richards & Reed.
2.3 Share Exchange Agreement between the Company and R&R
Advertising, Inc.
2.4 Share Exchange Agreement between the Company and
Physicomp Corporation (d.b.a. e.m.a.N.a.t.e.)
2.5 Share Exchange Agreement between the Company and
Interactive Marketing Group, Inc.
3.1 Articles of Incorporation, as amended
3.2 By-Laws, as amended
10.1 Software License and Distribution Agreement between the
Company and AT&T
10.2 Limited Partnership Agreement with Positive Response T.V.
10.3 Memorandum of Understanding between the Company and
Softbank
21 Subsidiaries
27 Financial Data Schedule
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
iMALL, INC.
January 31, 1996
By:/s/ Craig R. Pickering
--------------------------
Craig R. Pickering
Chairman of Board and President
By: /s/ Tracy W. Scott
-------------------------
Tracy W. Scott
Chief Executive Officer
By: /s/ Richard Rosenblatt
--------------------------------
Richard Rosenblatt
Director and Senior Vice President
By: /s/ Mark R. Comer
-----------------------------
Mark R. Comer
Director and Senior Vice President
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Plan") is made this _ day of
January, 1996, among NATURES GIFT, INC., a Utah corporation ("Natures");
MADISON YORK & ASSOCIATES, INC., a Utah corporation, any and all of its
subsidiaries (hereinafter collectively referred to as "Madison") and its
shareholders (hereinafter "Shareholders").
Natures wishes to acquire all the issued and outstanding stock of Madison
for and in exchange for stock of Natures, in a stock for stock transaction
intending to qualify as a tax-free exchange pursuant to Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended. The parties intend for this
Plan to represent the terms and conditions of such tax-free reorganization,
which Plan the parties hereby adopt.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, IT IS AGREED:
Section 1
TERMS OF EXCHANGE
1.1 Number of Shares. Upon the execution hereof, the Shareholders of
Madison agree to assign, transfer, and deliver to Natures, free and clear of
all liens, pledges, encumbrances, charges, restrictions or known claims of any
kind, nature or description, all of their shares of Madison stock, which
constitutes all of the issued and outstanding shares of Madison aggregating
4,100 common shares, and Natures agrees to acquire such shares on the date
thereof, or as soon as practicable thereafter, by issuing and delivering in
exchange therefore solely common shares of Natures' stock, par value $0.001,
in the aggregate of 4,100,000 post split shares, as subject to the provisions
of this Plan, which shall represent, as a result thereof, approximately 31% of
the then issued and outstanding shares of Natures. Subsequent to the date
hereof, the Shareholders shall, upon the surrender of the Madison certificates
representing their respective beneficial and record ownership of all of the
issued and outstanding shares of Madison to Natures, as soon as practicable
hereafter, and further provided an exemption from the registration provisions
of Section 5 of the Securities Act of 1933 is available for the issuance
thereof, the Shareholders shall be entitled to receive a certificate(s)
evidencing shares of the exchanged Natures stock as provided for herein. Upon
the consummation of the transaction contemplated herein, Natures shall be the
beneficial and record owner of all of the issued and outstanding stock of
Madison.
1.2 Anti-Dilution. For all relevant purposes of this Plan, the number
of Natures shares to be issued and delivered pursuant to this Plan, shall be
appropriate adjusted to take into account any stock split, stock dividend,
reverse stock split, recapitalization, or similar change in Natures common
stock, which may occur between the date of the execution of this Plan and the
date of the delivery of such shares.
1.3 Delivery of Certificates. The Shareholders shall transfer to
Natures at the closing provided for in Section 2 (the "Closing") the shares of
common stock of Madison listed opposite their respective names on Exhibit A
hereto (the "Madison shares") in exchange for the post-split shares of the
common stock of Natures as outlined above in Section 1.1 hereof (the "Natures
Stock"). All of such shares of Natures common stock shall be issued at the
closing to the Shareholders, in the numbers shown opposite their respective
names in Exhibit A. The transfer of Madison shares by the Shareholders shall
be effected by the delivery to Natures at the Closing of certificates
representing the transferred shares endorsed in blank or accompanied by stock
powers executed in blank, with all signatures guaranteed by a national bank
and with all necessary transfer taxes and other revenue stamps affixed and
acquired at the Shareholders' expense.
1.4 Further Assurances. Subsequent to the execution hereof, and from
time to time thereafter, the Shareholders shall execute such additional
instruments and take such other action as Natures may request in order to more
effectively sell, transfer and assign clear title and ownership in the Madison
shares to Natures.
Section 2
CLOSING
2.1 Closing. The Closing contemplated by Section 1.3 shall be held at
the law offices of Fabian & Clendenin on January 8, 1996 or at such other time
or place as may be mutually agreed upon in writing by the parties. The Closing
may also be accomplished by wire, express mail or other courier service,
conference telephone communications or as otherwise agreed by the respective
parties or their duly authorized representatives. In any event, the closing of
the transactions contemplated by this Plan shall be effected as soon as
practicable after all of the conditions contained herein have been satisfied.
2.2 Closing Events. At the Closing, each of the respective parties
hereto shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged, and delivered) any agreements, resolutions, rulings, or other
instruments required by this Plan to be so delivered at or prior to Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transaction contemplated hereby.
Section 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF NATURES
Natures represents and warrants to, and covenants with, the Shareholders
and Madison as follows:
3.1 Corporate Status. Natures is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah incorporated
on February 9, 1984. Natures has full corporate power and is duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of its properties and
assets and to carry on its business on all material respects as it is now
being conducted, and there is no jurisdiction in which the character and
location of the assets owned by it, or the nature of the business transacted
by it, requires qualification. Included in the Natures schedules (defined
below) are complete and correct copies of its Articles of Incorporation and
Bylaws as in effect on the date hereof. The execution and delivery of this
Plan does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of Natures' Articles of Incorporation or
Bylaws. Natures has taken all action required by law, its Articles of
Incorporation, its Bylaws, or otherwise, to authorize the execution and
delivery of this Plan.
3.2 Capitalization. The authorized capital stock of Natures as of the
date hereof consists of 105,000,000 common shares, par value $0.001. As of the
date hereof there are 103,156,843 common shares of Natures issued and
outstanding. The foregoing shares constitute fully paid, non-assessable
shares. There are no outstanding options, warrants, or calls or any
understanding, agreements, commitments, contracts or promises with respect to
the issuance of Natures' common stock or with regard to any options, warrants
or other contractual rights to acquire any of Natures' authorized but unissued
common shares.
3.3 Recapitalization. In conjunction with the transaction embodied in
this Plan, Natures shall change its existing capitalization by effecting a
nineteen-to-one (19 to 1) revenue split of authorized, issued and outstanding
common stock (the "post-split shares") and will increase its authorized common
stock from 5,429,308 to 40,000,000 shares, par value $0.001. As a result of
the recapitalization, Natures will have 5,429,308 post-split shares issued and
outstanding and 40,000,000 authorized post-split shares, par value $0.001.
3.4 Financial Statements.
(a) Natures hereby warrants and covenants to Madison that the
audited financial statements of the period ended July 31, 1995 and for its
year ended December 31, 1994, December 31, 1993 and 1992, fairly and
accurately represent the financial condition of Natures and that the same will
be prepared along with the period ended as of the date of Closing, for
consolidation by an independent public accountant, which shall be prepared in
accordance with generally accepted accounting principles consistently applied,
on or before the expiration of forty-five days from the date of Closing.
(b) Natures hereby warrants and represents that the audited
financial statements for the periods set forth in subparagraph (a), supra,
fairly and accurately represent the financial condition of Natures as
submitted heretofore to Madison for examination and review.
3.5 Subsidiaries. Natures has no subsidiaries.
3.6 Conduct of Business. Natures has no ongoing business.
3.7 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of Natures, threatened by or against or
effecting Natures at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
Natures does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, warrant, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality.
3.8 Books and Records. From the date hereof, and for any reasonable period
subsequent thereto, Natures and its present management will (i) give to the
Shareholders and Madison, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and
Madison, or their duly authorized representatives, may inspect them; and (ii)
furnish such information concerning the properties and affairs of Natures as
the Shareholders and Madison, or their duly authorized representatives, may
reasonably request. Any such request to inspect Natures' books shall be
directed to Natures' counsel, Daniel W. Jackson, at the address set forth
herein under Section 9.4 Notices.
3.9 Confidentiality. Until the Closing (and thereafter if there is no
Closing), Natures and its representatives will keep confidential any
information which they obtain from the Shareholders or from Madison concerning
its properties, assets and the proposed business operations of Madison. If the
terms and conditions of this Plan imposed on the parties hereto are not
consummated on or before 5:00 p.m. MST on March 1, 1996 or otherwise waived or
extended in writing to a date mutually agreeable to the parties hereto,
Natures will return to Madison all written matter with regard to Madison
obtained in connection with the negotiations or consummation of this Plan.
3.10 Conflict with Other Instruments. The transactions contemplated by
this Plan will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or there
material agreements or instrument to which Natures was or is a party, or to
which any of its assets or operations are subject, and will not conflict with
any provision of the Articles of Incorporation or Bylaws of Natures.
3.11 Corporate Authority. Natures has full corporate power and
authority to enter into this Plan and to carry out its obligations hereunder
and will deliver to the Shareholders and Madison, or their respective
representatives, at the Closing, a certified copy of resolutions of its Board
of Directors authorizing execution of this Plan by its officers and
performance thereunder.
3.12 Consent of Shareholders. Natures hereby warrants and represents
that the Shareholders of Natures, being the owners of a majority of the issued
and outstanding stock of the Corporation consented in writing to the
authorization to execute an Agreement and Plan of Reorganization as between
Natures and Madison pursuant to a stock-for-stock transaction in which Natures
would acquire all of the issued and outstanding shares of Madison in exchange
for the issuance of 4,100,000 post reverse common shares of Natures.
3.13 Resignation of Directors. Upon the Closing, the current directors
of Natures shall submit their resignations.
3.14 Special Covenants and Representations Regarding the Exchanged
Natures Stock. The consummation of this Plan and the transactions herein
contemplated include the issuance of the exchanged Natures shares to the
Shareholders, which constitutes an offer and sale of securities under the
Securities Act of 1933, as amended, and applicable states' securities laws.
Such transaction shall be consummated in reliance on exemptions from the
registration and prospectus requirements of such statutes which depend
interlace on the circumstances under which the Shareholders acquire such
securities. In connection with the reliance upon exemptions from the
registration and prospectus delivery requirements for such transactions, at
the Closing, Shareholders shall cause to be delivered to Natures a Letter(s)
of Investment Intent in the form attached hereto as Exhibit B and incorporated
herein by reference.
3.15 Undisclosed or Contingent Liabilities. Natures hereby represents
and warrants that it has no undisclosed or contingent liabilities which have
not been disclosed to Madison.
3.16 Information. The information concerning Natures set forth in this
Plan, and the Natures schedules attached hereto, are complete and accurate in
all material respects and do not contain, or will not contain, when delivered,
any untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to Madison in connection with this Plan.
3.17 Title and Related Matters. Natures has good and marketable title
to all of its properties, interests in properties, and assets, real and
personal, which are reflected, or will be reflected, in the Natures balance
sheets, free and clear of any and all liens and encumbrances.
3.18 Contracts or Agreements. Natures is not bound by any material
contracts, agreements or obligations which it has not already disclosed to
Madison.
3.19 Governmental Authorizations. Natures has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Natures shall use its best efforts to obtain as quickly as
possible a listing in Moody's OTC Industrial Manual, or some other recognized
manual, recognized by the various states as an exemption from registration
provisions of any such state for the purposes of interstate trading of
Natures' post-split stock. Except for compliance with federal and state
securities laws, no authorization, approval, consent or order of, or
registration, declaration, or filing with, any court or other governmental
body is required in connection with the execution and delivery by Natures of
this Plan and the consummation by Madison of the transactions contemplated
hereby.
3.20 Compliance with Laws and Regulations. Natures has complied with
all applicable statutes and regulations of any federal, state, or other
applicable jurisdiction or agency thereof, except to the extent that
noncompliance would not materially and adversely effect the business,
operations, properties, assets, or condition of Natures or except to the
extent that noncompliance would not result in the occurrence of any material
liability, not otherwise disclosed to Madison.
3.21 Approval of Plan. The Board of Directors of Natures has authorized
the execution and delivery of this Plan by Natures and have approved the Plan
and the transactions contemplated hereby. Natures has full power, authority,
and legal right to enter into this Plan and to consummate the transactions
contemplated hereby.
3.22 Ratification by Shareholders. This Plan will be submitted to the
Shareholders of Natures for approval and ratification; the adoption and
ratification of the Plan by a majority of the Shareholders of Natures is a
condition precedent to the consummation of the Plan.
3.23 Investment Intent. Natures is acquiring the Madison shares to be
transferred to it under this Plan for investment and no with a view to the
sale or distribution thereof, and Natures has no commitment or present
intention to liquidate Madison or to sell or otherwise dispose of the Madison
shares.
3.24 Unregistered Shares and Access to Information. Natures understands
that the offer and sale of the Madison shares have not been registered with or
reviewed by the Securities and Exchange Commission under the Securities Act of
1933, as amended, or with or by any state securities law administrator, and no
federal, state securities law administrator has reviewed or approved any
disclosure or other material concerning Madison or the Madison shares. Natures
has been provided with and reviewed all information concerning Madison, the
Madison shares as it has considered necessary or appropriate as a prudent and
knowledgeable investor to enable it to make an informed investment decision
concerning the Madison shares. Natures has made an investigation as to the
merits and risks of its acquisition of the Madison Shares and has had the
opportunity to ask questions of, and has received satisfactory answers from,
the officers and directors of Madison concerning Madison, the Madison shares
and related matters, and has had an opportunity to obtain additional
information necessary to verify the accuracy of such information and to
evaluate the merits and risks of the proposed acquisition of the Madison
shares.
3.25 Natures' Schedules. Natures has delivered to Madison the following
items listed below, hereafter referred to as the "Natures Schedules", which is
hereby incorporated by reference and made a part hereof. A certification
executed by a duly authorized officer of Natures on or about the date within
the Plan is executed to certify that the Natures Schedules are true and
correct.
(a) Copy of Articles of Incorporation, as amended, and Bylaws;
(b) Natures' Prospectus;
(c) Financial statements;
(d) Shareholder list;
(e) Consent of Directors to Plan;
(f) Officer's Certificate as required under Section 6.2 of the Plan;
(g) Opinion of counsel as required under Section 6.4 of the Plan;
(h) Certificate of Good Standing;
(i) Resignations of current Board of Directors; and
(j) Consent of Shareholders approving Plan.
Section 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF MADISON
Madison represents and warrants to, and covenants with, the Shareholders
and Natures as follows:
4.1 Corporate Status. Madison is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah incorporated
on November 3, 1994. Madison has full corporate power and is duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of its properties and
assets and to carry on its business on all material respects as it is now
being conducted, and there is no jurisdiction in which the character and
location of the assets owned by it, or the nature of the business transacted
by it, requires qualification. Included in the Madison schedules (defined
below) are complete and correct copies of its Articles of Incorporation and
Bylaws as in effect on the date hereof. The execution and delivery of this
Plan does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of Madison's Articles of Incorporation or
Bylaws. Madison has taken all action required by law, its Articles of
Incorporation, its Bylaws, or otherwise, to authorize the execution and
delivery of this Plan.
4.2 Capitalization. The authorized capital stock of Madison as of the
date hereof consists of 10,000 common shares, par value $0.001. As of the date
hereof there are 4,100 common shares of Madison issued and outstanding. The
foregoing shares constitute fully paid, non-assessable shares. There are no
outstanding options, warrants, or calls or any understanding, agreements,
commitments, contracts or promises with respect to the issuance of Madison's
common stock or with regard to any options, warrants or other contractual
rights to acquire any of Madison's authorized but unissued common shares.
4.3 Financial Statements.
(a) Madison hereby warrants and covenants to Natures that the
audited financial statements of the period ended November 30, 1995, fairly and
accurately represent the financial condition of Madison and that the same will
be prepared along with the period ended as of the date of Closing, on or
before the expiration of forty-five days from the date of Closing.
(b) Madison hereby warrants and represents that the financial
statements for the periods set forth in subparagraph (a), supra, fairly and
accurately represent the financial condition of Madison submitted heretofore
to Natures for examination and review.
4.4 Subsidiaries. Madison has no subsidiaries.
4.5 Conduct of Business. Madison will use its best efforts to maintain
and preserve its business organization, employee relationships and goodwill
intact, and will not, without the prior written consent of Natures, enter into
any material commitments except in the ordinary course of business.
Madison agrees that Madison will conduct itself in the following manner
pending the Closing:
(a) Certificate of Incorporation and Bylaws. change will be made in
the Certificate of Incorporation or Bylaws of Madison.
(b) Capitalization, etc. Madison will not make any change in its
authorized or issued shares of any class, declare or pay any dividend or other
distribution, or issue, encumber, purchase or otherwise acquire any of its
shares of any class.
4.6 Options, Warrants and Rights. Although Madison intends to enact and
put into effect various management and employee benefit plans in the near
future, as of the date hereof, Madison has no options, warrants or stock
appreciation rights related to the authorized but unissued Madison common
stock. There are no existing options, warrants, calls, or commitments of any
character relating to the authorized and unissued Madison common stock, except
options, warrants, calls, or commitments, if any, to which Madison is not a
party and by which it is not bound.
4.7 Title to Property. Madison has good and marketable title to all of
its properties and assets, real and personal, proprietary or otherwise, as
will be reflected in the balance sheets of Madison, and the properties and
assets of Madison are subject to no mortgage, pledge, lien or encumbrance,
unless as otherwise disclosed in its financial statements.
4.8 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of Madison, threatened by or against or
effecting Madison at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
Madison does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, warrant, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality.
4.9 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, Madison and its present management will (i) give to
the Shareholders and Madison, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and
Madison, or their duly authorized representatives, may inspect them; and (ii)
furnish such information concerning the properties and affairs of Madison as
the Shareholders and Madison, or their duly authorized representatives, may
reasonably request. Any such request to inspect Madison's books shall be
directed to Madison's representative, Craig Pickering, at the address set
forth herein under Section 9.4 Notices.
4.10 Confidentiality.. Until the Closing (and thereafter if there is no
Closing), Madison and its representatives will keep confidential any
information which they obtain from the Shareholders or from Madison concerning
its properties, assets and the proposed business operations of Madison. If the
terms and conditions of this Plan imposed on the parties hereto are not
consummated on or before 5:00 p.m. MST on March 1, 1996 or otherwise waived or
extended in writing to a date mutually agreeable to the parties hereto,
Madison will return to Natures all written matter with regard to Natures
obtained in connection with the negotiations or consummation of this Plan.
4.11 Investment Intent. The Shareholders represent and covenant that
they are acquiring the unregistered and restricted common shares of Natures to
be delivered to them under this Plan for investment purposes and not with a
view to the subsequent sale or distribution thereof, and as agreed, supra, the
Shareholders, their successors and assigns agree to execute and deliver to
Natures on the date of Closing or no later than the date on which the
restricted shares are issued and delivered to the Shareholders, their assigns,
or designees, an Investment Letter similar in form to that attached hereto as
Exhibit B.
4.12 Unregistered Shares and Access to Information. Madison and the
Shareholders understand that the offer and sale of Natures post-split shares
to be exchanged for the Madison shares have not been registered with or
reviewed by the securities and Exchange Commission under the Securities Act of
1933, as amended, or with or by any state securities law administrator, and no
federal or state securities law administrator has reviewed or approved any
disclosure or other material facts concerning Natures or Natures post-split
stock. Madison and the Shareholders have been provided with and reviewed all
information concerning Natures and Natures' post-split shares, to be exchanged
for the Madison shares as they have considered necessary or appropriate as
prudent and knowledgeable investors to enable them to make informed investment
decisions concerning the Natures post-split shares, to be exchanged for the
Madison shares. Madison and the Shareholders have made an investigation as to
the merits and risks of their acquisition of the Natures post-split shares, to
be exchanged for the Madison shares and have had the opportunity to ask
questions of, and have received satisfactory answers from, the officers and
directors of Natures concerning Natures post-split shares to be exchanged for
the Madison shares and related matters, and have had an opportunity to obtain
additional information necessary to verify the accuracy of such information
and to evaluate the merits and risks of the proposed acquisition of the
Natures post-split shares to be exchanged for the Madison shares.
4.13 Title to Shares. The Shareholders are the beneficial and record
owners, free and clear of any liens and encumbrances, of whatever kind or
nature, of all of the shares of Madison of whatever class or series, which the
Shareholders have contracted to exchange.
4.14 Contracts.
(a) Set forth in the Madison Schedules are copies or descriptions of
all material contracts which written or oral, all agreements, franchises,
licenses, or other commitments to which Madison is a party or by which Madison
or its properties are bound.
(b) Except as may be set forth in the Madison Schedules, Madison is
not a party to any contract, agreement, corporate restriction, or subject to
any judgment, order, writ, injunction, decree, or award, which materially and
adversely effect the business, operations, properties, assets, or conditions
of Madison.
(c) Except as set forth in the Madison Schedules, Madison is not a
party to any material oral or written (i) contract for employment of any
officer which is not terminable on 30 days (or less) notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance, or any other
retirement plan of arrangement covered by Title IV of the Employee Retirement
Income Security Act, as amended, or otherwise covered; (iii) agreement
providing for the sale, assignment or transfer of any of its rights, assets or
properties, whether tangible or intangible, except sales of its property in
the ordinary course of business with a value of less than $2,000; or (iv)
waiver of any right of any value which in the aggregate is extraordinary or
material concerning the assets or properties scheduled by Madison, except for
adequate value and pursuant to contract. Madison has not entered into any
material transaction which is not listed in the Madison Schedules or reflected
in the Madison financial statements.
4.15 Material Contract Defaults. Madison is not in default in any
material respect under the terms of any contract, agreement, lease or other
commitment which is material to the business, operations, properties or
assets, or condition of Madison, and there is no event of default or event
which, with notice of lapse of time or both, would constitute a default in any
material respect under any such contract, agreement, lease, or other
commitment in respect of which Madison has not taken adequate steps to prevent
such default from occurring, or otherwise compromised, reached a satisfaction
of, or provided for extensions of time in which to perform under any one or
more contract obligations, among others.
4.16 Conflict with Other Instruments. The consummation of the within
transactions will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or material
agreement or instrument to which Madison was or is a party, or to which any of
its assets or operations are subject, and will not conflict with any provision
of the Articles of Incorporation or Bylaws of Madison.
4.17 Governmental Authorizations. Madison has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Except for compliance with federal and state securities laws, no
authorization, approval, consent or order of, or registration, declaration, or
tiling with, any court or other governmental body is required in connection
with the execution and delivery by Madison of this Plan and the consummation
by Madison of the transactions contemplated hereby.
4.18 Compliance with Laws and Regulations. Madison has complied with
all applicable statutes and regulations of any federal, state, or other
applicable jurisdiction or agency thereof, except to the extent that
noncompliance would not materially and adversely effect the business,
operations, properties, assets, or condition of Madison or except to the
extent that noncompliance would not result in the occurrence of any material
liability, not otherwise disclosed to Natures.
4.19 Approval of Plan. The Board of Directors of Madison have
authorized the execution and delivery of this Plan by Madison and have
approved the Plan and the transactions contemplated hereby. Madison has full
power, authority, and legal right to enter into this Plan and to consummate
the transactions contemplated hereby.
4.20 Information. The information concerning Madison set forth in this
Plan, and the Madison Schedules attached hereto, are complete and accurate in
all material respects and do not contain, or will not contain, when delivered,
any untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to Natures in connection with this Plan.
4.21 Madison' Schedules. Madison has delivered to Natures the following
items listed below, hereafter referred to as the "Madison Schedules", which is
hereby incorporated by reference and made a part hereof. A certification
executed by a duly authorized officer of Madison on or about the date within
the Plan is executed to certify that the Madison Schedules are true and
correct.
(a) Copy of Articles of Incorporation and Bylaws;
(b) Resolution of Board of Directors approving Plan;
(c) Consent of Shareholders approving Plan;
(d) Copies of all licenses, permits and other governmental
authorizations, requests or applications therefore pursuant to which Madison
carries on or proposes to carry on its business except those which, in the
aggregate, are immaterial to the present or proposed opinion business of
Madison;
(e) A list of all employees, including current compensation, with
notation as to job description and whether or not such employee is subject to
written contract, and if subject to a contract or employment agreement, a copy
of the same;
(f) A schedule showing the name and location of each bank or other
institution with which Madison has an account and the names of the authorized
persons to draw thereon or having access thereto;
(g) Financial statements of Madison;
(h) A schedule setting forth the shareholders, together with the
number of shares owned beneficially or of record by each (also attached as
Exhibit A);
(i) Officer's Certificate as required by Section 7.2 of the Plan;
(j) Certificate of Good Standing; and
(k) Acceptance of Nominations as Directors.
Section 5
SPECIAL COVENANTS
5.1 Resignation of Directors. At the Closing, all of Natures' current
management will resign their respective positions, seriatim, as Directors.
5.2 Madison Information Incorporated in Natures' Reports. Madison
represents and warrants to Natures that all the information furnished under
this Plan shall be true and correct in all material respects and that there is
no omission of any material fact required to make the information stated not
misleading. Madison agrees to indemnify and hold Natures harmless, including
each of its Directors and Officers, a nd each person, if any, who controls
such party, under any applicable law from and against any and all losses,
claims, damages, expenses or liabilities to which any of them may become
subject under applicable law, or reimburse them for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such actions, whether or not resulting in liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based on any untrue statement, alleged untrue statement, or omission of a
material fact contained in such information delivered hereunder.
5.3 Special Covenants and Representations Regarding the Exchanged
Natures Stock. The consummation of this Plan and the transactions herein
contemplated, including the issuance of the Natures post-split shares in
exchange for all of the issued and outstanding shares of Madison to the
Shareholders constitutes the offer and sale of securities under the Securities
Act and the applicable state statutes, which depend, inter alla, on the
circumstances under which the Shareholders acquire such securities. Natures
intends to rely on the exemption of the registration provision of Section 5 of
the Securities Act as provided for under Section 4.2 of the Securities Act of
1933, which states "transactions not involving a public offering", among
others. Each Shareholder upon submission of his Madison shares and the receipt
of the Natures post-split shares exchanged therefor, shall execute and deliver
to Natures a letter of investment invent to indicate, among other
representations, that the Shareholder is exchanging the Madison shares for
Natures post-split shares for investment purposes and not with a view to the
subsequent distribution thereof. A proposed Investment Letter is attached
hereto as Exhibit B and incorporated herein by reference for the general use
by the Shareholders, as they may determine.
5.4 Action Prior to Closing. Upon the execution hereof until the
Closing date, and the completion of the consolidated audited financials,
(a) Madison and Natures will (i) perform all of its obligations
under material contracts, leases, insurance policies and/or documents relating
to its assets and business; (ii) use its best efforts to maintain and preserve
its business organization intact, to retain its key employees, and to maintain
its relationship with existing potential customers and clients; and (iii)
fully comply with and perform in all material respects all duties and
obligations imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by all federal or state governmental
authorities.
(b) Neither Madison nor Natures will (i) make any change in its
Articles of Incorporation or Bylaws except and unless as contemplated pursuant
to Section 3 of this Plan; (ii) enter into or amend any contract, agreement,
or other instrument of the types described in the parties' schedules, except
that a party may enter into or amend any contract or other instrument in the
ordinary course of business involving the sale of goods or services, provided
that such contract does not involve obligations in excess of $10,000.
Section 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF MADISON AND THE SHAREHOLDERS
All obligations of Madison and the Shareholders under this Plan are
subject to the satisfaction, on or before the Closing date, except as
otherwise provided for herein, or waived or extended in writing by the parties
hereto, of the following conditions:
6.1 Accuracy of Representations. The representations and warranties
made by Natures in this Plan were true when made and shall be true as of the
Closing date (except for changes therein permitted by this Plan) with the same
force and effect as if such representations and warranties were made at and as
of the Closing date; and, Natures shall have performed and complied with by
Natures prior to the Closing, unless waived or extended in writing by the
parties hereto. Madison shall have been furnished with a certificate, signed
by a duly authorized executive officer of Natures and dated the Closing date,
to the foregoing effect.
6.2 Officers' Certificate. Madison and the Shareholders shall have been
furnished with a certificate dated the Closing date and signed by a duly
authorized executive officer of Natures, to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge of
Natures, threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of Natures.
6.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of Natures, nor shall any event have occurred which, with lapse
of time or the giving of notice or both, may cause or create any material
adverse change in the financial condition, business or operations of Natures,
except as otherwise disclosed to Madison.
6.4 Opinion of Counsel of Natures. Natures shall furnish to Madison and
the Shareholders an opinion dated as of the Closing date and in form and
substance satisfactory to Madison and the Shareholders to the effect that:
(a) Natures is a corporation duly organized, validly existing, and
in good standing. under the laws of the State of Nevada, and with all
requisite corporate power to perform its obligations under this Plan.
(b) The business of Natures, as presently conducted, including, upon
the consummation hereof, the ownership of all of the issued and outstanding
shares of Madison, does not require it to register it to do business as a
foreign corporation on any jurisdiction other than under the jurisdiction of
its Articles of Incorporation or Bylaws and Natures has complied to the best
of its knowledge in all material respects with all the laws, regulations,
licensing requirements and orders applicable to its business activities and
has filed with the proper authorities, including the Department of Commerce,
Division of Corporations, State of Utah and Secretary of State for the State
of Nevada, all statements and reports required to be filed.
(c) The authorized and outstanding capital stock of Natures as set
forth in Section 3.2 above, and all issued and outstanding shares have been
duly and validly authorized and issued and are fully paid and non-assessable.
(d) There are no material claims, suits or other legal proceedings
pending or threatened against Natures of any court or before or by any
governmental body which might materially effect the business of Natures or the
financial condition of Natures as a whole and no such claims, suits or legal
proceedings are contemplated by governmental authorities against Natures.
(e) Natures' initial public offering file declared effective by the
Utah Securities Commission on May 7, 1985, and was offered and sold in
accordance with and in compliance with the rules and regulations of the
Securities Act of 1933, as amended. Subsequent to the termination of Natures'
public offering, no stop orders suspending the effectiveness of the
distribution is or was in effect, and no proceedings since the termination
thereof for that purpose are pending before or threatened by any state or
federal agency or authority.
(f) To the best knowledge of such counsel, the consummation of the
transactions contemplated by this Plan will not violate or contravene the
provisions of the Certificate of Incorporation or Bylaws of Natures, or any
contract, agreement, indenture, mortgage, or order by which Natures is bound.
(g) This Plan constitutes a legal, valid and binding obligation of
Natures enforceable in accordance with its terms, subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium, or similar law effecting
creditors' rights generally and general principles of equity (regardless of
whether such principles are considered in a proceeding in equity or law).
(h) The execution and delivery of this Plan and the consummation of the
transactions contemplated hereby have been ratified by a majority of the
Shareholders of Natures and have been duly authorized by its Board of
Directors.
6.5 Good Standing. Madison shall have received a Certificate of Good
Standing from the State of Utah, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that Natures is in good standing as a corporation in the
State of Utah.
6.6 Other Items. Madison and the Shareholders shall have received such
further documents, certifications or instruments relating to the transactions
contemplated hereby as Madison and the Shareholders may reasonably request.
6.7 Resignations and Designation of New Directors. Madison and the
Shareholders shall have received duly executed resignations from all of the
directors and officers of Natures dated and effective as of the Closing, and
appointing the person or persons designated by Madison, to serve on the Board
of Directors of Natures until the next annual meeting of the stockholders and
until their successors shall be elected and qualified.
6.8 Changes in Capitalization and Cancellation of Shares, Change of
Name of Natures. All resolutions required to complete the matters outlined in
Section 1.4 hereof shall have been adopted, ratified and approved, save only
for the filing of the required and necessary documentation.
Section 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF NATURES
All obligations of Natures under this Plan are subject, at its option, to
the fulfillment, before the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties
made by Madison and the Shareholders under this Plan were true when made and
shall be true as of the Closing date (except for changes therein permitted by
this Plan) with the same force and effect as if such representations and
warranties were made at and as of the Closing date; and, Natures shall have
performed and complied with by Madison prior to the Closing, unless waived or
extended in writing by the parties hereto. Natures shall have been furnished
with a certificate, signed by a duly authorized executive officer of Madison
and dated the Closing date, to the foregoing effect.
7.2 Officers' Certificate. Natures shall have been furnished with a
certificate dated the Closing date and signed by a duly authorized executive
officer of Madison, to the effect that no litigation, proceeding,
investigation, or inquiry is pending, or to the best knowledge of Madison,
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of Madison.
7.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of Natures, nor shall any event have occurred which, with lapse
of time or the giving of notice or both, may cause or create any material
adverse change in the financial condition, business or operations of Madison,
except as otherwise disclosed to Natures.
7.4 Good Standing. Natures shall have received a Certificate of Good
Standing from the State of Utah, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that Madison is in good standing as a corporation in the
State of Utah.
7.5 Dissenters' Rights Waived. The Shareholders of Madison, and each of
them, agree and hereby waive any dissenters' rights, if any, under the laws of
the State of Utah in regards to any objection to this Plan as outlined herein
and otherwise consent to and agree and authorize the execution and
consummation of the within Plan in accordance to the terms and conditions of
this Plan by the management of Madison.
7.6 Other Items. Natures shall have received such further documents,
certifications or instruments relating to the transactions contemplated hereby
as Natures may reasonably request.
7.7 Registration of Madison Shares. In connection with the exchange of
Natures shares for Madison shares, Natures agrees, if practicable, and subject
to the consent of an underwriter(s) in the event Natures undertakes to file a
Registration Statement under the Securities Act of 1933, as amended, for the
purpose of raising money from the public through the sale of its equity, to
ensure that the Natures shares issued in connection with the within Plan will
be included as part of a general Registration Statement and "piggy back" any
such offering for the purpose of registering the same for sale by the
Shareholders, as they may determine.
7.8 Execution of Investment Letter. The Shareholders shall have executed
and delivered copies of Exhibit B to Natures.
Section 8
TERMINATION
8.1 Termination by Madison or the Shareholders. This Plan may be
terminated at any time prior to the Closing date by action of Madison or the
Shareholders, if Natures shall fail to comply in any material respect with any
of the covenants or agreements contained in this Plan. or if any of its
representations and warranties contained herein shall be inaccurate in any
material respect.
8.2 Termination by Natures. This Plan may be terminated at any time
prior to the Closing date by action of Natures if Madison shall fail to comply
in any material respect with any of the covenants or agreements contained in
this Plan, or if any of its representations or warranties contained herein
shall be inaccurate in any material respect.
8.3 Termination by Mutual Consent
(a) This Plan may be terminated at any time prior to the Closing
date by mutual consent of Natures, expressed by action of its Board of
Directors, Madison or the Shareholders.
(b) If this Plan is terminated pursuant to Section 8, this Plan
shall be of no further force and effect and no obligation, right or liability
shall arise hereunder. Each party shall bare its own costs in connection
herewith.
Section 9
SHAREHOLDERS' REPRESENTATIVE
The Shareholders hereby irrevocably designate and appoint Craig Pickering
as their agent and attorney in fact (the "Shareholders' Representative") with
full power and authority until the Closing to execute, deliver and receive on
their behalf all notices, requests and other communications hereunder; to fix
and alter on their behalf the date, time and place of the Closing; to waive,
amend or modify any provisions of this Plan and to take such other action on
their behalf in connection with this Plan, the Closing and the transactions
contemplated hereby as such agent deems appropriate; provided, however, that
no such waiver, amendment or modification may be made if it would decrease the
number of shares to be issued to the Shareholders under Section 1 hereof or
increase the extent of their obligation to Natures hereunder, unless agreed in
writing by the Shareholders.
Section 10
GENERAL PROVISIONS
10.1 Further Assurances. At any time, and from time to time, after the
Closing date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of the Plan.
10.2 Payments of Estimated Costs and Fees. Natures and Madison mutually
determine and agree that Natures shall pay the estimated costs and fees
incurred in connection with the execution and consummation of the Plan.
10.3 Press Release and Shareholders' Communications. On the date of
Closing, or as soon thereafter as practicable, Madison and the Shareholders
shall cause to have promptly prepared and disseminated a news release
concerning the execution and consummation of the Plan, such press release and
communication to he released promptly and within the time required by the
laws, rules and regulations as promulgated by the United States Securities and
Exchange Commission, and concomitant therewith to cause to be prepared a full
and complete letter to Natures' shareholders which shall contain information
required by Regulation 240.14f-1 as promulgated under Section 14(f) as
mandated under the Securities and Exchange Act of 1934, as amended.
10.4 Notices. All notices and other communications required or permitted
hereunder shall be sufficiently given if personally delivered, sent by
registered mail, or certified mail, return receipt requested, postage prepaid,
or by facsimile transmission addressed to the following parties hereto or at
such other addresses as follows:
If to Natures: Natures Gift, Inc.
870 East 9400 South #205
Sandy, Utah 84904
With a copy to: Daniel W. Jackson, Esq.
215 South State #1200
Salt Lake City, Utah 84111
If to Madison: Madison York & Associates
2474 North University Avenue
Provo, Utah 84604
If to the Shareholders: Craig Pickering
4400 Coldwater Canyon Blvd. #200
Studio City, California 91604
or at such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, sent
by facsimile transmission, or telegraphed.
10.5 Entire Agreement. This Plan represents the entire agreement
between the parties relating to the subject matter hereof, including any
previous letters of intent, understandings, or agreements between Natures,
Madison and the Shareholders with respect to the subject matter hereof, all of
which are hereby merged into this Plan, which alone fully and completely
expresses the agreement of the parties relating to the subject matter hereof.
Excepting the foregoing agreement, there are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
10.6 Governing Law. This Plan shall be governed by and construed and
enforced in accordance with the laws of the State of Utah, except to the
extent preempted by federal law, in which event (and to that extent only)
federal law shall govern.
10.7 Tax Treatment. The transaction contemplated by this Plan is
intended to qualify as a "tax-free" reorganization under the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. Madison
and Natures acknowledge, however, that each are being represented by their own
tax advisors in connection with this transaction, and neither has made any
representations or warranties to the other with respect to treatment of such
transaction or any part or effect thereof under applicable tax laws,
regulations or interpretations; and no attorney's opinion or tax revenue
ruling has been obtained with respect to the tax consequences of the
transactions contemplated by the within Plan.
10.8 Attorney Fees. In the event that any party prevails in any action
or suit to enforce this Plan, or secure relief from any default hereunder or
breach hereof, the nonprevailing party or parties shall reimburse the
prevailing party or parties for all costs, including reasonable attorney fees,
incurred in connection therewith.
10.9 Amendment of Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law or in equity, and may be enforced concurrently or separately, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, therefore, or
thereafter occurring or existing. Any time prior to the expiration of thirty
(30) days from the date hereof, this Plan may be amended by a writing signed
by all parties hereto, with respect to any of the terms contained herein, and
any term or condition of this Plan may be waived or the time for performance
thereof may be extended by a writing signed by the party or parties for whose
benefit the provision is intended.
10.10 Counterparts. This Plan may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which together shall constitute one and the same
instruments.
10.11 Headings. The section and subsection headings in this Plan are
inserted for convenience only and shall not effect in any way the meaning or
interpretation of the Plan.
10.12 Parties in Interest. Except as may be otherwise expressly
provided herein, all terms and provisions of this Plan shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, personal and legal representatives, and assigns.
IN WITNESS WHEREOF, the parties have executed this Plan and Agreement of
Reorganization effective the day and year first set forth above.
NATURES GIFT, INC.
Attest:
By: /s/ Rob Cropf
- ---------------------- -------------------
Its President
MADISON YORK & ASSOCIATES
Attest:
/s/ Cameron Carpenter By: /s/ Craig Pickering
- ---------------------- ----------------------
Its President
SHAREHOLDERS:
Attest:
/s/ Cameron Carpenter By: /s/ Craig Pickering
- ---------------------- -----------------------
Attest:
/s/ Cameron Carpenter By: /s/ Mark Comer
- ------------------------ ----------------------
Attest:
/s/ Lisa Rosenblatt By: /s/ Richard Rosenblatt
- ------------------------ ----------------------
Exhibit 2.2
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT and PLAN OF REORGANIZATION ("Plan") is made this 15th day
of January, 1996, among NATURES GIFT, INC., a Utah corporation ("Natures");
CABOT, RICHARDS AND REED, INC., a Utah corporation, any and all of its
subsidiaries (hereinafter collectively referred to as "CR&R") and its
shareholders (hereinafter "Shareholders").
Natures wishes to acquire all the issued and outstanding stock of CR&R
for and in exchange for stock of Natures, in a stock for stock transaction
intending to qualify as a tax-free exchange pursuant to Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended. The parties intend for this
Plan to represent the terms and conditions of such tax-free reorganization,
which Plan the parties hereby adopt.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, IT IS AGREED:
Section 1
TERMS OF EXCHANGE
1.1 Number of Shares. Upon the execution hereof, the Shareholders of
CR&R agree to assign, transfer, and deliver to Natures, free and clear of all
liens, pledges, encumbrances, charges, restrictions or known claims of any
kind, nature or description, all of their shares of CR&R stock, which
constitutes all of the issued and outstanding shares of CR&R aggregating 2,800
common shares, and Natures agrees to acquire such shares on the date thereof,
or as soon as practicable thereafter, by issuing and delivering in exchange
therefore solely common shares of Natures' stock, par value $0.001, in the
aggregate of 2,800,000 post reverse shares, as subject to the provisions of
this Plan, which shall represent, as a result thereof, approximately 21% of
the then issued and outstanding shares of Natures. Subsequent to the date
hereof, the Shareholders shall, upon the surrender of the CR&R certificates
representing their respective beneficial and record ownership of all of the
issued and outstanding shares of CR&R to Natures, as soon as practicable
hereafter, and further provided an exemption from the registration provisions
of Section 5 of the Securities Act of 1933 is available for the issuance
thereof, the Shareholders shall be entitled to receive a certificate(s)
evidencing shares of the exchanged Natures stock as provided for herein. Upon
the consummation of the transaction contemplated herein, Natures shall be the
beneficial and record owner of all of the issued and outstanding stock of
CR&R.
1.2 Anti-Dilution. For all relevant purposes of this Plan, the number
of Natures shares to be issued and delivered pursuant to this Plan, shall be
appropriate adjusted to take into account any stock split, stock dividend,
reverse stock split, recapitalization, or similar change in Natures common
stock, which may occur between the date of the execution of this Plan and the
date of the delivery of such shares.
1.3 Delivery of Certificates. The Shareholders shall transfer to
Natures at the closing provided for in Section 2 (the "Closing") the shares of
common stock of CR&R listed opposite their respective names on Exhibit A
hereto (the "CR&R shares") in exchange for the post-split shares of the common
stock of Natures as outlined above in Section 1.1 hereof (the "Natures
Stock"). All of such shares of Natures common stock shall be issued at the
closing to the Shareholders, in the numbers shown opposite their respective
names in Exhibit A. The transfer of CR&R shares by the Shareholders shall be
effected by the delivery to Natures at the Closing of certificates
representing the transferred shares endorsed in blank or accompanied by stock
powers executed in blank, with all signatures guaranteed by a national bank
and with all necessary transfer taxes and other revenue stamps affixed and
acquired at the Shareholders' expense.
1.4 Further Assurances. Subsequent to the execution hereof, and from
time to time thereafter, the Shareholders shall execute such additional
instruments and take such other action as Natures may request in order to more
effectively sell, transfer and assign clear title and ownership in the CR&R
shares to Natures.
Section 2
CLOSING
2.1 Closing. The Closing contemplated by Section 1.3 shall be held at
the law offices of Fabian & Clendenin on January 8, 1996 or at such other time
or place as may be mutually agreed upon in writing by the parties. The Closing
may also be accomplished by wire, express mail or other courier service,
conference telephone communications or as otherwise agreed by the respective
parties or their duly authorized representatives. In any event, the closing of
the transactions contemplated by this Plan shall be effected as soon as
practicable after all of the conditions contained herein have been satisfied.
2.2 Closing Events. At the Closing, each of the respective parties hereto
shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged, and delivered) any agreements, resolutions, rulings, or other
instruments required by this Plan to be so delivered at or prior to Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transaction contemplated hereby.
Section 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF NATURES
Natures represents and warrants to, and covenants with, the Shareholders
and CR&R as follows:
3.1 Corporate Status. Natures is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah incorporated
on February 9, 1984. Natures has full corporate power and is duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of its properties and
assets and to carry on its business on all material respects as it is now
being conducted, and there is no jurisdiction in which the character and
location of the assets owned by it, or the nature of the business transacted
by it, requires qualification. Included in the Natures schedules (defined
below) are complete and correct copies of its Articles of Incorporation and
Bylaws as in effect on the date hereof. The execution and delivery of this
Plan does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of Natures' Articles of Incorporation or
Bylaws. Natures has taken all action required by law, its Articles of
Incorporation, its Bylaws, or otherwise, to authorize the execution and
delivery of this Plan.
3.2 Capitalization. The authorized capital stock of Natures as of the
date hereof consists of 105,000,000 common shares, par value $0.001. As of the
date hereof there are 103,156,843 common shares of Natures issued and
outstanding. The foregoing shares constitute fully paid, non-assessable
shares. There are no outstanding options, warrants, or calls or any
understanding, agreements, commitments, contracts or promises with respect to
the issuance of Natures' common stock or with regard to any options, warrants
or other contractual rights to acquire any of Natures' authorized but unissued
common shares.
3.3 Recapitalization. In conjunction with the transaction embodied in
this Plan, Natures shall change its existing capitalization by effecting a
nineteen-to-one (19 to 1) revenue split of authorized, issued and outstanding
common stock (the "post-split shares") and will increase its authorized common
stock from 5,526,315 to 40,000,000 shares, par value $0.001. As a result of
the recapitalization, Natures will have 5,429,308 post-split shares issued and
outstanding and 40,000,000 authorized post-split shares, par value $0.001.
3.4 Financial Statements.
(a) Natures hereby warrants and covenants to CR&R that the audited
financial statements of the period ended July 31, 1995 and for its year ended
December 31, 1994 and December 31, 1993 and 1992, fairly and accurately
represent the financial condition of Natures and that the same will be
prepared along with the period ended as of the date of Closing. for
consolidation by an independent public accountant, which shall be prepared in
accordance with generally accepted accounting principles consistently applied,
on or before the expiration of forty-five days from the date of Closing.
(b) Natures hereby warrants and represents that the audited
financial statements for the periods set forth in subparagraph (a), supra,
fairly and accurately represent the financial condition of Natures as
submitted heretofore to CR&R for examination and review.
3.5 Subsidiaries. Natures has no subsidiaries.
3.6 Conduct of Business. Natures has no ongoing business.
3.7 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of Natures, threatened by or against or
effecting Natures at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
Natures does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, warrant, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality.
3.8 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, Natures and its present management will (i) give to
the Shareholders and CR&R, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and
CR&R, or their duly authorized representatives, may inspect them; and (ii)
furnish such information concerning the properties and affairs of Natures as
the Shareholders and CR&R, or their duly authorized representatives, may
reasonably request. Any such request to inspect Natures' books shall be
directed to Natures' counsel, Daniel W. Jackson, at the address set forth
herein under Section 9.4 Notices.
3.9 Confidentiality. Until the Closing (and thereafter if there is no
Closing), Natures and its representatives will keep confidential any
information which they obtain from the Shareholders or from CR&R concerning
its properties, assets and the proposed business operations of CR&R. If the
terms and conditions of this Plan imposed on the parties hereto are not
consummated on or before 5:00 p.m. MST on March 1, 1996 or otherwise waived or
extended in writing to a date mutually agreeable to the parties hereto,
Natures will return to CR&R all written matter with regard to CR&R obtained in
connection with the negotiations or consummation of this Plan.
3.10 Conflict with Other Instruments. The transactions contemplated by
this Plan will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or there
material agreements or instrument to which Natures was or is a party, or to
which any of its assets or operations are subject, and will not conflict with
any provision of the Articles of Incorporation or Bylaws of Natures.
3.11 Corporate Authority. Natures has full corporate power and
authority to enter into this Plan and to carry out its obligations hereunder
and will deliver to the Shareholders and CR&R, or their respective
representatives, at the Closing, a certified copy of resolutions of its Board
of Directors authorizing execution of this Plan by its officers and
performance thereunder.
3.12 Consent of Shareholders. Natures hereby warrants and represents
that the Shareholders of Natures, being the owners of a majority of the issued
and outstanding stock of the Corporation consented in writing to the
authorization to execute an Agreement and Plan of Reorganization as between
Natures and CR&R pursuant to a stock-for-stock transaction in which Natures
would acquire all of the issued and outstanding shares of CR&R in exchange for
the issuance of 13,526,315 common shares of Natures.
3.13 Resignation of Directors. Upon the Closing, the current directors
of Natures shall submit their resignations.
3.14 Special Covenants and Representations Regarding the Exchanged
Natures Stock. The consummation of this Plan and the transactions herein
contemplated include the issuance of the exchanged Natures shares to the
Shareholders, which constitutes an offer and sale of securities under the
Securities Act of 1933, as amended, and applicable states' securities laws.
Such transaction shall be consummated in reliance on exemptions from the
registration and prospectus requirements of such statutes which depend
interlace on the circumstances under which the Shareholders acquire such
securities. In connection with the reliance upon exemptions from the
registration and prospectus delivery requirements for such transactions, at
the Closing, Shareholders shall cause to be delivered to Natures a Letter(s)
of Investment Intent in the form attached hereto as Exhibit B and incorporated
herein by reference.
3.15 Undisclosed or Contingent Liabilities. Natures hereby represents
and warrants that it has no undisclosed or contingent liabilities which have
not been disclosed to CR&R.
3.16 Information. The information concerning Natures set forth in this
Plan, and the Natures schedules attached hereto, are complete and accurate in
all material respects and do not contain, or will not contain, when delivered,
any untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to CR&R in connection with this Plan.
3.17 Title and Related Matters. Natures has good and marketable title
to all of its properties, interests in properties, and assets, real and
personal, which are reflected, or will be reflected, in the Natures balance
sheets, free and clear of any and all liens and encumbrances.
3.18 Contracts or Agreements. Natures is not bound by any material
contracts, agreements or obligations which it has not already disclosed to
CR&R.
3.19 Governmental Authorizations. Natures has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Natures shall use its best efforts to obtain as quickly as
possible a listing in Moody's OTC Industrial Manual, or some other recognized
manual, recognized by the various states as an exemption from registration
provisions of any such state for the purposes of interstate trading of
Natures' post-split stock. Except for compliance with federal and state
securities laws, no authorization, approval, consent or order of, or
registration, declaration, or filing with, any court or other governmental
body is required in connection with the execution and delivery by Natures of
this Plan and the consummation by CR&R of the transactions contemplated
hereby.
3.20 Compliance with Laws and Regulations. Natures has complied with
all applicable statutes and regulations of any federal, state, or other
applicable jurisdiction or agency thereof, except to the extent that
noncompliance would not materially and adversely effect the business,
operations, properties, assets, or condition of Natures or except to the
extent that noncompliance would not result in the occurrence of any material
liability, not otherwise disclosed to CR&R.
3.21 Approval of Plan. The Board of Directors of Natures has authorized
the execution and delivery of this Plan by Natures and have approved the Plan
and the transactions contemplated hereby. Natures has full power, authority,
and legal right to enter into this Plan and to consummate the transactions
contemplated hereby.
3.22 Ratification by Shareholders. This Plan will be submitted to the
Shareholders of Natures for approval and ratification; the adoption
ratification of the Plan by a majority of the Shareholders of Natures is a
condition precedent to the consummation of the Plan.
3.23 Investment Intent. Natures is acquiring the CR&R shares to be
transferred to it under this Plan for investment and no with a view to the
sale or distribution thereof, and Natures has no commitment or present
intention to liquidate CR&R or to sell or otherwise dispose of the CR&R
shares.
3.24 Unregistered Shares and Access to Information. Natures understands
that the offer and sale of the CR&R shares have not been registered with or
reviewed by the Securities and Exchange Commission under the Securities Act of
1933, as amended, or with or by any state securities law administrator, and no
federal, state securities law administrator has reviewed or approved any
disclosure or other material concerning CR&R or the CR&R shares. Natures has
been provided with and reviewed all information concerning CR&R, the CR&R
shares as it has considered necessary or appropriate as a prudent and
knowledgeable investor to enable it to make an informed investment decision
concerning the CR&R shares. Natures has made an investigation as to the merits
and risks of its acquisition of the CR&R Shares and has had the opportunity to
ask questions of, and has received satisfactory answers from, the officers and
directors of CR&R concerning CR&R, the CR&R shares and related matters, and
has had an opportunity to obtain additional information necessary to verify
the accuracy of such information and to evaluate the merits and risks of the
proposed acquisition of the CR&R shares.
3.25 Natures' Schedules. Natures has delivered to CR&R the following
items listed below, hereafter referred to as the "Natures Schedules", which is
hereby incorporated by reference and made a part hereof. A certification
executed by a duly authorized officer of Natures on or about the date within
the Plan is executed to certify that the Natures Schedules are true and
correct.
(a) Copy of Articles of Incorporation, as amended, and Bylaws;
(b) Natures' Prospectus;
(c) Financial statements;
(d) Shareholder list;
(e) Consent of Directors to Plan;
(f) Officer's Certificate as required under Section 6.2 of the Plan;
(g) Opinion of counsel as required under Section 6.4 of the Plan;
(h) Certificate of Good Standing;
(i) Resignations of current Board of Directors; and
(j) Consent of Shareholders approving Plan.
Section 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CR&R
CR&R represents and warrants to, and covenants with, the Shareholders and
Natures as follows:
4.1 Corporate Status. CR&R is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah incorporated
on December 16, 1992. CR&R has full corporate power and is duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of its properties and
assets and to carry on its business on all material respects as it is now
being conducted, and there is no jurisdiction in which the character and
location of the assets owned by it, or the nature of the business transacted
by it, requires qualification. Included in the CR&R schedules (defined below)
are complete and correct copies of its Articles of Incorporation and Bylaws as
in effect on the date hereof. The execution and delivery of this Plan does
not, and the consummation of the transactions contemplated hereby will not,
violate any provision of CR&R's Articles of Incorporation or Bylaws. CR&R has
taken all action required by law, its Articles of Incorporation, its Bylaws,
or otherwise, to authorize the execution and delivery of this Plan.
4.2 Capitalization. The authorized capital stock of CR&R as of the
date hereof consists of 10,000 common shares, par value $0.001. As of the date
hereof there are 2,800 common shares of CR&R issued and outstanding. The
foregoing shares constitute fully paid, non-assessable shares. There are no
outstanding options, warrants, or calls or any understanding, agreements,
commitments, contracts or promises with respect to the issuance of CR&R's
common stock or with regard to any options, warrants or other contractual
rights to acquire any of CR&R's authorized but unissued common shares.
4.3 Financial Statements.
(a) CR&R hereby warrants and covenants to Natures that the audited
financial statements of the period ended November 30, 1995, fairly and
accurately represent the financial condition of CR&R and that the same will be
prepared along with the period ended as of the date of Closing, on or before
the expiration of forty-five days from the date of Closing.
(b) CR&R hereby warrants and represents that the financial
statements for the periods set forth in subparagraph (a), supra, fairly and
accurately represent the financial condition of CR&R submitted heretofore to
Natures for examination and review.
4.4 Subsidiaries. CR&R has no subsidiaries.
4.5 Conduct of Business. CR&R will use its best efforts to maintain and
preserve its business organization, employee relationships and goodwill
intact, and will not, without the prior written consent of Natures, enter into
any material commitments except in the ordinary course of business.
CR&R agrees that CR&R will conduct itself in the following manner pending
the Closing:
(a) Certificate of Incorporation and Bylaws. change will be made in
the Certificate of Incorporation or Bylaws of CR&R.
(b) Capitalization. etc. CR&R will not make any change in its
authorized or issued shares of any class, declare or pay any dividend or other
distribution, or issue, encumber, purchase or otherwise acquire any of its
shares of any class.
4.6 Options. Warrants and Rights. Although CR&R intends to enact and
put into effect various management and employee benefit plans in the near
future, as of the date hereof, CR&R has no options, warrants or stock
appreciation rights related to the authorized but unissued CR&R common stock.
There are no existing options, warrants, calls, or commitments of any
character relating to the authorized and unissued CR&R common stock, except
options, warrants, calls, or commitments, if any, to which CR&R is not a party
and by which it is not bound.
4.7 Title to Property. CR&R has good and marketable title to all of its
properties and assets, real and personal, proprietary or otherwise, as will be
reflected in the balance sheets of CR&R, and the properties and assets of CR&R
are subject to no mortgage, pledge, lien or encumbrance, unless as otherwise
disclosed in its financial statements.
4.8 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of CR&R, threatened by or against or
effecting CR&R at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
CR&R does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, warrant, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality.
4.9 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, CR&R and its present management will (i) give to
the Shareholders and CR&R, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and
CR&R, or their duly authorized representatives, may inspect them; and (ii)
furnish such information concerning the properties and affairs of CR&R as the
Shareholders and CR&R, or their duly authorized representatives, may
reasonably request. Any such request to inspect CR&R's books shall be directed
to CR&R's representative, Craig Pickering, at the address set forth herein
under Section 9.4 Notices.
4.10 Confidentiality. Until the Closing (and thereafter if there is no
Closing), CR&R and its representatives will keep confidential any information
which they obtain from the Shareholders or from CR&R concerning its
properties, assets and the proposed business operations of CR&R. If the terms
and conditions of this Plan imposed on the parties hereto are not consummated
on or before 5:00 p.m. MST on March 1, 1996 or otherwise waived or extended in
writing to a date mutually agreeable to the parties hereto, CR&R will return
to Natures all written matter with regard to Natures obtained in connection
with the negotiations or consummation of this Plan.
4.11 Investment Intent. The Shareholders represent and covenant that
they are acquiring the unregistered and restricted common shares of Natures to
be delivered to them under this Plan for investment purposes and not with a
view to the subsequent sale or distribution thereof, and as agreed, supra, the
Shareholders, their successors and assigns agree to execute and deliver to
Natures on the date of Closing or no later than the date on which the
restricted shares are issued and delivered to the Shareholders, their assigns,
or designees, an Investment Letter similar in form to that attached hereto as
Exhibit B.
4.12 Unregistered Shares and Access to Information. CR&R and the
Shareholders understand that the offer and sale of Natures post-split shares
to be exchanged for the CR&R shares have not been registered with or reviewed
by the securities and Exchange Commission under the Securities Act of 1933, as
amended, or with or by any state securities law administrator, and no federal
or state securities law administrator has reviewed or approved any disclosure
or other material facts concerning Natures or Natures post-split stock. CR&R
and the Shareholders have been provided with and reviewed all information
concerning Natures and Natures' post-split shares, to be exchanged for the
CR&R shares as they have considered necessary or appropriate as prudent and
knowledgeable investors to enable them to make informed investment decisions
concerning the Natures post-split shares, to be exchanged for the CR&R shares.
CR&R and the Shareholders have made an investigation as to the merits and
risks of their acquisition of the Natures post-split shares, to be exchanged
for the CR&R shares and have had the opportunity to ask questions of, and have
received satisfactory answers from, the officers and directors of Natures
concerning Natures post-split shares to be exchanged for the CR&R shares and
related matters, and have had an opportunity to obtain additional information
necessary to verify the accuracy of such information and to evaluate the
merits and risks of the proposed acquisition of the Natures post-split shares
to be exchanged for the CR&R shares.
4.13 Title to Shares. The Shareholders are the beneficial and record
owners, free and clear of any liens and encumbrances, of whatever kind or
nature, of all of the shares of CR&R of whatever class or series, which the
Shareholders have contracted to exchange.
4.14 Contracts.
(a) Set forth in the CR&R Schedules are copies or descriptions of
all material contracts which written or oral, all agreements, franchises,
licenses, or other commitments to which CR&R is a party or by which CR&R or
its properties are bound.
(b) Except as may he set forth in the CR&R Schedules, CR&R is not a
party to any contract, agreement, corporate restriction, or subject to any
judgment, order, writ, injunction, decree, or award, which materially and
adversely effect the business, operations, properties, assets, or conditions
of CR&R.
(c) Except as set forth in the CR&R Schedules, CR&R is not a party
to any material oral or written (i) contract for employment of any officer
which is not terminable on 30 days (or less) notice; (ii) profit sharing,
bonus, deferred compensation, stock option, severance, or any other retirement
plan of arrangement covered by Title IV of the Employee Retirement Income
Security Act, as amended, or otherwise covered; (iii) agreement providing for
the sale, assignment or transfer of any of its rights, assets or properties,
whether tangible or intangible, except sales of its property in the ordinary
course of business with a value of less than $2,000; or (iv) waiver of any
right of any value which in the aggregate is extraordinary or material
concerning the assets or properties scheduled by CR&R, except for adequate
value and pursuant to contract. CR&R has not entered into any material
transaction which is not listed in the CR&R Schedules or reflected in the CR&R
financial statements.
4.15 Material Contract Defaults. CR&R is not in default in any material
respect under the terms of any contract, agreement, lease or other commitment
which is material to the business, operations, properties or assets, or
condition of CR&R, and there is no event of default or event which, with
notice of lapse of time or both, would constitute a default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which CR&R has not taken adequate steps to prevent such default
from occurring, or otherwise compromised, reached a satisfaction of, or
provided for extensions of time in which to perform under any one or more
contract obligations, among others.
4.16 Conflict with Other Instruments. The consummation of the within
transactions will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or material
agreement or instrument to which CR&R was or is a party, or to which any of
its assets or operations are subject, and will not conflict with any provision
of the Articles of Incorporation or Bylaws of CR&R.
4.17 Governmental Authorizations. CR&R has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Except for compliance with federal and state securities laws, no
authorization, approval, consent or order of, or registration, declaration, or
filing with, any court or other governmental body is required in connection
with the execution and delivery by CR&R of this Plan and the consummation by
CR&R of the transactions contemplated hereby.
4.18 Compliance with Laws and Regulations. CR&R has complied with all
applicable statutes and regulations of any federal. state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of CR&R or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to Natures.
4.19 Approval of Plan. The Board of Directors of CR&R have authorized
the execution and delivery of this Plan by CR&R and have approved the Plan and
the transactions contemplated hereby. CR&R has full power, authority, and
legal right to enter into this Plan and to consummate the transactions
contemplated hereby.
4.20 Information. The information concerning CR&R set forth in this
Plan, and the CR&R Schedules attached hereto, are complete and accurate in all
material respects and do not contain, or will not contain, when delivered, any
untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to Natures in connection with this Plan.
4.21 CR&R' Schedules. CR&R has delivered to Natures the following items listed
below, hereafter referred to as the "CR&R Schedules", which is hereby
incorporated by reference and made a part hereof. A certification executed by
a duly authorized officer of CR&R on or about the date within the Plan is
executed to certify that the CR&R Schedules are true and correct.
(a) Copy of Articles of Incorporation and Bylaws;
(b) Resolution of Board of Directors approving Plan;
(c) Consent of Shareholders approving Plan;
(d) Copies of all licenses, permits and other governmental
authorizations, requests or applications therefore pursuant to which Cabot,
Richards & Reed, Inc. carries on or proposes to carry on its business except
those which, in the aggregate, are immaterial to the present or proposed
opinion business of Cabot, Richards & Reed, Inc.;
(e) A list of all employees, including current compensation, with
notation as to job description and whether or not such employee is subject to
written contract, and if subject to a contract or employment agreement, a copy
of the same;
(f) A schedule showing the name and location of each bank or other
institution with which Cabot, Richards & Reed, Inc. has an account and the
names of the authorized persons to draw thereon or having access thereto;
(g) Financial statements of Cabot, Richards & Reed, Inc.;
(h) A schedule setting forth the shareholders, together with the
number of shares owned beneficially or of record by each (also attached as
Exhibit A);
(i) Officer's Certificate as required by Section 7.2 of the Plan;
(j) Certificate of Good Standing; and
(k) Acceptance of Nominations as Directors.
Section 5
SPECIAL COVENANTS
5.1 Resignation of Directors. At the Closing, all of Natures' current
management will resign their respective positions, seriatim, as Directors.
5.2 CR&R Information Incorporated in Natures' Reports. CR&R represents
and warrants to Natures that all the information furnished under this Plan
shall be true and correct in all material respects and that there is no
omission of any material fact required to make the information stated not
misleading. CR&R agrees to indemnify and hold Natures harmless, including each
of its Directors and Officers, and each person, if any, who controls such
party, under any applicable law from and against any and all losses, claims,
damages, expenses or liabilities to which any of them may become subject under
applicable law, or reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
actions, whether or not resulting in liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based on
any untrue statement, alleged untrue statement, or omission of a material fact
contained in such information delivered hereunder.
5.3 Special Covenants and Representations Regarding the Exchanged
Natures Stock. The consummation of this Plan and tile transactions herein
contemplated, including the issuance of the Natures post-split shares in
exchange for all of the issued and outstanding shares of CR&R to the
Shareholders constitutes the offer and sale of securities under the Securities
Act and the applicable state statutes, which depend, inter alia, on the
circumstances under which the Shareholders acquire such securities. Natures
intends to rely on the exemption of the registration provision of Section 5 of
the Securities Act as provided for under Section 4.2 of the Securities Act of
1933, which states "transactions not involving a public offering", among
others. Each Shareholder upon submission of his CR&R shares and the receipt of
the Natures post-split shares exchanged therefor, shall execute and deliver to
Natures a letter of investment invent to indicate, among other
representations, that the Shareholder is exchanging the CR&R shares for
Natures post-split shares for investment purposes and not with a view to the
subsequent distribution thereof. A proposed Investment Letter is attached
hereto as Exhibit B and incorporated herein by reference for the general use
by the Shareholders, as they may determine.
5.4 Action Prior to Closing. Upon the execution hereof until the
Closing date, and the completion of the consolidated audited financials,
(a) CR&R and Natures will (i) perform all of its obligations under
material contracts, leases, insurance policies and/or documents relating to
its assets and business; (ii) use its best efforts to maintain and preserve
its business organization intact, to retain its key employees, and to maintain
its relationship with existing potential customers and clients; and (iii)
fully comply with and perform in all material respects all duties and
obligations imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by all federal or state governmental
authorities.
(b) Neither CR&R nor Natures will (i) make any change in its
Articles of Incorporation or Bylaws except and unless as contemplated pursuant
to Section 3 of this Plan; (ii) enter into or amend any contract, agreement,
or other instrument of the types described in the parties' schedules, except
that a party may enter into or amend any contract or other instrument in the
ordinary course of business involving the sale of goods or services, provided
that such contract does not involve obligations in excess of $10,000.
Section 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF CR&R AND THE SHAREHOLDERS
All obligations of CR&R and the Shareholders under this Plan are subject
to the satisfaction, on or before the Closing date, except as otherwise
provided for herein, or waived or extended in writing by the parties hereto,
of the following conditions:
6.1 Accuracy of Representations. The representations and warranties
made by Natures in this Plan were true when made and shall be true as of the
Closing date (except for changes therein permitted by this Plan) with the same
force and effect as if such representations and warranties were made at and as
of the Closing date; and, Natures shall have performed and complied with by
Natures prior to the Closing, unless waived or extended in writing by the
parties hereto. CR&R shall have been furnished with a certificate, signed by a
duly authorized executive officer of Natures and dated the Closing date, to
the foregoing effect.
6.2 Officers' Certificate. CR&R and the Shareholders shall have been
furnished with a certificate dated the Closing date and signed by a duly
authorized executive officer of Natures, to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge of
Natures, threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of Natures.
6.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of Natures, nor shall any event have occurred which, with lapse
of time or the giving of notice or both, may cause or create any material
adverse change in the financial condition, business or operations of Natures,
except as otherwise disclosed to CR&R.
6.4 Opinion of Counsel of Natures. Natures shall furnish to CR&R and
the Shareholders an opinion dated as of the Closing date and in form and
substance satisfactory to CR&R and the Shareholders to the effect that:
(a) Natures is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Nevada, and with all requisite
corporate power to perform its obligations under this Plan.
(b) The business of Natures, as presently conducted, including, upon
the consummation hereof, the ownership of all of the issued and outstanding
shares of CR&R, does not require it to register it to do business as a foreign
corporation on any jurisdiction other than under the jurisdiction of its
Articles of Incorporation or Bylaws and Natures has complied to the best of
its knowledge in all material respects with all the laws, regulations,
licensing requirements and orders applicable to its business activities and
has filed with the proper authorities, including the Department of Commerce,
Division of Corporations, State of Utah and Secretary of State for the State
of Nevada, all statements and reports required to be filed.
(c) The authorized and outstanding capital stock of Natures as set
forth in Section 3.2 above, and all issued and outstanding shares have been
duly and validly authorized and issued and are fully paid and non-assessable.
(d) There are no material claims, suits or other legal proceedings
pending or threatened against Natures of any court or before or by any
governmental body which might materially effect the business of Natures or the
financial condition of Natures as a whole and no such claims, suits or legal
proceedings are contemplated by governmental authorities against Natures.
(e) Natures' initial public offering file declared effective by the
Utah Securities Commission on May 7, 1985, and was offered and sold in
accordance with and in compliance with the rules and regulations of the
Securities Act of 1933, as amended. Subsequent to the termination of Natures'
public offering, no stop orders suspending the effectiveness of the
distribution is or was in effect, and no proceedings since the termination
thereof for that purpose are pending before or threatened by any state or
federal agency or authority.
(f) To the best knowledge of such counsel, the consummation of the
transactions contemplated by this Plan will not violate or contravene the
provisions of the Certificate of Incorporation or Bylaws of Natures, or any
contract, agreement, indenture, mortgage, or order by which Natures is bound.
(g) This Plan constitutes a legal, valid and binding obligation of Natures
enforceable in accordance with its terms, subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium, or similar law effecting
creditors' rights generally and general principles of equity (regardless of
whether such principles are considered in a proceeding in equity or law).
(h) The execution and delivery of this Plan and the consummation of
the transactions contemplated hereby have been ratified by a majority of the
Shareholders of Natures and have been duly authorized by its Board of
Directors.
6.5 Good Standing. CR&R shall have received a Certificate of Good
Standing from the State of Utah, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that Natures is in good standing as a corporation in the
State of Utah.
6.6 Other Items. CR&R and the Shareholders shall have received such
further documents, certifications or instruments relating to the transactions
contemplated hereby as CR&R and the Shareholders may reasonably request.
6.7 Resignations and Designation of New Directors. CR&R and the
Shareholders shall have received duly executed resignations from all of the
directors and officers of Natures dated and effective as of the Closing, and
appointing the person or persons designated by CR&R, to serve on the Board of
Directors of Natures until the next annual meeting of the stockholders and
until their successors shall be elected and qualified.
6.8 Chances in Capitalization and Cancellation of Shares. Change of
Name of Natures. All resolutions required to complete the matters outlined in
Section 1.4 hereof shall have been adopted, ratified and approved, save only
for the filing of the required and necessary documentation.
Section 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF NATURES
All obligations of Natures under this Plan are subject, at its option, to
the fulfillment, before the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties
made by CR&R and the Shareholders under this Plan were true when made and
shall be true as of the Closing date (except for changes therein permitted by
this Plan) with the same force and effect as if such representations and
warranties were made at and as of the Closing date; and, Natures shall have
performed and complied with by CR&R prior to the Closing, unless waived or
extended in writing by the parties hereto. Natures shall have been furnished
with a certificate, signed by a duly authorized executive officer of CR&R and
dated the Closing date, to the foregoing effect.
7.2 Officers' Certificate. Natures shall have been furnished with a
certificate dared the Closing date and signed by a duly authorized executive
officer of CR&R, to the effect that no litigation, proceeding, investigation,
or inquiry is pending, or to the best knowledge of CR&R. threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Plan, or which might result in any material
adverse change in the assets, properties, business, or operations of CR&R.
7.3 No Material Adverse Chance. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of Natures, nor shall any event have occurred which, with lapse
of time or the giving of notice or both, may cause or create any material
adverse change in the financial condition, business or operations of CR&R,
except as otherwise disclosed to Natures.
7.4 Good Standing. Natures shall have received a Certificate of Good
Standing from the State of Utah, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that CR&R is in good standing as a corporation in the State
of Utah.
7.5 Dissenters' Rights Waived. The Shareholders of CR&R, and each of
them, agree and hereby waive any dissenters' rights, if any, under the laws of
the State of Utah in regards to any objection to this Plan as outlined herein
and otherwise consent to and agree and authorize the execution and
consummation of the within Plan in accordance to the terms and conditions of
this Plan by the management of CR&R.
7.6 Other Items. Natures shall have received such further documents,
certifications or instruments relating to the transactions contemplated hereby
as Natures may reasonably request.
7.7 Registration of CR&R Shares. In connection with the exchange of
Natures shares for CR&R shares, Natures agrees, if practicable, and subject to
the consent of an underwriter(s) in the event Natures undertakes to file a
Registration Statement under the Securities Act of 1933, as amended, for the
purpose of raising money from the public through the sale of its equity, to
ensure that the Natures shares issued in connection with the within Plan will
be included as part of a general Registration Statement and "piggy back" any
such offering for the purpose of registering the same for sale by the
Shareholders, as they may determine.
7.8 Execution of Investment Letter. The Shareholders shall have
executed and delivered copies of Exhibit B to Natures.
Section 8
TERMINATION
8.1 Termination by CR&R or the Shareholders. This Plan may be
terminated at any time prior to the Closing date by action of CR&R or the
Shareholders, if Natures shall fail to comply in any material respect with any
of the covenants or agreements contained in this Plan, or if any of its
representations and warranties contained herein shall be inaccurate in any
material respect.
8.2 Termination by Natures. This Plan may be terminated at any time
prior to the Closing date by action of Natures if CR&R shall fail to comply in
any material respect with any of the covenants or agreements contained in this
Plan, or if any of its representations or warranties contained herein shall be
inaccurate in any material respect.
8.3 Termination by Mutual Consent
(a) This Plan may he terminated at any time prior to the Closing
date by mutual consent of Natures, expressed by action of its Board of
Directors, CR&R or the Shareholders.
(b) If this Plan is terminated pursuant to Section 8, this Plan
shall be of no further force and effect and no obligation, right or liability
shall arise hereunder. Each party shall bare its own costs in connection
herewith.
Section 9
SHAREHOLDERS' REPRESENTATIVE
The Shareholders hereby irrevocably designate and appoint Craig Pickering
as their agent and attorney in fact (the "Shareholders' Representative") with
full power and authority until the Closing to execute, deliver and receive on
their behalf all notices, requests and other communications hereunder; to fix
and alter on their behalf the date, time and place of the Closing; to waive,
amend or modify any provisions of this Plan and to take such other action on
their behalf in connection with this Plan, the Closing and the transactions
contemplated hereby as such agent deems appropriate; provided, however, that
no such waiver, amendment or modification may be made if it would decrease the
number of shares to be issued to the Shareholders under Section 1 hereof or
increase the extent of their obligation to Natures hereunder, unless agreed in
writing by the Shareholders.
Section 10
GENERAL PROVISIONS
10.1 Further Assurances. At any time, and from time to time, after the
Closing date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of the Plan.
10.2 Payments of Estimated Costs and Fees. Natures and CR&R mutually
determine and agree that Natures shall pay the estimated costs and fees
incurred in connection with the execution and consummation of the Plan.
10.3 Press Release and Shareholders' Communications. On the date of
Closing, or as soon thereafter as practicable, CR&R and the Shareholders shall
cause to have promptly prepared and disseminated a news release concerning the
execution and consummation of the Plan. such press release and communication
to be released promptly and within the time required by the laws, rules and
regulations as promulgated by the United States Securities and Exchange
Commission. and concomitant therewith to cause to be prepared a full and
complete letter to Natures shareholders which shall contain information
required by Regulation 240.14f-1 as promulgated under Section 14(f) as
mandated under the Securities and Exchange Act of 1934, as amended.
10.4 Notices. All notices and other communications required or
permitted hereunder shall be sufficiently given if personally delivered, sent
by registered mail, or certified mail, return receipt requested, postage
prepaid, or by facsimile transmission addressed to the following parties
hereto or at such other addresses as follows:
If to Natures: Natures Gift, Inc.
870 East 9400 South #205
Sandy, Utah 84904
With a copy to: Daniel W. Jackson, Esq.
215 South State #1200
Salt Lake City, Utah 84111
If to CR&R: Cabot, Richards and Reed, Inc.
2474 North University Avenue #350
Provo, Utah 84604
If to the Shareholders: Craig Pickering
2474 North University Avenue #350
Provo, Utah 84604
or at such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, sent
by facsimile transmission, or telegraphed.
10.5 Entire Agreement. This Plan represents the entire agreement
between the parties relating to the subject matter hereof, including any
previous letters of intent, understandings, or agreements between Natures,
CR&R and the Shareholders with respect to the subject matter hereof, all of
which are hereby merged into this Plan, which alone fully and completely
expresses the agreement of the parties relating to the subject matter hereof.
Excepting the foregoing agreement, there are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
10.6 Governing Law. This Plan shall be governed by and construed and
enforced in accordance with the laws of the State of Utah, except to the
extent preempted by federal law, in which event (and to that extent only)
federal law shall govern.
10.7 Tax Treatment. The transaction contemplated by this Plan is
intended to qualify as a "tax-free" reorganization under the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. CR&R
and Natures acknowledge, however, that each are being represented by their own
tax advisors in connection with this transaction, and neither has made any
representations or warranties to the other with respect to treatment of such
transaction or any part or effect thereof under applicable tax laws,
regulations or interpretations; and no attorney's opinion or tax revenue
ruling has been obtained with respect to the tax consequences of the
transactions contemplated by the within Plan.
10.8 Attorney Fees. In the event that any party prevails in any action
or suit to enforce this Plan, or secure relief from any default hereunder or
breach hereof, the nonprevailing party or parties shall reimburse the
prevailing party or parties for all costs, including reasonable attorney fees,
incurred in connection therewith.
10.9 Amendment of Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law or in equity, and may be enforced concurrently or separately, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, therefore, or
thereafter occurring or existing. Any time prior to the expiration of thirty
(30) days from the date hereof, this Plan may be amended by a writing signed
by all parties hereto, with respect to any of the terms contained herein, and
any term or condition of this Plan may be waived or the time for performance
thereof may be extended by a writing signed by the, party or parties for whose
benefit the provision is intended.
10.10 Counterparts. This Plan may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which together shall constitute one and the same
instruments.
10.11 Headings. The section and subsection headings in this Plan are
inserted for convenience only and shall not effect in any way the meaning or
interpretation of the Plan.
10.12 Parties in Interest. Except as may be otherwise expressly
provided herein, all terms and provisions of this Plan shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, personal and legal representatives, and assigns.
IN WITNESS WHEREOF the parties have executed this Plan and Agreement of
Reorganization effective the day and year first set forth above.
NATURES GIFT, INC.
Attest:
By /s/ Rob Cropf
---------------------- --------------------------
Its President
CABOT, RICHARDS AND REED, INC.
Attest:
/s/ Cameron Carpenter By /s/ Craig Pickering
----------------------- -----------------------------
Its President
SHAREHOLDERS:
Attest:
/s/ Cameron Carpenter By /s/ Craig Pickering
----------------------- --------------------------
Attest:
/s/ Cameron Carpenter By /s/ Mark Comer
----------------------- ---------------------------
Attest:
/s/ Cameron Carpenter By /s/ David Mickelsen
----------------------- -----------------------------
Attest:
/s/ Lisa Rosenblatt By:/s/ Richard Rosenblatt
----------------------- -----------------------------
Exhibit 2.3
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Plan") is made this ____ day
of January, 1996, among NATURES GIFT, INC., a Utah corporation ("Natures");
R&R ADVERTISING, INC., a California corporation, any and all of its
subsidiaries (hereinafter collectively referred to as "R&R") and its
shareholders (hereinafter "Shareholders").
Natures wishes to acquire all the issued and outstanding stock of R&R for
and in exchange for stock of Natures, in a stock for stock transaction
intending to qualify as a tax-free exchange pursuant to Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended. The parties intend for this
Plan to represent the terms and conditions of such tax-free reorganization,
which Plan the parties hereby adopt.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, IT IS AGREED:
Section 1
TERMS OF EXCHANGE
1.1 Number of Shares. Upon the execution hereof, the Shareholders of
R&R agree to assign, transfer, and deliver to Natures, free and clear of all
liens, pledges, encumbrances, charges, restrictions or known claims of any
kind, nature or description, all of their shares of R&R stock, which
constitutes all of the issued and outstanding shares of R&R aggregating 200
common shares, and Natures agrees to acquire such shares on the date thereof,
or as soon as practicable thereafter, by issuing and delivering in exchange
therefore solely common shares of Natures' stock, par value $0.001, in the
aggregate of 1,200,000 post split shares, as subject to the provisions of this
Plan, which shall represent, as a result thereof, approximately 9% of the then
issued and outstanding shares of Natures. Subsequent to the date hereof, the
Shareholders shall, upon the surrender of the R&R certificates representing
their respective beneficial and record ownership of all of the issued and
outstanding shares of R&R to Natures, as soon as practicable hereafter, and
further provided an exemption from the registration provisions of Section 5 of
the Securities Act of 1933 is available for the issuance thereof, the
Shareholders shall be entitled to receive a certificate(s) evidencing shares
of the exchanged Natures stock as provided for herein. Upon the consummation
of the transaction contemplated herein, Natures shall be the beneficial and
record owner of all of the issued and outstanding stock of R&R.
1.2 Anti-Dilution. For all relevant purposes of this Plan, the number
of Natures shares to be issued and delivered pursuant to this Plan, shall be
appropriate adjusted to take into account any stock split, stock dividend,
reverse stock split, recapitalization, or similar change in Natures common
stock, which may occur between the date of the execution of this Plan and the
date of the delivery of such shares.
1.3 Delivery of Certificates. The Shareholders shall transfer to
Natures at the closing provided for in Section 2 (the "Closing") the shares of
common stock of R&R listed opposite their respective names on Exhibit A hereto
(the "R&R shares") in exchange for the post-split shares of the common stock
of Natures as outlined above in Section 1.1 hereof (the "Natures Stock"). All
of such shares of Natures common stock shall be issued at the closing to the
Shareholders, in the numbers shown opposite their respective names in Exhibit
A. The transfer of R&R shares by the Shareholders shall be effected by the
delivery to Natures at the Closing of certificates representing the
transferred shares endorsed in blank or accompanied by stock powers executed
in blank, with all signatures guaranteed by a national bank and with all
necessary transfer taxes and other revenue stamps affixed and acquired at the
Shareholders' expense.
1.4 Further Assurances. Subsequent to the execution hereof, and from
time to time thereafter, the Shareholders shall execute such additional
instruments and take such other action as Natures may request in order to more
effectively sell, transfer and assign clear title and ownership in the R&R
shares to Natures.
Section 2
CLOSING
2.1 Closing. The Closing contemplated by Section 1.3 shall be held at
the law offices of Fabian & Clendenin on January 8, 1996 or at such other time
or place as may be mutually agreed upon in writing by the parties. The
Closing may also be accomplished by wire, express mail or other courier
service, conference telephone communications or as otherwise agreed by the
respective parties or their duly authorized representatives. In any event,
the closing of the transactions contemplated by this Plan shall be effected as
soon as practicable after all of the conditions contained herein have been
satisfied.
2.2 Closing Events. At the Closing, each of the respective parties
hereto shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged, and delivered) any agreements, resolutions, rulings, or other
instruments required by this Plan to be so delivered at or prior to Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transaction contemplated hereby.
Section 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF NATURES
Natures represents and warrants to, and covenants with, the Shareholders
and R&R as follows:
3.1 Corporate Status. Natures is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah incorporated
on February 9, 1994. Natures has full corporate power and is duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of its properties and
assets and to carry on its business on all material respects as it is now
being conducted, and there is no jurisdiction in which the character and
location of the assets owned by it, or the nature of the business transacted
by it, requires qualification. Included in the Natures schedules (defined
below) are complete and correct copies of its Articles of Incorporation and
Bylaws as in effect on the date hereof. The execution and delivery of this
Plan does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of Natures' Articles of Incorporation or
Bylaws. Natures has taken all action required by law, its Articles of
Incorporation, its Bylaws, or otherwise, to authorize the execution and
delivery of this Plan.
3.2 Capitalization. The authorized capital stock of Natures as of the
date hereof consists of 105,000,000 common shares, par value $0.001. As of
the date hereof there are 103,156,843 common shares of Natures issued and
outstanding. The foregoing shares constitute fully paid, non-assessable
shares. There are no outstanding options, warrants, or calls or any
understanding, agreements, commitments, contracts or promises with respect to
the issuance of Natures' common stock or with regard to any options, warrants
or other contractual rights to acquire any of Natures' authorized but unissued
common shares.
3.3 Recapitalization. In conjunction with the transaction embodied in
this Plan, Natures shall change its existing capitalization by effecting a
nineteen-to-one (19 to 1) revenue split of authorized, issued and outstanding
common stock (the "post-split shares") and will increase its authorized common
stock from 5,526,315 to 40,000,000 shares, par value $0.001. As a result of
the recapitalization, Natures will have 5,429,308 post-split shares issued and
outstanding and 40,000,000 authorized post-split shares, par value $0.001.
3.4 Financial Statements.
(a) Natures hereby warrants and covenants to R&R that the audited
financial statements of the period ended July 31, 1995 and for its year ended
December 31, 1994 and December 31, 1993 and 1992, fairly and accurately
represent the financial condition of Natures and that the same will be
prepared along with the period ended as of the date of Closing, for
consolidation by an independent public accountant, which shall be prepared in
accordance with generally accepted accounting principles consistently applied,
on or before the expiration of forty-five days from the date of Closing.
(b) Natures hereby warrants and represents that the audited
financial statements for the periods set forth in subparagraph (a), supra,
fairly and accurately represent the financial condition of Natures as
submitted heretofore to R&R for examination and review.
3.5 Subsidiaries. Natures has no subsidiaries.
3.6 Conduct of Business. Natures has no ongoing business.
3.7 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of Natures, threatened by or against or
effecting Natures at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
Natures does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, warrant, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality.
3.8 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, Natures and its present management will (i) give to
the Shareholders and R&R, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and R&R,
or their duly authorized representatives, may inspect them; and (ii) furnish
such information concerning the properties and affairs of Natures as the
Shareholders and R&R, or their duly authorized representatives, may reasonably
request. Any such request to inspect Natures' books shall be directed to
Natures' counsel, Daniel W. Jackson, at the address set forth herein under
Section 9.4 Notices.
3.9 Confidentiality. Until the Closing (and thereafter if there is no
Closing), Natures and its representatives will keep confidential any
information which they obtain from the Shareholders or from R&R concerning its
properties, assets and the proposed business operations of R&R. If the terms
and conditions of this Plan imposed on the parties hereto are not consummated
on or before 5:00 p.m. MST on March 1, 1996 or otherwise waived or extended in
writing to a date mutually agreeable to the parties hereto, Natures will
return to R&R all written matter with regard to R&R obtained in connection
with the negotiations or consummation of this Plan.
3.10 Conflict with Other Instruments. The transactions contemplated by
this Plan will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or there
material agreements or instrument to which Natures was or is a party, or to
which any of its assets or operations are subject, and will not conflict with
any provision of the Articles of Incorporation or Bylaws of Natures.
3.11 Corporate Authority. Natures has full corporate power and
authority to enter into this Plan and to carry out its obligations hereunder
and will deliver to the Shareholders and R&R, or their respective
representatives, at the Closing, a certified copy of resolutions of its Board
of Directors authorizing execution of this Plan by its officers and
performance thereunder.
3.12 Consent of Shareholders. Natures hereby warrants and represents
that the Shareholders of Natures, being the owners of a majority of the issued
and outstanding stock of the Corporation consented in writing to the
authorization to execute an Agreement and Plan of Reorganization as between
Natures and R&R pursuant to a stock-for-stock transaction in which Natures
would acquire all of the issued and outstanding shares of R&R in exchange for
the issuance of 13,526,315 post reverse common shares of Natures.
3.13 Resignation of Directors. Upon the Closing, the current directors
of Natures shall submit their resignations.
3.14 Special Covenants and Representations Regarding the Exchanged
Natures Stock. The consummation of this Plan and the transactions herein
contemplated include the issuance of the exchanged Natures shares to the
Shareholders, which constitutes an offer and sale of securities under the
Securities Act of 1933, as amended, and applicable states' securities laws.
Such transaction shall be consummated in reliance on exemptions from the
registration and prospectus requirements of such statutes which depend
interlace on the circumstances under which the Shareholders acquire such
securities. In connection with the reliance upon exemptions from the
registration and prospectus delivery requirements for such transactions, at
the Closing, Shareholders shall cause to be delivered to Natures a Letter(s)
of Investment Intent in the form attached hereto as Exhibit B and incorporated
herein by reference.
3.15 Undisclosed or Contingent Liabilities. Natures hereby represents
and warrants that it has no undisclosed or contingent liabilities which have
not been disclosed to R&R.
3.16 Information. The information concerning Natures set forth in this
Plan, and the Natures schedules attached hereto, are complete and accurate in
all material respects and do not contain, or will not contain, when delivered,
any untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to R&R in connection with this Plan.
3.17 Title and Related Matters. Natures has good and marketable title
to all of its properties, interests in properties, and assets, real and
personal, which are reflected, or will be reflected, in the Natures balance
sheets, free and clear of any and all liens and encumbrances.
3.18 Contracts or Agreements. Natures is not bound by any material
contracts, agreements or obligations which it has not already disclosed to
R&R.
3.19 Governmental Authorizations. Natures has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Natures shall use its best efforts to obtain as quickly as
possible a listing in Moody's OTC Industrial Manual, or some other recognized
manual, recognized by the various states as an exemption from registration
provisions of any such state for the purposes of interstate trading of
Natures' post-split stock. Except for compliance with federal and state
securities laws, no authorization, approval, consent or order of, or
registration, declaration, or filing with, any court or other governmental
body is required in connection with the execution and delivery by Natures of
this Plan and the consummation by R&R of the transactions contemplated hereby.
3.20 Compliance with Laws and Regulations. Natures has complied with
all applicable statutes and regulations of any federal, state, or other
applicable jurisdiction or agency thereof, except to the extent that
noncompliance would not materially and adversely effect the business,
operations, properties, assets, or condition of Natures or except to the
extent that noncompliance would not result in the occurrence of any material
liability, not otherwise disclosed to R&R.
3.21 Approval of Plan. The Board of Directors of Natures has authorized
the execution and delivery of this Plan by Natures and have approved the Plan
and the transactions contemplated hereby. Natures has full power, authority,
and legal right to enter into this Plan and to consummate the transactions
contemplated hereby.
3.22 Ratification by Shareholders. This Plan will be submitted to the
Shareholders of Natures for approval and ratification of the plan; the
adoption and ratification of the Plan by a majority of the Shareholders of
Natures is a condition precedent to the consummation of the Plan.
3.23 Investment Intent. Natures is acquiring the R&R shares to be
transferred to it under this Plan for investment and no with a view to the
sale or distribution thereof, and Natures has no commitment or present
intention to liquidate R&R or to sell or otherwise dispose of the R&R shares.
3.24 Unregistered Shares and Access to Information. Natures understands
that the offer and sale of the R&R shares have not been registered with or
reviewed by the Securities and Exchange Commission under the Securities Act of
1933, as amended, or with or by any state securities law administrator, and no
federal, state securities law administrator has reviewed or approved any
disclosure or other material concerning R&R or the R&R shares. Natures has
been provided with and reviewed all information concerning R&R, the R&R shares
as it has considered necessary or appropriate as a prudent and knowledgeable
investor to enable it to make an informed investment decision concerning the
R&R shares. Natures has made an investigation as to the merits and risks of
its acquisition of the Natures Shares and has had the opportunity to ask
questions of, and has received satisfactory answers from, the officers and
directors of R&R concerning R&R, the R&R shares and related matters, and has
had an opportunity to obtain additional information necessary to verify the
accuracy of such information and to evaluate the merits and risks of the
proposed acquisition of the R&R shares.
3.25 Natures' Schedules. Natures has delivered to R&R the following
items listed below, hereafter referred to as the "Natures Schedules", which is
hereby incorporated by reference and made a part hereof. A certification
executed by a duly authorized officer of Natures on or about the date within
the Plan is executed to certify that the Natures Schedules are true and
correct.
(a) Copy of Articles of Incorporation, as amended, and Bylaws;
(b) Natures' Prospectus;
(c) Financial statements;
(d) Shareholder list;
(e) Consent of Directors to Plan;
(f) Officer's Certificate as required under Section 6.2 of the
Plan;
(g) Opinion of counsel as required under Section 6.4 of the Plan;
(h) Certificate of Good Standing;
(i) Resignations of current Board of Directors; and
(j) Consent of Shareholders approving the Plan.
Section 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF R&R
R&R represents and warrants to, and covenants with, the Shareholders and
Natures as follows:
4.1 Corporate Status. R&R is a corporation duly organized, validly
existing and in good standing under the laws of the State of California
incorporated on January 5, 1994. R&R has full corporate power and is duly
authorized, qualified, franchised, and licensed under all applicable laws,
regulations, ordinances, and orders of public authorities to own all of its
properties and assets and to carry on its business on all material respects as
it is now being conducted, and there is no jurisdiction in which the character
and location of the assets owned by it, or the nature of the business
transacted by it, requires qualification. Included in the R&R schedules
(defined below) are complete and correct copies of its Articles of
Incorporation and Bylaws as in effect on the date hereof. The execution and
delivery of this Plan does not, and the consummation of the transactions
contemplated hereby will not, violate any provision of R&R's Articles of
Incorporation or Bylaws. R&R has taken all action required by law, its
Articles of Incorporation, its Bylaws, or otherwise, to authorize the
execution and delivery of this Plan.
4.2 Capitalization. The authorized capital stock of R&R as of the date
hereof consists of 1,000 common shares, par value $0.001. As of the date
hereof there are 200 common shares of R&R issued and outstanding. The
foregoing shares constitute fully paid, non-assessable shares. There are no
outstanding options, warrants, or calls or any understanding, agreements,
commitments, contracts or promises with respect to the issuance of R&R's
common stock or with regard to any options, warrants or other contractual
rights to acquire any of R&R's authorized but unissued common shares.
4.3 Financial Statements.
(a) R&R hereby warrants and covenants to Natures that the
financial statements of the period ended November 1995 and for its year ended
December 31, 1994 and December 31, 1993, fairly and accurately represent the
financial condition of R&R and that the same will be prepared along with the
period ended as of the date of Closing on or before the expiration of forty-
five days from the date of Closing.
(b) R&R hereby warrants and represents that the audited financial
statements for the periods set forth in subparagraph (a), supra, fairly and
accurately represent the financial condition of R&R submitted heretofore to
Natures for examination and review.
4.4 Conduct of Business. R&R will use its best efforts to maintain and
preserve its business organization, employee relationships and goodwill
intact, and will not, without the prior written consent of Natures, enter into
any material commitments except in the ordinary course of business.
R&R agrees that R&R will conduct itself in the following manner pending
the Closing:
(a) Certificate of Incorporation and Bylaws. No change will be
made in the Certificate of Incorporation or Bylaws of R&R.
(b) Capitalization, etc. R&R will not make any change in its
authorized or issued shares of any class, declare or pay any dividend or other
distribution, or issue, encumber, purchase or otherwise acquire any of its
shares of any class.
4.5 Options, Warrants and Rights. Although R&R intends to enact and
put into effect various management and employee benefit plans in the near
future, as of the date hereof, R&R has no options, warrants or stock
appreciation rights related to the authorized but unissued R&R common stock.
There are no existing options, warrants, calls, or commitments of any
character relating to the authorized and unissued R&R common stock, except
options, warrants, calls, or commitments, if any, to which R&R is not a party
and by which it is not bound.
4.6 Title to Property. R&R has good and marketable title to all of its
properties and assets, real and personal, proprietary or otherwise, as will be
reflected in the balance sheets of R&R, and the properties and assets of R&R
are subject to no mortgage, pledge, lien or encumbrance, unless as otherwise
disclosed in its financial statements.
4.7 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of R&R, threatened by or against or
effecting R&R at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
R&R does not have any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, warrant, rule, or regulation of any
court, arbitrator, or governmental agency or instrumentality.
4.8 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, R&R and its present management will (i) give to the
Shareholders and R&R, or their duly authorized representatives, full access,
during normal business hours, to all of its books, records, contracts and
other corporate documents and properties so that the Shareholders and R&R, or
their duly authorized representatives, may inspect them; and (ii) furnish such
information concerning the properties and affairs of R&R as the Shareholders
and R&R, or their duly authorized representatives, may reasonably request.
Any such request to inspect R&R's books shall be directed to R&R's
representative, Richard Rosenblatt, at the address set forth herein under
Section 9.4 Notices.
4.9 Confidentiality. Until the Closing (and thereafter if there is no
Closing), R&R and its representatives will keep confidential any information
which they obtain from the Shareholders or from R&R concerning its properties,
assets and the proposed business operations of R&R. If the terms and
conditions of this Plan imposed on the parties hereto are not consummated on
or before 5:00 p.m. MST on March 1, 1996 or otherwise waived or extended in
writing to a date mutually agreeable to the parties hereto, R&R will return to
Natures all written matter with regard to Natures obtained in connection with
the negotiations or consummation of this Plan.
4.10 Investment Intent. The Shareholders represent and covenant that
they are acquiring the unregistered and restricted common shares of Natures to
be delivered to them under this Plan for investment purposes and not with a
view to the subsequent sale or distribution thereof, and as agreed, supra, the
Shareholders, their successors and assigns agree to execute and deliver to
Natures on the date of Closing or no later than the date on which the
restricted shares are issued and delivered to the Shareholders, their assigns,
or designees, an Investment Letter similar in form to that attached hereto as
Exhibit B.
4.11 Unregistered Shares and Access to Information. R&R and the
Shareholders understand that the offer and sale of Natures post-split shares
to be exchanged for the R&R shares have not been registered with or reviewed
by the securities and Exchange Commission under the Securities Act of 1933, as
amended, or with or by any state securities law administrator, and no federal
or state securities law administrator has reviewed or approved any disclosure
or other material facts concerning Natures or Natures post-split stock. R&R
and the Shareholders have been provided with and reviewed all information
concerning Natures and Natures' post-split shares, to be exchanged for the R&R
shares as they have considered necessary or appropriate as prudent and
knowledgeable investors to enable them to make informed investment decisions
concerning the Natures post-split shares, to be exchanged for the R&R shares.
R&R and the Shareholders have made an investigation as to the merits and risks
of their acquisition of the Natures post-split shares, to be exchanged for the
R&R shares and have had the opportunity to ask questions of, and have received
satisfactory answers from, the officers and directors of Natures concerning
Natures post-split shares to be exchanged for the R&R shares and related
matters, and have had an opportunity to obtain additional information
necessary to verify the accuracy of such information and to evaluate the
merits and risks of the proposed acquisition of the Natures post-split shares
to be exchanged for the R&R shares.
4.12 Title to Shares. The Shareholders are the beneficial and record
owners, free and clear of any liens and encumbrances, of whatever kind or
nature, of all of the shares of R&R of whatever class or series, which the
Shareholders have contracted to exchange.
4.13 Contracts.
(a) Set forth in the R&R Schedules are copies or descriptions of
all material contracts which written or oral, all agreements, franchises,
licenses, or other commitments to which R&R is a party or by which R&R or its
properties are bound.
(b) Except as may be set forth in the R&R Schedules, R&R is not a
party to any contract, agreement, corporate restriction, or subject to any
judgment, order, writ, injunction, decree, or award, which materially and
adversely effect the business, operations, properties, assets, or conditions
of R&R.
(c) Except as set forth in the R&R Schedules, R&R is not a party to
any material oral or written (i) contract for employment of any officer which
is not terminable on 30 days (or less) notice; (ii) profit sharing, bonus,
deferred compensation, stock option, severance, or any other retirement plan
of arrangement covered by Title IV of the Employee Retirement Income Security
Act, as amended, or otherwise covered; (iii) agreement providing for the sale,
assignment or transfer of any of its rights, assets or properties, whether
tangible or intangible, except sales of its property in the ordinary course of
business with a value of less than $2,000; or (iv) waiver of any right of any
value which in the aggregate is extraordinary or material concerning the
assets or properties scheduled by R&R, except for adequate value and pursuant
to contract. R&R has not entered into any material transaction which is not
listed in the R&R Schedules or reflected in the R&R financial statements.
4.14 Material Contract Defaults. R&R is not in default in any material
respect under the terms of any contract, agreement, lease or other commitment
which is material to the business, operations, properties or assets, or
condition of R&R, and there is no event of default or event which, with notice
of lapse of time or both, would constitute a default in any material respect
under any such contract, agreement, lease, or other commitment in respect of
which R&R has not taken adequate steps to prevent such default from occurring,
or otherwise compromised, reached a satisfaction of, or provided for
extensions of time in which to perform under any one or more contract
obligations, among others.
4.15 Conflict with Other Instruments. The consummation of the within
transactions will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or material
agreement or instrument to which R&R was or is a party, or to which any of its
assets or operations are subject, and will not conflict with any provision of
the Articles of Incorporation or Bylaws of R&R.
4.16 Governmental Authorizations. R&R has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Except for compliance with federal and state securities laws, no
authorization, approval, consent or order of, or registration, declaration, or
filing with, any court or other governmental body is required in connection
with the execution and delivery by R&R of this Plan and the consummation by
R&R of the transactions contemplated hereby.
4.17 Compliance with Laws and Regulations. R&R has complied with all
applicable statutes and regulations of any federal, state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of R&R or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to Natures.
4.18 Approval of Plan. The Board of Directors of R&R have authorized
the execution and delivery of this Plan by R&R and have approved the Plan and
the transactions contemplated hereby. R&R has full power, authority, and
legal right to enter into this Plan and to consummate the transactions
contemplated hereby.
4.19 Information. The information concerning R&R set forth in this
Plan, and the R&R Schedules attached hereto, are complete and accurate in all
material respects and do not contain, or will not contain, when delivered, any
untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to Natures in connection with this Plan.
4.20 R&R' Schedules. R&R has delivered to Natures the following items
listed below, hereafter referred to as the "R&R Schedules", which is hereby
incorporated by reference and made a part hereof. A certification executed by
a duly authorized officer of R&R on or about the date within the Plan is
executed to certify that the R&R Schedules are true and correct.
(a) Copy of Articles of Incorporation and Bylaws;
(b) Resolutions of Board of Directors Meeting approving the Plan;
(c) Consent of Shareholder approving the Plan;
(d) Waiver of Notice of Shareholder's Meeting;
(e) Copies of all licenses, permits and other governmental
authorizations, requests or applications therefore pursuant to which R&R
carries on or proposes to carry on its business except those which, in the
aggregate, are immaterial to the present or proposed opinion business of R&R.
(f) A list of all employees, including current compensation, with
notation as to job description and whether or not such employee is subject to
written contract, and if subject to a contract or employment agreement, a copy
of the same;
(g) A schedule showing the name and location of each bank or other
institution with which R&R has an account and the names of the authorized
persons to draw thereon or having access thereto;
(h) Financial statements of R&R;
(i) A schedule setting forth the Shareholders, together with the
number of shares owned beneficially or of record by each (also attached as
Exhibit A);
(j) Officer's Certificate as required by Section 7.2 of the Plan;
(k) Certificate of Good Standing; and
(l) Acceptance of Nominations as Directors.
Section 5
SPECIAL COVENANTS
5.1 Resignation of Directors. At the Closing, all of Natures' current
management will resign their respective positions, seriatim, as Directors.
5.2 R&R Information Incorporated in Natures' Reports. R&R represents
and warrants to Natures that all the information furnished under this Plan
shall be true and correct in all material respects and that there is no
omission of any material fact required to make the information stated not
misleading. R&R agrees to indemnify and hold Natures harmless,including each
of its Directors and Officers,a nd each person, if any, who controls such
party, under any applicable law from and against any and all losses, claims,
damages, expenses or liabilities to which any of them may become subject under
applicable law, or reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
actions, whether or not resulting in liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based on
any untrue statement, alleged untrue statement, or omission of a material fact
contained in such information delivered hereunder.
5.3 Special Covenants and Representations Regarding the Exchanged
Natures Stock. The consummation of this Plan and the transactions herein
contemplated, including the issuance of the Natures post-split shares in
exchange for all of the issued and outstanding shares of R&R to the
Shareholders constitutes the offer and sale of securities under the Securities
Act and the applicable state statutes, which depend, inter alia, on the
circumstances under which the Shareholders acquire such securities. Natures
intends to rely on the exemption of the registration provision of Section 5 of
the Securities Act as provided for under Section 4.2 of the Securities Act of
1933, which states "transactions not involving a public offering", among
others. Each Shareholder upon submission of his R&R shares and the receipt of
the Natures post-split shares exchanged therefor, shall execute and deliver to
Natures a letter of investment invent to indicate, among other
representations, that the Shareholder is exchanging the R&R shares for Natures
post-split shares for investment purposes and not with a view to the
subsequent distribution thereof. A proposed Investment Letter is attached
hereto as Exhibit B and incorporated herein by reference for the general use
by the Shareholders, as they may determine.
5.4 Action Prior to Closing. Upon the execution hereof until the
Closing date, and the completion of the financial statements,
(a) R&R and Natures will (i) perform all of its obligations under
material contracts, leases, insurance policies and/or documents relating to
its assets and business; (ii) use its best efforts to maintain and preserve
its business organization intact, to retain its key employees, and to maintain
its relationship with existing potential customers and clients; and (iii)
fully comply with and perform in all material respects all duties and
obligations imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by all federal or state governmental
authorities.
(b) Neither R&R nor Natures will (i) make any change in its
Articles of Incorporation or Bylaws except and unless as contemplated pursuant
to Section 3 of this Plan; (ii) enter into or amend any contract, agreement,
or other instrument of the types described in the parties' schedules, except
that a party may enter into or amend any contract or other instrument in the
ordinary course of business involving the sale of goods or services, provided
that such contract does not involve obligations in excess of $10,000.
Section 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF
R&R AND THE SHAREHOLDERS
All obligations of R&R and the Shareholders under this Plan are subject
to the satisfaction, on or before the Closing date, except as otherwise
provided for herein, or waived or extended in writing by the parties hereto,
of the following conditions:
6.1 Accuracy of Representations. The representations and warranties
made by Natures in this Plan were true when made and shall be true as of the
Closing date (except for changes therein permitted by this Plan) with the same
force and effect as if such representations and warranties were made at and as
of the Closing date; and, Natures shall have performed and complied with by
Natures prior to the Closing, unless waived or extended in writing by the
parties hereto. R&R shall have been furnished with a certificate, signed by a
duly authorized executive officer of Natures and dated the Closing date, to
the foregoing effect.
6.2 Officers' Certificate. R&R and the Shareholders shall have been
furnished with a certificate dated the Closing date and signed by a duly
authorized executive officer of Natures, to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge of
Natures, threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of Natures.
6.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of Natures, nor shall any event have occurred which, with lapse
of time or the giving of notice or both, may cause or create any material
adverse change in the financial condition, business or operations of Natures,
except as otherwise disclosed to R&R.
6.4 Opinion of Counsel of Natures. Natures shall furnish to R&R and the
Shareholders an opinion dated as of the Closing date and in form and substance
satisfactory to R&R and the Shareholders to the effect that:
(a) Natures is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Nevada, and with all requisite
corporate power to perform its obligations under this Plan.
(b) The business of Natures, as presently conducted,including,
upon the consummation hereof, the ownership of all of the issued and
outstanding shares of R&R, does not require it to register it to do business
as a foreign corporation on any jurisdiction other than under the jurisdiction
of its Articles of Incorporation or Bylaws and Natures has complied to the
best of its knowledge in all material respects with all the laws, regulations,
licensing requirements and orders applicable to its business activities and
has filed with the proper authorities, including the Department of Commerce,
Division of Corporations, State of Utah and Secretary of State for the State
of Nevada, all statements and reports required to be filed.
(c) The authorized and outstanding capital stock of Natures as set
forth in Section 3.2 above, and all issued and outstanding shares have been
duly and validly authorized and issued and are fully paid and non-assessable.
(d) There are no material claims, suits or other legal proceedings
pending or threatened against Natures of any court or before or by any
governmental body which might materially effect the business of Natures or the
financial condition of Natures as a whole and no such claims, suits or legal
proceedings are contemplated by governmental authorities against Natures.
(e) Natures' initial public offering file declared effective by the
Utah Securities Commission on May 7, 1985, and was offered and sold in
accordance with and in compliance with the rules and regulations of the
Securities Act of 1933, as amended. Subsequent to the termination of Natures'
public offering, no stop orders suspending the effectiveness of the
distribution is or was in effect, and no proceedings since the termination
thereof for that purpose are pending before or threatened by any state or
federal agency or authority.
(f) To the best knowledge of such counsel, the consummation of
the transactions contemplated by this Plan will not violate or contravene the
provisions of the Certificate of Incorporation or Bylaws of Natures, or any
contract, agreement, indenture, mortgage, or order by which Natures is bound.
(g) This Plan constitutes a legal, valid and binding obligation
of Natures enforceable in accordance with its terms, subject to the effect of
any bankruptcy, insolvency, reorganization, moratorium, or similar law
effecting creditors' rights generally and general principles of equity
(regardless of whether such principles are considered in a proceeding in
equity or law).
(h) The execution and delivery of this Plan and the consummation
of the transactions contemplated hereby have been ratified by a majority of
the Shareholders of Natures and have been duly authorized by its Board of
Directors.
6.5 Good Standing. R&R shall have received a Certificate of Good
Standing from the State of Utah, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that Natures is in good standing as a corporation in the
State of Utah.
6.6 Other Items. R&R and the Shareholders shall have received such
further documents, certifications or instruments relating to the transactions
contemplated hereby as R&R and the Shareholders may reasonably request.
6.7 Resignations and Designation of New Directors. R&R and the
Shareholders shall have received duly executed resignations from all of the
directors and officers of Natures dated and effective as of the Closing, and
appointing the person or persons designated by R&R, to serve on the Board of
Directors of Natures until the next annual meeting of the stockholders and
until their successors shall be elected and qualified.
6.8 Changes in Capitalization and Cancellation of Shares, Change of Name
of Natures. All resolutions required to complete the matters outlined in
Section 1.4 hereof shall have been adopted, ratified and approved, save only
for the filing of the required and necessary documentation.
Section 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF NATURES
All obligations of Natures under this Plan are subject, at its option, to
the fulfillment, before the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties
made by R&R and the Shareholders under this Plan were true when made and shall
be true as of the Closing date (except for changes therein permitted by this
Plan) with the same force and effect as if such representations and warranties
were made at and as of the Closing date; and, Natures shall have performed and
complied with by R&R prior to the Closing, unless waived or extended in
writing by the parties hereto. Natures shall have been furnished with a
certificate, signed by a duly authorized executive officer of R&R and dated
the Closing date, to the foregoing effect.
7.2 Officers' Certificate. Natures shall have been furnished with a
certificate dated the Closing date and signed by a duly authorized executive
officer of R&R, to the effect that no litigation, proceeding, investigation,
or inquiry is pending, or to the best knowledge of R&R, threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Plan, or which might result in any material
adverse change in the assets, properties, business, or operations of R&R.
7.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of Natures, nor shall any event have occurred which, with lapse
of time or the giving of notice or both, may cause or create any material
adverse change in the financial condition, business or operations of R&R,
except as otherwise disclosed to Natures.
7.4 Good Standing. Natures shall have received a Certificate of Good
Standing from the State of Utah, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that R&R is in good standing as a corporation in the State
of California.
7.5 Dissenters' Rights Waived. The Shareholders of R&R, and each of
them, agree and hereby waive any dissenters' rights, if any, under the laws of
the State of California in regards to any objection to this Plan as outlined
herein and otherwise consent to and agree and authorize the execution and
consummation of the within Plan in accordance to the terms and conditions of
this Plan by the management of R&R.
7.6 Other Items. Natures shall have received such further documents,
certifications or instruments relating to the transactions contemplated hereby
as Natures may reasonably request.
7.7 Registration of R&R Shares. In connection with the exchange of
Natures shares for R&R shares, Natures agrees, if practicable, and subject to
the consent of an underwriter(s) in the event Natures undertakes to file a
Registration Statement under the Securities Act of 1933, as amended, for the
purpose of raising money from the public through the sale of its equity, to
ensure that the Natures shares issued in connection with the within Plan will
be included as part of a general Registration Statement and "piggy back" any
such offering for the purpose of registering the same for sale by the
Shareholders, as they may determine.
7.8 Execution of Investment Letter. The Shareholders shall have
executed and delivered copies of Exhibit B to Natures.
Section 8
TERMINATION
8.1 Termination by R&R or the Shareholders. This Plan may be terminated
at any time prior to the Closing date by action of R&R or the Shareholders, if
Natures shall fail to comply in any material respect with any of the covenants
or agreements contained in this Plan, or if any of its representations and
warranties contained herein shall be inaccurate in any material respect.
8.2 Termination by Natures. This Plan may be terminated at any time
prior to the Closing date by action of Natures if R&R shall fail to comply in
any material respect with any of the covenants or agreements contained in this
Plan, or if any of its representations or warranties contained herein shall be
inaccurate in any material respect.
8.3 Termination by Mutual Consent
(a) This Plan may be terminated at any time prior to the Closing
date by mutual consent of Natures, expressed by action of its Board of
Directors, R&R or the Shareholders.
(b) If this Plan is terminated pursuant to Section 8, this Plan
shall be of no further force and effect and no obligation, right or liability
shall arise hereunder. Each party shall bare its own costs in connection
herewith.
Section 9
SHAREHOLDER'S REPRESENTATIVE
The Shareholders hereby irrevocably designate and appoint Richard
Rosenblatt, the sole shareholder will act as agent and attorney in fact (the
"Shareholder's Representative") with full power and authority until the
Closing to execute, deliver and receive all notices, requests and other
communications hereunder; to fix and alter on their behalf the date, time and
place of the Closing; to waive, amend or modify any provisions of this Plan
and to take such other action on their behalf in connection with this Plan,
the Closing and the transactions contemplated hereby as such agent deems
appropriate; provided, however, that no such waiver, amendment or modification
may be made if it would decrease the number of shares to be issued to the
Shareholders under Section 1 hereof or increase the extent of their obligation
to Natures hereunder, unless agreed in writing by Mr. Rosenblatt.
Section 10
GENERAL PROVISIONS
10.1 Further Assurances. At any time, and from time to time, after the
Closing date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of the Plan.
10.2 Payments of Estimated Costs and Fees. Natures and R&R mutually
determine and agree that Natures shall pay the estimated costs and fees
incurred in connection with the execution and consummation of the Plan.
10.3 Press Release and Shareholders' Communications. On the date of
Closing, or as soon thereafter as practicable, R&R and the Shareholders shall
cause to have promptly prepared and disseminated a news release concerning the
execution and consummation of the Plan, such press release and communication
to be released promptly and within the time required by the laws, rules and
regulations as promulgated by the United States Securities and Exchange
Commission, and concomitant therewith to cause to be prepared a full and
complete letter to Natures' shareholders which shall contain information
required by Regulation 240.14f-1 as promulgated under Section 14(f) as
mandated under the Securities and Exchange Act of 1934, as amended.
10.4 Notices. All notices and other communications required or
permitted hereunder shall be sufficiently given if personally delivered, sent
by registered mail, or certified mail, return receipt requested, postage
prepaid, or by facsimile transmission addressed to the following parties
hereto or at such other addresses as follows:
If to Natures: Natures Gift, Inc.
870 East 9400 South #205
Sandy, Utah 84904
With a copy to: Daniel W. Jackson, Esq.
215 South State #1200
Salt Lake City, Utah 84111
If to R&R: R&R Advertising, Inc.
4400 Coldwater Canyon Boulevard #202
Studio City, California 91604
If to the Shareholder: Richard Rosenblatt
4400 Coldwater Canyon Blvd. #202
Studio City, California 91604
or at such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, sent
by facsimile transmission, or telegraphed.
10.5 Entire Agreement. This Plan represents the entire agreement
between the parties relating to the subject matter hereof, including any
previous letters of intent, understandings, or agreements between Natures, R&R
and the Shareholders with respect to the subject matter hereof, all of which
are hereby merged into this Plan, which alone fully and completely expresses
the agreement of the parties relating to the subject matter hereof. Excepting
the foregoing agreement, there are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
10.6 Governing Law. This Plan shall be governed by and construed and
enforced in accordance with the laws of the State of Utah, except to the
extent preempted by federal law, in which event (and to that extent only)
federal law shall govern.
10.7 Tax Treatment. The transaction contemplated by this Plan is
intended to qualify as a "tax-free" reorganization under the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. R&R
and Natures acknowledge, however, that each are being represented by their own
tax advisors in connection with this transaction, and neither has made any
representations or warranties to the other with respect to treatment of such
transaction or any part or effect thereof under applicable tax laws,
regulations or interpretations; and no attorney's opinion or tax revenue
ruling has been obtained with respect to the tax consequences of the
transactions contemplated by the within Plan.
10.8 Attorney Fees. In the event that any party prevails in any action
or suit to enforce this Plan, or secure relief from any default hereunder or
breach hereof, the nonprevailing party or parties shall reimburse the
prevailing party or parties for all costs, including reasonable attorney fees,
incurred in connection therewith.
10.9 Amendment of Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law or in equity, and may be enforced concurrently or separately, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, therefore, or
thereafter occurring or existing. Any time prior to the expiration of thirty
(30) days from the date hereof, this Plan may be amended by a writing signed
by all parties hereto, with respect to any of the terms contained herein, and
any term or condition of this Plan may be waived or the time for performance
thereof may be extended by a writing signed by the party or parties for whose
benefit the provision is intended.
10.10 Counterparts. This Plan may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which together shall constitute one and the same
instruments.
10.11 Headings. The section and subsection headings in this Plan are
inserted for convenience only and shall not effect in any way the meaning or
interpretation of the Plan.
10.12 Parties in Interest. Except as may be otherwise expressly
provided herein, all terms and provisions of this Plan shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, personal and legal representatives, and assigns.
IN WITNESS WHEREOF, the parties have executed this Plan and Agreement of
Reorganization effective the day and year first set forth above.
NATURES GIFT, INC.
Attest:
By /s/ Rob Cropf
- -------------------- -----------------------------
Its President
R&R ADVERTISIING, INC.
Attest:
By /s/ Lisa Rosenblatt By /s/ Richard Rosenblatt
- ------------------------ ---------------------------------
Its President
SHAREHOLDER:
Attest:
By /s/ Lisa Rosenblatt By /s/ Richard Rosenblatt
- ------------------------- ------------------------------
Exhibit 2.4
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Plan") is made this 26th day
of April, 1996, among iMALL, INC., a Nevada corporation ("iMall"); Physicomp
Corporation, a California corporation, any and all of its subsidiaries and
fictitious names (hereinafter collectively referred to as "Physicomp") and its
shareholders (hereinafter "Shareholders").
iMall wishes to acquire all the issued and outstanding stock of Physicomp
for and in exchange for stock of iMall, in a stock for stock transaction
intending to qualify as a tax-free exchange pursuant to Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended. The parties intend for this
Plan to represent the terms and conditions of such tax-free reorganization,
which Plan the parties hereby adopt.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, IT IS AGREED:
Section 1
Terms of Exchange
1.1 Number of Shares. Upon the execution hereof, the Shareholders of
Physicomp agree to assign, transfer, and deliver to iMall, free and clear of
all liens, pledges, encumbrances, charges, restrictions or known claims of any
kind, nature or description, all of their shares of Physicomp stock, and iMall
agrees to acquire such shares on the date thereof, or as soon as practicable
thereafter, by issuing and delivering in exchange therefore solely common
shares of iMall's stock, par value $0.001, in the aggregate of 400,000 shares,
subject to the provisions of this Plan, which shall represent, as a result
thereof, approximately three percent (3%) of the then issued and outstanding
shares of iMall. Subsequent to the date hereof, the Shareholders shall, upon
the surrender of the Physicomp certificates representing their respective
beneficial and record ownership of all of the issued and outstanding shares of
Physicomp to iMall, as soon as practicable hereafter, and further provided an
exemption from the registration provisions of Section 5 of the Securities Act
of 1933 is available for the issuance thereof, the Shareholders shall be
entitled to receive a certificate(s) evidencing shares of the exchanged iMall
stock as provided for herein. Upon the consummation of the transaction
contemplated herein, iMall shall be the beneficial and record owner of all of
the issued and outstanding stock of Physicomp.
1.2 Anti-Dilution. For all relevant purposes of this Plan, the number
of iMall shares to be issued and delivered pursuant to this Plan shall be
appropriately adjusted to take into account any stock split, stock dividend,
reverse stock split, recapitalization, or similar change in iMall common
stock, which may occur between the date of the execution of this Plan and the
date of the delivery of such shares.
1.3 Delivery of Certificates. The Shareholders shall transfer to iMall
at the closing provided for in Section 2 (the "Closing") the shares of common
stock of Physicomp listed opposite their respective names on Exhibit A hereto
(the "Physicomp shares") in exchange for shares of the common stock of iMall
as outlined above in Section 1.1 hereof (the "iMall Stock"). All of such
shares of iMall common stock shall be issued at the closing to the
Shareholders, in the numbers shown opposite their respective names in Exhibit
"A." The transfer of Physicomp shares by the Shareholders shall be effected
by the delivery to iMall at the Closing of certificates representing the
transferred shares endorsed in blank or accompanied by stock powers executed
in blank, with all signatures guaranteed by a national bank and with all
necessary transfer taxes and other revenue stamps affixed and acquired at the
Shareholders' expense.
1.4 Further Assurances. Subsequent to the execution hereof, and from
time to time thereafter, the Shareholders shall execute such additional
instruments and take such other action as iMall may request in order to more
effectively sell, transfer and assign clear title and ownership in the
Physicomp shares to iMall.
1.5 Management Contracts. Subsequent to the execution hereof,
management contracts shall be entered into between iMall and the officers of
Physicomp.
Section 2
Closing
2.1 Closing. The Closing contemplated by Section 1.3 shall be held at
the law offices of Daniel W. Jackson, Esq. on May 1, 1996 or at such other
time or place as may be mutually agreed upon in writing by the parties. The
Closing may also be accomplished by wire, express mail or other courier
service, conference telephone communications or as otherwise agreed by the
respective parties or their duly authorized representatives. In any event,
the closing of the transactions contemplated by this Plan shall be effected as
soon as practicable after all of the conditions contained herein have been
satisfied.
2.2 Closing Events. At the Closing, each of the respective parties
hereto shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged, and delivered) any agreements, resolutions, rulings, or other
instruments required by this Plan to be so delivered at or prior to Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transaction contemplated hereby.
Section 3
Representations, Warranties and Covenants of iMall
iMall represents and warrants to, and covenants with, the Shareholders
and Physicomp as follows:
3.1 Corporate Status. iMall is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. iMall
has full corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business on all material respects as it is now being conducted, and there is
no jurisdiction in which the character and location of the assets owned by it,
or the nature of the business transacted by it, requires qualification.
Included in the iMall schedules (defined below) are complete and correct
copies of its Articles of Incorporation and Bylaws as in effect on the date
hereof. The execution and delivery of this Plan does not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of iMall's Articles of Incorporation or Bylaws. iMall has taken all
action required by law, its Articles of Incorporation, its Bylaws, or
otherwise, to authorize the execution and delivery of this Plan.
3.2 Capitalization. The authorized capital stock of iMall as of the
date hereof consists of 50,000,000 common shares, par value $0.001. The
common shares of iMall issued and outstanding are fully paid, non-assessable
shares. There are no outstanding options, warrants, or calls or any
understanding, agreements, commitments, contracts or promises with respect to
the issuance of iMall's common stock or with regard to any options, warrants
or other contractual rights to acquire any of iMall's authorized but unissued
common shares.
3.3 Financial Statements.
(a) iMall hereby warrants and covenants to Physicomp that the audited
financial statements for its year ended December 31, 1995, December 31, 1994
and 1993, fairly and accurately represent the financial condition of IMall and
that the same will be prepared along with the period ended as of the date of
Closing, for consolidation by an independent public accountant, which shall be
prepared in accordance with generally accepted accounting principles
consistently applied, on or before the expiration of forty-five days from the
date of Closing.
(b) iMall hereby warrants and represents that the audited financial
statements for the periods set forth in subparagraph (a), supra, fairly and
accurately represent the financial condition of iMall as submitted heretofore
to Physicomp for examination and review.
3.4 Subsidiaries. iMall has four subsidiaries: Cabot, Richards & Reed,
Inc., a Utah Corporation ("CR&R"), Madison York, Inc., a Utah Corporation
("Madison"), R&R Advertising, Inc., a California Corporation ("R&R"), and
Inter-active Marketing Group, Inc. ("IMG").
3.5 Conduct of Business. iMall, Inc. owns and operates a "shopping
mall" on the Internet. Through the Company's subsidiaries, Madison, CR&R and
R&R, the company provides consulting services to businesses interested in
marketing their products or services on the Internet.
3.6 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of iMall, threatened by or against or
effecting iMall at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
iMall does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, warrant, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality.
3.7 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, iMall and its present management will (i) give to
the Shareholders and Physicomp, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and
Physicomp, or their duly authorized representatives, may inspect them; and
(ii) furnish such information concerning the properties and affairs of iMall
as the Shareholders and Physicomp, or their duly authorized representatives,
may reasonably request. Any such request to inspect iMall's books shall be
directed to iMall' counsel, Daniel W. Jackson, at the address set forth herein
under Section 10.4 Notices.
3.8 Confidentiality. Until the Closing (and thereafter if there is no
Closing), iMall and its representatives will keep confidential any information
which they obtain from the Shareholders or from Physicomp concerning its
properties, assets and the proposed business operations of Physicomp. If the
terms and conditions of this Plan imposed on the parties hereto are not
consummated on or before 5:00 p.m. MST on May 1, 1996 or otherwise waived or
extended in writing to a date mutually agreeable to the parties hereto, iMall
will return to Physicomp all written matter with regard to Physicomp obtained
in connection with the negotiations or consummation of this Plan.
3.9 Conflict with Other Instruments. The transactions contemplated by
this Plan will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or there
material agreements or instrument to which iMall was or is a party, or to
which any of its assets or operations are subject, and will not conflict with
any provision of the Articles of Incorporation or Bylaws of iMall.
3.10 Corporate Authority. iMall has full corporate power and authority
to enter into this Plan and to carry out its obligations hereunder and will
deliver to the Shareholders and Physicomp, or their respective
representatives, at the Closing, a certified copy of resolutions of its Board
of Directors authorizing execution of this Plan by its officers and
performance thereunder.
3.11 Consent of Shareholders. iMall hereby warrants and represents that
the Shareholders of iMall, being the owners of a majority of the issued and
outstanding stock of the Corporation consented in writing to the authorization
to execute an Agreement and Plan of Reorganization as between iMall and
Physicomp pursuant to a stock-for-stock transaction in which iMall would
acquire all of the issued and outstanding shares of Physicomp in exchange for
the issuance of a total of 400,000 common shares of iMall.
3.12 Special Covenants and Representations Regarding the Exchanged iMall
Stock. The consummation of this Plan and the transactions herein contemplated
include the issuance of the exchanged iMall shares to the Shareholders, which
constitutes an offer and sale of securities under the Securities Act of 1933,
as amended, and applicable states' securities laws. Such transaction shall be
consummated in reliance on exemptions from the registration and prospectus
requirements of such statutes which depend interlace on the circumstances
under which the Shareholders acquire such securities. In connection with the
reliance upon exemptions from the registration and prospectus delivery
requirements for such transactions, at the Closing, Shareholders shall cause
to be delivered to iMall a Letter(s) of Investment Intent in the form attached
hereto as Exhibit C and incorporated herein by reference.
3.13 Undisclosed or Contingent Liabilities. iMall hereby represents and
warrants that it has no undisclosed or contingent liabilities which have not
been disclosed to Physicomp.
3.14 Information. The information concerning iMall set forth in this
Plan, and the iMall schedules attached hereto, are complete and accurate in
all material respects and do not contain, or will not contain, when delivered,
any untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to Physicomp in connection with this
Plan.
3.15 Title and Related Matters. iMall has good and marketable title to
all of its properties, interests in properties, and assets, real and personal,
which are reflected, or will be reflected, in the iMall balance sheets, free
and clear of any and all liens and encumbrances.
3.16 Contracts or Agreements. iMall is not bound by any material
contracts, agreements or obligations which it has not already disclosed to
Physicomp.
3.17 Governmental Authorizations. iMall has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. iMall has obtained a listing in Moody's OTC Industrial Manual
which is recognized manual, recognized by the various states as an exemption
from registration provisions of any such state for the purposes of interstate
trading of iMall stock. Except for compliance with federal and state
securities laws, no authorization, approval, consent or order of, or
registration, declaration, or filing with, any court or other governmental
body is required in connection with the execution and delivery by iMall of
this Plan and the consummation by Physicomp of the transactions contemplated
hereby.
3.18 Compliance with Laws and Regulations. iMall has complied with all
applicable statutes and regulations of any federal, state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of iMall or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to Physicomp.
3.19 Approval of Plan. The Board of Directors of iMall has authorized
the execution and delivery of this Plan by iMall and have approved the Plan
and the transactions contemplated hereby. iMall has full power, authority,
and legal right to enter into this Plan and to consummate the transactions
contemplated hereby.
3.20 Investment Intent. iMall is acquiring the Physicomp shares to be
transferred to it under this Plan for investment and no with a view to the
sale or distribution thereof, and iMall has no commitment or present intention
to liquidate Physicomp or to sell or otherwise dispose of the Physicomp
shares.
3.21 Unregistered Shares and Access to Information. iMall understands
that the offer and sale of the Physicomp shares have not been registered with
or reviewed by the Securities and Exchange Commission under the Securities Act
of 1933, as amended, or with or by any state securities law administrator, and
no federal, state securities law administrator has reviewed or approved any
disclosure or other material concerning Physicomp or the Physicomp shares.
iMall has been provided with and reviewed all information concerning
Physicomp, the Physicomp shares as it has considered necessary or appropriate
as a prudent and knowledgeable investor to enable it to make an informed
investment decision concerning the Physicomp shares. iMall has made an
investigation as to the merits and risks of its acquisition of the Physicomp
Shares and has had the opportunity to ask questions of, and has received
satisfactory answers from, the officers and directors of Physicomp concerning
Physicomp, the Physicomp shares and related matters, and has had an
opportunity to obtain additional information necessary to verify the accuracy
of such information and to evaluate the merits and risks of the proposed
acquisition of the Physicomp shares.
3.22 iMall Schedules. iMall has delivered to Physicomp the following
items listed below, hereafter referred to as the "iMall Schedules", which is
hereby incorporated by reference and made a part hereof. A certification
executed by a duly authorized officer of iMall on or about the date within the
Plan is executed to certify that the iMall Schedules are true and correct.
(a) Copy of Articles of Incorporation, as amended, and Bylaws;
(b) iMall Prospectus;
(c) Financial statements;
(d) Shareholder list;
(e) Resolution of Directors approving Plan;
(f) Officer's Certificate as required under Section 6.2 of the
Plan;
(g) Opinion of counsel as required under Section 6.4 of the Plan;
(h) Certificate of Good Standing;
(i) Consent of Shareholders approving Plan;
(j) Copy of listing in Moody's Over-the-Counter Industrial Manual.
Section 4
Representations, Warranties and Covenants of Physicomp
Physicomp represents and warrants to, and covenants with, the
Shareholders and iMall as follows:
4.1 Corporate Status. Physicomp is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California incorporated on September 20, 1994. Physicomp has full corporate
power and is duly authorized, qualified, franchised, and licensed under all
applicable laws, regulations, ordinances, and orders of public authorities to
own all of its properties and assets and to carry on its business on all
material respects as it is now being conducted, and there is no jurisdiction
in which the character and location of the assets owned by it, or the nature
of the business transacted by it, requires qualification. Included in the
Physicomp schedules (defined below) are complete and correct copies of its
Articles of Incorporation and Bylaws as in effect on the date hereof. The
execution and delivery of this Plan does not, and the consummation of the
transactions contemplated hereby will not, violate any provision of
Physicomp's Articles of Incorporation or Bylaws. Physicomp has taken all
action required by law, its Articles of Incorporation, its Bylaws, or
otherwise, to authorize the execution and delivery of this Plan.
4.2 Capitalization. The authorized capital stock of Physicomp as of the
date hereof consists of 75,000,000 common shares. As of the date hereof all
common shares of Physicomp issued and outstanding are fully paid, non-
assessable shares. There are no outstanding options, warrants, or calls or
any understanding, agreements, commitments, contracts or promises with respect
to the issuance of Physicomp's common stock or with regard to any options,
warrants or other contractual rights to acquire any of Physicomp's authorized
but unissued common shares.
4.3 Subsidiaries. Physicomp has no subsidiaries.
4.4 Fictitous Names. In the course of its business, Physicomp has used
the fictitous name "emaNate", which has been registered with the County
Recorder for the county of Los Angeles, California.
4.5 Conduct of Business. Physicomp will use its best efforts to
maintain and preserve its business organization, employee relationships and
goodwill intact, and will not, without the prior written consent of iMall,
enter into any material commitments except in the ordinary course of business.
Physicomp agrees that Physicomp will conduct itself in the following
manner pending the Closing:
(a) Certificate of Incorporation and Bylaws. No change will be
made in the Certificate of Incorporation or Bylaws of Physicomp.
(b) Capitalization, etc. Physicomp will not make any change in its
authorized or issued shares of any class, declare or pay any dividend or other
distribution, or issue, encumber, purchase or otherwise acquire any of its
shares of any class.
4.6 Options, Warrants and Rights. Although Physicomp intends to enact
and put into effect various management and employee benefit plans in the near
future, as of the date hereof, Physicomp has no options, warrants or stock
appreciation rights related to the authorized but unissued Physicomp common
stock. There are no existing options, warrants, calls, or commitments of any
character relating to the authorized and unissued Physicomp common stock,
except options, warrants, calls, or commitments, if any, to which Physicomp is
not a party and by which it is not bound.
4.7 Title to Property. Physicomp has good and marketable title to all
of its properties and assets, real and personal, proprietary or otherwise, as
will be reflected in the balance sheets of Physicomp, and the properties and
assets of Physicomp are subject to no mortgage, pledge, lien or encumbrance,
unless as otherwise disclosed in its financial statements.
4.8 Litigation. On June 2, 1995, judgment was entered in the Superior
Court of the State of California in and for the County of Los Angeles in the
matter of The Titan Corporation vs. Physicomp Corporation, et al., whereby
Physicomp, Martin Rosenblatt, Douglas Hatfield and Paul Hassig were
permanently enjoined from using certain technology. A copy of such judgment
is attached hereto as Exhibit D. Other than such judgment, there are no
material actions, suits, or proceedings, pending, or, to the best knowledge of
Physicomp, threatened by or against or effecting Physicomp at law or in
equity, or before any governmental agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind; Physicomp does not have any
knowledge of any default on its part with respect to any judgment, order,
writ, injunction, decree, warrant, rule, or regulation of any court,
arbitrator, or governmental agency or instrumentality.
4.9 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, Physicomp and its present management will (i) give
to the Shareholders and Physicomp, or their duly authorized representatives,
full access, during normal business hours, to all of its books, records,
contracts and other corporate documents and properties so that the
Shareholders and Physicomp, or their duly authorized representatives, may
inspect them; and (ii) furnish such information concerning the properties and
affairs of Physicomp as the Shareholders and Physicomp, or their duly
authorized representatives, may reasonably request. Any such request to
inspect Physicomp's books shall be directed to Physicomp's representative, at
the address set forth herein under Section 10.4 Notices.
4.10 Confidentiality. Until the Closing (and thereafter if there is no
Closing), Physicomp and its representatives will keep confidential any
information which they obtain from the Shareholders or from Physicomp
concerning its properties, assets and the proposed business operations of
Physicomp. If the terms and conditions of this Plan imposed on the parties
hereto are not consummated on or before 5:00 p.m. MST on May 1, 1996 or
otherwise waived or extended in writing to a date mutually agreeable to the
parties hereto, Physicomp will return to iMall all written matter with regard
to iMall obtained in connection with the negotiations or consummation of this
Plan.
4.11 Investment Intent. The Shareholders represent and covenant that
they are acquiring the unregistered and restricted common shares of iMall to
be delivered to them under this Plan for investment purposes and not with a
view to the subsequent sale or distribution thereof, and as agreed, supra, the
Shareholders, their successors and assigns agree to execute and deliver to
iMall on the date of Closing or no later than the date on which the restricted
shares are issued and delivered to the Shareholders, their assigns, or
designees, an Investment Letter similar in form to that attached hereto as
Exhibit C.
4.12 Unregistered Shares and Access to Information. Physicomp and the
Shareholders understand that the offer and sale of iMall post-split shares to
be exchanged for the Physicomp shares have not been registered with or
reviewed by the securities and Exchange Commission under the Securities Act of
1933, as amended, or with or by any state securities law administrator, and no
federal or state securities law administrator has reviewed or approved any
disclosure or other material facts concerning iMall or iMall post-split stock.
Physicomp and the Shareholders have been provided with and reviewed all
information concerning iMall and iMall post-split shares, to be exchanged for
the Physicomp shares as they have considered necessary or appropriate as
prudent and knowledgeable investors to enable them to make informed investment
decisions concerning the iMall post-split shares, to be exchanged for the
Physicomp shares. Physicomp and the Shareholders have made an investigation
as to the merits and risks of their acquisition of the iMall post-split
shares, to be exchanged for the Physicomp shares and have had the opportunity
to ask questions of, and have received satisfactory answers from, the officers
and directors of iMall concerning iMall post-split shares to be exchanged for
the Physicomp shares and related matters, and have had an opportunity to
obtain additional information necessary to verify the accuracy of such
information and to evaluate the merits and risks of the proposed acquisition
of the iMall post-split shares to be exchanged for the Physicomp shares.
4.13 Title to Shares. The Shareholders are the beneficial and record
owners, free and clear of any liens and encumbrances, of whatever kind or
nature, of all of the shares of Physicomp of whatever class or series, which
the Shareholders have contracted to exchange.
4.14 Contracts.
(a) Set forth in the Physicomp Schedules are copies or descriptions
of all material contracts which written or oral, all agreements, franchises,
licenses, or other commitments to which Physicomp is a party or by which
Physicomp or its properties are bound.
(b) Except as may be set forth in the Physicomp Schedules,
Physicomp is not a party to any contract, agreement, corporate restriction, or
subject to any judgment, order, writ, injunction, decree, or award, which
materially and adversely effect the business, operations, properties, assets,
or conditions of Physicomp.
(c) Except as set forth in the Physicomp Schedules, Physicomp is
not a party to any material oral or written (i) contract for employment of any
officer which is not terminable on 30 days (or less) notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance, or any other
retirement plan of arrangement covered by Title IV of the Employee Retirement
Income Security Act, as amended, or otherwise covered; (iii) agreement
providing for the sale, assignment or transfer of any of its rights, assets or
properties, whether tangible or intangible, except sales of its property in
the ordinary course of business with a value of less than $2,000; or (iv)
waiver of any right of any value which in the aggregate is extraordinary or
material concerning the assets or properties scheduled by Physicomp, except
for adequate value and pursuant to contract. Physicomp has not entered into
any material transaction which is not listed in the Physicomp Schedules or
reflected in the Physicomp financial statements.
4.15 Material Contract Defaults. Physicomp is not in default in any
material respect under the terms of any contract, agreement, lease or other
commitment which is material to the business, operations, properties or
assets, or condition of Physicomp, and there is no event of default or event
which, with notice of lapse of time or both, would constitute a default in any
material respect under any such contract, agreement, lease, or other
commitment in respect of which Physicomp has not taken adequate steps to
prevent such default from occurring, or otherwise compromised, reached a
satisfaction of, or provided for extensions of time in which to perform under
any one or more contract obligations, among others.
4.16 Conflict with Other Instruments. The consummation of the within
transactions will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or material
agreement or instrument to which Physicomp was or is a party, or to which any
of its assets or operations are subject, and will not conflict with any
provision of the Articles of Incorporation or Bylaws of Physicomp.
4.17 Governmental Authorizations. Physicomp has all licenses,
franchises, permits and other government authorizations that are legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities laws, no authorization, approval, consent or order of, or
registration, declaration, or filing with, any court or other governmental
body is required in connection with the execution and delivery by Physicomp of
this Plan and the consummation by Physicomp of the transactions contemplated
hereby.
4.18 Compliance with Laws and Regulations. Physicomp has complied with
all applicable statutes and regulations of any federal, state, or other
applicable jurisdiction or agency thereof, except to the extent that
noncompliance would not materially and adversely effect the business,
operations, properties, assets, or condition of Physicomp or except to the
extent that noncompliance would not result in the occurrence of any material
liability, not otherwise disclosed to iMall.
4.19 Approval of Plan. The Board of Directors of Physicomp have
authorized the execution and delivery of this Plan by Physicomp and have
approved the Plan and the transactions contemplated hereby. Physicomp has
full power, authority, and legal right to enter into this Plan and to
consummate the transactions contemplated hereby.
4.20 Information. The information concerning Physicomp set forth in
this Plan, and the Physicomp Schedules attached hereto, are complete and
accurate in all material respects and do not contain, or will not contain,
when delivered, any untrue statement or a material fact or omit to state a
material fact the omission of which would be misleading to iMall in connection
with this Plan.
4.21 Physicomp Schedules. Physicomp has delivered to iMall the
following items listed below, hereafter referred to as the "Physicomp
Schedules", which is hereby incorporated by reference and made a part hereof.
A certification executed by a duly authorized officer of Physicomp on or about
the date within the Plan is executed to certify that the Physicomp Schedules
are true and correct.
(a) Copy of Articles of Incorporation and Bylaws;
(b) Financial Statements
(c) Resolution of Board of Directors approving Plan;
(d) Consent of Shareholders approving Plan;
(e) A list of key employees, including current compensation,
with notation as to job description and whether or not such employee is
subject to written contract, and if subject to a contract or employment
agreement, a copy of the same;
(f) A schedule showing the name and location of each bank or
other institution with which Physicomp has an account and the names of the
authorized persons to draw thereon or having access thereto;
(g) A schedule setting forth the shareholders, together with the
number of shares owned beneficially or of record by each (also attached as
Exhibit A);
(h) Officer's Certificate as required by Section 7.2 of the
Plan;
(i) Certificate of Good Standing.
Section 5
Special Covenants
5.1 Physicomp Information Incorporated in iMall's Reports. Physicomp
represents and warrants to iMall that all the information furnished under this
Plan shall be true and correct in all material respects and that there is no
omission of any material fact required to make the information stated not
misleading. Physicomp agrees to indemnify and hold iMall harmless, including
each of its Directors and Officers, a and each person, if any, who controls
such party, under any applicable law from and against any and all losses,
claims, damages, expenses or liabilities to which any of them may become
subject under applicable law, or reimburse them for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such actions, whether or not resulting in liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based on any untrue statement, alleged untrue statement, or omission of a
material fact contained in such information delivered hereunder.
5.2 Special Covenants and Representations Regarding the Exchanged iMall
Stock. The consummation of this Plan and the transactions herein
contemplated, including the issuance of the iMall shares in exchange for all
of the issued and outstanding shares of Physicomp to the Shareholders
constitutes the offer and sale of securities under the Securities Act and the
applicable state statutes, which depend, inter alia, on the circumstances
under which the Shareholders acquire such securities. iMall intends to rely
on the exemption of the registration provision of Section 5 of the Securities
Act as provided for under Section 4.2 of the Securities Act of 1933, which
states "transactions not involving a public offering", among others. Each
Shareholder upon submission of his Physicomp shares and the receipt of the
iMall post-split shares exchanged therefor, shall execute and deliver to iMall
a letter of investment invent to indicate, among other representations, that
the Shareholder is exchanging the Physicomp shares for iMall post-split shares
for investment purposes and not with a view to the subsequent distribution
thereof. A proposed Investment Letter is attached hereto as Exhibit B and
incorporated herein by reference for the general use by the Shareholders, as
they may determine.
5.3 Action Prior to Closing. Upon the execution hereof until the
Closing date, and the completion of the consolidated audited financials,
(a) Physicomp and iMall will (i) perform all of its obligations
under material contracts, leases, insurance policies and/or documents relating
to its assets and business; (ii) use its best efforts to maintain and preserve
its business organization intact, to retain its key employees, and to maintain
its relationship with existing potential customers and clients; and (iii)
fully comply with and perform in all material respects all duties and
obligations imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by all federal or state governmental
authorities.
(b) Neither Physicomp nor iMall will (i) make any change in its
Articles of Incorporation or Bylaws except and unless as contemplated pursuant
to Section 3 of this Plan; (ii) enter into or amend any contract, agreement,
or other instrument of the types described in the parties' schedules, except
that a party may enter into or amend any contract or other instrument in the
ordinary course of business involving the sale of goods or services, provided
that such contract does not involve obligations in excess of $10,000.
Section 6
Conditions Precedent to Obligations of
Physicomp and the Shareholders
All obligations of Physicomp and the Shareholders under this Plan are
subject to the satisfaction, on or before the Closing date, except as
otherwise provided for herein, or waived or extended in writing by the parties
hereto, of the following conditions:
6.1 Accuracy of Representations. The representations and warranties
made by iMall in this Plan were true when made and shall be true as of the
Closing date (except for changes therein permitted by this Plan) with the same
force and effect as if such representations and warranties were made at and as
of the Closing date; and, iMall shall have performed and complied with by
iMall prior to the Closing, unless waived or extended in writing by the
parties hereto. Physicomp shall have been furnished with a certificate,
signed by a duly authorized executive officer of iMall and dated the Closing
date, to the foregoing effect.
6.2 Officers' Certificate. Physicomp and the Shareholders shall have
been furnished with a certificate dated the Closing date and signed by a duly
authorized executive officer of iMall, to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge of
iMall, threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of iMall.
6.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of iMall, nor shall any event have occurred which, with lapse of
time or the giving of notice or both, may cause or create any material adverse
change in the financial condition, business or operations of iMall, except as
otherwise disclosed to Physicomp.
6.4 Opinion of Counsel of iMall. iMall shall furnish to Physicomp and
the Shareholders an opinion dated as of the Closing date and in form and
substance satisfactory to Physicomp and the Shareholders to the effect that:
(a) iMall is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada, and with all requisite
corporate power to perform its obligations under this Plan.
(b) The business of iMall, as presently conducted, including, upon
the consummation hereof, the ownership of all of the issued and outstanding
shares of Physicomp, does not require it to register it to do business as a
foreign corporation on any jurisdiction other than under the jurisdiction of
its Articles of Incorporation or Bylaws and iMall has complied to the best of
its knowledge in all material respects with all the laws, regulations,
licensing requirements and orders applicable to its business activities and
has filed with the proper authorities, including the Department of Commerce,
Division of Corporations, and Secretary of State for the State of Nevada, all
statements and reports required to be filed.
(c) The authorized and outstanding capital stock of iMall as set
forth in Section 3.2 above, and all issued and outstanding shares have been
duly and validly authorized and issued and are fully paid and non-assessable.
(d) There are no material claims, suits or other legal proceedings
pending or threatened against iMall of any court or before or by any
governmental body which might materially effect the business of iMall or the
financial condition of iMall as a whole and no such claims, suits or legal
proceedings are contemplated by governmental authorities against iMall.
(e) iMall's initial public offering file declared effective by the
Utah Securities Commission on May 7, 1985, and was offered and sold in
accordance with and in compliance with the rules and regulations of the
Securities Act of 1933, as amended. Subsequent to the termination of iMall's
public offering, no stop orders suspending the effectiveness of the
distribution is or was in effect, and no proceedings since the termination
thereof for that purpose are pending before or threatened by any state or
federal agency or authority.
(f) To the best knowledge of such counsel, the consummation of the
transactions contemplated by this Plan will not violate or contravene the
provisions of the Certificate of Incorporation or Bylaws of iMall, or any
contract, agreement, indenture, mortgage, or order by which iMall is bound.
(g) This Plan constitutes a legal, valid and binding obligation of
iMall enforceable in accordance with its terms, subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium, or similar law effecting
creditors' rights generally and general principles of equity (regardless of
whether such principles are considered in a proceeding in equity or law).
(h) The execution and delivery of this Plan and the consummation of
the transactions contemplated hereby have been ratified by a majority of the
Shareholders of iMall and have been duly authorized by its Board of Directors.
6.5 Good Standing. Physicomp shall have received a Certificate of Good
Standing from the State of California, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that iMall is in good standing as a corporation in the State
of California.
6.6 Other Items. Physicomp and the Shareholders shall have received
such further documents, certifications or instruments relating to the
transactions contemplated hereby as Physicomp and the Shareholders may
reasonably request.
Section 7
Conditions Precedent to Obligations of iMall
All obligations of iMall under this Plan are subject, at its option, to
the fulfillment, before the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties
made by Physicomp and the Shareholders under this Plan were true when made and
shall be true as of the Closing date (except for changes therein permitted by
this Plan) with the same force and effect as if such representations and
warranties were made at and as of the Closing date; and, iMall shall have
performed and complied with by Physicomp prior to the Closing, unless waived
or extended in writing by the parties hereto. iMall shall have been furnished
with a certificate, signed by a duly authorized executive officer of Physicomp
and dated the Closing date, to the foregoing effect.
7.2 Officers' Certificate. iMall shall have been furnished with a
certificate dated the Closing date and signed by a duly authorized executive
officer of Physicomp, to the effect that no litigation, proceeding,
investigation, or inquiry is pending, or to the best knowledge of Physicomp,
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of Physicomp.
7.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of iMall, nor shall any event have occurred which, with lapse of
time or the giving of notice or both, may cause or create any material adverse
change in the financial condition, business or operations of Physicomp, except
as otherwise disclosed to iMall.
7.4 Good Standing. iMall shall have received a Certificate of Good
Standing from the State of Utah, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that Physicomp is in good standing as a corporation in the
State of Utah.
7.5 Dissenters' Rights Waived. The Shareholders of Physicomp, and each
of them, have agreed and hereby waive any dissenters' rights, if any, under
the laws of the State of Utah in regards to any objection to this Plan as
outlined herein and otherwise consent to and agree and authorize the execution
and consummation of the within Plan in accordance to the terms and conditions
of this Plan by the management of Physicomp.
7.6 Other Items. iMall shall have received such further documents,
certifications or instruments relating to the transactions contemplated hereby
as iMall may reasonably request.
7.7 Registration of Physicomp Shares. In connection with the exchange
of iMall shares for Physicomp shares, iMall agrees, if practicable, and
subject to the consent of an underwriter(s) in the event iMall undertakes to
file a Registration Statement under the Securities Act of 1933, as amended,
for the purpose of raising money from the public through the sale of its
equity, to ensure that the iMall shares issued in connection with the within
Plan will be included as part of a general Registration Statement and "piggy
back" any such offering for the purpose of registering the same for sale by
the Shareholders, as they may determine. iMall shall execute and deliver to
the Shareholders the Registration Rights Agreement in form attached hereto as
Exhibit B.
7.8 Execution of Investment Letter. The Shareholders shall have
executed and delivered copies of Exhibit C to iMall.
Section 8
Termination
8.1 Termination by Physicomp or the Shareholders. This Plan may be
terminated at any time prior to the Closing date by action of Physicomp or the
Shareholders, if iMall shall fail to comply in any material respect with any
of the covenants or agreements contained in this Plan, or if any of its
representations and warranties contained herein shall be inaccurate in any
material respect.
8.2 Termination by iMall. This Plan may be terminated at any time prior
to the Closing date by action of iMall if Physicomp shall fail to comply in
any material respect with any of the covenants or agreements contained in this
Plan, or if any of its representations or warranties contained herein shall be
inaccurate in any material respect.
8.3 Termination by Mutual Consent
(a) This Plan may be terminated at any time prior to the Closing
date by mutual consent of iMall, expressed by action of its Board of
Directors, Physicomp or the Shareholders.
(b) If this Plan is terminated pursuant to Section 8, this Plan
shall be of no further force and effect and no obligation, right or liability
shall arise hereunder. Each party shall bare its own costs in connection
herewith.
Section 9
Shareholders' Representative
The Shareholders hereby irrevocably designate and appoint Martin
Rosenblatt as their agent and attorney in fact (the "Shareholders'
Representative") with full power and authority until the Closing to execute,
deliver and receive on their behalf all notices, requests and other
communications hereunder; to fix and alter on their behalf the date, time and
place of the Closing; to waive, amend or modify any provisions of this Plan
and to take such other action on their behalf in connection with this Plan,
the Closing and the transactions contemplated hereby as such agent deems
appropriate; provided, however, that no such waiver, amendment or modification
may be made if it would decrease the number of shares to be issued to the
Shareholders under Section 1 hereof or increase the extent of their obligation
to iMall hereunder, unless agreed in writing by the Shareholders.
Section 10
General Provisions
10.1 Further Assurances. At any time, and from time to time, after the
Closing date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of the Plan.
10.2 Payments of Estimated Costs and Fees. iMall and Physicomp mutually
determine and agree that Physicomp shall pay the estimated costs and fees
incurred in connection with the execution and consummation of the Plan.
10.3 Press Release and Shareholders' Communications. On the date of
Closing, or as soon thereafter as practicable, Physicomp and the Shareholders
shall cause to have promptly prepared and disseminated a news release
concerning the execution and consummation of the Plan, such press release and
communication to be released promptly and within the time required by the
laws, rules and regulations as promulgated by the United States Securities and
Exchange Commission, and concomitant therewith to cause to be prepared a full
and complete letter to iMall's shareholders which shall contain information
required by Regulation 240.14f-1 as promulgated under Section 14(f) as
mandated under the Securities and Exchange Act of 1934, as amended.
10.4 Notices. All notices and other communications required or
permitted hereunder shall be sufficiently given if personally delivered, sent
by registered mail, or certified mail, return receipt requested, postage
prepaid, or by facsimile transmission addressed to the following parties
hereto or at such other addresses as follows:
If to iMall: iMall, Inc.
2285 South Mike Jense Circle
Provo, Utah 84601
With a copy to: Daniel W. Jackson, Esq.
215 South State #1100
Salt Lake City, Utah 84111
If to Physicomp: Physicomp Corporation
22440 Clarendon Street, #101
Woodland Hills, California 91367
If to the Shareholders: Paul Hassig
22020 Clarendon Street, #200
Woodland Hills, California 91367
with a copy to: Michael Narvid
15060 Ventura Boulevard, #490
Sherman Oaks, California 91302
or at such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, sent
by facsimile transmission, or telegraphed.
10.5 Entire Agreement. This Plan represents the entire agreement
between the parties relating to the subject matter hereof, including any
previous letters of intent, understandings, or agreements between iMall,
Physicomp and the Shareholders with respect to the subject matter hereof, all
of which are hereby merged into this Plan, which alone fully and completely
expresses the agreement of the parties relating to the subject matter hereof.
Excepting the foregoing agreement, there are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
10.6 Governing Law. This Plan shall be governed by and construed and
enforced in accordance with the laws of the State of Utah, except to the
extent preempted by federal law, in which event (and to that extent only)
federal law shall govern.
10.7 Tax Treatment. The transaction contemplated by this Plan is
intended to qualify as a "tax-free" reorganization under the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Physicomp and iMall acknowledge, however, that each are being represented by
their own tax advisors in connection with this transaction, and neither has
made any representations or warranties to the other with respect to treatment
of such transaction or any part or effect thereof under applicable tax laws,
regulations or interpretations; and no attorney's opinion or tax revenue
ruling has been obtained with respect to the tax consequences of the
transactions contemplated by the within Plan.
10.8 Attorney Fees. In the event that any party prevails in any action
or suit to enforce this Plan, or secure relief from any default hereunder or
breach hereof, the nonprevailing party or parties shall reimburse the
prevailing party or parties for all costs, including reasonable attorney fees,
incurred in connection therewith.
10.9 Amendment of Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law or in equity, and may be enforced concurrently or separately, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, therefore, or
thereafter occurring or existing. Any time prior to the expiration of thirty
(30) days from the date hereof, this Plan may be amended by a writing signed
by all parties hereto, with respect to any of the terms contained herein, and
any term or condition of this Plan may be waived or the time for performance
thereof may be extended by a writing signed by the party or parties for whose
benefit the provision is intended.
10.10 Counterparts. This Plan may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which together shall constitute one and the same
instruments.
10.11 Headings. The section and subsection headings in this Plan are
inserted for convenience only and shall not effect in any way the meaning or
interpretation of the Plan.
10.12 Parties in Interest. Except as may be otherwise expressly
provided herein, all terms and provisions of this Plan shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, personal and legal representatives, and assigns.
IN WITNESS WHEREOF, the parties have executed this Plan and Agreement of
Reorganization effective the day and year first set forth above.
iMall, INC.
Attest:
/s/Cameron Carpenter /s/ Craig Pickering
- --------------------- ------------------------
By: /s/Craig Pickering
Its President
PHYSICOMP CORPORATION
Attest:
/s/ Cameron Carpenter /s/ Martin Rosenblatt
- --------------------- -------------------------
By :/s/ Martin Rosenblatt
Its President
SHAREHOLDERS:
Attest:
/s/Cameron Carpenter By /s/ Martin Rosenblatt
- ----------------------- -----------------------
Attest:
/s/ Cameron Carpenter By /s/ Paul Hassig
- --------------------- ---------------------
Attest:
/s/ Cameron Carpenter By /s/ Douglas Hattfield
- ---------------------- -----------------------
Exhibit 2.5
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Plan") is made this 5th day
of March, 1996, among iMALL, INC., a Nevada corporation ("iMall"); INTER-
ACTIVE MARKETING GROUP, INC., a Utah corporation, any and all of its
subsidiaries (hereinafter collectively referred to as "IMG") and its
shareholders (hereinafter "Shareholders").
iMall wishes to acquire all the issued and outstanding stock of IMG for
and in exchange for stock of iMall, in a stock for stock transaction intending
to qualify as a tax-free exchange pursuant to Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended. The parties intend for this Plan
to represent the terms and conditions of such tax-free reorganization, which
Plan the parties hereby adopt.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, IT IS AGREED:
Section 1
Terms of Exchange
1.1 Number of Shares. Upon the execution hereof, the Shareholders of
IMG agree to assign, transfer, and deliver to iMall, free and clear of all
liens, pledges, encumbrances, charges, restrictions or known claims of any
kind, nature or description, all of their shares of IMG stock, and iMall
agrees to acquire such shares on the date thereof, or as soon as practicable
thereafter, by issuing and delivering in exchange therefore solely common
shares of iMall's stock, par value $0.001, in the aggregate of 150,000 shares,
subject to the provisions of this Plan, which shall represent, as a result
thereof, approximately one percent (1%) of the then issued and outstanding
shares of iMall. Subsequent to the date hereof, the Shareholders shall, upon
the surrender of the IMG certificates representing their respective beneficial
and record ownership of all of the issued and outstanding shares of IMG to
iMall, as soon as practicable hereafter, and further provided an exemption
from the registration provisions of Section 5 of the Securities Act of 1933 is
available for the issuance thereof, the Shareholders shall be entitled to
receive a certificate(s) evidencing shares of the exchanged iMall stock as
provided for herein. Upon the consummation of the transaction contemplated
herein, iMall shall be the beneficial and record owner of all of the issued
and outstanding stock of IMG.
1.2 Additional Shares. In addition to the shares of iMall which
shall be delivered to the Shareholders in accordance with Section 1.1 herein,
the Shareholders will be entitled to receive certain additional shares of
iMall ("Additional iMall Shares") based upon profits earned by IMG during the
fiscal years ended February 28, 1997, 1998 and 1999, in accordance with the
terms and conditions set forth in this Section 1.2. Any Additional iMall
Shares which become payable to the Shareholders pursuant to this Section 1.2
shall be distributed to each Shareholder in an amount corresponding to the
percentage set forth opposite their respective names in Exhibit "A" hereto.
(a) Additional iMall Share Amounts. For the fiscal year ended
February 28, 1997, the Shareholders shall receive 50,000 Additional iMall
Shares if IMG's net revenues exceed $250,000. For the fiscal year ended
February 28, 1998, the Shareholders shall receive 50,000 Additional iMall
Shares if IMG's net revenues exceed $750,000. For the fiscal year ended
February 28, 1999, the Shareholders shall receive 50,000 Additional iMall
Shares if IMG's net revenues exceed $1,250,000. Net revenues shall be
determined using Generally Accepted Accounting Principals and the amount of
net revenues of IMG for purposes of this Section 1.2 may be stipulated to by
officers of both iMall and IMG, or by an independent certified public
accountant. If IMG's net revenues are less than $750,000 or $1,250,000 for
the respective fiscal years ending February 28, 1998 and February 28, 1999,
the Shareholders shall be entitled to receive a percentage of the 50,000
Additional iMall's Shares for that particular fiscal year equal to the
percentage of actual revenue achieved by IMG for the respective fiscal year in
relation to $750,000 or $1,250,000 as the case may be.
(b) Escrow and Payout. 150,000 shares of iMall common stock,
representing the maximum number of Additional iMall Shares which could be
transferred to the Shareholders pursuant to this Section 1.2 shall be placed
in escrow on the date hereof with Daniel W. Jackson, Esq. (the "Escrow Agent")
The Escrow Agent shall transfer any Additional iMall Shares to the
Shareholders only after receiving written authorization from officers of both
IMG and iMall authorizing a release of Additional iMall Shares. Any
Additional iMall Shares to which the Shareholders may be entitled as a result
of 1996 net revenues will not be transferred to the Shareholders prior to
March 1, 1997. However, in both fiscal 1997 and fiscal 1998, any time IMG
achieves the net revenue requirements for the respective fiscal year,
Additional iMall Shares may be transferred to the Shareholders whenever the
Escrow Agent receives proper authorization to so transfer. Any Additional
iMall Shares for which the Escrow Agent has not received transfer instructions
as of March 31, 1999, shall be transferred back to iMall.
(c) Assignability. Neither iMall nor IMG or any Shareholder may
assign any of its rights to any of the Additional iMall Shares while any
Additional iMall Shares remain in escrow pursuant to Section 1.2(b).
(d) Changes in iMall Capital Structure. In the event there is any
change in the iMall common stock by reason of a stock dividend issued with
respect to iMall common stock, or a recapitalization, reclassification, stock
split, or combination of shares with respect to such iMall common stock, or if
the outstanding iMall common stock should, by reason of a merger,
consolidation, acquisition of stock or property, reorganization, or
liquidation, be exchanged for other shares of iMall or of another corporation
which is a party to such transaction, any Additional iMall Shares to be issued
and delivered to the Shareholders pursuant to this Section 1.2 shall be the
shares into or for which the Additional iMall Shares to be issued and
delivered under this agreement would have been changed or exchanged had such
Shares already been issued and delivered to the Shareholders and become
outstanding at the time of such event.
1.3 Anti-Dilution. For all relevant purposes of this Plan, the number
of iMall shares to be issued and delivered pursuant to this Plan, including
any Additional iMall Shares, shall be appropriately adjusted to take into
account any stock split, stock dividend, reverse stock split,
recapitalization, or similar change in iMall common stock, which may occur
between the date of the execution of this Plan and the date of the delivery of
such shares.
1.4 Delivery of Certificates. The Shareholders shall transfer to iMall
at the closing provided for in Section 2 (the "Closing") the shares of common
stock of IMG listed opposite their respective names on Exhibit A hereto (the
"IMG shares") in exchange for shares of the common stock of iMall as outlined
above in Section 1.1 hereof (the "iMall Stock"). All of such shares of iMall
common stock shall be issued at the closing to the Shareholders, in the
numbers shown opposite their respective names in Exhibit "A." The transfer of
IMG shares by the Shareholders shall be effected by the delivery to iMall at
the Closing of certificates representing the transferred shares endorsed in
blank or accompanied by stock powers executed in blank, with all signatures
guaranteed by a national bank and with all necessary transfer taxes and other
revenue stamps affixed and acquired at the Shareholders' expense.
1.5 Further Assurances. Subsequent to the execution hereof, and from
time to time thereafter, the Shareholders shall execute such additional
instruments and take such other action as iMall may request in order to more
effectively sell, transfer and assign clear title and ownership in the IMG
shares to iMall.
1.6 Management Contracts. Subsequent to the execution hereof,
management contracts shall be entered into between iMall and the officers of
IMG which contracts shall conform to the understandings of the parties set
forth in the letter of intent executed by the parties.
Section 2
Closing
2.1 Closing. The Closing contemplated by Section 1.3 shall be held at
the law offices of Daniel W. Jackson, Esq. on April 5, 1996 or at such other
time or place as may be mutually agreed upon in writing by the parties. The
Closing may also be accomplished by wire, express mail or other courier
service, conference telephone communications or as otherwise agreed by the
respective parties or their duly authorized representatives. In any event,
the closing of the transactions contemplated by this Plan shall be effected as
soon as practicable after all of the conditions contained herein have been
satisfied.
2.2 Closing Events. At the Closing, each of the respective parties
hereto shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged, and delivered) any agreements, resolutions, rulings, or other
instruments required by this Plan to be so delivered at or prior to Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transaction contemplated hereby.
Section 3
Representations, Warranties and Covenants of iMall
iMall represents and warrants to, and covenants with, the Shareholders
and IMG as follows:
3.1 Corporate Status. iMall is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. iMall
has full corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business on all material respects as it is now being conducted, and there is
no jurisdiction in which the character and location of the assets owned by it,
or the nature of the business transacted by it, requires qualification.
Included in the iMall schedules (defined below) are complete and correct
copies of its Articles of Incorporation and Bylaws as in effect on the date
hereof. The execution and delivery of this Plan does not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of iMall's Articles of Incorporation or Bylaws. iMall has taken all
action required by law, its Articles of Incorporation, its Bylaws, or
otherwise, to authorize the execution and delivery of this Plan.
3.2 Capitalization. The authorized capital stock of iMall as of the
date hereof consists of 40,000,000 common shares, par value $0.001. The
common shares of iMall issued and outstanding are fully paid, non-assessable
shares. There are no outstanding options, warrants, or calls or any
understanding, agreements, commitments, contracts or promises with respect to
the issuance of iMall's common stock or with regard to any options, warrants
or other contractual rights to acquire any of iMall's authorized but unissued
common shares.
3.3 Financial Statements.
(a) iMall hereby warrants and covenants to IMG that the audited
financial statements for its year ended December 31, 1995, December 31, 1994
and 1993, fairly and accurately represent the financial condition of IMall and
that the same will be prepared along with the period ended as of the date of
Closing, for consolidation by an independent public accountant, which shall be
prepared in accordance with generally accepted accounting principles
consistently applied, on or before the expiration of forty-five days from the
date of Closing.
(b) iMall hereby warrants and represents that the audited financial
statements for the periods set forth in subparagraph (a), supra, fairly and
accurately represent the financial condition of iMall as submitted heretofore
to IMG for examination and review.
3.4 Subsidiaries. iMall has three subsidiaries: Cabot, Richards &
Reed, Inc., a Utah Corporation ("CR&R"), Madison York, Inc., a Utah
Corporation ("Madison"), and R&R Advertising, Inc., a California Corporation
("R&R").
3.5 Conduct of Business. iMall, Inc. owns and operates a "shopping
mall" on the Internet. Through the Company's subsidiaries, Madison, CR&R and
R&R, the company provides consulting services to businesses interested in
marketing their products or services on the Internet.
3.6 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of iMall, threatened by or against or
effecting iMall at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
iMall does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, warrant, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality.
3.7 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, iMall and its present management will (i) give to
the Shareholders and IMG, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and IMG,
or their duly authorized representatives, may inspect them; and (ii) furnish
such information concerning the properties and affairs of iMall as the
Shareholders and IMG, or their duly authorized representatives, may reasonably
request. Any such request to inspect iMall's books shall be directed to
iMall' counsel, Daniel W. Jackson, at the address set forth herein under
Section 10.4 Notices.
3.8 Confidentiality. Until the Closing (and thereafter if there is no
Closing), iMall and its representatives will keep confidential any information
which they obtain from the Shareholders or from IMG concerning its properties,
assets and the proposed business operations of IMG. If the terms and
conditions of this Plan imposed on the parties hereto are not consummated on
or before 5:00 p.m. MST on May 1, 1996 or otherwise waived or extended in
writing to a date mutually agreeable to the parties hereto, iMall will return
to IMG all written matter with regard to IMG obtained in connection with the
negotiations or consummation of this Plan.
3.9 Conflict with Other Instruments. The transactions contemplated by
this Plan will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or there
material agreements or instrument to which iMall was or is a party, or to
which any of its assets or operations are subject, and will not conflict with
any provision of the Articles of Incorporation or Bylaws of iMall.
3.10 Corporate Authority. iMall has full corporate power and authority
to enter into this Plan and to carry out its obligations hereunder and will
deliver to the Shareholders and IMG, or their respective representatives, at
the Closing, a certified copy of resolutions of its Board of Directors
authorizing execution of this Plan by its officers and performance thereunder.
3.11 Consent of Shareholders. iMall hereby warrants and represents that
the Shareholders of iMall, being the owners of a majority of the issued and
outstanding stock of the Corporation consented in writing to the authorization
to execute an Agreement and Plan of Reorganization as between iMall and IMG
pursuant to a stock-for-stock transaction in which iMall would acquire all of
the issued and outstanding shares of IMG in exchange for the issuance of up to
a total of 300,000 common shares of iMall.
3.12 Special Covenants and Representations Regarding the Exchanged iMall
Stock. The consummation of this Plan and the transactions herein contemplated
include the issuance of the exchanged iMall shares to the Shareholders, which
constitutes an offer and sale of securities under the Securities Act of 1933,
as amended, and applicable states' securities laws. Such transaction shall be
consummated in reliance on exemptions from the registration and prospectus
requirements of such statutes which depend interlace on the circumstances
under which the Shareholders acquire such securities. In connection with the
reliance upon exemptions from the registration and prospectus delivery
requirements for such transactions, at the Closing, Shareholders shall cause
to be delivered to iMall a Letter(s) of Investment Intent in the form attached
hereto as Exhibit B and incorporated herein by reference.
3.13 Undisclosed or Contingent Liabilities. iMall hereby represents and
warrants that it has no undisclosed or contingent liabilities which have not
been disclosed to IMG.
3.14 Information. The information concerning iMall set forth in this
Plan, and the iMall schedules attached hereto, are complete and accurate in
all material respects and do not contain, or will not contain, when delivered,
any untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to IMG in connection with this Plan.
3.15 Title and Related Matters. iMall has good and marketable title to
all of its properties, interests in properties, and assets, real and personal,
which are reflected, or will be reflected, in the iMall balance sheets, free
and clear of any and all liens and encumbrances.
3.16 Contracts or Agreements. iMall is not bound by any material
contracts, agreements or obligations which it has not already disclosed to
IMG.
3.17 Governmental Authorizations. iMall has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. iMall has obtained a listing in Moody's OTC Industrial Manual
which is recognized manual, recognized by the various states as an exemption
from registration provisions of any such state for the purposes of interstate
trading of iMall stock. Except for compliance with federal and state
securities laws, no authorization, approval, consent or order of, or
registration, declaration, or filing with, any court or other governmental
body is required in connection with the execution and delivery by iMall of
this Plan and the consummation by IMG of the transactions contemplated hereby.
3.18 Compliance with Laws and Regulations. iMall has complied with all
applicable statutes and regulations of any federal, state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of iMall or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to IMG.
3.19 Approval of Plan. The Board of Directors of iMall has authorized
the execution and delivery of this Plan by iMall and have approved the Plan
and the transactions contemplated hereby. iMall has full power, authority,
and legal right to enter into this Plan and to consummate the transactions
contemplated hereby.
3.20 Investment Intent. iMall is acquiring the IMG shares to be
transferred to it under this Plan for investment and no with a view to the
sale or distribution thereof, and iMall has no commitment or present intention
to liquidate IMG or to sell or otherwise dispose of the IMG shares.
3.21 Unregistered Shares and Access to Information. iMall understands
that the offer and sale of the IMG shares have not been registered with or
reviewed by the Securities and Exchange Commission under the Securities Act of
1933, as amended, or with or by any state securities law administrator, and no
federal, state securities law administrator has reviewed or approved any
disclosure or other material concerning IMG or the IMG shares. iMall has been
provided with and reviewed all information concerning IMG, the IMG shares as
it has considered necessary or appropriate as a prudent and knowledgeable
investor to enable it to make an informed investment decision concerning the
IMG shares. iMall has made an investigation as to the merits and risks of its
acquisition of the IMG Shares and has had the opportunity to ask questions of,
and has received satisfactory answers from, the officers and directors of IMG
concerning IMG, the IMG shares and related matters, and has had an opportunity
to obtain additional information necessary to verify the accuracy of such
information and to evaluate the merits and risks of the proposed acquisition
of the IMG shares.
3.22 iMall Schedules. iMall has delivered to IMG the following items
listed below, hereafter referred to as the "iMall Schedules", which is hereby
incorporated by reference and made a part hereof. A certification executed by
a duly authorized officer of iMall on or about the date within the Plan is
executed to certify that the iMall Schedules are true and correct.
(a) Copy of Articles of Incorporation, as amended, and Bylaws;
(b) iMall Prospectus;
(c) Financial statements;
(d) Shareholder list;
(e) Resolution of Directors approving Plan;
(f) Officer's Certificate as required under Section 6.2 of the
Plan;
(g) Opinion of counsel as required under Section 6.4 of the Plan;
(h) Certificate of Good Standing;
(i) Consent of Shareholders approving Plan;
(j) Copy of listing in Moody's Over-the-Counter Industrial Manual.
Section 4
Representations, Warranties and Covenants of IMG
IMG represents and warrants to, and covenants with, the Shareholders and
iMall as follows:
4.1 Corporate Status. IMG is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah incorporated
on September 13, 1995. IMG has full corporate power and is duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of its properties and
assets and to carry on its business on all material respects as it is now
being conducted, and there is no jurisdiction in which the character and
location of the assets owned by it, or the nature of the business transacted
by it, requires qualification. Included in the IMG schedules (defined below)
are complete and correct copies of its Articles of Incorporation and Bylaws as
in effect on the date hereof. The execution and delivery of this Plan does
not, and the consummation of the transactions contemplated hereby will not,
violate any provision of IMG's Articles of Incorporation or Bylaws. IMG has
taken all action required by law, its Articles of Incorporation, its Bylaws,
or otherwise, to authorize the execution and delivery of this Plan.
4.2 Capitalization. The authorized capital stock of IMG as of the date
hereof consists of 50,000,000 common shares, par value $0.001. As of the date
hereof all common shares of IMG issued and outstanding are fully paid, non-
assessable shares. There are no outstanding options, warrants, or calls or
any understanding, agreements, commitments, contracts or promises with respect
to the issuance of IMG's common stock or with regard to any options, warrants
or other contractual rights to acquire any of IMG's authorized but unissued
common shares.
4.3 Subsidiaries. IMG has no subsidiaries.
4.4 Conduct of Business. IMG will use its best efforts to maintain and
preserve its business organization, employee relationships and goodwill
intact, and will not, without the prior written consent of iMall, enter into
any material commitments except in the ordinary course of business.
IMG agrees that IMG will conduct itself in the following manner pending
the Closing:
(a) Certificate of Incorporation and Bylaws. No change will be
made in the Certificate of Incorporation or Bylaws of IMG.
(b) Capitalization, etc. IMG will not make any change in its
authorized or issued shares of any class, declare or pay any dividend or other
distribution, or issue, encumber, purchase or otherwise acquire any of its
shares of any class.
4.5 Options, Warrants and Rights. Although IMG intends to enact and put
into effect various management and employee benefit plans in the near future,
as of the date hereof, IMG has no options, warrants or stock appreciation
rights related to the authorized but unissued IMG common stock. There are no
existing options, warrants, calls, or commitments of any character relating to
the authorized and unissued IMG common stock, except options, warrants, calls,
or commitments, if any, to which IMG is not a party and by which it is not
bound.
4.6 Title to Property. IMG has good and marketable title to all of its
properties and assets, real and personal, proprietary or otherwise, as will be
reflected in the balance sheets of IMG, and the properties and assets of IMG
are subject to no mortgage, pledge, lien or encumbrance, unless as otherwise
disclosed in its financial statements.
4.7 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of IMG, threatened by or against or
effecting IMG at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
IMG does not have any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, warrant, rule, or regulation of any
court, arbitrator, or governmental agency or instrumentality.
4.8 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, IMG and its present management will (i) give to the
Shareholders and IMG, or their duly authorized representatives, full access,
during normal business hours, to all of its books, records, contracts and
other corporate documents and properties so that the Shareholders and IMG, or
their duly authorized representatives, may inspect them; and (ii) furnish such
information concerning the properties and affairs of IMG as the Shareholders
and IMG, or their duly authorized representatives, may reasonably request.
Any such request to inspect IMG's books shall be directed to IMG's
representative, at the address set forth herein under Section 10.4 Notices.
4.9 Confidentiality. Until the Closing (and thereafter if there is no
Closing), IMG and its representatives will keep confidential any information
which they obtain from the Shareholders or from IMG concerning its properties,
assets and the proposed business operations of IMG. If the terms and
conditions of this Plan imposed on the parties hereto are not consummated on
or before 5:00 p.m. MST on May 1, 1996 or otherwise waived or extended in
writing to a date mutually agreeable to the parties hereto, IMG will return to
iMall all written matter with regard to iMall obtained in connection with the
negotiations or consummation of this Plan.
4.10 Investment Intent. The Shareholders represent and covenant that
they are acquiring the unregistered and restricted common shares of iMall to
be delivered to them under this Plan for investment purposes and not with a
view to the subsequent sale or distribution thereof, and as agreed, supra, the
Shareholders, their successors and assigns agree to execute and deliver to
iMall on the date of Closing or no later than the date on which the restricted
shares are issued and delivered to the Shareholders, their assigns, or
designees, an Investment Letter similar in form to that attached hereto as
Exhibit B.
4.11 Unregistered Shares and Access to Information. IMG and the
Shareholders understand that the offer and sale of iMall post-split shares to
be exchanged for the IMG shares have not been registered with or reviewed by
the securities and Exchange Commission under the Securities Act of 1933, as
amended, or with or by any state securities law administrator, and no federal
or state securities law administrator has reviewed or approved any disclosure
or other material facts concerning iMall or iMall post-split stock. IMG and
the Shareholders have been provided with and reviewed all information
concerning iMall and iMall post-split shares, to be exchanged for the IMG
shares as they have considered necessary or appropriate as prudent and
knowledgeable investors to enable them to make informed investment decisions
concerning the iMall post-split shares, to be exchanged for the IMG shares.
IMG and the Shareholders have made an investigation as to the merits and risks
of their acquisition of the iMall post-split shares, to be exchanged for the
IMG shares and have had the opportunity to ask questions of, and have received
satisfactory answers from, the officers and directors of iMall concerning
iMall post-split shares to be exchanged for the IMG shares and related
matters, and have had an opportunity to obtain additional information
necessary to verify the accuracy of such information and to evaluate the
merits and risks of the proposed acquisition of the iMall post-split shares to
be exchanged for the IMG shares.
4.12 Title to Shares. The Shareholders are the beneficial and record
owners, free and clear of any liens and encumbrances, of whatever kind or
nature, of all of the shares of IMG of whatever class or series, which the
Shareholders have contracted to exchange.
4.13 Contracts.
(a) Set forth in the IMG Schedules are copies or descriptions of
all material contracts which written or oral, all agreements, franchises,
licenses, or other commitments to which IMG is a party or by which IMG or its
properties are bound.
(b) Except as may be set forth in the IMG Schedules, IMG is not a
party to any contract, agreement, corporate restriction, or subject to any
judgment, order, writ, injunction, decree, or award, which materially and
adversely effect the business, operations, properties, assets, or conditions
of IMG.
(c) Except as set forth in the IMG Schedules, IMG is not a party to
any material oral or written (i) contract for employment of any officer which
is not terminable on 30 days (or less) notice; (ii) profit sharing, bonus,
deferred compensation, stock option, severance, or any other retirement plan
of arrangement covered by Title IV of the Employee Retirement Income Security
Act, as amended, or otherwise covered; (iii) agreement providing for the sale,
assignment or transfer of any of its rights, assets or properties, whether
tangible or intangible, except sales of its property in the ordinary course of
business with a value of less than $2,000; or (iv) waiver of any right of any
value which in the aggregate is extraordinary or material concerning the
assets or properties scheduled by IMG, except for adequate value and pursuant
to contract. IMG has not entered into any material transaction which is not
listed in the IMG Schedules or reflected in the IMG financial statements.
4.14 Material Contract Defaults. IMG is not in default in any material
respect under the terms of any contract, agreement, lease or other commitment
which is material to the business, operations, properties or assets, or
condition of IMG, and there is no event of default or event which, with notice
of lapse of time or both, would constitute a default in any material respect
under any such contract, agreement, lease, or other commitment in respect of
which IMG has not taken adequate steps to prevent such default from occurring,
or otherwise compromised, reached a satisfaction of, or provided for
extensions of time in which to perform under any one or more contract
obligations, among others.
4.15 Conflict with Other Instruments. The consummation of the within
transactions will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or material
agreement or instrument to which IMG was or is a party, or to which any of its
assets or operations are subject, and will not conflict with any provision of
the Articles of Incorporation or Bylaws of IMG.
4.16 Governmental Authorizations. IMG has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Except for compliance with federal and state securities laws, no
authorization, approval, consent or order of, or registration, declaration, or
filing with, any court or other governmental body is required in connection
with the execution and delivery by IMG of this Plan and the consummation by
IMG of the transactions contemplated hereby.
4.17 Compliance with Laws and Regulations. IMG has complied with all
applicable statutes and regulations of any federal, state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of IMG or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to iMall.
4.18 Approval of Plan. The Board of Directors of IMG have authorized
the execution and delivery of this Plan by IMG and have approved the Plan and
the transactions contemplated hereby. IMG has full power, authority, and
legal right to enter into this Plan and to consummate the transactions
contemplated hereby.
4.19 Information. The information concerning IMG set forth in this
Plan, and the IMG Schedules attached hereto, are complete and accurate in all
material respects and do not contain, or will not contain, when delivered, any
untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to iMall in connection with this Plan.
4.20 IMG Schedules. IMG has delivered to iMall the following items
listed below, hereafter referred to as the "IMG Schedules", which is hereby
incorporated by reference and made a part hereof. A certification executed by
a duly authorized officer of IMG on or about the date within the Plan is
executed to certify that the IMG Schedules are true and correct.
(a) Copy of Articles of Incorporation and Bylaws;
(b) Resolution of Board of Directors approving Plan;
(c) Consent of Shareholders approving Plan;
(d) Schedule of every debt, mortgage, security interest, pledge,
lien, encumbrance, or claim, of any nature whatsoever, in excess of $1,000;
(e) A list of all employees, including current compensation,
with notation as to job description and whether or not such employee is
subject to written contract, and if subject to a contract or employment
agreement, a copy of the same;
(f) A schedule showing the name and location of each bank or
other institution with which IMG has an account and the names of the
authorized persons to draw thereon or having access thereto;
(g) A schedule setting forth the shareholders, together with the
number of shares owned beneficially or of record by each (also attached as
Exhibit A);
(h) Officer's Certificate as required by Section 7.2 of the
Plan;
(i) Certificate of Good Standing.
Section 5
Special Covenants
5.1 IMG Information Incorporated in iMall's Reports. IMG represents and
warrants to iMall that all the information furnished under this Plan shall be
true and correct in all material respects and that there is no omission of any
material fact required to make the information stated not misleading. IMG
agrees to indemnify and hold iMall harmless, including each of its Directors
and Officers, a and each person, if any, who controls such party, under any
applicable law from and against any and all losses, claims, damages, expenses
or liabilities to which any of them may become subject under applicable law,
or reimburse them for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such actions, whether or not
resulting in liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based on any untrue statement,
alleged untrue statement, or omission of a material fact contained in such
information delivered hereunder.
5.2 Special Covenants and Representations Regarding the Exchanged iMall
Stock. The consummation of this Plan and the transactions herein
contemplated, including the issuance of the iMall shares in exchange for all
of the issued and outstanding shares of IMG to the Shareholders constitutes
the offer and sale of securities under the Securities Act and the applicable
state statutes, which depend, inter alia, on the circumstances under which the
Shareholders acquire such securities. iMall intends to rely on the exemption
of the registration provision of Section 5 of the Securities Act as provided
for under Section 4.2 of the Securities Act of 1933, which states
"transactions not involving a public offering", among others. Each
Shareholder upon submission of his IMG shares and the receipt of the iMall
post-split shares exchanged therefor, shall execute and deliver to iMall a
letter of investment invent to indicate, among other representations, that the
Shareholder is exchanging the IMG shares for iMall post-split shares for
investment purposes and not with a view to the subsequent distribution
thereof. A proposed Investment Letter is attached hereto as Exhibit B and
incorporated herein by reference for the general use by the Shareholders, as
they may determine.
5.3 Action Prior to Closing. Upon the execution hereof until the
Closing date, and the completion of the consolidated audited financials,
(a) IMG and iMall will (i) perform all of its obligations under
material contracts, leases, insurance policies and/or documents relating to
its assets and business; (ii) use its best efforts to maintain and preserve
its business organization intact, to retain its key employees, and to maintain
its relationship with existing potential customers and clients; and (iii)
fully comply with and perform in all material respects all duties and
obligations imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by all federal or state governmental
authorities.
(b) Neither IMG nor iMall will (i) make any change in its Articles
of Incorporation or Bylaws except and unless as contemplated pursuant to
Section 3 of this Plan; (ii) enter into or amend any contract, agreement, or
other instrument of the types described in the parties' schedules, except that
a party may enter into or amend any contract or other instrument in the
ordinary course of business involving the sale of goods or services, provided
that such contract does not involve obligations in excess of $10,000.
Section 6
Conditions Precedent to Obligations of
IMG and the Shareholders
All obligations of IMG and the Shareholders under this Plan are subject
to the satisfaction, on or before the Closing date, except as otherwise
provided for herein, or waived or extended in writing by the parties hereto,
of the following conditions:
6.1 Accuracy of Representations. The representations and warranties
made by iMall in this Plan were true when made and shall be true as of the
Closing date (except for changes therein permitted by this Plan) with the same
force and effect as if such representations and warranties were made at and as
of the Closing date; and, iMall shall have performed and complied with by
iMall prior to the Closing, unless waived or extended in writing by the
parties hereto. IMG shall have been furnished with a certificate, signed by a
duly authorized executive officer of iMall and dated the Closing date, to the
foregoing effect.
6.2 Officers' Certificate. IMG and the Shareholders shall have been
furnished with a certificate dated the Closing date and signed by a duly
authorized executive officer of iMall, to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge of
iMall, threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of iMall.
6.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of iMall, nor shall any event have occurred which, with lapse of
time or the giving of notice or both, may cause or create any material adverse
change in the financial condition, business or operations of iMall, except as
otherwise disclosed to IMG.
6.4 Opinion of Counsel of iMall. iMall shall furnish to IMG and the
Shareholders an opinion dated as of the Closing date and in form and substance
satisfactory to IMG and the Shareholders to the effect that:
(a) iMall is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada, and with all requisite
corporate power to perform its obligations under this Plan.
(b) The business of iMall, as presently conducted, including, upon
the consummation hereof, the ownership of all of the issued and outstanding
shares of IMG, does not require it to register it to do business as a foreign
corporation on any jurisdiction other than under the jurisdiction of its
Articles of Incorporation or Bylaws and iMall has complied to the best of its
knowledge in all material respects with all the laws, regulations, licensing
requirements and orders applicable to its business activities and has filed
with the proper authorities, including the Department of Commerce, Division of
Corporations, and Secretary of State for the State of Nevada, all statements
and reports required to be filed.
(c) The authorized and outstanding capital stock of iMall as set
forth in Section 3.2 above, and all issued and outstanding shares have been
duly and validly authorized and issued and are fully paid and non-assessable.
(d) There are no material claims, suits or other legal proceedings
pending or threatened against iMall of any court or before or by any
governmental body which might materially effect the business of iMall or the
financial condition of iMall as a whole and no such claims, suits or legal
proceedings are contemplated by governmental authorities against iMall.
(e) iMall's initial public offering file declared effective by the
Utah Securities Commission on May 7, 1985, and was offered and sold in
accordance with and in compliance with the rules and regulations of the
Securities Act of 1933, as amended. Subsequent to the termination of iMall's
public offering, no stop orders suspending the effectiveness of the
distribution is or was in effect, and no proceedings since the termination
thereof for that purpose are pending before or threatened by any state or
federal agency or authority.
(f) To the best knowledge of such counsel, the consummation of the
transactions contemplated by this Plan will not violate or contravene the
provisions of the Certificate of Incorporation or Bylaws of iMall, or any
contract, agreement, indenture, mortgage, or order by which iMall is bound.
(g) This Plan constitutes a legal, valid and binding obligation of
iMall enforceable in accordance with its terms, subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium, or similar law effecting
creditors' rights generally and general principles of equity (regardless of
whether such principles are considered in a proceeding in equity or law).
(h) The execution and delivery of this Plan and the consummation of
the transactions contemplated hereby have been ratified by a majority of the
Shareholders of iMall and have been duly authorized by its Board of Directors.
6.5 Good Standing. IMG shall have received a Certificate of Good
Standing from the State of Nevada, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that iMall is in good standing as a corporation in the State
of Nevada..
6.6 Other Items. IMG and the Shareholders shall have received such
further documents, certifications or instruments relating to the transactions
contemplated hereby as IMG and the Shareholders may reasonably request.
Section 7
Conditions Precedent to Obligations of iMall
All obligations of iMall under this Plan are subject, at its option, to
the fulfillment, before the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties
made by IMG and the Shareholders under this Plan were true when made and shall
be true as of the Closing date (except for changes therein permitted by this
Plan) with the same force and effect as if such representations and warranties
were made at and as of the Closing date; and, iMall shall have performed and
complied with by IMG prior to the Closing, unless waived or extended in
writing by the parties hereto. iMall shall have been furnished with a
certificate, signed by a duly authorized executive officer of IMG and dated
the Closing date, to the foregoing effect.
7.2 Officers' Certificate. iMall shall have been furnished with a
certificate dated the Closing date and signed by a duly authorized executive
officer of IMG, to the effect that no litigation, proceeding, investigation,
or inquiry is pending, or to the best knowledge of IMG, threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Plan, or which might result in any material
adverse change in the assets, properties, business, or operations of IMG.
7.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of iMall, nor shall any event have occurred which, with lapse of
time or the giving of notice or both, may cause or create any material adverse
change in the financial condition, business or operations of IMG, except as
otherwise disclosed to iMall.
7.4 Good Standing. iMall shall have received a Certificate of Good
Standing from the State of Utah, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that IMG is in good standing as a corporation in the State
of Utah.
7.5 Dissenters' Rights Waived. The Shareholders of IMG, and each of
them, have agreed and hereby waive any dissenters' rights, if any, under the
laws of the State of Utah in regards to any objection to this Plan as outlined
herein and otherwise consent to and agree and authorize the execution and
consummation of the within Plan in accordance to the terms and conditions of
this Plan by the management of IMG.
7.6 Other Items. iMall shall have received such further documents,
certifications or instruments relating to the transactions contemplated hereby
as iMall may reasonably request.
7.7 Registration of IMG Shares. In connection with the exchange of
iMall shares for IMG shares, iMall agrees, if practicable, and subject to the
consent of an underwriter(s) in the event iMall undertakes to file a
Registration Statement under the Securities Act of 1933, as amended, for the
purpose of raising money from the public through the sale of its equity, to
ensure that the iMall shares issued in connection with the within Plan will be
included as part of a general Registration Statement and "piggy back" any such
offering for the purpose of registering the same for sale by the Shareholders,
as they may determine.
7.8 Execution of Investment Letter. The Shareholders shall have
executed and delivered copies of Exhibit B to iMall.
Section 8
Termination
8.1 Termination by IMG or the Shareholders. This Plan may be terminated
at any time prior to the Closing date by action of IMG or the Shareholders, if
iMall shall fail to comply in any material respect with any of the covenants
or agreements contained in this Plan, or if any of its representations and
warranties contained herein shall be inaccurate in any material respect.
8.2 Termination by iMall. This Plan may be terminated at any time prior
to the Closing date by action of iMall if IMG shall fail to comply in any
material respect with any of the covenants or agreements contained in this
Plan, or if any of its representations or warranties contained herein shall be
inaccurate in any material respect.
8.3 Termination by Mutual Consent
(a) This Plan may be terminated at any time prior to the Closing
date by mutual consent of iMall, expressed by action of its Board of
Directors, IMG or the Shareholders.
(b) If this Plan is terminated pursuant to Section 8, this Plan
shall be of no further force and effect and no obligation, right or liability
shall arise hereunder. Each party shall bare its own costs in connection
herewith.
Section 9
Shareholders' Representative
The Shareholders hereby irrevocably designate and appoint Benjamin
Hoskins as their agent and attorney in fact (the "Shareholders'
Representative") with full power and authority until the Closing to execute,
deliver and receive on their behalf all notices, requests and other
communications hereunder; to fix and alter on their behalf the date, time and
place of the Closing; to waive, amend or modify any provisions of this Plan
and to take such other action on their behalf in connection with this Plan,
the Closing and the transactions contemplated hereby as such agent deems
appropriate; provided, however, that no such waiver, amendment or modification
may be made if it would decrease the number of shares to be issued to the
Shareholders under Section 1 hereof or increase the extent of their obligation
to iMall hereunder, unless agreed in writing by the Shareholders.
Section 10
General Provisions
10.1 Further Assurances. At any time, and from time to time, after the
Closing date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of the Plan.
10.2 Payments of Estimated Costs and Fees. iMall and IMG mutually
determine and agree that IMG shall pay the estimated costs and fees incurred
in connection with the execution and consummation of the Plan.
10.3 Press Release and Shareholders' Communications. On the date of
Closing, or as soon thereafter as practicable, IMG and the Shareholders shall
cause to have promptly prepared and disseminated a news release concerning the
execution and consummation of the Plan, such press release and communication
to be released promptly and within the time required by the laws, rules and
regulations as promulgated by the United States Securities and Exchange
Commission, and concomitant therewith to cause to be prepared a full and
complete letter to iMall's shareholders which shall contain information
required by Regulation 240.14f-1 as promulgated under Section 14(f) as
mandated under the Securities and Exchange Act of 1934, as amended.
10.4 Notices. All notices and other communications required or
permitted hereunder shall be sufficiently given if personally delivered, sent
by registered mail, or certified mail, return receipt requested, postage
prepaid, or by facsimile transmission addressed to the following parties
hereto or at such other addresses as follows:
If to iMall: iMall, Inc.
2285 South Mike Jense Circle
Provo, Utah 84601
With a copy to: Daniel W. Jackson, Esq.
215 South State #1200
Salt Lake City, Utah 84111
If to IMG: Inter-Active Marketing Group, Inc.
870 East 9400 South, #205
Sandy, Utah 84094
If to the Shareholders: Benjamin Hoskins
870 East 9400 South, #205
Sandy, Utah 84094
or at such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, sent
by facsimile transmission, or telegraphed.
10.5 Entire Agreement. This Plan represents the entire agreement
between the parties relating to the subject matter hereof, including any
previous letters of intent, understandings, or agreements between iMall, IMG
and the Shareholders with respect to the subject matter hereof, all of which
are hereby merged into this Plan, which alone fully and completely expresses
the agreement of the parties relating to the subject matter hereof. Excepting
the foregoing agreement, there are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
10.6 Governing Law. This Plan shall be governed by and construed and
enforced in accordance with the laws of the State of Utah, except to the
extent preempted by federal law, in which event (and to that extent only)
federal law shall govern.
10.7 Tax Treatment. The transaction contemplated by this Plan is
intended to qualify as a "tax-free" reorganization under the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. IMG
and iMall acknowledge, however, that each are being represented by their own
tax advisors in connection with this transaction, and neither has made any
representations or warranties to the other with respect to treatment of such
transaction or any part or effect thereof under applicable tax laws,
regulations or interpretations; and no attorney's opinion or tax revenue
ruling has been obtained with respect to the tax consequences of the
transactions contemplated by the within Plan.
10.8 Attorney Fees. In the event that any party prevails in any action
or suit to enforce this Plan, or secure relief from any default hereunder or
breach hereof, the nonprevailing party or parties shall reimburse the
prevailing party or parties for all costs, including reasonable attorney fees,
incurred in connection therewith.
10.9 Amendment of Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law or in equity, and may be enforced concurrently or separately, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, therefore, or
thereafter occurring or existing. Any time prior to the expiration of thirty
(30) days from the date hereof, this Plan may be amended by a writing signed
by all parties hereto, with respect to any of the terms contained herein, and
any term or condition of this Plan may be waived or the time for performance
thereof may be extended by a writing signed by the party or parties for whose
benefit the provision is intended.
10.10 Counterparts. This Plan may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which together shall constitute one and the same
instruments.
10.11 Headings. The section and subsection headings in this Plan are
inserted for convenience only and shall not effect in any way the meaning or
interpretation of the Plan.
10.12 Parties in Interest. Except as may be otherwise expressly
provided herein, all terms and provisions of this Plan shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, personal and legal representatives, and assigns.
IN WITNESS WHEREOF, the parties have executed this Plan and Agreement of
Reorganization effective the day and year first set forth above.
iMall, INC.
Attest:
/s/ John Clayton By /s/ Craig Pickering
- ---------------------- ---------------------
Its President
INTER-ACTIVE MARKETING GROUP, INC.
Attest:
/s/ John Clayton
____________________ By /s/ Benjamin Hoskins
-------------------------
Its President
SHAREHOLDERS:
Attest:
/s/ John Clayton By /s/ Todd Hoskins
- -------------------- -----------------------
Attest:
/s/ John Clayton By: /s/ Benjamin Hoskins
_____________________ ______________________________________________
Attest:
/s/ John Clayton By /s/ Brett Nielson
_____________________ ______________________________________________
Attest:
_____________________ By_________________________________________________
Exhibit 3(i)
Articles of Incorporation and Amendments Thereto
Articles of Incorporation
of
Brickland Corp.
We the undersigned, natural persons over the age of eighteen (18)
years, acting as incorporators of a corporation under the Utah
Business Corporation Act adopt the following Articles of
Incorporation for such corporation.
ARTICLE I
CORPORATE NAME
The name of the Corporation is BRICKLAND CORP.
ARTICLE II
DURATION
The duration of the Corporation shall be perpetual.
ARTICLE III
GENERAL PURPOSES
This Corporation is organized for the following purposes
A. To purchase, sell and deal in products and technologies.
B. To acquire or merge into existing business.
C. To buy, sell, mortgage, exchange, lease hold for
investment or otherwise operate and personal property of all
kinds and any interest therein.
D. For any other purpose allowed by law.
E. The provisions of this Article shall be construed as
purposes and powers and each as an independent purpose and Power.
The enumeration of specific purposes and powers shall not be held
to limit or restrict in any manner the purposes and powers of the
Corporation and the purposes and powers therein specified shall
not be limited or restricted by reference to,or inference from,
the terms of any provision of this or any other article hereof.
ARTICLE IV
AUTHORIZED SHARES
The aggregate number of shares the Corporation shall
have authority to issue is FIFTY MILLION (50,000,000) shares with
a par value of ONE OF ONE CENT ($0.001) per share. All stock of
this Corporation shall be of the same class which shall be
designated common stock.
ARTICLE V
COMMENCEMENT OF BUSINESS
The Corporation will not commence business until at least
ONE THOUSAND DOLLARS ($1,000) in cash or property has been
received by it as consideration for the issuance of its shares.
ARTICLE VI
REGISTERED OFFICE AND AGENT
The post office address of the Corporation's initial
registered office is 1944 Cecelia Circle, Slat Lake City, Utah
84121 and the name of its initial registered agent at such
address is Michael C. Brown.
ARTICLE VII
PRE-EMPTIVE RIGHTS
The shareholders shall nave no pre-emptive rights to acquire
any securities of this Corporation.
ARTICLE VIII
DIRECTORS
The number of directors constituting the initial Board of
Directors of the Corporation are three (3) and the names and
addresses of the persons who are to serve as directors until
their successors are elected and qualified are:
Michael C. Brown 1944 Cecelia Circle
Salt Lake City, Utah 84121
Ken Maylor 1423 South Pearce Drive
West Valley City, Utah 84109
Kenneth Kotoku 12122 South Millridge Road
Sandy, Utah 84070
ARTICLE IX
INCORPORATORS
The names and addresses of the Incorporators are:
Michael C. Brown 1944 Cecelia Circle
Salt Lake City, Utah 84121
Ken Maylor 1423 South Pearce Drive
West Valley City, Utah 84109
Kenneth Kotoku 12122 South Millridge Road
Sandy, Utah 84070
ARTICLE X
NON-ASSESSABILITY
Shares of the corporation shall not be subject to assessment
for payment of debts of the Corporation.
ARTICLE XI
EXEMPTION FROM CORPORATE POWER
The private property of the shareholders shall not be
subject to the payment of any corporate debts to any extent
whatsoever.
DATED this 9th day of February, 1984.
/S/ Michael C. Brown
Incorporator
/S/ Ken Maylor
Incorporator
/S/ Kenneth Kotoku
Incorporator
<Notary block for Michael C. Brown>
<Notary block for Ken Maylor>
<Notary block for Kenneth Kotoku>
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF
BRICKLAND CORP.
Pursuant to the provisions of the Utah Business Act, the
undersigned Corporation hereby adopts the following Articles of
Amendment to its Articles of Incorporation:
FIRST: The name of the Corporation is BRICKLAND
CORPORATION.
SECOND: The following amendment was adopted by the
Shareholders of the Corporation an July 15, 1986, in the manner
prescribed the Utah Business Act.
THIRD: The date of the adoption of the amendment by
the Shareholders is July 15, 1986.
FOURTH: The number of shares outstanding at the time
of such adoption was 20,334,000, and the number of shares
entitled to vote thereon was 10,749,783. No shares of any class
were entitled to vote thereon as a class.
FIFTH: The number of shares which voted for such
amendment was 10,695,783, the number of shares which voted
against such amendment was 48,000, and the number of shares
which abstained from voting was 6,000. No shares of any class
were entitled to vote thereon as a class.
RESOLVED: that the Articles of Incorporation
shall be amended by the adoption of a new Article IV to read as
follows:
"Article IV: The Corporation shall have the
authority to issue 105,000,000 (one hundred-five million) shares
of stock each having a par value of one-tenth of one cent
($0.001). All stock of the Corporation shall be of the
same class and shall have the same rights and preferences.
Fully paid stock of this Corporation shall not be liable for
further call or assessment. The authorized trading
shares shall be issued at the discretion of the Directors."
SIXTH: The manner, if not set forth in such
amendment, in which an exchange, reclassification, or
cancellation of issued shares provided for in the amendment
shall be affected is as follows: None.
Dated this 15th day of July, 1986.
BRICKLAND CORPORATION
By: /S/ Joseph L. Flood, President
By: /S/ Sharron K. Flood, Secretary
<Notary block for Joseph L. Flood>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
John Jones and Donney Jones certify that:
1. They are the president and the secretary, respectively,
of Brickland Corporation, a corporation organized under the laws
of Utah on February 9, 1984.
2. Article I of the articles of incorporation of this
corporation is amended to read as follows:
The name of this corporation is NATURES GIFT, INC.
3. On May 15, 1991 a Special Meeting of the Shareholders was
held to vote on the aforementioned amendment.
4. The foregoing amendment of articles of incorporation has
been duly approved by the required vote of shareholders in
accordance with Section 16-10-55 of the Corporations Code. The
total number of shares of outstanding shares of the corporation
is 18,416,713. The number of share voting in favor the
amendment equaled or exceeded the vote required. The percentage
vote required was more than 50%.
5. The number of votes either by proxy or in person were
12,560,886. Those people that did not return proxies,
automatically voted for the amendment as stated in the proxy
statement. The total number for the amendment was 18,415,783.
400 voted against the amendment and 530 abstained.
6. The procedure for shareholders to exchange their
certificates will be set forth in the transmittal letter, which
will be sent within 10 days from today's date.
We further declare under penalty of perjury of Utah the
matters set forth in this certificate are true and correct to the
best of our knowledge.
DATE: 5-23-91
/S/ John Jones, President
/S/ Donney Jones, Secretary
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
NATURES GIFT, INC.
We the undersigned as President and Secretary of Natures
Gift, Inc. do hereby certify:
That the Board of Directors of said Corporation at a
meeting duly convened and held by telephone on the 28th day of
December, 1995 adopted a Resolution to amend the original
Articles as follows:
A. Delete Article I in its entirety and substitute
in its place the following:
Article One. The name of the
Corporation is iMall, Inc.
B. Delete Article IV in its entirety and substitute
in its place the following:
Article Four. (Capital Stock). The Corporation
shall have authority to issue five million five hundred twenty
six thousand three hundred fifteen (5,526,315) shares of common
stock, par value $0.001 per share.
The holders of shares of capital stock of the
Corporation shall not be entitled to preemptive or preferential
rights to subscribe to any unissued stock or any other securities
which the Corporation may now or hereafter be authorized to
issue.
The Corporation's capital stock may be issued
and sold from time to time for such consideration as may be fixed
by the board of directors.
The stockholders shall not possess cumulative
voting rights at all shareholder meetings called for the purpose
of electing a board of directors.
Said Amendment has been approved by the affirmative
vote of shareholders owning 90,000,000 of the 103,156,843 issued
and outstanding shares of common stock at a special meeting of
shareholders held on January 8, 1996 and thereby approved by the
owners of a majority of the duly issued and outstanding shares of
common stock which represent a majority of the sole class of
common stock outstanding and entitled to vote thereon. The
change is effective immediately upon the filing of this
Certificate.
/S/ Rob Kropf, President
/S/ Tammy Kropf, Secretary
<Notary block for Rob Kropf>
<Notary block for Tammy Kropf>
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
NATURES GIFT, INC.
We the undersigned as President and Secretary of Natures
Gift, Inc. do hereby certify:
That the Board of Directors of said Corporation at a
meeting duly convened and held by telephone on the 28th day of
December, 1995 adopted a Resolution to amend the original
Articles as follows:
A. Delete Article I in its entirety and
substitute in its place the following:
Article One. The name of the
Corporation is iMall, Inc.
B. Delete Article IV in its entirety and
substitute in its place the following:
Article Four. (Capital Stock). The Corporation
shall have authority to issue five million five hundred twenty
six thousand three hundred fifteen (5,526,315) shares of common
stock, par value $0.001 per share.
The holders of shares of capital stock of the
Corporation shall not be entitled to preemptive or preferential
rights to subscribe to any unissued stock or any other securities
which the Corporation may now or hereafter be authorized to
issue.
The Corporation's capital stock may be issued
and sold from time to time for such consideration as may be fixed
by the board of directors.
The stockholders shall not possess cumulative
voting rights at all shareholder meetings called for the purpose
of electing a board of directors.
Said Amendment has been approved by the
affirmative vote of shareholders owning 90,000,000 of the
103,156,843 issued and outstanding shares of common stock at a
special meeting of shareholders held on January 8, 1996 and
thereby approved by the owners of a majority of the duly issued
and outstanding shares of common stock which represent a majority
of the sole class of common stock outstanding and entitled to
vote thereon. The change is effective immediately upon the filing
of this Certificate.
/S/ Rob Kropf, President
/S/ Tammy Kropf, Secretary
<Notary block for Rob Kropf>
<Notary block for Tammy Kropf>
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
iMALL, INC.
We the undersigned as President and secretary of iMall,
Inc. do hereby certify:
That the Board of Directors of said Corporation
at a meeting duly convened and held on May 14, 1996 via telephone
adopted a Resolution to amend the original Articles as follows:
A. Delete Article IV in its entirety and
substitute in its place the following:
ARTICLE IV.
The total authorized capitalization of this Corporation shall be
and is the sum of 300,000,000 shares of Common Stock par
value of $.001 per share. Said stock to carry full voting power,
and the said shares shall be issued fully paid at such times as
the Board of Directors may designate in exchange for cash,
property or services, the stock of the other corporation or
other values, rights or things, and the judgment of the Board of
Directors as to the value thereof shall be conclusive.
Before this Amendment, 50,000,000 shares of Common
Stock with a par value of $.001 per share were authorized and of
those authorized 15,722,107 were issued and outstanding. After
this amendment 300,000,000 shares of Common Stock with a par
value of $.001 per share will be authorized.
The said Amendment and forward split have been
consented to and approved by a majority of the stockholders
holding at least a majority of the sole class of Common Stock
outstanding and entitled to vote thereon at a special meeting of
shareholders held on May 14, 1996. The change is effective
immediately.
/S/ Craig R. Pickering, President
/S/ John S. Clayton, Secretary
<Notary block for Craig R. Pickering and John S. Clayton>
AMENDED AND RESTATED
BYLAWS
OF
IMALL, INC.
ARTICLE 1. OFFICES
1.1 Business Office. The principal office of the corporation shall be
located at any place either within or outside the State of Nevada as
designated in the corporation's most recent document on file with the Nevada
Secretary of State, Division of Corporations. The corporation may have such
other offices, either within or without the State of Nevada as the board of
directors may designate or as the business of the corporation may require from
time to time.
1.2 Registered Office. The registered office of the corporation shall
be located within the State of Nevada and may be, but need not be, identical
with the principal office. The address of the registered office may be
changed from time to time.
ARTICLE 2. SHAREHOLDERS
2.1 Annual Shareholder Meeting. The annual meeting of the shareholders
shall be held on the 10th day of May in each year, beginning with the year
1997 at the hour of 10:00 a.m., or at such other time on such other day within
such month as shall be fixed by the board of directors, for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday in the State of Nevada, such meeting shall be held on the next
succeeding business day.
2.2 Special Shareholder Meeting. Special meetings of the shareholders,
for any purpose or purposes described in the meeting notice, may be called by
the president, or by the board of directors, and shall be called by the
president at the request of the holders of not less than one-fourth of all
outstanding votes of the corporation entitled to be cast on any issue at the
meeting.
2.3 Place of Shareholder Meeting. The board of directors may designate
any place, either within or without the State of Nevada, as the place of
meeting for any annual or any special meeting of the shareholders, unless by
written consent, which may be in the form of waivers of notice or otherwise,
all shareholders entitled to vote at the meeting designate a different place,
either within or without the State of Nevada, as the place for the holding of
such meeting.
2.4 Notice of Shareholder Meeting. Written notice stating the date,
time, and place of any annual or special shareholder meeting shall be
delivered not less than 10 nor more than 60 days before the date of the
meeting, either personally or by mail, by or at the direction of the
President, the board of directors, or other persons calling the meeting, to
each shareholder of record entitled to vote at such meeting and to any other
shareholder entitled by the Nevada Revised Statutes (the "Statutes") or the
articles of incorporation to receive notice of the meeting. Notice shall be
deemed to be effective at the earlier of: (1) when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid; (2) on
the date shown on the return receipt if sent by registered or certified mail,
return receipt requested, and the receipt is signed by or on behalf of the
addressee; (3) when received; or (4) 3 days after deposit in the United States
mail, if mailed postpaid and correctly addressed to an address other than that
shown in the corporation's current record of shareholders.
If any shareholder meeting is adjourned to a different date, time or
place, notice need not be given of the new date, time and place, if the new
date, time and place is announced at the meeting before adjournment. But if
the adjournment is for more than 30 days or if a new record date for the
adjourned meeting is or must be fixed, then notice must be given pursuant to
the requirements of the previous paragraph, to those persons who are
shareholders as of the new record date.
2.5 Waiver of Notice. A shareholder may waive any notice required by
the Statutes, the articles of incorporation, or these bylaws, by a writing
signed by the shareholder entitled to the notice, which is delivered to the
corporation (either before or after the date and time stated in the notice)
for inclusion in the minutes or filing with the corporate records.
A shareholder's attendance at a meeting:
(a) waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting because of lack of
notice or effective notice; and
(b) waives objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the matter when
it is presented.
2.6 Fixing of Record Date. For the purpose of determining shareholders
of any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive payment of any distribution,
or in order to make a determination of shareholders for any other proper
purpose, the board of directors may fix in advance a date as the record date.
Such record date shall not be more than 70 days prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken. If no record date is so fixed by the board for the determination of
shareholders entitled to notice of, or to vote at a meeting of shareholders,
the record date for determination of such shareholders shall be at the close
of business on the day the first notice is delivered to shareholders. If no
record date is fixed by the board for the determination of shareholders
entitled to receive a distribution, the record date shall be the date the
board authorizes the distribution. With respect to actions taken in writing
without a meeting, the record date shall be the date the first shareholder
signs the consent.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section, such determination
shall apply to any adjournment thereof unless the board of directors fixes a
new record date which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
2.7 Shareholder List. After fixing a record date for a shareholder
meeting, the corporation shall prepare a list of the names of its shareholders
entitled to be given notice of the meeting. The shareholder list must be
available for inspection by any shareholder, beginning on the earlier of 10
days before the meeting for which the list was prepared or 2 business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting, and any adjournment thereof. The list shall
be available at the corporation's principal office or at a place identified in
the meeting notice in the city where the meeting is to be held.
2.8 Shareholder Quorum and Voting Requirements.
2.8.1 Quorum. Except as otherwise required by the Statutes or
the articles of incorporation, a majority of the outstanding shares of the
corporation, represented by person or by proxy, shall constitute a quorum at
each meeting of the shareholders. If a quorum exists, action on a matter,
other than the election of directors, is approved if the votes cast favoring
the action exceed the votes cast opposing the action, unless the articles of
incorporation or the Statutes require a greater number of affirmative votes.
2.8.2 Voting of Shares. Unless otherwise provided in the
articles of incorporation or these bylaws, each outstanding share, regardless
of class, is entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
2.9 Quorum and Voting requirements of Voting Groups. If the articles
of incorporation or the Statutes provide for voting by a single voting group
on a matter, action on that matter is taken when voted upon by that voting
group.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for
that adjourned meeting.
Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless the articles of incorporation or the Statutes provide
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter.
If the articles of incorporation or the Statutes provide for voting by
two or more voting groups on a matter, action on that matter is taken only
when voted upon by each of those voting groups counted separately. Action may
be taken by one voting group on a matter even though no action is taken by
another voting group entitled to vote on the matter.
If a quorum exists, action on a matter, other than the election of
directors, by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless
the articles of incorporation or the Statutes require a greater number of
affirmative votes.
2.10 Greater Quorum or Voting Requirements. The articles of
incorporation may provide for a greater quorum or voting requirement for
shareholders, or voting groups of shareholders, than is provided for by these
bylaws. An amendment to the articles of incorporation that adds, changes, or
deletes a greater quorum or voting requirement for shareholders must meet the
same quorum requirement and be adopted by the same vote and voting groups
required to take action under the quorum and voting requirement then in effect
or proposed to be adopted, whichever is greater.
2.11 Proxies. At all meetings of shareholders, a shareholder may vote
in person or by proxy which is executed in writing by the shareholder or which
is executed by his duly authorized attorney-in-fact. Such proxy shall be
filed with the Secretary of the corporation or other person authorized to
tabulate votes before or at the time of the meeting. No proxy shall be valid
after 11 months from the date of its execution unless otherwise provided in
the proxy. All proxies are revocable unless they meet specific requirements
of irrevocability set forth in the Statutes. The death or incapacity of a
voter does not invalidate a proxy unless the corporation is put on notice. A
transferee for value who receives shares subject to an irrevocable proxy, can
revoke the proxy if he had no notice of the proxy.
2.12 Corporation's Acceptance of Votes.
2.12.1 If the name signed on a vote, consent, waiver, proxy
appointment, or proxy appointment revocation corresponds to the name of a
shareholder, the corporation, if acting in good faith, is entitled to accept
the vote, consent, waiver, proxy appointment, or proxy appointment revocation
and give it effect as the act of the shareholder.
2.12.2 If the name signed on a vote, consent, waiver, proxy
appointment, or proxy appointment revocation does not correspond to the name
of a shareholder, the corporation, if acting in good faith, is nevertheless
entitled to accept the vote, consent, waiver, proxy appointment, or proxy
appointment revocation and give it effect as the act of the shareholder if:
(a) the shareholder is an entity as defined in the Statutes
and the name signed purports to be that of an officer or agent of the entity;
(b) the name signed purports to be that of an
administrator, executor, guardian, or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to
the corporation has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(c) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver, proxy appointment, or proxy appointment
revocation; or
(d) the name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder has been presented with
respect to the vote, consent, waiver, proxy appointment or proxy appointment
revocation; or
(e) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all co-
tenants or fiduciaries.
2.12.3 If shares are registered in the names of two or more
persons, whether fiduciaries, members of a partnership, co-tenants, husband
and wife as community property, voting trustees, persons entitled to vote
under a shareholder voting agreement or otherwise, or if two or more persons
(including proxy holders) have the same fiduciary relationship respecting the
same shares, unless the secretary of the corporation or other officer or agent
entitled to tabulate votes is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or creating
the relationship wherein it is so provided, their acts with respect to voting
shall have the following effect:
(a) if only one votes, such act binds all;
(b) if more than one votes, the act of the majority so
voting bind all;
(c) if more than one votes, but the vote is evenly split on
any particular matter, each fraction may vote the securities in question
proportionately.
If the instrument so filed or the registration of the shares shows that
any tenancy is held in unequal interests, a majority or even split for
the purpose of this Section shall be a majority or even split in
interest.
2.12.4 The corporation is entitled to reject a vote, consent,
waiver, proxy appointment or proxy appointment revocation if the secretary or
other officer or agent authorized to tabulate votes, acting in good faith, has
reasonable basis for doubt about the validity of the signature on it or about
the signatory's authority to sign for the shareholder.
2.12.5 The corporation and its officer or agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section
are not liable in damages to the shareholder for the consequences of the
acceptance or rejection.
2.12.6 Corporate action based on the acceptance or rejection of a
vote, consent, waiver, proxy appointment or proxy appointment revocation under
this Section is valid unless a court of competent jurisdiction determines
otherwise.
2.13 Action by Shareholders Without a Meeting.
2.13.1 Written Consent. Any action required or permitted to be
taken at a meeting of the shareholders may be taken without a meeting and
without prior notice if one or more consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shareholders entitled to vote
with respect to the subject matter thereof were present and voted. Action
taken under this Section has the same effect as action taken at a duly called
and convened meeting of shareholders and may be described as such in any
document.
2.13.2 Post-Consent Notice. Unless the written consents of all
shareholders entitled to vote have been obtained, notice of any shareholder
approval without a meeting shall be given at least ten days before the
consummation of the action authorized by such approval to (i) those
shareholders entitled to vote who did not consent in writing, and (ii) those
shareholders not entitled to vote. Any such notice must be accompanied by the
same material that is required under the Statutes to be sent in a notice of
meeting at which the proposed action would have been submitted to the
shareholders for action.
2.13.3 Effective Date and Revocation of Consents. No action
taken pursuant to this Section shall be effective unless all written consents
necessary to support the action are received by the corporation within a
sixty-day period and not revoked. Such action is effective as of the date the
last written consent is received necessary to effect the action, unless all of
the written consents specify an earlier or later date as the effective date of
the action. Any shareholder giving a written consent pursuant to this Section
may revoke the consent by a signed writing describing the action and stating
that the consent is revoked, provided that such writing is received by the
corporation prior to the effective date of the action.
2.13.4 Unanimous Consent for Election of Directors.
Notwithstanding subsection (a), directors may not be elected by written
consent unless such consent is unanimous by all shares entitled to vote for
the election of directors.
2.14 Voting for Directors. Unless otherwise provided in the articles
of incorporation, every shareholder entitled to vote for the election of
directors has the right to cast, in person or by proxy, all of the votes to
which the shareholder's shares are entitled for as many persons as there are
directors to be elected and for whom election such shareholder has the right
to vote. Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present.
ARTICLE 3. BOARD OF DIRECTORS
3.1 General Powers. Unless the articles of incorporation have
dispensed with or limited the authority of the board of directors by
describing who will perform some or all of the duties of a board of directors,
all corporate powers shall be exercised by or under the authority, and the
business and affairs of the corporation shall be managed under the direction,
of the board of directors.
3.2 Number, Tenure and Qualification of Directions. The authorized
number of directors shall be seven (7); provided, however, that if the
corporation has less than seven shareholders entitled to vote for the election
of directors, the board of directors may consist of a number of individuals
equal to or greater than the number of those shareholders. The current number
of directors shall be within the limit specified above, as determined (or as
amended form time to time) by a resolution adopted by either the shareholders
or the directors. Each director shall hold office until the next annual
meeting of shareholders or until the director's earlier death, resignation, or
removal. However, if his term expires, he shall continue to serve until his
successor shall have been elected and qualified, or until there is a decrease
in the number of directors. Directors do not need to be residents of Nevada
or shareholders of the corporation.
3.3 Regular Meetings of the Board of Directors. A regular meeting of
the board of directors shall be held without other notice than this bylaw
immediately after, and at the same place as, the annual meeting of
shareholders, for the purpose of appointing officers and transacting such
other business as may come before the meeting. The board of directors may
provide, by resolution, the time and place for the holding of additional
regular meetings without other notice than such resolution.
3.4 Special Meetings of the Board of Directors. Special meetings of
the board of directors may be called by or at the request of the president or
any director. The person authorized to call special meetings of the board of
directors may fix any place as the place for holding any special meeting of
the board of directors.
3.5 Notice of, and Waiver of Notice for, Special Director Meeting.
Unless the articles of incorporation provide for a longer or shorter period,
notice of the date, time, and place of any special director meeting shall be
given at least two days previously thereto either orally or in writing. Any
director may waive notice of any meeting. Except as provided in the next
sentence, the waiver must be in writing and signed by the director entitled to
the notice. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any business and at
the beginning of the meeting (or promptly upon his arrival) objects to holding
the meeting or transacting business at the meeting, and does not thereafter
vote for or assent to action taken at the meeting. Unless required by the
articles of incorporation, neither the business to be transacted at, nor the
purpose of, any special meeting of the board of directors need be specified in
the notice or waiver of notice of such meeting.
3.6 Director Quorum and Voting.
3.6.1 Quorum. A majority of the number of directors prescribed
by resolution shall constitute a quorum for the transaction of business at any
meeting of the board of directors unless the articles of incorporation require
a greater percentage.
Unless the articles of incorporation provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A
director participating in a meeting by this means is deemed to be present in
person at the meeting.
A director who is present at a meeting of the board of directors
or a committee of the board of directors when corporate action is taken is
deemed to have assented to the action taken unless: (1) the director objects
at the beginning of the meeting (or promptly upon his arrival) to holding or
transacting business at the meeting and does not thereafter vote for or assent
to any action taken at the meeting; and (2) the director contemporaneously
requests his dissent or abstention as to any specific action be entered in the
minutes of the meeting; or (3) the director causes written notice of his
dissent or abstention as to any specific action be received by the presiding
officer of the meeting before its adjournment or to the corporation
immediately after adjournment of the meeting. The right of dissent or
abstention is not available to a director who votes in favor of the action
taken.
3.7 Director Action Without a Meeting. Any action required or
permitted to be taken by the board of directors at a meeting may be taken
without a meeting if all the directors consent to such action in writing.
Action taken by consent is effective when the last director signs the consent,
unless, prior to such time, any director has revoked a consent by a signed
writing received by the corporation, or unless the consent specifies a
different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.
3.8 Resignation of Directors. A director may resign at any time by
giving a written notice of resignation to the corporation. Such resignation
is effective when the notice is received by the corporation, unless the notice
specifies a later effective date.
3.9 Removal of Directors. The shareholders may remove one or more
directors at a meeting called for that purpose if notice has been given that a
purpose of the meeting is such removal. The removal may be with or without
cause unless the articles of incorporation provide that directors may only be
removed with cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in
the vote to remove him. A director may be removed only if the number of votes
cast to remove him exceeds the number of votes cast not to remove him.
3.10 Board of Director Vacancies. Unless the articles of incorporation
provide otherwise, if a vacancy occurs on the board of directors, including a
vacancy resulting from an increase in the number of directors, the
shareholders may fill the vacancy. During such time that the shareholders
fail or are unable to fill such vacancies then and until the shareholders act:
(a) the board of directors may fill the vacancy; or
(b) if the board of directors remaining in office constitute
fewer than a quorum of the board, they may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
If the vacant office was held by a director elected by a voting group of
shareholders:
(a) if there are one or more directors elected by the same
voting group, only such directors are entitled to vote to fill the vacancy if
it is filled by the directors; and
(b) only the holders of shares of that voting group are
entitled to vote to fill the vacancy if it is filled by the shareholders.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled before the vacancy occurs
but the new director may not take office until the vacancy occurs.
3.11 Director Compensation. By resolution of the board of directors,
each director may be paid his expenses, if any, of attendance at each meeting
of the board of directors and may be paid a stated salary as director or a
fixed sum for attendance at each meeting of the board of directors or both.
No such payment shall preclude any director from serving the corporation in
any other capacity and receiving compensation therefor.
3.12 Director Committees.
3.12.1 Creation of Committees. Unless the article sof
incorporation provide otherwise, the board of directors may create one or more
committees and appoint members of the board of directors to serve on them.
Each committee must have one or more members, who shall serve at the pleasure
of the board of directors.
3.12.2 Selection of Members. The creation of a committee and
appointment of members to it must be approved by the greater of (1) a majority
of all the directors in office when the action is taken or (2) the number of
directors required by the articles of incorporation to take such action.
3.12.3 Required Procedures. Those Sections of this Article 3
which govern meetings, actions without meetings, notice and waiver of notice,
quorum and voting requirements of the board of directors, apply to committees
and their members.
3.12.4 Authority. Unless limited by the article sof
incorporation, each committee may exercise those aspects of the authority of
the board of directors which the board of directors confers upon such
committee in the resolution creating the committee. Provided, however, a
committee may not:
(a) authorize distributions;
(b) approve or propose to shareholders action that the
Statutes require be approved by shareholders;
(c) fill vacancies on the board of directors or on any of
its committees;
(d) amend the articles of incorporation pursuant to the
authority of directors to do so;
(e) adopt, amend or repeal bylaws;
(f) approve a plan of merger not requiring shareholder
approval;
(g) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the board of directors; or
(h) authorize or approve the issuance or sale or contract
for sale of shares or determine the designation and relative rights,
preference,s and limitations of a class or series of shares, except that the
board of directors may authorize a committee (or an officer) to do so within
limits specifically prescribed by the board of directors.
ARTICLE 4. OFFICERS
4.1 Number of Officers. The officers of the corporation shall be a
president, a secretary and a treasurer, each of whom shall be appointed by the
board of directors. Such other officers and assistant officers as may be
deemed necessary, including any vice presidents, may also be appointed by the
board of directors. If specifically authorized by the board of directors, an
officer may appoint one or more officers or assistant officers. The same
individual may simultaneously hold more than one office in the corporation.
4.2 Appointment and Term of Office. The officers of the corporation
shall be appointed by the board of directors for a term as determined by the
board of directors. If no term is specified, they shall hold office until the
first meeting of the directors held after the next annual meeting of
shareholders. If the appointment of officers shall not be made at such
meeting, such appointment shall be made as soon thereafter as is convenient.
Each officer shall hold office until his successor shall have been duly
appointed and shall have qualified until his death, or until he shall resign
or is removed.
The designation of a specified term does not grant to the officer any
contract rights, and the board may remove the officer at any time prior to the
termination of such term.
4.3 Removal of Officers. Any officer or agent may be removed by the
board of directors at any time, with or without cause. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Appointment of an officer or agent shall not of itself create contract rights.
4.4 Resignation of Officers. Any officer may resign at any time,
subject to any rights or obligations under any existing contracts between the
officers and the corporation, by giving notice to the president or board of
directors. An officer's resignation shall take effect at the time specified
therein, and the acceptance of such resignation shall not be necessary to make
it effective.
4.5 President. Unless the board of directors has designated the
chairman of the board as chief executive officer, the president shall be the
chief executive officer of the corporation and, subject to the control of the
board of directors, shall in general supervise and control all of the business
and affairs of the corporation. Unless there is a chairman of the board, the
president shall, when present, preside at all meetings of the shareholders and
of the board of directors. The president may sign, with the secretary or any
other proper officer of the corporation thereunder authorized by the board of
directors, certificates for shares of the corporation and deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board f directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the board of directors from time to time.
4.6 Vice Presidents. If appointed, in the absence of the president or
in the event of his death, inability or refusal to act, the vice president (or
in the event there be more than one vice president, the vice presidents in the
order designate at the time of their election, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
of the president, and when so acting, shall have all the powers of, and be
subject to, all the restrictions upon the president.
4.7 Secretary. The secretary shall: (a) keep the minutes of the
proceedings of the shareholders, the board of directors, and any committees of
the board in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these bylaws or as
required by law; (c) be custodian of the corporate records; (d) when requested
or required, authenticate any records of the corporation; (e) keep a register
of the post office address of each shareholder which shall be furnished to the
secretary by such shareholder; (f) sign with the president, or a vice
president, certificates for shares of the corporation, the issuance of which
shall have been authorized by resolution of the board of directors; (g) have
general charge of the stock transfer books of the corporation; and (h) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned by the president or by the board
of directors. Assistant secretaries, if any, shall have the same duties and
powers, subject to the supervision of the secretary.
4.8 Treasurer. The treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for monies due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such bank, trust companies, or other depositaries as shall be
selected by the board of directors; and (c) in general perform all of the
duties incident to the office of treasurer and such other duties as from time
to time may be assigned by the president or by the board of directors. If
required by the board of directors, the treasurer shall give a bond for the
faithful discharge of his or her duties in such sum and with such surety or
sureties as the board of directors shall determine. Assistant treasurers, if
any, shall have the same powers and duties, subject to the supervision of the
treasurer.
4.9 Salaries. The salaries of the officers shall be fixed from time to
time by the board of directors.
ARTICLE 5. INDEMNIFICATION OF DIRECTORS,
OFFICERS, AGENTS, AND EMPLOYEES
5.1 Indemnification of Directors. Unless otherwise provided in the
articles of incorporation, the corporation shall indemnify any individual made
a party to a proceeding because the individual is or was a director of the
corporation, against liability incurred in the proceeding, but only if such
indemnification is both (i) determined permissible and (ii) authorized, as
such are defined in subsection (a) of this Section 5.1.
5.1.1 Determination of Authorization. The corporation shall not
indemnify a director under this Section unless:
(a) a determination has been made in accordance with the
procedures set forth in the Statutes that the director met the standard of
conduct set forth in subsection (b) below, and
(b) payment has been authorized in accordance with the
procedures set forth in the Statutes based on a conclusion that the expenses
are reasonable, the corporation has the financial ability to make the payment,
and the financial resources of the corporation should be devoted to this use
rather than some other use by the corporation.
5.1.2 Standard of Conduct. The individual shall demonstrate
that:
(a) he or she conducted himself in good faith; and
(b) he or she reasonably believed:
(i) in the case of conduct in his official capacity
with the corporation, that his conduct was in its best interests;
(ii) in all other cases, that his conduct was at least
not opposed to its best interests; and
(iii) in the case of any criminal proceeding, he or she
had no reasonable cause to believe his conduct was unlawful.
5.1.3 Indemnification in Derivative Actions Limited.
Indemnification permitted under this Section in connection with a proceeding
by or in the right of the corporation is limited to reasonable expenses
incurred in connection with the proceeding.
5.1.4 Limitation on Indemnification. The corporation shall not
indemnify a director under this Section of Article 5:
(a) in connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the corporation;
or
(b) in connection with any other proceeding charging
improper personal benefit to the director, whether or not involving action in
his or her official capacity, in which he or she was adjudged liable on the
basis that personal benefit was improperly received by the director.
5.2 Advance of Expenses for Directors. If a determination is made
following the procedures of the Statutes, that the director has met the
following requirements, and if an authorization of payment is made following
the procedures and standards set forth in the Statutes, then unless otherwise
provided in the articles of incorporation, the corporation shall pay for or
reimburse the reasonable expenses incurred by a director who is a party to a
proceeding in advance of final disposition of the proceeding, if:
(a) the director furnishes the corporation a written
affirmation of his good faith belief that he has met the standard of conduct
described in this section;
(b) the director furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay the advance if it
is ultimately determined that he did not meet the standard of conduct;
(c) a determination is made that the facts then known to
those making the determination would not preclude indemnification under this
Section or the Statutes.
5.3 Indemnification of Officers, Agents and Employees Who Are Not
Directors. Unless otherwise provided in the articles of incorporation, the
board of directors may indemnify and advance expenses to any officer,
employee, or agent of the corporation, who is not a director of the
corporation, to the same extent as to a director, or to any greater extent
consistent with public policy, as determined by the general or specific
actions of the board of directors.
5.4 Insurance. By action of the board of directors, notwithstanding
any interest of the directors in such action, the corporation may purchase and
maintain insurance on behalf of a person who is or was a director, officer,
employee, fiduciary or agent of the corporation, against any liability
asserted against or incurred by such person in that capacity or arising from
such person's status as a director, officer, employee, fiduciary, or agent,
whether or not the corporation would have the power to indemnify such person
under the applicable provisions of the Statutes.
ARTICLE 6. STOCK
6.1 Issuance of Shares. The issuance or sale by the corporation of any
shares of its authorized capital stock of any class, including treasury
shares, shall be made only upon authorization by the board of directors,
unless otherwise provided by statute. The board of directors may authorize
the issuance of shares for consideration consisting of any tangible or
intangible property or benefit to the corporation, including cash, promissory
notes, services performed, contracts or arrangements for services to be
performed, or other securities of the corporation. Shares shall be issued for
such consideration expressed in dollars as shall be fixed from time to time by
the board of directors.
6.2 Certificates for Shares.
6.2.1 Content. Certificates representing shares of the
corporation shall at minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Nevada; the
name of the person to whom issued; and the number and class of shares and the
designation of the series, if any, the certificate represents; and be in such
form as determined by the board of directors. Such certificates shall be
signed (either manually or by facsimile) by the president or a vice president
and by the secretary or an assistant secretary and may be sealed with a
corporate seal or a facsimile thereof. Each certificate for shares shall be
consecutively numbered or otherwise identified.
6.2.2 Legend as to Class or Series. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences and limitations
applicable to each class and the variations in rights, preferences and
limitations determined for each series (and the authority of the board of
directors to determine variations for future series) must be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish the
shareholder this information on request in writing and without charge.
6.2.3 Shareholder List. The name and address of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the stock transfer books of the
corporation.
6.2.4 Transferring Shares. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have
been surrendered and canceled, except that in cash of a lost, destroyed, or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the corporation as the board of directors may prescribe.
6.3 Shares Without Certificates.
6.3.1 Issuing Shares Without Certificates. Unless the articles
of incorporation provide otherwise, the board of directors may authorize the
issue of some or all the shares of any or all of its classes or series without
certificates. The authorization does not affect shares already represented by
certificates until they are surrendered to the corporation.
6.3.2 Information Statement Required. Within a reasonable time
after the issue or transfer of shares without certificates, the corporation
shall send the shareholder a written statement containing, at a minimum, the
information required by the Statutes.
6.4 Registration of the Transfer of Shares. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a
nominee is to be recognized by the corporation as the owner, the person in
whose name shares stand in the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
6.5 Restrictions on Transfer or Registration of Shares. The board of
directors or shareholders may impose restrictions on the transfer or
registration of transfer of shares (including any security convertible into,
or carrying a right to subscribe for or acquire shares). A restriction does
not affect shares issued before the restriction was adopted unless the holders
of the shares are parties to the restriction agreement or voted in favor of or
otherwise consented to the restriction.
A restriction on the transfer or registration of transfer of shares may
be authorized:
(a) to maintain the corporation's status when it is
dependent on the number or identity of its shareholders;
(b) to preserve entitlements, benefits or exemptions under
federal or local laws; and
(c) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares may:
(a) obligate the shareholder first to offer the corporation
or other persons (separately, consecutively or simultaneously) an opportunity
to acquire the restricted shares;
(b) obligate the corporation or other persons (separately,
consecutively or simultaneously) to acquire the restricted shares;
(c) require as a condition to such transfer or registration,
that any one or more persons, including the holders of any of its shares,
approve the transfer or registration if the requirement is not manifestly
unreasonable; or
(d) prohibit the transfer or the registration of transfer of
the restricted shares to designated persons or classes of persons, if the
prohibition is not manifestly unreasonable.
A restriction on the transfer or registration of transfer of shares is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this Section and its existence is noted
conspicuously on the front or back of the certificate or is contained in the
information statement required by this Article 6 with regard to shares issued
without certificates. Unless so noted, a restriction is not enforceable
against a person without knowledge of the restriction.
6.6 Corporation's Acquisition of Shares. The corporation may acquire
its own shares and the shares so acquired constitute authorized but unissued
shares.
If the articles of incorporation prohibit the reissue of acquired
shares, the number of authorized shares is reduced by the number of shares
acquired, effective upon amendment of the articles of incorporation, which
amendment may be adopted by the shareholders or the board of directors without
shareholder action. The articles of amendment must be delivered to the
Secretary of State and must set forth:
(a) the name of the corporation;
(b) the reduction in the number of authorized shares,
itemized by class and series;
(c) the total number of authorized shares, itemized by class
and series, remaining after reduction of the shares; and
(d) a statement that the amendment was adopted by the board
of directors without shareholder action and that shareholder action was not
required.
ARTICLE 7. DISTRIBUTIONS
7.1 Distributions to Shareholders. The board of directors may
authorize, and the corporation may make, distributions to the shareholders of
the corporation subject to any restriction sin the corporation's articles of
incorporation and in the Statutes.
7.2 Unclaimed Distributions. If the corporation has mailed three
successive distributions to a shareholder at the shareholder's address as
shown on the corporation's current record of shareholders and the
distributions have been returned as undeliverable, no further attempt to
deliver distributions to the shareholder need be made until another address
for the shareholder is made known to the corporation, at which time all
distributions accumulated by reason of this Section, except as otherwise
provided by law, be mailed to the shareholder at such other address.
ARTICLE 8. MISCELLANEOUS
8.1 Inspection of Records by Shareholders and Directors. A shareholder
or director of a corporation is entitled to inspect and copy, during regular
business hours at the corporation's principal office, any of the records of
the corporation required to be maintained by the corporation under the
Statutes, if such person gives the corporation written notice of the demand at
least five business days before the date on which such a person wishes to
inspect and copy. The scope of such inspection right shall be as provided
under the Statutes.
8.2 Corporate Seal. The board of directors may provide a corporate
seal which may be circular in form and have inscribed thereon any designation
including the name of the corporation, the state of incorporation, and the
words "Corporate Seal."
8.3 Amendments. The corporation's board of directors may amend or
repeal the corporation's bylaws at any time unless:
(a) the articles of incorporation or the Statutes reserve
this power exclusively to the shareholders in whole or part; or
(b) the shareholders in adopting, amending, or repealing a
particular bylaw provide expressly that the board of directors may not amend
or repeal that bylaw; or
(c) the bylaw either establishes, amends, or deletes, a
greater shareholder quorum or voting requirement.
Any amendment which changes the voting or quorum requirement for the
board must meet the same quorum requirement and be adopted by the same vote
and voting groups required to take action under the quorum and voting
requirements then in effect or proposed to be adopted, whichever are greater.
8.4 Fiscal Year. The fiscal year of the corporation shall be
established by the board of directors.
DATED as of this 16th day of January, 1996.
__________________________________________
President
Exhibit 10.1
SOFTWARE LICENSE
AND
DISTRIBUTION AGREEMENT
between
iMALL, INCORPORATED
and
AT&T CORP.
dated as of June 26, 1996
SOFTWARE LICENSE AND
DISTRIBUTION AGREEMENT
In this Software License and Distribution Agreement ("Agreement")
dated 1996 ("Effective Date") iMall Incorporated,("iMALL"), with
offices at 4400 Coldwater Canyon Boulevard, Suite 200, Studio
City, California 91604, and AT&T Corp., on behalf of itself and
its Affiliates ("AT&T"), with offices at 295 North Maple Avenue,
Basking Ridge, New Jersey 07920, agree as follows:
I. BACKGROUND
AT&T provides an Internet service called AT&T WorldNet <service
mark> Service which is accessed using AT&T-provided client
software.
iMALL develops, manufactures and markets software. On the terms
of this Agreement, iMALL will distribute AT&T WorldNet Service
client software in conjunction with certain of its own software
2. DEFINITIONS
As used in this Agreement:
"Affiliate" means a corporation or other entity that controls, is
controlled by or is under common control with another corporation
or entity, where "control" means the direct or indirect ownership
or control of more than 50% of the stock or other equity interest
entitled to vote for the election of directors or equivalent
governing body.
"AT&T Compatibility Specification" means functional, technical,
performance and other requirements applicable to client software
products that are to be certified as compatible with the Services
under this Agreement, including user interface, quality, and
customer support requirements as set forth in Appendix D, as
such requirements may be amended by AT&T from time to time. AT&T
may update such requirements from time to time.
"AT&T Mark" means a trademark, service mark, logo, trade name,
or other insignia or symbol owned by AT&T and used in connection
with the Service, including but not limited to the AT&T WORLDNET
mark.
"AT&T WorldNet Software" means the executable version (but not
the source code version) of the client software used for access
to the Service.
"Certification Date" means the date on which iMALL certifies
under Section 5 that an Integrated iMALL Product complies with
the AT&T Compatibility Specification.
"Content" means pre-approved marketing language about AT&T
WorldNet Service, AT&T WorldNet Software, or other related
offering or other related offering provided by AT&T.
"Delivered Member" means a person or entity who (i) has
registered, and has been billed, for the Service using an
Integrated iMALL Product(a "iMALL Member'); (ii) has provided a
unique identifying affinity code to identify the person or
entity as a iMALL Member in the course of registering for the
Service; and (iii) has accrued at least $19.95 of Member Revenue
to AT&T using the Service during the first three months after
registering for the Service.
"Derivative Work" means a revision, modification, translation,
abridgment, condensation or expansion of the AT&T WorldNet
Software or any form in which the AT&T WorldNet Software may be
recast, transferred, transformed, or adapted, which, if prepared
without the consent of AT&T would be a copyright infringement.
TABLE OF CONTENTS
1 BACKGROUND
2 DEFINITIONS
3 GRANT OF LICENSES AND RIGHTS
4 MARKETING, DISTRIBUTION AND CUSTOMER CARE
5 PRODUCTION AND DEVELOPMENT
6 CERTIFICATION AND TESTING
7 PAYMENTS
8 DELIVERABLES AND UPDATES
9 TRADEMARKS, SERVICE MARKS AND TRADE NAMES
10 PROPRIETARY RIGHTS
11 CONFIDENTIAL INFORMATION AND DISCLOSURE
12 REPRESENTATIONS AND WARRANTIES
13 INDEMNIFICATION
14 LIMITATION OF LIABILITY
15 TERM AND TERMINATION
16 GENERAL PROVISIONS
Attachment A - iMALL Products
Attachment B - Trademark and Service Mark
Guidelines
Attachment C - Customer Care Requirements
Attachment D - Performance Specification
Requirements
Attachment E - iMALL Icon
Attachment F - Long Distance Reward Agreement
"Developer Marks" means a trademark, service mark, logo, trade
name, or other insignia or symbol owned by an entity and used in
connection with a iMALL Product for which such entity has
developed, in whole or in part, a substantial portion of such
iMALL Product.
"Distribute' means any third party which acquires possession of a
iMALL Product from iMALL and distributes such iMALL Product on
tangible media, along with an End User License Agreement.
"Documentation" means those software user manuals, reference
manuals and installation guides, or portions thereof, and any
other material made generally available in connection with
Integrated iMALL Products or the Service, as the same may be
updated from time to time "AT&T Documentation" refers only to
Documentation made available in connection with the AT&T WorldNet
Software or the Service, and "iMALL Documentation" refers only
to Documentation made available in connection with the Integrated
iMALL Products.
"Effective Date" means the date specified in the preamble to this
Agreement.
"End User" means any third party licensed by iMALL or a
Distributor to use the AT&T WorldNet Software.
"iMALL Integration Software" means the software developed and
tested by the iMALL to integrate each Integrated iMALL Product
with the AT&T WorldNet Software (including any and all Updates
to the AT&T WorldNet Software issued during the Term of this
Agreement.
"iMALL Mark" means a trademark, service mark, logo, trade name,
or other insignia or symbol owned by iMALL and used in connection
with iMALL Products, including but not limited to iMALL, iMALL
logo.
"iMALL Products" means collectively Integrated iMALL Products
and Unintegrated iMALL Products.
"Integrated iMALL Product" means a product listed in Attachment A
together with its Documentation integrated with AT&T WorldNet
Software "Unintegrated iMALL Product" means a product listed in
Attachment A that is not integrated with AT&T WorldNet Software.
"Information" means information of any type, including
descriptions of all inventions, creations, ideas, know-how,
specifications, designs, software, simulations, test results,
reports, drawings, manufacturing processes, algorithms,
improvements, and other developments, whether or not fixed in a
tangible, reproducible medium, and whether or not protected or
protectable by patents, copyrights, mask work rights, trade
secret rights, or other intellectual property rights.
"Inserts" means marketing collateral as AT&T shall specify.
"Member Revenue" means any revenue derived from the Service that
is received by AT&T or an Affiliate, as the case may be, from a
Delivered Member, less rebates and refunds, and less any federal,
state or local taxes based on such fees (except taxes based on
AT&T's net income). In no event shall Member Revenue be deemed
to include unbundled charges for transport, tariffed services not
bundled with the Service, or value added Internet-related
services (e.g., hosting, security, directory, content services,
products, etc.)
"Service" means the AT&T WorldNet Service (or any successor
service) that has dial-up Internet access.
"Switched AT&T LD Customer@ means a person or entity who (i) has
provided a unique identifying code to identify the person or
entity as a iMALL customer and (ii) has switched to AT&T Dial I
long distance service from another interexchange carrier.
"Term" means the period of time from the Effective Date through
the termination of this Agreement as provided in Section 15.
"Territory" means the world.
"Third Party Mark" means a trademark, service mark, logo, trade
name, or other insignia or symbol owned by an individual or
entity other than iMALL, AT&T or their respective Affiliates.
"Updates" means updates, revisions or other modifications or
enhancements to the AT&T WorldNet Software or iMALL Products.
"Virus" means a time bomb, worm, virus, lock, drop-dead device,
trojan horse or other similar component of software or
electronically stored or transmitted information that, contrary
to the expectation of a user of that software or information, is
intended in any manner to (i) damage, destroy, alter, or
adversely affect the operation of software, firmware, or
hardware, (ii) reveal, damage, destroy, or alter any data or
other information or (iii) permit unauthorized access.
3. GRANT OF LICENSES AND RIGHTS
3.1 Software License Beginning on the Certification
Date, AT&T grants to iMALL a nonexclusive, nontransferable
license to reproduce and distribute, but not electronically, the
AT&T WorldNet Software to Distributors and End Users throughout
the Territory by all means and media now known or hereafter
developed or discovered, subject to the following:
3.1.1 iMALL may reproduce and distribute the AT&T
WorldNet Software only as a component of an Integrated iMALL
Product for use in conjunction with the Service within the
United States.
3.1.2 iMALL and its Distributors may not transmit
the AT&T WorldNet Software to any third party electronically.
3.1.3 iMALL and its Distributors are expressly
prohibited from (i) modifying the AT&T WorldNet Software in any
way except as provided in Section 5.2; and from (ii) marketing or
distributing of the AT&T WorldNet Software other than as a
component of an Integrated iMALL Product.
3.1.4 iMALL may grant its Distributors the right to
grant further sublicenses to reproduce and distribute (but not
transmit electronically) copies of the AT&T WorldNet Software as
a component of an Integrated iMALL Product to other Distributors
in accordance with the provisions herein; and
3.1.5 iMALL, itself or through any Distributor,
shall have the right to grant to End Users the right to use the
AT&T WorldNet Software as a component of an Integrated iMALL
Product for use in conjunction with the Service within the United
States.
3.1.6 iMALL shall have no right to distribute the
AT&T WorldNet Software or Updates thereto on a standalone basis.
3.1.7 This license grant is conditional upon
marketing and integrating the AT&T WorldNet Software as required
herein and all other terms and conditions of this Agreement.
3.2 Documentation License. Commencing on the Certification
Date and subject to the terms and conditions of this Agreement,
AT&T hereby grants and iMALL and its Distributors hereby accepts
a nonexclusive license throughout the Territory to reproduce the
AT&T Documentation as specified in Section 4.4 and, to distribute
copies of the AT&T documentation and modifications thereof as
specified in Section 4.4 to Distributors and End Users solely in
conjunction with the permitted distribution and use of the AT&T
WorldNet Software.
3.3 Non-exclusivity. The parties' rights set forth herein are
non-exclusive. AT&T reserves the right to grant the rights
granted herein to others, and iMALL reserves the right to
integrate third parties' software into any iMALL Products.
3.4 Source Code Restrictions. iMALL agrees (i) not to
decompile, disassemble, or otherwise determine or attempt to
determine source code for the executable code of the AT&T
WorldNet Software or any other software included in the Service
or to create any Derivative Works based upon the AT&T WorldNet
Software, the Service or AT&T Documentation (except as may be
expressly authorized in this Agreement),(ii) that it will
prohibit iMALL Distributors from any of the foregoing actions and
(iii) not to authorize anyone else to do so. iMALL agrees that
no software included in the Integrated iMALL Product shall rely
upon, cooperate with, or share in any way any component of, or
the entirety of, the AT&T WorldNet Software or the Service
without the prior written consent of AT&T or except as provided
in Section 5.2.
3.5 Unintegrated Products. Commencing on the Certification
Date and throughout the remainder of the Term of this Agreement,
iMALL shall not market, distribute, or offer for sale within the
Territory any iMALL Product listed on Attachment A including any
successor products or versions thereof, without integrating the
AT&T WorldNet Software. Notwithstanding the foregoing, nothing
herein shall be construed to require iMALL to destroy any
inventory which is not in compliance with the obligations set
forth herein and which is in existence before the Certification
Date.
3.6 Patents, Audio-Visual Effects. It is understood that the
licenses granted under Section 3.1 and 3.2 above include without
limitation, subject to the same rights and limitations as
provided therein and elsewhere in this Agreement: (i) a
nonexclusive license under any patents, copyrights, trade secret
rights and other intellectual property rights (to the extent such
rights are necessary to exercise the rights granted elsewhere in
this Agreement) of AT&T owned by or licensed to AT&T at any time
during the Term; and (ii) a nonexclusive license (including the
right to publicly perform and publicly display) to pictorial,
graphic and audio-visual works, including, without limitation
icons, screens, text and characters, that are included in, or
result from execution of, the AT&T WorldNet Software (to the
extent such rights are necessary to exercise the rights granted
elsewhere in this Agreement). The foregoing license expressly
excludes any rights to any works obtained from the Internet.
4. MARKETING, DISTRIBUTION, AND CUSTOMER CARE
4.1 Cooperative Promotion. At such times as the parties deem
it mutually beneficial, they shall cooperatively market, sell and
support the Service and Integrated iMALL Products. The parties
shall synchronize their respective marketing plans and efforts,
review schedules and offerings, and take such other actions as
each party deems appropriate to achieve the goals of this
Agreement.
4.2 Co-marketing Activities.
4.2.1 Promotional Offers. AT&T shall offer to all
iMALL Members any and all promotional offers as are made
generally available by AT&T to other Customers through
Integrated iMALL Products during the Term. Such promotional
offers may include terms, conditions and qualifications with
differential pricing based on the customers status as a customer
of other AT&T products and services (such as AT&T Long Distance
Service or AT&T Universal Card).
4.2.2 Future Promotional Activities. Although they are
not obligated to undertake all such activities, the parties
expect, that their co-marketing activities may include, without
limitation, the following: (a) promotions or demonstrations of
the Service and Integrated iMALL Products; (b) endorsements of
the Service and Integrated iMALL Products; (c) joint or
coordinated participation in trade shows, open houses,
conventions and conferences;(d) joint or coordinated
participation in customer information events (such as user group
meetings, seminars); (e) sales support activities (such as
communications, guides, training, videos, tools); (f) joint
promotional offers; (g) advertising; (h) providing each party the
opportunity to establish appropriate relationships with the
other party's sales channels; and (i) public relations
activities (such as press/analyst events, releases, executive
speeches, testimonials, pro-active story development in target
publications). The content of all of the foregoing promotional
materials and activities shall be subject to the prior, written
approval of both parties.
4.3 Service Collateral. iMALL shall insert with all
Integrated iMALL Products sold or offered for sale, such AT&T
Documentation and "Inserts" as AT&T and iMALL shall mutually
agree upon from time to time in accordance with Section 4.4
below. If AT&T provides Inserts, such Inserts shall remain in
their original packaging, as provided by AT&T to iMALL, up to and
including the time of distribution to purchasers of Integrated
iMALL Products.
4.4 Reproduction of Inserts For each different Integrated
iMALL Product:
4.4.1 After an Integrated iMALL Product has
satisfactorily completed the testing and certification procedures
pursuant to Section 6, AT&T shall provide iMALL with Content
iMALL shall use the Content to prepare Inserts, at iMALL's
expense, for inclusion with the Integrated iMALL Product. iMALL
shall supply AT&T with a master copy of such Inserts.
4.4.2 AT&T may request iMALL to revise the Inserts
at any time provided AT&T gives iMALL 30 days notice prior to
such revision appearing in the Integrated iMALL Product.
4.4.3 If iMALL wishes to include marketing language
which is not pre-approved by AT&T in any Insert, such Insert
and/or marketing language must be reviewed and approved by AT&T
before an initial run of actual copies of such Inserts. If AT&T
has not approved such Insert and/or marketing language and iMALL
prepares such Inserts, iMALL shall be liable to AT&T for any
losses, damages, claims, liabilities, which may result from such
Inserts.
4.5 Required Product Packaging Consistent with Attachment B,
iMALL shall be required to identify the AT&T WorldNet Software
and the Service on its product packaging as follows:
4.5.1 the AT&T WorldNet mark solely as depicted in
an AT&T approved representation to be provided by AT&T must
appear on the outside front of the Integrated iMALL Product
package, such depiction may be via a sticker;
4.5.2 the AT&T WorldNet mark solely
as depicted in an AT&T approved representation to be provided by
AT&T must appear in the operating system Program Group or
functional equivalent; and
4.5.3 the AT&T WorldNet mark must not appear any
less prominently than any other Third Party Mark (excepting
Developer Marks) used on the Integrated iMALL Product or its
packaging.
4.6 Icons. iMALL shall integrate the AT&T WorldNet Software
as a component of each different Integrated iMALL Product in such
a manner as to cause the AT&T WorldNet icon to appear as a
minimized program group icon on the applicable operating systems
in conformity with the Service specification to be provided by
AT&T.
4.7 Customer Care. AT&T will provide all technical support
and customer care functions for End Users of the Service and the
AT&T WorldNet Software and iMALL will provide all technical
support and customer care for users of Integrated iMALL Products.
iMALL agrees to participate with AT&T to develop a cooperative
customer support program to provide seamless customer care
enabling hot transfers between AT&T and iMALL for prompt delivery
of customer care. The cooperative customer support program shall
be continuously updated and revised throughout the Term of this
Agreement in order to deliver support competitive with the
leading providers of comparable services and products. The
cooperative customer support program shall include at least
those program elements set forth in Attachment C.
4.8 Public Announcements and Promotional Materials. AT&T and
iMALL shall cooperate so that each party may issue press releases
concerning this Agreement, provided that each party must approve
any press release prior to its release. The parties shall
cooperate in their development of marketing and sales materials
used to promote the distribution of Integrated iMALL Products.
4.9 First Announcement. The first cooperative marketing
activity under this Agreement shall commence upon the Effective
Date and shall be the development of the announcement of this
Agreement and the plan for associated promotional materials under
this Agreement. AT&T and iMALL shall cooperate to make an
announcement about the execution of this Agreement. Each party
must approve in writing the final content and form of that
announcement. Neither party may make any earlier public
statements or announcements relating to this Agreement. After
the initial announcement is made under this Section 4.9, iMALL
and AT&T shall communicate and cooperate with respect to
advertising and publicity regarding this Agreement and their
relationship, and, subject to Sections 4.8, 10.1 and 10.2, shall
obtain the written consent of the other party before publishing
or releasing any such advertising or publicity. In addition,
iMALL shall obtain the prior written consent of AT&T before
publishing or releasing any advertising or publicity concerning
the Service generally. In promoting the Service and Integrated
iMALL Products, each party shall only make representations
concerning the products and services of the other party based
upon information supplied by such other party.
4.10 Fair Dealing by iMALL. In conducting activities relating
to the Service, iMALL shall, except to the extent any of the
following may be based on information provided by AT&T for
iMALL's use, (i) conduct business in a manner that reflects
favorably at all times on the Service and the good name, goodwill
and reputation of AT&T; (ii) not employ deceptive, misleading or
unethical practices that are or might be detrimental to AT&T or
the Service, including disparagement of AT&T of the Service;
(iii) not make any false or misleading representations with
regard to iMALL or the Service, (iv) not publish or employ, or
cooperate in the publication or employment of, any misleading or
deceptive advertising material; (v) not make any representations,
warranties or guaranties to anyone with respect to the
specifications, features or capabilities of the Service that are
inconsistent with the literature distributed by AT&T, including
all warranties and disclaimers contained in such literature, and
(vi) not engage in illegal or deceptive trade practices with
respect to the Service, such as bait and switch techniques, or
any other practices proscribed under this Section 4.1.0.
4.11 Fair Dealing by AT&T. In conducting activities relating
to iMALL Products, AT&T shall, except to the extent any of the
following may be based on information provided by iMALL for
AT&T's use: (i) conduct business in a manner that reflects
favorably at all times on iMALL Products and the good name,
goodwill and reputation of iMALL, (ii) not employ deceptive,
misleading or unethical practices that are or might be
detrimental to iMALL or iMALL Products, including disparagement
of iMALL or iMALL Products; (iii) not make any false or
misleading representations with regard to iMALL or iMALL
Products; (iv) not publish or employ, or cooperate in the
publication or employment of, any misleading or deceptive
advertising material; (v) not make any representations,
warranties or guaranties to anyone with respect to the
specifications, features or capabilities of iMALL Products that
are inconsistent with the literature distributed by iMALL,
including all warranties and disclaimers contained in such
literature; and (vi) not engage in illegal or deceptive trade
practices with respect to iMALL Products, such as bait and
switch techniques, or any other practices proscribed under this
Section 4.11.
4.12 Terms Relating to Distribution. iMALL agrees to comply
with and shall require its Distributors to comply with all
applicable laws, rules and regulations to preclude the
acquisition of unlimited rights to technical data, software and
documentation provided with the Service to a governmental agency,
and ensure the inclusion of the appropriate "Restricted Right" or
"Limited Rights" notices required by the U.S. Government
agencies.
4.13 No Modification of End User Agreements. iMALL and its
Distributors shall not remove, alter or otherwise interfere with
the distribution and delivery of any End User license agreements
packaged, distributed, or otherwise associated with the AT&T
WorldNet Software and/or Service.
5. PRODUCTION AND DEVELOPMENT
5.1 Integration Development Commencing on the Effective Date
of this Agreement and throughout its Term, iMALL agrees to
develop, test, and integrate as a component of each different
Integrated iMALL Product (iMALL Integration Software) to enable
users of Integrated iMALL Products to access and register for the
Service using the AT&T WorldNet Software contained as a component
of each different Integrated iMALL Product.
5.2 Icon Development. AT&T permits iMALL to develop a iMALL
icon as described in Attachment E, to appear in iMALL's desktop
application software which will take an End User directly to
iMALL's home page using the Service. Such icon shall be labeled
"iMALL Home Page" and shall solely be promoted and used by iMALL
to enable End Users to gain "one-button" access to iMALL's home
page. In no event shall iMALL be permitted to market, promote or
label such icon as a means for obtaining Internet access
generally or in association with the AT&T brand or the AT&T
globe. Nothing herein shall be deemed to authorize iMALL to make
any Derivative Works of the AT&T WorldNet Software or the
Service.
5.3 Compliance with Specification. From the Certification Date
and throughout the Term of this Agreement, iMALL shall cause each
different Integrated iMALL Product to continuously comply with
the AT&T Compatibility Specification Requirements. If at any
time an Integrated iMALL Product is not in compliance with the
AT&T Compatibility Specification Requirements, iMALL shall
promptly use all commercially reasonable efforts to remedy the
noncompliance.
5.4 Cross-License of Information and Materials. To enable
iMALL to perform the development work necessary to successfully
integrate the AT&T WorldNet Software as a component of the
Integrated iMALL Products, the parties agree to provide each
other such information and assistance as may be necessary to
accomplish such integration. Commencing on the Effective
Date of this Agreement and throughout its Term, iMALL hereby
grants to AT&T and AT&T hereby grants to iMALL a nonexclusive,
nontransferable license to use internally only at its own
facilities or the facilities of its third party contractors and
make a reasonable number of copies of the information and
materials furnished solely for the purpose of performing the
parties' obligations under this Agreement. The parties shall
maintain, reproduce and apply the copyright, trademark
and other proprietary rights notices, legends, symbols or labels
of each other and of any suppliers on all copies of such
information and materials furnished to enable integration of the
AT&T WorldNet Software as a component of the Integrated iMALL
Products.
5.5 Inspection. iMALL shall permit AT&T or its agents access
for on-site inspection of each production run of each different
Integrated iMALL Product upon the reasonable discretion of and
notice from AT&T at a mutually convenient time.
6. PERFORMANCE SPECIFICATION
6.1 Requirement for Testing (AT&T WorldNet Software). Within
30 days of receipt of a golden master copy of the initial version
of the AT&T WorldNet Software or any Update thereto, iMALL shall
(i) cause each Integrated iMALL Product to comply in all respects
with the AT&T Compatibility Specification Requirements;:(ii)
complete the preparation of such records required by the AT&T
Compatibility Specification Requirements to document such
compliance; and (iii) certify to AT&T in writing that it has
completed the requirements set forth in clauses (i) and (ii)
herein.
6.2 Requirement for Testing (iMALL Updates) Within 120 days
of the commencement of beta testing of any Update to an
Integrated iMALL Product, but not later than the date on which
iMALL makes Update generally available to Customers. iMALL
shall (i) cause each Integrated 1MALL Product to which the
Update pertains to comply in all respects with the AT&T
Compatibility Specification Requirements; (ii) complete the
preparation of such records required by the AT&T Compatibility
Specification Requirements necessary to document such
compliance; (iii) certify to AT&T in writing that it has
completed the requirements set forth in clauses (i) and (ii)
herein.
6.3 Testing Representations Warranties. Upon submission of
the written notices specified in Sections 6.1(iii) and 6.2(iii)
herein, iMALL represents and warrants that the Integrated iMALL
Product referenced in such notice: (i) is ready for release for
general distribution; (ii) has been adequately and extensively
tested; (iii) has been fixed to correct any major errors
affecting its functionality which have been detected by iMALL or
its customers; (iv) is subject to ongoing support, error
detection and correction; and (v) complies in all respects with
the AT&T Compatibility Specification Requirements. AT&T shall
have the right, but not the obligation, to participate in any
such testing with iMALL.
6.4 Product Shipment. Upon request by AT&T, iMALL will
provide to AT&T for inspection (1) records as specified in
Sections 6.1(ii) and 6.2(ii) and (2) prototype Integrated iMALL
Products iMALL shall provide 5 copies of Integrated iMALL
Products which are in good condition and working order, with
separate copies provided for each medium of reproduction in
which the Integrated iMALL Product is sold. iMALL shall also
provide AT&T with any other documentation or information
reasonably requested by AT&T relating to the operation of the
Integrated iMALL Products and/or the conduct of the activities.
6.5 AT&T Testing. AT&T may randomly test the Integrated
iMALL Products for compliance with the AT&T Compatibility
Specification Requirements. If an Integrated iMALL Product
fails to satisfy the applicable certification and testing
requirements, AT&T will specify the reasons for the failure.
iMALL shall use all commercially reasonable efforts to cause any
Integrated iMALL Product which fails AT&T random testing to
comply with the AT&T Compatibility Specification Requirements,
and iMALL shall promptly re-submit such failed Integrated iMALL
Product for re-testing pursuant to Section 6.1 or 6.2, as
appropriate.
6.6 Successful Completion of Certification Testing.
Notwithstanding any other provision in this Agreement, only upon
certification by iMALL pursuant to Sections 6.1 or 6.2, as
appropriate, that the tested version of the Integrated iMALL
Product is compatible with the Service may iMALL (i) offer an
Integrated iMALL Product for sale; (ii) market an Integrated
iMALL Product; or (iii) state in advertising in a form consistent
with the requirements set forth in Attachment B and on product
packaging that the particular version of an Integrated iMALL
Product includes AT&T WorldNet Software.
6.7 Product Changes. Compatibility certification shall be
valid only for the specific version of an Integrated iMALL
Product and the specific version of the AT&T WorldNet Software
for which such Integrated iMALL Product was tested.
6.7.1 AT&T WorldNet Software Updates. AT&T shall provide
iMALL with at least 30 days notice of the issuance of any Updates
to the AT&T WorldNet Software. Upon receipt by iMALL of a
golden master copy of an Update to the AT&T WorldNet Software,
subject to iMALL=s right to exhaust portions of its existing
inventory pursuant to Section 6.8, (i) iMALL's rights under
Sections 3.1, 3.2, 3.6, and 6.6 for each of the Integrated iMALL
Products shall be void; and (ii) iMALL must remove any AT&T Mark
from all product packaging, labeling, advertising and marketing
materials for each of the Integrated iMALL Products, unless and
until the Integrated iMALL Product(s) incorporating any and all
Updates have successfully completed the AT&T Compatibility
Specification Requirements.
6.7.2 iMALL Product Updates. Upon the release for
general availability of an Update to a iMALL Integrated Product,
subject to iMALL's right to exhaust portions of its existing
inventory pursuant to Section 6.8, (i) iMALL's rights under
Sections 3.1, 3.2, 3.6, and 6.6 for the Integrated iMALL Product
to which such Update pertains shall be void; and (ii) iMALL must
remove any AT&T Mark from all product packaging, labeling,
advertising and marketing materials for the Integrated iMALL
Product to which such Update pertains, unless and until the
Integrated iMALL Product to which such Update pertains has
successfully completed the AT&T Compatibility Specification
Requirements.
6.8 Exhaustion of Inventory Upon the delivery of any Update
of the AT&T WorldNet Software to iMALL, iMALL shall no longer be
permitted to reproduce and iMALL and its Distributors shall no
longer be permitted to distribute pursuant to Section 3.1, 3.2
and 3.6 versions of any Integrated iMALL Product not integrated
with the most current Update ("Outdated Product"), excepting
that upon delivery of such Update to iMALL, iMALL shall be
permitted to exhaust existing inventory of Outdated Product for a
period of 120 days In no event shall AT&T have any obligations
with respect to Updates under this Agreement following the 30
days notice period set forth in Section 6.7. 1, except that after
expiration of such notice period, AT&T will make available to
customers all Updates issued between the expiration of such 30
days notice period and the date of the customer's initial
registration for the Service.
6.9 Notice of iMALL Updates. iMALL agrees to give AT&T
written notice of the commencement of development of any Updates
to any Integrated iMALL Products no later than 30 days prior to
the commencement of beta testing of such Update. iMALL shall
indicate, in the notice to AT&T, the expected completion and
commercial release dates for such Updates. iMALL shall
cooperate with AT&T to provide timely reports as to product
development product release schedules.
7. PAYMENTS
7.1 Accrue of Payments. On the date an individual becomes a
Delivered Member, a credit of $5.00 shall accrue to iMALL. Within
ninety (90) days following the end of each calendar quarter,
AT&T shall provide to iMALL a quarterly report specifying the
amounts of credits accrued for new Delivered Members during that
quarter.
7.2 Payments. Accrued payments under Section 7.1 shall be paid
to iMALL within ninety (90) days following the end of each
calendar quarter.
7.3 Accrual of CCS Payments. Subject to execution of the
Long Distance Reward Agreement and iMALL providing AT&T with a
list of all of its clients, on the date an individual becomes a
switch AT&T LD Customer, credits of $5.00 per Switch AT&T LD
Customer shall accrue to iMALL. Within fifteen (15) days
following the end of each calendar quarter, AT&T shall provide to
iMALL a quarterly statement specifying the amount of credits
accrued for Switch AT&T LD Customer who becomes Switch AT&T LD
Customer during the quarter. iMALL shall invoice AT&T for such
an amount appearing in the quarterly statement.
7.4 Payments. Accrued payments under Section 7.3 shall be paid
to iMALL within forty-five (45) days following the receipt of an
invoice from iMALL.
7.5 Taxes. Each party agrees to pay for any taxes, charges or
fees arising out of its obligations or acts hereunder.
8. DELIVERABLES AND UPDATES
8.1 Alliance Managers. Each party shall appoint an Alliance
Manager, who will be charged with primary responsibility for
coordinating, managing and scheduling the collaborative efforts
described in this Agreement
8.2 Delivery of Software and Updates. Promptly after the
Effective Date, AT&T shall provide iMALL with a golden master
copy of the AT&T WorldNet Software AT&T shall provide to iMALL
and iMALL shall provide to AT&T a golden master of any Updates
to the AT&T WorldNet Software and any Integrated iMALL Products,
respectively, upon the commencement of beta testing of such
Updates Such beta versions shall be Confidential Information of
AT&T or iMALL, as the case may be, and shall be treated in
accordance with Section 1.1.
8.3 Test Accounts. AT&T shall provide iMALL with 2 test
accounts for the purpose of testing Integrated iMALL Products in
conjunction with the Service iMALL shall be responsible for all
local, long distance or 800 facility access charges to reach the
Service, and any additional access charges or taxes that may be
imposed on Members or on the Service.
8.4 Updates/Service Changes. Nothing in this Agreement shall
limit AT&T=s right to change the functionality or pricing of the
Service or AT&T's and its suppliers' rights to change the
functionality of the AT&T WorldNet Software at any time. AT&T's
or its suppliers' exercise of such rights shall not be grounds
for termination of this Agreement by iMALL, provided that the
exercise of such rights does not adversely impact the
compatibility of the AT&T WorldNet Software and the Integrated
iMALL Products.
8.5 End User Warranties. iMALL shall offer each End User of
Integrated iMALL Products the same warranty as it offers to End
Users of like products.
8.6 Internal Use. iMALL grants to AT&T a royalty-free,
nonexclusive license during the Term of this Agreement to use
internally, solely for purposes of marketing, promotion,
demonstration, testing and technical support, at least 50 copies
of each different Integrated iMALL Product, or such greater
number of copies as the parties shall mutually agree upon. All
such copies of Integrated iMALL Products shall contain all
appropriate and customary proprietary rights notices provided by
iMALL with such Integrated iMALL Products. The license granted
under this Section 8.7 expressly excludes the right to distribute
Integrated iMALL Products. Nothing in this Agreement shall be
construed as giving AT&T any right to manufacture or otherwise
make or distribute copies of Integrated iMALL Products.
9. TRADEMARKS AND TRADE NAMES
9.1 License to AT&T Marks. Commencing on the Certification
Date and subject to the terms and conditions of this Agreement,
iMALL is hereby granted for the remainder of the Term of this
Agreement a nontransferable, nonexclusive, royalty-free
restricted license extending to the Territory to market each
version of each of the Integrated iMALL Products as including
the AT&T WorldNet Software and otherwise solely use on the
Integrated iMALL Products and in advertising and marketing
materials thereof any AT&T Marks provided by AT&T to iMALL
expressly for use with Integrated iMALL Products which are
distributed by iMALL or its Distributors in connection with this
Agreement, provided that AT&T shall have given iMALL written
confirmation that iMALL has, in form, met the requirements set
forth in Attachment B with respect to such version of the
Integrated iMALL Product, and provided further that such grant
shall be conditioned on and subject to iMALL's compliance with
the requirements of Sections 6 and 8 at all times. All such
usage of AT&T Marks shall inure solely to the benefit of AT&T and
shall not create any rights, title or interest for iMALL in
and to the AT&T Marks. iMALL may use Third Party Marks on the
Integrated iMALL Products and in advertising and marketing
materials thereof in connection with the permitted marketing and
distribution of iMALL Products under this Agreement, provided
that the AT&T Marks are used at least as prominently as the Third
Party Marks of any service provider or product manufacturer
other than iMALL, excepting Developer Marks, whose goods or
services are integrated with or packaged with iMALL. Upon AT&T's
request from time to time iMALL agrees to provide AT&T with
copies of iMALL Products bearing AT&T Marks so that AT&T can
verify their adequate quality. iMALL shall suspend use of AT&T
Marks if such quality is reasonably deemed inferior by AT&T
until iMALL has taken such steps as AT&T may reasonably require
to solve the quality deficiencies, but any such suspension of
AT&T Marks usage will not result in suspension of the license to
use, reproduce and distribute the AT&T WorldNet Software granted
to iMALL hereunder provided that iMALL is diligently taking the
required steps to solve the quality deficiencies.
9.2 License to iMALL Marks. Commencing on the Effective Date
and subject to the terms and conditions of this Agreement, iMALL
hereby grants to AT&T for the Term of this Agreement a
nontransferable, nonexclusive, royalty-free, restricted license
extending to the Territory to use the iMALL Marks solely to
promote, advertise, and market the Service and the Integrated
iMALL Products and in advertising and marketing materials
thereof and on promotional, advertising, and marketing materials
in connection with the Service AT&T shall use such iMALL Marks
in accordance with the guidelines set forth in Attachment B. All
such usage of iMALL Marks shall be subject to iMALL's prior
written approvals, shall inure solely to the benefit of iMALL
and shall not create any rights, title or interest for AT&T in
and to the iMALL Marks. AT&T agrees to cooperate with iMALL in
facilitating iMALL's monitoring and control of the use of the
1MALL Marks and to supply iMALL with samples of use of the iMALL
Marks Except for the iMALL Marks, AT&T will be the owner of all
marks used solely to distribute, promote, advertise and market
the Service and the goodwill related thereto and all uses thereof
shall inure solely to the benefit of AT&T.
10. PROPRIETARY RIGHTS
10.1 Proprietary Rights. Title to and ownership of all copies
of AT&T WorldNet Software and AT&T Documentation, whether in
machine-readable or printed form, and including, without
limitation, Derivative Works, compilations, or collective works
thereof prepared by AT&T and all related technical know-how and
all rights therein (including without limitation rights in
patents, copyrights, and trade secrets applicable thereto), are
and shall remain the exclusive property of AT&T and its
suppliers. iMALL shall not take any action to jeopardize, limit
or interfere in any manner with AT&T's ownership of and rights
with respect to the AT&T WorldNet Software and AT&T
Documentation iMALL shall have only those rights in or to the
AT&T WorldNet Software and AT&T Documentation granted to it
pursuant to this Agreement. Nothing herein shall be deemed to
affect iMALL's ownership of or rights in or to any information
developed or owned by, or made available by third parties to,
iMALL.
10.2 Proprietary Notices.
10.2.1 No Alteration of Notices. iMALL and its employees and
agents shall not remove or alter any proper trademark, service
mark, trade name, copyright, or other proprietary notices
appearing on or in copies of the AT&T WorldNet Software and AT&T
Documentation delivered to iMALL by AT&T and shall use the same
notices in and on copies of iMALL Products and AT&T Documentation
made pursuant to Section 3.1, 3.2 and 4.4 as are contained in and
on such copies of the AT&T WorldNet Software and AT&T
Documentation.
10.2.2 Notice. Each portion of the AT&T WorldNet Software
and AT&T Documentation reproduced by iMALL or its Distributors
shall include the intellectual property notice or notices
appearing in or on the corresponding portion of such materials
as delivered by AT&T hereunder. iMALL further agrees that, to
the extent that iMALL prepares any Derivative Works of iMALL
Products incorporating, in whole or in part, the AT&T WorldNet
Software as permitted by this Agreement it will include an
appropriate copyright notice of AT&T.
11. CONFIDENTIAL INFORMATION AND DISCLOSURE
11.1 Confidential Information. Each party agrees to maintain
all Confidential Information in confidence to the same extent
that it protects its own similar Confidential Information and to
use such Confidential Information only as permitted under this
Agreement. For purposes of this Agreement "Confidential
Information" shall mean confidential or proprietary technical or
business Information given by the discloser of the Information to
the recipient of the Information All Information which is
disclosed by one party to the other in connection with this
Agreement(whether orally, in writing, or by any other means or
media) shall automatically be deemed proprietary to the
discloser of the Information and subject to this Agreement,
unless otherwise confirmed in writing by the discloser of the
Information. Each party agrees to take all reasonable
precautions to prevent any unauthorized disclosure or use of
confidential Information including, without limitation,
disclosing Confidential Information only to its employees and in
the case of AT&T its Affiliates and in the case of iMALL its
Distributors (a) with a need to know to further permitted uses
of such information and (b) who are parties to appropriate
agreements sufficient to comply with this Section 11, and (c) who
are informed of the nondisclosure/non-use obligations imposed by
this Section 11, and both parties shall take appropriate steps
to implement and enforce such non-disclosure/non-use obligations
The foregoing restrictions on disclosure and use shall survive
for 3 years following termination of this Agreement but shall not
apply with respect to any Confidential Information which (i) was
or becomes publicly known through no fault of the receiving
party, (ii) was rightfully known or becomes rightfully known to
the receiving party without confidential or proprietary
restriction from a source other than the disclosing party; (iii)
is independently developed by the receiving party without the
participation of individuals who have had access to the
Confidential Information; (iv) is approved by the disclosing
party for disclosure without restriction in a written document
which is signed by a duly authorized officer of such disclosing
party, and (v) the receiving party is legally compelled to
disclose, provided, however, that prior to any such compelled
disclosure, the receiving party will (a) assert the
privileged and confidential nature of the Confidential
Information against the third party seeking disclosure and (b)
cooperate fully with the disclosing party in protecting
against any such disclosure and/or obtaining a protective
order narrowing the scope of such disclosure and/or
use of the Confidential Information In the event that such
protection against disclosure is not obtained, the receiving
party will be entitled to disclose the Confidential Information,
but only as and to the extent necessary to legally comply with
such compelled disclosure.
11.2 Member Information iMALL agrees that all information
concerning customers who subscribe to the Service and who switch
long distance service (including quantities or percentages of
such Members who sign up through iMALL Products) is the
Confidential Information of AT&T. AT&T shall include in its
quarterly reports pursuant to Section 7 the number of Delivered
Members registered for the Service.
12. REPRESENTATIONS AND WARRANTIES
12.1 No Warranty. EXCEPT AS MAY BE PROVIDED IN THE AT&T
MEMBER AGREEMENT OR ANY END USER LICENSE AGREEMENT ASSOCIATED
WITH THE AT&T SOFTWARE, AT&T MAKES NO REPRESENTATIONS OR
WARRANTY OF ANY KIND WHETHER EXPRESS OR IMPLIED (EITHER IN FACT
OR BY OPERATION OF LAW) WITH RESPECT TO THE AT&T WORLDNET
SOFTWARE OR ANY OTHER PRODUCT OR SERVICE RELATED THERETO AT&T
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. AT&T DOES NOT WARRANT, FOR
EXAMPLE, THAT THE AT&T WORLDNET SOFTWARE OR ANY OTHER PRODUCT
OR SERVICE RELATED THERETO IS ERROR-FREE OR THAT OPERATION OF
THE AT&T WORLDNET SOFTWARE OR ANY PRODUCTS OR SERVICES
RELATED THERETO WILL BE SECURE OR UNINTERRUPTED THERE IS ALSO
NO IMPLIED WARRANTY OF NONINFRINGEMENT, THE SOLE REMEDY FOR
INFRINGEMENT IS PROVIDED IN SECTION 13.
12.2 AT&T Representations and Warranties AT&T warrants and
represents to iMALL that (i) AT&T owns or has licensed, and will
own or have licensed, the AT&T WorldNet Software and all
necessary intellectual property right therein, and has and will
have the full power and authority to license and deliver copies
of the AT&T WorldNet Software to iMALL as contemplated
hereunder; and (ii) AT&T has not incorporated in the AT&T
WorldNet Software, and, to AT&T's knowledge, the AT&T WorldNet
Software does not contain viruses.
12.3 Netscape Representations and Warranties. iMALL
acknowledges that (i) the AT&T WorldNet Software contains, as a
critical component thereof, a Netscape Navigator <Trade Mark>
brand browser; (ii) representations and warranties are made by
Netscape Communications Corp. ("Netscape") to AT&T in an
agreement between Netscape and AT&T (the "AT&T/Netscape
Agreement"); and (iii) AT&T has the right to fulfill any and all
of its obligations to iMALL under this Agreement by exercising
its rights under the AT&T/Netscape Agreement and securing
performance of such obligations by Netscape.
12.4 iMALL Representations and Warranties iMALL further
warrants and represents to AT&T that: iMALL owns or has
licensed, and will own or have licensed, the iMALL Products and
all necessary intellectual property right therein, and has and
will have the full power and authority to license and deliver
copies of the iMALL Products to customers as contemplated
hereunder; and (ii) iMALL has not incorporated in iMALL Products
and, to iMALL's knowledge, iMALL Products do not contain viruses.
13. INDEMNIFICATION
13.1 AT&T Indemnity
13.1.1 Obligation AT&T shall defend iMALL and its directors,
officers, agents, employees and representatives, in any third
party action for infringement by, or alleged infringement by,
the AT&T WorldNet Software of any U.S. trademark or service
mark, or any U.S. patent issued as of the Effective Date, any
U.S. patent issued after the Effective Date or any U.S.
copyright, or misappropriation of any trade secret by the AT&T
WorldNet Software, and to pay any final judgments awarded or
settlements entered into in any such action. iMALL agrees that
it shall notify AT&T of all threats, claims and proceedings
related to any such suit promptly after such threat, claim or
proceeding comes to the attention of iMALL. AT&T shall have
sole control of the defense and/or settlement of any such suit,
and iMALL shall furnish to AT&T, upon request, information
available to iMALL for such defense, and shall provide AT&T with
such assistance in defending such suits as is requested by AT&T.
13.1.2 Options. If iMALL's use of the AT&T WorldNet Software
under the terms of this Agreement is, or in AT&T's opinion is
likely to be, enjoined due to the type of infringement or
misappropriation specified above, then AT&T may, at its sole
option and expense, either (i) procure for iMALL the right to
continue using such the AT&T WorldNet Software under the terms
of this Agreement, or (ii) replace or modify the AT&T WorldNet
Software so that it is noninfringing and substantially equivalent
in function to the enjoined AT&T WorldNet Software.
13.1.3 Exceptions. The foregoing obligation of AT&T does
not apply (i) with respect to versions of the AT&T WorldNet
Software or portions or components thereof: (a) which are
modified after shipment, if the alleged infringement relates to
such modification, and if such modification was not authorized,
expressly permitted or performed by AT&T; (b) which are combined
with other products, processes or materials, if the alleged
infringement relates to such combination and if AT&T did not
authorize or expressly permit the combination; or (c) where
iMALL's use of the AT&T WorldNet Software is incident to an
infringement not resulting primarily from the AT&T WorldNet
Software or is not in accordance with the license granted under
this Agreement; or (ii) for use or distribution of AT&T WorldNet
Software or the Service or the use of any AT&T Marks by iMALL,
outside the Territory or otherwise not in accordance with the
terms and conditions of this Agreement.
13.1.4 Netscape Indemnity. iMALL acknowledges that (i)
the AT&T WorldNet Software contains, as a critical component
thereof, a Netscape Navigator <trade mark> Internet browser,
(ii) certain indemnity obligations are made by Netscape to AT&T
in the AT&T/Netscape Agreement; and (iii) AT&T has the right to
fulfill any and all of its indemnity obligations to iMALL under
this Agreement by exercising its rights under the AT&T/Netscape
Agreement and securing performance by Netscape.
13.1.5 Sole Liability. THE FOREGOING IS IMALL'S SOLE AND
EXCLUSIVE REMEDY WITH RESPECT TO INFRINGEMENT OR ALLEGED
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS BY THE AT&T
WORLDNET SOFTWARE, THE SERVICE OR ANY AT&T MARKS, WHETHER UNDER
THEORY OF INDEMNITY, WARRANTY OR OTHERWISE.
13.2 iMALL Indemnity
13.2.1 Obligation iMALL shall defend AT&T, its Affiliates,
and their respective directors, officers, agents, employees and
representatives, in any third party action for infringement by,
or alleged infringement by, iMALL Products, iMALL Marks, or any
modification of the AT&T WorldNet Software by iMALL (when the
infringement or alleged infringement would not be present in the
AT&T WorldNet Software standing alone, as provided by AT&T), of
any U.S. Third Party Mark, or any U.S. patent issued as of the
Effective Date, any U.S. patent issued after the Effective Date
or any copyright, or misappropriation of any trade secret by the
iMALL Products, and any action based on a claim related to
defective disks or defective duplication in copies of iMALL
Products distributed by iMALL and to pay any final judgments
awarded or settlements entered into in any such action AT&T
agrees that it shall notify iMALL of all threats, claims and
proceedings related to any such suit promptly after such threat,
claim or proceeding comes to the attention of AT&T. iMALL shall
have sole control of the defense and/or settlement of any such
suit, and AT&T shall furnish to iMALL upon request, information
available to AT&T for such defense, and shall provide iMALL with
reasonable assistance.
13.2.2 Sole Liability. THE FOREGOING IS AT&T'S SOLE
AND EXCLUSIVE REMEDY WITH RESPECT TO INFRINGEMENT OR ALLEGED
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS BY OR RELATED
TO THE IMALL PRODUCTS, THE IMALL MARKS, OR ANY MODIFICATION OF
THE AT&T WORLDNET SOFTWARE BY IMALL AND ANY PRODUCTS OR
SERVICES RELATED THERETO, WHETHER UNDER THEORY OF INDEMNITY,
WARRANTY OR OTHERWISE.
14. LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY (OR ITS RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, SUPPLIERS, AGENTS, REPRESENTATIVES OR
DISTRIBUTORS) BE LIABLE FOR ANY LOSS OF PROFITS, LOSS OF
BUSINESS, LOSS OF USE OR DATA, INTERRUPTION OF BUSINESS, OR
FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF
ANY KIND, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES (AND NOT\WITHSTANDING ANY FAILURE OF ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY), OR FOR ANY CLAIM AGAINST THE
OTHER PARTY BY ANY THIRD PARTY, EXCEPT AS PROVIDED IN SECTION
14 ENTITLED "INDEMNIFICATION" IN NO EVENT WILL EITHER PARTY
(OR ITS RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, SUPPLIERS,
AGENTS, REPRESENTATIVES OR DISTRIBUTORS) BE LIABLE FOR (a) ANY
REPRESENTATION OR WARRANTY MADE TO ANY THIRD PARTY BY THE
OTHER PARTY (OR ITS RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES,
SUPPLIERS, AGENTS, REPRESENTATIVES OR DISTRIBUTORS); (b) IN THE
CASE OF AT&T, (i) FAILURE OF THE AT&T WORLDNET SOFTWARE OR ANY
PRODUCTS OR SERVICES RELATED THERETO TO PERFORM AS SPECIFIED
HEREIN EXCEPT AS, AND TO THE EXTENT, OTHERWISE EXPRESSLY
PROVIDED HEREIN, (ii) FAILURE OF THE AT&T WORLDNET SOFTWARE
AND ANY PRODUCTS OR SERVICES RELATED THERETO TO PROVIDE
SECURITY, OR (iii) ANY USE OF THE AT&T WORLDNET SOFTWARE OR
ANY PRODUCTS OR SERVICES RELATED THERETO OR THE DOCUMENTATION
FOR SAME OR THE RESULTS OR INFORMATION OBTAINED OR DECISIONS
MADE BY END USERS OF THE AT&T WORLDNET SOFTWARE OR ANY PRODUCTS
OR SERVICES RELATED THERETO OR THE DOCUMENTATION FOR SAME.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY,
EACH PARTY'S ENTIRE LIABILITY TO THE OTHER PARTY FOR DAMAGES
CONCERNING PERFORMANCE OR NONPERFORMANCE BY SUCH PARTY OR IN
ANY WAY RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT, AND
REGARDLESS OF WHETHER THE CLAIM FOR SUCH DAMAGES IS BASED IN
CONTRACT OR IN TORT (INCLUDING NEGLIGENCE), SHALL NOT EXCEED
AN AMOUNT EQUAL TO THE AMOUNT PAID (AND OBLIGATED TO BE PAID)
BY AT&T UNDER THIS AGREEMENT NOTHING IN THIS SECTION 14 SHALL
BE DEEMED TO LIMIT OR EXPAND EITHER PARTY'S RIGHTS OR LIABILITY
(i) UNDER SECTION 13,(ii) FOR INTELLECTUAL PROPERTY INFRINGEMENT
OR MISAPPROPRIATION OF TRADE SECRETS BY EITHER PARTY OR (iii)
FOR BREACH OF SECTION 11 BY EITHER PARTY. IN ADDITION, THE
FOREGOING PROVISIONS OF THIS SECTION 14 WILL NOT AFFECT EITHER
PARTY'S LIABILITY, IF ANY, WITH RESPECT TO CONTRIBUTION OR
INDEMNITY FOR THIRD PARTY CLAIMS FOR PERSONAL INJURY, DEATH, OR
PHYSICAL DAMAGE TO PROPERTY.
15. TERM AND TERMINATION
15.1 Term. Unless sooner terminated under the provisions of
Section 15, or otherwise rightfully terminated, this Agreement
shall remain in effect for a period of one year from the
Effective Date Such term shall be automatically extended for
another one year provided neither party gives the other party 30
days notice prior to the end of the initial period of their
desire to terminate this Agreement.
15.2 Termination for Default. If either party defaults in
any of its obligations under this Agreement, the non-defaulting
party, at its option, shall have the right to terminate this
Agreement by written notice unless, within 30 calendar days after
receipt of written notice of such default, the defaulting party
remedies the default, or, in the case of a default which cannot
with due diligence be cured within a period of 30 calendar days,
the defaulting party institutes within the 30 calendar days steps
necessary to remedy the default and thereafter diligently
prosecutes the same to completion.
15.3 Bankruptcy. Either party shall have the right to
terminate this Agreement if the other party ceases to do business
in the normal course, becomes or is declared insolvent or
bankrupt, is the subject of any proceeding relating to its
liquidation or insolvency which is not dismissed within 90
calendar days, or makes an assignment for the benefit of its
creditors.
15.4 Termination of Browser or Service. AT&T may terminate
this Agreement on 6O days' notice upon termination (1) of AT&T's
browser agreements with its supplier for any reason, including
whether due to lapse of time or to a notice of termination based
on the conduct or status of AT&T or supplier or (2) in the event
AT&T determines to substantially terminate offering the Service.
15.5 Effect on Rights.
15.5.1 Termination of this Agreement by either party shall
not act as a waiver of any breach of this Agreement and shall not
act as a release of either party from any liability for breach of
such party's obligations under this Agreement.
15.5.2 Except as specified in Sections 15.6 and 15.7 below,
upon termination or expiration of this Agreement, all licenses
for AT&T WorldNet Software and its Documentation granted under
this Agreement shall terminate.
15.5.3 Except where otherwise specified, the rights and
remedies granted to a party under this Agreement are cumulative
and in addition to, and not in lieu of, any other rights or
remedies which the party may possess at law or in equity,
including without limitation rights or remedies under applicable
patent, copyright, trade secrets, or proprietary rights laws,
rules or regulations.
15.6 Effect of Termination. Within 30 calendar days after
termination of this Agreement, each party shall, on request by
the other party, either deliver to the other party or destroy all
copies of the requesting party's Confidential Information,
including (in the case of iMALL) AT&T WorldNet Software and
Documentation (except as provided in Section 15.7) and any other
materials provided by the requesting party to the other party
hereunder in its possession or under its control, and shall
furnish to the requesting party a certificate signed by an
officer of the other party certifying that, to the best of its
knowledge, such delivery or destruction has been fully effected.
Notwithstanding the foregoing, and provided iMALL fulfills its
obligations specified in this Agreement with respect to such
items, iMALL may continue to use and retain copies of the AT&T
WorldNet Software and Documentation to the extent, but only to
the extent, necessary to support and maintain iMALL Products
rightfully distributed to End Users by iMALL prior to termination
of this Agreement.
15.7 Continuing Obligations.
15.7.1 Continuance of Sublicenses Notwithstanding the
termination of this Agreement, all End User sublicenses which
have been granted by iMALL and its Distributors pursuant to
this Agreement prior to its termination shall survive, provided
any such licensee or sublicensee continues to comply with the
terms of the applicable license agreement.
15.7.2 Other Continuing Obligations. In addition to the
foregoing, all other respective rights and obligations of AT&T
and iMALL which by their nature survive termination of this
Agreement (including without limitation under the provisions of
Sections 3.4, 4.13, 7, 10.1, 11, 12, 13, 14 and 16) shall survive
termination of this Agreement.
15.7.3 Injunctive Relief Consistent with the protection of
the rights of the party seeking injunctive relief as permitted
hereunder, any injunctive relief sought by either party to
enforce the obligations of the other party under this Agreement
shall be structured, to the greatest extent possible, in a manner
that will maintain the business operations of the party on which
any such relief is imposed.
16. GENERAL PROVISIONS
16.1 Notices. Any notice required or permitted hereunder
shall be in writing and shall be deemed to be properly given upon
the earlier of (a) actual receipt by the addressee or (b) five
business days after deposit in the U.S. mail, postage prepaid,
when mailed by registered or certified U.S. mail, return receipt
requested, or two (2) business days after being sent via
overnight courier to the respective parties at the addresses
first set forth above or to such other person or address as the
parties may from time to time designate in writing delivered
pursuant to this Section 16.1 Notices to AT&T shall be sent to
the address set forth in the introductory paragraph to this
Agreement, attention. Vice President, Law-Multimedia Services
Notices to iMALL shall be sent to the address set forth in the
introductory paragraph to this Agreement, attention: Richard
Rosenblatt.
16.2 Waiver and Amendment. The waiver by either party of a
breach of or a default under any provision of this Agreement,
shall not be construed as a waiver of any subsequent breach of
the same or any other provision of the Agreement, nor shall any
delay or omission on the part of either party to exercise or
avail itself of any right or remedy that it has or may have
hereunder operate as a waiver of any right or remedy. No
amendment or modification of any provision of this Agreement
shall be effective unless in writing and signed by a duly
authorized signatory of AT&T and iMALL.
16.3 Assignment.
16.3.1 No Assignment. Except as expressly provided herein,
neither party may assign this Agreement without the prior written
consent of the other party provided that either party may assign
this agreement to any person or entity that acquires all or
substantially all of that party's business. Such consent shall be
in the sole discretion of the party requested to give consent.
Any attempt to sublicense, assign or transfer (except as
expressly provided herein) any of the rights, duties or
obligations under this Agreement in derogation hereof shall be
null and void.
16.3.2 AT&T Restructuring. By the provision of notice in
accordance with this Agreement, AT&T shall have the right to
assign this Agreement and to assign its rights and delegate its
obligations and liabilities under this Agreement, either in whole
or in part (an "Assignment") to any entity that is, or that was
immediately preceding such Assignment: (i) a current or former
subsidiary, business unit, or division of AT&T, or (ii) an entity
in which AT&T had an ownership interest. The notice of
Assignment shall state the effective date thereof. Upon the
effective date and to the extent of the Assignment, AT&T shall be
released and discharged from all obligations and liabilities
under this Agreement. Such Assignment, release and discharge
shall be complete and shall not be altered by the termination of
the affiliation between AT&T and the entity assigned rights or
delegated obligations and liabilities under this Agreement.
16.4 Governing Law, Dispute Resolution. This Agreement and
all disputes hereunder shall be governed by the substantive law
of the State of New York, without regard to the conflicts of law
provisions therein, and the parties hereby expressly consent to
be subject to the jurisdiction of the courts of the State of New
York. In the event of a dispute regarding any matter under this
Agreement which cannot be resolved by the parties, the dispute
shall be referred to a Vice President of AT&T and a Vice
President of iMALL, who will attempt to resolve the dispute
within 10 business days of such referral date. If such officers
resolve the dispute they shall set forth in writing the
resolution. If such officers are unable to resolve the dispute
within such 10 business day period, the parties shall further
seek to resolve the dispute pursuant to arbitration as set forth
below. All disputes hereunder which cannot be amicably resolved
by the parties as described above, except those solely concerned
with AT&T's intellectual property rights in the AT&T WorldNet
Software, shall be settled exclusively by binding arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration shall be held in New
York City, New York and shall be conducted by a single
arbitrator who shall be a lawyer familiar with computer software
development and license agreements. The decision of the
arbitrator shall be final and binding upon the parties and may be
enforced by either party in any court of competent jurisdiction.
Each party shall bear the cost of preparing and presenting its
case. The costs of the arbitration, including the fees and
expenses of the arbitrator, will be shared equally by the
parties unless the award otherwise provides. This provision
shall not be construed to prohibit either party from seeking
preliminary or permanent injunctive relief in any court of
competent jurisdiction to the extent not prohibited by this
Agreement.
16.5 Regulatory Compliance. The parties recognize that the
Service may be subject to regulation by the Federal
Communications Commission and/or state regulatory agencies. If
any applicable regulation, whether now existing or hereafter
enacted, requires a modification of this Agreement or the waiver
of any right hereunder in order to market and offer iMALL
Products, and/or the Service as contemplated hereunder, the
parties agree to take such reasonable actions as are required
under the circumstances in order to accomplish the purposes of
this Agreement. Each party shall comply with all requirements of
applicable laws, ordinances, administrative rules and regulations
in the performance of this Agreement, and shall take prompt
action to remove or remedy any violation that occurs or is
discovered during the Term of this Agreement.
16.6 Relationship of the Parties. No agency, partnership,
franchise, joint venture, or employment is created as a result
of this Agreement and neither iMALL nor its agents have any
authority of any kind to bind AT&T in any respect whatsoever.
16.7 Severability. If the application of any provision or
provisions of this Agreement to any particular facts of
circumstances shall be held to be invalid or unenforceable by
any court of competent jurisdiction, then (a) the validity and
enforceability of such provision or provisions as applied to any
other particular facts or circumstances and the validity of
other provisions of this Agreement shall not in any way be
affected or impaired thereby and (b) such provision or
provisions shall be reformed without further action by the
parties hereto to and only to the extent necessary to make such
provision or provisions valid and enforceable when applied to
such particular facts and circumstances.
16.8 Force Majeure. Either party shall be excused from any
delay or failure in performance hereunder caused by reason of
any occurrence or contingency beyond its reasonable control,
including but not limited to, acts of God, earthquake, labor
disputes and strikes, riots, war, novelty of product manufacture
or other unanticipated product development problems, and
governmental requirements. The obligations and rights of the
party so excused shall be extended on a day-to-day basis for the
period of time equal to that of the underlying cause of the
delay.
16.9 Expenses. Each party shall bear its own costs and
expenses in connection with this Agreement, except as expressly
provided herein.
16.10 Compliance with all Laws. Each party shall comply fully
with all requirements of applicable laws, ordinances,
administrative rules and regulations, including but not limited
to those relating to the export of technical data, those of the
United States Departments of State and Commerce and other
applicable governmental agencies, and each party acknowledges
that by virtue of certain security technology embedded in the
AT&T WorldNet Software, the export of such software may not be
legal. Further, each party agrees to comply with and require
its Distributors to comply with rules and regulations to preclude
the acquisition of unlimited rights to technical data, software
and documentation provided with the AT&T WorldNet Software and
Integrated iMALL Products to a governmental agency, and ensure
the inclusion of appropriate "Restricted Rights" or "Limited
Rights" notices required by the U.S. Government agencies.
16.11 Entire Agreement. This Agreement, including the
Attachments hereto, constitutes the entire agreement between
the parties concerning the subject matter hereof and supersedes
all proposals or prior agreements whether oral or written, and
all communications between the parties relating to the subject
matter of this Agreement and all past courses of dealing or
industry custom. The terms and conditions of this Agreement
shall prevail, notwithstanding any variance with any purchase
order or other written instrument submitted by iMALL, unless
specifically agreed in writing by AT&T.
AUTHORIZED SIGNATURES
In order to bind the parties to this Agreement, their duly
authorized representatives have signed their names below on the
dates indicated. This Agreement shall be binding on both parties
when signed on behalf of each party and delivered to the other
party (which delivery may be accomplished by facsimile
transmission of the signature pages hereto).
iMALL, INCORPORATED AT&T CORP.
By: By:
/S/ Richard Rosenblatt /S/??
Title: Senior Vice President Marketing Vice President
Date: 6/13/96 Date: 6/24/96
Attachment A - iMALL Products
iMALL Software Starter Kit
Attachment B - Trademark and Service Mark Guidelines
GUIDELINES FOR USE OF THE AT&T CORPORATE SIGNATURE
Components
The AT&T corporate signature is comprised of two parts the globe
and the logotype (AT&T).
The globe is comprised of a series of 8 or 12 horizontal black
lines depending on the size of the corporate signature. The
8-fine design is used for globe diameters of 3/8" or less The
12-line design is used for globe diameters over 3/8". The globe
also contains a "hot spot" which is the highlighted area in the
upper left hand area of the globe sphere. This hot spot is
always the color of the background which supports the globe,
except when the background is a dark color and the globe is
printed in a light color, the lightest color of the globe always
prevails in the hot spot. The globe must never be used as part
of graphic design, and never without the logotype.
The print specifications for the logotype is "AT&T Garamond" The
distance between the logotype and the globe should never be
altered.
Positioning
The AT&T corporate signature should be positioned in a prominent
area of the material being supported. On printed material, it is
usually used as a "sign off" in the lower right hand corner, or
as a sign on in the upper left hand corner. If the material is
co-logged with one of AT&T's Business Alliances, then both logos
carry equal weight at the beginning or at the end of the
material.
Orientation
Two different orientations of the corporate signature have been
developed to support different layouts:
Horizontal configuration - The logotype is located to the
immediate right of the globe. The horizontal configuration is
usually used flush left in the upper left hand corner of the
page/item or, as in advertising, flush left or flush right with
the last line of copy This configuration is seldom centered"
except on business cards.
Centered configuration - The logotype is located centered
under the globe. The centered configuration is used whenever the
corporate signature is centered on a page/item.
Clear Space
The minimum clear area around the signature is the diameter of
the globe. This is required for proper staging of visual impact
regardless of the size of the globe.
Corporate Signature with Organization Name AT&T WorldNet <service
mark> Services Signatures combined with organization names
should not be used on the primary surface (front cover) of a
printed piece, only the corporate signature may appear on the
front cover. The organization name is typeset in Helvetica
Light, initial capitals and lower case letters. The distance
of the organization name from the bottom of the globe is the
globe diameter, and is flush left with the logotype in the
horizontal configuration), or centered below the logotype (in
the centered configuration).
Color
When used on light-colored backgrounds up to 30% black or
equivalent value, the preferred color of the corporate signature
is Process Blue (globe) and Black (logotype). The two
alternates are, both globe and logotype in Black, or both in
Process Blue. If the background color does not permit
sufficient contrast with either of the three preferred color
treatments, then the globe and logotype may be printed in any
one color that will permit sufficient contrast with the
background.
Using Black or Dark Backgrounds
A "Reverse Logo" has been developed for use on dark backgrounds
with more than 30% of black or equivalent value. This version is
not an exact photographic opposite of the positive version. It's
design ensures that the "hot spot" always remains the lightest
color of the globe. When using the reverse version, the globe
symbol may be reproduced in Process Cyan or 80% screen of AT&T
Process Blue, the logotype is always white.
Background Control
For optimum visibility, the corporate signature must be
reproduced on backgrounds that present continuous, even color
values as well as sufficient contrast.
Approval
All material displaying the AT&T corporate signature must be
approved by AT&T WorldNet <service mark> Marketing Communications
and Advertising before developing. It will be evaluated for
compliance to AT&T graphic standards and brand positioning.
Approval Process
Please send a copy of the proposed layout to Gayle Jones-Jackson
Please include the diameter and measurements you are requesting
of the logo.
Fax number 908-658-2631
Voice number 908-658-7292
Email [email protected]
With approval, she will sign and fax back and send a repro logo
or sheet for your use.
Attachment C - Customer Care Requirements
Coordination and Interface
The coordination of customer service processes and interfaces
between iMALL and AT&T will provide both AT&T and iMALL with an
outline of how to work together to resolve any problems
associated with AT&T WorldNet Services access and the use of
iMALL products.
Single Contact
iMALL will provide AT&T with a single point of contact from their
customer service organization, for purposes of coordinating
process interfaces and comparing service results. Where there
is an Integrated iMALL Product, AT&T and iMALL will work to
develop an integration test plan that evaluates that integration
and allows both organizations to support the integration.
Quality Control Metrics
iMALL will provide automated tracking of customer service
performance associated with AT&T WorldNet Services software
concerns. A monthly (or as mutually agreed) review of customer
problems and resolution as well as performance metrics related
to AT&T WorldNet Services software will be set up between AT&T
and iMALL. Reporting and tracking will be defined and
implemented in order to achieve continuous improvement to the
customer's on line experience and seamless use of the AT&T
WorldNet Services enhanced product.
AT&T WorldNet Services Support Material
AT&T will provide the AT&T WorldNet Services support material
content to iMALL's Services Team that will handle any calls
associated with the Integrated iMALL Product. Training of iMALL
Services team will be at iMALL's expense.
Tier One Support
iMALL will be responsible for tier one customer support, either
on iMALL Website or by phone, fax or other means of an end user
seeking customer support iMALL will provide to their end users
the same level of support (for Integrated iMALL Product) that is
offered to customers of any iMALL product at a similar cost.
iMALL's current customer care model will apply to the new
products.
On-line Support and Reference to WorldNet Services
If support is introduced on iMALL home page and there is mention
of or any references to AT&T or AT&T WorldNet Services, AT&T has
the right to approve the content that mentions AT&T or AT&T
WorldNet Service. Referral of end users to AT&T's 800 number
must be approved by AT&T, from a process perspective before any
initiation of this activity Publishing of AT&T Customer Care 800
number without prior written consent from the AT&T Customer Care
single point of contact, is prohibited.
Attachment D - AT&T WORLDNET PERFORMANCE SPECIFICATION
AT&T Compatibility Specification apply to all Integrated iMALL
Products that are to be certified as compatible with AT&T
WorldNet Services or which include AT&T WorldNet Registration
Software.
General
The integration test schedule provides reasonable turnaround
times for the test activities, but vendor manufacturing deadlines
are the highest priority. Thus, anything that can be done to
meet these deadlines within acceptable risk will be done.
The test suites and their scope are detailed in the "Integration
Test Suites" section. Each test suite will be run with two
hardware configurations (See equipment list), and the
appropriate operating system of Windows 3.1 or Windows-95,
depending if it's the 16-bit product (for Windows 3.1) or the
32-bit product (for Windows-95) New (or modified) test suites
will incorporated as necessary.
Quality
Quality of the integrated product will be tracked by monitoring
the following quality objectives:
0 If available at the time of testing, the packaging must
clearly state the system requirements for the integrated product.
0 The integrated setup and install scripts must contain all the
functionality required to get a user "up-and-running" with AT&T
WorldNet Services.
0 For both Win 3 x and Win 95 systems, Setup Wizard/WorldNet
connection must work with stated minimum system requirements
(Usually 8MB RAM)
0 When system resources are insufficient, it should recommend
actions to the user to correct the problem and exit gracefully.
0 Any new program group icons that are created during the
installation process must work and correctly identify any AT&T
WorldNet software or functionality.
0 Any new "bookmarks" that were added must exist and not point
to any site that contains links or references that may be illegal
or contrary to AT&T policy.
INTEGRATION TEST SUITES
General Guidelines
Basic guidelines will be to check for a complete copy of all
files from the source (floppy or our Internet site's zipped
files) to the integrated CD, verify end-to-end installation,
registration and use, and lastly make sure the registration code
works (pulls down the correct home page, allows registration, and
correct pricing)
Test I - File Compare
Create a batch file that will compare all the files on each
floppy to the directories on the integrated CD, using Exhibit A
as a guide. If the files have been retrieved via our Internet
server, use the CRC numbers to verify that all files have been
copies over successfully (refer to the download instructions for
more information) The exception to this of course would be if
they have modified any setup scripts or the bookmark file (e.g.
to incorporate a home page URL).
Test 2 - End-to-End Installation
A. Integrated Products that launch the AT&T WorldNet
Software as an independent application must:
1. properly load the AT&T WorldNet browser program into
Windows 3.1 and Windows 95 program environments.
2. properly launch and render fully operational all
executable files from the AT&T WorldNet Service Program Group,
The executable files from the AT&T WorldNet Service Program Group
currently contains the following executable files:
I. AT&T WorldNet Service executable
ii. AT&T WorldNet Customer Care executable
iii. The Registration Wizard executable
iv. The AT&T WorldNet Service Read Me executable
3. operate free of memory conflicts between the AT&T
WorldNet Software and any other software contained in the
Integrated iMALL Products.
Integrated iMALL Products that launch the AT&T WorldNet Software
both as an independent application and within another
iMALL
application must:
1. fulfill all of the functional requirements specified in
part A.1 above, plus:
2. [to be specified upon the development of Integrated
Products failing within this category]
Install the integrated application, including the WorldNet Dial
software, and register using the assigned registration code(s)
During the installation, check for the following:
0 Check the registration code(s) for validity. Some plans will
have two or more codes These codes are validated during the
registration process.
0 Check for the appropriate pricing plan to be presented,
based upon the registration code. The pricing plans are also
presented during the registration process.
Test 3 - Browser Execution
After the installation, make sure the browser is invoked
successfully from the following:
0 For Windows-95, from all shortcuts, program icons, and
"start button" locations.
0 For Windows 3.1, from all program icons.
0 Any execution from within the application itself.
Test 4 - Adherence to Contact Guidelines
After the application is installed, make sure all shortcuts,
icons, and invocations of the browser have the correct wording
and icon representation Use the following guidelines.
Any Program icon that invokes the browser and uses the
default WorldNet home page, must display the correct AT&T
WorldNet globe icon.
0 Any shortcut, start button, or program icon that invokes
anything other than the default WorldNet home page must NOT have
the AT&T WorldNet globe icon, unless approved by AT&T legal
beforehand.
Test 5 - Bookmarks
It is possible that the default bookmarks have been changed to
contain the vendor's home page(s). The general guideline here is
that:
They all work (the site exists)
They don't point to any site that is in obvious violation of the
contract
Test 6 - Minimum Resources
Test the installation using the minimum recommended hardware
requirements. The issue here is if the browser is invoked from
within the vendor application, will they work together. Note
that the recommended minimum requirements might not be the same
as it is for the AT&T WorldNet Service software.
RISKS
Equipment Availability
Equipment availability and use as planned (see Test Equipment
section) is necessary and should be sufficient for testing both
Windows 3.1 and Windows-95. Should needed test components not be
available, we will consider deleting them from coverage
objectives or postponing coverage until available without
slipping the test completion dates.
Delays and Schedule Sensitivity
Testing intervals are short in comparison to the overall
integration effort, the risk is that with a one week test
interval, the project is sensitive to delays that consume
calendar time to resolve. Should a critical or road-blocking
problem take more than a couple of days to resolve, a large
portion of the interval is lost and recovery is more difficult
Plans to address such delays include.
Lowering release quality objectives
Postponing scheduled manufacturing
TEST EQUIPMENT
Integration testing expects to use the following two
hardware/software configurations.
1. A 8MB (or minimally recommended configuration) machine
running Windows 3.1. Internal or external 2X or above CDROM, 14
4kb or higher modem Hard disk space of adequate size to handle
the disk space required for the operating system, the
application, and the WorldNet software (usually 300MB or higher)
2. A 16MB or above configured machine running Windows 95.
Internal or external 2X or above CDROM, 14.4kb or higher modem.
Hard disk space of adequate size to handle the disk space
required for the operating system, the application, and the
WorldNet software (usually 500MB or higher).
AUDIT
AT&T is authorized to audit the testing documentation to
validate certification of any Integrated Product and/or AT&T
WorldNet Software release.
DOCUMENTATION
The testing and certification process must be complete in order
to support the rights to use AT&T Marks and certification
affiliation The documentation required to support this process
are:
must provide AT&T with written notification of compliance
with testing.
must include all testing notes and re-test notes associated
with testing.
SCOPE OF TESTING
The testing must be complete for all releases of an Integrated
iMALL Product and/or the AT&T WorldNet Software. In addition,
the testing cycle must comply with the following guidelines:
must use associates who are not the developers of the
software and were not involved in any previous test cycles.
EXHIBIT A
<TESTING COMMANDS>
ATTACHMENT E - iMALL ICON
Option 1.
Windows 3.lx using AT&T WorldNet Software version 1.22
iMALL may add bookmarks to sites of their own choosing by adding
them to the default'bookmark.htm' provided on the distribution
disks.
The iMALL's end-users will then have the ability to have a
single-click access to iMALL's home-page, the support-page etc
Option 2.
Windows 3.lx using iMALL launcher
iMALL may choose to write their own application launcher that
launches the AT&T WorldNet software and communicates with it to
go to the URL of their choosing.
The icon representing the launcher will be developed by the iMALL
and shall not be the AT&T globe or other AT&T Mark.
Such an application launcher would test whether AT&T WorldNet has
been installed, and use standard Netscape 1.22 PE defined methods
(DDE/OLE2)to make it invoke the iMALL chosen URLs.
Option 3.
Windows 95 using iMALL launcher
iMALL may choose to write their own application launcher that
invokes the AT&T WorldNet Service and points it to the chosen
URL. Such an application launcher would test whether AT&T
WorldNet Software has been installed using the standard Win95
registry API - upon finding that it is NOT, the launcher would
give some appropriate error message such as "AT&T WorldNet is not
yet installed Install it using the CD and then try and reach AT&T
Tech-Support On-line . ." or substantially similar language.
ATTACHMENT F - LONG DISTANCE REWARD AGREEMENT
AGREEMENT
BETWEEN
AT&T COMMUNICATIONS, INC.
AND
iMALL, INCORPORATED
This Agreement is made and entered into effective as of
1996, by and iMall Incorporated, a Nevada corporation with
offices located at 4400 Coldwater Canyon Boulevard, Suite 200,
Studio City, California 91604 ("iMALL"), and AT&T Communications,
Inc, a Delaware corporation, with offices located at 295 North
Maple Avenue, Basking Ridge, New Jersey 07920, for itself and
its affiliated companies (collectively "AT&T")
RECITALS
WHEREAS, AT&T operates a telecommunications network in the
United States and around the world, through which customers may
obtain telecommunication services including residential long
distance telephone service, interstate and/or intrastate
interLATA and/or intraLATA telecommunications service, and
interexchange or intraexchange telecommunications service
("AT&T Service"), and
WHEREAS, iMALL markets and sells various software products in the
United States; and
WHEREAS, iMALL and AT&T desire to engage in marketing efforts to
their respective customers.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants set forth herein, AT&T and iMALL agree as
follows,
1. TERM OF AGREEMENT AND RENEWAL.
This Agreement shall commence on the date first set forth above
(the "Effective Date") and shall expire one year after the
Effective Date (the "Initial Term"), unless sooner terminated by
either party pursuant to this Agreement. No later than sixty
(60) days prior to the expiration date, the Parties shall
initiate negotiations concerning the renewal of this Agreement.
Such negotiations may include the modification of any and all
terms of this Agreement. In the event that either Party
concludes, in its sole discretion, not to renew this Agreement,
then this Agreement shall terminate pursuant to this Article.
2. MARKETING PROGRAMS.
A. Subject to Article 4, and for the period to AT&T
will provide iMALL customers who switch their Dial-1 residential
long distance telecommunications service from another
interexchange carrier to AT&T with (i) a iMALL Gift Certificate,
which may be used to and (ii) Long Distance Certificates or a
check for any fee charged by the customer's local telephone
company for switching to AT&T as an Interexchange carrier,
provided, however, that AT&T will provide such offer only to
iMALL customers who are not currently subscribed to AT&T as the
customer's long distance carrier AT&T will distribute iMALL
Gift Certificates and AT&T Long Distance Certificates to its
customers in its Welcome Package to new customers AT&T shall
promote and market the offer described above via direct mail
marketing materials and telemarketing activities.
B. iMALL, at its expense, shall design, develop and print
iMALL Gift Certificates. iMALL agrees to accept iMALL Gift
Certificate as payment for goods and services at any iMALL
retail stores until Such date shall be printed on the
certificate. Upon AT&T's request, iMALL shall send to AT&T the
number of iMALL Gift Certificates requested by AT&T.
C. On or before iMALL shall provide AT&T with a list of
approximately million of its customers, including their names,
addresses and telephone numbers. AT&T shall only use iMALL
customer list for the purpose of making the offer set forth in
Section 2A above to selected names on such list. Following
completion of the marketing activities set forth in Section
2A above, AT&T shall return the list to iMALL and shall not
retain a copy of such list. AT&T shall not disclose or transfer
such customer list to any third party. iMALL acknowledges that
some names on iMALL customer list may be existing AT&T customers
or will become AT&T customers and AT&T intends to continue to
contact and market to its customers AT&T shall provide iMALL
with a list of names, addresses and phones numbers of customers
that have accepted the offer set forth in Section 2A above;
provided that the customer consents to the disclosure of such
information.
D. AT&T will be responsible for installing and
maintaining the AT&T Service ordered by iMALL customers in
accordance with AT&T's then current standard practices and
tariffs iMALL customers will be eligible to participate in any
AT&T tariffed offers, for which they otherwise qualify. Existing
AT&T credit policies and practices shall apply, including but
not limited to, AT&T's right to refuse to accept or cancel
orders for the AT&T Services Termination or expiration of this
Agreement shall not affect the AT&T Service provided to iMALL
customers. All AT&T Services, ordered by iMALL customers shall
be provided in accordance with the rules, regulations, and rates
in applicable federal and state tariffs.
3. REGULATORY APPROVALS.
AT&T agrees to use its reasonable business efforts to obtain and
maintain all necessary federal and state regulatory authority
approvals in a timely manner, which may be required for AT&T
activities and/or obligations under this Agreement.
4. COSTS.
A. AT&T shall pay iMALL, on a monthly basis, dollars ($_)
for each iMALL Gift Certificate delivered to an AT&T customer as
a result of the offer set forth in this Agreement.
B. Other than as specifically stated to the contrary in
this Agreement, each party shall bear all costs and expenses in
connection with the performance of its obligations under this
Agreement, including the cost of any additional marketing efforts
either party wishes to undertake.
5. MARKETING.
A. AT&T may make reasonable use of the name, logo,
trademark and trade name (hereinafter the "Marks") of iMALL in
connection with AT&T's obligations under this Agreement AT&T
understands and agrees, however, that all AT&T marketing efforts
which contain any iMALL Mark, or any reference to iMALL, are
subject to prior review and written approval by IMALL. iMALL
agrees that it will review all such AT&T marketing materials in
a timely fashion and shall notify AT&T in writing of the results
of such review within five (5) business days after AT&T confirms
(verbally or in writing) that the marketing materials were
received by iMALL. iMALL agrees that approval of the marketing
materials shall not be unreasonably withheld Notwithstanding the
foregoing, in the event that iMALL fails to provide such written
notice within five (5) days of receipt, iMALL agrees that such
failure may be interpreted by AT&T as approval of such marketing
materials by iMALL.
B. iMALL shall not use the Marks of AT&T or any reference to
AT&T without the prior written approval of AT&T. AT&T agrees
that it will review all such iMALL marketing materials in a
timely fashion and shall notify iMALL in writing of the results
of such review within five (5) business days after iMALL confirms
(verbally or in writing) that the marketing materials were
received by AT&T AT&T agrees that approval of the marketing
materials shall not be unreasonably withheld. Notwithstanding
the foregoing, in the event that AT&T fails to provide such
written notice within five(5) days of receipt, AT&T agrees that
such failure may be interpreted by iMALL as approval of such
marketing materials by AT&T.
C. The Parties understand and agree that nothing in this
Agreement creates any right, title or interest in the Marks of
the other Party Any use of the other Party's Marks shall inure to
the benefit of the owner of such Marks Upon termination of this
Agreement, any and all rights or privileges of either party to
use the other's Marks shall expire, and each party shall
discontinue use of the other's Marks unless otherwise
specifically agreed in writing.
D. iMALL and AT&T may seek to establish such additional
marketing opportunities as are mutually agreeable AT&T and iMALL
each agree to use good faith efforts to identify and implement
such opportunities Once identified, the terms and conditions of
such opportunities will be included as an amendment to this
Agreement.
6. CONFIDENTIALITY.
A. Except as otherwise provided in this Agreement, any
Confidential Information that is furnished, made available, or
otherwise disclosed by one Party (Disclosing Party) to the other
Party (Receiving Party) in consequence of the existence of this
Agreement, shall be deemed and remain the property of the
Disclosing Party
B. Unless Confidential Information was previously known
to the Receiving Party free of any obligation to keep it
confidential, or has been or is subsequently made public by any
act not attributable to the Receiving Party, or has been agreed
by the Disclosing Party in writing not to be regarded as
confidential, and if the Information is marked as "confidential"
or "proprietary" by an appropriate stamp, mark, or label
thereon, or if orally disclosed, summarized in writing by the
Disclosing Party, stamped or marked as "confidential" or
"proprietary" and delivered to the Receiving Party within ten
(10) business days after such disclosure, it shall be deemed
Confidential Information of the Disclosing Party and shall be
held in confidence by the Receiving Party, and shall
be disclosed by the Receiving Party only to those of its
employees who have a need for such confidential Information to
carry out this Agreement. For the purpose of this Agreement,
Confidential Information shall be deemed to include the customer
list provided by iMALL and the AT&T list of names of the
customers that have accepted the AT&T offer set forth in Section
2A Except as the Parties may otherwise agree in writing,
Confidential Information: (a) shall be used only for the purpose
of performing under this Agreement, (b) shall not be reproduced
or copied, in whole or in part, except as necessary for use as
authorized herein, and (c) shall, together with any copies
thereof, be returned or destroyed when no longer needed or upon
termination of this Agreement, whichever occurs first.
C. Confidential Information may be provided to third
parties only upon written authorization of the Disclosing Party
Any third party to whom Confidential Information is provided
pursuant to such authorization of the Disclosing Party must agree
in writing (a copy of which writing will be furnished to the
Disclosing Party at its request) to the conditions respecting
use of Confidential Information contained in Section 6(A) through
(F) of this Agreement.
D. The Receiving Party shall give prompt notice to the
Disclosing Party of any demand by any third party to provide
Confidential Information under lawful process prior to
furnishing Confidential Information, and shall cooperate in
seeking reasonable protective arrangements requested by the
Disclosing Party. In addition, the Receiving Party may provide
Confidential Information of the Disclosing Party requested by a
government agency having jurisdiction over the Receiving Party,
provided prompt notice of such request is given to the Disclosing
Party and that the Receiving Party uses reasonable business
efforts to obtain protective arrangements satisfactory to the
Disclosing Party, and provided further that the Disclosing Party
may not unreasonably withhold approval of the protective
arrangements.
E. The Disclosing Party shall have the right to demand,
upon unauthorized disclosure of any Confidential Information by
the Receiving Party to a third party, the return of all
Confidential Information disclosed to the Receiving Party, and
that the Receiving Party uses reasonable business efforts to
obtain the return from the third party of all Confidential
Information improperly disclosed, in addition to any other
remedies the Disclosing Party may have.
F. The Parties acknowledge that the terms of this
Agreement constitute Confidential Information that may be
considered proprietary by either or both Parties, and agree to
limit distribution of this Agreement to those individuals in
their respective organizations with a need to know the contents
of this Agreement.
7. TERMINATION.
This Agreement may be terminated upon thirty (30) days' prior
written notice by either party without any liability of any kind
on the part of the terminating party. Either party may
immediately terminate this Agreement by written notice, if the
other party breaches a material provision of this Agreement
Notwithstanding the foregoing, all rights and obligations of the
parties that by their nature should continue after the expiration
or termination of this Agreement shall survive the expiration or
termination of this Agreement; including, without limitation,
iMALL's obligation to honor iMALL Gift Certificate and AT&T's
obligation to pay for all such Gift Certificates sent to AT&T.
8. INDEMNIFICATION.
A. iMALL shall indemnify, defend, and hold harmless
AT&T and its directors, officers, employees, agents, parent,
subsidiaries, successors, and assigns from and against any and
all third party claims, suits, and liabilities (including
reasonable attorneys' fees) arising out of or resulting
from, in whole or in part, any actual or alleged acts or
omissions of iMALL, its employees, agents or contractors in
connection with the performance of or failure to perform its
obligations under this Agreement.
B. AT&T shall indemnify, defend, and hold harmless
iMALL and its directors, officers, employees, agents, parent,
subsidiaries, successors, and assigns from and against any and
all third party claims, suits, and liabilities (including
reasonable attorneys' fees) arising out of or resulting from, in
whole or in part, any actual or alleged acts or omissions of
AT&T, its employees, agents or contractors in connection with the
performance of or failure to perform its obligations under this
Agreement.
9. LIMITATION OF LIABILITY.
EITHER PARTY'S SOLE REMEDY AGAINST THE OTHER FOR LOSS OR
DAMAGE ARISING OUT OF THE PERFORMANCE OR NON-PERFORMANCE
UNDER THIS AGREEMENT SHALL BE PROVEN DIRECT, ACTUAL DAMAGES
NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
RELIANCE, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF
ITS PERFORMANCE OR NON-PERFORMANCE UNDER THIS AGREEMENT,
WHETHER OR NOT SUCH PARTY HAD BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
10. NO THIRD PARTY BENEFICIARIES.
This Agreement shall not provide any person not a party to the
Agreement with any remedy, claim, liability, reimbursement,
commission, cause of action or other right in excess of those
existing without reference to this Agreement.
11. INDEPENDENT CONTRACTOR.
A. iMALL is not, and shall not directly or indirectly
hold itself out as, an agent, partner, franchisee or joint
venturer of AT&T. Further, iMALL shall not directly or indirectly
hold itself out as having any relationship to AT&T other than
that arising from this Agreement or other agreement between the
parties. iMALL is an independent contractor with respect to the
services it provides under this Agreement and shall have no
authority to bind AT&T to any contract or otherwise make
representations as to the policies or procedures of AT&T other
than those expressly permitted by AT&T in writing or stated in
this Agreement, AT&T's tariffs, or current, official literature
or price lists given to iMALL by AT&T.
B. AT&T is not, and shall not directly or indirectly hold
itself out as, an agent, partner, franchisee or joint venturer of
iMALL. Further, AT&T shall not directly or indirectly hold itself
out as having any relationship to iMALL other than that arising
from this Agreement or other agreement between the parties AT&T
is an independent contractor with respect to the services it
provides under this Agreement and shall have no authority to
bind iMALL to any contract or otherwise make representations as
to the policies or procedures of iMALL other than those expressly
permitted by iMALL in writing or stated in this Agreement.
12. ASSIGNMENT.
No assignment of this Agreement shall be made by either party
without the written consent of the other party; provided,
however, that such consent is not required when the proposed
assignment is to be made to any parent, subsidiary or parent,
affiliate or successor of AT&T. In the event of an assignment to
a parent, subsidiary, affiliate or successor of AT&T, AT&T shall
remain fully liable for the assignee's performance and breach of
any provisions hereof applicable to AT&T. In the event of any
other assignment made with the written consent of the other
party, the assignee shall assume all liability of the assignor.
13. AGENTS.
Any party may engage one or more agents or affiliates to perform
portions of its responsibilities under this Agreement, provided,
however, that the party engaging an agent or affiliate will
remain responsible to the other party for performance under this
Agreement, including the performance of its agent or affiliate.
14. FORCE MAJEURE.
A party's delay in, or failure of, performance under this
Agreement shall be excused where the delay or failure is caused
by an act of God, fire or other catastrophe, electrical,
computer or mechanical failure, work stoppage, delays or failure
to act of any carrier or carrier's agent or any other cause
beyond a party's direct control.
15. SURVIVAL OF OBLIGATION.
The obligations of the parties under Articles 6, 8 and 9 of this
Agreement shall survive any termination or cancellation of this
Agreement for the maximum period permitted by law or such shorter
period as provided for by this Agreement.
16. CHOICE OF LAW.
The construction, interpretation and performance of this
Agreement shall be governed by the laws of the State of New York.
If any provision of this Agreement is held contrary to law, the
remaining provisions shall remain valid.
17. NO WAIVER.
The failure of any party at any time to enforce any right or
remedy available to it under this Agreement with respect to any
breach or failure by the other party shall not be construed to
be a waiver of such right or remedy.
18. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements, oral or written
representations, statements, negotiations, proposals and
undertakings with respect to the subject matter hereof This
Agreement shall not be modified or amended except by a writing
signed by an authorized agent of the party to be charged. Should
any provision of this Agreement be deemed by a court of competent
jurisdiction to be void, invalid or inoperative, the remainder of
the Agreement shall be effective as though such void, invalid or
inoperative provision had not been contained herein.
19. HEADINGS AND CAPTIONS.
The headings and captions contained in this Agreement are
inserted for convenience only and shall not constitute a part
hereof.
20. DUPLICATE ORIGINALS.
This Agreement may be signed in any number of counterparts with
the same effect as if the signatures were on the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first written above.
AT&T COMMUNICATIONS, INC. iMALL, INC.
CORPORATE
By: /S/ David Hood By: /s/ Richard Rosenblatt
------------------------- -----------------------
Title: Product Marketing Title: Senior Vice
Vice President President
Online Expo 96
window to the world
Exhibit 10.2
SUPERHIGHWAY PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
SUPERHIGHWAY PARTNERS L.P.______
A CALIFORNIA LIMITED PARTNERSHIP
TABLE OF CONTENTS
I DEFINITIONS..................................................2
II FORMATION, NAME AND PURPOSES.................................5
1. Formation of the Partnership................................ 5
2. Name of the Partnership......................................5
3. Required Documentation of the Partnership....................5
4. Office and Principal Place of Business of the Partnership....5
5. Purpose of the Partnership...................................6
6. Title of Partnership Properties of the Partnership.......... 6
7. Address of the Limited Partners of the Partnership...........6
8. Address of the General Partner of the Partnership............6
9. Relationship Among the Partners..............................6
10. Partnership Opportunities....................................7
11. Outside Activities Permitted.................................7
III TERM OF THE PARTNERSHIP......................................8
IV PARTNERS' CAPITAL CONTRIBUTIONS..............................8
1. Initial Contribution to Capital of Partnership...............8
2. Additional Cash Contributions................................8
3. Noncash Contributions by the General Partner.................9
4. Business Opportunity Infomercial.............................9
5. Infomercial Tags.............................................9
6. Seminar Infomercials.........................................9
7. Internet Mall Address........................................9
8. Telemarketing and Media Buying...............................9
9. Merchant Account............................................10
10. Quality of Infomercials and Tags............................10
11. Noncash Contributions by the Limited Partners ..............10
12. iMALL Loan Out of Richard Rosenblatt........................10
13. Mall Provider...............................................10
14. Seminar Revenues, Costs and Budget..........................10
15. Additional Agreements.......................................11
16. Capital Account.............................................11
17. Return of Capital...........................................11
V INCOME AND LOSS.............................................11
1. Income......................................................11
2. Losses......................................................12
VI DISTRIBUTIONS...............................................13
1. Net Cash Available for Distributions........................13
2. Character of Distributions..................................13
3. To Whom Distributions Made..................................13
4. Minimum Distributions.......................................13
VII REIMBURSEMENT OF EXPENSES AND COMPENSATION TO PARTNERS......14
1. Reimbursement of Expenses...................................14
2. Limitations on Expenses Reimbursed to Limited Partner.......14
3. Compensation of the Partners................................14
4. Compensation of General Partner............................ 14
5. Positive Response Telemarketing, Inc....................... 14
6. Positive Response Media, Inc................................15
7. Compensation of Limited Partners........................... 15
8. Payment of Partner Compensation............................ 15
VIII POWERS AND DUTIES OF AND RESTRICTIONS UPON THE GENERAL
PARTNERS....................................................15
1. Authority...................................................15
2. Liability...................................................15
3. Indemnification.............................................15
4. Insurance ..................................................16
IX RIGHTS, DUTIES AND POWERS OF THE LIMITED PARTNERS.......... 16
1. Liability of the Limited Partners...........................16
2. Restrictions on the Limited Partners........................16
3. Rights of the Limited Partners..............................17
X. TRANSFER OF THE GENERAL PARTNERSHIP INTEREST................17
1. Additional General Partners.................................17
2. Assignment of the General Partner's Interest................17
XI TRANSFERS OF LIMITED PARTNERSHIP INTEREST.................. 17
1. Transfer of Limited Partner's Interests.....................17
2. Distributions and Allocations with Respect to
Transferred Interests.....................................18
3. Transfers to Related Parties................................18
XII TERMINATION OF THE GENERAL PARTNER..........................19
1. Termination of the General Partner..........................19
2. Interest of a Terminated or Removed General Partner.........19
XIII RESIGNATION, WITHDRAWAL OR REMOVAL OF A GENERAL
PARTNER OR LIMITED PARTNER..................................19
1. Resignation or Withdrawal or Removal of a General Partner...19
2. Resignation, Withdrawal or Removal of a Limited Partner.....20
XIV RECORDS, BOOKS, REPORTS AND BANKING.........................20
1. Method of Accounting........................................20
2. Partnership Calendar Year...................................20
3. Annual Statements...........................................20
4. Bank Accounts...............................................20
5. Income Tax Information......................................21
6. Required Records............................................21
7. Delivery of Records to a Limited Partner....................21
8. Rights of Limited Partner to Audit Records..................22
9. Limitation on Audit Rights..................................22
XV LOANS AND ADVANCES..........................................22
1. Loans by the Partners.......................................22
VVI. DISSOLUTION - TERMINATION AND DISTRIBUTION.................23
1. Dissolution................................................23
2. Expiration of Term.........................................23
3. Lack of Business...........................................23
4. Sale of Substantially all of Partnership Property..........23
5. By Written Consent.........................................23
6. By Operation of Law........................................23
7. Acts of General Partner....................................23
8. General Partner Ceases to be General Partner...............24
9. Winding Up.................................................24
10. Deficit Makeup by the General Partner......................25
11. Election to Carry On Business by the Remaining
General Partner........................................25
12. Election to Carry On Business by the Limited Partner.......25
XVII TAX MATTERS PARTNER........................................25
XVIII TAX ELECTIONS..............................................26
1. 754 Elections..............................................26
2. Other Elections............................................26
IXX EXECUTION IN COUNTERPARTS..................................26
XX REGULATORY PROVISIONS......................................26
XXI POWER OF ATTORNEY......................................... 35
1. Appointment of the General Partner.........................35
2. Special Power..............................................35
3. Conflict...................................................36
XXII MISCELLANEOUS..............................................36
1. Governing Law..............................................36
2. Binding on Successors......................................36
3. Validity...................................................36
4. Captions...................................................36
5. Entire Agreement...........................................36
6. Gender.....................................................36
7. Further Documents..........................................36
8. Choice of Law\Disputes.....................................37
9. Partner Right to Bring Action..............................37
10. Representation by Counsel..................................37
11. Signature Page.............................................38
12. Exhibits...................................................39
END TABLE CONTENTS
<PAGE>
ORIGINAL
AGREEMENT OF LIMITED PARTNERSHIP
OF
SUPERHIGHWAY PARTNERS L.P.
A CALIFORNIA LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP ("Agreement") is effective as of
September 3, 1996 by and among iMALL, INC., a Nevada corporation, with its
offices located at 4400 Coldwater Canyon Boulevard, Suite 200, Studio City,
California 91604 ("iMALL") and referred to herein as a ("Limited Partner") and
POSITIVE RESPONSE SEMINARS, INC., a California corporation (the "General
Partner").
RECITALS
A. The General Partner is a wholly owned subsidiary of Positive Response
Television, Inc. ("PRTV"). PRTV is in the business of developing, producing
and airing infomercials on its own account and for third parties. PRTV shall
produce infomercials intended to market and sell business opportunity products
and drive seminar attendance at which the business opportunity products and
Internet workshops are sold. Business opportunity products, seminars and
Internet workshops are defined below and more particularly described in
Exhibit A attached hereto, made part hereof by this reference.
B. iMALL is in the business of organizing, arranging, conducting,
providing and administering public seminars and locating and training
qualified hosts for such seminars. iMALL has developed and seeks to market and
distribute certain business opportunity products and conduct seminars
offering, providing and administering Internet workshops.
C. The parties intend to form a joint venture to develop, market, promote
and provide the infomercials, products, seminars and Internet workshops to the
public relating to the use of the Internet and such other programs as may be
decided by the parties.
D. iMALL shall develop the products, conduct the seminars and Internet
workshops and act as the Internet mall provider in connection therewith
directing the seminar participants to the iMALL and PRTV shall, to the extent
commercially practicable and contractually permissible, tag the infomercial
and its existing and future infomercials with the mall address of iMALL as the
Internet mall provider.
NOW, THEREFORE, the parties agree as follows:
I. DEFINITIONS
-------------
When used in this Agreement, the following terms shall have the meanings
set forth below:
1. "Act" means the provisions of the California Revised Limited
Partnership Act, as amended, or any corresponding provision or provisions of
succeeding law.
2. "Agreement" means this Agreement of Limited Partnership, as
originally executed and as amended from time to time, as the context requires.
3. "Capital Account." (See Paragraph XX,3)
4. "Capital Contribution." (See Paragraph XX,4)
5. "Certificate" means the Certificate of Limited Partnership for
this Partnership, as originally executed and filed, and as amended from time
to time as the context may require.
6. "Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provision or provisions of succeeding law.
7. "General Partner" means Positive Response Seminars, Inc. or any
successor.
8. "General Partnership Interest" means the ownership interest of the
General Partner in the Partnership.
9. "Income" and "Profit" mean any item of Partnership economic
income.
10. "Interest" and "Limited Partnership Interest" mean a Limited
Partner's ownership interest in the Partnership.
11. "Limited Partner" means iMALL, Inc., and any permitted
successors.
12. "Losses" means the Partnership's net economic loss.
13. "Net Cash Available for Distribution" means the excess of all
cash receipts over the sum of cash expenditures payable in connection with the
generation thereof and provision, as the General Partner in its sole
discretion may determine, for any reserves for expenditures, contingencies,
and liabilities.
14. "Paragraph" means the designated paragraph number of this
Agreement.
15. "Partners" means collectively the parties executing this
Agreement.
16. "Partnership" means the limited partnership formed by executing
this Agreement and by filing a Certificate of Limited Partnership with the
State of California.
17. "Partner Percentage" means for any year, 50.1% for the General
Partner and 49.9% for the Limited Partner. These Percentages will apply for
purposes of any voting which is required under the Partnership Agreement or
under the Act. For purposes of Paragraphs V. 1 and V.2, the Partner Percentage
shall be determined based upon the following percentages for each product
line, unless the aggregate Income allocated to the General Partner for any
year is less than 50.1% of the total Partnership Income. If the General
Partner's aggregate allocated Income based upon applying the percentages below
is less than 50.1%, the Partner Percentage for purposes of Paragraph V.1 will
be 50.1% for the General Partner and 49.9% for the Limited Partner.
For all sales of the Basic Product:
General Partner 75%
Limited Partner 25%
For all sales of the Deluxe Product:
General Partner 50%
Limited Partner 50%
For all sales of the Internet workshop when sold through the Seminar:
General Partner 25%
Limited Partner 75%
For all sales of the Internet workshop when a preview was not attended
and the client became aware of the workshop through the Infomercial:
General Partner 50%
Limited Partner 50%
18. "Property" and "Properties" mean all property, real or personal,
the Partnership may acquire.
l9. "Regulations" means Income Tax Regulations, including Temporary
Regulations and Proposed Regulations promulgated under the Code, as such
Regulations may be amended from time to time (including corresponding
provisions of succeeding Regulations).
20. "Regulatory Definitions." (See Paragraph 21 of this Agreement).
21. "Representative" means that person designated by each corporate
Limited Partner to be its representative to the Partnership.
22. "Section" means the designated section of the specified statute
or regulation, or the comparable provision of any successor statute or
regulation.
23. "Tax Allocation Regulations" means the regulations issued by the
Treasury Department under Code Section 704(b), as amended from time to time.
24. "Tax Item" means each item of income, gain, loss, deduction or credit of
the Partnership.
25. "Transfer" means to lend, pledge, encumber, assign, sell,
exchange, give, lease, license, abandon or dispose in any other manner of any
rights in property, tangible or intangible.
26. "Basic Product" means a business opportunity product offered at a
price under one hundred dollars ($100.00).
27. "Deluxe Product" means a business opportunity product offered at
a price above one hundred dollars ($100.00).
28. "iMALL Workshop" means a full day of training on marketing on the
Internet which is sold for $3,000.
29. "Internet Seminar" means an introductory seminar held to sell
clients on Internet Products.
II FORMATION. NAME AND PURPOSES
----------------------------
1. FORMATION OF THE PARTNERSHIP. execution hereof and by filing-the
Certificate, the Partners hereby form a limited partnership pursuant to the
Act, and the rights and liabilities of the Partners shall be as provided in
the Act, except as herein expressly provided.
2. NAME OF THE PARTNERSHIP. The name of the Partnership shall be
"Superhighway Partners, L.P." Such name may be changed by the General Partner
after providing notice of such change to the Limited Partners.
3. REQUIRED DOCUMENTATION OF THE PARTNERSHIP. The General Partner
shall execute, acknowledge and cause to be filed, published or recorded, as
appropriate, the following documents:
* A Certificate in accordance with the Act;
* Certificates of Amendment to the Certificate whenever required by the
Act or this Agreement;
* A certified copy of the Certificate and any Certificate of Amendment
in every county in which the Partnership owns real property;
* A Fictitious Business Name Statement as required by law to be filed in
Los Angeles County, California; and
* Any and all other documents as may be required by the Act or by law.
4. OFFICE AND PRINCIPAL PLACE OF BUSINESS OF THE PARTNERSHIP. The
office and principal place of business of the Partnership shall be:
14724 Ventura Boulevard, Suite 600
Sherman Oaks, California 91403
Such location may be changed by the General Partner to such other place or
places, but only after providing notice to the Limited Partners.
5. PURPOSE OF THE PARTNERSHIP. The Partnership's purpose is to
create, produce and market products and seminars promoting, among other
things, business opportunities in connection with use of the Internet, and to
promote advertising for such products, seminars and Internet use through the
infomercial to the extent commercially practicable and contractually
permissible and tags to PRTV infomercials.
6. TITLE OF PARTNERSHIP PROPERTIES OF THE PARTNERSHIP. All property
owned by the Partnership, whether real or personal, tangible, intangible or
mixed, shall be owned by the Partnership as an entity, and no Partner shall
have any ownership interest in any such property.The Partnership shall not
acquire any ownership interest in any infomercial produced by PRTV pursuant to
this Agreement.
7. ADDRESSES OF THE LIMITED PARTNER OF THE PARTNERSHIP. The current
address of the Limited Partner of the Partnership are as follows:
iMALL, Inc.,
Attention: Richard Rosenblatt, Senior Vice President
4400 Coldwater Canyon Boulevard, Suite 200,
Studio City, California 91604
8. ADDRESS OF THE GENERAL PARTNER OF THE PARTNERSHIP. The current
addresses of the General Partner of the Partnership is as follows:
Positive Response Seminars, Inc.
Attention: Valerie Castle,
Vice President of Business Affairs and Distribution Marketing
14724 Ventura Boulevard, Suite 600
Sherman Oaks, California 91403
9. RELATIONSHIP AMONG THE PARTNERS. Notwithstanding any other
provision contained herein, the relationship among the Partners created by
this Agreement shall be limited to the performance of this Agreement, and
shall not affect any business or activity of any Partner or of any Affiliate
of any Partner. Except as specifically provided herein, nothing in this
Agreement shall be construed to authorize or require any Partner or Affiliate
to act as general agent for any other Partner, or to require any Partner or
Affiliate to offer to other Partners or to the Partnership, any business
opportunity that a Partner or Affiliate wish to pursue with Persons other than
Partners, or to prohibit any Partner or Affiliate from entering into business
activity in competition with the Partnership or any other Partner.
10. PARTNERSHIP OPPORTUNITIES. The Partners acknowledge that, from
time to time, potential business opportunities for new investments or other
seminars may be presented to the Partnership for consideration in connection
with the Partnership's business. For purposes of this Agreement, any seminar
opportunities unrelated to the Partnership's initial Internet seminars which
come to the attention of the General Partner, PRTV or iMALL shall be
considered partnership opportunities; PRTV's obligation to present any seminar
opportunity shall be subject to any obligation to a product endorser or other
good faith negotiations. The determination as to whether or not the
Partnership shall avail itself of any such opportunity or investment shall be
made by the General Partner. If the Partners so elect, the opportunity or
investment shall be incorporated into the business of the Partnership in such
manner as the General Partner determines to be in the Partnership's best
interests, provided that such method reflects the Partners' respective
interest in the profits and losses of the Partnership at that time, or as
otherwise agreed by the Partners. If the General Partner determines that it is
not in the best interest of the Partnership to avail itself of any such
business opportunity or investment, the General Partner shall so notify the
Limited Partner, whereupon the Limited Partner shall have the right to elect
to participate in such opportunity or investment. If the Limited Partner
elects not to approve such opportunity or investment, the General Partner
shall have the right to pursue such opportunity or investment for its sole
account.
11. OUTSIDE ACTIVITIES PERMITTED. Any Partner or any shareholder of a
Partner may invest or be engaged in one or more businesses other than the
business of the Partnership, including any business or investment which may be
in competition with the Partnership's business, except that no Partner shall
participate in the management or ownership of any Internet seminar marketing
business independent of the other subject to any existing or future obligation
on the part of the General Partner to any product endorser or other good faith
negotiation. The General Partner shall have no duty to offer any infomercial
opportunity to the Partnership. Neither the Partnership nor any other Partner
shall have any right to any income or profit derived by a Partner from any
business activity permitted under this Paragraph. The Partners acknowledge and
agree that the General Partner and its parent corporation, PRTV, may produce
infomercials which may be tagged for Internet purposes for the benefit of the
Partnership but that such activities shall not provide the Partnership with
any interest in the infomercial and that such infomercial activities are
expressly permitted and shall not be deemed business opportunities of the
Partnership.
III TERM OF THE PARTNERSHIP
----------------------
1. The limited partnership shall commence upon execution and shall
continue until December 31, 2023 unless earlier terminated in accordance with
the provisions of Paragraph XVI, this Paragraph III 1., or as otherwise
provided by law.
IV PARTNERS' CAPITAL CONTRIBUTIONS
-------------------------------
1. INITIAL CONTRIBUTION TO CAPITAL OF PARTNERSHIP. The initial
contribution by each Partner to the capital of the Partnership shall be as
follows:
General Partner $6,000 cash
iMALL $4,000 cash
2. ADDITIONAL CASH CONTRIBUTIONS. In addition to its initial capital
contributions as set forth in Paragraph IV, 1, the General Partner shall
provide additional funding to the Partnership up to such amount as the General
Partner deems in its sole discretion to be necessary to provide operational
cash for the Partnership to produce infomercials offering to the general
public business opportunity products and to conduct three (3) Internet
seminars as reflected in the budget attached hereto as Exhibit B. It is the
intention of the Partners to conduct not less than three (3) initial Internet
seminars. The decision to fund the operations of the Partnership and to fund
one or more Internet seminars shall be made in the sole discretion of the
General Partner. Such future contributions by the General Partner shall be in
the form of capital contributions or loans, at the election of the General
Partner, and shall be delivered to the Partnership when and as needed.
3. NONCASH CONTRIBUTIONS BY THE GENERAL PARTNER. By Agreement with
PRTV, the General Partner has obtained and will contribute the following to
the Partnership:
4. BUSINESS OPPORTUNITY INFOMERCIAL. Subject to the approval rights
of PRTV's endorser agreements, the right to modify the Internet business
opportunity infomercial to promote and advertise Internet Seminars;.
5. INFOMERCIAL TAGS. Subject to the rights of and negotiations with
the owners of past, present and future infomercials if owned by persons or
entities other than PRTV, the right to tag all such infomercials, past,
present and future, with the Internet Mall Address and seminar information, as
appropriate;
6. SEMINAR INFOMERCIALS. When and as opportunities for seminars and
infomercials on topics and programs other than the Internet arise, PRTV, in
its sole discretion and subject to the approval of the Limited Partner, shall
develop, produce and finance such infomercials. The cost of such infomercials
shall be paid initially by the General Partner and thereafter reimbursed by
the Partnership.
7. INTERNET MALL ADDRESS. The General Partner's rights to its
Internet Mall Address for use by the Partnership during its term;
8. Telemarketing and Media Buying. To the Partnership, at the General
Partner's cost as charged by Positive Response Telemarketing, Inc. and
Positive Response Media, Inc. (or such other appointed by General Partner)
which costs shall be no greater than the competitive rates charged by such
entities to third parties;
9. MERCHANT ACCOUNT. PRTV's merchant account and bank references to
process all seminar revenues within forty-five (45) days of the end of each
month, PRTV will remit to the Partnership its share of all merchant account
activity; and
10. QUALITY OF INFOMERCIALS AND TAGS. The Limited Partner may
participate in the formulation of any seminar infomercial or tag by way of
suggestion; however, all final decisions respecting the creation, production
and airing of the infomercial or tag are made solely by the General Partner.
Any revision, modification or changes to an infomercial or tag shall be made
by the General Partner. The General Partner makes no representation whether or
not any particular infomercial or tag will be successful.
11. NONCASH CONTRIBUTIONS BY THE LIMITED PARTNER. The Limited Partner
has obtained and will contribute the following, without limitation, to the
Partnership: iMall will contribute its current and future Internet marketing,
promotion, and seminar materials for use by the partnership. This includes the
iMALL Business Opportunity Kit and Workshop manuals. In addition, the
Partnership will be able to use the iMALL Web Site for its clients.
12. iMALL LOAN OUT OF RICHARD ROSENBLATT. By agreement with iMALL,
Richard is employed exclusively by iMALL and iMALL shall contribute the
services of Richard to, without limitation, appear in the infomercials in
PRTV's sole discretion, conduct seminars, train seminar hosts, develop
computer presentations for seminar speakers, and manage the day-to-day affairs
of the Partnership.
13. MALL PROVIDER. iMALL shall be solely responsible for the
day-to-day operations of the Mall Provider with the General Partner
participating and deciding the material structure related thereto.
14. Seminar Revenues, Costs and Budget. Attached hereto as Exhibit C is a
Projected Seminar Budget for three (3) seminars. The Partnership is being
formed by the General Partner in reliance upon the Projected Seminar Budget.
15. ADDITIONAL AGREEMENTS. Subject to the General Partner's final
written approval, iMALL shall make and obtain all necessary agreements and
arrangements with third parties in connection with the Internet Seminars and
iMALL workshops on behalf of the Partnership for the sole benefit of the
Partnership.
16. CAPITAL ACCOUNT. The Partnership shall maintain a single Capital
Account for each Partner, computed in accordance with the definition of
"Capital Account" in Paragraph XX, 3.
17. RETURN OF CAPITAL. No Partner shall have any right to the return
or withdrawal of its capital contribution until the termination or dissolution
of the Partnership, unless such withdrawal is consented to by all other
Partners or otherwise provided for herein. No Partner shall be personally
liable for the return of all or any portion of the capital contribution to any
other Partner, it being understood that any such return shall be solely from
Partnership assets.
V. INCOME AND LOSS
---------------
1. INCOME. Income which remains after giving effect to any
Regulatory Allocations required under Paragraph XX, 15 shall be allocated to
the Partners in accordance with their Partner Percentages. This calculation
shall be made based upon the following procedure:
(a) The net Income or Loss for any year shall first be allocated
among the various categories of net income for which there are different
Partner Percentages. This allocation shall be made based upon the ratio which
gross sales in the category for a year compares with the aggregate retail
sales for that year. This amount will be multiplied by the Partner Percentage
for each category. The resulting amount will be added to the amount for the
other categories to arrive at the Income to be allocated to each Partner. If
there is Income, the aggregate percentage allocated to the General Partner
will then be compared to the minimum of 50.1% which must be allocated to the
General Partner, and if such amount is less than 50.1%, the allocation to the
Partners will be changed so that 50.1% is allocated to the General Partner,
and 49.9% is allocated to the Limited Partner. The excess of the amount
determined by multiplying 50.1% by the new Income shall hereinafter be
referred to as the "Excess Income Allocation."
(b) an Excess Income Allocation has been provided in one year, subsequent
years losses provided under paragraph V.2 will first offset this Excess Income
Allocation. In addition, in subsequent years if there remains any unoffsetted
Excess Income Allocations, and the allocation of income for that year results
in the General Partner receiving a share of income which is greater than
50.1%, the Limited Partner, prior to any other allocation will be allocated
income equal to the lesser of ( l ) the extent that the General Partner's
share of income exceeds 50.1% and (2) the unoffsetted Excess Income
Allocation.
Attached as Exhibit D is an example of the applications of the procedure.
2. LOSSES. Losses which remain after giving any Regulatory
Allocations required under Paragraphs XX, 15 shall be allocated as follows:
* First, to the General Partner to the extent that the total Losses
allocated under this Paragraph are equal to the cumulative Excess Income
allocated to the General Partner reduced by any income which has already been
applied as an Offset against such amount.
* Second, to the Partners in accordance with their Partner Percentages, in
accordance with the same procedures provided in Paragraph V. 1.
* Third, the Losses allocated pursuant to the immediately preceding bullet
point sentence shall not exceed the maximum amount of Losses that can be so
allocated without causing any Partner who is not a General Partner to have an
Adjusted Capital Account Deficit at the end of any fiscal year. In the event
some, but not all, of the Partners would have had Adjusted Capital Account
Deficits as a consequence of the allocation of Losses pursuant to the
immediately preceding bullet point sentence, the limitations set forth in this
Paragraph shall be applied on a Partner by Partner basis so as to allocate the
maximum permissible Losses to each Partner who is not a General Partner under
Regulations Section 1.704-l(b)(2)(ii)(d). All Losses in excess of the
limitations set forth in this Paragraph shall be allocated to the General
Partner.
VI DISTRIBUTIONS
----------------
1. NET CASH AVAILABLE FOR DISTRIBUTIONS. Net Cash Available for
Distributions will be distributed to each Partner based upon that Partner's
positive Capital Account compared with the aggregate positive Capital Accounts
of all Partners immediately prior to any such distribution. In the event that
Partnership debt renders the Capital Accounts of both Partners negative, the
debt shall be added to each Partner's Capital Account in proportion to each
Partner's Partner Percentage to determine a ratio for allocating distributions
among the Partners.
2. CHARACTER OF DISTRIBUTIONS. No Partner shall be entitled to
receive as a distribution from the Partnership, any Partnership Asset other
than cash.
3. TO WHOM DISTRIBUTIONS MADE. Unless named in this Agreement, or
unless admitted to the Partnership as provided herein, no person shall be
considered a Partner in the Partnership. Each Partner, and any other persons
having business with the Partnership, need only deal with the Partner so named
or so admitted, and shall not be required to deal with any other person by
reason of an assignment or transfer of the legal ownership of the Partnership
Interest of a transferring Partner. Any payment by the Partnership to the
person shown on the Partnership records as a Partner, or to a Partner's legal
representative, or to the transferee of the right to receive Partnership
distributions, shall relieve the Partnership completely of all liabilities to
any other person who may be interested in such payment by reason of a transfer
by a Partner.
4. MINIMUM DISTRIBUTIONS. Each year at a minimum, to the extent that
there is Net Cash Available For Distribution, the Partnership shall distribute
to the Partners by April 15 of the following year an amount equal to the
highest marginal individual tax rate multiplied by the Partnership's income
for that year.
VII REIMBURSEMENT OF EXPENSES AND COMPENSATION TO PARTNERS
-----------------------------------------------------
1. REIMBURSEMENT OF EXPENSES. Partnership shall reimburse the
General Partner and Limited Partner from available Partnership funds for
reasonable and necessary actual expenses incurred by any of them in
furtherance of the Partnership's business.
2. LIMITATIONS ON EXPENSES REIMBURSED TO LIMITED PARTNER. Prior to
incurring any expenses for a seminar, iMALL shall submit a detailed budget for
written approval by the General Partner. To the extent incurred, all expenses
incurred pursuant to an approved budget shall be paid by the Partnership or
reimbursed to iMALL, as the case may be, upon submission of receipts, invoices
or other appropriate documentation. Seminar expenses in excess of those
expressly approved in a budget may be reimbursed if reasonable and necessary.
iMALL shall not incur any capital expenditures for the Partnership except with
the prior written approval of the General Partner.
3. COMPENSATION OF THE PARTNERS. The Partners of the Partnership and
the employees, shareholder and affiliates of any Partner shall only be
entitled to such compensation for Partnership activities as expressly set
forth in this Agreement.
4. COMPENSATION OF GENERAL PARTNER. Except for reimbursement of its
direct expenses which shall all be reimbursed to the General Partner at its
cost, the General Partner shall receive no compensation for its services or
services of its affiliates except as provided in this Agreement.
5. POSITIVE RESPONSE TELEMARKETING, INC. The Partnership may, from
time to time, engage the services of Positive Response Telemarketing, Inc.
("PR Telemarketing"), an affiliate of the General Partner, to provide inbound
and outbound telemarketing services for seminars. Any such engagement of PR
Telemarketing by the Partnership shall be on arm's length terms not greater
than such rates and terms as would be charged to unrelated third parties.
6. POSITIVE RESPONSE MEDIA, INC. The Partnership may, from time to
time, engage the services of Positive Response Media, Inc. ("PR Media"), an
affiliate of the General Partner, to provide media buying services for
infomercials or other advertising for seminars. Any such engagement of PR
Media by the Partnership shall be on arm's length terms not greater than such
rates and terms as would be charged to unrelated third parties.
7. COMPENSATION OF LIMITED PARTNER. The Limited Partner shall
receive no compensation for the services of their employees to the Partnership
except as provided in this Agreement.
8. PAYMENT OF PARTNER COMPENSATION. Affiliates of the General
Partner shall be paid by the Partnership at such times as are customary for
the service being provided.
VIII POWERS AND DUTIES OF AND RESTRICTIONS UPON THE GENERAL PARTNERS
--------------------------------------------------------------
1. AUTHORITY. Except as otherwise herein provided, the General
Partner shall have the sole and exclusive right to manage the business of the
Partnership, and shall have all of the rights and powers which may be
possessed by general partners under the Act.
2. LIABILITY. The General Partner shall in no event be liable to
other Partners for any act or omission performed or omitted to be performed by
the General Partner in good faith and in pursuance of the authority granted to
the General Partner by this Agreement, but shall only be liable to the other
Partners for fraud, willful misconduct or gross negligence.
3. INDEMNIFICATION. The General Partner shall be indemnified by the
Partnership for any act performed by it within the scope of its authority
conferred by this Agreement.
4. INSURANCE. The General Partner shall procure and maintain for the
Partnership a general liability insurance policy with $1,000,000/$2,000,000
limits naming the Partnership as primary insured and the General Partner and
the Limited Partner as additional named insureds.
IX RIGHTS, DUTIES AND POWERS OF THE LIMITED PARTNER
---------------------------------------------------
1. LIABILITY OF THE LIMITED PARTNER. The liability of the Limited
Partner for the losses, debts and obligations of the Partnership shall be
limited to their capital contribution; provided, however, that under the Act
and applicable law, a Limited Partner may, under certain circumstances, be
required to return to the Partnership certain amounts previously distributed
to such Partner as a return of capital.
2. RESTRICTIONS ON THE LIMITED PARTNER. The Limited Partner and its
Representative will be restricted in the actions which it can perform on
behalf of the Partnership. A Limited Partner and its Representative shall not
(i) be permitted to participate in the control of the business of the
Partnership, (ii) have the authority or power in the capacity of a Limited
Partner to act as agent for or on behalf of the Partnership or any other
Partner, (iii) perform any act which would be binding on the Partnership or
any other Partner, or (iv) incur any expenditures on behalf of or with respect
to the Partnership, except as expressly authorized pursuant to this Agreement.
3. Rights of the Limited Partner. Except as specifically provided in this
Paragraph IX,3, the Limited Partner shall have no right to participate in any
matter relating to the management or operation of the Partnership. The
following actions may be taken by the General Partner only with the written
consent of the Limited Partner:
* Perform any act in contravention of this Agreement;
* Perform any act which would make it impossible to carry on the ordinary
business of the Partnership;
* Confess a judgment against the Partnership;
* Admit a Partner except as otherwise provided in this Agreement;
* Compromise the obligation of a Partner to make a contribution or return
money or property distributed in violation of this Agreement or the Act; or
* Dissolve and wind up the Partnership pursuant to the terms and conditions of
this Agreement.
4. LIMITED PARTNER'S INDEMNIFICATION. The Limited Partner, its
receiver, or its trustee shall indemnify, hold harmless, and pay all damages,
judgments, claims and expenses of and against the General Partner or the
Partnership relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by the Limited Partner in connection with
its development of products and conducting the seminars and Internet Workshops
as the Mall Provider. The indemnified amount will include attorneys' fees
incurred by such General Partner and the Partnership in connection with the
defense of any action based on any such act omission.
X TRANSFER OF THE GENERAL PARTNERSHIP INTEREST
----------------------------------------------
1. ADDITIONAL GENERAL PARTNERS. Except as provided in Paragraph XVI,
12, no Person shall be admitted to the Partnership as a General Partner
without the written consent of all of the Limited Partner.
2. ASSIGNMENT OF THE GENERAL PARTNER'S INTEREST. The Interest of the
General Partner in the Partnership may only be assigned with the written
consent of the Limited Partner.
XI TRANSFERS OF LIMITED PARTNERSHIP INTEREST
--------------------------------------------
1. TRANSFER OF LIMITED PARTNER'S INTERESTS. The Limited Partner
shall not assign, sell, or otherwise dispose of an Interest in the Partnership
without the written approval of the General Partner. Any act in violation of
this Paragraph XI, 1 shall be void.
2. DISTRIBUTIONS AND ALLOCATION WITH RESPECT TO TRANSFERRED
INTERESTS. If the Limited Partnership Interest is transferred during any
accounting period in compliance with the provisions of Paragraph XI, 1,
profits, losses, each item thereof, and all other items attributable to
such Interest for such period, shall be divided and allocated between the
transferor and transferee by taking into account their varying interests
during the period in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the General Partner. All
distributions on or before the date of such transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such allocations and distributions, the
Partnership shall recognize such transfer (provided it is a proper transfer
under Paragraph XI, 1) not later than the end of the calendar month during
which it is given notice of such transfer, provided that if the Partnership
does not receive a notice stating the date on which the Interest was
transferred and such other information as the General Partner may reasonably
require within thirty (30) days after the end of the accounting period during
which the transfer occurs, then all the items shall be allocated, and all
distributions shall be made, to the person who, according to the books and
records of the Partnership on the last day of the accounting period during
which the transfer occurs, was the owner of the Interest. The General Partner
shall not incur any liability for making allocations and distributions in
accordance with this Paragraph XI, 2, whether or not it has knowledge of any
transfer or ownership of any Interest.
3. TRANSFERS TO RELATED PARTIES. Paragraph XI, 1 shall not apply to:
The transfer of a Limited Partnership Interest by a Partner who is a
partnership to a partner of such Partner in complete dissolution of such
Partner;
The transfer of a Limited Partnership Interest by a Partner to another Partner
upon the merger of such Partner into the other Partner;
The transfer of a Limited Partnership Interest by gift, bequest, devise or
inheritance outright or in trust.
XII TERMINATION OF THE GENERAL PARTNER
--------------------------------------
1. TERMINATION OF THE GENERAL PARTNER. In addition to the
resignation or withdrawal of the General Partner pursuant to Paragraph XIII,
I, a General Partner shall also cease to be a General Partner upon i) the
dissolution of a General Partner which is a corporation or partnership, ii) an
entry by a court of competent jurisdiction of an order adjudicating the
partner incompetent to manage the General Partner's person or estate, iii) the
filing by or against the General Partner of a proceeding under the Federal
Bankruptcy Act (and in the case of an involuntary proceeding, the failure to
obtain dismissal thereof within sixty (60) days of the filing thereof, and in
the case of a proceeding under Chapter 11 of the Bankruptcy Act, unless the
General Partner continues to operate its business under the bankruptcy laws as
a "debtor in possession"), and iv) as further set forth in the Act.
2. INTEREST OF A TERMINATED OR REMOVED GENERAL PARTNER. If a
remaining, surviving or newly elected General Partner or Partners continues
the business of the Partnership, the interest of a resigning or withdrawing
General Partner, or of a General Partner ceasing to act pursuant to Paragraph
XII (the "ex-General Partner"), shall be converted into the interest of a
Limited Partner, and such ax-General Partner shall:
* Retain the same interest in his capital, profits and distributions as
existed immediately prior thereto, but that interest shall be converted to
that of a Limited Partner;
* Not be personally liable for Partnership debts incurred after the date the
ax-General Partner ceases to act as General Partner; and
* Be entitled to vote as a Limited Partner on all matters that a Limited
Partner may vote on.
XIII RESIGNATION, WITHDRAWAL OR REMOVAL OF A GENERAL PARTNER OR
---------------------------------------------------------
LIMITED PARTNER
----------------
1. RESIGNATION OR WITHDRAWAL OR REMOVAL OF A GENERAL PARTNER. The
General Partner shall not resign or withdraw from the Partnership or assign
any portion of its Interest in violation of Paragraph X, 2 (whether
voluntarily, involuntarily or by operation of law), without (i)obtaining the
written consent of the Limited Partner, (ii) providing one or more successor
general partners (to whom the resigning General Partner shall assign the
General Partner's interest) satisfactory to the to the Limited Partner, and
(iii) delivering to the Partnership an opinion of counsel satisfactory to the
Partnership that such action will net adversely affect the Partnership for
purposes of taxation or applicable federal and state securities laws and
regulations, and will not result in a default under any material agreement by
which the Partnership is bound.
2. RESIGNATION, WITHDRAWAL OR REMOVAL OF A LIMITED PARTNER. The
Limited Partner shall not resign or withdraw from the Partnership as a Limited
Partner without the Consent of the General Partner.
XIV RECORDS, BOOKS, REPORTS AND BANKING
---------------------------------------
1. METHOD OF ACCOUNTING. The Partnership shall keep its accounting
records, and shall report for income tax purposes on the accrual basis.
2. PARTNERSHIP CALENDAR YEAR. The year of the Partnership for
accounting, income tax, and all other purposes, shall be the calendar year;
provided however, that the fiscal year of the Partnership may from time to
time be changed by the General Partner.
3. ANNUAL STATEMENTS. The General Partner shall cause annual
financial statements of the operations of the Partnership to be prepared and
provided to all Partners within one hundred twenty (120) days of the end of
the calendar year. These shall include a balance sheet, a statement of
operations, and such supporting statements and information as the General
Partner deems relevant.
4. BANK ACCOUNTS. The Partnership funds shall be deposited in the
name of the Partnership in one or more banks or savings and loan associations,
and all withdrawals therefrom shall be make upon the General Partner's
signature.
5. INCOME TAX INFORMATION. The General Partner shall provide to each
Partner information on the Partnership's taxable income or loss, and on each
class of income, gain, loss or deduction that is relevant to reporting
Partnership income. The information shall also show each Partner's
distributive share of each class of income, gain, loss or deduction. This
information shall be furnished to the Partners as soon as possible after the
close of the Partnership's taxable year.
6. REQUIRED RECORDS. The General Partner shall maintain or cause to
be maintained at the office of the Partnership all of the following:
A current list of the full name and last known business or residence address
of each Partner, set forth in alphabetical order, together with the value of
the capital contribution and the share in profits and losses of each Partner;
* A copy of the Certificate and all Certificates of Amendment thereto,
together with executed copies of any powers of attorney pursuant to which any
Certificate or Certificate of Amendment has been executed;
* Copies of the Partnership's federal, state and local income tax or
information returns and reports, if any, for the six (6) most recent taxable
years;
* Copies of the original of this Agreement and all amendments thereto;
* Financial Statements of the Partnership for the six (6) most recent fiscal
years; and
* The Partnership's books and records for at least the current and past three
(3) fiscal years. The Partnership's books and records shall include financial
statements for all quarters, showing the cumulative income statement for that
year and the balance sheet as of the end of each quarter.
7. DELIVERY OF RECORDS TO A LIMITED PARTNER. Upon the request of a
Limited Partner, the General Partner shall promptly deliver to that Limited
Partner or to his designated representative, at the expense of the
Partnership, a copy of the information the Partnership is required to maintain
pursuant to Paragraph XIV.
8. RIGHTS OF LIMITED PARTNER TO AUDIT RECORDS. Notwithstanding any
other rights generated by law, the Limited Partner shall have the right to
audit the books and records of the Partnership only once for each fiscal year
and such right must be exercised, if at all, within the twelve (12) calendar
months following the calendar month within which the Partnership Financial
Statements are issued for a fiscal year. Such examination shall be conducted
(i) after the Limited Partner provides the General Partner with at least
thirty (30) days prior written notice of its election to examine the
Partnership's books and records; (ii) during the Partnership's normal business
hours at the place where the General Partner maintains the Partnership's books
and records and (iii) at the Limited Partner's sole cost and expense. If it is
reasonably determined that General Partner has underpaid the Limited Partner
by an amount exceeding seven and one-half percent (7.5%) of the amounts the
Limited Partners should have been distributed based upon the amounts
distributed to the General Partner during the period in question, the General
Partner shall pay the reasonable costs of such examination (which reasonable
cost will not include travel, living and other personal expenses of the
examiner). Any determination that the Partnership has underpaid the Limited
Partner shall not be deemed a breach of this Agreement unless the Partnership
fails to pay the agreed-upon shortfall within the prescribed time period.
9. LIMITATION ON AUDIT RIGHTS. rights granted the Limited Partner
pursuant to Paragraph XIV, 8 shall not include the right to audit the books
and records of PRTV or any of its affiliates or to any documents or papers
that are privileged between the General Partner and its attorneys.
XV LOANS AND ADVANCES
---------------------
1. LOANS BY THE PARTNERS. Any Partner may, from time to time, but
shall not be required to, make loans to the Partnership. Such loans shall bear
interest and be repaid in a manner no less favorable than similar loans then
being made by nationally chartered banks located in the State of California.
Such loans shall not result in an increase in the interest of any lender
Partner in the capital of the Partnership. Such loans shall be prior in right
to the interest of the Partners upon dissolution or termination of the
Partnership.
XVI DISSOLUTION - TERMINATION AND DISTRIBUTION
----------------------------------------------
1. DISSOLUTION. The Partnership shall be dissolved upon the first
to occur of any of the following events:
2. EXPIRATION OF TERM. Expiration of the term of the Partnership as
provided in Paragraph 3;
3. LACK OF BUSINESS. Election by the General Partner, if the General
Partner determines in good faith that the business of the Partnership cannot
be continued profitably or that sufficient insurance coverage is not available
to properly protect the Partnership and its Partners;
4. SALE OF SUBSTANTIALLY ALL OF PARTNERSHIP PROPERTY. A Distribution
by the Partnership of all or substantially all of the Partnership properties;
provided, however, if a promissory note or deferred payment is received in
exchange for the Partnership Properties, the Limited Partner shall have the
right to elect not to dissolve the Partnership so long as deemed advisable to
receive payments on the promissory note or deferred payment;
5. BY WRITTEN CONSENT. Election by the General Partner and written
consent of the Limited Partner to dissolve the Partnership;
6. BY OPERATION OF LAW. Termination required by operation of law;
7. ACTS OF GENERAL PARTNER. The bankruptcy or dissolution (except by
way of merger, consolidation or corporate reorganization) of the General
Partner; or
8. GENERAL PARTNER CEASES TO BE GENERAL PARTNER. The General Partner
ceases to be the General Partner of the Partnership pursuant to this
Agreement, unless the Limited Partner consents to carry on the business of the
Partnership pursuant to Paragraph XVI, 1.
9. WINDING UP. Upon dissolution of the Partnership, provided that
the Partners do not elect to continue the business of the Partnership in
accordance with this Agreement, the General Partner, or, if there be none, a
liquidator whose appointment is approved by the Limited Partner, shall file a
Certificate of Dissolution in accordance with the Act in the Office of the
California Secretary of State, and shall wind up the affairs and liquidate the
assets of the Partnership. The winding up of the affairs of the Partnership
and the distribution of its assets shall be conducted exclusively by the
General Partner (or authorized liquidator), who is hereby authorized to do any
and all acts and things authorized by law for these purposes. The Partners
shall continue to share in profits and losses of the Partnership in the same
ratio as profits and losses of the Partnership were divided prior thereto. The
proceeds from liquidation of the Partnership assets shall be distributed in
the following order:
* First, to satisfy all Partnership debts and liabilities to persons other
than Partners;
* Second, to satisfy all debts and liabilities to the Partners; and
* Third, after all such liabilities have either been discharged or adequately
provided for, the remaining assets of the Partnership shall be distributed to
the Partners in accordance with their positive Adjusted Capital Account
balances (computed after making all allocations required pursuant to Paragraph
V).
The Limited Partner shall look solely to the assets of the Partnership for the
return of the Limited Partner's contribution. If the Partnership Properties
remaining after discharge of the debts and liabilities of the Partnership are
insufficient to return the contribution of the Limited Partner, the Limited
Partner shall have no recourse against the General Partner. Upon completion of
the winding up of the Partnership affairs, the General Partner (or authorized
liquidator) shall execute and file in the Office of the California Secretary
of State, a Certificate of Cancellation of the Certificate.
10. DEFICIT MAKEUP BY THE GENERAL PARTNER. Notwithstanding anything
herein to the contrary, upon the ultimate liquidation of the Partnership, if
the General Partner has an Adjusted Capital Account Deficit, such General
Partner shall be required to make a Capital Contribution equal to such
deficit. Such Capital contribution shall be made no later than the end of the
taxable year of the Partnership in which the Partnership is liquidated or, if
later, within ninety (90) days of such liquidation.
11. ELECTION TO CARRY ON BUSINESS BY THE REMAINING GENERAL PARTNER.
In the event a General Partner ceases to act as a General Partner at any time
and there is a remaining or surviving General Partner(s), the remaining or
surviving General Partner(s) shall carry on the business of the Partnership
and the Partnership shall not be dissolved.
12. ELECTION TO CARRY ON BUSINESS BY THE REMAINING LIMITED PARTNER.
In the event a General Partner 1) withdraws as General Partner or 2) ceases to
serve as a General Partner as a result of any of the events described in
Paragraph XIII, 1, when there is no remaining or surviving General Partner, if
the Limited Partner consents in writing both to continue the business of the
Partnership and to admit a new General Partner, the new General Partner will
be admitted to the Partnership as a General Partner and the partnership will
not be dissolved.
XVII TAX MATTERS PARTNER
------------------------
1. The Limited Partner hereby appoints and designates the General
Partner as the Tax Matters Partner of the Partnership, as such term is defined
under the Code. Any action taken by the General Partner in connection with
audits of the Partnership under the Code will be binding upon all the
Partners. No Partner may treat any Partnership item on the Partner's income
tax return inconsistently with the treatment of the item on the Partnership
return, and no Partner may act independently with respect to tax audits or tax
litigation affecting the Partnership, unless previously authorized to do so in
writing by the Limited Partner.
XVIII TAX ELECTIONS
-------------------
1. 754 ELECTIONS. In the event of a transfer of a Partner's Interest
or. upon the death of a Partner, the General Partner may (but shall not be
required to) file an election in accordance with Code Section 754 and
applicable Treasury Regulations, to cause the basis of Partnership Properties
to be adjusted for federal income tax purposes, as provided in Sections 734
and 743 of the Code. Each Partner shall, upon the request of the General
Partner, execute all documents necessary or convenient to accomplish said
election. Any expenses connected with the making of such election, including
the legal and accounting costs in connection therewith, in the initial year or
any subsequent year, may, at the General Partner's discretion, be charged to
the transferee of any interest and may offset such charge against
distributions to which such transferee is otherwise entitled.
2. OTHER ELECTIONS. The General Partner may make such other elections
as the General Partner deems appropriate.
IXX EXECUTION IN COUNTERPARTS
-----------------------------
1. This Agreement may be executed in any number of counterparts with
the same effect as if all parties hereto had signed the same document. All
counterparts shall be construed together and shall constitute one instrument.
XX REGULATORY PROVISIONS\DEFINITIONS
------------------------------------
1. "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any
Limited Partner, the deficit balance, if any, in such Partner's Capital
Account as of the end of the relevant fiscal year, after giving effect to the
following adjustments:
* Credit to such Capital Account any amounts which such Partner is obligated
to restore pursuant to any provision of this Agreement, or is deemed to be
obligated to restore pursuant to Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
* Debit to such Capital Account the items described in Regulations Sections 1.
704-1 (b)(2)(ii)(d)(4), 1. 704-1 (b)(2)(ii)(d)(5), and 1. 704-1 (b)(2)(ii)
(d)(6).
The foregoing definition of"Adjusted Capital Account Deficit" is intended
to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d), and
shall be interpreted consistently therewith.
2. "ADJUSTED CAPITAL CONTRIBUTION" means, as of any day, a Partner's
Capital Contribution, adjusted as follows:
* Increased by the amount of any Partnership Liabilities which in connection
with distributions pursuant to Paragraphs VI and XVI, are assumed by such
Partner, or are secured by any Partnership Properties distributed to such
Partner;
* Increased by any amounts actually paid by such Partners to any Partnership
lender pursuant to the terms of any assumption agreements;
* Reduced by the amount of cash and the Gross Asset Value of any Partnership
Properties distributed to such Partner pursuant to Paragraphs VI and XVI, plus
the amount of any liabilities of such Partner assumed by the Partnership or
which are secured by any Properties contributed by such Partner to the
Partnership. In the event that a Partner transfers all or a portion of his
Partnership Interest in accordance with the terms of this Agreement, his
transferee shall succeed to the Adjusted Capital Contribution of the
transferor to the extent it relates to the transferred Partnership Interest.
3. "CAPITAL ACCOUNT" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following
provisions:
3.1 To each Partner's Capital Account there shall be credited
such Partner's Capital Contribution, such Partner's distributive share of
Profits, any items in the nature of income or gain which are allocated
pursuant to Paragraph V and Paragraph XX, 15, and the amounts of any
Partnership liabilities assumed by such Partner or which are secured by any
Properties distributed to such Partner; and
3.2 To each Partner's Capital Account, there shall be debited the
amount of cash and the Gross Asset Value of any Properties distributed to such
Partner pursuant to any provision of this Agreement, such Partner's
distributive share of Losses, any item in the nature of expenses or losses
allocated pursuant to Paragraph V and XX, 15, and the amounts of any
liabilities of such Partner assumed by the Partnership, all of which are
secured by any Properties contributed by such Partner to the Partnership.
3.3 In the event all or a portion of an Interest in the
Partnership is transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred Interest. In determining the amount of
any liability for purposes of Paragraph 3.1 and 3.2, there shall be taken into
account Code Section 752(C), and any applicable provisions of the Code and
Regulations.
3.4 The foregoing provisions, and all provisions of this
Agreement relating to the maintenance of Capital Accounts, are intended to
comply with Regulations Section 1.704-(b), and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the General
Partner shall determine that it is prudent to modify the manner in which the
Capital Accounts or any debits or credits thereof (including, without
limitations, debits and credits relating to liabilities which are secured by
contributed or distributed Properties, or which are assumed by the Partnership
or Partners), are computed in order to comply with such Regulations, the
General Partner may make such modification, provided that it is not likely to
have a material effect on the amounts distributed to any Partner pursuant to
Paragraphs VI or XVI. The General Partner shall (i) make any adjustments that
are necessary or appropriate to maintain equality between the Capital Accounts
of the Partners and the amount of Partnership Capital reflected on the
Partnership's Balance Sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-l(b)(2)(iv)(q), and (ii) make any appropriate
modification in the event unanticipated events might otherwise cause this
Agreement not to comply with the Regulations Section 1.704-l(b).
4. "CAPITAL CONTRIBUTION" means, with respect to any Partner, the
amount of money and the Initial Gross Asset Value of any property (other than
money) contributed to the Partnership with respect to the Interests in the
Partnership held by such Partner. The principal amount of a promissory note
which is not readily tradable on an established securities market, and
which is contributed to the Partnership by the maker of the note, should not
be included in the Capital Account of any Partner until the Partnership makes
a taxable disposition of the note or until (and to the extent) principal
payments are made on the note, all in accordance with Regulations Section
1.704-l(b)(2)(iv)(d)(2).
5. "DEPRECIATION" means for each fiscal or other period, an amount
equal to the depreciation, amortization, or other cost recovery deductions
allowable with respect to an asset for such year or other period, except that
if the Gross Asset Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such year or other period,
Depreciation shall be in an amount which bears the same ratio as such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other
beginning adjusted tax basis; provided, however, that if the federal income
tax depreciation, amortization, or other cost recovery deductions for such
year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value or any reasonable method selected by the General
Partner.
6. "GROSS ASSET VALUE" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
6.1 The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such asset,
as determined by the contributing Partner and the Partnership;
6.2 The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
the General Partner as of the following times:
6.3 The acquisition of an additional Interest in the Partnership
by any new or existing Partner in exchange for more than a de minimis Capital
Contribution;
6.4 The distribution by the Partnership to a Partner of more than
a de minimis amount of Properties as consideration for an Interest in the
Partnership; and
6.5 The liquidation of the Partnership within the meaning of
Regulations Section 1.704-l(b)(2)(ii)(g); provided, however, that adjustments
pursuant to causes contained in Paragraphs XX 6.1 and 6.2 above, shall be made
only if the General Partner reasonably determines that such adjustments are
necessary or appropriate to reflect the relative economic interests of the
Partners in the Partnership;
6.6 The Gross Asset Value of any Partnership asset distributed to
any Partner shall be the gross fair market value of such asset on the date of
distribution; and
6.7 The Gross Asset Value of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only
to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-l(b)(2)(iv)(m) and
Paragraph XX,12; provided, however, that the Gross Asset Values shall not be
adjusted pursuant to this Paragraph XX, 6.7 to the extent that the General
Partner determines that an adjustment pursuant to this Paragraph XX, 6.2 is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this Paragraph XX, 6.7. If the Gross Asset
Value of an asset has been determined or adjusted pursuant to any of
Paragraphs XX, 6.1, 6.2 or 6.4 such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such assets
for purposes
7. "NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Section 1.704-2(b)(1).
8. "NONRECOURSE LIABILITY" has the meaning as set forth in
Regulations Section 1.704-2(b)(3).
9. "PARTNER NONRECOURSE DEBT" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
10. "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulation Sections 1.704-2(i)(1) and 1:704-2(i)(2).
11. "PARTNER NONRECOURSE DEBT MINIMUM GAIN" means the amount, with
respect to each Partner Nonrecourse Debt equal to Partnership Minimum Gain,
that would result if such Partner Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Regulations Section
1.704-2(i)(3).
12. "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
13. REGULATORY ALLOCATIONS. The following special allocations shall
be made in the following order:
14. MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding any other provision of
Paragraph V and this Paragraph XX, if there is a net decrease in Partnership
Minimum Gain during any Partnership fiscal year, each Partner shall be
specially allocated items of Partnership income and gain for such year (and if
necessary, subsequent years) in an amount equal to such Partner's share of the
net decrease in Partnership Minimum Gain, determined in accordance with
Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Sections 1.704-2(f)(6) and
1.704-2(j)(2). This Paragraph XX is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.704-2(f), and shall be
interpreted consistently therewith.
15. PARTNERSHIP MINIMUM GAIN CHARGEBACK. Except as otherwise provided
in Regulations Section 1.704-2(i)(4), notwithstanding any other provision of
Paragraph V and this Paragraph XX, 15 if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse Debt
during any Partnership fiscal year, each Partner who has a share of the
Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Section 1.704-2(i)(5), shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years)in an amount equal to such Partner's share of the
net decrease in Partner NonrecourseDebt Minimum Gain attributable to such
Partner's Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amount required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This
Paragraph XX,15 is intended to comply with the minimum gain chargeback
requirement in Regulations Section 1.704-2(i)(4), and shall be interpreted
consistently therewith.
16. QUALIFIED INCOME OFFSET. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Regulations Sections 1.704-l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5), or
1.704-l(b)(2)(ii)(d)(6), items of Partnership income and gain shall be
specially allocated to each Partner in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of such Partner as quickly as possible, provided that an
allocation pursuant to this Paragraph XX, 16 shall be made only if and to the
extent that such Partner would have an Adjusted Capital Account Deficit after
all allocations provided for in this Paragraph XX, 16 had been tentatively
made, as if this Paragraph XX, 16 were not in this Agreement.
17. GROSS INCOME ALLOCATION. In the event the Limited Partner has a
deficit Capital Account at the end of any Partnership fiscal year which is in
excess of the sum of (A) the amount that such Limited Partner is obligated to
restore pursuant to any provision of this Agreement, and (B) the amount such
Limited Partner is deemed to be obligated pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), the Limited
Partner shall be specially allocated items of Partnership income and gain in
the amount of such excess as quickly as possible, provided that an allocation
pursuant to this Paragraph XX, 17 shall be made only if and to the extent that
such Partner would have had a deficit Capital Account in excess of such sum
after other allocations provided for in this Paragraph XX have made, as if
Paragraph XX, 20 and this Paragraph XX, 17 were not in this Agreement.
18. NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any fiscal
year or other period shall not be specially allocated among the Partners.
19. PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any fiscal year or other period shall be specially allocated to
the Partner who bears the economic risk of loss with respect to such Partner
Nonrecourse Debt to which such Partner's Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(1).
20. CODE SECTION 754 ADJUSTMENT. To the extent an adjustment to the
adjusted tax basis of any Partnership Assets pursuant to Code Sections 734(b)
or 743(b) is required, pursuant to Regulations Sections 1.704-l(b)(2)(iv)
(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts shall
be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such gain or loss
shall be specially allocated to Partners in accordance with their interests in
the Partnership in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Partner to whom such distribution was made in the event
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
21. ALLOCATIONS RELATING TO TAXABLE ISSUANCE OF PARTNERSHIP
INTERESTS. Any income, gain, loss or deduction realized as a direct or
indirect result of the issuance of an Interest by the Partnership to a Partner
(the "Issuance Items") shall be allocated among the Partners so that, to the
extent possible, the net amount of such Issuance Items, together with all
other allocations under this Agreement to each Partner, shall be equal to the
net amount that would have been allocated to each such Partner if the Issuance
Items had not been realized.
22. CURATIVE ALLOCATIONS. The allocations set forth in Paragraphs V
and XX (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Partners that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss or deductions pursuant to this Paragraph XX,
22. Therefore, notwithstanding any other provision of Paragraph V and this
Paragraph XX, 22 (other than the Regulatory Allocations), the General Partner
shall make such offsetting special allocations of Partnership income, gain,
loss or deduction in whatever manner it determines appropriate so that, after
such offsetting allocations are made, each Partner's Capital Account balance
is, to the extent possible, equal to the Capital Account balance such Partner
would have had if the Regulatory Allocations were not part of the Agreement
and all Partnership items were allocated pursuant to Paragraph V.In exercising
its discretion under this Paragraph XX, 22, the General Partner shall take
into account future Regulatory Allocations under Paragraphs XX, 14 and 15
that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Paragraphs XX, 20 and 21.
23. TAX ALLOCATIONS: CODE SECTION 704(c). In accordance with Code
Section any property contributed to the Partnership shall, solely for tax
purposes, be allocated among the Partners so as to take into account any
variation between the adjusted basis of such property to the Partnership for
federal income tax purposes and its initial Gross Asset Value (computed in
accordance with Paragraph XX, 8.
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Paragraph XX, 6.2, subsequent allocations of income, gain, loss,
and deductions with respect to such assets, shall be taken in account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the regulations thereunder.
Any elections or other decisions related to such allocations shall be
made by the General Partner in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Paragraph XX, 23
are solely for purposes of federal, state and local taxes and shall not affect
or any way be taken into account in computing any partner's capital account or
share of Profits, Losses, other items, or distributions, pursuant to any
provision of this Agreement.
XXI POWER OF ATTORNEY
---------------------
1. APPOINTMENT OF THE GENERAL PARTNER. The undersigned Limited
Partner hereby constitute and appoint the General Partner, with full power of
substitution, their true and lawful attorney for them, in their place and
stead, for their use and benefit to sign, file and record all Certificates,
instruments and/or documents, including counterparts thereof which the General
Partner deems necessary and appropriate, to form, qualify, continue, dissolve
or terminate Superhighway Partners L.P. as a Limited Partnership (or the
equivalent thereof under local law) in all jurisdictions in which Superhighway
Partners L.P. does business, including, but not limited to, the following:
* Any Fictitious Business Name statements that are required by law;
* Any amendments or modifications to this Agreement;
* Any Certificates or other instruments which may be required to be filed by
Superhighway Partners L.P. under the laws of the State of California, or by
any other government entity, or which the General Partner deems advisable to
file; and
* Any documents which may be required to effect the continuation of
Superhighway Partners L.P., the admission of an additional Limited Partner, or
the dissolution or termination of Superhighway Partners L.P., provided such
continuation, admission, dissolution or termination is according to the terms
of this Agreement.
2. SPECIAL POWER. The foregoing grant of authority.
* Is a special grant of attorney, coupled with an interest, is irrevocable,
and shall survive the dissolution of the Limited Partner;
* May be exercised by the General Partner for the Limited Partner by facsimile
signature of the General Partner, or by listing the Limited Partner and
executing any instrument with a single signature of the General Partner for
all of them; and
* Will survive the transfer of a permitted assignment by the Limited Partner
of the whole or any portion of a Limited Partner's interest in Superhighway
Partners L.P.
3. CONFLICT. In the event of any conflict between the provisions to
this Agreement and any document executed or filed by the General Partner
pursuant to the Power of Attorney granted in this Paragraph XXI, this
Agreement will govern.
XXII MISCELLANEOUS
-------------
1. GOVERNING LAW. All questions with respect to the construction of
this Agreement and the rights and liabilities of the parties hereto shall be
determined in accordance with the applicable provisions of the laws of the
State of California.
2. BINDING ON SUCCESSORS. This Agreement shall inure for the benefit
of and be binding upon the parties hereto and their permitted assigns and
successors in interest.
3. VALIDITY. The invalidity of any portion of this Agreement shall
not affect the validity of the remainder of this Agreement.
4. CAPTIONS. Any section or paragraph title or caption contained in
this Agreement is for convenience only and shall not be deemed a part of this
Agreement.
5. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the General Partner and the Limited Partner, and
supersedes any prior written or oral agreements between them respecting the
within subject matter.
6. GENDER. As used in this Agreement, the masculine, feminine or
neuter gender, and the singular or plural number, shall each be deemed to
include the others wherever the context so indicates.
7. FURTHER DOCUMENTS. Each Partner shall, after demand by the
General Partner, promptly perform any further acts, and execute, acknowledge
and deliver any documents which may be reasonably necessary to carry out the
provisions or purposes of the Partnership or of this Agreement.
8. CHOICE OF LAW/DISPUTES. This Agreement shall be governed by and
interpreted in accordance with the Laws of the State of California. In the
event of any dispute under or relating to the terms of this Agreement or any
breach thereof, the same shall be settled by any court in the county of Los
Angeles having competent jurisdiction, and judgment upon any award rendered
may be entered in any court in the county of Los Angeles having jurisdiction
thereof.
9. PARTNER RIGHT TO BRING ACTION. Any Partner may bring an action to
resolve any matters pertaining to the partnership without the necessity of
including an action for accounting and dissolution.
10. REPRESENTATION BY COUNSEL. Each of the parties hereto has been
represented by counsel in connection with the execution of this Agreement. The
original draft of this Agreement has been drafted by counsel for the General
Partner who has represented the General Partner and not the Partnership. This
Agreement shall not be construed in favor of or against a party by reason of
its participation or lack of participation of that party or its counsel in
drafting this Agreement, any provision or term of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
LIMITED PARTNER:
- ----------------
iMALL, INC., a Nevada corporation
BY: /s/ Richard Rosenblatt
------------------------
ITS: Senior Vice-President
----------------------
GENERAL PARTNER:
- ----------------
POSITIVE RESPONSE SEMINARS, INC.
BY: /s/
-------------
ITS: Corporate Secretary
-------------------
APPROVED AND AGREED TO THE EXTENT THIS AGREEMENT
IS EXPRESSLY APPLICABLE TO THE UNDERSIGNED:
POSITIVE RESPONSE TELEVISION, INC.
BY:/s/
-------------------------------
ITS: Vice President Business Affairs
-------------------------------
/s/ Richard Rosenblatt
- ----------------------
Richard Rosenblatt
<PAGE>
LIST OF EXHIBITS
Exhibit A Business opportunity products, seminars and Internet workshops
Exhibit B Additional Cash Contributions
Exhibit C Projected Seminar Budget
Exhibit D Example of applications of Excess Income Allocation procedure
<PAGE>
EXHIBIT A
Business opportunity products, seminars and Internet workshops
TO BE DETERMINED
EXHIBIT B
Additional Cash Contributions
TO BE DETERMINED
EXHIBIT C
iMall Consulting, Inc.
Cost of Goods Sold Analysis - Per Attendee
%
-----
Seminar Price: Per Unit $2,995.00 100%
---------
Direct Costs:
Preview Crew Commissions $209.63
Road Crew Commission 78.00
Road Crew Salary 10.50
Workshop Speaker Commissions 71.05
Service Bureau 200.00
Attendee Travel/Meals 145.00
Hotel/Banquet Room - Preview 65.00
Hotel/Banquet Room - Workshop 85.29
Manuals/Misc. 25.00
----------
TOTAL DIRECT COSTS: $889.49 29.70%
----------
CONTRIBUTION MARGIN: $2,105.51 70.30%
----------
NOTE 1: These costs are averages based on our Internet Seminar experience
during 1996. We are continually trying to streamline processes and costs
where possible.
NOTE 2: Per the agreement, we are not including any direct Advertising or O&A
cost in these figures.
EXHIBIT D
EXAMPLE: ALLOCATION
If, for a given year:
- --------------------
Partnership Net Income $100,000
Gross Sales Income:
Basic Product $100,000 18.18% 18,182
Deluxe Product 50,000 9.10% 9,090
Internet + Seminar 200,000 36.36 36,364
Internet w/out Seminar 200,000 36.36% 36,364
------- ------
$550,000 $100,000
STEP 2: Allocate income based on Partner Percentage.
GENERAL LIMITED INCOME TO GENERAL LIMITED
PARTNER PARTNER BE PARTNER PARTNER
PERCENTAGE PERCENTAGE ALLOCATED ALLOCATION ALLOCATION
---------- ---------- --------- ---------- ----------
Basic Produce 75% 25% $ 18,182 $ 13,636 $ 4,546
Deluxe Product 50% 50% 9,090 4,545 4,545
Internet +
Seminar 25% 75% 36,364 9,091 27,273
Internet w/out
Seminar 50% 50% 36,364 18,182 18,182
--------- ---------- --------- ---------- ----------
45.45% 54.54% $100,000 $45,454 $54,545
STEP 3: Compare percentages with minimum percentages which must be allocated;
if percentage is less, apply 50.1% for General Partner and 49.9% for Limited
Partner.
An allocation of 45.45% to the General Partner is less than the required
minimum of 50.1%; therefore, the minimum applies, and the income is allocated
as follows:
General Partner 50.1% $ 50,100
Limited Partner 49.9% 49,900
----- --------
100% $100,000
Excess Income Allocation $ 4,646
Exhibit 10.3
MEMORANDUM OF UNDERSTANDING
Whereas, Softbank Interactive Marketing, (SIM) 2361 Rosecrans Avenue,
Suite 275, El Segundo, CA 90245 and iMALL, Inc. (iMALL), 4400 Coldwater Canyon
Boulevard, Suite 200, Studio City CA, 91604 mutually desire to enter into a
joint test of a business model in preparation for the potential formation of a
continuing joint business venture (Venture) to offer for direct sale certain
categories and classifications of Products to Internet users, therefor, the
parties agree as follows:
1. TERM: The term of the initial test period and agreement shall commence
upon the execution of this Agreement and end on June 30, 1997. It is the
intention of the parties that the first product will be offered for sale to
the public under this test on or about January 15, 1997. It is also agreed
that on or before April 15, 1997 the parties shall enter into good faith
negotiations to potentially extend this agreement between them on the same
terms and conditions as set forth herein for a period of at least One (1)
additional year.
2. NAME: The Test and the venture shall be a joint venture conducted under
the name "(SIM/iMALL Venture)".
3. DESCRIPTION: It is the intention of the parties to conduct a direct
response sales business over the Internet, using banner advertising space
acquired under a Pay Sale model which offers "impulse" sale products of a type
typically sold in Television Direct Response Advertising, which the venture
acquires at a greater than 50% discount from the offered retail pricing. the
parties further intend that the average price point of such products will be
not more than $50.00 and that all products will be offered with a 100% thirty
day money back guarantee. The parties shall jointly conduct and exploit the
sale of such products, including creation of such ancillary businesses as
buyers clubs for this category of product and other such ancillary ventures as
they may hereafter jointly agree to create. However, nothing contained herein
shall be construed as restricting or implying a restriction on the ability of
either party to separately conduct or startup a transactional business
separate and apart from this venture that is directly competitive with the
others Core Business and each recognizes that they are governed by the terms
and conditions of a mutual non-disclosure agreement previously executed.
Notwithstanding the foregoing, the parties agree to meet from time to time as
appropriate to discuss the possible joint expansion of the scope and nature of
this venture into other areas or categories of product or sales.
4. DUTIES: SIM shall be responsible for providing the following services and
capabilities to the Venture:
a) SIM shall use its best efforts to secure unsold but viewed page
advertising availabilities on a variety of Web Sites for the publication and
distribution of banner advertisements featuring the products to be sold by the
Venture, in a quantity of at least 20 million pages per month. SIM shall use
its client contacts, relationships and resources to secure such pages for the
venture on the basis that each Web Site shall be compensated by receiving a
percentage of the Sales of products off its pages according to the business
model agreed to by the parties and set forth in paragraph 6 of this
memorandum.
b) SIM shall prepare all agreements, negotiate all deals and service the
affiliate relations requirements of the Web site participants during the term
of the Venture at its cost and expense.
SIM shall provide Marketing and Merchandising support for the Venture in the
form of creative sales and merchandise input from its Marketing Products Group
and other SIM personnel.
c) SIM shall provide marketing and merchandising support for the Venture
in the form of creative sales and merchandise input from its marketing
products group and other SIM personnel.
c) iMALL shall provide the programming for the banner advertisements as
well as the links between Banner advertisements and order entry pages; between
order entry pages and the product list pages; between order entry pages and
contest entry pages, advisory board pages, mailing list pages, etc. iMALL
shall also provide programming to make the order entry process convenient and
user friendly, including without limitation Zip Code check programs, credit
cad verification algorithms, reminders to fill in blanks, secure commerce
icons and messages, memory copy and fill in for key information so the
customer does not have to repeat name or credit card insertion, etc., sales
tax calculation programs, autosum programs for sales totals and taxes,
including recognition of quantity discounts and shipping and handling charges,
all at its cost and expense.
d) iMALL shall provide creative input into graphic design, layout, copy
presentation and web publishing technologies and process relating to banner
ads, order entry pages and all other HTML or VRML or other web publishing done
by the Venture.
e) iMALL shall participate in the in the sourcing and selection of
Product to be offered for sale and shall use its best efforts to help supply
the Venture with an effective product mix.
f) iMALL shall provide marketing and merchandising support for the
Venture in the form of creative sales and merchandise input, including data
from its Internet iMALL business.
g) IMALL shall participate in the design and creation of Brand Identity
and promotional concepts for the Venture and in support of the product sales.
h) IMALL shall provide the Venture at its cost and expense with a
location on the iMALL for the display of its products.
In consideration of these undertakings IMALL shall be entitled to receive
forty five percent (45%) of the Net profits from the sale of products by the
Venture as defined in paragraph 7 below, expect it shall receive 50% of sales
generated by direct visits to the Venture location within the iMALL.
5. MANAGEMENT: SIM and iMALL shall jointly operate and manage this Venture in
its test and subsequent phases and shall jointly agree on all creative and
business decisions after good faith discussion. Richard Rosenblatt for iMALL
and Alan Gerson for SIM shall jointly direct the Venture, unless and until
either of them is replaced by iMALL in the case of Richard Rosenblatt, or SIM
in the case of Alan Gerson.
6. BUSINESS MODEL: The provisions of any other paragraph of this agreement to
the contrary notwithstanding, the business model to be tested will be as
follows:
Average Price Point of Initial Package Sale- $37.50
Average Click Thru Percentage (minimum)- 1.5%
Average Sale Percentage From Click Thru (minimum)- 2%
Chargebacks, Returns, Refunds, (maximum)- 10% of Gross Sales
Costs of Goods (Average)-43% of Retail Price Point Offered
Costs of Distribution - 20% of Adjusted Gross Sales (Gross Sales less
Chargebacks, Returns, Refunds)
Cost of Sales to Venture (maximum)-5%
Upsell or Additional Unit Target- 15% of total units sold at 15% operating
profit margin
Shipping & Handling Profit Target-$0.95 per package shipped
7. DEFINITION OF NET PROFITS: Net profits of the Venture shall be defined as
gross revenues from sales of products and shipping and handling revenue
received by the Venture; less chargebacks, refunds and returns, and less cost
of goods, and less cost of sales chargeable to the Venture, and less cost of
distribution/banner inventory acquisition chargeable to the Venture, and less
actual cost of shipping and handling, and less any other charges to the
Venture agreed upon by both parties.
8. ENTIRE AGREEMENT: This memorandum constitutes the entire agreement between
the parties regarding the subject matter hereof. All prior understandings,
whether written or oral are superseded hereby. No purported modification or
amendment to this Agreement will be effective unless made in writing and
signed by the parties.
9. CHOICE OF LAW: This Agreement shall be governed by, construed and enforced
in accordance with the laws of the State of California.
10. ASSIGNMENT: Neither party shall assign any of its rights or obligations
hereunder, except to any Affiliate or successor in interest, without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld.
11. SEVERABILITY: If any provision of this agreement is found to be
unenforceable, the remainder shall be enforced as fully as possible and the
unenforceable provisions shall be deemed modified to the limited extent
required to permit its enforcement in a manner most closely representing the
intention of the parties as expressed herein.
ACCEPTED AND AGREED:
SOFTBANK Interactive Marketing, Inc.
By /s/ Alan H. Gerson
---------------------
Alan H. Gerson, President, Marketing Products Group
iMALL, Inc.
By /s/ Richard Rosenblatt
---------------------------
Richard Rosenblatt, Executive Vice President and Co-Founder
Dated: As of December 20, 1996
EXHIBIT 21
The subsidiaries of the Company and their respective
states of organization are listed below.
iMall Consulting, Inc., a Utah corporation
iMall Services, Inc., a Nevada corporation
The Internet Yellow Pages, Inc., a Utah corporation
PhysiComp, Inc., a California corporation
Cabot, Richards & Reed, Inc., a Utah corporation
R&R Advertising, Inc., a California corporation
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion of all of the audited financial
statements which we prepared of Madison, York & Associates, Inc.,
Cabot Richards & Reed, Inc., R & R Advertising, Inc., and iMall,
Inc. (the "Company"), in the Company's registration on Form 10 to
be filed with the Securities and Exchange Commission.
Salt Lake City, Utah
January 30, 1997
/s/ Crouch, Bierwolf & Chisholm
--------------------------------
Crouch, Bierwolf & Chisholm
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 321,513
<SECURITIES> 0
<RECEIVABLES> 218,641
<ALLOWANCES> 43,833
<INVENTORY> 142,259
<CURRENT-ASSETS> 1,055,975
<PP&E> 1,370,314
<DEPRECIATION> 254,809
<TOTAL-ASSETS> 2,443,389
<CURRENT-LIABILITIES> 1,004,895
<BONDS> 42,234
0
0
<COMMON> 60,489
<OTHER-SE> 1,335,771
<TOTAL-LIABILITY-AND-EQUITY> 2,443,389
<SALES> 12,601,116
<TOTAL-REVENUES> 12,601,116
<CGS> 6,383,369
<TOTAL-COSTS> 10,983,792
<OTHER-EXPENSES> 35,553
<LOSS-PROVISION> 33,835
<INTEREST-EXPENSE> 0
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