SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-28530
AMERICAN CAREER CENTERS, INC.
(Name of small business issuer in its charter)
Nevada 87-0636498
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2490 South 300 West, South Salt Lake City, Utah 84115
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (801) 485-6200
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0001 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___
Check if disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment
to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $765,411.
The aggregate market value of the voting and non-voting common
equity held by non-affiliates, based upon the average bid and
asked prices of the issuer's common stock on March 27, 2000 was
$0. Shares of common stock held by each officer and director
and by each person who owns 5% or more of the outstanding common
stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares outstanding of the issuer's common stock, as
of March 27, 2000, was 5,902,500.
AMERICAN CAREER CENTERS, INC.
FORM 10-KSB
TABLE OF CONTENTS
ITEM No. Page
PART I
ITEM 1. DESCRIPTION OF BUSINESS 1
ITEM 2. DESCRIPTION OF PROPERTY 5
ITEM 3. LEGAL PROCEEDINGS 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 5
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN
OF OPERATIONS 7
ITEM 7. FINANCIAL STATEMENTS 9
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 9
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT 10
ITEM 10. EXECUTIVE COMPENSATION 12
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 15
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 16
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND SCHEUDLES,
AND REPORTS ON FORM 8-K 16
FORWARD LOOKING STATEMENTS
When used in this Form 10-KSB or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or
other public or shareholder communications, or in oral statements made
with the approval of an authorized executive officer, the words or phrases
"would be", "will be", "will allow", "intends to", "will likely result",
"are expected to", "will continue", "is anticipated", "estimate", "project",
or similar expressions are intended to identify "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made, and
to advise readers that these statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels
of activity, performance or achievements to be materially different from
those anticipated. Such factors include the availability of sufficient
financing to implement the Company's plan of operation, acceptance in the
marketplace of the Company's new characters and story franchises and
distribution via the Internet, ability to generate revenues through Internet
distribution, increased levels of competition, new products and technological
changes, and regulatory factors. The Company does not undertake, and
specifically disclaims any obligation, to update any forward-looking
statements to reflect occurrences or unanticipated events or circumstances
after the date of such statements.
AMERICAN CAREER CENTERS, INC.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Overview
American Career Centers. Inc. (hereinafter sometimes referred to as
"ACCI" or the "Company") was formed in June 1999 as a holding company for
the acquisition of Information Technology career training centers and
related businesses. ACCI completed its first acquisition in June 1999
through the purchase of 100% of the capital stock of Alpha Computer
Solutions, Inc., a Utah corporation. Alpha began operations in June 1998
and trained over 5,700 students in its first year of operation. The Alpha
Computer Solutions training facility in Salt Lake City, Utah is the largest
in the state, and ACCI plans to expand its Alpha Computer Solutions Career
Centers to more than 12 cities by the end of 2001.
Effective December 3, 1999 ACCI acquired 100% of the outstanding shares of
Tunlaw International Corporation ("Tunlaw"), a public company for reporting
purposes under the Securities Exchange Act of 1934, in exchange for an
aggregate of 200,000 shares of common stock of ACCI, with Tunlaw becoming a
wholly-owned subsidiary of ACCI. With the completion of the acquisition,
ACCI became the successor
issuer to Tunlaw and retains that public company reporting status under the
Securities Exchange Act of 1934. Tunlaw has had no operations to date.
Trends in the Computer Training Industry
Economic and Demographic Factors: Several converging trends have
contributed to the accelerated growth in the Computer Training industry:
1 A strong economy
2 A corresponding increase in high-technology positions
3 Increasing numbers of adults in post-secondary education programs
4 Accelerated salary increases in technical specialties
5 Increasing numbers of high school graduates looking for technical
education alternatives
6 A narrowing salary gap between technical and degreed positions
7 Budgetary constraints at traditional colleges and universities
Technological Factors: As global competition has fostered ever-increasing
computerization, shifts in technology have advanced the mainframe paradigm
to PCs, then to LANs, WANs, the Internet and finally B2B models. The
result has been an explosion of computers, software, applications, networks
and Internet sites. In addition, the Information Technology landscape
changes constantly as:
1 Software developers release new versions of existing products to
maintain market share and market new products to expand
(a) Equipment manufacturers integrate new technology
(b) Network and Operating Systems are revised to take advantage of
all of the above
2 Paradigm shifts such as the Internet ripple through the entire
IT industry
In addition, the rapid rate of change in hardware and software technology
has greatly increased the need for short-term training solutions that four
year university degree programs cannot address.
IT Staffing Factors: While demand for trained IT personnel has exploded,
the number of experienced professionals has grown slowly. In fact, demand
has exceeded supply for several years and the gap is now growing at an
accelerated rate. In addition, most employees now use computers to
accomplish their primary function, and they need initial and ongoing
training for these software packages.
ACCI's Strategic Perspective
The Computer Training marketplace is generally segmented into two groups:
1 Corporations and other organizations with specific employee
training needs
2 Individuals seeking knowledge, advancement or a new career
Corporations and organizations are marketed on the basis of increased
productivity, while individuals are marketed on the basis of a more
challenging career and increased earning power. Unlike its competitors,
ACCI targets both market segments because:
1 Individuals see corporate clients as a validation of the Company's
position in the market
2 Individuals will eventually become corporate clients
3 Corporations provide high-margin recurring revenues
4 Contact with businesses provides the ultimate forecast of demand
in the marketplace for specific types of training and the
associated high-paying careers
Alpha Computer Solutions, Inc.
Alpha Computer Solutions, Inc. was founded in May 1998. It offers over 300
different instructor-led computer training courses from a 16,000 square foot
classroom facility in its Salt Lake City, UT location. Day, evening and
weekend classes are provided and Alpha trained over 5,700 students in its
first year of operation.
Alpha's training orientation is marked by instructor-led classes that combine:
1 Real-world knowledge together with testing preparation
2 Computer-based curriculum using one computer per student
3 The latest in hardware and software
4 Private or onsite classes for corporate and government clients
5 Internet access for each student
6 A certified Sylvan-Prometric testing center for certification
examinations
Over 2000 major corporations and organizations train their employees at
Alpha including American Express, American Stores, AT&T, Barnes & Noble,
Delta Airlines, IBM, IRS, Kennecott, Novell, US West and the State of
Utah.
Alpha Computer Solutions Products
Alpha's products are all applicable to both individual and corporate market
segments and fall into three broad categories:
1 Over 300 software application classes
2 "Tracks", or combinations of individual classes that lead to
certifications from Microsoft, Novell, Adobe and Macromedia.
3 Proprietary curriculum such as the Internet Webmaster Pyramid
4 Complimentary courseware and text
Application Classes: Applications are generally taught at several levels
(beginning through advanced) and include all major software developers
such as Adobe, Corel, Intuit, Lotus, Macromedia, Microsoft, Netscape,
Novell, Quark and Symantec. Specific topics range from accounting to
animation, graphics to multimedia, and programming to word processing.
Certification Tracks: "Tracks" are groups of individual applications
classes sequenced for specialized certification requirements:
1 Adobe certifications such as Premiere
2 Macromedia certifications such as Flash
3 Microsoft certifications such as A+ and MCSE
4 Novell certifications such as CNA and CNE
Alpha's Internet Webmaster Pyramid: The Internet Webmaster Pyramid is a
proprietary product that:
1 Offers in-depth training and hands on experience in all aspects
of web site design
2 Offers classes that bridge all levels of difficulty from overview
to advanced specialties
3 Offers complete career preparation in a few months
4 Is affordable and priced incrementally
5 Is unique in the computer training industry
Strategic Implications of the Internet
The Internet and E-commerce revolution are at the center of Alpha's plans
for expansion and growth. There is no question that the Internet represents
a paradigm shift in the Information Technology industry. Use of the Net is
the fastest growing technological advance in history. It has provided new
models for communications, sales, marketing and distribution and promises
unparalleled growth and profitability for companies that win the race for
"next big thing". Not only have existing organizations embraced the
Internet, but new companies in new industries have been created and
blossomed to huge market values in very little time pursuing the dream of
Internet riches.
The Internet will eventually impact almost all types of organizations.
The retail success of Internet e-commerce has created a legitimate technical
and financial infrastructure. Business-to-business Internet transactions
will eventually dwarf retail consumer dollar volumes. Companies that
establish early Internet dominance in a market niche tend to remain dominant.
"Net-Centricity" requires an organization to restructure all of it operating
components in order to take optimal advantage of the Internet's capabilities.
The creation of successful Web sites represent a collaboration of MIS with
marketing, sales, operations and distribution personnel.
The implications for the computer training industry are fairly clear.
There is a competitive mania to create Internet Web sites. There is a huge
market for trained personnel who can participate in the creation of Web
sites and the demand (and associated pay) is accelerating. University
programs are not reducing the shortage of experienced, trained IT personnel.
Because of the need to work in site-design teams with many types of IT
specialists, there is an increased need for IT professionals to integrate
themselves into team environments. Because of the input and/or control of
marketing, sales, operations and distribution, there is an increased need
for these professionals to conceptually grasp the capabilities of the site
design team.
The Alpha Internet Webmaster Pyramid
In this environment, the ideal computer training curriculum for the Internet
would therefore possess the following characteristics:
1 Offer in-depth training and hands-on experience in all aspects
of web site design
2 Offer classes that bridge all levels of difficulty from overview
to advanced technical specialties
3 Offer complete career preparation in a matter of months, not years
4 Be affordable and priced incrementally depending on the custom
tailored curriculum and interests of each student.
Alpha has designed the Webmaster Pyramid curriculum to fully address each
of these issues. The Pyramid encompasses all aspects of Internet Web site
creation and is unique in the computer training industry.
The Alpha Webmaster Pyramid curriculum is divided into three areas of
specialization: design, programming and technical administration. Students
progress down the Pyramid as they advance to more difficult areas of
specialization.
The Alpha Webmaster Pyramid curriculum begins at the top with the Webmaster
Foundations track. This course introduces students to Internet Business
Fundamentals, Internet Security, Programming Basics, HTML, FrontPage,
PhotoShop, Relational Database Design, Networking Fundamentals and CIW Test
Preparation.
Level I Tracks for the three areas of specialization include:
1 Design - Site Designer: Introduction to Web Graphics Tools,
Authoring and Programming, Integrating Design Tools, Web
Portfolio Design, Project Design.
2 Programming - Application Developer: HTML & DHTML, JavaScript,
Visual Java, XML, CGI, PERL, Server-Side Scripting.
3 Technical Administration - Server Administrator: Introduction
to Networks and UNIX administration.
Marketing Channels
Alpha utilizes a variety of marketing channels including:
1 Print and Media Ads
2 Outbound Telemarketing
3 Seminars
4 Trade Shows
5 Internet Web Site
Geographic Expansion
As part of its overall growth plan, ACCI plans to acquire Information
Technology training facilities in various locations throughout the United
States. The primary criteria for acquisition will include proven
profitability, local reputation, local market potential, similarity of
current programs to the Alpha model and stringent ROI analysis. Alpha has
ranked expansion cities based on 10 factors including population, per
capita IT spending, per capita IT training spending, population and
Internet infrastructure. The top ten cities are listed in the following
table:
Denver
Dallas/Ft. Worth
Seattle
Las Vegas
Phoenix
Kansas City, MO
Los Angeles
San Francisco
San Jose
San Diego
Employees
As of March 15, 2000, Alpha Computer Solutions employed a total of 39
full-time employees, 15 of whom were in instructional training; 3 in
technology; 16 in sales, marketing and business development; and 5 in
finance and administration. To support our anticipated future growth, we
expect to hire additional employees, particularly in the area of
instructional training. None of our employees are represented by unions,
and we believe our relations with our employees are good.
ITEM 2. DESCRIPTION OF PROPERTY
Our principal executive offices are located at 2490 South 300 West, South
Salt Lake City, Utah, 84115, where we lease approximately 16,000 square
feet that expires in August 2003. We intend to lease and/or sublease
suitable premises in connection with our planned acquisitions of other
smaller information technology training schools. As we expand, we
anticipate that additional space will be available on commercially
reasonable terms, and that terms of these leases will vary as to duration
and rent escalation provisions tied to either increases in the landlord's
operating expenses or fluctuations in the consumer price index in the
relevant geographical area, but no assurance can be made in this regard.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings, nor, to
our knowledge, are any threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended December 31, 1999, the Company submitted the
reorganization transaction between the Company and Tunlaw International
Corporation for a vote of security holders, which vote was approved by
written consent of the Company's shareholders.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There has been no public market for ACCI's securities to date. ACCI has
issued securities that are exempt from registration under the Securities
Act of 1933, as amended (the "Securities Act") pursuant to Rule 504 and
Rule 506 of Regulation D of the General Rules and Regulations of the
Securities and Exchange Commission.
As of March 24, 2000, we had 455 shareholders of record of American Career
Centers, Inc.'s common stock, excluding shares held in street name by
brokerage firms and other nominees who hold shares for multiple investors,
and no Preferred Stock shareholders.
Holders of common stock are entitled to receive dividends if, as and when
declared by the Board of Directors out of funds legally available therefor,
subject to the dividend and liquidation rights of any preferred stock that
may be issued and outstanding. We have never declared or paid any dividends
on our common stock. We intend to retain any future earnings for use in the
operation and expansion of our
business. Consequently, we do not anticipate paying any cash dividends on
our common stock to our shareholders for the foreseeable future.
Recent Sales of Unregistered Securities
Sales of Common Stock Prior to January 1, 2000.
Effective June 21, 1999 ACCI engaged in a share exchange with Alpha Computer
Solutions, Inc., a Utah corporation. In this share exchange, the shareholders
of Alpha Computer Solutions received 2,849,500 shares of common stock of ACCI
in exchange for all of the issued and outstanding shares of common stock
of Alpha Computer Solutions, Inc.
Effective July 14, 1999, ACCI approved the sale of 1,183,000 shares of
common stock to the founders of ACCI for an aggregate of $1,183, or $.001
per share, which shares are subject to a repurchase option that expires
based on a three year vesting schedule.
Between September and November 1999, ACCI sold, in a private placement,
1,406,000 shares of common stock for an aggregate of $587,685, or $.41798
per share. These securities were sold only to accredited investors pursuant
to an exemption from registration provided by Rule 504 of Regulation D
enacted promulgated under the Securities Act, and in compliance with certain
states' accredited investor exemption.
Between September and November 1999, ACCI sold, in a private placement,
199,000 shares of common stock for an aggregate of $337,460, or $1.695779
per share. The securities were sold only to accredited investors pursuant
to an exemption from registration provided by Rule 506 of Regulation D
promulgated under the Securities Act.
During 1999, an individual subscribed to 65,000 shares of common stock for
$16,250.
Effective December 3, 1999, ACCI engaged in a share exchange with Tunlaw
International Corporation, a public company, incorporated in the State of
Delaware, which previously had no operating history. This share exchange
was accounted for as a reverse acquisition in which ACCI is considered our
predecessor because it had operations at the time of the share exchange.
In this share exchange, the shareholders of Tunlaw received 200,000 shares
of common stock of ACCI in exchange for all of the issued and outstanding
shares of common stock of Tunlaw.
Stock Option Issuances.
There were no stock option exercises by optionees or issuances by the
Company in fiscal year 1999. Stock Options granted are shown under
Item 10 - Stock Plans.
Sales of Common Stock Post December 31, 1999.
During January 2000, the Company sold, in a private placement, 55,000 shares
of common stock for an aggregate of $152,500, or an average $2.77 per share.
securities were sold only to accredited investors pursuant to Rule 506 of
Regulation D promulgated under the Securities Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This discussion contains forward-looking information that involves risks
and uncertainties. Our actual results could differ materially from those
anticipated by this forward-looking information. This discussion should be
read in conjunction with our financial statements and the related notes
thereto set forth elsewhere in this Report.
Our predecessor company, Tunlaw International Corporation, conducted only
organizational activities. Accordingly, there were no material operations
for the comparable periods for the prior year, and therefore, there is no
discussion of comparable historical periods.
The Company
American Career Centers, Inc. ("ACCI") was formed in June of 1999 as a
holding company to acquire Information Technology career training centers.
ACCI completed its first acquisition in June of 1999 through the purchase of
100% of the capital stock of Alpha Computer Solutions, Inc., a Utah
corporation. Alpha began operations in June of 1998 and trained over 5,700
students in Information Technology courses in its first year of operation.
As Tunlaw conducted only organizational activities, consolidated results to
date reflect ACCI holding company activity including the operations of Alpha
Computer Solutions, Inc.
Alpha began operations in June of 1998. Throughout 1998 and 1999, the
Company focused on building the foundation for geographic expansion. This
process involved several steps:
1 Recruiting management talent
2 Raising additional capital
3 Recruiting training and sales staffs
4 Developing proprietary curriculum that would be replicable in
multiple locations
5 Designing effective marketing programs
6 Perfecting training delivery and management systems
Results of Operations
For the fiscal year ended December 31, 1998, the Company had revenues of
$197,564 and a net loss from operations of $714,496.
Fiscal Year Ended December 31, 1999 Versus Fiscal Year Ended December 31,
1998
During the first half of 1999, the Company focused heavily on recruiting,
curriculum development and the design of effective marketing programs.
In the second half of 1999, ACCI significantly increased both its fund
raising activities and its acquisition search activities. These factors
resulted in corresponding increases in marketing and corporate overhead
expenses. For the fiscal year ended December 31, 1999, the Company
increased consolidated revenues 287% to $765,411 with a net loss from
operations of $1,265,636. Selling and marketing expense for 1999 increased
752% from 1998 to $514,366 as sales and marketing personnel were recruited
and marketing programs were implemented. General and Administrative expense
for 1999 increased 45% to $1,037,177 as proprietary curriculum was completed
and acquisition and fund raising activity ramped up. In addition, total
operating expense fell from 397% of revenue in 1998 to 203% in 1999.
Plan of Operations
There are three key elements to the ACCI growth plan:
1. Raising additional capital through private placements
of common stock. The Company will require additional funds to
operate, expand geographically and to establish credit facilities for
anticipated acquisitions.
2. Expanding the Alpha Education and Training model to a
total of 12 cities in the Western U.S. in the next 24 months. As noted in
Item 1, the replication of Alpha training facilities is a significant part
of the ACCI profit engine.
3. Acquiring Information Technology facilities in
complementary locations throughout the U.S. The primary criteria for
acquisition will include historical and projected profitability, local
reputation, local market potential, viability of curriculum and stringent
ROI targets.
Liquidity and Capital Resources
Our primary sources of liquidity and capital resources have been private
placements of common stock and borrowings from related and non-related
parties. See Notes 10 and 13 to the Financial Statements (Stockholders'
Deficiency and Subsequent Events, respectively) and Note 8 to the Financial
Statements (Notes and Loans Payable) for further descriptions of these
activities. We will require additional capital financing to continue the
development of our business plan consistent with anticipated growth in
operations, infrastructure and personnel. We anticipate that the cash on
hand coupled with the cash to be raised from additional private placements
and public offerings, assuming they will be successful, should be
sufficient to satisfy our operating expenses and capital until such time
as revenues are sufficient to meet operating requirements.
Income Taxes
Net operating losses generated a deferred tax asset of approximately $1.226
million at December 31, 1999.
Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "According for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires
companies to recognize all derivative contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as
a hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability that are
attributable to the hedge risk or (ii) the earnings effect of the hedged
forecasted transaction for a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of
change. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Historically, the Company has not entered
into derivative contracts either to hedge existing risks or for speculative
purposes. Accordingly, the Company does not expect adoption of the new
standard on January 1, 2000 to affect its financial statements.
In June 1998, the Accounting Standards Executive Committee of the AICPA
issued SOP 98-5, Reporting on the Costs of Start-up Activities. SOP 98-5
requires all start-up and organizational costs to be expensed as incurred.
It also requires all remaining historically capitalized amounts of these
costs existing at the date of adoption to be expensed and reported as the
cumulative effect of a change in accounting principles. SOP 98-5 is
effective for all fiscal years beginning after December 31, 1998. The
adoption of SOP 98-5 on January 1, 1999 had no effect on the financial
statements.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements are listed at the "Index to Financial
Statements" elsewhere in this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Effective December 3, 1999, we continued the engagement of Weinberg &
Company, P.A. as the registrant's independent public accountants, subsequent
to the acquisition transaction. The engagement of Weinberg & Company, P.A.
was approved by our board of directors. The financial statements for the
past two years contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles. There were no accounting or auditing disagreements between the
Company and
Weinberg & Company, P.A.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Our Board of Directors consists of only one class. All of the
directors will serve until the next annual meeting of shareholders
and until their successors are elected and qualified, or until
their earlier death, retirement, resignation or removal. There
are no family relationships among directors and executive officers.
We also have provided a brief description of the business
experience of each director and executive officer during the past
five years and an indication of directorships held by each director
in other companies subject to the reporting requirements under the
Federal securities laws.
Our predecessor company conducted only organizational activities
and, accordingly, no information is included for the period prior
to December 3, 1999.
Executive Officers and Directors
The following tables set forth certain information regarding the
directors, executive officers and certain key employees of American
Career Centers, Inc.:
Directors:
Name Age Date Director Service Commenced
William G. Anthony 56 December 3, 1999
Ronald C. Mears 61 December 3, 1999
Thomas D. Keene 41 December 3, 1999
Executive Officers:
Name Age Office
William G. Anthony 56 President
Ronald C. Mears 61 Chairman of the Board
Thomas D. Keene 41 Secretary and Treasurer
William G. Anthony - President: Mr. Anthony has more than 20 years of
successful background as a senior executive in the computer industry. He
was formerly President of InterWest Graphics, Inc.; President, CEO and
founder of, TimberWolf Multimedia, Inc.; President and CEO of Wasatch
Education Systems, Inc. and President and COO of Systems Associates Inc.
Throughout his career with these organizations, Mr. Anthony was
instrumental in leading their rapid growth and financial success in the
harsh and quickly changing information technology environment. He has led
organizations from start-up to over $33 million in revenues, managed
growth from start-up to more than 500 employees and spearheaded over $24
million in financing rounds with IPOs, venture capitalists, and private
placements.
Ronald C. Mears - Chairman: Since 1995 Mr. Mears has been actively
involved with Sales and Sales Management in the computer-training field
with New Horizons Computer Learning Centers (now Technology Solutions,
Inc.) and with his own company, New Technology Services, Inc. While
working at the Salt Lake City New Horizons computer Learning Center, Mr.
Mears began to understand that there was great business potential to be
achieved by integrating the various aspects of the effort to "Computerize
America." Combining training, consulting and personnel placement all under
on roof, Mr. Mears founded, in May 1997 New Technology Services, Inc.
Within one year he was conducting specialized computer network training
in Salt Lake City, Denver, Minneapolis, Las Vegas, Chicago and Atlanta.
Before working for New Horizons Computer Learning Centers and opening New
Technology Solutions, Inc., Mr. Mears had been founder and co-founder of
numerous businesses and held management positions in many more, including
car rentals, restaurants, single family and commercial construction, and
specialty clothing. During the early 1980s Mr. Mears worked as an Account
Executive and Loan officer.
Thomas D. Keene - Secretary and Treasurer: For more than 10 years Mr.
Keene has conducted accounting, administration, finance and business
planning as both senior level management and as an independent consultant,
including the following clients and employers: Morrison Knudsen Corporation,
Data-Cache Corporation, ParaDynamix and now ACCI. As a senior level
manager Mr. Keene has established and supervised treasury, finance and
accounting functions of multi-million dollar start up business, including
management of all administrative functions associated with the establishment
of several employee benefit plans.
Compliance with Section 16(b) of the Exchange Act:
To our knowledge, during and for American Career Centers, Inc.'s year ended
December 31, 1999, there were no directors or officers, or more than 10%
shareholders of the Company who failed to timely file a Form 3, Form 4 or
Form 5 with the Securities and Exchange Commission, other than the
individuals set forth below. All of the filings have been made as of the
date of this Report.
William G. Anthony failed to timely file a Form 3 in which one
transaction was reported and a Form 5 in which one transaction was
reported.
Ronald C. Mears failed to timely file a Form 3 in which one
transaction was reported and a Form 5 in which one transaction was
reported.
Thomas D. Keene failed to timely file a Form 3 in which one
transaction was reported and a Form 5 in which one transaction was
reported.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information for 1999 with regard to
compensation paid to our chief executive officer and the executive
officers or key employees whose total salary and bonus exceeded $100,000.
None of our officers was compensated in 1998.
SUMMARY COMPENSATION TABLE
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LONG-TERM
COMPENSATION
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ANNUAL COMPENSATION SECURITIES ALL OTHER
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OTHER ANNUAL UNDERLYING COMPENSATION
------------ ---------- ------------
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NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTIONS(#) ($)(1)
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---
---
Ronald C. Mears .............. 1999 $ 100,000 $ 0 4,000 - -
Chairman
William G. Anthony...........
President and Director 1999 72,000 0 5,871 - -
Thomas D. Keene ........ 1999 50,000 0 - 0 -
Treasurer, Secretary and
Director
</TABLE>
The following table sets forth further information regarding individual
grants of stock options during fiscal 1999 and 1998 to each of the named
executive officers. In accordance with the rules of the Securities and
Exchange Commission, the table sets forth the hypothetical gains or "option
spreads" that would exist for the options at the end of their respective
five-year terms based on assumed annualized rates of compound stock price
appreciation of 5% and 10% from the dates the options were granted to the
end of the respective option terms. Actual gains, if any, on option
exercises are dependent on the future performance of the Company's Common
Stock and overall market conditions. There can be no assurance that the
potential realizable values shown in this table will be achieved. The table
also shows all options that were granted with exercise prices equal to fair
market value on the dates of grant.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
INDIVIDUAL GRANTS
------------------------------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS PER SHARE OF STOCK PRICE
UNDERLYING GRANTED PER SHARE MARKET APPRECIATION FOR OPTION
OPTIONS TO EXERCISE PRICE ON TERM(2)
GRANTED EMPLOYEES IN PRICE GRANT DATE EXPIRATION -------------------------
NAME (#)(1) FISCAL 1999 ($/SH)(1) ($/SH) DATE 5%($) 10%($)
- ---- -------------- ----------- --------- ------ ------------ ----- ------
Ronald C. Mears........ - - - - - - -
William G. Anthony..... 110,000 33% 5.00 - 5/20/2009 - 0
Thomas D. Keene ....... 60,000 18% 5.00 5/20/2009 0 0
</TABLE>
(1) Stock options were generally awarded at an exercise price of
$5.00, in excess of the fair market value of the Company's Common Stock on
the date of grant as determined by the Company's Board of Directors.
Options granted to new employees become exercisable, so long as the employee
continues to provide services to the Company, as to one-third of the shares
at the end of the first year, as to two-thirds of the shares at the end of
the second year, and as to all of the shares at the end of the second year.
Options expire five years from the date of grant or at the time of the
optionee's termination of employment.
(2) The 5% and 10% assumed rates of annual compound stock price
appreciation are prescribed by rules of the SEC and do not represent the
Company's estimate or projection of future Common Stock prices.
There were no exercises of stock options by any of the named executive
officers in 1999.
Board of Directors:
From the Company's inception through December 31, 1999, there have been no
meetings of the Company's board of directors. Other actions in 1999 were
conducted by means of unanimous written consents on separate instances.
Non-employee directors receive options to purchase 5,000 shares of the
Company's common stock for each year of service, and are reimbursed for
travel costs and other out-of-pocket expenses incurred in attending board
of directors and committee meetings in addition to the payment of $500.00
for each meeting attended. As of March 27, 2000, no options to acquire
shares of common stock were granted to non-employee directors.
The board of directors does not have a nominating committee. However, the
board of directors will consider nomination recommendations from
shareholders, which should be addressed to American Career Centers, Inc.'s
secretary at its principal executive offices.
Employment Agreements:
The Company entered into a three-year employment agreement with Ronald C.
Mears as of September 8, 1998 (and modified April 13, 1999), providing for
Mr. Mears to serve as the Company's Chairman of the Board of Directors, an
initial annual salary of $100,000, a discretionary bonus, and 250,000 shares
of unregistered common stock at a purchase price of $.001 per share (subject
to a repurchase right ratably over the three-year employment period should
Mr. Mears terminate the agreement within said period).
The Company entered into an approximate three-year employment agreement with
William G. Anthony as of November 13, 1998 (and modified April 13, 1999) and
terminating as of September 7, 2001, providing for Mr. Anthony to serve as
the Company's President, an initial annual salary of $72,000, a discretionary
bonus, 100,000 shares of unregistered common stock at a purchase price of
$.001 per share (subject to a repurchase right ratably over the three-year
employment period should Mr. Anthony terminate the agreement within said
period), and non-qualified options to purchase 110,000 shares of the
Company's common stock ratably over the three-year period at an exercise
price of $5.00 per share.
The Company entered into a three-year employment agreement with Thomas D.
Keene as of September 8, 1998 (and modified April 13, 1999), providing for
Mr. Keene to serve as the Company's Chief Financial Officer and Secretary,
an initial annual salary of $50,000, a discretionary bonus, 75,000 shares of
unregistered common stock at a purchase price of $.001 per share (subject to
a repurchase right ratably over the three-year employment period should Mr.
Anthony terminate the agreement within said period), and non-qualified
options to purchase 60,000 shares of the Company's common stock ratably
over the three-year period at an exercise price of $5.00 per share.
Stock Plans
1998 Stock Option Plan. The Company assumed the Alpha Computer Solutions,
Inc. 1998 Stock Option Plan on July 15, 1999, which was adopted by its board
of dircectors in October 1998 and by its shareholders in November 1998. This
stock option plan provides for the grant of incentive stock options to
employees and nonstatutory stock options and stock purchase rights to
employees, directors, officers and consultants to acquire shares of common
stock. The purposes of the 1998 stock plan are to attract and retain the
best available personnel, to provide additional incentives to our employees
and consultants and to promote the success of our business. Unless
terminated earlier by the board of directors, the 1998 stock plan will
terminate on September 30, 2007.
As of March 27, 2000, options to purchase 332,500 shares of common stock
were outstanding at a weighted average exercise price of $5.00. No shares
had been issued upon exercise of outstanding options, and 267,500 shares
remained available for future grant under the 1998 stock plan.
The 1998 stock plan may be administered by the board of directors, a
committee appointed by the board of directors or a combination of the board
of directors and a committee, as determined by the board of directors. The
administrator determines the terms of options granted under the 1998 stock
plan, including the number of shares subject to the option, exercise price,
term and exercisability Incentive stock options granted under the 1998 stock
plan must have an exercise price of at least 100% of the fair market value
of the common stock on the date of grant and at least 110% of such fair
market value in the case of an optionee who holds more than 25% of the total
voting power of all classes of our stock. Nonstatutory stock options granted
under the 1998 stock plan will have an exercise price as determined by the
administrator. Payment of the exercise price may be made in cash or such
other consideration as determined by the administrator.
The administrator determines the term of options, which may not exceed 10
years, or 5 years in the case of an optionee who holds more than 25% of the
total voting power of all classes of our stock. No option may be transferred
by the optionee other than by will or the laws of descent or distribution.
Each option may be exercised during the lifetime of the optionee only by
such optionee. The administrator determines when options become exercisable.
Options granted under the 1998 stock plan generally must be exercised within
3 months after the termination of the optionee's status as an employee,
director or consultant of the Company, or within 12 months if such
termination is due to the death or disability of the optionee, but in no
event later than the expiration of the option's term. Options granted under
the 1998 stock plan generally vest immediately as of the date of grant. At
the option of the administrator, the stock to be delivered pursuant to the
exercise of any option granted to an employee under the plan may be subject
to a right of repurchase in favor of the Company, with respect to any
employee whose employment with the Company is terminated.
In the event of our merger with or into another corporation, the successor
corporation may assume each option and outstanding stock purchase right or
may substitute an equivalent option or stock purchase right. However, if the
successor corporation does not agree to this assumption or substitution, the
option or stock purchase right will terminate. The board of directors has
the authority to amend or terminate the 1998 stock plan provided that no
action that impairs the rights of any holder of an outstanding option may
be taken without the holder's consent. In addition, we will obtain requisite
stockholder approval for any action requiring stockholder approval under the
applicable law.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 27, 2000 by (i) each
person known by the Company to be the beneficial owner of more than five
percent of its Common Stock; (ii) each director; and (iii) all directors
and executive officers as a group. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
includes voting or investment power with respect to the securities.
Shares of common stock that may be acquired by an individual or group
within 60 days of March 27, 2000, pursuant to the exercise of options or
warrants are deemed to be outstanding for the purpose of computing the
percentage ownership of such individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table. Percentage of ownership is based on
5,902,500 shares of common stock outstanding.
Except as indicated in the footnotes to this table, we believe that the
stockholders named in this table have sole voting and investment power with
respect to all shares of common stock shown to be beneficially owned by them
based on information provided to us by such shareholders. Unless otherwise
indicated, the address for each director and executive officer listed is:
c/o American Career Centers, Inc. 2490 South 300 West, South Salt Lake City,
Utah, 84115.
Name of Shareholder Number of Shares Percent of Common
Stock
Ronald C. Mears(1) 1,750,000 29.6%
William G. Anthony(2) 580,000 9.6
Thomas D. Keene(3) 440,000 7.4
Combined Assets, Inc.(1) 525,000 8.9
InterAsset Management, Inc.(1) 601,000 10.2
T.A.S.S., Inc. 445,000 7.5
All executive officers and directors 2,770,000 45.6
as a group (3 persons)
(1) Includes 624,000 shares owned by Ronald C. Mears and
1,126,000 shares that are held by corporations, Combined Assets, Inc., and
InterAsset Management, Inc., that could be deemed to be controlled by Ronald
C. Mears.
(2) Includes options to acquire 110,000 shares of Company's
Common Stock, which options are immediately exercisable. Stock subject to
a three-year vesting period that commenced on July 30, 1999.
(3) Includes options to acquire 60,000 shares of Company's
Common Stock, which options are immediately exercisable. Stock subject to
a three-year vesting period that commenced on July 30, 1999.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ronald C. Mears, the Company's Chairman of the Board of Directors sold
certain assets to the Company in consideration for the issuance and delivery
of 624,000 shares of common stock of the Company. These assets included
computers, computer networks, software to operate the network, course
materials, furniture and fixtures required to construct classroom
facilities, and customer lists.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES, AND
REPORTS ON FORM 8-K
(a) Financial Statements and Schedules. The Financial
Statements and Schedules required to be filed hereunder are enclosed on
Pages F-1 through F-17.
(b) Current Reports on Form 8-K. A Current Report on
Form 8-K dated December 3, 1999, was filed on December 14, 1999
with the Securities and Exchange Commission, to report a
transaction under Items 1 and 2, Changes in Control of Registrant,
and Acquisition or Disposition of Assets, respectively, containing
information related to the reorganization transaction involving Tunlaw
International Corporation by the Company, pursuant to which the Company
became the successor issuer under Rule 12g-3 of the Securities Exchange Act
of 1934.
(c) Exhibits
3.1 Articles of Incorporation
3.2 Certificate of Amendment to American Career Centers, Inc.
Certificate of Incorporation
3.3 Bylaws
10.1 1998 Stock Option Plan
10.2 Form of Incentive Stock Option Agreement
21 Subsidiaries of the Registrant
27 Financial Data Schedule
AMERICAN CAREER CENTERS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
AMERICAN CAREER CENTERS, INC. AND SUBSIDIARIES
CONTENTS
PAGE F-1 INDEPENDENT AUDITORS' REPORT
PAGE F-2 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER
31, 1999 AND 1998
PAGE F-3 CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE (LOSS) FOR THE YEAR ENDED
DECEMBER 31, 1999 AND FOR THE PERIOD JUNE 16,
1998 (INCEPTION) TO DECEMBER 31, 1998
PAGES F-4-5 CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' DEFICIENCY FOR THE PERIOD JUNE
16, 1998 (INCEPTION) TO DECEMBER 31, 1999
PAGE F-6 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD JUNE 16, 1998 (INCEPTION) TO DECEMBER 31,
1998
PAGES F-7-17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
American Career Centers, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of American
Career Centers, Inc. and Subsidiaries as of December 31, 1999 and 1998 and
the related statements of operations and comprehensive (loss), changes in
stockholder's deficiency and cash flows for the year ended December 31,
1999 and for the period June 16, 1998 (inception) to December 31, 1998.
These consolidated 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.
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 American
Career Centers, Inc. and Subsidiaries as of December 31, 1999 and 1998 and
the results of their operations and their cash flows for the year ended
December 31, 1999 and for the period June 16, 1998 (inception) to December
31, 1998, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 12 to the consolidated financial statements, the Company has
recurring losses from operations, working capital and equity deficiencies.
These matters raise substantial doubt about the Company's ability to continue
as going concern. Management's Plan in regards to these matters is also
described in Note 12. The consolidated financial statements do not include
and adjustments that might result from the outcome of this uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
January 19, 2000
AMERICAN CAREER CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
1999 1998
CURRENT ASSETS
Cash $ 42,879 $ 11,246
Accounts receivable, net 83,988 77,438
Inventories 3,447 7,145
Prepaid expenses and other assets 357 6,189
Short term investments - 130,000
------- -------
Total Current Assets 130,671 232,018
------- -------
PROPERTY AND EQUIPMENT - NET 122,538 24,592
------- -------
OTHER ASSETS
Intangibles, net 115,106 37,142
Deposits 14,464 12,289
------- -------
Total Other Assets 129,570 49,431
------- -------
TOTAL ASSETS $ 382,779 $ 306,041
========= =======
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and other accrued expenses $ 256,892 $ 105,800
Payroll taxes payable 238,076 60,707
Accrued payroll and payroll taxes 317,594 87,267
Deferred revenue 273,736 251,521
Notes payable 162,500 322,448
--------- -------
Total Current Liabilities 1,248,798 827,743
========= =======
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.0001 par value,
20,000,000 shares authorized, none issued - -
Common stock, $.0001 par value, 100,000,000
shares authorized, 5,902,500 and 2,880,000
shares issued and outstanding, respectively 590 288
Additional paid in capital 1,258,962 316,717
Accumulated deficit (2,064,321) (733,707)
Accumulated other comprehensive loss - (105,000)
--------- -------
804,769 (521,702)
Less subscriptions receivable (61,250) -
--------- -------
Total Stockholders' Deficiency (866,019) (521,072)
--------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 382,779 $ 306,041
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
AMERICAN CAREER CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE (LOSS)
<TABLE>
<CAPTION>
<S> <C> <C>
Year June 16, 1998
ended (Inception) to
December 31, December 31,
1999 1998
REVENUES $ 765,411 $ 197,564
COST OF SALES 479,504 127,604
GROSS PROFIT 285,907 69,960
OPERATING EXPENSES
Selling and marketing 514,366 60,360
--------- -------
General and administrative 1,037,177 724,096
--------- -------
Total Operating Expense 1,551,543 784,456
--------- -------
LOSS FROM OPERATIONS (1,265,636) (714,496)
--------- -------
OTHER INCOME (EXPENSE)
Gain on exchange of securities 10,000 -
Interest income - 5,015
Interest expense (24,605) (7,268)
Tax penalties (38,615) (766)
Other expenses (11,758) (16,192)
------ ------
Total Other Income (Expense) (64,978) (19,211)
------ ------
NET LOSS $ (1,330,614) (733,707)
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) on short
term investments 105,000 (105,000)
--------- ---------
COMPREHENSIVE LOSS $ (1,225,614) $ (838,707)
========= =========
Net loss per common share and
equivalents - basic and diluted $ (0.37) $ (0.42)
========= =========
Weighted average shares outstanding
during the period - basic and diluted 3,628,324 1,764,790
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
AMERICAN CAREER CENTERS, INC. AND SUBSIDIARIES
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
PREFERRED STOCK COMMON STOCK PAID IN ACCUMULATED INCOME SUBSCRIPTIONS
STOCK AMOUNT STOCK AMOUNT CAPITAL DEFICIT LOSS RECEIVABLE TOTAL
Issuance of
common stock
to founders and
employees - - 2,005,000 $ 200 $ 1,805 $ - $ - $ - $ 2,005
Issuance of
common stock
for cash - - 775,000 78 79,922 - - - 80,000
Issuance of
common stock
for investment
securities - - 100,000 10 234,990 - - - 235,000
Unrealized loss
on available
for sale
securities - - - - - - (105,000) - (105,000)
Net loss from
June 16, 1998
(Inception) to
December 31,
1998 - - - - - (733,707) - - (733,707)
Balance,
December 31,
1998 - - 2,880,000 288 316,717 (733,707) (105,000) - (521,702)
Redemption of
common stock - - (11,000) (1) (10) - - - (11)
Recapitalization:
Issuance of
common stock
to founders and
employees of
ACCI - - 1,183,000 118 1,065 - - - 1,183
Issuance of
common stock
for cash and
extinguishment
of debt - - 1,605,000 161 924,984 - - (45,000) 880,145
Redemption of
common stock - - (19,500) (2) (18) - - - (20)
Issuance of
common stock
for subscriptions
receivable - - 65,000 6 16,244 - - (16,250) -
Recapitalization:
Stock issued to
Tunlaw
International
Corporation
stockholders - - 200,000 20 (20) - - - -
Unrealized gain
on short term
investments - - - - - - 105,000 - 105,000
Net loss for 1999 - - - - - (1,330,614) - - (1,330,614)
------- ------ --------- ------- ------------ ----------- -------- -------- ----------
BALANCE,
DECEMBER 31,
1999 - - 5,902,500 $ 590 $ 1,258,962 $ (2,064,321) $ - $ (61,250) $ (866,019)
======= ====== ========= ======= ============ =========== ======== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements
AMERICAN CAREER CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C>
June 16, 1998
Year ended (Inception) to
December 31, December 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,330,614) $ (733,707)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and Amortization 105,497 6,081
Gain on exchange of securities (10,000) -
Provision for doubtful accounts 17,493 40,710
(Increase) in accounts receivable (24,043) (118,148)
(Increase) in inventories 5,198 (7,145)
(Increase) in prepaid expenses and other assets 5,832 (6,189)
Increase in accounts payable and accrued expenses 151,092 105,800
Increase in payroll taxes payable 177,369 60,707
Increase in accrued payroll and payroll taxes 230,327 87,267
Increase in deferred revenue 22,215 251,521
-------- --------
Net Cash Used In Operating Activities (649,634) (313,103)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (37,907) (26,030)
Deposits (2,175) (12,289)
-------- --------
Net Cash Used in Investing Activities (40,082) (38,319)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on notes payable (25,635) (16,150)
Loan proceeds - 296,813
Proceeds from issuance of common stock 746,984 82,005
-------- --------
Net Cash Provided By Used In Financing Activities 721,349 362,668
-------- --------
NET INCREASE IN CASH 31,633 11,246
CASH, BEGINNING OF YEAR 11,246 -
-------- --------
CASH, END OF YEAR $ 42,879 $ 11,246
======== ========
SUPPLEMENTAL DISCLOSER OF NON - CASH
INVESTING AND FINANCING ACTIVITIES:
During 1999, the Company exchanged 100,000 shares of
marketable securities for equipment and customer database. $ 245,000 $ -
======== ========
During 1999, the Company converted $134,313
of notes payable to common stock. $ 134,313 $ -
======== ========
During 1998, the Company exchanged 100,000
shares of common stock for investments. $ - $ 235,000
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
AMERICAN CAREER CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION
(A) Organization
Alpha Computer Solutions, Inc. ("ACS") was incorporated in the State of
Utah on June 16, 1998.
On June 21, 1999, under an Agreement and Plan of Reorganization,
American Career Centers, Inc., ("ACCI"), an inactive Nevada Corporation,
acquired all the stock of ACS by issuing one share of its common stock for
each share of ACS common stock outstanding. On December 3, 1999,
Tunlaw International Corporation ("TIC"), an inactive Nevada public shell
corporation, acquired all the outstanding stock of ACCI. The Merger
Agreement stipulated that TIC issue to ACCI shareholders one share of TIC
common stock for each share of common stock held by ACCI shareholders.
As a result, the reorganizations were treated as an acquisition by the
acquiror and as a recapitalization by the acquiree for accounting purposes.
Accordingly, the financial statements include the following:
(1) The balance sheets consist of the net assets of the acquiror at
historical cost and the net assets of the acquirees at historical
cost.
(2) The statement of operations includes the operations of the
acquiror for the periods presented and the operations of the
acquirees from the date of reorganizations.
The Company intends to operate career-training centers throughout the
United States. The Company presently provides Instructor-led Computer
and Internet training courses in Salt Lake City, Utah.
(B) Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries Alpha Computer
Solutions, Inc. and Tunlaw International Corporation. All significant
inter-company transactions and balances have been eliminated in
consolidation.
(C) Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reported period. Actual
results could differ from those estimates.
(D) Cash and Cash Equivalents
For purposes of the cash flow statements, the Company considers all
highly liquid investments with original maturates of three months or less at
the time of purchase to be cash equivalents.
(E) Short - Term Investments
The Company's policy is to invest in marketable equity instruments.
The Company accounts for such investments in accordance with Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investments
in Debt and Equity Securities."
Management determines the appropriate classification of its investments
at the time of acquisition and reevaluates such determination at each balance
sheet date. Available - for - sale securities are carried at fair value, with
unrealized gains and losses, net of tax, reported as other comprehensive
income (loss) and as a separate component of stockholders' equity (deficiency).
Investments classified as held - to - maturity are carried at amortized cost.
In determining realized gains and losses, the cost of the securities sold is
based on the specific identification method.
(F) Inventories
Inventories, consisting of training materials are stated at lower of
cost or market determined on the first - in, first - out method.
(G) Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful life of the assets from two to seven years.
(H) Intangible Assets
Intangible assets are being amortized on a straight - line basis over periods
varying from two to three years.
(I) Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ('Statement 109"). Under Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date.
(J) Revenue Recognition
The Company recognizes specific training course tuition revenues in the
period in which the training courses are preformed. Membership club
revenue is recognized over the membership period based on the member's
actual usage of the Company's training programs and classes. Deferred
revenue represents tuition revenues collected in advance for classes in
specific training course programs and the unrecognized portion of
membership club revenues.
(K) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires disclosures of information
about the fair value of certain financial instruments for which it is
practicable to estimate that value. For purposes of this disclosure, the
fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties, other
than in a forced sale or liquidation. The carrying amounts of the Company's
accounts receivable, accounts payable, accrued liabilities, and current
loans payable approximates fair value due to the relatively short period to
maturity for these instruments.
(L) Per Share Data
Basic net income (loss) per common share is computed based on the
weighted average common shares outstanding during the year as defined by
Statement of Financial Accounting Standards, No. 128, "Earnings Per
Share" ("SFAS 128"). Diluted net income per common share is computed
based on the weighted average common shares and common stock
equivalents outstanding during the year as defined by SFAS 128.
For 1999, the effect of the assumed exercise of 332,500 stock options were
not utilized in the computation of diluted earnings per share since the
effect was anti-dilutive.
(M) Advertising Expense
Costs incurred for producing and communicating advertising of the
Company are charged to operations as incurred. Advertising expense for
the years ended December 31, 1999 and 1998 was approximately $111,800
and $15,800, respectively.
(N) Segment Information
The Company follows Statement of Financial Accounting Standards No.
131 "Disclosures About Segments of an Enterprise and Related Information".
During 1999 and 1998, the Company operations consisted only of the activity
of its wholly owned subsidiary Alpha Computer Solutions, therefore, segment
disclosure has not been presented.
(0) Impairment of Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards
No. 121 (SFAS 121) "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." Under the provisions of this
statement, the Company has evaluated its long-lived assets for financial
impairment, and will continue to evaluate them as events or changes in
circumstances indicated that the carrying amount of such assets may not be
fully recoverable.
The Company evaluates the recoverability of long-lived assets not held for
sale by measuring the carrying amount of the assets against the estimated
undisclosed future cash flows associated with them. At the time such flows
of certain long-lived assets are not sufficient to recover the carrying
value of such assets, the assets are adjusted to their fair values.
NOTE 2 SHORT-TERM INVESTMENTS
The Company's short-term investments were comprised of marketable
equity securities, classified as available for sale securities, which were
carried at their fair value based upon the quoted market prices of those
investments at December 31, 1998. Accordingly, net unrealized losses on
available for sale securities are included in other comprehensive income
(loss). At December 31, 1998, the investments had a cost basis of $235,000
and a fair market value of $130,000.
NOTE 3 ACCOUNTS RECEIVABLE
Accounts receivable at December 31 consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Accounts receivable $ 142,191 $ 118,148
Less allowance for doubtful accounts (58,203) (40,710)
------- -------
$ 83,988 $ 77,438
======= =======
</TABLE>
For the years ended December 31, 1999 and 1998, the Company recorded a
provision for doubtful accounts of $17,493 and $40,710, respectively in
its statement of operations.
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment at December 31 consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Furniture 100,865 -
Office equipment $ 30,724 $ 10,838
Leasehold improvement 12,710 12,710
Software 5,608 2,482
Less accumulated depreciation (27,369) (1,438)
------- ------
$ 122,538 $ 24,592
======= =======
</TABLE>
Depreciation expense for the year ended December 31, 1999 and 1998
was $25,931 and $1,438, respectively.
NOTE 5 INTANGIBLE ASSETS
In 1998, the Company entered into an employment agreement with an
individual. As part of the agreement, the Company agreed to refund
tuition payments to his former students at his prior company. This
amount, which aggregated $41,785, has been recorded as an intangible
employment cost and is being amortized over the 3-year life of the
employment contract. (See Note 9(B))
In 1999, the Company purchased intangible assets consisting of a student
database and other miscellaneous intangibles for $157,530. This amount
is being amortized over a 2-year period.
Intangible assets at December 31 consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Customer database $ 157,530 $ -
Employment cost 41,785 41,785
Less accumulated Amortization (84,209) (4,643)
------- ------
$ 115,106 $ 37,142
======= ======
</TABLE>
Amortization expense for the employment cost for the years ended
December 31, 1999 and 1998 was $13,928 and $4,643 respectively.
Amortization expense for the customer database for the year ended
December 31, 1999 was $65,638.
NOTE 6 PAYROLL TAXES PAYABLE
At December 31, 1999 and 1998 the Company owed $237,365 and $59,904,
respectively, in federal and state payroll taxes and interest and
penalties for prior tax periods. Such amounts were recorded in payroll
taxes payable at December 31. In January, 2000, the Company made payments
of $34,445 against the 1999 payroll tax liability.
NOTE 7 ACCRUED PAYROLL AND PAYROLL TAXES
The accrued payroll and payroll taxes represent past due wages owed to
employees and the related payroll taxes accrued on these wages.
NOTE 8 NOTES AND LOANS PAYABLE
The following schedule reflects notes and loans payable at December 31:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Note payable to individual, 12% interest,
due on demand, unsecured. 135,000 135,000
Note payable to an officer. 12% interest,
due on demand, unsecured. $ 25,000 $ 25,000
Loan payable to individual non-interest
bearing, due on demand, unsecured. - 40,000
Notes payable to individual, non-interest
bearing, due 30 days after settlement
agreement, unsecured. - 25,635
Loan payable to individual, non-interest
bearing, due on demand, unsecured 2,500 7,500
Loans payable to a corporation, non-
interest bearing, due on demand,
unsecured. - 89,313
TOTAL - ALL CURRENT $ 162,500 $ 322,448
</TABLE>
NOTE 9 COMMITMENTS
(A) Operating Leases
The Company leases corporate office space under operating leases.
These leases have remaining terms varying from the years 2003
through 2004.
Future minimum lease payments under operating leases are
approximately as follows at December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
2000 $ 110,600
2001 114,600
2002 118,700
2003 80,900
-------
$ 424,800
=======
</TABLE>
Rent expense under operating leases for the years ended December
31, 1999 and 1998 was $106,540 and $35,064, respectfully.
(B) Employment Agreements
During September 1998, (the "Effective Date"), the Company entered into
three employment agreements (the "Agreements") with executives of the
Company (the "Employees"). The Employees were engaged as the
President, the Chief Financial Officer ("CFO") and the Chairman of the
board of the Company. The Agreements were established for terms of
three years, from the effective date. The agreements contain a
confidentiality clause and a non - compete clause. As consideration for
the employees' performances, the Company agreed to pay an annual base
salary of $72,000 to the President, $50,000 to the CFO, and of $100,000
to the Chairman of the Board.
In addition, the Company granted 100,000 shares of common stock to the
President, 75,000 shares of common stock to the CFO, and 250,000 shares
of common stock to the Chairman of the Board, subject to a buy back
arrangement. The Company also granted incentive stock options, with an
exercise price of $5, to the President, CFO, and Chairman of the Board of
110,000, 60,000, and 0 shares, respectively.
NOTE 10 STOCKHOLDERS' DEFICIENCY
(A) Preferred Stock
The Company authorized 20,000,000 shares of preferred stock at
$.0001 par value to be issued in one or more series with such rights,
preferences, and restrictions as determined by the Board of Directors
at the time of authorization of issuance. At December 31, 1999 and
1998, no shares had been issued.
(B) Common Stock Issuances
In June 1998, the Company issued 2,005,000 shares of common stock
to its founders for cash of $2,005.
During 1998, the Company issued 775,000 shares of common stock
to individuals for cash of $80,000.
During 1998, the Company issued 100,000 shares of common stock
in exchange for marketable securities with a fair market value of
$235,000.
During 1999, the Company issued 1,183,000 shares of common stock
to its founders for cash of $1,183.
During 1999, the Company issued 1,605,000 shares of common
stock, for a total of $925,145, on reliance of Regulation D, Rule 504
and 506 exemption from registration under the Securities Act of
1933, as amended. The total amount represented cash of $745,832,
extinguishment of debt of $134,313 and a subscription receivable of
$45,000.
During 1999, an individual subscribed to 65,000 shares of common
stock, for $16,250.
On June 21, 1999 and December 31, 1999, the Company recapitalized
through mergers (Note 1(A)).
(C) Stock Options Granted Under Employment Agreements
In Accordance with SFAS 123, for options granted to employees, the
Company applies APB Opinion No. 25 and related interpretations in
accounting for the options issued. No compensation cost has been
recognized for options issued under the employment agreements. For
financial statement disclosure purposes and for purposes of valuing
stock options issued, the fair market value of each stock option
granted was estimated on the date of grant using the Black-Scholes
Option-Pricing Model in accordance with SFAS 123. There was no
resulting Black-Scholes value for the stock options, as the exercise
price of the options as stipulated in the option agreements exceeded
the fair market value of the stock on the grant date. Had
compensation cost been determined based on the fair market value at
the grant date, consistent with SFAS 123, the Company's Net Loss
and loss per share amounts would not have changed in 1999 and
1998.
NOTE 11 INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1999 and
1998 is summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Current:
Federal $ - $ -
State - -
Deferred-Federal and State - -
Change in Valuation Allowance - -
------ ------
Income tax expense (benefit) $ - $ -
====== ======
The Company's tax expense differs from the "expected" tax expense for
the years ended December 31, 1999 and 1998, as follows:
1999 1998
U.S. Federal income tax provision
(benefit) $ (452,000) $ (250,000)
Effect of net operating loss
Carryforward 452,000 250,000
------- -------
$ - $ -
======= =======
The tax effects of temporary differences that gave rise to significant
portions of deferred tax assets and liabilities at December 31, are as
follows:
1999 1998
Deferred tax assets:
Net operating loss carryforward $ 702,000 $ 250,000
------- -------
Total gross deferred tax assets 702,000 250,000
Less valuation allowance (702,000) (250,000)
------- -------
Net deferred tax assets $ - $ -
======= =======
</TABLE>
At December 31, 1999, the Company had net operating loss
carryforwards, of approximately $2,064,000, for U.S. federal income tax
purposes available to offset future taxable income expiring on various
dates beginning in 2016 through 2018.
The valuation allowance at January 1, 1999 was approximately $250,000.
The net change in the valuation allowance during the year ended
December 31, 1999 was an increase of approximately $452,000.
NOTE 12 GOING CONCERN
As reflected in the accompanying financial statements, the Company has
had continuing losses since inception and, at December 31, 1999, has a
working capital deficiency of $1,118,127 and a stockholders' deficiency
of $866,019. The ability of the Company to continue as a going concern is
dependent on the Company's ability to raise additional capital and
implement its business plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue
as a going concern.
The Company anticipates an increase in revenues during 2000 and intends
to continue raising additional capital during 2000. Management believes
that actions presently taken to improve its future operations and obtain
additional funding provide the opportunity for the Company to continue as
a going concern (See Note 13).
NOTE 13 SUBSEQUENT EVENT
During January 2000, the Company sold, in Regulation D, Rule 506,
private placement, 55,000 restricted shares of common stock for an
aggregate of $152,000, or an average $2.77 per share.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN CAREER CENTERS, INC.,
By:
William G. Anthony, President and Chief
Executive Officer
By:
Thomas D. Keene, Treasurer
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
William G. Anthony and Thomas D. Keene, and each of them, as his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and his name, place and stead, in any and all
capacities, to sign any or all amendments to this Annual Report on Form
10-KSB and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the foregoing, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them,
or their substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature Title Date
President, Chief Executive April 10, 2000
/S/ William G. Anthony Officer and Director
(Principal Executive Officer)
Chairman of the Board of Directors April 10, 2000
/S/ Ronald C. Mears
Treasurer, Secretary and Director April 10, 2000
/S/ Thomas D. Keene (Principal Financial and
Accounting Officer)
INDEX TO EXHIBITS
Exhibits Page
3.1 Articles of Incorporation
3.2 Certificate of Amendment to American Career Centers, Inc.
Certificate of Incorporation
3.3 Bylaws
10.1 1998 Stock Option Plan
10.2 Form of Incentive Stock Option Agreement
21 Subsidiaries of Registrant
27 Financial Data Schedule
ARTICLE ONE
NAME
The name of the Corporation is American Career Centers, Inc.
ARTICLE TWO
DURATION
The Corporation shall have perpetual existence.
ARTICLE THREE
PURPOSE
The purpose for which this Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under the
Nevada General Corporation Law.
ARTICLE FOUR
SHARES
The total number of shares of stock which the Corporation shall authority
to issue is 120,000,000 shares, consisting of 100,000,000 shares of Common
Stock having a par value of $.0001 per share and 20,000,000 shares of
Preferred Stock having a par value of $.0001 per share.
The Board of Directors is authorized to provide for the issuance of the
shares of Preferred Stock in series and, by filing a certificate pursuant
to the applicable law of the State of Nevada, to establish from time to
time the number of shares to be included in each such series, and to fix
the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions
thereof.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of
the following:
A. The number of shares constituting that series and the
distinctive designation of that series;
B. The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends on shares
of that series;
C. Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting
rights;
D. Whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
E. Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the date
or dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under difference
conditions and at different redemption dates;
F. Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of
such sinking fund;
G. The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
H. Any other relative rights, preferences and limitations of that
series.
ARTICLE FIVE
COMMENCEMENT OF BUSINESS
The Corporation is authorized to commence business as soon as its articles
of incorporation have been filed.
ARTICLE SIX
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the initial resident office of the Corporation
and the name of its initial resident agent and its business address is:
CSC Services of Nevada, Inc.
502 E. John Street
Carson City, Nevada 89706
The initial resident agent is a resident of the State of Nevada.
ARTICLE SEVEN
INCORPORATOR
James M. Cassidy, 1504 R Street, N.W., Washington, D.C. 20009.
ARTICLE EIGHT
DIRECTORS
The Board of Directors shall consist of one director. The initial director
shall be:
William Anthony
2490 South 300 West
Salt Lake City, Utah 84115
ARTICLE EIGHT
PRE-EMPTIVE RIGHTS
No shareholder or other person shall have any pre-emptive rights whatsoever.
ARTICLE NINE
BY-LAWS
The initial by-laws shall be adopted by the Shareholders or the Board of
Directors. The power to alter, amend, or repeal the by-laws or adopt new
by-laws is vested in the Board of Directors, subject to repeal or change
by action of the Shareholders.
ARTICLE TEN
NUMBER OF VOTES
Each share has one vote on each matter on which the share is entitled to
vote.
ARTICLE ELEVEN
MAJORITY VOTES
A majority vote of a quorum of Shareholders (consisting of the
holders of a majority of the shares entitled to vote, represented in person
or by proxy) is sufficient for any action which requires the vote or
concurrence of Shareholders, unless otherwise required or permitted by law
or the by-laws of the Corporation.
ARTICLE TWELVE
NON-CUMULATIVE VOTING
Directors shall be elected by majority vote. Cumulative voting shall not
be permitted.
ARTICLE THIRTEEN
INTERESTED DIRECTORS, OFFICERS AND SECURITYHOLDERS
A. VALIDITY. If Paragraph (B) is satisfied, no contract or other
transaction between the Corporation and any of its directors, officers or
securityholders, or any corporation or firm in which any of them are
directly or indirectly interested, shall be invalid solely because of this
relationship or because of the presence of the director, officer or
securityholder at the meeting of the Board of Directors or committee
authorizing the contract or transaction, or his participation or vote in
the meeting or authorization.
B. DISCLOSURE, APPROVAL, FAIRNESS. Paragraph (A) shall apply if:
(1) The material facts of the relationship or interest of each
such director, officer or securityholder are known or disclosed:
(a) to the Board of Directors or the committee and it nevertheless
authorizes or ratifies the contract or transaction by a majority of the
directors present, each such interested director to be counted in
determining whether a quorum is present but not in calculating the majority
necessary to carry the vote; or
(b) to the Shareholders and they nevertheless authorize or ratify
the contract or transaction by a majority of the shares present, each such
interested person to be counted for quorum and voting purposes; or
(2) the contract or transaction is fair to the Corporation as of
the time it is authorized or ratified by the Board of Directors, the
committee or the Shareholders.
ARTICLE FOURTEEN
INDEMNIFICATION AND INSURANCE
A. PERSONS. The Corporation shall indemnify, to the extent
provided in Paragraphs (B), (D) or (F):
(1) any person who is or was director, officer, agent or employee
of the Corporation, and
(2) any person who serves or served at the Corporation's request
as a director, officer, agent, employee, partner or trustee of another
corporation or of a partnership, joint venture, trust or other enterprise.
B. EXTENT-DERIVATIVE SUITS. In case of a suit by or in the right
of the Corporation against a person named in Paragraph (A) by reason of
his holding a position named in Paragraph (A), the Corporation shall
indemnify him, if he satisfies the standard in Paragraph (C), for expenses
(including attorneys' fees but excluding amounts paid in settlement)
actually and reasonably incurred by him in connection with the defense or
settlement of the suit.
C. STANDARD-DERIVATIVE SUITS. In case of a suit by or in the right
of the Corporation, a person named in Paragraph (A) shall be indemnified
only if:
(1) he is successful on the merits or otherwise, or
(2) he acted in good faith in the transaction which is the subject
of the suit, and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation. However, he shall not be
indemnified in respect of any claim, issue or matter as to which he has
been adjudged liable for negligence or misconduct in the performance of
his duty to the Corporation unless (and only to the extent that) the court
in which the suit was brought shall determine, upon application, that
despite the adjudication but in view of all the circumstances, he is fairly
and reasonably entitled to indemnity for such expenses as the court shall
deem proper.
D. EXTENT-NONDERIVATIVE SUITS. In case of a suit, action or
proceeding (whether civil, criminal, administrative or investigative),
other than a suit by or in the right of the Corporation against a person
named in Paragraph (A) by reason of his holding a position named in
Paragraph (A), the Corporation shall indemnify him, if he satisfies the
standard in Paragraph (E), for amounts actually and reasonably incurred by
him in connection with the defense or settlement of the suit as
(1) expenses (including attorneys' fees),
(2) amounts paid in settlement,
(3) judgments, and
(4) fines.
E. STANDARD-NONDERIVATIVE SUITS. In case of a nonderivative suit,
a person named in Paragraph (A) shall be indemnified only if:
(1) he is successful on the merits or otherwise, or
(2) he acted in good faith in the transaction which is the subject
of the nonderivative suit, and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the Corporation and, with respect
to any criminal action or proceeding, he had no reason to believe his
conduct was unlawful. The termination of a nonderivative suit by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person
failed to satisfy this Paragraph (E)(2).
F. DETERMINATION THAT STANDARD HAS BEEN MET. A determination that
the standard of Paragraph (C) or (E) has been satisfied may be made by a
court of law or equity or the determination may be made by:
(1) a majority of the directors of the Corporation (whether or not
a quorum) who were not parties to the action, suit or proceeding, or
(2) independent legal counsel (appointed by a majority of the
directors of the Corporation, whether or not a quorum, or elected by the
Shareholders of the Corporation) in a written opinion, or
(3) the Shareholders of the Corporation.
G. PRORATION. Anyone making a determination under Paragraph (F)
may determine that a person has met the standard as to some matters but not
as to others, and may reasonably prorate amounts to be indemnified.
H. ADVANCE PAYMENT. The Corporation may pay in advance any
expenses (including attorneys' fees) which may become subject to the
indemnification under Paragraphs (A)-(G) if:
(1) the Board of Directors authorizes the specific payment and
(2) the person receiving the payment undertakes in writing to
repay unless it is ultimately
determined that he is entitled to indemnification by the Corporation under
Paragraphs (A)-(G).
I. NONEXCLUSIVE. The indemnification provided by Paragraphs (A)-(G)
shall not be exclusive of any other rights to which a person may be entitled
by law or by by-law, agreement, vote of Shareholders or disinterested
directors, or otherwise.
J. CONTINUATION. The indemnification and advance payment provided
by Paragraphs (A)-(H) shall continue as to a person who has ceased to hold
a position named in Paragraph (A) and shall inure to his heirs, executors
and administrators.
K. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of any person who holds or who has held any position named in
Paragraph (A) against any liability incurred by him in any such positions
or arising out of this status as such, whether or not the Corporation would
have power to indemnify him against such liability under
Paragraphs (A)-(H).
L. REPORTS. Indemnification payments, advance payments, and
insurance purchases and payments made under Paragraphs (A)-(K) shall be
reported in writing to the Shareholders of the Corporation with the next
notice of annual meeting, or within six months, whichever
is sooner.
M. AMENDMENT OF ARTICLE. Any changes in the General Corporation
Law of Nevada increasing, decreasing, amending, changing or otherwise
effecting the indemnification of directors, officers, agents, or employees
of the Corporation shall be incorporated by reference in this Article as of
the date of such changes without further action by the Corporation, its
Board of Directors, of Shareholders, it being the intention of this Article
that directors, officers, agents and employees of the Corporation shall be
indemnified to the maximum degree allowed by the General Corporation Law of
the State of Nevada at all times.
ARTICLE FIFTEEN
LIMITATION ON DIRECTOR LIABILITY
A. SCOPE OF LIMITATION. No person, by virtue of being or having
been a director of the Corporation, shall have any personal liability for
monetary damages to the Corporation or any of its Shareholders for any
breach of fiduciary duty except as to the extent provided in Paragraph (B).
B. EXTENT OF LIMITATION. The limitation provided for in this
Article shall not eliminate or limit the liability of a director to the
Corporation or its Shareholders (i) for any breach of the director's duty
of loyalty to the Corporation or its Shareholders, (ii) for any acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for any unlawful payment of dividends or
unlawful stock purchases or redemptions in violation of the General
Corporation Law of Nevada, or (iv) for any transaction for which the
director derived an improper personal benefit.
IN WITNESS WHEREOF, the incorporator hereunto has executed these articles
of incorporation on this 11th day of June 1999.
/s/ JAMES M. CASSIDY
James M. Cassidy
CERTIFICATE OF INCORPORATION
The undersigned, being all the incorporators of American Career Centers,
Inc. (the "Corporation"), a corporation organized and existing under the
Nevada General Corporation Law, hereby certifies as follows:
1. The original Articles of Incorporation for American Career Centers,
Inc. were filed with the Nevada Secretary of State on June 15, 1999.
2. No payment for any shares of any class of stock has been
received by the Corporation as of the date of this amendment.
3. The Corporation, by action of the undersigned incorporator
comprising all the incorporators, files this Certificate of Amendment to
change Article Eight to read as follows:
"ARTICLE EIGHT
DIRECTORS
"The number of directors which shall constitute the whole Board shall be
not fewer than one nor more than seven as shall be determined from time
to time pursuant to the by-laws of the Corporation. The initial director
shall be William Anthony."
IN WITNESS WHEREOF, I have hereunto set my hand this 20th days
of July, 1999.
/S/ JAMES M. CASSIDY
James M. Cassidy
Incorporator
ARTICLE I
OFFICES
The principal office of the Corporation shall be located and situated in
the State of Utah. The Corporation may also have such other offices,
within and/or without the State of Utah, as the Board of Directors may
from time to time decide or the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
Section 1. Annual Meetings.
The annual meeting of the shareholders, beginning with the year 2000, shall
be held on the 14th day of the month of May, if not a Saturday, Sunday or
legal holiday, and if a Sunday or legal holiday, then on the next business
day following, at ten o'clock a.m. At such Annual Meeting, the
shareholders shall elect the Board of Directors and transact such other
business as may come before the meeting.
Section 2. Special Meetings.
Special meetings of the shareholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the President and shall
be so called at the request, in a writing stating the purpose(s) of the
requested Special Meeting, of a majority of the Board of Directors or of
shareholders who together hold at least 51% of the entire issued and
outstanding capital stock of the Corporation and are entitled to vote.
Business transacted at any special meeting of shareholders shall be limited
to the purposes specifically described in the Notice of Meeting.
Section 3. Place of Meetings.
All meetings of the shareholders shall be held at such place, within or
without the State of Utah, as may be designated from time to time by the
Board of Directors. If no designation is made, the place of the meeting
shall be the principal offices of the Corporation.
Section 4. Notice of Meetings.
A written Notice of Meeting or, when applicable, Notice of Special Meeting,
stating the purpose(s) for which the meeting is called and stating the
place, date, and hour of the meeting, shall be delivered to each shareholder
entitled to vote at such meeting not less than ten nor more than sixty days
before the date of the meeting. If "delivery" is to be accomplished by mail,
the Notice shall be deemed to be "delivered" when deposited in the United
States mail, postage prepaid, addressed to the shareholder at the last
address recorded for such shareholder in the stock ledger/book(s) of the
Corporation.
A written Waiver of Notice, signed by the person(s) entitled to such notice,
shall be deemed equivalent to the required notice.
Section 5. List of Shareholders.
At least ten days prior to any meeting of shareholders, the officer in
charge of the stock ledger/books of the Corporation shall make a complete
list of all shareholders entitled to vote at the meeting, arranged in
alphabetical order, showing the name, address, and number of shares held
by each shareholder. Such list shall be produced and kept open at the
principal offices of the Corporation for examination and/or inspection by
any shareholder, for any purpose, during ordinary business hours, for a
period of not less than ten days immediately preceding the meeting. The
list shall also be produced at, and kept open during, the meeting, and may
be inspected by any shareholder who is present at the meeting.
Section 6. Quorum.
The holders of a majority of the issued and outstanding shares of the
Corporation and entitled to vote, present in person or by proxy, shall
constitute a quorum at any meeting of the shareholders. If, however,
such quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote, present in person or
represented by proxy, shall have the power to adjourn the meeting without
notice to a future date at which a quorum shall be present. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting
as originally noticed. If the adjournment is for more than thirty days, a
notice of the adjourned meeting shall be given to each shareholder of
record entitled to vote at the meeting.
Section 7. Proxies.
A written proxy, executed by a shareholder or his or her duly authorized
attorney-in-fact and filed with the Secretary of the Corporation before or
at the time of any meeting of shareholders, may be used to vote any or all
of the voting shares of such shareholder. Unless specifically provided
otherwise in the written proxy, no proxy shall be voted on after the first
anniversary of its execution. Every proxy shall be revocable by the
shareholder executing it, except where an irrevocable proxy is permitted
by statute and the proxy specifically states that it shall be irrevocable.
Section 8. Voting.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of the
incorporating documents, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Unless otherwise provided in the incorporating documents or by statute,
each shareholder shall at every meeting of the shareholders be entitled to
one vote in person or by proxy for each share of the capital stock having
voting power held by such shareholder. Shares of its own stock belonging
to the Corporation shall not be voted, directly or indirectly, at any
meeting and shall not be counted in determining the total number of
outstanding shares.
Section 9. Written Consent.
Unless otherwise provided by law or in the incorporating documents, any
action required to be taken at any meeting of shareholders of the
Corporation, or any other action which may be taken at any meeting of the
shareholders, may be taken without a meeting, without notice and without a
vote, if a written consent, setting forth the action so taken shall be
signed by the holders of outstanding stock 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 shares entitled to vote thereon were
present and voted. Any such consent shall be filed with the minutes of
the Corporation.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Function, Authority, and Compensation.
The property, business, and affairs of the Corporation shall be managed by
its Board of Directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or
otherwise required to be exercised by the shareholders. The Board of
Directors shall have the authority from time to time to fix the
compensation of Directors and to authorize the payment of expenses
relating to service on the Board.
Section 2. Number.
The Corporation shall have up to seven Directors serving on the Board of
Directors.
Section 3. Election and Term.
Each person named in the Articles or Certificate of Incorporation as a
member of the first Board of Directors shall hold such office until the
First Meeting of Shareholders and until his or her successor shall have
been elected and qualified or until his or her resignation, removal, or
death.
At the First Meeting of Shareholders and at each annual meeting thereafter,
the shareholders shall elect directors to hold office until the next
election. Each Director shall hold such office until his or her successor
shall have been elected and qualified or until his or her resignation,
removal, or death.
Section 4. Vacancies.
Any vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled by the affirmative vote
of a majority of the directors then in office, though less than a quorum
of Directors, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election and until their successors
are duly elected and qualified, or until his or her resignation, removal,
or death.
Section 5. Removal.
At any Annual Meeting of Shareholders or at a Special Meeting of
Shareholders called expressly for such purpose, any Director(s) or the
entire Board of Directors may be removed, with or without cause, by a
majority vote of the issued and outstanding shares of the Corporation
eligible to vote.
Section 6. Place of Meetings.
The Board of Directors of the Corporation may hold meetings, both regular
and special, either within or without the State of Utah, at such place as
may be designated from time to time by the Board. If no designation is
made, the place of meetings shall be the principal offices of the
Corporation.
Section 7. Notice of Meetings.
Regular meetings of the Board of Directors may be held with forty-eight
(48) hours' notice on such dates and at such times as shall from time to
time be determined by the Board of Directors. Special meetings of the
Board of Directors may be called by the President on two days' notice to
each director, by phone, mail, electronic mail, or telegram, setting forth
the time, place, and purpose of the meeting. Special meetings shall be
called by the President or Secretary in like manner and on like notice on
the written request of at least two directors.
Notice of a meeting need not be given to any Director who signs a Waiver
of Notice either before or after a meeting. Attendance of a Director at
a meeting shall constitute a Waiver of Notice of such meeting and a waiver
of any and all objections to the place or time of the meeting, unless the
Director states, at the beginning of the meeting, any objections to the
transaction of business because the meeting was not lawfully called or
convened.
Section 8. Telephonic Meetings and Action Without a Meeting.
Members of the Board of Directors may participate in a meeting of the Board
as if present in person by means of a conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear each other at the same time. Any action required to
be taken at a meeting of the Board or which may be taken at any meeting of
the Board, may be taken without a meeting, if all Directors consent thereto
in writing, and such writing(s) is/are filed with the Minutes of the
proceedings of the Board. Such consent shall have the same effect as a
unanimous vote.
Section 9. Voting.
A majority of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors. If
a quorum is not present, a majority of the directors present may adjourn
the meeting until an announced date and time.
Section 10. Presumption of Assent.
At any meeting of the Board at which action is taken on a corporate matter,
each Director in attendance shall be presumed to assent to the action unless
such director's dissent is entered in the Minutes of the meeting or unless
any such dissent is filed with the Secretary.
ARTICLE IV
OFFICERS
Section 1. Positions.
The officers of the Corporation shall be elected by the Board of Directors
and shall consist of a President, one or more Vice Presidents, a Secretary,
and a Treasurer. The Board of Directors may also choose additional officers
or assistant officers, and/or a Chairman of the Board.
Section 2. Election and Term.
At its first meeting and following each Annual Meeting of Shareholders, the
Board shall elect the officers. Each officer shall hold his or her office
until his or her successor shall be duly elected and qualified, or until
his or her resignation, removal, or death.
Section 3. Removal.
Any officer elected or appointed by the Board of Directors may be removed
at any time by the affirmative vote of a majority of Directors.
Section 4. Salaries.
Officers' salaries shall be fixed from time to time by the Board of
Directors.
Section 5. President.
The President shall be the chief executive officer of the Corporation and
shall have general and active supervision and management of the business
and affairs of the Corporation. He or she shall enforce and/or effect all
orders and resolutions of the Board of Directors and shall preside at all
Shareholders' and Board of Directors' meetings. The President shall have
the authority to sign checks and to execute all bonds, deeds, mortgages,
conveyances, contracts, and other instruments on behalf of the Corporation.
The President shall have the power to appoint or hire such agents and
employees as in his or her judgment may be necessary or proper for the
transaction of the business or affairs of the Corporation.
Section 6. Vice President.
The Vice Presidents shall, in the absence of the President, perform and
exercise the duties and powers of the President with the same force and
effect as if performed by the President and shall generally assist the
President and perform any duties given to him or her from time to time
by the Board of Directors.
Section 7. Secretary.
The Secretary shall have custody of and maintain the non-financial
corporate records of the Corporation and he or she shall attend all
meetings of the Board of Directors and all meetings of the shareholders
and record all the proceedings of the meetings of the Corporation and of
the Board of Directors in a book to be kept for that purpose. The Secretary
shall give, or cause to be given, notice of all meetings of the shareholders
and of the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or President.
Section 8. Treasurer.
The Treasurer shall have the custody of the corporate funds and financial
records and shall keep full and accurate accounts of receipts and
disbursements. He or she shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board
of Directors, taking proper vouchers for such disbursements, and shall
render to the President, the Board of Directors, and the Shareholders at
regular meetings, or when the Board of Directors so requires, an account
of all of his or her transactions as Treasurer and of the financial
condition of the Corporation.
ARTICLE VI
STOCK CERTIFICATES
Section 1. Certificates for Shares
Every holder of shares of the Corporation shall be entitled to have a
certificate certifying the number of shares owned by that person.
Certificates representing shares of the Corporation shall be in such form
as shall be determined by the Board of Directors. Such certificates shall
be signed by the President and by the Secretary or by such other officers
authorized by law and by the Board of Directors so to do, and sealed
with the corporate seal. All certificates for shares shall be
consecutively numbered or otherwise identified. 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. 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 case 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.
Section 2. Transfer of Shares.
The Corporation shall register a Stock Certificate presented to it for
transfer provided that it is properly endorsed by the holder of record or
by his or her duly authorized representative, who shall furnish proper
evidence of authority to transfer.
Section 3. Lost Certificate.
The Board of Directors may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be from January 1st to December
31st.
ARTICLE VIII
AMENDMENTS
These bylaws may be amended, revised, or repealed or new bylaws may be
adopted by the shareholders or by the Board of Directors at any meeting
of the shareholders or of the Board of Directors.
ARTICLE IX
INDEMNIFICATION
The Corporation shall indemnify to the full extent authorized or permitted
by the general corporation law of the State of Nevada any person made, or
threatened to be made, a party to any threatened, pending, or completed
action, suit, or proceeding (whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation)
by reason of the fact that he or she is or was a director, officer,
employee, or agent of the Corporation or serves or served any other
enterprise as such at the request of the Corporation. This right of
indemnification shall not be deemed exclusive of any other rights to which
such persons may be entitled apart from this Article. The foregoing right
of indemnification shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of
his or her heirs, executors, representatives, and administrators.
Signed this 14th day of July, 1999.
/s/ William G. Anthony
William G. Anthony,
Director of Corporation
ARTICLE 1. OBJECTIVES OF THE PLAN. The objectives of the 1998 Stock
Option Plan (the "Plan") of Alpha Computer Solutions, Inc. (the "Company")
are to: (i) Furnish incentive to individuals chosen to receive options
because they are considered capable of improving operations and increasing
profits; (ii) Encourage officers, selected employees, directors and
consultants to accept or continue employment with, or serve as a Director
of, or continue consulting to, the Company or its Affiliates; and (iii)
Stimulate greater participation of selected employees, directors and
consultants in the Company's welfare through increasing their interest
and participation in the growth of the Common stock of the Company.
To accomplish the foregoing objectives, this Plan provides a means whereby
officers, directors, employees and consultants may receive options to
purchase Common shares. Options granted under this Plan will be either
Nonqualified Options ("NQOs") or Incentive Stock Options ("ISOs").
ARTICLE 2. ELIGIBLE PERSONS. Every person who at the date of grant is an
employee of the Company is eligible to receive NQOs and ISOs under this
Plan; provided, however, than an ISO may not be granted under this Plan to
any person who owns, directly or indirectly, stock of the Company
constituting more than twenty five percent (25%) of the total combined
voting power of the Company's outstanding stock, unless the exercise price
of the ISO at the time of the option is granted is at least one hundred ten
percent (110%) of the fair market value of the stock subject to the option,
and the option is exercisable for no more than five years after the date of
the grant, as set forth in Section 6.2 of this Agreement. The term employee
includes and officer or director who is an employee, as well as a
non-officer, non-director, regular employee of the Company. Every person
who at the date of grant is a non-employee director or consultant to the
Company is eligible to receive NQOs but shall not be eligible to receive
ISOs. The term "consultant" includes persons employed by, or otherwise
affiliated with, a consultant.
ARTICLE 3. STOCK SUBJECT TO THIS PLAN. The total number of shares of
stock which may be granted pursuant to the Plan is 600,000 common shares
of the Company, par value $.001 (.1 cent) per share. The shares covered by
the portion of any grant which expires unexercised under the Plan shall
become available again for grants under the Plan. The number of shares
reserved for purchase under the Plan is subject to adjustment in accordance
with the provisions for adjustment in the Plan.
ARTICLE 4. ADMINISTRATION. The Plan shall be administered by the Board
of Directors of the Company or by a committee appointed by the Board which
shall not have less than three Board members (in either case, the
"Administrator"). Subject to the provisions of the Plan, the Administrator
shall have the authority to select the persons to receive options under the
Plan, to fix the number of shares which each optionee may purchase, to set
the terms and conditions of each option (including whether each option
should be a NQO, and ISO or in part a NQO and in part an ISO), and to
determine all other matters relating to the Plan. All questions of
interpretation, implementation, and application of the Plan shall be
determined by the Administrator, such determination shall be final and
binding on all persons.
ARTICLE 5. GRANTING OF OPTIONS
Section 5.1. Term. No options shall be granted under this Plan after
ten years from the date of adoption of this Plan by the Board of Directors.
Section 5.2. Stock Option Agreement. Each Option shall be evidenced by
a written stock option agreement, in form satisfactory to the Company,
executed by the Company and the person to whom such option is granted.
The agreement shall specify whether each option it evidences is a NQO, and
ISO, or in part a NQO and in part an ISO. If an option is in part a NQO
and in part an ISO, the agreement shall clearly identify each portion and
the number of shares subject to each portion.
Section 5.3. Value of Grant. The Administrator can grant ISOs for shares
of any value, provided that the value of the shares subject to one or more
ISOs first exercisable in any calendar year does not exceed $300,000
(determined at the grant date) plus fifty percent (50%) of any unused limit
carryover from prior years.
Section 5.4. Grants to Officers, Directors, Consultants and Employees in
Advance. The Administrator may approve the grant under this Plan to
persons who are expected to become officers, directors, employees of, or
consultants to, the Company, but are not officers, directors, employees or
consultants at the date of approval. In such cases, the option shall be
deemed granted, without further approval, on the date the grantee becomes
and officer, director, employee or consultant and must satisfy all
requirements of this Plan for options granted on that date.
ARTICLE 6. TERMS AND CONDITIONS OF OPTION. Each option granted under
this Plan shall be designated as an ISO, a NQO, or in part an ISO and in
part a NQO. Each option shall be subject to the terms and conditions set
forth in Section 6.1 below. In addition, NQOs shall be subject to the
terms and conditions set forth in Section 6.2, below, but not those set
forth in Section 6.3. ISOs shall be subject to the terms and conditions
set forth in Section 6.3, below, but not those set forth in Section 6.2.
Section 6.1. General Terms and Conditions. All options granted under this
Plan shall be subject to the following terms and conditions:
Section 6.1.1. Changes in Capital Structure. Subject to Section 6.1.2,
below, if the stock of the Company is changed by reason of a stock split,
reverse stock split, stock dividend, or recapitalization, or converted into
or exchanged for other securities as a result of a merger, consolidation or
reorganization, appropriate adjustments shall be made in (a) the number and
class of shares of stock subject to this Plan and each option outstanding
under this Plan, and (b) the exercise price of each outstanding option;
provided, however, that the Company shall not be required to issue
fractional shares as a result of any such adjustments. Each such adjustment
shall be determined by the Administrator at his sole discretion, which
determination shall be final and binding on all persons.
Section 6.1.2. Corporate Transactions. New option rights may be
substituted for the option right granted under this Plan, or the Company's
obligations as to options outstanding under this Plan may be assumed, by
an employer corporation other than the Company, or by a parent or subsidiary
of such employer corporation, in connection with any merger, consolidation,
acquisition, separation, reorganization, liquidation or like occurrence in
which the Company is involved, in such manner that the then outstanding
options which are ISOs will continue to be "incentive stock options" within
the meaning of the applicable section of the Internal revenue Code, as
amended (the "Code"), to the full extent permitted thereby. Notwithstanding
the foregoing or the provisions of Section 6.1.1, if such employer
corporation, or parent or subsidiary of such employer corporation, does
not substitute new option rights for, and substantially equivalent to,
the option rights granted hereunder, or assume the option rights granted
hereunder, or if the Company's Board of Directors determines, in its sole
discretion, that option rights outstanding under this Plan should not
then continue to be outstanding, the option rights granted hereunder shall
terminate (i) upon dissolution, liquidation, merger, acquisition,
separation, or similar occurrence, or (ii) upon any merger, consolidation,
acquisition, separation, or similar occurrence, where the Company will
not in economic substance be a surviving corporation; provided however,
that each optionee shall be mailed notice at least ten days prior to such
dissolution, liquidation, merger, consolidation, acquisition, separation
or similar occurrence, and shall have at least thirty days after the
mailing of such notice to exercise any unexpired option rights granted
hereunder to
the extent such option rights are then exercisable.
Section 6.1.3. Time of Option Exercise. Options granted under this Plan
shall be immediately exercisable, and shall be exercisable in whole or in
part.
Section 6.1.4. Change of Option Period. Notwithstanding any other
provision of this Plan (Except Section 6.3.3), the Administrator may
accelerate or defer the earliest date or dates on which outstanding
options (or any installments thereof) are exercisable.
Section 6.1.5. Option Grant Date. Except in case of advance approvals
as described in Section 5.4, the date of grant of an option under this
Plan shall be the date on which the Administrator approves the grant.
No option shall be exercisable, however, until a written stock option
agreement in form satisfactory to the Company is executed by the Company
and the optionee.
Section 6.1.6. Nonassignability of Option Rights. No option granted under
this Plan shall be assignable or otherwise transferable by the optionee
except by will or by the laws of descent and distribution. During the life
of the optionee, an option shall be exercisable only by the optionee.
Section 6.1.7. Payment. Except as provided below, payment in full, in
cash, shall be made for all stock purchased at the time written notice of
exercise of an option is given to the Company, and proceeds of any payment
shall constitute general funds of the Company. At the time an option is
granted or exercised, the Administrator, in the exercise of its absolute
discretion, may authorize any one or more of the following additional
methods of payment: (a) Acceptance, in the case of an optionee who is
an employee, of the optionee's full recourse promissory note for all or
part of the option price, payable on such terms and bearing such interest
rate specified by the Administrator (but in no event less than the minimum
interest rate specified by Federal tax law at which no additional interest
would be imputed), which promissory note may be either secured or unsecured
in such manner as the Administrator shall approve (including, without
limitation, by a security in the shares of the Company); and (b) Delivery
by the optionee of Common Shares already owned by the optionee for all or
part of the option price, provided the Value (determined as set forth in
Section 6.3.1) of such Common Shares is equal on the date of exercise to
the option price, or such portion thereof as the optionee is authorized to
pay by delivery of such stock; provided, however, that if an optionee has
exercised any portion of any option granted by the Company by delivery of
Common Shares, the optionee may not, within six months following such
exercise, exercise any option granted under this Plan by delivery of Common
Shares.
Section 6.1.8. Termination of Employment. Option rights, granted to an
employee under this Plan, to the extent such rights have not then expired
or been exercised, shall terminate three months after optionee ceases, for
any reason, to be an employee of the Company, and shall not be exercisable
on or after said date, except that if termination of employment is due to
the disability or death of the optionee, the optionee, or the optionee's
representative or any other person who acquires the option rights from the
optionee by will or the applicable laws of descent and distribution, may
within twelve months after the termination of employment, exercise the
rights to the extent they were exercisable on the date of the termination.
A transfer of an optionee from the Company to an Affiliate or vice versa,
or from one Affiliate to another, or a leave of absence duly authorized by
the Company, shall not be deemed a termination of employment or a break in
continuous employment. Option rights granted to a consultant under this
Plan, to the extent such rights have not expired or been exercised, shall
terminate at such times and in such a manner as provided by the
Administrator at the time of grant.
Section 6.1.9. Repurchase of Stock. At the option of the Administrator,
the stock to be delivered pursuant to the exercise of any option granted
to an employee under this Plan may be subject to a right of repurchase in
favor of the Company, with respect to any employee whose employment with
the Company is terminated. At the option of the Administrator, the stock
to be delivered pursuant to exercise of any option granted to a consultant
under this Plan may be subject to a right of repurchase in favor of the
Company with respect to any consultant whose consultancy to the Company is
terminated. Fractional Shares subject to repurchase shall be rounded to
the nearest full share.
Section 6.1.10. Other Provisions. Each option granted under this Plan
may contain such other terms, provisions, and conditions not inconsistent
with this Plan as may be determined by the Administrator, and each ISO
granted under this Plan shall include such provisions and conditions as
are necessary to qualify the option as an "incentive stock option" within
the meaning of the Code. If options provide for a right of first refusal
in favor of the Company with respect to stock acquired by employees, such
options shall further provide that the right of first refusal shall
terminate when such stock of the Company is first quoted on the National
Association of Securities Dealers Automated Quotation System or listed on
an established
stock exchange.
Section 6.2. Additional Terms and Conditions to Which Only NQOs are
Subject. Options granted under this Plan which are designated as NQOs
shall also be subject to the following terms and conditions:
Section 6.2.1. Exercise Price. The exercise price of a NQO shall be not
less than eighty-five percent (85%) of the fair market value (determined
in accordance with Section 6.3.1) of the stock subject to the option on
the date of the grant.
Section 6.2.3. Option Term. Each NQO granted under this Plan shall expire
ten years and two days from the date of its grant or such earlier date as
may be set by the Administrator on the date of its grant.
Section 6.2.3. Withholding and Employment Taxes. At the time of exercise
of an NQO, the optionee shall remit to the Company in cash all applicable
federal and state withholding and employment taxes.
Section 6.3. Additional Terms and Conditions to Which Only ISOs are
Subject. Options granted under this Plan which are designated as ISOs
shall also be subject to the following terms and conditions:
Section 6.3.1 Exercise Price. The exercise price of an ISO, which shall
be approved by the Board of Directors, shall be determined in accordance
with the applicable provisions of the Code and shall in no event be less
than the fair market value (determined as described in this paragraph) of
the stock covered by the option at the time the option is granted, except
that the exercise price of an ISO granted to any person who owns, directly
or indirectly, (or is treated as owning by reason of attribution rules,
currently set forth in Code Section 425) stock of the Company constituting
more than ten percent (10%) of the total combined voting power of the
Company's outstanding stock, or the stock of any Affiliate of the Company,
shall in no event be less than one hundred ten percent (110%) of such fair
market value. In the absence of an established market for the stock, the
fair market value thereof shall be determined in good faith by the
Administrator, with reference to the Company's net worth, prospective
earning power, dividend-paying capacity, and other relevant factors,
including
the goodwill of the Company, the economic outlook in the Company's industry,
the company's position in the industry and its management, and the values
of stock of other corporations in the same or similar lines of business.
If the stock of the Company is regularly quoted by a recognized securities
dealer, its fair market value shall be the mean between the high bid and
the low asked price for the stock on the date the option is granted (or if
there are no quoted prices for the date of grant, then for the last
preceding business day on which thee were quoted prices). If the stock
of the Company is listed on any stock exchange, its fair market value shall
be the mean between the highest and lowest selling prices for such stock as
quoted on such exchange (or the largest such exchange) for the date the
option is granted (or if there are no sales for such date of grant, then
for the last preceding business day on which there were sales).
Section 6.3.2. Expiration. Unless an earlier expiration date is specified
by the Administrator at the time of grant, each ISO granted under this Plan
shall expire ten years from the date of its grant, except that an ISO
granted to any person who owns, directly or indirectly, (or is treated as
owning by reason of applicable attribution rules, currently set forth in
Code Section 425) stock of the Company constituting more than twenty five
percent (25%) of the total stock of any Affiliate of the Company, shall
expire five years from the date of its grant.
Section 6.3.3. Disqualifying Dispositions. If stock acquired by exercise
of an ISO granted pursuant to this Plan is disposed of within two years
from the date of grant of the option or within one year after the transfer
of the stock to the optionee, the holder of the stock immediately prior to
the disposition shall promptly notify the Company in writing of the date
and terms of the disposition and shall provide such other information
regarding the disposition as the Company may reasonably require.
ARTICLE 7. MANNER OF EXERCISE.
Section 7.1 Exercise. An optionee wishing to exercise an option shall give
written notice to the Company at its principal executive office, to the
attention of the Secretary of the Company, accompanied by an executed stock
option agreement in the form and substance satisfactory to the company and
by payment of the exercise price as provided in Section 6.1.7. The date
the Company receives written notice of an exercise hereunder accompanied by
payment of the exercise price will be considered as the date such option
was exercised.
Section 7.2. Delivery. Promptly after receipt of written notice of exercise
of an option, the Company shall, without stock issue or transfer taxes to
the optionee or other person entitled to exercise the option, deliver to the
optionee or such other person a certificate or certificates for the
requisite number of shares of stock. An optionee or transferee of an
option shall not have any privileges as shareholders with respect to any
stock covered by the option until the date of issuance of a stock certificate.
ARTICLE 8. EMPLOYMENT OR CONSULTING RELATIONSHIP. Nothing in this Plan
or any option granted hereunder shall interfere with or limit in any way
the right of the Company or any of its Affiliates to terminate any
optionee's employment or consultancy at any time, nor confer upon any
optionee any right to continue in the employ of, or consulting to, the
Company or any of its Affiliates.
ARTICLE 9. AMENDMENT, SUSPENSION OR TEMINATION OF THIS PLAN. The Board of
Directors of the Company may from time to time, with respect to any shares
at the time not subject to options, suspend or terminate the Plan or amend
or revise the terms of the Plan; provided that any amendment to the Plan
shall be approved by a majority of the shareholders of the Company if the
amendment would (i) materially increase the benefits accruing to
participants under the Plan; (ii) increase the number of shares of Common
Stock which may be issued under the Plan; or (iii) materially modify the
requirements as to eligibility for participation in the Plan. No amendment,
suspension or termination of the Plan shall, without the consent of the
Optionee, alter or impair any rights or obligations under any option
theretofore granted to such Optionee under the Plan. The Plan shall
terminate on September 30, 2007.
ARTICLE 10. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective
upon adoption by the Board of Directors; provided, however, that no option
shall be exercisable unless and until unanimous written consent of the
stockholders of the Company, or approval by stockholders of the company
voting at a validly called Stockholders meeting and holding a majority (or
such greater number as may be required by law or entitled to vote), is
obtained within 12 months after adoption by the Board of Directors. Options
may be granted and exercised under this Plan only after there has been
compliance with all applicable federal and state securities laws.
Date adopted by the Board of Directors: October 19, 1998
Date approved by Shareholders: November 6, 1998
This Incentive Stock Option Agreement (hereinafter referred to as the
"Agreement"), is made and entered into as of _____________, _______,
between Alpha Computer Solutions, Inc. a Utah corporation (hereinafter
referred to as the "Company") with a principal place of business at 2490
South 300 West, Salt Lake City, Utah 84115 and _________________________,
an individual (hereinafter referred to as the "Optionee"), residing at
______________________________________________________.
THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1. GRANT OF OPTION AND EFFECTIVE DATE.
Section 1.1. Grant. The Company hereby grants to Optionee pursuant to
the Company's 1998 Stock Option Plan (hereinafter referred to as the
"Plan"), an Incentive Stock Option ("ISO") to purchase all or any part of
an aggregate of _______________ shares ("ISO Shares") of the Company's
Common Stock on the terms and conditions set forth herein and in the Plan,
the terms and conditions of the Plan being incorporated into this Agreement
by reference.
Section 1.2. Effective Date. The effective date of this ISO is
_________________ (the "Effective Date").
ARTICLE 2. EXERCISE PRICE. The exercise price for the purchase of the
ISO shares covered by this ISO shall be $ ________ per share.
ARTICLE 3. TERM. Unless otherwise specified on Exhibit A, "Right of
Repurchase", attached hereto, this ISO shall expire as provided in Section
6.3.2 of the Plan.
ARTICLE 4. ADJUSTMENTS OF ISOs. The Company shall adjust the number and
kind of shares and the exercise price thereof in certain circumstances in
accordance with the provisions of Section 6.1.1 of the Plan.
ARTICLE 5. EXERCISE OF OPTIONS.
Section 5.1. Time of Exercise. The ISO shall be exercisable in whole or
in part as of the Effective Date except as provided in Exhibit A, Right of
Repurchase, attached hereto.
Section 5.2. Exercise After Termination of Employment. This ISO may be
exercised after termination of the Optionee's employment only in accordance
with the provision of Section 6.1.8 of the Plan and only to the extent then
vested in accordance with Exhibit A of this Agreement.
Section 5.3. Manner of Exercise. Optionee may exercise this ISO, or any
portion of this ISO, by giving written notice to the company at its
principal executive office, to the attention of the Secretary of the
Company, accompanied by a copy of the Stock Option Plan Purchase Agreement
(hereinafter referred to as the "Stock Purchase Agreement") executed by the
Optionee. The date the Company receives written notice of an exercise
hereunder accompanied by payment witll be considered as the date this ISO
was exercised.
Promptly after receipt of written notice of exercise of the ISO, the
Company shall, without stock issue taxes or transfer taxes to the Optionee
or other person entitled to exercise, deliver to the Optionee or other
person a certificate or certificates for the requisite number of ISO Shares.
An Optionee or transferee of an option shall not have any privileges as a
shareholder with respect to any ISO Shares covered by the option until the
date of issuance of a stock certificate.
Section 5.4. Payment. Payment in full, in cash, shall be made for all ISO
Shares purchased at the time written notice of exercise of the ISO is given
to the Company, and proceeds of any payment shall constitute general funds
of the Company.
ARTICLE 6. NONASSIGNABILITY OF ISO. This ISO is not assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the life of the Optionee, the ISO is exercisable only
by the Optionee. Any attempt to assign, pledge, transfer, hypothecate, or
otherwise dispose of this ISO in a manner not herein permitted, and any levy
of execution, attachment, or similar process on this ISO, shall be null and
void.
ARTICLE 7. COMPANY'S RIGHTS TO REPURCHASE EXERCISED SHARES UPON
TERMINATION OF EMPLOYMENT. The ISO Shares shall be subject to a right of
repurchase in favor of the Company ("Right of Repurchase"). The Company
may purchase ISO Shares subject to the Right of Repurchase for an amount per
shall equal to the price per share the Optionee paid for the ISO Shares if
the Optionee's employment, directorship or consultancy with the Company
terminates before the Right of Repurchase expires as delineated in Exhibit
A "Stock Restriction Agreement". Fractional shares subject to repurchase
shall be rounded to the fullest share. The Optionee may not dispose of or
transfer ISO Shares while such shares are subject to the Right of Repurchase
and any such attempted transfer shall be null and void.
ARTICLE 8. COMPANY'S RIGHT OF FIRST REFUSAL REPURCHASING EXERCISED SHARES.
Section 8.1. Right of First Refusal. In the event that the Optionee
proposes to sell, pledge, or otherwise transfer any ISO shares, the Company
shall have a right of first refusal ("Right of First Refusal") with respect
to such ISO Shares. Any Optionee desiring to transfer ISO Shares to any
person or entity shall give a written notice ("Transfer Notice") to the
Company describing fully the proposed transfer, including the number of ISO
Shares proposed to be transferred, the proposed transfer price, and the name
and address of the proposed transferee. The Transfer Notice shall be signed
by both the Optionee and by the proposed transferee and must constitute a
binding commitment of both parties for the transfer of such ISO Shares.
The Company shall have the right to purchase the ISO Shares subject to the
Transfer notice on the terms of the proposed transfer described in the
Transfer Notice by delivery of a notice of exercise of the Company's Right
of First Refusal within 30 days after the date the Transfer notice is
delivered to the Company. The Company's rights under this Section 8.1 shall
be freely assignable, in whole or in part.
Section 8.2. Transfer of Exercised Shares. If the Company fails to
exercise the Right of First Refusal within 30 days from the date the
Transfer Notice is delivered to the Company, the Optionee may, not less
than 30 days following delivery to the Company of the Transfer Notice,
conclude a transfer of the ISO Shares subject to the Transfer notice.
Any proposed transfer on terms and conditions different from those described
in the Transfer notice, as well as any subsequent proposed transfer by the
Optionee, shall again be subject to the Right of First Refusal and shall
require compliance by the Optionee with the procedure described in Section
8.1 of this Agreement. If the Company exercise the Right of First Refusal,
the parties shall consummate the sale of the ISO Shares on the terms set
forth in the Transfer Notice; provided, however, in the event the Transfer
Notice provides for payment for the ISO Shares other than in cash, the
Company shall have the option of paying for the ISO Shares by the discounted
cash equivalent of the consideration described in the Transfer Notice.
Section 8.3. Binding Effect. The Right of First Refusal shall inure to
the benefit of the successors and assigns of the Company and shall be
binding upon any transferee of the ISO Shares other than a transferee
acquiring ISO Shares in a transaction where the Company failed to exercise
the Right of First Refusal (a "Free Transferee") or a transferee of a Free
Transferee.
Section 8.4. Termination of the Company's Right of First Refusal.
Notwithstanding anything in this Section 8, in the event that the stock is
listed on an established stock exchange or quoted on the National
Association of Securities Dealers Automated Quotation system at the time
the Optionee desires to transfer ISO Shares, the Company shall have no Right
of First Refusal, and Optionee shall have no obligation to comply with the
procedures of Section 8.1 through Section 8.3
inclusive.
ARTICLE 9. RESTRICTION ON ISSUANCE OF SHARES.
Section 9.1. Legality of Issuance. The Company shall not be obligated to
sell or issue any ISO Shares pursuant to this Agreement if such sale or
issuance, in the opinion of the Company and the Company's counsel, might
constitute a violation by the Company of any provision of law, including
without limitation the provisions of the Securities Act of 1933, as amended
(the "Act").
Section 9.2. Registration or Qualification of Securities. The Company may,
but shall not be required to, register or qualify the sale of this ISO or
any ISO Shares under the Act or any other applicable law. The Company shall
not be obligated to take any affirmative action in order to cause the grant
or exercise of this option or the issuance or sale of any ISO Shares
pursuant thereto to comply with any law.
ARTICLE 10. RESTRICTION ON TRANSFER. Regardless of whether the sale of
the ISO Shares has been registered under the Act or has been registered or
qualified under the securities laws of any state, the Company may impose
restrictions upon the sale, pledge or other transfer of the ISO Shares
(including the placement of appropriate legends on stock certificates) if,
in the judgment of the Company and the Company's counsel, such restrictions
are necessary or desirable in order to achieve compliance with the
provisions of the Act, the securities laws of any state, or any other law.
ARTICLE 11. STOCK CERTIFICATES. Stock Certificates evidencing ISO Shares
will bear such restrictive legends as the Company and the Company's counsel
deem necessary or advisable under applicable law or pursuant to this
Agreement, including, without limitation, the following legends:
"The shares represented by this certificate are subject to an option set
forth in an employee stock restriction agreement between the Company and
the registered hold, or his predecessor in interest, a copy of which is on
file at the principal office of the Company"
"The shares represented by this certificate are subject to a right of first
refusal option in favor of the Company or its assignee set forth in an
employee stock restriction agreement between the Company and the registered
holder, or his predecessor in interest, a copy of which is on file at the
principal office of this Company"
"These securities have not been registered under the Securities Act of 1933.
They may not be sold, offered for sale, pledged or hypothecated in the
absence of an effective registration statement as to the securities under
said Act or an opinion of counsel satisfactory to the Company that such
registration is not required"
ARTICLE 12. REPRESENTATION, WARRANTIES, COVENANTS AND ACKNOWLEDGEMENTS
OF THE OPTIONEE UPON EXERCISE OF ISO. Optionee hereby agrees that in the
event that the Company and the Company's counsel deem it necessary or
advisable in the exercise of their discretion, the issuance of the ISO
Shares may be conditioned upon the purchaser of ISO Shares (the "Purchaser")
making certain representations, warranties, and acknowledgments, including,
without limitation those set forth in Section 12.1 through 12.7 inclusive:
Section 12.1 Investment. Purchaser is acquiring the ISO Shares for
Purchaser's own account, and not for the account of any other person.
Purchaser is acquiring the ISO Shares for investment and not with a view
to distribution or resale thereof except in compliance with applicable
laws regulating securities.
Section 12.2 Business Experience. Purchaser is capable of evaluating the
merits and risks of Purchaser's investment in the Company evidenced by the
purchase of the ISO Shares.
Section 12.3. Relation to the Company. Purchaser is presently an officer,
director or other employee of the Company and in such capacity has become
familiar with the business affairs, financial condition, and results of
operations of the Company.
Section 12.4. Access to Information. Purchaser has had the opportunity to
ask questions of, and to receive answers from, appropriate executive
officers of the Company with respect to the terms and conditions of the
transaction contemplated hereby and with respect to the business, affairs,
financial conditions, and results of operations of the Company. Purchaser
has had access to such financial and other information as is necessary in
order for Purchaser to make a fully-informed decision as to investment in
the Company by way of purchase of the ISO Shares, and has had the
opportunity to obtain any additional information necessary to verify any
of such information to which the Purchaser has had access.
Section 12.5. Speculative Investment. Purchaser's investment in the
Company represented by the ISO Shares is highly speculative in nature and
is subject to a high degree of risk of loss in whole or in part. The amount
of such investment is within Purchaser's risk capital means and is not so
great in relation to Purchaser's total financial resources as would
jeopardize the personal financial needs of the Purchaser or Purchaser's
family in the event such investment were lost in whole or in part.
Section 12.6. Registration. Purchaser must bear the economic risk of
investment for an indefinite period of time because the sale to Purchaser
of the ISO Shares has not been registered under the Act and the ISO Shares
cannot be transferred by Purchaser unless such transfer is registered under
the Act or an exemption from such registration is available. The Company
has made no agreement, covenants or undertakings whatsoever to register the
transfer of any of the ISO Shares under the Act. The Company has made no
representations, warranties, or covenants whatsoever as to whether any
exemption including without limitation any exemption for limited sales
in routine broker's transactions pursuant to Rule 144, will be available.
Section 12.7. Tax Advice. The company has made no warranties or
representations to Purchaser with respect to the income tax consequences of
the transactions contemplated by the option agreement pursuant to which the
ISO Shares will be purchased and Purchaser is in no manner relying on the
Company or the Company's representatives for an assessment of such tax
consequences.
ARTICLE 13: ASSIGNMENT: BINDING EFFECT. Subject to the limitation set
forth in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the executors, administrators, heirs, legal representatives,
and successors of the parties hereto; provided, however, that Optionee may
not assign any of the Optionee's rights under this Agreement.
ARTICLE 14: DAMAGES. Optionee shall be liable to the Company for
all costs and damages, including incidental and consequential damages,
resulting from a disposition of shares which is not in conformity with the
provisions of this Agreement.
ARTICLE 15: GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah.
ARTICLE 16: NOTICES. All matters and other communications under this
Agreement shall be in writing. Unless and until the Optionee is notified
in writing to the contrary, all notices, communications and documents
directed to the Company and related to the Agreement if not delivered by
hand, shall be mailed to the Company's executive offices at:
Alpha Computer Solutions, Inc.
2490 South 300 West
Salt Lake City, Utah 84115
Unless and until the Company is notified in writing to the contrary, all
notices, communications and documents intended for the Optionee and related
to this Agreement, if not delivered by hand, shall be mailed to Optionee's
last known address as shown on the Company's books. Notice and
communications shall be mailed by first class mail, postage prepaid;
documents shall be mailed by registered mail, return receipt requested,
postage prepaid. All mailings and deliveries related to this Agreement
shall be deemed received only when actually received.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
Alpha Computer Solutions, Inc.
By: /S/__________________________
William G. Anthony
President
The Optionee hereby accepts and agrees to be bound by all of the terms
and conditions of this Agreement and the Plan.
Optionee: _______________________
Name: _________________________
Date: __________________________
Optionee's spouse indicates by execution of this Incentive Stock Option
Agreement his or her consent to be bound by the terms thereof as to his
or her interest, whether as community property or otherwise, in the options
granted hereunder, and in any ISO Shares purchased pursuant to this Agreement.
Optionee's Spouse: ______________________
Alpha Computer Solutions, Inc.
Tunlaw International Corporation
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