SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: November 12, 1998
(Date of Earliest Event Reported: September 1, 1998)
RIGL CORPORATION
_____________________________________________________________________________
(Exact name of registrant as specified in its charter)
Nevada 0-24217 85-026668
_______________ ______________ _____________
(State or other jurisdiction (Commission File No.) (IRS Employer I.D. No.)
of incorporation)
7501 North 16th Street, Suite 200, Phoenix, Arizona 85020
_____________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 906-1924
_____________________________________________________________________________
(Former name of former address, if changed since last report.)
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ITEM 2
______________________________________________________________________________
The Registrant reports that on June 15, 1999, the Registrant completed the
acquisition of 100% of the issued and outstanding shares of Telco Billing,
Inc., a Nevada corporation, pursuant to the terms and conditions of that
certain Stock Purchase Agreement attached hereto and incorporated herein as
Exhibit A, dated March 16, 1999, by and among Registrant, TBI and its
shareholders, Mathew & Markson, Ltd. and Morris & Miller, Ltd.(collectively
"Shareholders") and as amended by that certain Amendment to Stock Purchase
Agreement attached hereto and incorporated herein as Exhibit B, dated March
16,1999, by and among Registrant, TBI and Shareholders. The transaction was
approved by the written consent of Registrant's shareholders representing a
majority of the issued and outstanding voting shares of Registrant pursuant to
Section 78.320, paragraph 2 of the Nevada Revised Statutes. The Registrant
intends to prepare an information statement which will be sent to all of
Registrant's shareholders setting forth the nature and terms of the
transaction pursuant to Section 14(c) of the Securities Exchange Act.
Pursuant to the terms of the Stock Purchase Agreement, as amended, the
purchase price consisted of the issuance of 17,000,000 restricted shares of
the common stock of Registrant to Shareholders as follows:
Mathew & Markson, Ltd - 7,650,000 shares
Morris & Miller, Ltd. - 9,350,000 shares
Subsequent to the closing of the transaction, Shareholders, at their election
may also have the right to put back a portion of said shares to the Registrant
under the terms of two (2) separate put options - the "Initial Put" and the
"Subsequent Put."
The Initial Put provides that in the event RIGL has not attained a five
percent (5%) market share for the products and services of TBI as of December
1, 1999, Shareholders shall have the right, but not the obligation, to require
RIGL to purchase from Shareholders, in proportion to each Shareholders' pro-
rata ownership of Registrant's common stock, for cash any number of
Shareholders' shares not to exceed in the aggregate and collectively the sum
of $5,000,000 at a purchase price equal to eighty percent (80%) of the Last
Trade on the applicable exchange prior to the time such put is exercised,
provided that the purchase price shall at no time be less than $1.00 per
share, notwithstanding the Last Trade price. This Initial Put must be
exercised, if at all, by Shareholders no later than the day upon which the
Shareholders have the right to exercise the Subsequent Put (defined below),
upon written notice to Registrant.
The Subsequent Put provides that in the event RIGL has not attained a ten
percent (10%) market share for the products and services of TBI as of June 1,
2000, Shareholders shall have the right, but not the obligation, to require
RIGL to purchase from Shareholders, in proportion to each Shareholders' pro-
rata ownership of Registrant's common stock, for cash any number of
Shareholders' shares not to exceed in the aggregate and collectively the sum
of $5,000,000 at a purchase price equal to eighty percent (80%) of the Last
Trade on the applicable exchange prior to the time such put is exercised,
provided that the purchase price shall at no time be less than $1.00 per
share, notwithstanding the Last Trade price. This Initial Put must be
exercised, if at all, by Shareholders no later than six (6) months following
the date upon which this Subsequent Put becomes effective, upon written notice
to Registrant.
The purchase price was mutually negotiated between the parties. Registrant's
management applied standard valuation methods in arriving at the purchase
price. During negotiations, Management performed its due diligence by an
inspection of the records of TBI. This inspection included, among other
things, reviews of all corporate documents and agreements, with particular
attention paid to the contracts to the billing services companies whose
services are utilized by TBI. The records of accounting were also reviewed
and the findings indicated that the representations made by TBI management
fairly presented its corporate and financial position. In determining the
price to be paid, management of the Registrant negotiated with TBI management
and principals and arrived at the price by mutual agreement. The Board of
Directors of the Registrant discussed the negotiated terms and determined that
the price paid fell within reasonable valuation guidelines. The purchase
price, if the shares of the Registrant were valued at $1.00 and the income
statement of TBI were extrapolated to a full year of operations, was less than
two times a projected gross revenue and based upon figures known at that time
it represented a price between five to six times net revenue. Management
believed that the price paid for the acquisition of TBI was significantly less
than what might have been anticipated and the contract was ratified by the
Board of Directors.
Registrant also agreed to pay to Mathew & Markson the sum of $5,000,000 as a
discounted accelerated royalty for the perpetual exclusive worldwide rights to
the URL "yellow-page.net" pursuant to the terms of that certain Exclusive
Licensing Agreement dated September 21, 1998, by and between TBI, as licensor,
and Mathew & Markson, as licensee, attached hereto and incorporated herein as
Exhibit C (the "License"), which provides for annual royalty payments of
$400,000 over a twenty year period. It also provided that in the event of a
change of control or ownership in TBI in excess of 50% all royalty payments
become immediately due and payable. $3,000,000 of the Royalty Fee was paid in
cash at the closing, and the $2,000,000 balance is due on or before July 15,
1999. The Royalty Fee Balance is evidenced by a promissory note bearing no
interest, except a default interest rate of 20%, and is secured by 2,000,000
shares of Registrant's restricted common stock pursuant to a stock pledge
agreement in favor of Mathew & Markson.
The initial $3,000,000 payment was funded through a combination of debt and
equity capital. A loan for $2,000,000 was obtained from Joseph and Helen Van
Sickle, current shareholders of Registrant. The loan bears an annual interest
rate of 8%. The term of the loan is 6 months with interest only payments made
on a monthly basis with the principal due and payable in full at the end of
the 6 month period. The loan is secured with 2,500,000 restricted shares of
Registrant's common stock and with the account receivables of Registrant, a
position which the Van Sickles have agreed to subordinate to an asset based
lender. The Van Sickles also received 1,000,000 restricted shares of
Registrant's common stock as additional consideration for making the loan
without the benefit of a reasonable due diligence period. An unsecured loan
for $500,000 was obtained from Wallace Olson, another shareholder of
Registrant. This is a demand note requiring a payback amount of $600,000. The
balance of $500,000 was paid out of the equity capital of the Registrant. The
Royalty Fee Balance shall be paid through commercial credit lines advanced to
Registrant which are currently being negotiated with several commercial
lending sources.
<PAGE>
ITEM 2 EXHIBIT INDEX
Exhibit A - Stock Purchase Agreement
Exhibit B - Amendment to the Stock Purchase Agreement
Exhibit C - License Agreement
Exhibit D - Financials
<PAGE>
EXHIBIT A
_________
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
on this 16th day of March, 1999, by and among RIGL CORPORATION, a Nevada
corporation ("RIGL"), TELCO BILLING, INC., a Nevada corporation ("TBI"),
______________ and ____________________ (collectively "Shareholders").
RECITALS
WHEREAS, RIGL, a publicly traded corporation, is domiciled in the State
of Nevada, having its principal place of business in Arizona, and is currently
listed on the OTC Electronic Bulletin Board (the "OTC");
WHEREAS, TBI, a private corporation, with a limited number of
shareholders, is domiciled in the State of Nevada, having its principal place
of business in Arizona.
WHEREAS, RIGL desires to acquire the outstanding shares of TBI and
Shareholders are desirous to have their shares acquired.
NOW, THEREFORE, the parties having determined that it is in their
respective best interests that RIGL purchase One Hundred Percent (100%) of the
issued and outstanding capital stock of TBI from Shareholders, and in
consideration of the mutual premises, covenants, and conditions herein
contained the parties do hereby agree as follows:
ARTICLE I
PURCHASE TERMS
1.1 Stock Purchase. At the Closing (as defined in Section 1.6 below),
Shareholders shall sell, and RIGL shall purchase, One Hundred Percent
(100%) of the issued and outstanding capital stock of TBI (the "TBI
Stock") for the consideration set forth in Section 1.2 below.
1.2 Purchase Price. The purchase price for the TBI Stock shall be
Seventeen Million (17,000,000) shares of the common stock of RIGL, par
value $.001 per share (the "Purchase Price"), upon the Closing. Prior
to Closing, RIGL shall have taken all requisite action to have the
Purchase Price validly authorized by its shareholders, so that the
Purchase Price, when issued, will be deemed fully authorized, non-
assessable, validly issued and outstanding shares of RIGL common
stock. The Purchase Price, though validly authorized, will be
considered investment shares and are subject to certain restrictions
on sale and transfer as prescribed under the rules and regulations of
the Securities and Exchange Commission ("SEC"). In as much,
certificates representing the Purchase Price will bear a restricted
legend as follows:
"The shares of stock represented by this certificate have
not been registered under the Securities Act of 1933, as
amended, and may not be sold or otherwise transferred
unless a compliance with the registration provisions of
such act has been made or unless availability of an
exemption from such registration provisions has been
established, or unless sold pursuant to Rule 144 under
the Securities Act of 1933."
1.3 Outstanding Royalty Payment. RIGL acknowledges that certain Exclusive
Licensing Agreement by and between TBI, as licensee, and Mathew &
Markson, Ltd. ("Licensor") dated June 1, 1998 (the "License") granting
TBI the exclusive, perpetual and worldwide right to use certain
intellectual property owned by Licensor necessary to conducting the
business of TBI. RIGL further acknowledges that the License provides
for the acceleration of outstanding royalty payments upon a "change of
control" of TBI, as defined in the License (the "Royalty Balance").
Upon the Closing, RIGL agrees to pay to Licensor the Royalty Balance
in cash or other immediately available funds.
1.3.1 In furtherance of RIGL's agreement to pay the Royalty Balance,
within a reasonable time after the execution of this Agreement,
RIGL shall open an escrow account (the "Escrow Account") with a
mutually acceptable escrow agent. Within thirty (30) days of
the execution of this Agreement, RIGL shall deposit in the
Escrow Account one-half of the Royalty Balance in immediately
available funds or such other proof acceptable to Shareholders
that said funds are available ("30 Day Satisfactory Proof of
Funds"). In the event that RIGL fails to deposit said funds or
30 Day Satisfactory Proof of Funds in the Escrow Account within
thirty (30) days from the date hereof, then this Agreement is
subject to cancellation by TBI and/or Shareholders upon written
notice to RIGL. If RIGL deposits said amount in immediately
available funds or 30 Day Satisfactory Proof of Funds in the
Escrow Account within the thirty (30) day period, then RIGL
shall have an additional thirty (30) days to deposit the
balance of the Royalty Balance in the Escrow Account as set
forth above. Provided that RIGL shall have deposited in the
Escrow Account the Royalty Balance in immediately available
funds or such other proof of the availability of funds
acceptable to Shareholders ("60 Day Satisfactory Proof of
Funds"), then this Agreement may not be canceled by TBI or
Shareholders, except for a material breach of the covenants,
terms and conditions set forth herein.
1.4 Shareholders Option. Subsequent to Closing, the Shareholders, at
their election, have the right to put shares back to RIGL under the
terms as set forth in this paragraph:
1.4.1 Initial Put Option the event RIGL has not attained a Five
Percent (5%) market share for the products and services of TBI
as of December 1, 1999, Shareholders shall have the collective
right, but not the obligation, to require RIGL to purchase from
Shareholders, in proportion to each Shareholders' pro-rata
ownership of RIGL common stock, for cash any number of
Shareholders' RIGL shares ("Initial $5,000,000 Put") not to
exceed in the aggregate and collectively the sum of Five
Million Dollars ($5,000,000) at a purchase price equal to
eighty percent (80%) of the Last Trade prior to the time the
$5,000,000 Put is exercised, provided that the purchase price
shall at no time be less than One Dollar ($1.00) per share
notwithstanding the Last Trade Price. This Initial $5,000,000
Put must be exercised, if at all, by Shareholders no later than
the day upon which the Shareholders have the right to exercise
the Subsequent Put Option (as defined in Section 1.4.2), upon
written notice to RIGL or the Initial $5,000,000 Put shall
automatically expire.
1.4.2 Subsequent Put Option. In the event RIGL has not attained a
Ten Percent (10%) market share for the products and services of
TBI as of June 1, 2000, Shareholders shall have the collective
right, but not the obligation, to require RIGL to purchase from
Shareholders, in proportion to each Shareholders' pro-rata
ownership of RIGL common stock, for cash any number of
Shareholders' RIGL shares ("Subsequent $5,000,000 Put"), not to
exceed in the aggregate and collectively the sum of Five
Million Dollars ($5,000,000), at a purchase price equal to
eighty percent (80%) of the Last Trade prior to the time the
$5,000,000 Put is exercised, provided that the purchase price
shall at no time be less than One Dollar ($1.00) per share
notwithstanding the Last Trade Price. This Subsequent
$5,000,000 Put must be exercised, if at all, by Shareholders no
later six (6) months following the date upon which this
Subsequent Put Option becomes effective, upon written notice to
RIGL or the Subsequent $5,000,000 Put shall automatically
expire.
1.4.3 Payments on Put In the event Shareholders elect to exercise
either or both the Initial $5,000,000 Put and the Subsequent
$5,000,000 Put (the "Put Options"), in whole or in part, RIGL
shall pay the applicable amounts due Shareholders,
respectively, pursuant to such exercise(s) no later than thirty
(30) days from the date RIGL receives written notice of such
exercise(s).
1.4.4 Public Offering Proceeds In the event RIGL shall undertake a
public offering of its shares, at any time after the Closing,
Shareholders shall be entitled to payment with respect to any
outstanding Put Options at the closing of such offering out of
an amount equal to Thirty-Five Percent (35%) of the net
proceeds of such offering, not to exceed the aggregate
remaining balance due on the Put Options or $10,000,000
whichever is less. Prior to undertaking any public offering,
RIGL shall deliver a notice to Shareholders setting forth the
number of shares to be offered and the net price anticipated to
be received by RIGL.
1.5 Line of Credit. Within fourteen days (14) of the execution of this
Agreement, RIGL shall obtain a written commitment from a leading
lending institution establishing a line of credit for use by TBI up to
$1,000,000 (the "Line of Credit"). The Line of Credit shall be
secured by the receivables of TBI, which receivables will be assigned
to RIGL on mutually acceptable terms as of the date of the execution
of this Agreement. RIGL has informed TBI and Shareholders that a
complete due diligence package on TBI will need to be in RIGL's
possession in order to establish the Line of Credit and to secure the
Royalty Balance. The due diligence package will need to contain
accurate financial statements as of December 31, 1998, copies of all
material contracts, including among other things the contracts with
the Local Exchange Carriers which perform the billings for TBI,
Articles of Incorporation, Bylaws, sufficient documentation supporting
the accounts receivable and such other information as may be deemed
necessary to fully understand the operations of TBI. In the event that
this due diligence package is not available on the day of execution of
this Agreement, then the fourteen (14) days contemplated hereunder
shall not begin to run until the delivery of this information.
1.6 Closing. RIGL's purchase of TBI Stock shall take place at 2:00 p.m.
on or before that date which is ninety (90) days from the date of the
execution of this Agreement or thirty (30) days following approval of
the RIGL shareholders, whichever shall first occur (the "Closing
Date"). RIGL has informed Shareholders and Shareholders acknowledge
that the RIGL shareholders must approve the transaction contemplated
herein and that to acquire said approval a definitive Information
Statement must be prepared and a Special Meeting of the RIGL
shareholders must be called and held. The definitive Information
Statement shall be filed on or before April 1, 1999. RIGL management
believes that 90 days is sufficient time to acquire this approval and
in all respects RIGL will use its best efforts to effect a purchase of
the TBI Stock and the consummation of this Agreement. However, the
definitive Information Statement is subject to review by the SEC which
could delay the ability of RIGL to close the transaction on the
Closing Date. In the event that RIGL has not received shareholder
approval by the Closing Date, and provided that RIGL has and continues
to diligently pursue approval, the Closing Date shall be extended to
the second business day after said approval of RIGL's shareholders,
but not beyond ten (10) days thereafter without the further written
consent of TBI. The place of Closing shall be mutually agreed upon by
the parties at least 24 hours prior to Closing.
1.7 Delivery of Certificates. At the Closing, Shareholders shall deliver
to RIGL certificates (duly endorsed for transfer to RIGL) for the TBI
Stock, free and clear of any liens, security interests or other
encumbrances. RIGL shall have no obligation to either register any or
all of the Purchase Price or provide a public or private market for
such shares or any shares acquired by virtue of the exercise of any
option granted to Shareholder, except for the registration rights set
forth in Section 1.10 below.
1.8 Structure as of the Closing. Effective as of the Closing, TBI shall
be a wholly-owned subsidiary of RIGL.
1.9 Registration Rights. Following the Closing, and in the event that
RIGL shall undertake a registration of any of its shares of stock for
any reason whatsoever, then Shareholders shall be entitled to piggy-
back up to Twenty-Five Percent (25%) of its shares then held in said
registration without registration or other costs and expenses except
for the payment of brokerage commissions for shares sold by the
Shareholders. Prior to any registration of any portion of the
Purchase Price, RIGL shall deliver a notice to Shareholders setting
forth the purpose of the registration of shares, and the number of
shares being registered.
1.10 Further Assurances. If, at any time after the date hereof, RIGL
shall be advised that any further assignments or assurances or any
other acts or things are necessary or desirable to vest, perfect,
confirm or record, in or to RIGL the title to the TBI Stock, TBI
and/or Shareholders shall execute and deliver all such assignments,
deeds, endorsements and assurances, and do such other reasonable
things as may be requested by the Board of Directors of RIGL as are
necessary or proper to vest, perfect or confirm title to the TBI
Stock, and otherwise carry out the purposes of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF RIGL
RIGL hereby represents and warrants to Shareholders as follows:
2.1 Organization and Qualification. RIGL is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has the requisite corporate power
to carry on its business as now conducted and presently proposed to be
conducted.
2.2 Authority Relative to This Agreement. RIGL has the requisite
corporate power and authority to enter into this Agreement to carry
out its obligations hereunder. The execution and delivery of this
Agreement by RIGL and the consummation by RIGL of the transactions
contemplated hereby have been duly authorized by the Board of
Directors of RIGL, and no other corporate proceedings on the part of
RIGL are necessary to authorize this Agreement and such transactions,
except the approval of the shareholders of RIGL pursuant to Section
6.3.3 below. This Agreement has been duly executed and delivered by
RIGL and constitutes a valid and binding obligation of RIGL,
enforceable in accordance with its terms.
2.3 Consents and Approvals; No Violation. The execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated hereby will not violate, conflict with or result in a
default under any provision of:
2.3.1 RIGL's Articles of Incorporation or Bylaws;
2.3.2 any agreement, arrangement or understanding to which RIGL is a
party;
2.3.3 any license, franchise or permit to which RIGL is a party; or
2.3.4 any law, regulation, order, judgment or decree, which would be
violated or breached, or in respect of which a right of
termination or acceleration or any encumbrance on any of RIGL's
assets would be created, other than any such breaches or
violations that will not, individually or in the aggregate,
have a material adverse effect on the business, operations or
financial condition of RIGL and its subsidiaries, taken as a
whole.
2.3.5 Other than in connection with or in compliance with the
corporation laws of the States of Nevada and Arizona, and the
rules and regulations of the NASD, or U.S. Securities Laws or
Blue Sky Laws, no authorization, consent or approval of, or
filing with, any public body, court or authority is necessary
on the part of RIGL for the consummation by RIGL of the
transactions contemplated by this Agreement, except for such
authorizations, consents, approvals and filings as to which the
failure to obtain or make will not, individually or in the
aggregate, have a material adverse effect on the business,
operations or financial condition of RIGL and its subsidiaries,
taken as a whole.
2.4 Capitalization of RIGL. The authorized equity capitalization of RIGL
consists of 50,000,000 shares of RIGL common stock, $.001 par value
per share and 15,000,000 shares of preferred stock. The current
number of shares issued and outstanding and issuable under options,
warrants, conversion privileges or other rights, agreements,
arrangements or commitments are set forth on Exhibit "A" attached
hereto, and incorporated herein by reference.
2.5 SEC Filings. RIGL has previously delivered to Shareholders copies of
all reports filed by RIGL with the SEC since September 30, 1998, which
constitute all reports required to be filed by RIGL with the SEC since
such date. As of their respective dates, the documents and reports
referred to above did not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
financial statements of RIGL included in such documents and reports
were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present
in all material respects according to generally accepted accounting
principles, the financial position of RIGL as of the date thereof and
the results of its operations and its cash flows for the period then
ended, in the case of the unaudited interim financial statements
subject to normal year-end audit adjustments and the absence of
complete footnote disclosures all required SEC reports since September
30, 1998 have been timely filed.
2.6 Absence of Undisclosed Liabilities. RIGL does not have any
obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due and regardless
of when asserted) arising out of transactions heretofore entered into,
or any action or inaction, or any state of facts existing, including
taxes with respect to or based upon transactions or events heretofore
occurring, except:
2.6.1 obligations under contracts or commitments (but not liabilities
for breaches thereof);
2.6.2 liabilities or reserves reflected on the consolidated balance
sheet dated September 30, 1998 (the "Balance Sheet");
2.6.3 liabilities which have arisen after the date of the Balance
Sheet in the ordinary course of business (none of which is an
uninsured liability for breach of contract, breach of warranty,
tort, infringement, claim or lawsuit);
2.6.4 liabilities otherwise specifically disclosed in the documents
and reports described in Section 2.5 hereof; and
2.6.5 liabilities incurred for financings related to this Agreement.
2.7 No Material Adverse Change. Since September 30, 1998, there has been
no material adverse change in the assets, financial condition,
operating results, customer, distributor, employee or supplier
relations or business condition of RIGL.
2.8 Compliance With Laws; Permits; Certain Operations. RIGL, and its
respective officers, directors, agents and employees have complied in
all material respects with all applicable laws and regulations which
affect the businesses or any owned or leased properties of RIGL and to
which RIGL may be subject, and no claims have been filed against RIGL
alleging a violation of any such laws or regulations, except as
described in the documents and reports identified in Section 2.5
above. RIGL has not authorized, given or agreed to give any money,
gift or similar benefit (other than incidental gifts of nominal value)
to any actual or potential distributor, customer, supplier,
governmental employee or any other person in a position to assist or
hinder RIGL in connection with any actual or proposed transaction.
RIGL holds all of the material permits, licenses, certificates and
other authorizations of foreign, federal, state and local governmental
agencies required for the conduct of its business or the ownership or
leasing of their respective properties. In particular, but without
limiting the generality of the foregoing, RIGL has not in any material
respect violated, or received a written notice or charge asserting any
violation of, any laws pertaining to occupational health or safety or
the environment (including rules and regulations thereunder).
2.9 Disclosure. Neither this Agreement nor any of the documents delivered
hereunder by RIGL contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they were
made, not misleading, and there is no fact which has not been
disclosed to Shareholders of which any officer or director of RIGL is
aware which materially affects adversely or could reasonably be
anticipated to materially affect the business, including operating
results, assets, customer, distributor, supplier or employee
relations, or business condition, of RIGL.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders represent and warrant to RIGL that:
3.1 Organization and Qualification. TBI is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation and has the requisite corporate power and authority to
own and operate its properties and to carry on its business as now
conducted and presently proposed to be conducted. The copies of TBI's
Articles of Incorporation and Bylaws which have been furnished by TBI
to RIGL prior to the date of this Agreement reflect all amendments
made thereto and are correct and complete. TBI is qualified to do
business in every jurisdiction in which the nature of its business or
its ownership of property requires it to be qualified, other than
where the failure to so qualify will not, individually or in the
aggregate, have a material adverse effect on the business, operations
or financial condition of TBI.
3.2 Authority Relative to This Agreement. Shareholders have the full
power and authority to execute and deliver this Agreement and to carry
out its respective obligations hereunder. The execution and delivery
of this Agreement by Shareholders and the consummation of the
transactions contemplated hereby have been duly authorized by
Shareholders, and no other proceedings are necessary to authorize this
Agreement and such transactions. This Agreement has been duly
executed and delivered by Shareholders and constitutes a valid and
binding obligation of Shareholders, enforceable against Shareholders
in accordance with its terms.
3.3 Consents and Approvals; No Violation. Except as disclosed under the
caption "Consents and Approvals" in the disclosure from TBI to RIGL of
even date herewith (the "Disclosure Letter"), the execution, and
delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, violate, conflict with or
result in a default under any provision of:
3.3.1 TBI's Articles of Incorporation or Bylaws;
3.3.2 any agreement, arrangement or understanding to which TBI is a
party;
3.3.3 any license, franchise or permit to which TBI is a party; or
3.3.4 any law, regulation, order, judgment or decree, which would be
breached or violated, or in respect of which a right of
termination or acceleration or any encumbrance on any of TBI's
assets would be created, other than any such breaches or
violations that will not, individually or in the aggregate,
have a material adverse effect on the business, operations or
financial condition of TBI. Other than in connection with or
in compliance with the corporation laws of its state of
incorporation, no authorization, consent or approval of, or
filing with, any public body, court or authority is necessary
on the part of TBI or Shareholders to allow Shareholders to
consummate the transactions contemplated by this Agreement,
except for such authorizations, consents, approvals and filings
as to which the failure to obtain or make will not,
individually or in the aggregate, have a material adverse
effect on the business, operations or financial condition of
TBI.
3.4 Capitalization. The authorized equity capitalization of TBI consists
of 25,000 shares of TBI Stock. As of the date hereof, 2,000 shares of
the TBI Stock are issued and outstanding, all of which shares are
validly issued, fully paid and non-assessable; and owned beneficially
and of record by Shareholders. Except as disclosed under the caption
"Capitalization" in the Disclosure Letter, there are no options,
warrants, conversion privileges or other rights, agreements,
arrangements or commitments obligating TBI to issue or sell any shares
of capital stock of TBI or securities or obligations of any kind
convertible into or exchangeable for any shares of capital stock of
TBI, nor are there any stock appreciation, phantom or similar rights
outstanding based upon the book value or any other attribute of TBI
(collectively, "TBI Options"). Other than as set forth in this
Agreement, Shareholders are not entitled to any preemptive,
registration or other similar rights. At or prior to the Closing, all
TBI Options will be repurchased, satisfied or otherwise canceled or
terminated without payment of any sum, or the incurrence of any
liability for future payment of any sum, by TBI. As of the Closing,
RIGL will own of record and beneficially the TBI Stock, free and clear
of all liens, security interests or other encumbrances, shareholder
agreements or voting trusts, and there will not be outstanding any
subscriptions, warrants, options or rights to which any person is or
may be entitled to purchase or otherwise acquire any capital stock of
TBI.
3.5 No Subsidiaries. Except as otherwise disclosed in the Disclosure
Letter under the caption "Subsidiaries", TBI does not directly or
indirectly have any material investment in any other corporation,
partnership, joint venture or other business association or entity,
and is not subject to any obligation or requirement to provide for or
to make any investment (by loan, capital contribution or otherwise) in
any entity.
3.6 Financial Statements. Shareholders have caused to be delivered to
RIGL the following financial statements of TBI:
3.6.1 unaudited balance sheets at December 31, 1998; and
3.6.2 unaudited statements of income, retained earnings and cash
flows for the year ended December 31, 1998. The foregoing
financial statements have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all
material respects the financial position of TBI as of the dates
thereof and the results of its operations and its cash flows
for the periods then ended. TBI's unaudited balance sheet as
of December 31, 1998 and TBI's unaudited statements of income,
retained earnings and cash flows for the year ended December
31, 1998 are hereinafter collectively referred to as the
"December 31, 1998 Financial Statements."
3.7 Absence of Undisclosed Liabilities. TBI does not have any obligation
or liability (whether accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due and regardless of when
asserted) arising out of transactions heretofore entered into, or any
action or inaction, or any state of facts existing, including taxes
with respect to or based upon transactions or events heretofore
occurring, except
3.7.1 obligations under contracts or commitments described in the
Disclosure Letter under the caption "Contracts", or under
contracts or commitments which are not required to be disclosed
thereunder (but not liabilities for breaches thereof);
3.7.2 liabilities or reserves reflected on the balance sheet included
in the December 31, 1998 Financial Statements;
3.7.3 liabilities which have arisen after the date of the balance
sheet included in the December 31, 1998 Financial Statements in
the ordinary course of business (none of which is an uninsured
liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit), and
3.7.4 liabilities otherwise specifically disclosed in this Agreement
or in the Disclosure Letter.
3.8 No Material Adverse Change. Since December 31, 1998, there has been
no material adverse change in the financial condition, properties,
business, operations, results of operations, or customer, distributor,
sales representative, employee or supplier relations, of TBI.
3.9 Absence of Certain Developments. Except as set forth under the
caption "Developments" in the Disclosure Letter, since December 31,
1998, TBI has not:
3.9.1 Redeemed or purchased, directly or indirectly, any shares of
its capital stock, or declared or paid any dividends or
distributions with respect to any shares of its capital stock.
3.9.2 Other than upon the repurchase or other satisfaction of the TBI
Options pursuant to Section 3.4, issued or sold any of its
equity securities, securities convertible into or exchangeable
for its equity securities, warrants, options or other rights to
acquire its equity securities, or any bonds or other
securities.
3.9.3 Borrowed any amount or incurred or become subject to any
material liability, except current liabilities incurred in the
ordinary course of business.
3.9.4 Discharged or satisfied any material lien or encumbrance or
paid any material liability, other than current liabilities
paid in the ordinary course of business.
3.9.5 Mortgaged, pledged or subjected to any lien, charge or other
encumbrance, any of its assets with a fair market value in
excess of $10,000, except liens for current property taxes not
yet due and payable.
3.9.6 Sold, assigned or transferred (including without limitation
transfers to any employees, shareholder or affiliates of TBI)
any tangible assets in excess of $10,000, except in the
ordinary course of business, or canceled any debts or claims in
excess of $10,000.
3.9.7 Sold, assigned or transferred (including without limitation
transfers to any employees, shareholder or affiliates of TBI)
any patents, trademarks, trade names, copyrights, trade secrets
or other intangible assets, except in the ordinary course of
business, or disclosed any proprietary confidential information
to any person other than RIGL or employees or agents of TBI.
3.9.8 Suffered any extraordinary loss or waived any rights of
material value, whether or not in the ordinary course of
business or consistent with past practice.
3.9.9 Taken any other action or entered into any other transaction
other than in the ordinary course of business and in accordance
with past custom and practice, or entered into any transaction
with any Insider (as defined in Section 3.21), in each case
involving in excess of $10,000.
3.9.10 Suffered any material theft, damage, destruction or loss of or
to any property or properties owned or used by it, whether or
not covered by insurance.
3.9.11 Other than in the ordinary course of business and consistent
with past practice, made or granted any bonus or any wage,
salary or compensation increase to any director, officer,
employee who earns more than $25,000 per year, group of
employees or consultant, or made or granted any increase in any
employee benefit plan or arrangement, or amended or terminated
any existing employee benefit plan or arrangement or adopted
any new employee benefit plan or arrangement.
3.9.12 Paid, accrued or agreed to pay in the future any sum under
TBI's profitsharing plan.
3.9.13 Made any capital expenditures or commitments therefor that in
the aggregate exceeded $50,000.
3.9.14 Made any loans or advances to, or guarantees for the benefit
of, any persons that in the aggregate exceeded $10,000.
3.9.15 Made charitable contributions or pledges which in the
aggregate exceeded $10,000.
3.10 Title to Properties. TBI owns good and marketable title to the
tangible properties and tangible assets reflected on the balance
sheet included in the December 31, 1998 Financial Statements or
acquired since the date thereof, free and clear of all liens and
encumbrances, except for
3.10.1 liens for current taxes not yet due and payable,
3.10.2 liens set forth under the caption "Real Estate" in the
Disclosure Letter, and
3.10.3 the properties subject to the leases set forth under the
caption "Leases" in the Disclosure Letter.
3.11 Accounts Receivable. To the best of TBI's knowledge and belief,
TBI's notes and accounts receivable recorded on the balance sheet
included in the December 31, 1998 Financial Statements and those
arising since the date thereof are valid receivables and are
collectible in accordance with their terms, net of the reserves
recorded on such balance sheet or thereafter, subject to no valid
counterclaims or setoffs. All reserves for notes and accounts
receivable are established in accordance with generally accepted
accounting principles applied consistently with prior periods.
3.12 Inventories. Except as set forth under the caption "Inventory" in
the Disclosure Letter, the inventories of TBI recorded on the balance
sheet included in the December 31, 1998 Financial Statements, and the
inventory created or purchased since the date thereof, consists of a
quantity and quality usable and salable in the ordinary course of
business, net of the reserves recorded on the balance sheet or
thereafter, is not slow-moving as determined in accordance with past
practices, obsolete or damaged, and is not defective. All reserves
for inventory were established in accordance with generally accepted
accounting principles applied consistently with prior periods.
3.13 Tax Matters. Except as set forth under the caption "Tax Matters" in
the Disclosure Letter, TBI has filed all federal, foreign, state,
county and local income, excise, property, sales and other tax returns
which are required to be filed by it, and all such returns are true
and correct in all material respects; all taxes due and payable by TBI
has been paid; the liability for taxes on the balance sheet included
in the December 31, 1998 Financial Statements fully reflects TBI's
obligations for taxes as of such date, and TBI's provisions for taxes
in such balance sheet are sufficient for all accrued and unpaid taxes
as of the date of such balance sheet; TBI has paid all taxes due and
payable or which it is obligated to withhold from amounts owing to any
employee, creditor, independent contractor, shareholder or other third
party; TBI has not waived any statute of limitations in respect of
taxes or agreed to any extension of time with respect to a tax
assessment or deficiency; the assessment of any additional taxes for
periods for which returns have been filed is not expected; and there
are no unresolved questions or claims concerning the tax liability of
TBI. TBI has not made an election under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code"). No claim has
ever been made by an authority in a jurisdiction where TBI did not
file tax returns that they are or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of
TBI that arose in connection with any failure (or alleged failure) to
pay any tax. TBI has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Code
Section 6662.
3.14 Contracts and Commitments.
3.14.1 Except as set forth under the caption "Contracts" in the
Disclosure Letter, TBI is not a party to any (i) collective
bargaining agreement or contract with any labor union, (ii)
bonus, pension, profit sharing, retirement, or other form of
deferred compensation plan, (iii) hospitalization insurance or
similar plan or practice, whether formal or informal, (iv)
contract for the employment of any officer, individual
employee, or other person on a full time or consulting basis
or relative to severance pay for any such person, (v)
agreement or indenture relating to the borrowing of money in
excess of $10,000 or to mortgaging, pledging or otherwise
placing a lien on any of the assets of TBI, (vi) guaranty of
any obligation for borrowed money or otherwise, other than
endorsements made for collection, (vii) lease or agreement
under which it is lessor of, or permits any third party to
hold or operate, any property, real or personal, with
aggregate remaining rental payments in excess of $10,000,
(viii) contract or group of related contracts with the same
party for the purchase of products or services, under which
the undelivered balance of such products and services has a
purchase price in excess of $25,000, (ix) contract or group of
related contracts with the same party for the sale of products
or services under which the undelivered balance of such
products or services has a sales price in excess of $25,000,
(x) other contract or group of related contracts with the same
party continuing over a period of more than six months from
the date or dates thereof, other than contracts terminable by
it on thirty days' or less notice without penalty or involving
less than $25,000, (xi) contract which prohibits TBI from
freely engaging in business anywhere in the world, (xii) sales
representative or distribution agreement, or any other
contract relating to the sale or distribution of TBI's
products, (xiii) contract, agreement or understanding with any
Insider, (xiv) license agreement or other agreement providing
for the payment or receipt of royalties or other compensation
by or to TBI, or (xv) other agreement material to TBI's
business or not entered into in the ordinary course of
business.
3.14.2 Except as specifically disclosed under the caption "Contracts"
in the Disclosure Letter, (i) to the knowledge of
Shareholders, no contract or commitment required to be
disclosed under such caption has been breached or canceled by
the other party, (ii) since December 31, 1998, no customer or
supplier (except for InfoSpace) has notified TBI that it will
stop or materially decrease the rate of business done with
TBI, except for changes in the ordinary course of TBI's
business, (iii) TBI has performed in all material respects all
obligations required to be performed by it in connection with
the contracts or commitments required to be disclosed under
such caption and is not in receipt of any written claim of
default under any contract or commitment required to be
disclosed under such caption, and (iv) TBI has no present
expectation or intention of not fully performing any
obligation pursuant to any contract or commitment set forth
under such caption.
3.14.3 Prior to the date of this Agreement, RIGL has been supplied
with a true and correct copy of each written contract or
commitment, and a written description of each oral contract or
commitment, referred to under the caption "Contracts" in the
Disclosure Letter, together with all amendments, waivers or
other changes thereto.
3.15 Proprietary Rights.
3.15.1 Except as set forth under the caption "Proprietary Rights" in
the Disclosure Letter, there are no patents, patent
applications, trademarks, service marks, trade names,
corporate names, copyrights, trade secrets or other
proprietary rights owned by TBI or necessary to the conduct
of TBI's business as now conducted. TBI owns and possesses
all rights, titles and interest, or a valid license, in and to
the proprietary rights set forth under such caption.
3.15.2 The Disclosure Letter describes under such caption all
Proprietary Rights which have been licensed to third parties
and those Proprietary Rights which are licensed from third
parties. TBI has taken all necessary action to protect the
proprietary rights set forth under such caption. TBI has not
received any written notice of, nor are Shareholders aware of
any facts which indicate a probable likelihood of, any
infringement, misappropriation, or conflict from any third
party with respect to TBI's proprietary rights; TBI has not
infringed, misappropriated or otherwise conflicted with any
proprietary rights of any third parties, nor are Shareholders
aware of any infringement, misappropriation or conflict which
will occur in the continued operation of TBI; and no written
claim by any third party contesting the validity of any
proprietary rights listed under such caption has been made, is
currently outstanding, or, to the knowledge of Shareholders,
is threatened.
3.16 Litigation. Except as set forth under the caption "Litigation" in
the Disclosure Letter, there are no actions, suits, proceedings,
orders or investigations pending or, to the knowledge of
Shareholders, threatened against TBI, at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, and there is no material basis known to Shareholders for any
of the foregoing.
3.17 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement
made by or on behalf of TBI or Shareholders.
3.18 Employment Matters. TBI has complied in all material respects with
all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other taxes. TBI
has no material labor relations problems pending, its labor relations
are satisfactory and no key executive employee of TBI and no group of
TBI's employees have notified TBI of any plans to terminate his or
its employment.
3.19 Employee Benefit Plans.
3.19.1 With respect to all employees and former employees of TBI,
except as set forth under the caption "Employee Benefits" in
the Disclosure Letter, TBI does not presently maintain,
contribute to or have any liability (including current or
potential multi-employer plan withdrawal liability) under any
(i) non-qualified deferred compensation or retirement plan or
arrangement which is an "employee pension benefit plan" as
such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
(ii) qualified defined contribution retirement plan or
arrangement which is an employee pension benefit plan, (iii)
qualified defined benefit pension plan or arrangement which is
an employee pension benefit plan, (iv) "multi-employer plan"
as such term is defined in Section 3(37) of ERISA, (v)
unfunded or funded medical, health or life insurance plan or
arrangement for present or future retirees or present or
future terminated employees which is an "employee welfare
benefit plan" as such term is defined in Section 3(1) of
ERISA, (vi) profit-sharing or other similar plan, or (vii) any
other employee welfare benefit plan.
3.19.2 With respect to each of the employee benefit plans listed in
the Disclosure Letter, Shareholders have furnished to RIGL
true and complete copies of (i) the plan documents and summary
plan description, (ii) the most recent determination letter
received from the Internal Revenue Service, (iii) the latest
actuarial valuation, (iv) the latest financial statement, (v)
the last Form 5500 Annual Report, and (vi) all related trust
agreements, insurance contracts or other funding agreements
which implement such employee benefit plan. Neither TBI nor
any of its directors, officers, employees or any other
"fiduciary", as such term is defined in Section 3(21) of ERISA,
has any liability for failure to comply with ERISA or the Code
for any action or failure to act in connection with the
administration or investment of such plans.
3.19.3 With respect to the insurance contracts or funding agreements
which implement any of the employee benefit plans listed in the
Disclosure Letter, such insurance contracts or funding
agreements are fully insured or the reserves under such
contracts are sufficient to pay claims incurred.
3.20 Insurance. The Disclosure Letter, under the caption "Insurance",
lists and briefly describes each insurance policy maintained by TBI
with respect to its properties and assets and sets forth the date of
expiration of each such insurance policy. All of such insurance
policies are in full force and effect and TBI is not in default in any
material respect with respect to its obligations under any of such
insurance policies. The insurance coverage of TBI is customary for
corporations of similar size engaged in similar lines of businesses.
3.21 Affiliate Transactions. Except as set forth under the caption
"Affiliate Transactions" in the Disclosure Letter, no holder of 5% or
more of any class of stock of TBI, officer or director of TBI or, to
Shareholders' knowledge, any member of the immediate family of
Shareholders, officer or director, or, to Shareholders' knowledge, any
entity in which any of such persons owns any beneficial interest
(other than a publicly-held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and
less than 5% of the stock of which is beneficially owned by any of
such persons) (collectively "Insiders"), has any agreement with TBI
(other than at-will employment arrangements) or any interest in any
property, real, personal or mixed, tangible or intangible, used in or
pertaining to the business of TBI. For purposes of the preceding
sentence, the members of the immediate family of Shareholders, officer
or director consist of the spouse, parents, children, siblings,
mothers- and fathers-in-law, sons- and daughters-in-law, and brothers-
and sisters-in-law of Shareholders, officer or director.
3.22 Customers and Suppliers. The Disclosure Letter, under the caption
"Customers and Suppliers," lists the 10 largest customers and 10
largest suppliers of TBI for 1998, and sets forth opposite the name of
each such customer and supplier the approximate percentage of net
sales or purchases, as the case may be, attributable to such customer
or supplier. The Disclosure Letter also sets forth the forecast of
the 10 largest customers and suppliers for 1999.
3.23 Officers and Directors; Bank Accounts. The Disclosure Letter, under
the caption "Officers and Directors," lists all officers and directors
of TBI, all of TBI's bank accounts, and each authorized signer on such
accounts.
3.24 Compliance with Laws; Permits; Certain Operations. TBI and its
officers, directors, agents and employees have complied in all
material respects with all applicable laws and regulations of foreign,
federal, state and local governments and all agencies thereof which
affect the businesses or any owned or leased properties of TBI and to
which TBI may be subject, and no claims have been filed against TBI
alleging a violation of any such laws or regulations, except as set
forth in the Disclosure Letter under the caption "Compliance." TBI
has not authorized, given or agreed to give any money, gift or similar
benefit (other than incidental gifts of articles of nominal value) to
any actual or potential distributor, customer, supplier, governmental
employee or any other person in a position to assist or hinder TBI in
connection with any actual or proposed transaction. TBI holds all of
the material permits, licenses, certificates and other authorizations
of foreign, federal, state and local governmental agencies required
for the conducts of its business or the ownership or leasing of its
property. In particular, but without limiting the generality of the
foregoing, TBI has not in any material respect violated, or received a
written notice or charge asserting any violation of, any laws
pertaining to occupational health or safety or the environment
(including rules and regulations thereunder).
3.25 Year 2000 Issue. TBI's data systems are functionally operable to
handle four digit date fields and the Year 2000 issue will not
materially affect future financial results, or cause reported
financial information to necessarily be inherently unreliable as a
result of the Year 2000 issue. With regard to TBI's proprietary
software, TBI has undertaken to test its application(s) which revealed
that no modifications or replacements to significant portions of its
software will be required in order for the software to run properly
after December 31, 1999. TBI has determined that it has no material
exposure to contingencies related to the Year 2000 issue.
3.26 Disclosure. Neither this Agreement, nor any other documents
delivered hereunder by Shareholders nor the Disclosure Letter contains
any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light
of the circumstances in which the were made, not misleading, and there
is no fact which has not been disclosed to RIGL of which Shareholders
are aware which materially affects adversely or could reasonably be
anticipated to materially affect adversely the business, including
operating results, assets, customer, distributor, supplier or employee
relations, and business operations, of TBI.
<PAGE>
ARTICLE IV
CONDUCT OF BUSINESS PRIOR TO THE CLOSING
4.1 Conduct of Business Prior to the Closing. Prior to the Closing,
unless RIGL has otherwise consented (such consent shall not be
withheld unreasonably), or as otherwise provided herein, Shareholders
shall cause TBI to take the following actions:
4.1.1 TBI shall continue to conduct operations in the ordinary and
usual course of business, and maintain their facilities in
their current condition.
4.1.2 TBI shall refrain from: (A) issuing, selling, pledging,
disposing of or encumbering (i) any additional shares of, or
any options, warrants, conversion privileges or rights of any
kind to acquire any shares of, any of its capital stock, or
(ii) any of its assets, except in the ordinary course of
business; (B) amending or proposing to amend its Articles of
Incorporation or Bylaws; (C) splitting, combining or
reclassifying any outstanding shares of TBI's common stock, or
declaring or paying any dividend or other distribution payable
in cash, stock, property or otherwise with respect to shares of
TBI's common stock; (D) redeeming, purchasing or acquiring or
offering to acquire any shares of TBI's common stock; (E)
acquiring (by merger, exchange, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership,
joint venture or other business organization or division or
material assets thereof; (F) incurring any indebtedness for
borrowed money or issuing any debt securities except the
borrowing of working capital in the ordinary course of business
and consistent with past practice; (G) making any payment under
promissory notes to any employee of TBI, or (H) entering into
or proposing to enter into or modifying or proposing to modify
in any material respect any material agreement, arrangement or
understanding with respect to any of the matters set forth in
this Section 4.1.2.
4.1.3 Except in the ordinary course and consistent with past
practice, TBI shall refrain from entering into or modifying any
employment, severance or similar agreements or arrangements
with, or granting any bonuses, salary increases, severance or
termination pay to, any officers, directors, employees or
consultants.
4.1.4 Except as required by law, TBI shall refrain from adopting or
amending any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment or other
employee benefit plan, trust, fund or group arrangement for the
benefit or welfare of any employees or any bonus, profit
sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit
plan, agreement, trust, fund or arrangement for the benefit or
welfare of any director.
4.1.5 TBI will use its best efforts to cause its current insurance
(or reinsurance) policies not to be canceled or terminated or
any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement
policies providing coverage substantially equal to the coverage
under the canceled, terminated or lapsed policies for
substantially similar premiums are in full force and effect.
4.1.6 TBI shall use its reasonable efforts to preserve intact its
business organizations and goodwill, keep available the
services of its officers and employees as a group and maintain
satisfactory relationships with suppliers, distributors,
customers and others having business relationships with it;
confer on a regular and frequent basis with representatives of
RIGL and report operational matters and the general status of
ongoing operations to RIGL; refrain from taking any action
which would render, or which reasonably may be expected to
render, any representation or warranty made by it in this
Agreement untrue at, or at any time prior to, the Closing Date;
after discovery by TBI, notify RIGL of any emergency or other
change in the normal course of its business or in the operation
of its property and of any governmental or third party
complaints, investigations or hearings known to TBI (or
communications indicating that the same may be contemplated) if
such emergency, change, complaint, investigation or hearing
would be material, individually or in the aggregate, to the
business, operations or financial condition of TBI or
Shareholders' ability to consummate the transactions
contemplated by this Agreement; and notify RIGL if Shareholders
discover that any representation or warranty made by them in
this Agreement was when made, or has subsequently become,
untrue in any material respect.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions
contemplated by this Agreement, including using reasonable efforts to
obtain all necessary waivers, consents and approvals and to effect all
necessary filings.
5.2 Notification of Certain Matters. Each party will give prompt written
notice to the others of (a) the occurrence or failure to occur of any
event, which occurrence or failure has caused, will cause or is likely
to cause any representation or warranty on its part contained in this
Agreement to be untrue or inaccurate in any material respect at, or at
any time prior to, the Closing Date, and (b) any material failure of
such party, or any officer, director, shareholder, employee or agent
thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
5.3 Director and Officer Indemnification; Liability Insurance. RIGL
agrees that it will cause TBI to maintain in effect, for a period of
at least two years following the Closing Date, the rights to
indemnification existing as of the Closing Date under TBI's Bylaws in
favor of its directors and officers and, for a period of two years
following the Closing Date, liability insurance for TBI's officers and
directors substantially equivalent to that maintained by RIGL for its
officers and directors. Any determination required to be made with
respect to whether an indemnified party's conduct complies with the
standards set forth under the Bylaws or applicable liability insurance
policies will be made by independent counsel selected by RIGL and TBI,
which said person shall be a retired Superior Court Judge.
5.4 Access to Information; Confidentiality. At all times from the date
hereof to the Closing Date: (a) RIGL shall afford the officers,
employees, accountants, counsel and other representatives of
Shareholders access to all of the properties, books, contracts,
commitments and records of RIGL; and (b) Shareholders shall cause TBI
to afford the officers, employees, accountants, counsel and other
representatives of RIGL access to all of the properties, books,
contracts, commitments and records of TBI. Further, at all times from
the date hereof to the Closing Date, RIGL on the one hand, and
Shareholders and TBI on the other hand, shall promptly furnish to the
other (i) a copy of each report, schedule, registration statement or
other document filed or received by it during such period pursuant to
the requirements of applicable securities laws, and (ii) all other
information concerning its business, properties and personnel as such
other party may reasonably request. Unless otherwise required by law,
the parties will hold any such information which is nonpublic in
confidence until such time as such information otherwise becomes
publicly available through no wrongful act of either party and will
not use such information other than to evaluate the other party in
conjunction with the transactions contemplated by this Agreement.
Additionally, in the event of termination of this Agreement for any
reason, each party (x) will promptly return all nonpublic documents
obtained from the other party, and (y) will refrain from the use or
disclosure of any such confidential information provided hereunder.
Subject to the limitations above, in the event of a termination of
this Agreement for any reason, each party shall be precluded from
developing or offering products or services competitive with those of
the other parties for a period of one year following such termination,
within the continental United States of America.
ARTICLE VI
CLOSING
6.1 Conditions of Each Party to Effect the Closing. The respective
obligations of each party to perform at the Closing shall be subject
to the fulfillment at or prior to the Closing of the following
conditions:
6.1.1 Shareholders and RIGL shall have obtained all consents and
approvals necessary to the consummation of this Agreement and
the transactions contemplated hereby.
6.1.2 There shall be no action, proceeding or pending or actual
litigation to enjoin, restrain or prohibit the consummation of
the transactions contemplated by this Agreement.
6.1.3 No party hereto will have terminated this Agreement as
permitted herein.
6.2 Additional Conditions to Obligations of Shareholders. Shareholders'
obligation to perform at the Closing is also subject to satisfaction
of the following condition: The representations and warranties of RIGL
set forth in ARTICLE III will be true and correct in all material
respects as of the Closing Date as if made at and as of the Closing
Date, and RIGL will in all material respects have performed each
obligation and agreement and complied with each covenant to be
performed and complied with by it hereunder at or prior to the
Closing.
6.2.1 There will have been no material adverse change in the
financial condition, liabilities, operation results, business
prospects, assets, or employee customer, licensor or supplier
relations of TBI, and there will have been no damage,
destruction or loss, individually or in the aggregate, which
materially and adversely affects the properties, assets or
business of TBI (whether or not covered by insurance).
6.3 Additional Conditions to Obligations of RIGL. RIGL's obligations to
perform at the Closing are also subject to satisfactions of each of
the following conditions:
6.3.1 Each of the representations and warranties of Shareholders
contained in this Agreement will be true and correct as of the
Closing Date as if made at and as of the Closing Date, and
Shareholders will in all material respects have performed each
obligation and agreement and complied with each covenant to be
performed and complied with by them hereunder at or prior to
the Closing.
6.3.2 There will have been no material adverse change in the
financial condition, liabilities, operating results, business
prospects, assets, or employee, customer, licensor or supplier
relations of TBI, and there will have been no damage,
destruction or loss, individually or in the aggregate, which
materially and adversely affects the properties, assets or
business of TBI (whether or not covered by insurance).
6.3.3 The shareholders of RIGL shall have approved the transaction
contemplated herein pursuant to a special shareholders meeting
to be called by the Board of Directors of RIGL at the earliest
time permissible under Nevada law.
ARTICLE VII
REMEDIES
7.1 Termination. In the event of any breach of the terms, conditions,
representations and/or warranties by either of the parties hereto, the
non-breaching party shall provide written notice to the breaching
party setting forth the breach. If such breach is not cured within
fifteen (15) days of receipt of such written notice by the breaching
party, the non-breaching party shall have the right to terminate the
Agreement and pursue any and all remedies available to it in law or in
equity.
7.2 Costs and Fees. If either party hereto breaches any term of this
Agreement, the breaching party agrees to pay the reasonable
investigation costs, costs of tests and analysis, travel and
accommodation expenses, deposition and trial transcript copies, court
costs and other costs and expenses incurred by the non-breaching party
in enforcing this Agreement or preparing for legal or other
proceedings, whether or not instituted, but only to the extent that
the costs and expenses were reasonably required for the services
rendered and all charges therefore were paid or incurred in good
faith. The reasonable value of all in-house counsel time spent as a
result of outside counsel. If any legal or other proceedings are
instituted, the party prevailing in any such proceeding shall be paid
all of the aforementioned costs, expenses and fees by the other party,
and if any judgment is secured by such prevailing party, all such
costs, expenses, and fees shall be included in such judgment,
attorneys' fees to be set by the court and not by the jury.
7.3 Waiver. Excuse or waiver of the performance by the other party of any
obligation under this Agreement shall only be effective if evidenced
by a written statement signed by the party so excusing. No delay in
exercising any right or remedy shall constitute a waiver thereof, and
no waiver by any of the parties hereto of the breach of any covenant
of this Agreement shall be construed as a waiver of any preceding or
succeeding breach of the same or any other covenant or condition of
this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Publicity. All press releases and other public announcements
regarding this Agreement and the transactions contemplated hereby will
be approved by RIGL unless otherwise required by law, in which event
each party will use best efforts to enable the other party to review,
prior to dissemination, the form and substance of such announcements.
8.2 Entire Agreement; Amendments; Further Assurances. This Agreement,
including any documents delivered hereunder or ancillary hereto,
constitutes the entire agreement of the parties pertaining to the
subject matter hereof and supersedes all prior agreements or
understandings of the parties. This Agreement may only be amended by
a writing signed by all of the parties hereto, but any party hereto
can waive any right, condition or agreement of which it is entitled to
avail itself, but any such waiver will apply only to the circumstances
involved and only if it is in writing. Each party agrees to execute
and deliver any other documents and take any other actions necessary
to carry out the terms of this Agreement and to consummate the
transactions contemplated herein.
8.3 Successors. Neither this Agreement nor any right, remedy, obligation
or liability hereunder may be assigned by any party without the prior
written consent of the other parties, except that the rights and
obligations of any party who is an individual may pass to his estate
upon his death. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective permitted
successors and assigns.
8.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon receipt if delivered personally
or if delivered by facsimile (in the latter case, with a copy
delivered by first class mail as described below), the next business
day if by express mail (overnight delivery) or three days after being
sent by registered or certified mail, return receipt requested,
postage prepaid:
If to RIGL: RIGL Corporation
4840 E. Jasmine Street, Suite 105
Mesa, Arizona 85205
Attention: William D. O'Neal, Esq., General Counsel
Facsimile: (602) 654-9727
If to TBI: Telco Billing, Inc.
9420 E. Doubletree Ranch Road, Suite C-102
Scottsdale, Arizona 85258-5508
Attention: Joseph Carlson, President
Facsimile: 1-800-305-1515
With a Copy to: Burton M. Bentley, Esq.
7878 North 16th Street, Suite 110
Phoenix, Arizona 85020
Facsimile: 1-602-861-3230
or at such other address for a party as shall be specified by notice
hereunder.
8.5 Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona, without
regard to conflict of law principles; provided, however, that all
matters pertaining exclusively to the corporate governance of a party
will be governed by the laws of the state or province of its
incorporation. In the event that any provision hereof is held to be
invalid, void or illegal by any court of competent jurisdiction, the
same shall be deemed severable from the remainder of this Agreement,
the remaining provisions shall be construed to preserve the intent and
purposes of this Agreement and the parties will negotiate in good
faith to modify the provision, covenant, term or restriction held to
be invalid, void or illegal to preserve each party's anticipated
benefits under this Agreement.
8.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of
which together shall constitute one and the same instrument.
8.7 Interpretation. This Agreement has been prepared and negotiations in
connection herewith have been carried on by the joint efforts of the
parties hereto and their respective counsel. This Agreement is to be
construed fairly and not strictly for or against any of the parties
hereto. The Articles and Section headings contained in this Agreement
are for convenience of reference only, and shall not effect the
meaning or interpretation of any provision hereof. As used in this
Agreement, the masculine, feminine and neuter genders will be deemed
to include the others if the context requires.
8.8 Disclosure Generally. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, shall
be deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant, or agreement
contained herein. The inclusion of any information in any written
disclosure provided hereunder shall not be deemed to be an admission
or acknowledgment by a party, in and of itself, that such information
is material to or outside of the ordinary course of the business of
such party. Any written information provided by TBI hereunder shall
be divided into paragraphs corresponding to the sections of this
Agreement. TBI's written information shall constitute disclosure for
purposes of all other paragraphs thereof.
8.9 Survival of Representations and Warranties. The representations and
warranties of the parties shall survive the Closing for a period of 12
months from the Closing Date.
8.10 Fees and Expenses. The parties shall bear their own fees and
expenses in connection with this Agreement.
DATED on March 16, 1999.
RIGL:
RIGL CORPORATION, a Nevada corporation
By: _______/s/_________
KEVIN JONES
Its: President
TBI:
TELCO BILLING, INC., an Arizona corporation
By: _______/s/__________
JOSEPH CARLSON
Its: President
SHAREHOLDERS:
Morris & Miller, Ltd.
By: _______/s/__________
DENNIS MILLER
Its: President
Mathew & Markson, Ltd.
By: _______/s/__________
WILLIAM C. COOPER
Its: President
EXHIBIT "A"
RIGL WARRANTS AND OPTIONS
1. Effective October 22, 1997, warrants were issued to existing
stockholders to acquire 2,666,920 Common Stock at a price of $2.00
per share and 750,000 Common Stock at a price of $2.30 per share.
The warrants expire on October 30, 1999. RIGL granted certain of
its executive officers and other individuals to purchase shares of
RIGL's Common Stock. At September 30, 1998, options to purchase
1,125,474 shares of Common Stock were outstanding.
2. There is currently 2.5million shares of Class B Series Preferred
Stock authorized and 2.1 million shares issued.
<PAGE>
AMENDMENT TO THE STOCK PURCHASE AGREEMENT.
The amendment to Stock Purchase Agreement ("Amendment") is made and entered
into on the16th day of March, 1999, by and among RIGL Corporation, a Nevada
corporation ("RIGL"), Telco Billing, Inc. a Nevada corporation ("TBI") Morris
& Miller, Ltd and Mathew & Markson, Ltd. (collectively "Shareholders").
RECITALS
A. On or about march 16, 1999, a certain Stock Purchase Agreement
(Agreement") was executed by the parties above named, which said Agreement is
still in full force and effect as TBI and the Shareholders have elected not to
declare a default, but the parties hereto acknowledge that RIGL is in
substantial and material default pursuant to the terms and conditions of said
Agreement in that RIGL has not complied with the provisions of paragraph 1.3.1
of said Agreement.
B. RIGL has requested that the time for performance pursuant to
paragraph 1.3.1 of said agreement shall be extended in the manner hereinafter
set forth.
C. TBI and the shareholders have agreed to extend the time for
performance under paragraphs 1.3.1 of said Agreement subject to and in
conformance with the provisions of this Amendment, and not otherwise, but only
upon the condition that RIGL shall pay to Mathew & Markson, one of the
Shareholders, an "Extension Fee" in the sum of $2,000,000 as hereinafter
provided, none of which shall be refundable.
D. Except for the revisions, amendments and additions effected by
this Amendment, the said Agreement shall be deemed to be in full force and
effect according to its terms, as amended.
Now therefore in consideration of the mutual promises of parties' and
other valuable consideration, it is agreed as follows:
1. Recitals. Each and all of the Recitals is hereby represented by
the parties hereto to be true and accurate as of the date hereof, and said
Recitals are hereby incorporated fully into this Amendment.
2. Extension Fee. RIGL is hereby granted an extension of time, up to
but not past 5:00 p.m. on the 16th day of July, 1999, ("Extension Date") in
which to pay the Royalty Balance of $5,000,000.00 provided for in said
Agreement subject to the following:
a) Concurrently with the execution of this Agreement, RIGL shall pay to
Mathew & Markson in cash, cashier's check drawn on a Phoenix, Arizona bank, or
by wire transfer to Mathew & Markson pursuant to wiring instructions, the sum
of one million dollars ($1,000,000.00) as and for an Extension Fee which
extends to RIGL the right to defer payment of the Royalty Balance as provided
for herein;
b) The receipt of payment of the Extension Fee by Mathew & Markson shall
be deemed to cure RIGL's default of paragraph 1.3.1 of the Agreement, and
shall extend the time for RIGL to pay the Royalty Balance of $5,000,000 prior
to the expiration of the Extension Date.
C) Upon the receipt of the Extension Fee by Mathew & Markson, the parties
agree that paragraph 1.3.1 of the Agreement is hereby deleted in full, and in
lieu thereof, the following paragraphs 1.31 through and including 1.3.8 shall
be substituted for paragraph 1.3.1 of said Agreement:
1.3.1. On or before 5:00 p.m. on June 16, 1999, RIGL shall have the option to
pay directly to Mathew & Markson at such address as Mathew & Markson shall
designate in writing, in cash, cashier's check drawn on a Phoenix, Arizona
bank, or by wire transfer pursuant to written instructions, the remaining
$3,000,000.00 of the Royalty Balance;
1.3.2. In Lieu of the payment provided for in paragraph 1.3.1, on or before
5:00 p.m. on June 16, 1999, RIGL shall have the option of paying to Mathew &
Markson the sum of $3,000,000.00 inclusive of the Extension Fee, along with a
Promissory Note (the "Note") in favor of Mathew & Markson in the original
principal amount of $2,000,000.00, with all outstanding principal due and
payable no later than 5:00 p.m. on July 15, 1999. The note shall be in a form
satisfactory to Mathew & Markson, and shall be secured by 2,000,000 shares of
the restricted common shares of RIGL Corporation. The terms of such security
arrangement shall be set forth in a Stock Pledge Agreement on terms and
conditions acceptable to Mathew & Markson. The share certificate representing
the 2,000,000 shares shall be validly issued, fully paid and non-accessible
and shall be accompanied by opinion of counsel for RIGL as to its authenticity
and shall be held in escrow by counsel for Mathew & Markson until such time as
the Note is fully satisfied or a default occurs under the terms of the Note
and or the Stock Pledge;
1.3.3. Upon the payment of either the entire $5,000,000.00 Royalty Balance
described in paragraph 1.3.1, or that $3,000,000 portion of the Royalty
Balance and delivery of the Note, Stock Pledge and Shares, TBI and
Shareholders shall close the transaction contemplated under the Agreement in
accordance with paragraph 1.6 therein;
1.3.4. In the event that RIGL shall fail or refuse to perform completely in
accordance with the separate provisions of paragraphs 1.3.1 or 1.3.2 of this
Amendment, then none of the Extension Fee shall be credited toward the Royalty
Balance, and RIGL shall be deemed to have substantially and materially
breached the said agreement as herein amended, and the Extension Fee shall be
deemed to have been earned by TBI and the Shareholders;
1.3.5. In the event that RIGL shall fully perform pursuant to paragraph
1.3.1, or in the alternative pursuant to paragraph 1.3.2, then and in either
of such events the Extension Fee shall be credited toward the payment of the
Royalty Balance of $5,000,000.00.
1.3.6. All references to time herein shall be determined to refer to Phoenix
local time;
1.3.7. It is the intension of the parties hereto that the Extension Fee shall
at no time be repaid to RIGL, but that said Extension Fee shall either be
retained by Mathew & Markson on behalf of TBI and the Shareholders as payment
for the Extension Fee, or, the Extension Fee shall be applied toward payment
of the Royalty Balance and retained by Mathew & Markson for that reason;
1.3.8. No Part of the Extension Fee paid by RIGL shall be derived from the
sale or hypothecation of any of the real, personal or intangible property of
TBI and/or its affiliates, it being the intent of the parties that only funds
at risk by RIGL and/or its affiliates will be used to pay the Extension Fee.
3. Build out allowance. In the event RIGL elects to move forward
under paragraph 1.3.2, as additional consideration, RIGL agrees to provide
Simple.Net a build-out allowance of $250,000.00 to be used as Simple.Net deems
reasonable to build out, furnish and equip office space to be utilized by
Simple.Net located at 4840 E. Jasmine Street, Suite 111, Mesa, Arizona 85205.
This space is currently leased by RIGL pursuant to a lease dated July 1, 1998.
The initial terms of the Lease expires on June 30. 2003. Simple.Net shall
have the right to sublease such space from RIGL for the sum of $1.00 per year
for the remainder of the initial term, and RIGL warrants to comply with the
terms of the July 1, 1996 Lease and pay all rent in a timely manner.
4. Right of Offer. In the event RIGL elects to Move forward under,
and complies with the terms of paragraph 1.3.2, RIGL shall have the right to
receive notification from the principals of Simple.Net of their intention to
sell Simple.Net before Simple.Net is advertised for sale on the general
market. If Simple.Net receive and offer(s) to sel, RIGL shall receive
notification of such offer(s) and shall have the right to compete against such
offer(s) for the right to purchase Simple.Net upon such terms mutually
acceptable to the principals of Simple.Net and RIGL. Simple.Net shall have no
obligation to accept any such offer from RIGL.
This Amendment has been executed on the day and year first above written.
RIGL
RIGL CORPORATION, a Nevada corporation
By: ______________/S/_____________
WILLIAM O'NEAL
Its: Sr. Vice President
TBI
TELCO BILLING, INC., an Arizona corporation
By: _____________/S/_____________
JOSEPH CARLSON
Its: President
SHAREHOLDERS:
Morris & Miller, Ltd.
By: _____________/S/_____________
CATHERINE THOMAS
Its: Director
Mathew & Markson, Ltd.
By: _____________/S/_____________
ILSE COOPER
Its: Director
<PAGE>
EXHIBIT C
LICENSE AGREEMENT
_________________
This EXCLUSIVE LICENSING AGREEMENT ("License") is entered into on this 21st
day of September, 1998 by and between MATHEW & MARKSON, LTD. ("M&M") and TELCO
BILLING, INC. ("TBI"), a Nevada corporation.
RECITALS
A. M&M is the sole and exclusive owner of the intellectual property
rights to the name "YELLOW-PAGE.NET" including the name, the trade name,
trademark, and the URL www.yellow-page.net (hereinafter, "Name") and wishes to
establish a royalty agreement to permit utilization of the Name.
B. TBI has the contracts, connections and contractual arraignments to
place information on the Internet, and seeks to utilize the intellectual
property rights owned by M&M as its exclusive licensee under their terms and
conditions of this License, granting such sub licenses as may be necessary to
achieve the business goals of the parties, and agrees to the terms and
conditions stated herein.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants between the
parties, the sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. GRANT OF EXCLUSIVE LICENSE
M&M hereby grants an exclusive and worldwide licenses to TBI yo use,
market, and sub-license the Name both as a means of identifying a product
and/or service as well as a means of soliciting business. In such
utilization, TBI discloses, and M&M specifically consents to marketing same by
means of sales and marketing agreements to sub-licensees as TBI may in its
sole discretion deem necessary for the generation of royalties.
2. COMPENSATION
TBI agrees to pay m&M the sum of $400,000.00 on each anniversary date of
this License for the following twenty (20) years. In the event that TBI
should undergo a change of control or ownership in excess of 50% of the issued
and outstanding common stock of TBI, all outstanding royalty payments shall
become immediately due and payable. All payments are net M&M's Antigua or
other M&M appointed bank account(s). Any and all taxes that may be or become
due shall be solely paid by TBI and not deducted from the amount due M&M.
3. TERM OF LICENSE
The term of this Licenses (the "Term") shall be for twenty (20) years,
except that this Licenses may be terminated for cause if TBI or any of its
agents or independent contractors engages in any activities which causes any
civil or criminal investigation, allegation or action for fraud,
misrepresentation, or violation of any rule, statute or procedure.
4. DEFINED SCOPE OF AGREEMENT
This License is not for a joint venture, partnership, or any combined
work effort or benefit. This is strictly an agreement for payment of
royalties for generation of income, and TBI shall not be an employee, agent or
independent contractor for or on behalf of M&M.
5. WARRANTIES AND COVENANTS
TBI os solely responsible for its means, methods, and mechanisms
(hereinafter "techniques") for marketing; as such, TBI assumes all liability
for its sales efforts, techniques, tools, marketing strategies, scripts for
solicitations, and any other means utilized. TBI covenants, warranties and
agrees to hold M&M and its successors and assigns harmless, indemnify, and
defend against any complaints by any individual or entity that arises. TBI
assures M&M that all techniques shall be reviewed and signed off by an
attorney, thereby issuing an opinion that said Techniques are lawful.
6. INDEMNIFICATION, HOLD HARMLESS, AND DEFENSE
TBI hereby indemnifies and agrees to hold harmless M&M, and its
beneficiaries, officers, directors, shareholders, employees, attorneys,
representative, agents and affiliates (each and "Indemnified Person") from and
against any and all liabilities, obligations, claims, demands, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature (collectively, the "Claims") which may be
imposed on, incurred by, or asserted against, any Indemnified Person arising
in connection with the name or marketing thereof. In addition, TBI agrees to
defend M&M and its successors and assigns against any such claims that may
arise. Without limitation, the foregoing indemnities shall apply to each
Indemnified Person with respect to any claims which in whole or in part are
caused by or arise out of the negligence of such Indemnified Person, except to
the limited extent the Claims against an Indemnified Person are proximately
caused by such Indemnified Person's gross negligence or willful misconduct.
If TBI or any third party ever alleges such gross negligence or willful
misconduct by any Indemnified Person, the indemnification provided for ion
this Section shall nonetheless be paid upon demand, subject to late adjustment
or reimbursement, until such time as a court of competent jurisdiction enters
a final judgment as to the extent and effect of the alleged gross negligence
or willful misconduct. The indemnification provided for in this Section shall
survive the termination of this Licenses and shall extend and continue to
benefit each individual or entity who is or has at any time been and
indemnified Person hereunder.
7. ASSIGNABILITY
M&M may assign its rights to receive royalties under this License without
consent of TBI. TBI agrees to place all sublicense"s on notice of M&M's
rights, royalty claims, and legal requirements. TBI may upon payment of
assignment fee, assign this License with the written consent of M&M, which
shall not be unreasonably withheld. Assignment fees shall be 20% of the gross
amount already paid to M&M by assignor.
8. COUNTERPARTS AND FAX COPY
This Licenses may be assigned or executed in one or more counterparts,
each of which shall be an original, but all of which collectively shall
constitute one entire agreement. A facsimile (FAX) copy of this License shall
have the same force and effect as the original, and may be signed and faxed to
the other party for confirmation. Delivery of an executed counterpart of this
License by fax shall be equally effective as delivery of a manually executed
counterpart.
9. MISCELLANEOUS
A. The parties agree that this License shall be governed under the
laws of the Antigua and Barbuda, and in the event of any dispute arising
hereunder, jurisdiction and venue shall be Antigua, W.I.
B. In the event of any dispute under this License wherein this matter
is brought to court, the prevailing party shall be entitled to their costs and
attorney's fees as reasonably incurred by them in the enforcement of this
License.
C. The provisions of this License shall inure to the benefit of an
shall be binding upon the respective heirs, personal representatives,
successors and assigns of the parties.
D. The provisions of this License are severable, and if court finds
one provision unenforceable, the remaining provisions of the agreement shall
remain in full force and effect.
10. NOTICE
All notices, requests, demands, or other communications required or
permitted to be given under this License ("Notice") shall be addressed to the
parties at the following addresses:
TBI:
Tellco billing, Inc.
9420 E. Doubletree, C-102
Scottsdale, AZ 85258
M&M:
Mathew and Markson, LTD.
Woods Centre, Friars Hill Road, #1407
St. John's, Antigua, W.I.
FAX numbers and E-mail addresses may be provided as a means of rapid
communication, and the parties are encouraged to utilize the entire realm of
communications available As technology advances. However, for the purpose of
legal notice under this document, Notice shall be sent by Certified or
Registered Mail, Return Receipt Requested, or by commercial messenger service,
or by physical placement of item in the parties mail box and/or on their desk
or chair, all fees paid by sender. Notice shall be deemed complete once the
item is delivered or out of the senders immediate control. The parties shall
have the right to change its address for notice hereunder to any other
location within the continental Untied States by Notice to the other party of
such new address at least thirty (30) days before the effective date of such
new address.
11. ENTIRE AGREEMENT
The License constitutes the entire agreement between the parties
pertaining to the subject matter contained in this License. All prior and
contemporaneous agreements, representations, and understandings, written or
oral, are superseded by and merged in this License. No modification or
amendment of this License shall be binding unless in writing and executed by
both parties.
IN WITNESS WHEREOF, the parties have signed on the date first written
above.
TELCO BILLING, INC.
By: ________/S/_______
Joseph Carlson
Its: President
Date: 9-21-98
Mathew and Markson, LTD.
By: ________/S/_______
William W. Cooper
Its: Director
Date: 9-21-98
<PAGE>
EXHIBIT D
FINANCIALS
_________________
Independent Auditors' Report
<PAGE>
Telco Billing, Incorporated
AUDITED FINANCIAL STATEMENTS
For the Period ended February 28, 1999
<PAGE>
Contents
Independent Auditor's Report .......................... 1
Financial Statements
Balance Sheet .......................... 2
Statement of Income .......................... 3
Statement of Cash Flow .......................... 4
Notes to the Financial Statements .......................... 5
<PAGE>
The Thompson Group
7373 North Scottsdale Road
Suite A-179
Scottsdale, Arizona 85253
602.998.9005
Fax: 602.998.5477
Independent Auditor's Report
Board of Directors and Stockholders
Telco Billing, Inc.
Scottsdale, Arizona
We have audited the accompanying balance sheet of Telco Billing, Inc., (the
Company) as of February 28, 1999, and the related statements of income,
retained earnings, and cash flows from the date of inception to February 28,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Telco Billing as of February
28, 1999, and the results of its operations and its cash flows for the period
then ended in conformity with generally accepted accounting principles.
THE THOMPSON GROUP, PC
______/S/_____________
Scottsdale, AZ
May 12, 1999
<PAGE>
TELCO BILLING, INC.
Balance Sheet
as of February 28, 1999
ASSETS
______
Current Assets:
Cash and cash equivalents - Note 1 $ 29,753
Trade accounts receivable - Note 2 2,230,327
Trade subscriptions receivable - Note 3 781,136
__________
Total Current Assets 3,041,216
Property and Equipment, net - Note 4 26,334
Other Assets:
Prepaid marketing - Note 5 598,083
____________
TOTAL ASSETS $ 3,665,633
============
LIABILITIES AND STOCKHOLDER'S EQUITY
____________________________________
Current Liabilities:
Accounts payable $ 26,167
Accrued rent - Note 6 8,725
Accrued royalty - Note 6 400,000
Interest payable - Note 7 3,803
Income tax payable - Note 9 1,131,195
___________
Total Current Liabilities 1,569,890
Long-term Liabilities:
Notes payable - Note 7 142,415
___________
TOTAL LIABILITIES 1,712,305
Stockholders' Equity: Note 11
Common Stock, no par value; 25,000 shares authorized
and 2,000 shares issued and outstanding. 1,000
Net Income 1,952,328
___________
TOTAL STOCKHOLDERS' EQUITY 1,953,328
___________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,665,633
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TELCO BILLING, INC.
Statement of Income
for the period ending February 28, 1999
Revenues:
_________
Internet advertising and telephony $ 9,999,740
Cost of sales 3,482,131
___________
Gross Profit 6,517,609
Expenses:
_________
Selling 826,135
General administrative 2,599,890
Interest 8,061
___________
INCOME FROM CONTINUING OPERATIONS 3,083,523
___________
Income tax liability - Note 9 1,131,195
___________
NET INCOME $ 1,952,328
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TELCO BILLING, INC.
Statement of Cash Flows
for the period ending February 28, 1999
Cash Flows From Operating Activities:
____________________________________
Net Income $ 1,952,328
Adjustments to reconcile net income
to net cash used in operating activities.
Depreciation 2,138
Allowance for Doubtful Accounts 1,569,859
(Increase) decrease in:
Trade accounts receivable (2,621,688)
Subscriptions receivable (1,959,634)
Prepaid expenses (598,083)
Increase (decrease) in:
Accounts payable 26,167
Rent payable 8,725
Royalty payable 400,000
Income tax payable 1,131,195
Interest payable 3,803
___________
NET CASH (USED)BY OPERATING ACTIVITIES (85,190)
Cash Flows From Investing Activities:
____________________________________
Purchases of property and equipment (28,472)
___________
NET CASH (USED) BY INVESTING ACTIVITIES (28,472)
Cash Flows From Financing Activities:
____________________________________
Proceeds from Publications Mgt. 90,000
Proceeds from JIB Holding Trust 52,415
Proceeds from the sale of stock 1,000
___________
NET CASH PROVIDED BY FINANCING ACTIVITIES 143,415
___________
NET INCREASE IN CASH 29,753
___________
CASH AT END OF PERIOD $ 29,753
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
Telco Billing, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Period Ended February 28, 1999
NOTE 1 - NATURE OF OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, USE
OF ESTIMATES
Nature of Operations
____________________
The Company was incorporated on April 23, 1998 and became a Nevada
corporation. The Company is a High Tech Internet, Advertising, and Telephony
service provider. Telco Billing, Inc offers these services throughout the
nation and recently internationally. The industry has experienced a rapid
growth in market share, because of the accelerated use of the Internet in
business, education, and personal use.
Advertising Costs
_________________
Advertising production costs, except for costs associated with direct-response
marketing are charged to operations when incurred. Advertising expenses
totaled approximately $271,069 for the audited period.
Cash and Cash Equivalents, Short and Long-term Investments
__________________________________________________________
All highly liquid instruments with an original maturity of three months or
less are considered cash equivalents, those with original maturities greater
than three months and current maturities less than twelve months from the
balance sheet date are considered short-term investments, and those with
maturities greater than twelve months from the balance sheet date are
considered long-term investments.
Concentration of Credit Risk
____________________________
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist primarily of cash, trade receivables, and
subscriptions receivables. Subscriptions receivables are typically unsecured
and are derived from revenues earned from customers primarily located in the
United States. The Company performs ongoing evaluations of its customers and
maintains reserves for the potential credit losses; such losses have been
within management's expectations.
Depreciation and Amortization
_____________________________
Property and equipment, including leasehold improvements, are stated at cost
and depreciated using the straight-line method over the estimated useful lives
of the assets, generally two to five years. The Company periodically
evaluates the recoverability of its long-lived assets based on expected
undiscounted cash flows and recognizes impairments, if any, based on expected
discounted future cash flows.
Revenue Recognition
___________________
The Company's revenues are derived principally from the sale of advertisements
and related services for Internet advertising. Advertising revenues are
recognized over the period in which the advertisement is displayed or viewed
by others, provided that no significant Company obligations remain at the end
of the period and collection of the resulting receivable is probable. Billing
vendors collect and disburse net allowance for certain revenues which the
vendors estimate will be refunded, rebated, uncollectible, or unbillable.
Income Taxes
____________
The provision for income taxes is computed based on the pretax income item
included in the statement of income. The asset and liability approach is used
to recognize deferred tax assets and liabilities of the expected future tax
consequences of temporary difference between the carrying amounts and the tax
basis of assets and liabilities.
Use of Estimates
________________
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates. Material estimates that are
particularly susceptible to significant change relate to the determination of
the collectability of receivables.
NOTE 2 - TRADE ACCOUNTS RECEIVABLE
The Company has entered into a customer billing service agreement with
Integretel, Inc., and as a customer Ingretel provides billing and collection
and related services. Determining the net realizable value requires an
estimation of both uncollectible receivables or any returns and allowances.
The trade receivable at February 28, 1999 is $110,800, less aggregated amounts
for Telco fees, and reserve hold backs based on dilution. The reserve
receivable is $65,440, based on dilution. These receivables have been reduced
by an allowance for doubtful accounts of $16,963.
The Company has also entered into a customer billing service agreement with
Olympic Telecommunications, Inc., and as a customer Olympic provides billing
and collection and related services. Determining the net realizable value
requires an estimation of both uncollectible receivables or any returns and
allowances. The trade receivable at February 28, 1999 is $1,375,299, less
aggregated amounts for Telco fees, and reserve hold backs based on dilution.
The reserve receivable is $890,111, based on dilution. This trade receivable
has been reduced by an allowance for doubtful accounts of $346,834.
The Company has also entered into a customer billing service agreement with
Enhanced Services Billing, Inc.(ESBI), and as a customer ESBI provides billing
and collection and related services. Determining the net realizable value
requires an estimation of both uncollectible receivables or any returns and
allowances. The trade receivable at February 28, 1999 is $180,038 less
aggregated amounts for Telco fees, and reserve hold backs based on dilution.
This trade receivable has been reduced by an allowance for doubtful accounts
of $27,564.
See also Note 11 - COMMITMENTS AND CONTINGENCIES, Service Agreements
NOTE 3 - TRADE SUBSCRIPTIONS RECEIVABLE
Trade receivables are valued and reported at net realizable value, the net
amount expected to be received. This amount may or may not be necessarily the
amount received. Determining the net realizable value requires an estimation
of both uncollectible receivables or any returns and allowances. The trade
subscriptions receivable at February 28, 1999 is $1,959,634, and has been
reduced by an allowance for doubtful accounts of $1,178,498.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment, at cost, at February 28 consists of:
Computer Equipment $ 28,472
Less: Accumulated Depreciation (2,138)
_______
Property and Equipment - net $ 26,334
======
Depreciation is calculated using the straight-line method over a five year
estimated useful life.
NOTE 5 - MARKETING AGREEMENT
A service and marketing agreement was entered and executed on January 29th,
1998, between Internet Yellow Pages, and Publication Management.
Subsequently, Internet Yellow Pages assigned its terms to Telco Billing, Inc.,
on December 7, 1998. Publication Management has obtained the commercial right
to place billings generated in conjunction with utilization of telephone
services connections with Local Exchange Carriers (LEC) to have those billings
placed on an ultimate end-user's telephone bill through their local telephone
service provider.
Internet Yellow Pages assigned its terms for the exclusive right to use,
market and sublicense the registered trade name Yellow-Page.Net, and the
related trade marks, and the URL "www.yellow-page.net", (hereafter, "Name")
and furthermore wished to grant to Publication Management limited rights to
use, market and sublicense in any portion, the Name based on Publication
Management's best efforts to achieve its desired performance standards and
sales goals.
Direct-response marketing costs are capitalized and amortized on the basis of
separate advertising cost pools. Amortization is computed using the ratio of
current period revenues to the total of current and future period revenues.
Capitalized direct-response marketing costs reported as assets as of February
28, 1999, is $978,875. The amount of corresponding expense includes $380,792,
resulting from an estimated decrease to net realizable value. This represents
capitalized direct-response marketing costs.
NOTE 6 - LEASE AND ROYALTY AGREEMENTS
Lease Agreement
_______________
The Company has entered into lease obligations for office space for its
operations in Scottsdale, Arizona. The agreement, dated May 15, 1998 is on a
month-to-month basis for $1,472.46 per month, payable in advance on the first
day of the calendar month. The agreement is executed between Business
Executive Services, Inc., and Telco Billing, Inc. The dwelling is located at
9420 E. Doubletree Ranch Road, Suite C-102 Scottsdale, Arizona, 85258.
See also Note 10 - RELATED PARTY TRANSACTIONS
Royalty Agreement
_________________
The exclusive licensing agreement was entered and executed on January 4, 1999.
The agreement is between Mathew and Markson, LTD., and Telco Billing, Inc.,
for the purpose of establishing ownership of intellectual property rights to
the name "YELLOW-PAGE.NET", including the name, the trade name, trademark, and
the URL "www.yellow-page.net", (the Name) and establishes a royalty agreement
to permit the utilization of the Name. Telco Billing, Inc., agrees to pay
M&M, LTD., the sum of $400,000, on each anniversary date of the licensing
agreement for the following 20 years. Royalty expense for the audited period
is $400,000. The present value of the royalty is $5,000,000.
NOTE 7 - NOTES PAYABLE
Long-term debt at February 28, 1999, consisted of the following:
Note payable to Publications Management on October 1, 1998,
with terms of payments to be credited first on accrued interest
and then the principle balance outstanding. The
principle amount of $90,000, plus interest at 7.00%,
calculated and charged on a daily basis per annum. $ 90,000
Note payable to JIB Holding Trust on June 10, 1998,
with terms of payments to be credited first on
accrued interest and then the principle balance
outstanding. The principle amount of $52,415,
plus interest at 7.00%, calculated and charged on
a daily basis per annum. 52,415
________
Total Long-term debt $ 142,415
========
These notes are not secured by company assets, and assets have not been
pledged or subject to any liens. The above accrued and unpaid interest
totaled $1,069 and $2,734 respectively.
NOTE 8 - YEAR 2000
The company is in the process of assessing the Year 2000 issue and expects to
complete a fully developed contingency plan by mid-year. The Company has not
incurred material costs to date in this process, and currently does not
believe that the cost of additional actions will have a material effect on its
results of operations or financial condition. Although, Telco Billing
currently believes that its systems are Year 2000 compliant in all material
respects, the current systems may contain undetected errors or defects with
the Year 2000 date functions that may result in material costs. The Company
is in the process of developing a plan to assess whether third parties are
adequately addressing the Year 2000 issue and whether any of its non-IT
systems have material Year 2000 compliance problems. The company does not
currently have any information about the Year 2000 status of its advertising
customers. The purchasing patterns of advertisers may be affected by the Year
2000 issues as companies expend significant resources to correct their current
systems for the Year 2000 compliance. These expenditures may result in
reduced funds available for Internet advertising, which could have an adverse
effect on the Company's business, results of operations, and financial
condition.
NOTE 9 - PROVISION FOR INCOME TAX
The provision for income taxes is computed based on the pretax income item
included in the statement of income. The asset and liability approach is used
to recognize deferred tax assets and liabilities of the expected future tax
consequences of temporary difference between the carrying amounts and the tax
basis of assets and liabilities.
Income before taxes and the provision for taxes consisted on the following:
Income before taxes: 3,231,985
_________
Provision for Taxes:
Federal:
Current: 1,131,195
_________
Total provision for taxes $1,131,195
=========
Effective tax rate 35.0 %
=========
The provision for taxes reconciles to the amount computed by applying the
statutory federal rate of 35% to income before taxes as follows:
Computed expected tax $1,131,195
State taxes, net of federal benefits ---0---
Provision for taxes $1,131,195
NOTE 10 - RELATED PARTY TRANSACTIONS
Publications Management, Inc. primarily does marketing for Telco Billing, Inc.
There have been assignments of contractual obligations amongst Companies.
Telco Billing, Inc., management has agreed and decided to retain Publications
Management, Inc., after consummation of the acquisition with RIGL Corporation,
as subagent to handle marketing for them.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Service Agreements:
Integretel Service Agreement
____________________________
The Company and Publication Management has entered into a customer billing
service agreement with Integretel, Inc., on January 9, 1998, for the purposes
of providing billing, collection, and associated services within the
telecommunications industry. These services are provided to their customers
who utilize billing and collections through Local Exchange Carriers (LEC).
Integretel has the ability through its computer hardware, software and
accounting systems to provide billing and information management services on
behalf of the contracting agent.
Olympic Telecommunications Agreement
____________________________________
The Company has entered into a customer billing service agreement with Olympic
Telecommunications, Inc., on June 2, 1998, for the purposes of providing
billing, collection, and associated services within the telecommunications
industry. These services are provided to their customers who utilize billing
and collections through Local Exchange Carriers (LEC). Olympic has the
ability through its computer hardware, software and accounting systems to
provide billing and information management services on behalf of the
contracting agent.
Enhanced Services Billing Agreement
___________________________________
The Company has also entered into a customer billing service agreement with
Enhanced Services Billing, Inc. (ESBI), on February 1, 1999, for the purposes
of providing billing, collection, and associated services within the
telecommunications industry. These services are provided to their customers
who utilize billing and collections through Local Exchange Carriers (LEC).
ESBI has the ability through its computer hardware, software and accounting
systems to provide billing and information management services on behalf of
the contracting agent.
NOTE 12 - SUBSEQUENT EVENTS - Acquisition of Telco Billing, Inc.
The stock purchase agreement signed and executed on March 16, 1999, was
entered between Telco Billing, Inc., Morris and Miller, LTD., (1,100 shares of
stock), Mathew and Markson, LTD., (900 shares of stock) (collectively
"shareholders"), and RIGL Corporation currently listed on the OTC Electronic
Bulletin Board (RIGN).
RIGL Corporation will acquire all of the outstanding shares of Telco Billing,
Inc., with shareholders in agreement at the "Closing Date". Shareholders will
sell 100% of the issued and outstanding capital stock of Telco Billing, Inc.
In consideration, RIGL Corporation will validly issue and deliver 17 million
shares of common stock at a par value of $.001 per share, free from all liens,
claims, and encumbrances, upon the "Closing Date" as prescribed by the
agreement.
