UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES Under Section 12(b)
and (g) of the Securities Exchange Act of 1934
DigiTEC 2000, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Nevada 54-1287957
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(State of Incorporation) (I.R.S. Employer Identification)
8 West 38th Street, Fifth Floor
New York, New York 10018
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (212) 944-8888
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.001 Per Share
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DigiTEC 2000, Inc.
Index to Form 10
For the Fiscal Year Ended June 30, 1997
Item
- ----
No. Page No.
- --- --------
1 Business....................................................... 3
2 Financial Information.......................................... 9
3 Properties..................................................... 14
4 Security Ownership of Beneficial Owners and Management......... 15
5 Directors and Executive Officers............................... 16
6 Executive Compensation......................................... 17
7 Certain Relationships and Related Transactions................. 19
8 Legal Proceedings.............................................. 19
9 Market Price of and Dividends on the Registrant's Common
Equity and Other Stockholder Matters........................... 20
10 Recent Sales of Unregistered Securities........................ 21
11 Description of Registrant's Securities to be Registered........ 22
12 Indemnification of Directors and Officers...................... 24
13 Financial Statements and Supplementary Data.................... 24
14 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure....................................... 24
15 Financial Statements and Exhibits.............................. 24
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DigiTEC 2000, Inc.
Form 10
For the Year Ended June 30, 1997
Item 1. Business
Overview
DigiTEC 2000, Inc. (formerly Promo Tel, Inc.) (the "Company") is engaged
in the creation, distribution, marketing and management of consumer prepaid
utility telephone calling cards. On October 18, 1996, the Company changed its
current name to more accurately reflect the increased range of
telecommunications business activities in which the Company has become engaged
(see "Company History"). The Company's principal products are the "F/X(TM)" and
"DigiTEC Direct" phone cards which were introduced in May and December 1996,
respectively (See "Telecommunications Products and Services of the Company").
Sales of the F/X(TM) and DigiTEC Direct phone cards currently represent more
than 98% of the total revenues of the Company.
The prepaid telephone card business is a relatively recent development in
the telecommunications service industry. Prepaid local and long distance calling
cards began to develop in the United States during 1988-1989 using a technology
developed in Europe in the early 1980s that relied upon either an embedded
microchip or a magnetic strip on each card and a telephone set device with a
built in "reader" to access information contained on the cards. Although the
microchip and magnetic strip cards were introduced in the U.S. by several
telephone carriers, the results were disappointing and the product did not
attain sales volumes necessary for commercial success. The European technology
was developed primarily as a replacement for coin operated public pay
telephones. This technology worked reasonably well in areas where a monopoly
telephone service provider had the ability to set widespread standards for the
cards, readers, and rates per minute of usage. However, in the U. S. with many
independent telephone providers, several versions of technologies soon developed
that were not compatible (i.e. a caller in the New York metropolitan area ("NY
Metro Area") purchasing one type of card from one provider, was not able to use
that card with other types of telephones installed by that provider or at
certain public payphone installed by other providers). Other drawbacks included
the significant cost of the reader telephone sets, high maintenance costs
associated with the remote reader equipment and the inability to use the card
with non-reader telephone sets.
By 1992, advances in computers and telephone switch technology allowed
several companies to introduce "cards" that could be used from any touch-tone
("DTMF" signaling) telephone in the U.S. This technology relies upon network
based intelligence including the management of the debit card data bases. A card
using this technology merely contains the designated toll free 1-800 access
number, the personal identification number ("PIN") that identifies the card to
the network and instructions for using the card. The card itself contains no
technology such as a chip or magnetic strip. There are no card readers or other
forms of remote special equipment required for use of the card. The card is more
analogous to a "debit account" in which a fixed amount of money is first
deposited and the account is then debited for services as they are used by the
person with access to the PIN number. When the prepaid account balance is
depleted, it is automatically closed by the remote debit card database computer
of the prepaid card provider. Thereafter, the card has no further commercial
value.
The $72.5 billion U.S. long distance industry is dominated by the nation's
three largest long distance providers, AT&T, MCI and Sprint, which together
generated approximately 80.9% of the aggregate revenues of all U.S. long
distance interexchange carriers in 1995. Other long distance companies, some
with national capabilities, accounted for the remainder of the market. Based on
published Federal Communications Commission estimates, toll service revenues of
U.S. long distance interexchange carriers have grown from $38.8 billion in 1984
to $72.5 billion in 1995. The aggregate market share of all interexchange
carriers other than AT&T, MCI and Sprint has grown from 2.6% in 1984 to 17.1% in
1995. During the same period, the market share of AT&T declined from 90.1% to
53%. These aforementioned changes in telecommunications market have created
opportunities for the growth of alternative
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telecommunications providers.
The market for prepaid phone cards has grown substantially, from an
estimated $25 million in 1992 to an estimated $1.5 billion in 1996, making it
one of the fastest growing segments of the telecommunications industry. The
market is expected to grow to approximately $5 billion within the next four
years. The Company has identified three distinct segments of the prepaid
telephone calling card market. These three segments are utility card products,
corporate/affinity card products and promotional card products. The Company
presently intends to concentrate its efforts in the utility card market.
The Company markets its prepaid telephone cards as a convenient
alternative to credit cards and conventional coin and collect long distance
services. Card operations are supported by remote data base units located on
special switching platforms in the telephone network. The Company currently
distributes and markets its prepaid telephone cards through distributors
primarily in the NY Metro Area and expects to be active in other major U.S.
metropolitan areas by June 1998.
F/X(TM) and DigiTEC Direct phone card users are provided with access to
domestic long distance and international telephone services through toll-free
(1-800 or 1-888 numbers) calls directed to platforms operated by Premiere
Communications, Inc. ("Premiere") and Frontier Corporation ("Frontier"). Brand
awareness is developed and promoted by the design of the cards as well as the
high level of customer service provided to the users of the cards.
At the Company's current sales volume, the Company is among the leading
independent providers (those companies not owned or controlled by a regulated
telephone common carrier) of prepaid utility telephone calling card products in
the United States. The Company is currently in negotiations with suppliers to
begin introducing prepaid cellular phone service.
The Company owns all of the outstanding stock of World Access Solutions,
Inc. ("World Access"), a Nevada corporation with offices in Jackson,
Mississippi. World Access provides Internet access and other Internet related
services. (See "Business of Subsidiary"). As of June 30, 1997, management
resolved to discontinue the operations of World Access.
Risk Factors
Forward Looking Statements
The information set forth in this Registration Statement includes "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended (the "33 Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended. Words "estimated", "intends", "believes", "plans",
"planning", "expects", and "if" are intended to identify forward looking
statements. Although management believes that the assumptions made and
expectations reflected in the forward looking statements are reasonable, it must
be recognized that there is no assurance that the underlying assumptions will,
in fact, prove to be correct, or that actual future results will not be
different from the Company's expectations.
Dependence on Long Distance Provider
The Company currently depends upon Premiere and Frontier, to provide the
Company with the bundled prepaid phone cards that it resells to its customers.
The Company's ability to resell the phone cards depends upon whether it can
continue to maintain a favorable relationship with its providers. The Company's
long distance providers may terminate upon breach of certain conditions.
Although the Company believes that the likelihood of such a termination is
remote, the Company does not have a specific contingency arrangement in place to
provide for such termination.
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Competition
The prepaid or debit card sector of the long distance market is highly
competitive and is affected by the constant introduction of new cards and
services by industry participants. Competition in the prepaid card sector of the
long distance business is based upon pricing, customer service and perceived
reliability of the prepaid phone cards. Several of the Company's competitors are
substantially larger and have greater financial, technical and marketing
resources than the Company. The ability of the Company to compete effectively in
the prepaid sector of the long distance market will depend upon the Company's
continued ability to provide highly reliable phone cards at prices competitive
with, or lower than, those charged by its competitors.
Financing Requirements
To date, the Company remains undercapitalized and cannot finance its
expansion as quickly as opportunities arise. In order for the Company to be
successful in its current plans for expansion and to continue with its plans to
construct its own switching platforms, the Company will be required to obtain
financing. There can be no assurance that such financing will be available on
acceptable terms, or at all, to the Company.
Litigation
The Company and its Chief Executive Officer have been named as defendants
in a legal action in Mississippi in the case entitled Heritage Graphics, Inc.
("Heritage") vs. Telephone Electronics Corporation ("TEC") (see Item 8. Legal
Proceedings). The complaint alleges, among other things, that the defendants
breached a contractual agreement and conspired to have Heritage go out of
business. The complaint seeks damages of $500 million. The Company believes that
the case has no merit and intends to vigorously contest the complaint. The case
is scheduled to go to trial January 5, 1998. There is no assurance as to the
outcome of the litigation. However, in the event of a decision adverse to the
Company, the Company's business, financial condition, operating results and the
Company's stockholders, could be materially adversely affected. While the
Company has an indemnification agreement with TEC which calls for the Company to
be indemnified for all claims regarding Heritage which arose prior to January
20, 1996, it is unknown as of this date what impact it will have in the event of
a decision adverse to the Company.
Outstanding Warrants and Options
As of October 15, 1997 the Company had warrants and options outstanding to
purchase 3,528,949 shares of Company's common stock ("Common Stock") at exercise
prices ranging from $1.50 to $14.50 per share and an average price of $4.42 per
share. Warrants and options outstanding for 3,328,949 shares of Common stock are
immediately exercisable. To the extent that the outstanding warrants and options
are exercised, dilution to the interest of the Company's stockholders may occur.
Further, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of the outstanding
warrants and options can be expected to exercise them at a time when the Company
would, in all likelihood, be able to obtain any needed capital on terms more
favorable to the Company than those provided by the outstanding warrants and
options.
Dependence on Key Personnel
The Company is dependent on its ability to retain and motivate high
quality personnel, especially its management and any key technical personnel
that may be needed in connection with the Company's plans to construct its own
switching platform. The loss of services of any of its executive officers or key
employees could have a material adverse effect on the business, operating
results or financial condition of the Company. The Company's future success also
depends on its continuing ability to identify, attract and hire qualified
personnel as it expands it lines of business. There can be no assurance that the
Company will be able to attract and hire qualified technical and managerial
personnel in the future. The inability to attract and retain the necessary
personnel could have a material adverse effect upon the Company's business,
operating results or financial condition.
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Market Listing; Volatility of Stock Price
The Company's Common Stock is traded on the NASDAQ Bulletin Board. To
date, the Company's Common Stock has been relatively illiquid and subject to
wide fluctuations. There can be no assurance that an active public market for
the common stock will develop or be sustained. Further, the market price of the
Company's Common Stock will likely continue to be highly volatile based on
quarterly results of operations, announcements of new products or lines of
business by the Company or its competitors or other events or factors.
Company History
The Company was organized as a Nevada corporation in May 1987 under the
name Yacht Havens International Corp. ("Yacht Havens"). In July, 1995, the
Company changed its name from Yacht Havens International, Inc. to Promo Tel,
Inc. ("Promo Tel-Nevada"). In August 1995, Promo Tel-Nevada merged with a
Delaware corporation, named Promo Tel, Inc. ("Promo Tel-Delaware"). The Company
exchanged 1,333,334 shares of previously unissued and unregistered common stock
for the outstanding common stock of Promo Tel-Delaware. Promo Tel-Delaware's
assets consisted of personnel, sales, marketing and distribution programs and
contacts for the development and sale of prepaid phone cards. In October 1996,
the Company amended its articles of incorporation to its current name. The
Company's principal executive and sales offices are located at 8 West 38th
Street, 5th floor, New York, N.Y. 10018. Its telephone number is (212) 944-8888.
During fiscal 1996 the Company introduced an array of prepaid phone card
products. Although the Company had sales of $17,425,200 for fiscal 1996, during
the last quarter of fiscal 1996 and the first half of fiscal 1997, the Company
experienced customer service problems and could not compete effectively in the
marketplace. However, in October 1996, the Company and Frontier reached an
agreement whereby the Company would resell Frontier's prepaid phone card under
the Company's brand names. As a result of this agreement and a subsequent
agreement with Premier the customer service issues were alleviated and the
Company began to experience consistent sales growth. The Company's sales for the
fourth quarter of fiscal 1997 were approximately $14,000,000 and its sales for
the year ended June 30,1997 reached $26,027,000.
Telecommunications Products and Services of the Company
Prepaid Cards
The principal products of the Company are telephone network access
products commonly referred to as prepaid utility calling cards, the F/X(TM) and
DigiTEC Direct phone cards, that allow users to access domestic long distance,
international long distance, and local telephone services from any touch tone
("DTMF" signaling) telephone set in the U.S. Users purchase the F/X(TM) and
DigiTEC Direct phone cards in denominations of $5.00, $10.00, $20.00, and $50.00
at retail outlets such as convenience stores, vending machines, newsstands,
delicatessens, gasoline stations, check cashing centers, supermarkets, and drug
stores. Each phone card has printed on the back a toll-free access number (1-800
or 1-888) and a PIN that is unique to that card. F/X(TM) and DigiTEC Direct
phone cards are currently available with instructions in English, Spanish and
Chinese. The Company has plans to introduce cards with instructions in Korean,
Japanese and German. When the toll-free access number is entered, the user is
connected to a debit or prepaid card platform switch in the telephone network
that provides interactive voice prompts in the user selected language through
the call process. After entering the PIN, the user may dial one or more
destination telephone numbers in the same manner as a normal telephone call. The
interactive voice prompts in the platform advise the user of the minutes
remaining available on that card for the dialed destination. The prepaid account
balance associated with each card is managed by the platform which automatically
deducts for usage. Upon use of all the minutes stored in the card's account, the
debit card database computer automatically instructs the debit platform to
terminate the account associated with the card. Usage charges are based upon
values in a "rate deck" stored in the computer database connected to the
platform. Different rates may be set for domestic long distance, international
calls by country of destination and for local calls. The Company provides 24
hour customer service operators to answer service calls related to using the
cards.
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Marketing and Distribution
The Company distributes the F/X(TM) and DigiTEC Direct phone cards
primarily through independent distributors. Distributors purchase cards from the
Company at a discount from the face amount of the card. Distributor discounts
range from 26% to 37% (depending on the product) of the face amount of the card
with the size of the discount determined by the volume of card purchases. Master
distributor agreements provide for limited exclusivity in defined metropolitan
areas, subject to the master distributor maintaining an agreed upon monthly
volume of card purchases. A master distributor has the right to enter into local
distribution agreements with sub-distributors in his territory which the Company
is not party to. Terms of the discount offered to the sub-distributor are
negotiated directly between the master distributor and the sub-distributor. A
master distributor is responsible to supply the sub- distributor and may also
sell directly to retailers. The Company retains the right to supply national
accounts directly within the master distributor's territory as well as its own
direct retail accounts. A national account is generally defined as a large
retailer that operates in more than one state. Distributors sell the cards to
retail outlets at discounts of 15% to 25%. Most of the expenses that are
incurred in the course of distribution of the F/X(TM) and DigiTEC Direct phone
cards are the responsibility of the Company. The Company also expects to
distribute its prepaid cellular products through certain of its master
distributors and through direct sales to check cashing firms, kiosk operators
and other retail outlets.
Prepaid Cellular Phone Service
The 1996 total revenues for the wireless industry was approximately $23.6
billion, with a total of 44 million cellular phone subscribers, representing an
increase of approximately 6% over 1995. Cellular analysts estimate that
approximately 30% to 50% of all applications for cellular service are initially
denied due to the applicant's credit history. This represents a large target
audience for prepaid cellular phones.
In May of 1997, the Company introduced its prepaid cellular phone service.
The Company intends to have the phones co-branded with the "DigiFone" and/or
"DigiFone Select" logos for purchase by consumers at selected retail outlets or
authorized customer agents. DigiFone is sold through retailers or agents ready
to be activated by the end user. The customer purchases the phone and calls a
customer service number provided to them to activate the phone. Included in the
purchase price of the phone is 30 minutes of local airtime and two months'
access. The customer may then purchase additional airtime through retailers in
increments of 30,60 or 200 minutes. The rate per minute varies based on the
volume purchased by the customer and includes two months of access.
DigiFone Select is an alternative switch based prepaid cellular phone
whereby the customer either purchases a phone from, or brings in an existing
cellular phone to, one of the Company authorized agents. The customer pays an
activation fee and are required to purchase a minimum $25 of airtime. The
customer is assigned a cellular phone number. In order for the the customer to
have continued service, they are required to purchase additional airtime cards
within a two month period.
Under either of the services, the customer does not sign a service
contract.
Employees
The Company had 39 full-time employees, including three of its officers,
as of October 15, 1997.
Business of Subsidiary
The Company's wholly-owned subsidiary, World Access, commenced its
operations on June 1, 1997. The Company established World Access as a
Mississippi based internet provider with assets which the Company had reacquired
from TecLink, Inc. ("TecLink"), an affiliate of the Company. In May, 1996, the
Company sold certain internet service provider assets to TecLink. The Company,
which owned 40% of TecLink, received $50,000 and a $2,405,000 promissory note
(the "Note"), due December 31, 1998, bearing interest at 6% per annum from
TecLink. The assets sold to TecLink had been purchased primarily from TEC in
January 1996 in exchange for 1,475,126 shares of
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the Company's Common Stock. Due to TecLink's continuing losses, it ceased
operations as of May 31, 1997. The Company and TecLink entered into an agreement
whereby TecLink exchanged its net assets for satisfaction of the outstanding
balance of the Note. The Company recorded a loss of $1,340,230 as a result of
the settlement of the Note (See Item 7. Certain Relationships and Related
Transactions).
For the year ended June 30, 1997, revenues from the operations of World
Access were not material. Further, as of June 30, 1997, management resolved to
discontinue the operations of World Access by selling its net assets. On October
1, 1997, the Company entered into an agreement (the "Agreement") to sell the
customer base, the equipment and software which services the customer base and
the Company's obligations under its leases for its premises and telephone
equipment to Meta3, Inc. ("Meta3"), a Mississippi corporation in a similar
business. The Agreement calls for Meta3 to pay for the assets sold over a ten
month period (the "Purchase Period"), commencing November, 1997, based on number
of subscribers in the identified customer base, adjusted for its attrition rate
for the first five months of the Purchase Period . As of June 30, 1997, the
Company recorded a loss on disposal of $893,347.
Trademarks
The brand names F/X(TM) and TEC Direct(TM) are registered trademarks of
the Company. The Company's trademark for DigiTEC Direct is currently in
registration. The Company currently has plans to file DigiFone and DigiFone
Select for trademark status. As the Company develops new products and variants
of the F/X and the TECDirect trademarks, it intends to file additional trademark
applications. There can be no assurance that the Company will receive
registration for any applied for trademarks or that any registered trademark
will provide the Company with any significant marketing or industry recognition,
protection, advantage or benefit.
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Item 2. Financial Information
Selected Consolidated Financial Data
The following selected consolidated financial data for the period from May
18, 1995 (inception) to June 30, 1995 and the years ended June 30, 1996 and 1997
are derived from the consolidated financial statements of the Company which have
been audited by BDO Seidman, LLP, independent certified public accountants,
whose report is included elsewhere herein. The selected consolidated financial
data should be read in conjunction with, and are qualified in their entirety by,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements included
elsewhere in this Registration Statement.
PERIOD FROM
MAY 18, 1995 YEAR ENDED JUNE 30,
(INCEPTION) TO -----------------------------
JUNE 30, 1995 1996 1997
=============================================
Consolidated Statements
of Operations Data:
Sales ............................ $ -- $ 17,425,199 $ 26, 027,909
Cost of sales .................... -- 16,900,370 25,161,443
Gross profit ..................... -- 524,829 866,466
Selling, general and
administrative expenses ....... -- 654,104 2,040,749
Loss from operations ............. (129,275) (1,174,283)
Other expenses (income), net ..... -- -- (1,305,970)
Loss from continuing operations .. $ -- $ (129,275) $ (2,480,253)
Net loss ......................... $ -- $ (129,275) $ (3,549,514)
Net loss per share: .............. --
From continuing operations ... $ -- (.05) $ (.55)
From discontinued operations . $ -- $ -- $ (.23)
Net loss per share ........... $ $ (.05) $ (.78)
Weighted average common
shares outstanding ........... -- 2,599,532 4,579,075
AT JUNE 30,
--------------------------------------------
1995 1996 1997
============================================
Consolidated Balance Sheets
Data:
Working capital (deficit) ........ $ - $1,216,279 $ (636,687)
Total assets ..................... $ - $6,056,462 $ 3,526,723
Long-term debt ................... $ - $ -- $ 64,390
Total stockholders' equity
(deficit) ...................... $ - $3,126,946 $ (71,469)
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion should be read in conjunction with the
consolidated financial statements included elsewhere in this Registration
Statement.
Introduction
The Company was founded in 1995 to exploit the prepaid phone card sector
of the long distance phone service market.
The Company's fiscal 1997 sales to date have been primarily derived from
the resale of bundled prepaid telephone cards. The Company resells the cards, at
a discount off the face value of the cards to either master distributors or
retail outlets, depending on the locality of distribution. The Company's fiscal
1997 cost of sales consist primarily of the purchase of the prepaid card at a
greater discount off the face value than what they sell it for, thereby
receiving its gross margin on the difference of discounts given to its customers
and the discounts the Company receives from its long distance provider. Since
the card is sold to the Company as a bundled product, the long distance provider
is liable to the end user for the time remaining on the cards. At the point of
sale, the Company has no further obligation towards the cards sold. The Company
believes that its ability to negotiate competitive rates with its long distance
providers, attract certain master distributors and to connect with certain
ethnic markets are the primary reasons for its sales increases in fiscal 1997.
While the Company has been able to negotiate fair and competitive rates
from its long distance providers, the Company intends to lessen its dependence
on such providers to a certain extent through the construction of its own
platform. As a result of the deployment of the Company's own platform, the
Company would look to negotiate more competitive rates with its long distance
providers. Based on the Company's cost analysis, the total cost per call under
the platform is expected to be less than the bundled card product that it
presently purchases. This is expected to have positive impact on the Company's
gross margins as well as its cash generated from operations. The Company may
continue to purchase the cards as a bundled product. The Company is presently
negotiating for the construction of its platform, however it has not yet entered
into any definitive agreements related to the purchase of such equipment to date
or the related financing of such equipment.
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
Sales. Sales for the year ended June 30, 1997 increased to $26,027,909
from $17,425,199 for the fiscal year ended June 30, 1997 representing an
increase of 49.4%. During the last half of fiscal 1997, the Company terminated
its switchless unbundled products and introduced a bundled product which it
purchased from Frontier (and later from Premiere). With the Company offering
more competitive rates, the Company's revenues for the fourth quarter of fiscal
1997 were approximately $14,000,000. Sales were primarily made through one
master distributor who had exclusivity in the state of New York for one of the
Company's products. The distributor resold the cards to distributors and
retailers in credit challenged residential areas within the NY Metro Area. This
one master distributor accounted for approximately 54% of the Company's sales
during fiscal 1997. Subsequent to June 1997, the Company terminated the
exclusivity clause in the agreement. Due to this change and expansion into new
geographic areas of distribution, the Company expects that its concentration of
sales with any particular customer will be significantly reduced for fiscal
1998.
Cost of Sales. The Company's cost of sales for the year ended June 30,
1997 increased to $25,161,443 from $16,900,370 for the fiscal year ended June
30, 1996. The increase of $8,261,073 or 48.9% was primarily related to the
increase in revenues that the Company experienced in the last half of fiscal
1997.
Gross Profit. Gross profit for the year ended June 30, 1997 was $886,466
as compared to $524,829 or an increase of $341,637 or 65.1%. The increase in
gross profit is entirely related to the Company's ability, in the last half of
fiscal 1997, to offer cards whose rates per minute were more competitive in its
pricing and the Company's ability to offer a card which was reliable to the end
user.
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Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended June 30, 1997 increased to $2,040,749
from $654,104 for the year ended June 30, 1996. This increase of $1,386,645 or
212.0% is primarily related to an increase in salaries and personnel related
expenses of $463,683 as the Company's officers received raises and bonuses of
$175,000 and the Company's employees increased to 29 full-time employees by June
30, 1997. The Company's rent expense increased to $92,308 or 177% primarily
related to the Company recording a $71,000 non-cash charge for the straight
lining of its rental payments under the lease for the Company's new distribution
and administrative headquarters which the Company began occupying April 1, 1997.
Advertising, telephone, office expense, bad debt expense, bank charges, repairs
and maintenance and travel and entertainment increased by $186,291, $54,898,
$54,702, $51,562, $42,418, $32,116 and $25,569, respectively, primarily related
to an increase in the Company's business. The Company's professional fees also
increased by $131,326 primarily in connection with the Company's role in the
Heritage litigation (See Item 8. Legal Proceedings) as well as having increased
needs for accounting and corporate consulting. The Company also recorded
amortization related to its intangibles of $87,798 primarily due to the
acquisition of customer bases during fiscal 1997.
Other Expenses. During 1996, the Company helped establish TecLink as a
Mississippi-based Internet service provider by selling to TecLink certain
Internet service provider assets, intellectual property, computer hardware,
software and officer equipment (that it had previously purchased from TEC and
others) as well as an exclusive value added reseller distribution contract for
Direct PC satellite dishes from Hughes Corporation ("Hughes"). In exchange for
these assets, the Company received $50,000 cash and the Note for $2,405,000 due
the earlier of December 31, 1998 or upon the completion of TecLink's initial
public offering ("IPO"). The Note was collateralized by the assets of TecLink.
$250,000 became due upon the completion of a private placement of TecLink's
common stock.
TecLink and Hughes never reached an accord related to Hughes
responsibilities under its agreement and TecLink experienced losses resulting
from not being able to proceed with its initial business plan. As a result of
this and other factors, TecLink's IPO was never consummated. Due to the
continuing losses, the Company entered into an agreement to acquire the net
assets of TecLink as partial satisfaction of the outstanding balance of the Note
from TecLink ($2,105,000). The Company recorded a loss on the Note satisfaction
of $1,340,230. On June 1, 1997, the Company established World Access as a
wholly-owned subsidiary providing Internet access with the assets reacquired
from TecLink. As of June 30, 1997, management determined that it needed to focus
on its core business and would discontinue the operations of World Access by
selling its net assets. On October 1, 1997, the Company entered into the
Agreement to sell the customer base, the equipment and software which services
the customer base and the Company's obligations under its leases for its
premises to Meta3, Inc. The Agreement calls for Meta3 to pay for the assets sold
over a ten month period, commencing November, 1997, based on number of
subscribers in the identified customer base, adjusted for its attrition rate for
the first five months of the Purchase Period.
Loss from Continuing Operations. The Company's switchless unbundled
product, which was terminated and replaced by the offering of bundled products
during the second half of the year, had not been a profitable, nor a reliable
product. It is primarily for this reason that the Company experienced a loss
(before other expenses) of $1,174,283 for the year ended June 30, 1997. The
Company further experienced a loss on the Note satisfaction (as described above)
of $1,340,230. As a result, the Company's loss from continuing operations was
$2,480,253.
Loss from Discontinued Operations. As described above, management
resolved, as of June 30, 1997 that it would discontinue the operations of World
Access. As a result of the Agreement, the Company accrued a loss on disposal of
$893,347. World Access reported a net loss from operations of $175,914 for the
one month ended June 30, 1997.
Net Loss. Due to its market and customer service issues related to its
products during the first half of fiscal 1997 and losses related to TecLink and
World Access, the Company recorded a net loss of $3,549,514 for the year ended
June 30, 1997.
11
<PAGE>
Year Ended June 30, 1996 Compared to period May 18, 1995 (Inception) to June 30,
1995
While the Company began as of May 18, 1995, it was primarily a shell
entity until July, 1995, at which point employees whose contacts were vital to
the Company were hired by the Company and the Company began to strategize its
way into the prepaid sector of the long distance telecommunications market.
Sales. Sales for the year ended June 30, 1996 was $17,425,199 as the
Company began to exploit the contacts that were introduced to the Company
through certain employees of the Company. Sales were primarily make to
distributors who were selling the cards in credit challenged residential areas
within the NY Metro Area.
Cost of Sales. The Company's cost of sales for the year ended June 30,
1996 was $16,900,370 which is directly related to the cards sold during that
year.
Gross Profit. Gross profit for the year ended June 30, 1996 was $524,829
or 3.0% of sales. In it's efforts to gain market share, the Company was selling
the cards with little markup over cost.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended June 30, 1996 were $654,104. The
expenses were comprised primarily of salaries and personnel related expenses of
$261,339 and organization expenses of $86,518 related to various corporate
filings in order to establish the Company. The Company also had rent of $51,801
for its then current premises for its distributions and administrative
headquarters.
Net Loss. As a result of the Company's strategy to increase market share,
the Company recorded a loss of $129,275 for the year ended June 30, 1996.
Liquidity and Capital Resources
To date, the Company has experienced losses from continuing operations. It
has financed its operations through certain equity transactions completed in the
prior fiscal year, the exercise of warrants in the current fiscal year and
through operating cash flow. While the Company reported operating income for its
fourth quarter of fiscal 1997 and believes that it will be profitable for fiscal
1998, it remains significantly undercapitalized. The Company's growth in its
last quarter of fiscal 1997 and during the first quarter of fiscal 1998, have
outpaced its cash flow availability. The Company currently has plans to put its
own switching platforms in place, however that will be dependent on its ability
to raise financing in the near future.
The Company's major components of cash flow are as follows:
YEAR ENDED JUNE 30,
-----------------------
1996 1997
---- ----
Net cash used in operating activities $ (89,880) $(440,074)
Net cash (used in) provided by
investing activities (461,003) 171,779
Net cash provided by financing activities 1,000,000 486,375
--------- -------
Net increase in cash $ 449,117 $ 218,080
========== =========
Net cash used by operating activities during fiscal 1997 was $440,074 as
compared to $89,880 for fiscal 1996. The increase of $350,194 is primarily
related to the net loss of $3,549,514 for the year ended June 30,1997 as
compared to the net loss of $129,275 for the year ended June 30, 1996. This is
partially offset by a net increase in non-cash
12
<PAGE>
charges of $374,426. The most significant of the non-cash charges is the loss on
write-down of the Note, described above, of $1,340,230. In addition, the Company
recorded amortization related to its intangibles of $87,798 and recorded
deferred rent of $71,000 relating to the straight lining of its rental payments
under the lease for its new distribution and administrative facility. Other
significant operating changes, which are primarily related to the Company's
growth during the last half of fiscal 1997 are net increases in accounts
receivable and accounts payable and other liabilities of $787,548 and
$1,581,141, respectively. Prepaid expenses and other current assets had a net
decrease of $1,000,773, primarily related to prepaid time the Company had at the
end of fiscal 1996 related to certain products that it terminated in the first
half of fiscal 1997.
The increase in cash provided by investing activities for fiscal 1997 of
$632,782 is primarily related to purchased communication equipment valued at
$533,625 during fiscal 1996 which was sold as part of the TecLink transaction
during fiscal 1996. In addition, the Company received $200,000 and $150,000 in
cash related to the TecLink transaction and the Note during fiscal 1997 and
1996, respectively.
The decrease in cash provided by financing activities of $513,625 is
primarily related to the Company receiving $486,375 during fiscal 1997 for the
exercise of warrants to purchase 324,250 shares of the Company's common stock at
$1.50 per share as compared to the Company receiving $1,000,000 during fiscal
1996 for the two offerings which were completed under Rule 504 of Regulation D
during that year. A total of l,666,666 shares were sold as a result of the two
offerings (see Item 10. Recent Sales of Unregistered Securities).
In April of 1996, the Company entered into an agreement whereby it enabled
the Company to issue warrants to purchase an aggregate of 4,203,124 shares of
its Common Stock to four individuals and six corporations in exchange for trade
secrets, customer bases and other intangible property. Warrants to purchase
3,677,082 shares of the Company's common stock were actually issued. The
remaining warrants to purchase 526,042 shares of Common stock were held awaiting
the delivery of certain assets to the Company. Those assets were never received
and the Company never issued the warrants to the three parties. Of the warrants
issued, warrants to purchase 1,333,334 and 2,343,748 shares of Common Stock are
exercisable at $13.20 and $1.50 per share, respectively. The warrants have a
term of five years commencing April 23, 1996 and are callable by the Company,
upon 30 days notice, at a call price of $.10 per warrant to purchase one share.
To date, capital expenditures have not been material. However, if the
Company is capable of obtaining financing to fund the purchase of equipment and
software related to switching platforms, the Company plans to purchase
$1,200,000 of such equipment and software by December 31, 1997 and would look to
purchase an additional $3,000,000 of equipment and software by December 31,
1998.
The Company, during fiscal 1997, acquired the customer bases of certain of
its distributors through the release of their outstanding obligations to the
Company. In connection with one of these transactions, the Company agreed to a
$182,000 note payable with interest at 8% per annum. The payments under this
note commence November 1, 1997 with the last payment being due October 1, 1998.
The Company believes that its current cash requirements can be funded by
its operations for the next twelve months. However, its plans to acquire the
switching platforms, which would eventually impact its gross margins in a
positive manner, and to continue to grow its core line of business, is
significantly hampered by the Company's undercapitalization and will be
contingent on its ability to raise additional financing.
Seasonality
The business of the Company does not experience significant seasonality.
Inflation
Management does not believe that inflation has had, or is expected to have
any significant adverse impact on the Company's financial condition or results
of operations.
13
<PAGE>
Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 123, " Accounting for
Stock Based Compensation." SFAS No.123 established a fair value method for
accounting for stock-based compensation plans either through recognition or
disclosure. The Company adopted the employee stock-based compensation provision
of SFAS No. 123 by disclosing the pro forma net income and pro forma net income
per share amounts, assuming the fair value method was adopted July 1, 1995. The
adoption of this standard did not impact the Company's consolidated results of
operations, financial position or cash flow.
In December 1996, the FASB issued SFAS No. 128, "Earnings Per Share",
which is effective for both interim and annual periods ending after December 15,
1997. SFAS No. 128 requires all prior period earnings per share data to be
restated to conform to the provisions of the statement. The Company will adopt
SFAS No.128 for the three and six-months ended December 31, 1997. The adoption
of this standard is not expected to have material effect on the Company's
earnings per share.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which established standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by, or
distributions to, owners. Among other disclosures, SFAS No.130 requires that all
items that are required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
SFAS No.130, effective for all years beginning after December 31, 1997,
requires comparative information for earlier years and early adoption is
permitted. The Company intends to adopt SFAS No. 130 effective July 1, 1998.
Results of operations and financial position will be unaffected by
implementation of this standard.
Item 3. Properties
The Company occupies leased premises of approximately 20,000 square feet
on two floors at 8 West 38th Street, New York, New York. The lease provides for
10,000 rentable square feet per floor, with a base rental of $14.50 per square
foot per annum or approximately $24,200 per month, commencing July 1, 1997 and
annual fixed increases of 2.5% in lieu of payment for operating expenses. The
lease expires on March 30, 2001.
The Company's present use of the premises involves: 2,000 square feet for
reception and common areas; 1,400 square feet for executive offices; 1,000
square feet for conference rooms; 1,500 square feet for shipping and receiving;
and the remainder is for working areas.
The Company also maintains a sales and distribution office in Phoenix,
Arizona in leased premises containing 1,360 square feet. The lease is for a
two-year term which commenced in April of 1997 and provides for an annual rent
of approximately $19,000 the first term year and $20,000 the second term year.
World Access occupies leased premises in Suite 1510 at 125 South Congress
Street, Jackson, Mississippi. The offices contain 4,750 square feet. The lease
is for a five year term commencing June 1, 1997 and ending May 31, 2002. The
monthly rental for the first three years is $5,940 per month, $6,237 per month
in the fourth year and $6,336 per month in the fifth year. As part of the
Agreement with Meta3, Meta3 has agreed to accept the obligation under the lease
for World Access' premises.
14
<PAGE>
Item 4. Security Ownership of Beneficial Owners and Management
The following table sets forth information as of October 15, 1997 with
respect to shares of the Company's Common Stock (its only class of outstanding
securities) held of record by each of its named executive officers, directors,
all of its named executive officers and directors as a group and each
shareholder who or which owns more than 5% of the Company's outstanding Common
Stock. The Company believes that the beneficial owners of the Common Stock
listed below have sole investment and voting power with respect to such shares.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Amount and Nature
Name and Relationship of Shares Beneficially
Address To Company Owned(1)(2) Percent of Class(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Frank C. Magliato Chief Executive Officer, 2,062,500(3) 24.0%
President and Director
Telephone Electronics Stockholder 1,475,126 17.2%
Corporation
700 Southwest Street
Jackson, MS 39201
Lori Ann Perri Director 72,917 0.8%
31 Spruce Street
Great Neck, NY 10021
Diego E. Roca Vice President of 250,000 2.9%
Operations and Secretary
Keith A. McGowan Vice President of Finance 200,000 2.3%
All Named Executive Officers & Directors 2,585,417 30.1%
Officers and Directors
as a Group (4 Persons)
- ------------------------------------------------------------------------------------------
</TABLE>
(1) The securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission ("SEC") and,
accordingly, may include securities owned by or for, among others, the
spouse, children or certain other relatives of such person. The same
shares may be beneficially owned by more than one person. Beneficial
ownership may be disclaimed as to certain of the securities.
(2) Includes shares underlying the options and warrants held by the listed
persons.
(3) Includes 250,000 shares held in trust for Kendall Magliato, daughter of
Mr. Magliato.
15
<PAGE>
Item 5. Directors and Executive Officers
The following table sets forth information regarding the directors and
executive officers of the Company.
Name Age Position
---- --- --------
Frank C. Magliato 46 Chief Executive Officer, President and Director
Lori Ann Perri 33 Director
Diego E. Roca 30 Vice President of Operations and Secretary
Keith A. McGowan 35 Vice President of Finance
The principal occupation for the past five years, and other biographical
information with respect to each of the directors and executive officers of the
Company is as follows:
Frank C. Magliato has served as Chief Executive Officer, President and a
director of the Company since June of 1995. From February of 1993 to June of
1995, he was employed as President of Windsor Associates of New York City, a
telecommunications consulting firm. From December of 1988 to February of 1993,
he was employed as President of Telecorp Funding, Inc. and subsidiaries, a
telecommunications company in New York City. Mr. Magliato received a Bachelor of
Science degree in Engineering from Rensselaer Polytechnic Institute in 1973.
Lori Ann Perri, CPA, sibling of Frank C. Magliato, has served as a
director of the Company since November of 1995. She has been employed by the
publishing division of Time, Inc. in New York City since August of 1995 and
presently serves as an Assistant Director of Finance. From August of 1993 to
August of 1995, she was employed by Computer Dynamics, Inc. of Virginia Beach,
Virginia as Director of Finance and Accounting. Ms. Perri received a Bachelor of
Science degree in Accounting from Hofstra University in 1987. She is a member of
the American Institute of Certified Public Accountants and the New York State
Society of Certified Public Accountants.
Diego E. Roca began employment with the Company during July of 1995 on a
part-time basis. He began full-time employment during September 1996 and was
given the position of Vice President of Operations. From October of 1991 to May
of 1995, he was employed by Telecorp Funding , Inc. and subsidiaries . He served
as Assistant Controller in 1991 and became Controller in 1992. From May of 1995
to September of 1996, he served as a consultant to various entities in the
telecommunications industry. Mr. Roca received a Bachelor of Science degree in
Accounting from Queens College in 1992.
Keith A . McGowan, CPA, became the Vice President of Finance effective
July 1, 1997. Prior to joining the Company, he was a Partner with BDO Seidman,
LLP. He commenced his career with BDO Seidman, LLP in November of 1985 and
serviced primarily publicly-held companies. Mr. McGowan received a Bachelor of
Science degree in Accounting from Adelphi University in 1984. He is a member of
the American Institute of Certified Public Accountants and the New York State
Society of Certified Public Accountants.
16
<PAGE>
Item 6. Executive Compensation
The following table sets forth information with respect to the aggregate
remuneration paid by the Company to the Chief Executive Officer and one other
most highly compensated officer (the "Named Executives") of the Company for the
period from May 18, 1995 (inception) to June 30, 1995 and the fiscal years ended
June 30, 1996 and 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
----------------------- Awards
(a) (b) (c) (d) (g)
- --------------------------------------------------------------------------------------------------------
Securities Underlying
Name and Salary Bonus Options/SARs
Principal Position Year ($) ($) (#)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank C. Magliato, Chief Executive Officer, 1997 $125,000 $ 35,000 --
President and Director
1996 $ 70,000 $ -- --
1995 $ -- $ -- --
Diego E. Roca, Vice President of Operations
and Secretary 1997 $ 75,342 $ 25,000 187,500
1996 $ 5,200 $ -- --
1995 $ -- $ -- --
- --------------------------------------------------------------------------------------------------------
</TABLE>
Employment Agreements
The Company has entered into separate employment agreements with Messrs.
Magliato, Roca and McGowan. Except with respect to the positions to be occupied,
the duties to be performed and the renumeration to be paid, the agreements are
on identical terms and conditions and provide for (i) a term of three years
commencing April 25, 1997 (except for Mr. McGowan, whose employment agreement
commenced July 1, 1997); (ii) the Board of Directors to review each employee's
base salary at least annually during the term and may increase it at the Board's
discretion; (iii) if an employee's service is terminated by the Company without
cause, for the payment of the employee's then base salary for the remainder of
the term; (iv) that in the event of the death of an employee, for the payment of
the employee's then base salary to the employee's surviving spouse or estate as
is applicable; (v) the full participation by the employee in the Company's
benefits available to the Company's other employees; (vi) that all trade
secrets, inventions, work product, methods, software and similar property which
relate to the Company's business and are developed by the employee are the
property of the Company; (vii) in the event of either the employee's voluntary
termination of employment, the employee's involuntary termination for cause or
the employee's failure to accept an extension of the employment agreement on
substantially similar terms, the employee agrees not to conduct any activity
competitive to the Company for a period of two years from the termination; and
(viii) other terms customarily contained in similar employment agreements.
The employment agreements provide for base salaries as follows: (i) Mr.
Magliato-$175,000 in fiscal 1998, $225,000 in fiscal 1999 and $250,000 in fiscal
2000; (ii) Mr. Roca-$150,000 in fiscal 1998, $200,000 in fiscal 1999 and
$225,000 in fiscal 2000; and (iii) Mr. McGowan-$140,000 in fiscal 1998, $190,000
in fiscal 1999 and $215,000 in fiscal 2000.
In addition to the base salaries, the employment agreements provide for an
annual performance bonus commencing in the fiscal year ending June 30, 1998 to
each of the three officers equivalent to a percentage of the Company's adjusted
annual net income before depreciation and amortization, interest and income tax
as follows: (i) Mr. Magliato- 2%; (ii) Mr. Roca- 1%; and (iii) Mr. McGowan-1%.
17
<PAGE>
Stock Option Grants
The following table sets forth information regarding grants of options to
purchase Common Stock made by the Company during the year ended June 30, 1997 to
the Named Executives.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Potential Realized Value
At Assumed Annual Rates of Stock Price
Appreciation for Individual Grant
Individual Grants Option Term(2)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g)
- ----------------------------------------------------------------------------------------------------
Percent of
Number of Total
securities Options/SARs
underlying Granted to
Options/SARs Employees in Exercise or
Granted Fiscal Year Base Price Expiration
Name (#)(1) (%) ($/Share) Date 5% 10%
- ----------------------------------------------------------------------------------------------------
Diego E. Roca 187,500 100 14.50 4/24/07 $1,709,207 $4,332,987
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Options granted above vest at the date of grant and expire ten years
from date of grant.
(2) Disclosures of the 5% and 10% assumed compound rates of stock
appreciation are mandated by the rules of the SEC and do not
represent the Company's estimate or projection of future common
stock prices. The actual value realized may be greater or less that
the potential realizable value set forth in the table.
The following table sets forth information concerning the year-end value of
unexercised in-the-money options held by each of the Named Executives.
Aggregated Option/SAR Exercises And Fiscal Year-end Option/SAR Values
- --------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs at Fiscal Options/SARs at Fiscal Year End
Year-End(#) ($)(1)
- --------------------------------------------------------------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- --------------------------------------------------------------------------------
Diego Roca 187,500/- $-/$-
- --------------------------------------------------------------------------------
(1) Based on a year-end fair market value of the underlying securities
equal to $13.00 per share.
Compensation Committee Interlocks and Insider Participation
At the present time, the Company has not yet established a formal Compensation
Committee. It is the Company's intention, in connection with its plans to expand
its Board of Directors, to create a Compensation Committee of independent
directors during fiscal 1998. To date, Mr. Magliato has participated in the
Board deliberations relating to executive compensation.
Performance Graph
Due to the illiquidity of the Company's Common Stock and the amount of shares of
its Common Stock which are restricted from trading (over 50% of outstanding
shares at June 30, 1997), no performance graph has been reported. Such
information, in the opinion of management, would be misleading to the investor.
From May 18, 1995 to June 30, 1996, the Company's Common Stock has been very
thinly traded on the NASDAQ Bulletin Board.
18
<PAGE>
Item 7. Certain Relationships and Related Transactions
In August of 1995, a Delaware corporation owned by Mr. Magliato was merged
into the Company. In the transaction Mr. Magliato received 1,333,334 shares of
the Company's Common Stock, which were issued as "restricted securities" as
defined under the 33 Act. The assets of the Delaware corporation acquired by the
Company in the merger consisted of personnel, sales, marketing and distribution
programs and contracts for the development and sale of prepaid phone cards.
In April of 1996, the Company entered into an agreement whereby it enabled
the Company to issue warrants to purchase an aggregate of 4,203,124 shares of
its Common Stock to four individuals and six corporations in exchange for trade
secrets, customer bases and other intangible property. Warrants to purchase
3,677,082 shares of the Company's common stock were actually issued. The
remaining warrants to purchase 526,042 shares of Common stock were held awaiting
the delivery of certain assets to the Company. Those assets were never received
and the Company never issued the warrants to the three parties. Of the warrants
issued, warrants to purchase 1,333,334 and 2,343,748 shares of Common Stock are
exercisable at $13.20 and $1.50 per share, respectively. The warrants have a
term of five years commencing April 23, 1996 and are callable by the Company,
upon 30 days notice, at a call price of $.10 per warrant to purchase one share.
During May through October 15, 1997, 535,633 shares of Common Stock were issued
upon exercise of warrants at a $1.50 per share.
In connection with this transaction, warrants to purchase Common Stock at
$13.20 per share were issued to officers and directors of the Company as
follows, (i) Mr. Magliato - 729,167 shares; (ii) Ms. Perri - 72,917 shares; and
(iii) Mr. Roca - 62,500 shares.
For information with respect to employment agreements between the Company
and its officers and stock option grants to officers, see Item 6. Executive
Compensation and Item 11. Description of Registrant's Securities To Be
Registered.
In May, 1996, the Company sold certain internet service provider assets to
TecLink. The Company, which owned 40% of TecLink, received $50,000 and the Note
for $2,405,000, due December 31, 1998, bearing interest at 6% per annum from
TecLink. The assets sold to TecLink had been purchased from TEC in January 1996
in exchange for 1,475,126 shares of the Company's Common Stock. Due to TecLink's
continuing losses, it ceased operations as of May 31, 1997. The Company and
TecLink entered into an agreement whereby TecLink exchanged its net assets for
satisfaction of the outstanding balance of the Note. The Company recorded a loss
of $1,340,230 as a result of the settlement of the Note. On June 1, 1997 the
Company established World Access with the assets reacquired from TecLink. On
June 30, 1997 management resolved to discontinue the operations of World Access
by selling its assets. On October 1, 1997, the Company entered into the
Agreement to sell the customer base, the equipment and software which services
the customer base and the Company's obligations under its leases for its
premises and telephone equipment to Meta3. The Agreement calls for Meta3 to pay
for the assets sold over a ten month period, commencing November 1997, based on
the number of subscribers in the identified customer base, adjusted for its
attrition rate for the first five months of the Purchase Period. As of June 30,
1997, the Company recorded a loss on disposal of $843,347.
Item 8. Legal Proceedings
In June of 1996, the Company became a co-defendant in a legal action in
the Circuit Court for the First Judicial District of Hinds County in Jackson,
Mississippi in the case entitled Heritage Graphics Inc., et. al. v. Telephone
Electronics Corporation, et. al. Civ. No. 251-96-000492. The named plaintiffs in
the action are: Heritage Graphics, Inc.; Thomas L. Gould, Jr.; Suzanne G. Gould;
and Rainey Scott. The named defendants in the action are: Telephone Electronics
Corporation d/b/a TecLink; Teclink, Inc.; the Company; Asynchronous
Technologies, Inc.; Barbara Scott; Ronald D. Anderson, Sr. d/b/a Anderson
Engineering; Walter Frank; and Frank Magliato. The second Amended Complaint
filed in the action alleges a wide-spread conspiracy on the part of all of the
defendants to destroy Heritage and to eliminate it as a competitor in the
Internet services provider market. The heart of the complaint's allegations
concerns an alleged joint venture. Through the vehicle of this prospective joint
venture, the Company and others allegedly duped Heritage into surrendering its
trade secrets, its services, its intellectual property, its expertise, etc. to
the Company. The complaint alleges that, in essence, the deal materialized,
Heritage's owners never received the stock,
19
<PAGE>
and Heritage was never "rolled into" a new entity, TECLink, Inc. The complaint's
lesser allegations are that (i) defendants conspired to slander the business
reputations of Heritage and Tom Gould; and (ii) TEC and the Company are jointly
and severally liable to it for $268,245 worth of production work and consulting
services provided over the September to December 1995 time period. The
plaintiffs seek damages of $500 million.
The Company is not aware of any evidence to support the plaintiffs claim
of a joint venture. The Company believes that plaintiffs' claims are without
merit. Further, the Company believes that its counter claims are sufficiently
well grounded to offset any judgement entered against the Company.
The case is scheduled to go to trial January 5, 1998. While the Company
has an indemnification agreement with TEC which calls for the Company to be
indemnified for all claims regarding Heritage which arose prior to January 20,
1996, it is unknown as of this date what impact it will have in the event of a
decision adverse to the Company.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Other Stockholder Matters
The Company's Common Stock has been and is being quoted and traded on an
inconsistent basis on the NASDAQ Bulletin Board, under the trading symbol "DGTT"
since October 15, 1996. Prior to October 15, 1996, it so traded under the symbol
"PROE".
The following table sets forth the high and low closing bid and ask prices
as reported on the NASDAQ Bulletin Board for the periods indicated.
- --------------------------------------------------------------------------------
Period (1) High(1) Low(1)
- --------------------------------------------------------------------------------
Year Ending June 30, 1996(2):
First Quarter $27.00 $24.00
Second Quarter 30.00 25.50
Third Quarter 30.00 15.00
Fourth Quarter 36.00 12.00
Year Ending June 30, 1997(2):
First Quarter $36.00 $18.00
Second Quarter 30.00 9.88
Third Quarter 13.50 9.88
Fourth Quarter 15.50 13.00
Through October 15, 1997 17.25 12.75
- --------------------------------------------------------------------------------
(1) High and low closing bid and ask prices prior to October 15, 1996 have
been retroactively adjusted to give effect to the Company's 6:1 reverse
stock split of its Common Stock.
(2) For the years ended June 30, 1996 and 1997, the Company's Common stock was
thinly traded.
As of October 15, 1997, there were approximately 610 holders of record of
the Company's Common Stock.
The Company has paid no dividends for the years ended June 30, 1996 and
1997 and the Company has no current plans to pay dividends in the foreseeable
future. The Company plans to retain earnings, if any, to finance development and
expansion of the Company's operations. Payment of cash dividends, if any, in the
future will be determined by the Company's Board of Directors in light of future
earnings, capital requirements, financial condition and other relevant
considerations.
At October 15, 1997, the Company had options and warrants outstanding for
3,528,949 shares of the Company's Common Stock. The Company has agreed to file a
file a Registration Statement under the 33 Act with respect to all outstanding
shares of restricted common stock acquired through the exercise of warrants and
3,528,949 shares of common stock underlying outstanding warrants and options.
20
<PAGE>
Item 10. Recent Sales of Unregistered Securities
Information with respect to all securities sold by the Company during the
period from May 18, 1995 (inception) to June 30, 1995 and the fiscal years ended
June 30, 1996 and 1997 without the offer and sale thereof being registered under
the 33 Act, is as follows:
1. On August 10, 1995 the Company issued 1,333,334 shares of its $.001
par value Common Stock to Mr. Magliato in connection with the merger
of Promo-Tel-Delaware wholly owned by Mr. Magliato into the Company.
The assets acquired by the Company in the merger consisted of sales,
marketing and distribution programs and contracts for the
development and sale of prepaid phone cards. No person or entity
acted as an underwriter with respect to the transaction. The shares
were issued as "restricted securities" under the 33 Act and in
reliance upon the exemption from the registration requirements of
Section 5 of the 33 Act set out in Section 4(2) thereof. Mr.
Magliato acquired the shares for investment, the certificate issued
to represent the securities contains an appropriate restrictive
legend denoting their status as "restrictive securities" and stop
transfer restrictions on the certificates have been filed with the
Company's transfer agent;
2. During the period from August 16, 1995 through October 31, 1995, the
Company offered and sold to individual and corporate public
investors an aggregate of 833,333 shares of its $.001 par value
Common Stock at $.60 per share for an aggregate of $500,000. No
person or entity acted as an underwriter with respect to the
offering. The offering was made directly by the Company and no
commissions were paid on any sales. The offering was made in
reliance upon the exemption from the registration requirements of
Section 5 of the 33 Act provided in Rule 504 of Regulation D adopted
by the SEC under the 33 Act. A Form D with respect to the offering
has been filed with the SEC;
3. In April of 1996, the Company entered into an agreement whereby it
enabled the Company to issue warrants to purchase an aggregate of
4,203,124 shares of its Common Stock to four individuals and six
corporations in exchange for trade secrets, customer bases and other
intangible property. Warrants to purchase 3,677,082 shares of the
Company's common stock were actually issued. The remaining warrants
to purchase 526,042 shares of Common stock were held awaiting the
delivery of certain assets to the Company. Those assets were never
received and the Company never issued the warrants to the three
parties. Of the warrants issued, warrants to purchase 1,333,334 and
2,343,748 shares of Common Stock are exercisable at $13.20 and $1.50
per share, respectively. The warrants have a term of five years
commencing April 23, 1996 and are callable by the Company, upon 30
days notice, at a call price of $.10 per warrant to purchase one
share. No person or entity acted as an underwriter with respect to
the transaction. The warrants were, and absent a then effective
Registration Statement, any shares acquired upon exercise thereof
will be issued as "restricted securities". The shares acquired upon
exercise thereof, nor any interest therein may be assigned or
transferred, if such would occasion a violation of Section 5 of the
33 Act. The warrants and the shares underlying them have been and
are being offered in reliance upon the exemption from the
registration requirements of Section 5 of the 33 Act provided in
Section 4(2) thereof;
4. On January 20, 1996, the Company issued 1,475,126 shares of $.001
par value Common Stock to TEC in exchange for telecommunication
service provider assets valued by the parties for purposes of the
exchange at $1,564,724. No person acted as an underwriter with
respect to the transaction. The shares were issued as "restricted
securities" and in reliance upon the exemption from the registration
requirements of Section 5 of the 33 Act set out in Section 4(2)
thereof. TEC acquired the shares for investment, the certificates
issued to represent the shares contain an appropriate restrictive
legend denoting their status as "restricted securities" and stop
transfer restrictions on the certificates have been filed with the
Company's transfer agent;
5. During the month of May of 1996, the Company offered and sold an
aggregate of 833,333 shares of its $.001 par value Common Stock to
individual and corporate investors who had loaned money to the
21
<PAGE>
Company in exchange for cancellation of the debt at $.60 per share
of a total of $500,000. No person or entity acted as an underwriter
with respect to the offering. The offering was made directly by the
Company and no commissions were paid on any sales. The offering was
made in reliance upon the exemption from the registration
requirements of Section 5 of the 33 Act provided in Rule 504 of
Regulation D. A Form D with respect to the offering was filed with
the SEC;
6. During the period from May to October 15, 1997, Warrants to purchase
535,633 shares of Common Stock at $1.50 per share were exercised. No
person or entity acted as an underwriter in the transaction. The
shares were issued as "restricted securities" and in reliance upon
the exemption from the registration requirements of Section 5of the
33 Act set out in Section 4(2) thereof. The certificates issued to
represent the shares contain is appropriate restrictive legend
denoting their status as "restricted securities" and stop transfer
restrictions on the certificates have been filed with the Company's
transfer agent. These shares are to be included in a Registration
Statement to be filed under the 33 Act.
Item 11. Description of Registrant's Securities to be Registered
The Company's authorized capitalization consists of 100,000,000 shares of
$.001 par value Common Stock ("Common Stock") and 1,000,000 shares of $.001 par
value of preferred stock ("Preferred Stock"). As of October 15, 1997, there were
4,534,168 shares of Common Stock outstanding, no shares of Preferred Stock
outstanding and there are no outstanding options, warrants or other rights to
acquire shares of Preferred Stock. As of October 15, 1997, the Company has
outstanding warrants to purchase 3,141,449 shares of Common Stock. On that date,
the Company had outstanding options to purchase 387,500 shares of its Common
Stock. For details on these warrants and options, see Warrants and Options
below.
Common Stock The shares of Common Stock currently outstanding are fully
paid and non-assessable. The holders of Common Stock do not have any preemptive
rights to acquire shares of any capital stock of the Company. In the event of
liquidation of the Company, assets then legally available and able for
distribution to the holders of Common Stock (assets remaining after payment or
provision for payment of all debts and of all preferential liquidation payments
to holders of any outstanding Preferred Stock) will be distributed in pro rata
shares among the holders of Common Stock in proportion to their stock holdings.
Each stockholder is entitled to one vote for each share of Common Stock
held by such stockholder. A quorum for a meeting of the stockholders is one-half
of the shares of capital stock entitled to vote at that meeting. There is no
right to cumulate votes for the election of directors. This means that holder of
more than 50% of the shares voting for the election of directors can elect 100%
of the directors if they choose to do so; and in such event, the holders of the
remaining shares voting for the election of directors will not be able to elect
any person or persons to the Board of Directors.
Holders of Common Stock are entitled to dividends when, and if, declared
by the Board of Directors, out of funds legally available; and then, only after
all preferential dividends have been paid on any outstanding Preferred Stock.
The Company has not had any earnings and it does not presently contemplate the
payment of any cash dividends in the foreseeable future.
Preferred Stock The Company's articles of incorporation authorize its
Board of Directors to issue Preferred Stock in one or more series and to fix and
state the designations, powers, preferences, qualifications, limitation,
restrictions and relative rights of the shares of each such series. The
directors may determine among other things, the annual dividend rates, whether
dividends are to be cumulative or non-cumulative, whether the Preferred Stock is
subject to redemption and, if so, the manner of redemption and the redemption
price, the preference of the Preferred Stock over any other series of Preferred
Stock or Common Stock on liquidation or dissolution of the Company, and sinking
fund or other retirement provisions for the Stock and any conversion or exchange
rights or other privileges of the holders to acquire the Preferred Stock or
Common Stock of the Company. The Board of Directors may also determine the
number
22
<PAGE>
of shares in each series, the voting rights of each series and the consideration
for which the Preferred Stock may be issued.
Holders of Preferred Stock may have the right to receive dividends and
payments in the event of liquidation of the Company prior to the holders of
Common Stock and any issued Preferred Stock may also have other rights which
adversely affect the rights of the holders of Common Stock. The holders of
Preferred Stock do not have any preemptive rights to acquire shares of any
capital stock of the Company. The Company does not have any present plans to
issue any Preferred Stock.
Transfer Agent Intercontinental Registrar and Transfer Agent, Inc. acts as
the transfer agent of the Company with respect to its Common Stock. The transfer
agent's address is: P.O. Box 62405, Boulder City, Nevada 89006. There are
presently no shares of Preferred Stock outstanding, and accordingly, there is no
transfer agent for the Preferred Stock.
Warrants All of the warrants to purchase a total of 3,141,449 shares of
Common Stock which were outstanding at October 15, 1997 are for a term of five
years commencing April 23, 1996 and are exercisable, in whole or in part, at any
time during their term. Warrants to purchase 1,808,115 and 1,333,334 shares are
exercisable at $1.50 and $13.20 per share, respectively. During May through
October 15, 1997, warrants to purchase 535,633 shares at $1.50 were exercised by
the holders. The outstanding warrants were issued pursuant to an agreement made
in April of 1996 between the Company and the warrant holders in exchange for
trade secrets, customer bases, computer software and other intangible property,
all involved with or related to the prepaid telephone card industry, transferred
to the Company by the warrant holders. The shares underlying the warrants were
and are to be issued as "restricted securities" as that term is defined under
the 33 Act. Unless a Registration Statement under the 33 Act is effective with
respect thereto, the shares of Common Stock to be issued upon exercise of a
warrant will be issued as "restricted securities".
Options At October 15, 1997, the Company has options to purchase 387,500
shares of Common Stock outstanding comprised of the following:
(a) On April 25, 1997, the Company granted a stock option to Mr. Roca,
as part of his employment agreement, to purchase 187,500 shares of
Common Stock at $14.50 per share. The option is immediately
exercisable and expires on April 25, 2007.
(b) As part of Mr. McGowan's employment agreement, effective July 1,
1997, the Company granted a stock option to purchase 200,000 shares
of Common Stock at $13.00 per share. The option vests over two years
and expires July 1, 2007.
The Board of Directors of the Company has adopted a Stock Incentive Plan
(the "Plan") under which stock options, stock appreciation rights or
"restricted" or unrestricted stock awards, for up to 600,000 shares of the
Company's Common Stock, may be granted subject to the approval of the Plan by
the stockholders of the Company on or before April 24, 1998. Options may be
granted under the Plan to officers, directors, employees and consultants of the
Company. Stock options granted under the Plan may be incentive stock options
under Section 422 of the Internal Revenue Code ("Code") or non-qualified stock
options.
Upon approval by the Company's stockholders, the Plan will be administered
by a committee of the Board of Directors, the members of which must be
non-employees of the Company and outside directors as defined by the Code. Prior
to such vote, the existing Board of Directors have authority to administer the
Plan. Subject to certain restrictions set out in the Plan and the Code with
respect to incentive stock options, and up to a limit of 100,000 shares in any
one fiscal year to any one individual, the Committee has full discretion and
power as to the form and terms of an option or other right granted under the
Plan. As of October 15, 1997, the Company had not granted any options, rights or
awards under the Plan.
23
<PAGE>
Item 12. Indemnification of Directors and Officers
Limitations on Liability of Directors and Officers
The Company's Articles of Incorporation provide that a director or officer
shall not be liable for damages to the Company or its stockholders for breach of
fiduciary duty except for acts of omission that involve intentional misconduct,
fraud or a knowing violation of law and unlawful dividend payments under Nevada
Revised Statutes.
Indemnification of Directors, Officers and Others
The Company's Articles of Incorporation provide that it shall have the
right to indemnify any person for any liability or expenses incurred by that
person by reason of the fact that he was a director, officer, employee or agent
of the Company and has the right to advance or pay the expenses of directors and
officers in defending civil or criminal suit or proceeding to the full extent
provided by the Private Corporation Law of Nevada.
The Company's Bylaws provide that it shall to the fullest extent permitted
by law indemnify its directors, officers and others who were or are a party or
are threatened to be made a party to any threatened, pending or completed
action, suit or proceeding.
The Company also maintains policies of directors' and officers' liability
insurance for the purpose of indemnification.
Item 13. Financial Statements and Supplementary Data
The financial statements and schedule required as part of this
Registration Statement are included beginning on the index pages F-1 and S-1,
respectively, of this Registration Statement.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
During the Company's last two fiscal years there were no changes in or
disagreements with accountants on accounting and financial disclosure of the
type required to be disclosed in this Item.
Item 15. Financial Statements and Exhibits
The financial statements required as part of this Registration Statement
are included beginning on the index page F-1 of this Registration Statement.
Exhibits required by Item 601 of Regulation S-K are included as Part II to
this Registration Statement.
24
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
DigiTEC 2000, Inc.
Date: October 29, 1997 By /s/ Frank C. Magliato
---------------------
Frank C. Magliato
Chief Executive Officer,
President and Director
In accordance with the Securities Act of 1934, as amended, this
Registration Statement has been signed below by the persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: October 29, 1997 By /s/ Diego E. Roca
----------------------------
Diego E. Roca
Vice President of Operations
and Secretary
Date: October 29, 1997 By /s/ Lori Ann Perri
----------------------------
Lori Ann Perri
Director
Date: October 29, 1997 By /s/ Keith A. McGowan
----------------------------
Keith A. McGowan
Vice President of Finance
25
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Consolidated Financial Statements
Period from May 18, 1995 (inception) to June 30, 1995
and Years Ended June 30, 1996 and 1997
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
================================================================
Consolidated Financial Statements
Period from May 18, 1995 (inception) to June 30, 1995
and Years Ended June 30, 1996 and 1997
F-1
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Index
================================================================================
Report of independent certified public accountants F-3
Consolidated financial statements:
Balance sheets F-4
Statements of operations F-5
Statements of stockholders' equity (deficit) F-6
Statements of cash flows F-7
Notes to consolidated financial statements F-8 - F-22
F-2
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors
and Stockholders of DigiTEC 2000, Inc.
(formerly Promo Tel, Inc.)
We have audited the accompanying consolidated balance sheets of DigiTEC 2000,
Inc. and subsidiary (formerly Promo Tel, Inc.) as of June 30, 1996 and 1997, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the period from May 18, 1995 (inception) to June 30, 1995 and for each
of the two years in the period ended June 30, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of DigiTEC 2000, Inc.
and subsidiary as of June 30, 1996 and 1997, and the results of their operations
and their cash flows for the period from May 18, 1995 (inception) to June 30,
1995 and for each of the two years in the period ended June 30, 1997, in
conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, New York
October 22, 1997
F-3
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
=========================================================================================================
June 30, 1996 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current:
Cash $ 141,754 $ 727,197
Restricted cash (Note 2) 367,363 -
Accounts receivable, net of allowance for bad debts of $26,000
and $60,000, respectively (Note 1(j)) 725,852 1,868,227
Communications equipment inventory, at cost (Note 4) 1,601,105 -
Inventory 71,929 218,877
Prepaid expenses 494,162 11,814
Due from related parties, net of allowance for bad debts of $27,000
(Note 3) 176,494 -
- ---------------------------------------------------------------------------------------------------------
Total current assets 3,578,659 2,826,115
Property and equipment 6,616 64,397
Notes receivable (Note 3(b)) 2,305,000 -
Intangibles, net of accumulated amortization of $9,946 and $62,944,
respectively 149,197 606,920
Other assets, net 16,990 29,291
- ---------------------------------------------------------------------------------------------------------
$6,056,462 $ 3,526,723
=========================================================================================================
Liabilities and Stockholders' Equity
Current:
Accounts payable - communication equipment (Note 4) $1,601,105 $ -
Accounts payable 761,275 2,842,891
Accrued expenses and other current liabilities - 290,799
Note payable - current (Note 1(h)) - 117,610
Net liabilities of discontinued operations (Note 3(b)) - 211,502
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 2,362,380 3,462,802
Note payable (Note 1(h)) - 64,390
Deferred rent - 71,000
Deferred income 567,136 -
- ---------------------------------------------------------------------------------------------------------
Total liabilities 2,929,516 3,598,192
- ---------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 8 and 9)
Stockholders' equity (Notes 1(b), 3(a) and 5):
Preferred stock, $.001 par value, 1,000,000 shares authorized; no
shares outstanding - -
Common stock, $.001 par value, 100,000,000 shares authorized;
4,664,427 and 4,858,418 shares issued and outstanding,
respectively 4,664 4,858
Additional paid-in capital 3,251,557 3,602,462
Accumulated deficit (129,275) (3,678,789)
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity 3,126,946 (71,469)
- ---------------------------------------------------------------------------------------------------------
$6,056,462 $ 3,526,723
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
============================================================================================================
Period from
May 18, 1995 Year ended June 30,
(inception) to ---------------------------------
June 30, 1995 1996 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales (Note 1(j)) $- $17,425,199 $26,027,909
Cost of sales - 16,900,370 25,161,443
- ------------------------------------------------------------------------------------------------------------
Gross profit - 524,829 866,466
Selling, general and administrative
expenses - 654,104 2,040,749
- ------------------------------------------------------------------------------------------------------------
Loss before other income
(expenses) - (129,275) (1,174,283)
- ------------------------------------------------------------------------------------------------------------
Other income (expenses):
Other income - - 34,260
Loss on note satisfaction (Note 3(b)) - - (1,340,230)
- ------------------------------------------------------------------------------------------------------------
Other expenses - - (1,305,970)
- ------------------------------------------------------------------------------------------------------------
Loss from continuing
operations - (129,275) (2,480,253)
Discontinued operations (Note 3(b)):
Loss from operations of World Access - - (175,914)
Loss on disposal of World Access - - (893,347)
- ------------------------------------------------------------------------------------------------------------
Net loss $- $ (129,275) $(3,549,514)
============================================================================================================
Net loss per common share:
From continuing operations $- $ (.05) $ (.55)
From discontinued operations - - (.23)
- ------------------------------------------------------------------------------------------------------------
$- $ (.05) $ (.78)
============================================================================================================
Weighted average number of common
and common equivalent
shares outstanding - 2,599,532 4,579,075
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Consolidated Statements of Stockholders' Equity (deficit)
<TABLE>
<CAPTION>
=====================================================================================================================
Common Stock Stock
------------------------- Additional Accumulated subscriptions
Shares Amount paid-in capital deficit receivable
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, May 18, 1995 (inception) - $ - $ - $ - $ -
For the period from May 18, 1995
(inception) to June 30, 1995:
Stock issued to founder 1,333,334 1,334 (1,334) - -
- ---------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1995 1,333,334 1,334 (1,334) - -
For the year ended June 30, 1996:
Sale of common stock relating to
merger with Promo Tel - Nevada
(Note 1(b)) 59,042 59 (59) - -
Issuance of stock subscriptions 833,333 833 499,167 - (440,000)
Issuance of common stock relating to
debt conversion (Note 5(a)) 833,333 833 499,167 - -
Issuance of options to purchase
common stock in exchange for
customer lists and other intangible
property (Note 5(b)) - - 584,143 - -
Issuance of common stock relating to
asset purchase (Note 3(a)) 1,605,385 1,605 1,670,473 - -
Payment of stock subscriptions
receivable - - - - 440,000
Net loss - - - (129,275) -
- ---------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1996 4,664,427 4,664 3,251,557 (129,275) -
For the year ended June 30, 1997:
Acquisition of treasury stock
(Note 3(a)) - - - - -
Retirement of treasury stock (130,259) (131) (135,145) - -
Exercise of warrants 324,250 325 486,050 - -
Net loss - - - (3,549,514) -
- ---------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1997 4,858,418 $ 4,858 $ 3,602,462 $(3,678,789) $ -
=====================================================================================================================
</TABLE>
================================================================================
Treasury Stock Total
----------------------- stockholders'
Shares Amount equity
- --------------------------------------------------------------------------------
Balance, May 18, 1995 (inception) - $ - $ -
For the period from May 18, 1995
(inception) to June 30, 1995:
Stock issued to founder - - -
- --------------------------------------------------------------------------------
Balance, June 30, 1995 - - -
For the year ended June 30, 1996:
Sale of common stock relating to
merger with Promo Tel - Nevada
(Note 1(b)) - - -
Issuance of stock subscriptions - - 60,000
Issuance of common stock relating to
debt conversion (Note 5(a)) - - 500,000
Issuance of options to purchase
common stock in exchange for
customer lists and other intangible
property (Note 5(b)) - - 584,143
Issuance of common stock relating to
asset purchase (Note 3(a)) - - 1,672,078
Payment of stock subscriptions
receivable - - 440,000
Net loss - - (129,275)
- --------------------------------------------------------------------------------
Balance, June 30, 1996 - - 3,126,946
For the year ended June 30, 1997:
Acquisition of treasury stock
(Note 3(a)) 130,259 (135,276) (135,276)
Retirement of treasury stock (130,259) 135,276 -
Exercise of warrants - - 486,375
Net loss - - (3,549,514)
- --------------------------------------------------------------------------------
Balance, June 30, 1997 - $ - $ (71,469)
================================================================================
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Consolidated Statements of Cash Flows
(Note 7)
<TABLE>
<CAPTION>
===================================================================================================
Period from
May 18, 1995 Year ended June 30,
(inception) to --------------------------
June 30, 1995 1996 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ -- $ (129,275) $(3,549,514)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Provision for bad debts -- 53,248 33,752
Amortization -- 9,946 87,798
Depreciation -- 2,545 11,657
Loss on write-down of note receivable -- -- 1,340,230
Deferred income -- 567,136 (567,136)
Deferred rent -- -- 71,000
(Increase) decrease in:
Accounts receivable -- (752,100) (1,539,648)
Inventory -- (71,929) (146,948)
Prepaid expenses and other assets 60,000 (530,726) 470,047
Increase in:
Accounts payable and accrued expenses -- 761,275 2,372,416
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities of continuing
operations 60,000 (89,880) (1,416,346)
Net cash provided by operating activities of
discontinued operations -- -- 976,272
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 60,000 (89,880) (440,074)
- ---------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures -- (9,160) (69,439)
Purchase of communications equipment -- (533,625) --
Proceeds from sale of assets -- 50,000 --
Proceeds from repayment of related party loans -- -- 41,218
Related party loans granted -- (68,218) --
Payment received on note receivable -- 100,000 200,000
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities -- (461,003) 171,779
- ---------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of convertible debt -- 500,000 --
Proceeds from exercise of warrants -- -- 486,375
Proceeds from stock subscriptions -- 500,000 --
- ---------------------------------------------------------------------------------------------------
Net cash provided by financing
activities -- 1,000,000 486,375
- ---------------------------------------------------------------------------------------------------
Net increase in cash 60,000 449,117 218,080
Cash (including restricted cash of $367,363 at
June 30, 1996), beginning of period -- 60,000 509,117
- ---------------------------------------------------------------------------------------------------
Cash (including restricted cash of $367,363 at
June 30, 1996), end of period $ 60,000 $ 509,117 $ 727,197
- ---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
1. Summary of (a) Business
Significant
Accounting Policies DigiTEC 2000, Inc. and Subsidiary (formerly
Promo Tel, Inc., the "Company") is primarily
engaged in the distribution, marketing and
management of prepaid telephone calling
cards. It currently markets its telephone
calling card products principally throughout
the New York tri-state metropolitan area.
On October 18, 1996, the Company changed its
name to DigiTEC 2000, Inc.
(b) Organization
On July 11, 1995, Promo Tel, Inc., a
Delaware corporation ("Promo Tel-Delaware"),
merged (the "Merger") into Promo Tel, Inc.,
a Nevada corporation ("Promo Tel-Nevada").
Immediately prior to the Merger, Promo
Tel-Nevada changed its name from Yacht
Havens International Corp. ("Yacht Havens").
The surviving corporation remained Promo
Tel, Inc. Pursuant to the terms of the
Merger, Promo Tel-Nevada, which had 59,042
shares of its common stock previously
outstanding, exchanged with the sole
stockholder of Promo Tel-Delaware an
aggregate of 1,333,334 shares of previously
unissued $.001 Promo Tel-Nevada common stock
for the outstanding shares of Promo
Tel-Delaware's outstanding common stock.
Since the Merger resulted in voting control
by the stockholder of Promo Tel-Delaware and
Promo Tel-Delaware had the personnel and
owned all the assets to be utilized for its
ongoing business, the Merger was treated as
a recapitalization of Promo Tel-Delaware and
the sale of 59,042 shares of previously
issued Promo Tel-Nevada common stock for the
net assets of Promo Tel-Nevada ($-0-).
Promo Tel-Delaware is the continuing entity
for financial reporting purposes, and the
financial statements prior to July 11, 1995
represent its financial position and results
of operations. The assets, liabilities and
results of operations of Promo Tel-Nevada
are included as of July 11, 1995.
The Company was formed on May 18, 1995 and
commenced operations in July 1995.
F-8
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
Although Promo Tel-Delaware is deemed to be
the acquiring corporation for financial
accounting and reporting purposes, the legal
status of Promo Tel-Nevada as the surviving
corporation will not change. Promo
Tel-Nevada had amended its Articles of
Incorporation to change its name from Promo
Tel, Inc. to the Company's current name
(Note 1(a)).
In September 1996, the Board of Directors of
the Company approved a reverse stock split
of the Company's common stock. Each
stockholder of record on October 18, 1996
received one share of new common stock for
each six shares of common stock held.
The equity accounts of the Company and all
disclosures have been retroactively adjusted
to reflect the recapitalization and the
one-for-six reverse stock split.
(c) Principles of Consolidation
The consolidated financial statements
include the accounts of the Company and,
from June 1, 1997 (Note 3(b)), its
wholly-owned subsidiary, World Access
Solutions, Inc. ("World Access"). All
significant intercompany balances and
transactions have been eliminated.
(d) Deferred Rent
The Company accounts for rent on a
straight-line basis over the term of the
leases. The effect of such adjustment for
the year ended June 30, 1997 was $71,000. No
adjustment was necessary for all other
periods presented.
(e) Use of Estimates
In preparing the consolidated financial
statements in conformity with generally
accepted accounting principles, management
is required to make estimates and
assumptions that affect the reported amounts
of assets and liabilities and the disclosure
of contingent assets and liabilities at the
date of the consolidated financial
statements and revenues and expenses during
the reported period. Actual results could
differ from those estimates.
F-9
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
(f) Revenue Recognition
Sales from third-party prepaid phone cards
for which the Company acts solely as a
distributor are recognized upon delivery.
Sales from the sale of proprietary, branded
prepaid phone cards are deferred and
recognized upon completion of telephone
calls by end users. Sales under this program
were terminated during the first quarter of
fiscal 1997.
(g) Inventory
Inventory, consisting primarily of telephone
calling cards, is stated at the lower of
cost or market. Cost is determined by the
first-in, first-out (FIFO) method.
(h) Intangibles and Amortization
Intangibles include the costs to acquire
customer lists. As part of one of the
customer acquisition agreements, the Company
entered into an 8% per annum note payable
for $182,000. The note is unsecured with
payments commencing on November 1, 1997 and
continuing until the last payment which is
due October 1, 1998. The maturities of the
note are $117,610 for the year ended June
30, 1998 with the remainder due during the
year ended June 30, 1999.
The Company periodically evaluates the
recoverability of these intangibles based on
several factors, including management's
intention with respect to these acquired
assets and the estimated future
nondiscounted cash flows expected to be
generated by such assets. To date, the
Company has not recorded any impairment on
its intangibles.
Amortization is computed on a straight-line
basis over the estimated useful lives of the
intangibles which approximate three years.
F-10
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
(i) Income Taxes
Deferred tax assets and liabilities are
recorded for the estimated future tax
effects attributable to temporary
differences between the bases of assets and
liabilities recorded for financial and tax
reporting purposes.
(j) Risk Concentration
(i) Accounts Receivable
At June 30, 1996, approximately 60%
and 57%, respectively, of trade
receivables and sales were with one
customer. For the year ended June 30,
1997, one master distributor accounted
for approximately 48% and 54% of the
Company's accounts receivable and
sales, respectively. Subsequent to
June 30, 1997, the Company terminated
the exclusivity clause of the
distribution agreement. As a result,
the Company's concentration of sales
to one customer will be reduced for
the year ended June 30, 1998.
(ii) Suppliers
The Company purchases its long
distance products primarily from two
long distance providers.
(k) Earnings Per Share
Earnings (loss) per share is calculated
using weighted average shares outstanding
during the period. The weighted average
shares have been retroactively adjusted to
reflect the exchange of the 1,333,334 shares
and the one-for-six reverse stock split
(Note 1(b)). Options and warrants to
purchase common stock are not included in
the earnings per share calculation because
they are anti-dilutive.
(l) Advertising Costs
The Company expenses all advertising costs
as incurred.
F-11
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
(m) Fair Value of Financial Instruments
The carrying values of financial
instruments, including cash and note
receivable at June 30, 1996 and cash and
note payable at June 30, 1997, approximate
fair value as of those dates because of the
relatively short-term maturity of these
instruments.
(n) Reclassifications
Certain amounts as previously reported have
been reclassified to conform to the 1997
presentation.
(o) Recent Accounting Pronouncements
The Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be
Disposed of" for the year ended June 30,
1996. The adoption of SFAS No. 121 did not
have a material effect on the Company's
consolidated financial statements.
In October 1995, the Financial Accounting
Standards Board ("FASB") issued SFAS No.
123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a
fair value method for accounting for
stock-based compensation plans either
through recognition or disclosure. The
Company's adoption of employee stock-based
compensation provisions of SFAS No. 123 as
of July 1, 1996 will require disclosure of
the pro forma net income and pro forma net
income per share amounts assuming the fair
value method was adopted July 1, 1995. The
adoption of this standard did not impact the
Company's results of operations, financial
position or cash flows.
In December 1996, the FASB issued SFAS No.
128, "Earnings Per Share", which is
effective for both interim and annual
periods ending after December 15, 1997. SFAS
No. 128 requires that all prior period
earnings per share data be restated to
conform to this statement. The Company will
adopt SFAS No. 128 for the three and six
months ended December 31, 1997. The adoption
of this standard is not expected to have a
material effect on the Company's earnings
per share.
F-12
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income", which
established standards for reporting and
display of comprehensive income, its
components and accumulated balances.
Comprehensive income is defined to include
all changes in equity except those resulting
from investments by, or distributions to,
owners. Among other disclosures, SFAS No.
130 requires that all items that are
required to be recognized under current
accounting standards as components of
comprehensive income be reported in a
financial statement that is displayed with
the same prominence as other financial
statements.
SFAS No. 130, effective for all years
beginning after December 31, 1997, requires
comparative information for earlier years to
be restated and early adoption is permitted.
The Company intents to adopt SFAS No. 130
effective July 1, 1998. Results of
operations and financial position will be
unaffected by implementation of this
standard.
2. Restricted Cash At June 30, 1996, the Company had an agreement
with a long distance service provider to maintain
an amount on deposit, in a specified bank account,
for unused activated time on prepaid telephone
calling cards. This agreement was terminated in
September 1996.
3. Related Party (a) On January 20, 1996, the Company purchased
Transactions certain internet service provider assets
consisting primarily of computer hardware,
software and office equipment from Telephone
Electronics Corporation ("TEC") in exchange
for 1,605,385 shares of the Company's
restricted common stock valued at
approximately $1.7 million based on the
estimated fair values of the assets
received.
TEC is a communications company
headquartered in Jackson, Mississippi that
provides local and long distance telephone
exchange services and provides other
telecommunications services nationally.
F-13
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
Subsequent to the purchase date, the
purchase agreement was amended to reflect
certain assets which were not delivered by
TEC, resulting in a receivable from TEC of
$135,276 at June 30, 1996. In November 1996,
TEC returned 130,259 of the Company's shares
to the Company. TEC's current ownership
interest at June 30, 1997 was approximately
30%.
(b) The Company owns 40.3% of the outstanding
common stock of TecLink, Inc. ("TecLink").
The Company helped establish TecLink as a
Mississippi-based internet service provider
by selling to TecLink certain internet
service provider assets, intellectual
property, computer hardware, software and
office equipment (that it had previously
purchased from TEC and others) as well as an
exclusive value added reseller distribution
contract from Hughes Corporation ("Hughes")
(see Note 4). The Company received in the
sale $50,000 cash and a 6% per annum
promissory note of $2,405,000 due the
earlier of December 31, 1998 or upon the
completion of TecLink's initial public
offering. The promissory note was
collateralized by the assets of TecLink.
$250,000 became due upon the completion of a
private placement of TecLink's common stock.
The Company accounted for its investment in
TecLink's common stock on the equity method.
As a result of TecLink's loss for the year
ended June 30, 1996, the investment was
written down to $-0- as of that date. The
Company did not reduce its carrying value of
the note at June 30, 1996 since it received
the first $250,000 upon its due date and
believed that its security interest in the
assets of TecLink was sufficient at June 30,
1996 to cover the balance of the note.
Hughes and TecLink never reached an accord
as to Hughes' responsibilities under the
distribution contract. As such, TecLink was
never able to fully implement its business
plan. As a result of this and other factors,
TecLink's initial public offering was never
consummated and TecLink continued to
experience losses. Due to the continuing
losses, the Company entered into an
agreement to acquire the net assets as
partial satisfaction of its outstanding
balance of its note receivable from TecLink
($2,105,000). As a result, the Company
recorded a loss of $1,340,230. The Company
maintained its right to part of any proceeds
that TecLink may receive from its claims
F-14
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
against Hughes. The Company established
World Access as a wholly-owned subsidiary
providing internet access with the net
assets re-acquired from TecLink. As of June
30, 1997, management determined that it
needed to focus on its core business and
would discontinue the operations of World
Access by selling its net assets.
On October 1, 1997, the Company entered into
an agreement (the "Agreement") to sell the
customer base, the related hardware related
to servicing the customer base and its
obligations under World Access' leases for
its premises and telephone equipment to
Meta3, Inc. ("Meta3"), a Mississippi
corporation in a similar line of business.
The Agreement calls for Meta3 to pay for the
subscribers at $10 per month per customer
for ten months. The amount to be paid will
be adjusted by the identified customer
base's net attrition rate for the first five
months of the purchase period. As a result
of the Agreement and the Company's plan to
dispose of the remaining assets and
liabilities, the Company recorded a loss on
disposal of $893,347. The assets and
liabilities of World Access, adjusted for
the Agreement, as of June 30, 1997 are as
follows:
---------------------------------------------------
Cash $ 15,566
Accounts receivable 46,874
Inventory 146,650
Receivable from Meta3 270,000
Prepaid expenses 28,800
Equipment 38,153
Accounts payable (338,271)
Other liabilities (419,274)
---------------------------------------------------
Net liabilities of World Access $(211,502)
===================================================
F-15
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
The Company intends to use the proceeds from
the sale of the assets to Meta3, as well as
the proceeds from the sale or collection of
the remaining assets, to liquidate the
liabilities. The Company accrued $175,000
for the estimated loss related to its
operations for the year ended June 30, 1998.
4. Communications The Company purchased communications equipment
Equipment from Hughes which allows high speed
Inventory satellite-based access service for both internet
and private network applications. Subsequently,
the Company decided not to enter this line of
business and sold this equipment to TecLink (Note
3(b)) and assigned the Company's rights and
obligations under the exclusive value added
reseller distribution agreement to TecLink, as
well as its payables relating to this equipment to
its vendor. The vendor agreed to the assignment of
the equipment and the distribution agreement, and
settled the liability for amounts already paid to
Hughes.
5. Stockholders' Equity
(a) In December 1995 and May 1996, the Company
received an aggregate of $1,000,000 as a
result of completing two offerings under
Rule 504 of Regulation D.
(b) At June 30, 1997, the Company had an option
agreement with one of its officers and had
one stock option plan. The agreement and
plan are more fully described below. The
Company applies Accounting Principles Board
Opinion ("APB") No. 25, "Accounting for
Stock Issued to Employees", and related
Interpretations in accounting for the
agreements and the plan. Under APB No. 25,
when the exercise price of the Company's
employee stock options equals the market
price of the underlying stock on the date of
the grant, no compensation cost is
recognized. The following is a summary of
the agreements and the option plan:
(i) On April 25, 1997, the Company granted
a stock option to one of its officers,
as part of his employment agreement,
to purchase 187,500 shares of common
stock at $14.50 per share. The option
is exercisable at the date of grant
and expires ten years from the date of
grant.
F-16
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
(ii) In April 1997, the Company's Board of
Directors adopted the Company's Stock
Incentive Plan (the "Plan") which
provided for the granting of up to
600,000 shares of common stock,
subject to the approval of the Plan by
the stockholders of the Company on or
before April 24, 1998. As of June 30,
1997, no options had been granted
under the Plan.
SFAS No. 123, "Accounting for Stock-Based
Compensation", requires the Company to
provide pro forma information regarding net
income and earnings per share as if
compensation cost for the Company's stock
options had been determined in accordance
with the fair value-based method prescribed
in SFAS No. 123. The Company estimates the
fair value of each stock option at the grant
date by using the Black-Scholes
option-pricing model with the following
weighted average assumptions used for grants
in fiscal 1996 and 1997, respectively: no
dividends paid for all years; expected
volatility of 30% for all years; weighted
average risk-free interest rate of 5.9%; and
an expected life of 1 year.
Under the accounting provisions of SFAS No.
123, the Company's net loss and net loss per
share from continuing operations would have
been increased to the pro forma amounts
indicated below.
Year ended June 30, 1997
----------------------------------------------------------------
Net loss from continuing operations:
As reported $2,480,253
Pro forma $2,590,662
Net loss per share from continuing operations:
As reported $ (.55)
Pro forma $ (.57)
=================================================================
F-17
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
The following table contains information on
stock options for the three year period
ended June 30, 1997:
Weighted
Exercise average
Option price range exercise
shares per share price
---------------------------------------------------------------------
Outstanding and
exercisable, June 30,
1995 and 1996 - $ - $ -
Granted 187,500 14.50 14.50
---------------------------------------------------------------------
Outstanding and
exercisable, June 30,
1997 187,500 $14.50 $14.50
=====================================================================
The weighted average fair value of the
options granted in fiscal 1997 was $0.59 per
share.
The weighted average remaining contractual
life of the outstanding and exercisable
options as of June 30, 1997 is 9.8 years.
(c) Warrants
In April 1996, the Company entered into an
agreement which enabled the Company to issue
warrants to purchase 4,203,124 shares of
common stock to various individuals and
corporations in exchange for trade secrets,
customer bases, software and other
intangible property. Warrants to purchase
3,677,082 shares of the Company's common
stock were actually issued. The remaining
warrants to purchase 526,042 shares of
common stock were held awaiting the two
parties to deliver their promised assets to
the Company. Those assets were never
received and the Company did not issue the
remaining warrants. The warrants issued have
a term of five years from date of grant and
are immediately exercisable. The Company may
call the warrants at a price of $.10 per
share of common stock.
F-18
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
The following table contains information on
warrants for the three-year period ended
June 30, 1997:
Weighted
Exercise average
Warrant price range exercise
shares per share price
---------------------------------------------------------------------
Outstanding and
exercisable, June 30,
1995 - $ - $ -
Granted 3,677,082 1.50-13.20 3.01
---------------------------------------------------------------------
Outstanding and
exercisable, June 30,
1996 3,677,082 1.50-13.20 3.01
Exercised (324,250) 1.50 1.50
---------------------------------------------------------------------
Outstanding and
exercisable, June 30,
1997 3,352,832 $1.50-13.20 $3.16
=====================================================================
The weighted average remaining contractual
life of the outstanding and exercisable
warrants as of June 30, 1997 is 3.8 years.
6. Income Taxes The tax effects of temporary differences that give
rise to deferred tax assets are as follows:
June 30, 1996 1997
----------------------------------------------------------------
Net operating loss carryforwards $ - $ 876,000
Loss on World Access - 313,000
Deferred rent - 25,000
Allowance for bad debts 18,000 21,000
Other 1,000 43,000
----------------------------------------------------------------
Total deferred tax assets 19,000 1,278,000
Less valuation allowance (19,000) (1,278,000)
----------------------------------------------------------------
Net deferred tax assets $ - $ -
================================================================
F-19
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
The ultimate realization of the deferred tax
assets is dependent on the generation of
future taxable income during the period in
which the temporary differences become
deductible. Based on the Company's
historical earnings, management has
established a valuation allowance equal to
the tax effects of the Company's deferred
tax assets at June 30, 1996 and 1997.
The Company's net operating loss
carryforwards of approximately $2,500,000
are available to offset future Federal
taxable income, if any, through 2012 and may
be subject to various limitations.
7. Supplemental Cash Supplemental disclosures of cash flow
Flow Information information are as follows:
Year ended June 30, 1996 1997
- -------------------------------------------------------------------------------
Non-cash investing and financing activities:
Return of common stock $ - $ 135,276
Write-off of receivables for acquisition of
customer lists - 363,521
Note received from sale of assets 2,405,000 -
Common stock issued for assets purchased 1,672,078 -
Common stock issued for conversion of debt 500,000 -
Transfer of Hughes communications
equipment and related payable - 1,601,105
Communications equipment and related
payable obtained from Hughes 1,601,105 -
Acquisition of the net assets of TecLink in
satisfaction of note receivable - 764,770
===============================================================================
F-20
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
8. Commitments and (a) Leases
Contingencies
The Company leases its office space under a
noncancellable operating lease agreement
which expires in June 30, 2002. Rent expense
for the years ended June 30, 1996 and 1997
was approximately $52,000 and $144,000,
respectively. Future minimum rentals
required as of June 30, 1997 under all
noncancellable operating leases (exclusive
of renewals) are as follows:
Fiscal year ended June 30,
--------------------------------------------
1998 $ 287,500
1999 314,600
2000 307,200
2001 314,900
2002 240,000
--------------------------------------------
$1,464,200
============================================
(b) Litigation
The Company and its Chief Executive Officer
have been named as defendants in a legal
action in Mississippi in the case entitled,
Heritage Graphics, Inc. ("Heritage") vs.
Telephone Electronics Corporation. The
complaint alleges, among other things, that
the defendants breached a contractual
agreement and conspired to have Heritage go
out of business. The complaint seeks damages
of $500 million. The case is in discovery.
The Company believes such litigation will
not have a material adverse effect on the
financial condition of the Company, and is
defending the suit vigorously and asserting
appropriate counterclaims.
F-21
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Notes to Consolidated Financial Statements
================================================================================
(c) Employment Agreements
The Company has employment agreements with
three of its officers. The aggregate minimum
payments under the agreements are as
follows:
June 30,
--------------------------------------------
1998 $ 465,000
1999 565,000
2000 690,000
--------------------------------------------
$1,720,000
============================================
(d) Commitments to Provider
At June 30, 1997, the Company had a
commitment to Frontier Corporation for the
purchase of prepaid telephone cards. The
agreement, which is for the period of
October 30, 1996 through January 30, 1998,
calls for the Company to purchase $10
million of cards at face value. As of June
30, 1997, the Company had purchased in
excess of this commitment.
9. Subsequent Event On September 25 and 26, 1997, the Company entered
into one year distribution agreements with
Premiere Communications, Inc. The agreements call
for the Company to purchase an aggregate of $81
million of cards at face value. As part of one of
the agreements, the Company entered into a $6
million, 15% per annum, note payable due December
31, 1997 with any purchases paid for by that date
offsetting the note payable.
F-22
<PAGE>
DIGITEC 2000, INC.
EXHIBIT INDEX
Exhibit #
- ---------
3.(i) Articles of Incorporation
3.(ii) Bylaws
27 Financial Data Schedule
99.1 Articles of Merger and Agreement and Plan of Merger
99.2 Sublease Agreement between Vanity Fair Intimates, Inc. and Promo
Tel, Inc.
99.3 TECLink Promissory Note and Agreement
99.4 Asset Purchase Agreement by and Between World Access Solutions, Inc.
and Meta3, Inc.
99.5 Agreement and Plan of Reorganization and amendments
99.6 Telephone Electronics Corporation Agreement and amendments
99.7 TECLink Note Satisfaction Agreement
99.8 Premiere Communications, Inc. Independent Distributor Agreements
99.9 CG Com, Inc. Independent Master Distributor Agreements
99.10 Frank Magliato Employment Agreement
99.11 Diego Roca Employment Agreement
99.12 Keith McGowan Employment Agreement
99.13 DigiTEC 2000, Inc. Stock Incentive Plan
99.14 Report of Independent Certified Public Accountants' on Schedule II -
Valuation and Qualifying Accounts
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
PROMOTEL, INC.
The undersigned, constituting all of the directors of PromoTel, Inc., a
Nevada corporation ("Corporation"), do hereby approve and adopt the Resolutions
set forth below pursuant to their unanimous written consent under the applicable
provisions of the Private Corporations Law of Nevada.
RESOLUTION I
RESOLVED, that the Articles of Incorporation of PromoTel, Inc. be restated and
amended in their entirety to read as follows:
RESTATED ARTICLES OF INCORPORATION
PROMOTEL, INC.
ARTICLE I
Name
The name of the Corporation shall be PromoTel, Inc.
ARTICLE II
Duration
The period of duration of the Corporation shall be perpetual.
ARTICLE III
Purpose
The purpose of the Corporation is to engage in any lawful act or activities for
which corporations may be organized under the Private Corporations Law of the
State of Nevada.
1
<PAGE>
ARTICLE IV
Capital Stock
The authorized capital stock of the Corporation shall be 101,000,000 shares
consisting of 100,000,000 shares of common stock with a par value of 0.001 per
share ("Common Stock") and 1,000,000 shares of preferred stock with a par value
of 0.001 share ("Preferred Stock").
The designations and the preferences, conversion and other rights, voting
powers, restrictions,. limitations as to dividends, qualifications, and terms
and conditions or redemption of the shares of each class of stock are as
follows:
1. Preferred Stock
The Preferred Stock may be issued from time to time by the Board of Directors as
shares of one or more series. The description of shares of each series of
Preferred Stock, including any preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption shall be as set forth in resolutions and adopted by the
Board of Directors and filed as required by Nevada law from time to time prior
to the issuance of any shares of such series.
The Board of Directors is expressly authorized to issue, by adopting resolutions
providing for the issuance of, or providing for a change in the number of,
shares of any particular series of Preferred Stock and to set or change in any
one respects the designations, preferences conversion of other rights, voting
rights, restrictions, limitations as to dividends, qualifications, or terms and
conditions of redemption relating to the shares of each such series.
Notwithstanding the foregoing, the Board of Directors shall not be authorized to
change the right of the Common Stock of the Corporation to vote one vote per
share on all matters submitted for stockholder action. The authority of the
Board of Directors with respect to each series of Preferred Stock shall include,
but not limited to, setting or changing the following:
(a) the distinctive serial designation of such series and the number of
shares constituting such series (provided that the aggregate number of shares
constituting all series of Preferred Stock shall not exceed 1,000,000);
(b) the annual dividend rate on shares of such series, whether dividends
shall be cumulative and, if so, from which date or dates;
(c) whether the shares of such series shall be redeemable and, if so, the
terms and conditions of such redemption, including the date or dates upon and
after which such shares shall be redeemable, and whether the amount may vary
under different conditions and at different redemption dates;
(d) the obligation, if any, of the Corporation to redeem or repurchase
shares of such series pursuant to a sinking fund;
(e) whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes and, if so, the
terms and conditions or such conversion or exchange, including the price or
prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any;
(f) whether the shares of such series shall be voting rights, in addition
to the voting provided by the law, and if so, the terms of such voting rights;
(g) the rights of the shares of such series in the event of voluntary or
involuntary liquidation, dissolution of winding up of the Corporation; and
2
<PAGE>
(h) any other relative rights, powers, preferences, qualifications,
limitations or restrictions thereof relating to such series which may be
authorized under Nevada Private Corporations Act.
The shares of Preferred Stock of any one series shall be identical with each
other in all respects except as to the dates from and after which dividends
thereon shall cumulate, if cumulative.
2. Common Stock
Subject to all rights of the Preferred Stock as expressly provided herein, by
law or by the Board of Directors pursuant to this Article, the Common Stock of
the Corporation shall possess all such rights and privileges as are afforded to
capital stock by applicable law in the absence of any express grant of rights or
privileges in these Articles of Incorporation, including, but not limited to,
the following rights and privileges:
(a) dividends may be declared and paid or set apart for payment upon the
Common Stock out of any asset or funds of the Corporation legally available for
the payment of dividends';
(b) the holders of Common Stock shall have the right to vote for the
election of directors and on all other matters requiring stockholder action,
each share being entitled to one vote; and
(c) upon the voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, the net assets of the Corporation, after making provision
for the satisfaction of any liquidation preference of any then outstanding
Preferred Stock, shall be distributed pro rata to the holders of the Common
Stock in accordance with their respective rights and interests.
3. Capital Stock
The following provisions shall apply to all shares of capital stock, either
common stock or preferred stock:
(a) Cumulative voting shall not be allowed in elections of directors of
for any other purpose;
(b) No holders of shares of capital stock of the Corporation shall be
entitled, as such, to any preemptive or preferential right to acquire any
unissued stock or any other securities which the Corporation may now or
hereafter be authorized to issue. The Board of Directors of the Corporation,
however, in its discretion by resolution, may determine that any unissued
securities of the Corporation shall be offered for subscription solely to the
holders of capital stock of any class or classes of such stock, which the
Corporation may not or hereafter be authorized to issue, in such proportions
based on stock ownership as said Board in its discretion may determine;
(c) All shares, when issued, shall be fully paid and non-assessable;
(d) The Board of Directors may restrict the transfer of any of the
Corporation's stock issued by giving the Corporation or any shareholder "first
right of refusal to purchase" the stock, by making the stock redeemable, or by
restricting the transfer of the stock under such terms and in such manner as the
directors may deem necessary and as are not inconsistent with the laws of the
State of Nevada. Any stock so restricted must carry a conspicuous legend noting
the restriction and the place where such restriction may be found in the records
of the Corporation; and
(e) The judgment of the Board of Directors as to the adequacy of any
consideration received or to be received for any shares, options, or any other
securities which the Corporation at any time may be authorized to issue or sell
or otherwise dispose of shall be conclusive in the absence of fraud, subject to
the provisions of these Articles of Incorporation and any applicable law.
3
<PAGE>
ARTICLE IV
Board of Directors
The affairs of the Corporation shall be governed by a Board of Directors which
shall be organized and operate in accordance with the provisions of this
Article.
1. The number of Directors of the Corporation which shall constitute the whole
Board shall not be less than three Directors. The exact number of Directors
shall be fixed from time to time pursuant to a resolution adopted by a majority
of the entire Board of Directors. Each Director elected shall hold office until
his successor shall be elected and shall qualify.
2. Newly created Directorships resulting from any increases in the authorized
number of Directors shall be filled by a majority vote of the remaining
Directors, though less than a quorum, and the Directors so chosen shall hold
office for a term expiring at the next annual meeting of stockholders at which a
successor shall be elected and shall qualify.
3. Any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause, shall be
filled by the vote of a majority of the remaining Directors, though less than a
quorum, and the Directors so chosen shall serve for the unexpired term of this
predecessor in office.
4. The names and addresses of the members of the initial Board of Directors, who
shall hold office until the next annual meeting of the shareholders of the
Corporation or until their successors shall have been elected and qualified,
are:
Name Address
---- -------
Lori Ann Perri 500 Fifth Avenue, Suite 424
New York, NY 10110
Frank C. Magliato 500 Fifth Avenue, Suite 424
New York, NY 10110
ARTICLE V
Principal Place of Business
The principal office and the principal place of business of the Corporation in
Nevada initially shall be at 321 N. Walsh Street, Carson City, Nevada 89701. The
Board of Directors, however, from to time may establish such other offices,
branches, subsidiaries, or divisions which it may consider to be advisable.
4
<PAGE>
ARTICLE VI
Registered Office and Registered Agent
The address of the Corporation's initial registered office in Nevada for purpose
of the Private Corporations Law of Nevada, shall be at 321 N. Walsh Street,
Carson City, Nevada 89701 The name of the Corporation's initial registered agent
at the address of the aforesaid registered office shall be United Corporate
Services, Inc.
ARTICLE VIII
Subject to the By-laws, if any, adopted by the shareholders, the Board of
Directors of the Corporation is expressly authorized to make, alter or repeal
the By-laws of the Corporation.
ARTICLE IX
Liability of Directors and Officers
No directors or officer of the Corporation shall be personally liable to the
Corporation or its shareholders for damages for breach of fiduciary duty as a
director or officer, save and except for:
(a) Acts if omissions which involve intentional misconduct, fraud or a
knowing violation of law; or
(b) The payment of dividends in violation of Nevada Revised Statutes
78.300.
ARTICLE X
Statutory Election
The Corporation hereby expressly elects not to be governed by the provisions of
Sections 78.411 through 78.444, inclusive, of the Nevada Private Corporations
Act to the extent that such sections may be otherwise applicable.
ARTICLE XI
Indemnification of Directors, Officers and Others
Except as may be set forth in the By-laws of the Corporation, the Corporation
shall have the right to indemnify any person for any liability or expenses
incurred by that person by reason of the fact that he was a director, officer,
employee or agent of the Corporation and has the right to advance or pay the
expenses of directors and officers in defending a civil or criminal suit or
proceeding to the full extent provided by the Private Corporations Law of
Nevada.
and be it:
5
<PAGE>
FURTHER RESOLVED, that the officers of the Corporation be and they are
authorized and directed to present the foregoing restatement and amendment of
the Corporation's Articles of Incorporation in their entirety be to the
shareholders of the Corporation for their consideration and approval and if duly
approved by the shareholders to take actions necessary and appropriate to
complete the filing and to achieve the effectiveness of the restatement and
amendment.
RESOLUTION II
RESOLVED, that the following slate of officers be elected to serve as the
officers of the Corporation for the ensuing year or until their successors are
duly elected and qualified:
Name Position
---- --------
Frank Magliato President
Diego Roca Secretary
RESOLUTION III
RESOLVED, that the actions of the President of the Corporation in the employment
of Gilbert L. McSwain, Attorney-at-Law of Denver, Colorado as corporate and
securities counsel for the Corporation on terms and conditions deemed by the
President to be fair and reasonable to the Corporation be and they are approved
and ratified.
RESOLUTION IV
RESOLVED, that the President of the Corporation be and he hereby authorized and
directed to enter into negotiations with TECLink, Inc. a Nevada Corporation
relative to a transaction or series of transactions in which the Corporation
will sell to TECLink certain of the assets to be acquired under the Plan and
Agreement of Reorganization described in Resolution III above and from other
sources and will assign to TECLink certain rights under PromoTel's Agreement
with Hughes Network Services, Inc. in exchange for cash and stock of TECLink on
terms and conditions deemed fair and reasonable to the Corporation in his
discretion.
RESOLUTION V
RESOLVED, that the President of the Corporation be and he hereby is authorized
and directed to negotiate with Mr. Walter Frank and companies associated with
him for the acquisition of certain assets which are involved in a project known
as the TECLink Company of Jackson, Mississippi in exchange for shares of common
stock of the Corporation on such terms and conditions as are deemed fair and
reasonable to the Corporation by the President in his sole discretion.
6
<PAGE>
RESOLUTION VI
WHEREAS, in December of 1995 the Corporation accepted funds from loans from
certain investors in the aggregate amount of $500,000 to enable the Company to
enter into an agreement which Hughes Network Services, Inc.; and
WHEREAS, at that time the Corporation was unable to sell common stock to the
lending investors without risking violations of preemptive rights of
stockholders; and
WHEREAS, the Corporation agreed with the lending investors that it would offer
them the opportunity to convert the loans to the Corporation into shares of its
common stock once its Articles of Incorporation had been amended to deny
preemptive with the conversion offering to be made under the exemption from the
registration requirements of the Securities Act of 1933, as amended ("Act")
provided for in Rule 504 adopted under the Act and to be made outside the United
States; and
WHEREAS, once the above approved Amendment to the Company's Articles of
Incorporation has become effective the Corporation desires to honor its
commitment to the lending investors;
NOW THEREFORE BE IT;
RESOLVED, that the Board of Directors does hereby approve and authorize an
offering of 5,000,000 shares of its common stock to the investors who or which
loaned to the Company the aggregate sum of $500,000 in December of 1995 in
conversion of these loans at a conversion price of $.l0 per share with the
offering to be made under Rule 504 adopted under the Act outside the territory
of the United States and on such other terms and conditions as may be deemed
reasonable to and necessary for the Corporation by its officers, in their sole
discretion; and be it
FURTHER RESOLVED, that the officers and agents of the Corporation be and they
hereby are authorized and directed to make all actions necessary and appropriate
to enable the Corporation to make the foregoing stock offering, including the
issuance of stock certificates to represent shares sold therein.
RESOLUTION VII
RE SOLVED, that the Board of Directors does hereby authorize and direct that the
Corporation prepare and file the appropriate documents which the United States
Securities and Exchange Commission to register the common stock of the
Corporation under Section 12(g) of the Securities Exchange Act of 1934, amended;
and be it
FURTHER RESOLVED, that the officers of the Corporation be and they hereby are
authorized and directed to take all actions necessary, as they so deem in their
sole discretion and appropriate to complete the foregoing registration.
RESOLUTION VIII
RESOLVED, that the set of Amended and Restated Bylaws attached hereto as Exhibit
B be and they hereby are approved and adopted as the Bylaws of the Corporation.
7
<PAGE>
RESOLVED, that the actions of the officers of the Corporation in negotiating for
and in executing and entering into a Distributorship Agreement with Hughes
Network Services, Inc. dated December 12, 1995, a copy of which is attached
hereto as Exhibit C, be they hereby are ratified and approved.
Executed as of the dates set forth below:
Dated: April 8, 1996 /s/ Frank C. Magiato
------------------------------
Frank C. Magiato
Dated: April 23, 1996 /s/ Lori Ann Perri
------------------------------
Lori Ann Perri
8
<PAGE>
ACTION BY WRITTEN CONSENT
OF
MAJORITY SHAREHOLDER
OF
PROMOTEL, INC.
The undersigned, the holder of more than 90% of the company's outstanding
common stock does hereby adopt the Resolution set forth below pursuant to the
undersigned's written consent under the applicable provisions of the Private
Corporations Law of Nevada.
RESOLUTION I
RESOLVED, that the Articles of Incorporation of PromoTel, Inc. be restated
and amended in their entirety to read as follows:
RESTATED ARTICLES OF INCORPORATION
PROMOTEL, INC.
ARTICLE I
Name
The name of the Corporation shall be PromoTel, Inc.
ARTICLE II
Duration
The period of duration of the Corporation shall be perpetual.
ARTICLE III
Purpose
The purpose of the Corporation is to engage in any lawful act or activities for
which corporations may be organized under the Private Corporations Law of the
State of Nevada.
1
<PAGE>
ARTICLE IV
Capital Stock
The authorized capital stock of the Corporation shall be 101,000,000 shares
consisting of 100,000,000 shares of common stock with a par value of 0.001 per
share ("Common Stock") and 1,000,000 shares of preferred stock with a par value
of 0.001 share ("Preferred Stock").
The designations and the preferences, conversion and other rights, voting
powers, restrictions,. limitations as to dividends, qualifications, and terms
and conditions or redemption of the shares of each class of stock are as
follows:
1. Preferred Stock
The Preferred Stock may be issued from time to time by the Board of Directors as
shares of one or more series. The description of shares of each series of
Preferred Stock, including any preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption shall be as set forth in resolutions and adopted by the
Board of Directors and filed as required by Nevada law from time to time prior
to the issuance of any shares of such series.
The Board of Directors is expressly authorized to issue, by adopting resolutions
providing for the issuance of, or providing for a change in the number of,
shares of any particular series of Preferred Stock and to set or change in any
one respects the designations, preferences conversion of other rights, voting
rights, restrictions, limitations as to dividends, qualifications, or terms and
conditions of redemption relating to the shares of each such series.
Notwithstanding the foregoing, the Board of Directors shall not be authorized to
change the right of the Common Stock of the Corporation to vote one vote per
share on all matters submitted for stockholder action. The authority of the
Board of Directors with respect to each series of Preferred Stock shall include,
but not limited to, setting or changing the following:
(a) the distinctive serial designation of such series and the number of
shares constituting such series (provided that the aggregate number of shares
constituting all series of Preferred Stock shall not exceed 1,000,000);
(b) the annual dividend rate on shares of such series, whether dividends
shall be cumulative and, if so, from which date or dates;
(c) whether the shares of such series shall be redeemable and, if so, the
terms and conditions of such redemption, including the date or dates upon and
after which such shares shall be redeemable, and whether the amount may vary
under different conditions and at different redemption dates;
(d) the obligation, if any, of the Corporation to redeem or repurchase
shares of such series pursuant to a sinking fund;
(e) whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes and, if so, the
terms and conditions or such conversion or exchange, including the price or
prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any;
(f) whether the shares of such series shall be voting rights, in addition
to the voting provided by the law, and if so, the terms of such voting rights;
(g) the rights of the shares of such series in the event of voluntary or
involuntary liquidation. dissolution of winding up of the Corporation; and
2
<PAGE>
(h) any other relative rights, powers, preferences, qualifications,
limitations or restrictions thereof relating to such series which may be
authorized under Nevada Private Corporations Act.
The shares of Preferred Stock of any one series shall be identical with each
other in all respects except as to the dates from and after which dividends
thereon shall cumulate, if cumulative.
2. Common Stock
Subject to all rights of the Preferred Stock as expressly provided herein, by
law or by the Board of Directors pursuant to this Article, the Common Stock of
the Corporation shall possess all such rights and privileges as are afforded to
capital stock by applicable law in the absence of any express grant of rights or
privileges in these Articles of Incorporation, including, but not limited to,
the following rights and privileges:
(a) dividends may be declared and paid or set apart for payment upon the
Common Stock out of any asset or funds of the Corporation legally available for
the payment of dividends';
(b) the holders of Common Stock shall have the right to vote for the
election of directors and on all other matters requiring stockholder action,
each share being entitled to one vote; and
(c) upon the voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, the net assets of the Corporation, after making provision
for the satisfaction of any liquidation preference of any then outstanding
Preferred Stock, shall be distributed pro rata to the holders of the Common
Stock in accordance with their respective rights and interests.
3. Capital Stock
The following provisions shall apply to all shares of capital stock, either
common stock or preferred stock:
(a) Cumulative voting shall not be allowed in elections of directors of
for any other purpose;
(b) No holders of shares of capital stock of the Corporation shall be
entitled, as such, to any preemptive or preferential right to acquire any
unissued stock or any other securities which the Corporation may now or
hereafter be authorized to issue. The Board of Directors of the Corporation,
however, in its discretion by resolution, may determine that any unissued
securities of the Corporation shall be offered for subscription solely to the
holders of capital stock of any class or classes of such stock, which the
Corporation may not or hereafter be authorized to issue, in such proportions
based on stock ownership as said Board in its discretion may determine;
(c) All shares, when issued, shall be fully paid and non-assessable;
(d) The Board of Directors may restrict the transfer of any of the
Corporation's stock issued by giving the Corporation or any shareholder "first
right of refusal to purchase" the stock, by making the stock redeemable, or by
restricting the transfer of the stock under such terms and in such manner as the
directors may deem necessary and as are not inconsistent with the laws of the
State of Nevada. Any stock so restricted must carry a conspicuous legend noting
the restriction and the place where such restriction may be found in the records
of the Corporation; and
(e) The judgment of the Board of Directors as to the adequacy of any
consideration received or to be received for any shares, options, or any other
securities which the Corporation at any time may be authorized to issue or sell
or otherwise dispose of shall be conclusive in the absence of fraud, subject to
the provisions of these Articles of Incorporation and any applicable law.
3
<PAGE>
ARTICLE V
Board of Directors
The affairs of the Corporation shall be governed by a Board of Directors which
shall be organized and operate in accordance with the provisions of this
Article.
1. The number of Directors of the Corporation which shall constitute the whole
Board shall not be less than three Directors. The exact number of Directors
shall be fixed from time to time pursuant to a resolution adopted by a majority
of the entire Board of Directors. Each Director elected shall hold office until
his successor shall be elected and shall qualify.
2. Newly created Directorships resulting from any increases in the authorized
number of Directors shall be filled by a majority vote of the remaining
Directors, though less than a quorum, and the Directors so chosen shall hold
office for a term expiring at the next annual meeting of stockholders at which a
successor shall be elected and shall qualify.
3. Any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause, shall be
filled by the vote of a majority of the remaining Directors, though less than a
quorum, and the Directors so chosen shall serve for the unexpired term of this
predecessor in office.
4. The names and addresses of the members of the initial Board of Directors, who
shall hold office until the next annual meeting of the shareholders of the
Corporation or until their successors shall have been elected and qualified,
are:
Name Address
---- -------
Lori Ann Perri 500 Fifth Avenue, Suite 424
New York, NY 10110
Frank C. Magliato 500 Fifth Avenue, Suite 424
New York, NY 10110
ARTICLE V
Principal Place of Business
The principal office and the principal place of business of the Corporation in
Nevada initially shall be at 321 N. Walsh Street, Carson City, Nevada 89701. The
Board of Directors, however, from to time may establish such other offices,
branches, subsidiaries, or divisions which it may consider to be advisable.
4
<PAGE>
ARTICLE VI
Registered Office and Registered Agent
The address of the Corporation's initial registered office in Nevada for purpose
of the Private Corporations Law of Nevada, shall be at 321 N. Walsh Street,
Carson City, Nevada 89701 The name of the Corporation's initial registered agent
at the address of the aforesaid registered office shall be United Corporate
Services, Inc.
ARTICLE VIII
By-laws
Subject to the By-laws, if any, adopted by the shareholders, the Board of
Directors of the Corporation is expressly authorized to make, alter or repeal
the By-laws of the Corporation.
ARTICLE IX
Liability of Directors and Officers
No directors or officer of the Corporation shall be personally liable to the
Corporation or its shareholders for damages for breach of fiduciary duty as a
director or officer, save and except for:
(a) Acts if omissions which involve intentional misconduct, fraud or a
knowing violation of law; or
(b) The payment of dividends in violation of Nevada Revised Statutes
78.300.
ARTICLE X
Statutory Election
The Corporation hereby expressly elects not to be governed by the provisions of
Sections 78.411 through 78.444, inclusive, of the Nevada Private Corporations
Act to the extent that such sections may be otherwise applicable.
ARTICLE XI
Indemnification of Directors, Officers and Others
Except as may be set forth in the By-laws of the Corporation, the Corporation
shall have the right to indemnify any person for any liability or expenses
incurred by that person by reason of the fact that he was a director, officer,
employee or agent of the Corporation and has the right to advance or pay the
expenses of directors and officers in defending a civil or criminal suit or
proceeding to the full extent provided by the Private Corporations Law of
Nevada.
and be it:
5
<PAGE>
FURTHER RESOLVED, that the officers of the Corporation be and they are
authorized and directed to present the foregoing restatement and amendment of
the Corporation's Articles of Incorporation in their entirety be to the
shareholders of the Corporation for their consideration and approval and if duly
approved by the shareholders to take actions necessary and appropriate to
complete the filing and to achieve the effectiveness of the restatement and
amendment.
Executed this 8 day of April, 1996
/s/ Frank C. Magliato
-------------------------
Frank C. Magliato
6
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
OCT 09 1996
No. C.4011 - 87
Dean Heller
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF
RESTATED ARTICLES OF INCORPORATION
OF
PROMOTEL, INC.
We the undersigned, Frank C. Magliato, President, and Diego Roca,
Secretary, of Promotel, Inc., a Nevada corporation ("Corporation"), do hereby
certify as follows:
FIRST: That the Board of Directors, acting pursuant to their unanimous written
consent, did on April 3, 1996 adopt a resolution to amend and to restate the
Corporation's Articles of Incorporation in their entirety as follows:
RESTATED ARTICLES OF INCORPORATION
PROMOTEL, INC.
ARTICLE I
Name
The name of Corporation shall be Promotel, Inc.
ARTICLE II
Duration
The period of duration of the Corporation shall be perpetual.
ARTICLE III
Purpose
The purpose of the Corporation is to engage in any lawful act or activities for
which corporations may be organized under the Private Corporation Law of the
State of Nevada.
RECEIVED
OCT 09 1996
DEAN HELLER
- ------------------
SECRETARY OF STATE
1
<PAGE>
ARTICLE IV
Capital Stock
The authorized capital stock of the corporation shall be 101,000,000 shares
consisting of 100,000,000 shares of common stock with a par value of 0.001 per
share ("Common Stock") and 1,000,000 shares of preferred stock with a par value
of 0.001 share ("Preferred Stock").
The designation and the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions or redemption of the shares of each class of stock are as follows:
1. Preferred Stock
The Preferred Stock may be issued from time to time by the Board of Directors as
shares of one or more series.
The description of shares of each series of Preferred Stock, including any
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption shall be as set forth in resolutions and adopted by the Board of
Directors and filed as required by Nevada law from time to time prior to the
issuance of any shares of such series.
The Board of Directors is expressly authorized to issue, by adopting resolutions
providing for the issuance of, or providing for a change in the number of,
shares of any particular series of Preferred Stock and to set or change in any
one respects the designations, preferences conversion of other rights, voting
rights, restrictions, limitations as Notwithstanding the foregoing, the Board of
Directors shall not be authorized to change the right of the Common Stock of the
Corporation to vote one vote per share on all matters submitted for stockholder
action. The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not limited to, setting or changing the
following:
(a) the distinctive serial designation of such series and the number of
shares constituting such series (provided that the aggregate number of shares
constituting all series of Preferred Stock shall not exceed 1,000,000);
(b) the annual dividend rate on shares of such series, whether dividends
shall be cumulative and, if so, from which date or dates,
(c) whether the shares of such series shall be redeemable and, if so, the
terms and conditions of such redemption, including the date or dates upon and
after which such shares shall be redeemable, and whether the amount may vary
under different conditions and at different redemption dates;
(d) the obligation, if any, of the Corporation to redeem or repurchase
shares of such series pursuant to a sinking fund;
(e) whether shares of such series shall be convertible into, or
exchangeable for shares of stock of any other class or classes and, if so, the
terms and conditions or such conversion or exchange, including the price or
prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any,
(f) whether the shares of such series shall be voting rights in addition
to the voting provided by law, and if so, the terms of such voting rights,
(g) the rights of the shares of such series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation; and
2
<PAGE>
ARTICLE V
Board of Directors
The affairs of the Corporation shall be governed by a Board of Directors which
shall be organized and operate in accordance with the provisions of this
Article.
1. The number of directors of the Corporation which shall constitute the whole
Board shall not be less than three Directors. The exact number of Directors
shall be fixed from time to time pursuant to a resolution adopted by a majority
of the entire Board of Directors. each Director elected shall hold office until
his successor shall be elected and shall qualify.
2. Newly created Directorships resulting from any increases in the authorized
number of Directors shall be filled by a majority vote of the remaining
Directors, though less than a quorum, and the Directors so chosen shall hold
office for a term expiring at the next annual meeting of stockholders at which a
successor shall be elected and shall qualify.
3. Any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause, shall be
filled by the vote of a majority of the remaining Directors, though less than a
quorum, and the Directors so chosen shall serve for the unexpired term of
of this predecessor in office.
4. The names and addresses of the members of the initial Board of Directors, who
shall hold office until the next annual meeting of the shareholders of the
Corporation or until their successors shall have been elected and qualified,
are:
Name Address
---- -------
Lori Ann Perri 500 Fifth Avenue, Suite 424
New York, NY 10110
Frank C. Magliato 500 Fifth Avenue, Suite 424
New York, NY 10110
ARTICLE V
Principle Place of Business
The principal office and the principal place of business of the Corporation in
Nevada initially shall be at 321 N. Walsh Street, Carson City, Nevada 89701. The
Board of Directors, however, from time to time may establish such other offices,
branches, subsidiaries, or divisions which it may consider to be advisable.
4
<PAGE>
ARTICLE VI
Registered Office and Registered Agent
The address of the Corporation's initial registered office in Nevada for purpose
of the Private Corporations Law of Nevada, shall be at 3579 Highway 50 East,
Carson City, Nevada 89701. The name of the Corporation's initial registered
agent at the address of the aforesaid registered office shall be United
Corporate Service, Inc.
ARTICLE VIII
By-laws
Subject to the By-laws, if any, adopted by the shareholders, the Board of
Directors of the Corporation is expressly authorized to make, alter or repeal
the By-laws of the Corporation.
ARTICLE IX
Liability of Directors and Officers
No directors or offices of the Corporation shall be personally liable to the
Corporation or its shareholders for damages for breach of fiduciary duty as a
director or officer, save and except for:
(a) Acts if omissions which involve intentional misconduct, fraud or a
knowing violation of law; or
(b) The payment of dividends in violation of Nevada Revised Statutes
78.300.
ARTICLE X
Statutory Election
The Corporation hereby expressly elects not to be governed by the provisions of
Section 78.411 through 78.444, inclusive, of the Nevada Private Corporations Act
to the [ILLEGIBLE] that such sections may be otherwise applicable.
ARTICLE XI
Indemnification of Directors, Officers and Others
Except as may be set forth in the By-laws of the [ILLEGIBLE] Corporation shall
have the right to indemnify any person for any liability or expenses incurred by
that [ILLEGIBLE] by reason of the fact that was a director, officer, employee or
agent of the Corporation and has the right to advance or pay the expenses of
directors and others in defending a civil or criminal suit or proceeding to the
full [ILLEGIBLE] provided by the Private Corporations Law of Nevada.
and be it;
5
<PAGE>
FURTHER RESOLVED, that the officers of the Corporation be and they authorized
and directed to present the foregoing restatement and amendment of the
Corporation's Articles of Incorporation in their entirety be to the shareholders
of the Corporation for their consideration and approval and if duly approved by
the shareholders to take actions necessary and appropriate to complete the
filing and to achieve the effectiveness of the restatement and amendment.
SECOND: The Corporation's only class of capital stock issued, outstanding and
entitled to vote in the amendment and restatement of its Articles of
Incorporation is 8,354,250 shares of common stock; and that the foregoing
amendment and restatement of the Corporation's Articles of Incorporation was
duly approved and adopted by the written consent of the stockholders owing
8,320,000 of the outstanding shares.
Executed on the date(s) set forth below.
Date: September 9, 1996 /s/ Frank C. Magliato
----------------------
Frank C. Magliato
President
Date: September 9, 1996 /s/ Diego Roca
----------------------
Diego Roca
Secretary
State of New York )
)ss
County of New York )
On September 9, 1996, personally appeared before me, a Notary Public,
Frank C. Magliato, who acknowledged that he executed the above Certificate of
Restated Articles of Incorporation of Promo Tel, Inc. as its President.
/s/ Zulma A. Bodon
----------------------
Signature of Notary
(Notary Seal)
ZULMA A. BODON
Notary Public, State of New York
No. 5007137
Qualified in Queens County
Commission Expires 1/19/97
State of New York )
)ss
County of New York )
My Commission expires: January 19, 1997
On September 9, 1996, personally appeared before me, a Notary Public,
Diego Roca, who acknowledged that he executed the above Certificate of Restated
Articles of Incorporation of Promo Tel, Inc. as its Secretary.
/s/ Zulma A. Bodon
----------------------
Signature of Notary
(Notary Seal)
ZULMA A. BODON
Notary Public, State of New York
No. 5007137
Qualified in Queens County
Commission Expires 1/19/97
My Commission expires: January 19, 1997
6
<PAGE>
FILED
THE OFFICE OF
SECRETARY OF STATE
STATE OF NEVADA
OCT 09 1996
No. C4011-87
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
THIS FORM SHOULD ACCOMPANY RESTATED ARTICLES (PURSUANT TO NRS 78.403 (b))
OF INCORPORATION FOR A NEVADA CORPORATION
1. Name of corporation PromoTel, Inc.
2. Date of adoption of Amendment and Restated Articles April 3, 1996
3. If the articles were amended, please indicate what changes have been made:
(a) Was there a name change? Yes |_| No |x| If yes, what is the new
name?
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(b) Did you change the resident agent? Yes |_| No |x| If yes, please
indicate the new resident agent and address.
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Please attach the resident agent acceptance certificate.
(c) Did you change the purposes.? Yes |_| No |_| Did you add
Banking? |_| Gaming? |_| Insurance? |_| None of these? |x|
(d) Did you change the capital stock? Yes |_| No |x| If yes, what is the
new capital stock?
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(e) Did you change the directors? Yes |_| No |x| If yes, indicate the
change:
(f) Did you add the directors liability provision? Yes |x| No |_|
(g) Did you change the period of existence? Yes |_| No |x| If yes, what
is the new existence?
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(h) If none of the above apply, and you have amended or modified the
articles, how did you change your articles?
In addition to the above change listed in (F) preemptive rights were
denied in articles 3 (b).
/s/ Diego E. Roca October 3, 1996
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Name and Title of Office Date
Diego E. Roca Secretary
State of New York )
)ss
County of New York )
On October 3, 1996, personally appeared before me, a Notary Public,
Diego E. Roca, who acknowledged [ILLEGIBLE] he/she executed the
above instrument.
[ILLEGIBLE] (Notary Stamp or Seal) /s/ Alex Karminski
--------------------------------
Notary Public
ALEX KARMINSKI
Notary Public, State of New York
No. 31-4526180
<PAGE>
STATE OF NEVADA
Secretary of State
I hereby certify that this is a
true and complete copy of
the document as filed in this
office.
OCT 29 '96
/s/ Dean Heller
DEAN HELLER
Secretary of State
By /s/ [illegible]
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
OCT 15, 1996
[illegible]
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
PROMOTEL, INC.
We, the undersigned, Frank C. Magliato, President, and Diego Roca,
Secretary, of PromoTel, Inc., a Nevada corporation ("Corporation "), do hereby
certify as follows:
FIRST: That the Board of Directors, acting pursuant to their unanimous written
consent, did on September 12, 1996 adopt a resolution to amend the Corporation's
Articles of Incorporation as follows:
RESOLVED, that Article I of the Corporation's Articles of Incorporation be
amended to read as follows:
"ARTICLE I
Name
The name of the Corporation shall be DigiTec 2004, Inc." and be it:
FURTHER RESOLVED, that the outstanding common stock of the Corporation
("Common Stock") , as of the Record Date hereinafter provided for, shall be
adjusted and decreased in a reverse stock split so that each six shares of
Common Stock outstanding as of the Record Date shall become one share of Common
Stock as of the close of business on the Record Date subject to and in
accordance with the following:
(1) All shares held by holders having less than 30 shares of Common Stock
as of the Record Date shall be canceled ("Canceled Shares") and the Corporation
shall issue a check to the holders thereof in payment for the Canceled Shares in
an amount equal to the "Cancellation Price" (hereinafter defined) times the
number of shares, or fractional share, which the holder would otherwise have
been entitled to after dividing the number of Canceled Shares by six, with the
payment to be made by the Corporation upon its receipt of the certificate(s)
representing the Canceled Shares;
<PAGE>
(2) No fractional shares will be issued or created in this stock split and
each holder of 30 shares or more of Common Stock as of the Record Date who would
be entitled to a fractional share after dividing the number of shares held prior
to the stock split by six shall be credited with and entitled to a full share in
lien of the fractional share:
(3) The Cancellation Price shall be the moving average of the average mean
price between the bid and the ask quotations appearing for the Common Stock on
the NASDAQ Bulletin Board quotations system for the five consecutive trading
days prior to the Record Date.
(4) The Record Date as determined by action of the Board of Directors
after approval of this resolution by the Corporation's shareholders and set
forth in this Certificate of Amendment to the Articles of Incorporation to be
filed with the Nevada Secretary of State is October 18, 1996, and be it
FURTHER RESOLVED, that the Board of Directors and the officers of the
Corporation be and they hereby are authorized and directed to take all actions
necessary and appropriate to complete the name change and stock split which are
the subject of this resolution.
SECOND: The Corporation's only class of capital stock issued outstanding and
entitled to vote on the amendment to its Articles of Incorporation is common
stock; and that the foregoing amendment of the Corporation's Articles of
Incorporation was duly approved and adopted by the written consent of the
stockholders owing more than a majority of the outstanding shares.
Executed on the date(s) set forth below
Date: October 10, 1996
Date: October 10, 1996
State of New York )
) ss
County of New York )
/s/ Frank C. Magliato
- ---------------------
Frank C. Magliato
President
/s/ Diego Roca
- ---------------------
Diego Roca
Secretary
On October 10, 1996, personally appeared before me, a Notary Public, Frank
C. Magliato, who acknowledged that he executed the above Certificate of
Amendment to Articles of Incorporation of Promo Tel, Inc. as its President
(Notary Seal)
[notary seal omitted]
My Commission expires
/s/ Alex [illegible]
Signature of Notary
<PAGE>
STATE OF NEVADA
Secretary of State
I hereby certify that this is a
true and complete copy of
the document as filed in this
office.
OCT 29 '96
/s/ Dean Heller
DEAN HELLER
Secretary of State
By /s/ [illegible]
AMENDED AND RESTATED
BYLAWS
OF
DIGITEC 2000, INC.
ARTICLE I
OFFICES
Section 1. Business Offices.
The principal office of the Corporation shall be located in Carson City,
Nevada. The Corporation may also have offices at such other places both within
and without the State of Nevada as the Board of Directors may from time to time
determine or the business of the Corporation may require.
Section 2. Registered Office.
The registered office of the Corporation shall be in Carson City Nevada.
The registered office may be changed from time to time by the Board of
Directors.
ARTICLE II
SHAREHOLDERS' MEETINGS
Section 1. Place:
The place of the shareholders' meetings shall be the principal office of
the Corporation unless some other place either within of without of the State of
Nevada shall be determined and designated from time to time by the Board of
Directors.
Section 2. Annual Meeting.
The annual meeting of the shareholders of the Corporation for the election
of directors to succeed those whose terms expire, and for the transaction of
such other business as may properly come before the meeting, shall be held each
year on the third Monday in November beginning in the year 1996.
If the annual meeting of the shareholders is not held, or if held and
directors shall not be elected for any reason, then the election of directors
may be held at any meeting of shareholders thereafter called pursuant to these
Bylaws and the laws of the State of Nevada.
Section 3. Special Meetings.
Special meetings of the shareholders for any purpose or purposes may be
called by the President, the Board of Directors, or the holders of twenty-five
(25) percent or more of all the shares entitled to vote at such meeting, by the
giving of notice in writing as hereinafter described.
1
<PAGE>
Section 4. Voting:
At all meetings of shareholders, voting may be viva voce; but any
qualified voter may demand a stock vote, whereupon such vote shall be taken by
ballot and the Secretary shall record the name of the shareholder voting, the
number of shares voted, and if any such vote shall be in person or by proxy
appointed in writing, manually signed by the shareholder or his duly authorized
attorney-in-fact. No proxy shall be valid after 11 months from the date of its
execution, unless otherwise provided therein.
Each shareholder shall have such rights to vote as the Articles of
Incorporation provide for each share of stock registered in his name on the
books of the Corporation, except where the transfer books of the Corporation
shall have dosed or a date shall be faxed as a record date, not to exceed, in
any case, 60 days preceding the meeting, for the determination of shareholders
entitled to vote.
Section 5. Order of Business
The order of business at any meeting shall be as follows:
1. Calling the meeting to order.
2. Calling of roll.
3. Proof of notice of meeting.
4. Report of the Secretary of the stock represented at the meeting
and the determination of the existence or lack of a quorum.
5. Reading of minutes of last previous meeting and disposal of any
unapproved minutes.
6. Reports of officers.
7. Reports of committee.
8. Election of directors, if appropriate.
9. Unfinished business.
10. New business.
11. Adjournment.
To the extent that these Bylaws do not apply, Roberts' Rules of Order
shall prevail.
Section 6. Notices:
Written or printed notice stating the place, day, and hour of the meeting
and, in case of a special meeting, the purpose for which the meeting is called,
shall be delivered not less than 10 nor more than 60 days before the date of the
meetings, either personally or by mail, by or at the direction of the President,
the Secretary, or the officer or persons calling the meeting, to each
shareholder or record entitled to vote at such meeting. Notice to shareholders
of record, if mailed, shall be deemed delivered as to any shareholder of record
when deposited in the United States mail, addressed to the shareholder at his
address as it appears on the stock transfer books of the Corporation, with
postage pre-paid. If three successive letters mailed to the last known address
of any shareholder of record are returned as undeliverable, no further notices
to such shareholder shall be necessary until another address for such
shareholder is made known to the Corporation.
2
<PAGE>
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjournment meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is faxed for the adjournment meeting, a notice of
the adjourned meeting shall be given to each shareholder of record entitled to
vote at the meeting.
Section 7. Quorum:
A quorum at any annual or special meeting shall consist of the
representation in person or by proxy of a majority in number of the shares of
outstanding capital stock of the Corporation entitled to vote at such meeting,
and the vote of a majority of the quorum shall be the act of the shareholders
unless the vote of a greater number, or voting by classes, is required by the
laws of the state of Nevada or the Articles of Incorporation. In the event a
quorum be not present, the meeting may be adjourned by those present for a
period not to exceed 60 days at any one adjournment. The shareholders entitled
to vote, present either in person or by proxy at such adjourned meeting, shall,
if equal to one-half of the shares entitled to vote at the meeting, constitute a
quorum, and the vote of a majority of the quorum shall be the act of the
shareholders at such adjourned meeting unless the vote of a greater number, or
voting by classes, is required by the laws of the state of Nevada or the
Articles of Incorporation.
Section 8. Action by Shareholders Without a Meeting:
Any action which may be taken at a meeting may be taken without a meeting
if authorized by the written consent of shareholders holding at least a majority
of the voting power, except that if any greater proportion of voting power is
required for any specific action at a meeting, then the greater proportion of
written consents is required. For a written consent to be valid it must be: (a)
signed by the shareholder; (b) dated as to signature; and (C) delivered to the
Corporation in the legally prescribed manner.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Organization and Powers:
The Board of Directors shall constitute the policymaking of legislative
authority of the Corporation. Management of the affairs, property and business
of the Corporation shall be vested in the Board of Directors, which shall
consist of not less than two, nor more than seven members, who shall be elected
at the annual meeting of shareholders by a plurality vote for a term of one
year, and shall not hold office until their successors are elected and qualify.
Directors need not be shareholders of the Corporation nor residents of Nevada.
Directors shall have all powers with respect to the management, control and
determination of policies of the Corporation that are not limited by these
Bylaws, the Articles of Incorporation, or the statutes of the State of Nevada
and the enumeration of any power shall not be considered a limitation thereof.
Section 2. Vacancies:
Any vacancy in the Board of Directors, however caused or created, shall be
filled by the affirmative vote of a majority of the remaining directors, though
less than a quorum of the Board, or at a special meeting of the shareholders
called for that purpose. The directors elected to fill vacancies shall hold
office for the unexpired term and until their successors are elected and
qualify.
3
<PAGE>
Section 3. Regular Meetings:
A regular meeting of the Board of Directors shall be held, without other
notice than this Bylaw, immediately after and at the same place as the annual
meeting of shareholders or any special meeting of shareholders at which a
director or directors shall have been elected. The Board of Directors may
provide by resolution the time and place, either within or without the State of
Nevada, for the holding of additional regular meetings without other notice than
such resolution.
Section 4. Special Meetings:
Special meetings of the Board of Directors may be held at the principal
office of the Corporation, or such other place as may be faxed by resolution of
the Board of Directors for such purpose, at any time on call of the President or
of any member of the Board, or may be held at any time and place without notice,
by unanimous written consent of all the members, or with the presence and
participation of all members at such meeting.
Section 5. Notices:
Notices of both regular and special meetings, when held by unanimous
consent or participation, shall be mailed or delivered by the Secretary to each
member of the Board not less than two days before any such meeting and notices
of special meetings may state the purposes thereof. No failure or irregularity
of notice of any regular meeting shall invalidate such meeting or any proceeding
thereat.
Section 6. Quorum and Manner of Acting:
A quorum for any meeting of the Board of Directors shall be a majority of
the Board of Directors as then constituted. Any act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. Any action of such majority, although not at a regularly
called meeting, and the record thereof, if assented to in writing by all of the
other members of the Board, shall always be as valid and effective in all
respects as if otherwise duly taken by the Board of Directors.
Section 7. Committees:
The Board of Directors may, by resolution of a majority of the full Board,
designate two or more directors to constitute an Executive Committee and one or
more other committees, each of which shall have and may exercise, to the extent
provided in such resolutions, all of the authority of the Board of Directors in
the management of the Corporation, except that no such committee shall have the
authority to declare dividends or distributions; approve or recommend to
shareholders actions or proposals required by the laws of the State of Nevada to
be approved by shareholders; fill vacancies on the Board of Directors or any
committee thereof; amend the Corporation's Bylaws; approve a plan of merger not
requiring the shareholder approval; reduce earned or capital surplus; authorize
or approve the reacquisition of shares unless pursuant to a general formula or
method specified by the Board of Directors pursuant to the laws of the State of
Nevada; or authorize or approve the issuance or sale of, or any contract to
issue or sell, shares or designate the terms of a series of a class of shares.
Neither the designation of any such committee, the delegation of authority
to such committee, on or any action by such committee pursuant to its authority
shall alone constitute compliance by any member of the Board of Directors, nor
any member of the committee in question, with his responsibility to act in good
faith, in a manner he reasonably believes to be in the best interests of the
Corporation, and with such care as an ordinary prudent person in a like position
would use under similar circumstances.
4
<PAGE>
Section 8. Action by Directors Without A Meeting:
Any action required to be, or which may be, taken at a meeting of the
Board of Directors, Executive Committee or other committee or the directors, may
be taken without a meeting if one or more written consents setting forth the
action so taken is signed by all directors or committee members entitled to vote
with respect to the subject matter thereof, and delivered to the Secretary of
the Corporation for inclusion in the corporate records. Such action is effective
when all directors or committee members have signed the consent, unless the
consent specifies a different effective date.
Section 9. Order of Business:
The order of business at any regular or special meeting of the Board of
Directors, unless otherwise prescribed for any meeting by the Board, shall be as
follows:
1. Reading and disposal of any unapproved minutes.
2. Reports of officers and committees.
3. Unfinished business.
4. New business.
5. Adjournment.
To the extent that these Bylaws do not apply, Roberts' Rules of Order
shall prevail.
Section 10. Remuneration:
No state salary shall be paid to directors for their services as such,
but, by resolution of the Board of Directors, a faxed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board. Members of special or standing committees may be allowed
like compensation for attending meetings. Nothing herein contained shall be
construed to preclude any director from receiving compensation for serving the
Corporation in any other capacity, subject to such resolutions of the Board of
Directors as may then govern receipt of such compensation.
Section 11. Telephone Meetings.
The members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of such Board or committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting in such a manner shall constitute presence in person
at the meeting.
ARTICLE IV
OFFICERS AND AGENTS
Section 1. Number and Qualifications.
The officers of the Corporation shall be a Chairman of the Board, a President, a
Secretary, a Treasurer. The Board of Directors may also elect or appoint such
other officers, assistant officers and agents, including a Vice-Chairman,
Vice-Chairman of the Board, one or more Vice-Presidents, a Controller, Assistant
Secretaries and Assistant Treasurers, as the may consider necessary. Any number
of offices may be held by the same person, except that no person may
simultaneously hold the officers of President and Secretary.
5
<PAGE>
Section 2. Election and Term of Office.
The officers of the Corporation shall be elected by the Board of Directors
annually at the first meeting of the Board held after each annual meeting of the
stockholders. If the election of officers hail not be held after each annual
meeting, such election shall be held as soon thereafter as conveniently may be.
Each officer shall hold office until his successor shall have been duly elected
and qualified or until his earlier death, resignation or removal.
Section 3. Salaries.
The salaries of the officers shall be as fixed from time to time by the
Board or Directors and no officer shall be prevented from receiving a salary by
reason of the fact that he is also a Director of the Corporation.
Section 4. Removal.
Any officer or agent elected or appointed by the Board of Directors may be
removed at any time by the Board whenever in its judgment the best interest of
the Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not in itself create contract rights.
Section 5. Vacancies.
Any officer may resign at any time, subject to any rights or obligations
under any existing contracts between the officer and the Corporation, by giving
written notice to the Corporation. Any officer's resignation shall take effect
at the time specified in such notice; and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Any vacancy occurring in any office by the death, resignation, removal or
otherwise shall be filled by the Board of Directors for the unexpired portion of
the term.
Section 6. Authority and Duties of the Officers.
The officers of the Corporation shall have the authority and shall
exercise the powers and perform the duties specified below and as may be
additionally specified by the Chairman of the Board, the President, the Board of
Directors or by the Bylaws, except that in any event such officer shall exercise
such powers and perform such duties as may be required by law:
(a) Chairman of the Board. The Chairman of the Board shall be the chief
executive officer of the Corporation. Subject to the direction and supervision
of the Board of Directors; he shall (i) have primary authority with respect to
all matters regarding corporate policy; (ii) supervise and control the business
of the Corporation, its officers and employees; (iii) preside at all meetings of
the Corporation's stockholders and Board of Directors; and (iv) perform such
other duties as may be assigned to him from tine to time by the Board of
Directors.
(b) President. The President, subject to the direction and supervision of
the Board of Directors, shall (i) supervise the day to day operations of the
Corporation, (ii) in the absence of the Chairman of the Board, preside at all
meetings of the stockholders and Board if Directors; (iii) be the chief
operation officer of the Corporation and perform the duties of and have all the
powers of and be subject to all of the restrictions upon the Chairman of the
Board in the event of the vacancy of the office of Chairman of the Board, in
which case the provision of the this subject (ii) shall apply to him; (iv)
perform all other duties incident to the office of the President and as from
time to time may be assigned to him by the Chairman of the Board or by the Board
of Directors.
6
<PAGE>
(c) Vice- Presidents. The Vice-President, if any, (or if there is more
than one then each Vice-President) shall assist the President shall perform such
duties as may be assigned to him by the President, the Chairman of the Board or
the Board of Directors. The Vice-President if there is one (or if there is more
than one, the Vice-President designated by the Board of Directors, or if there
is no such designation then the Vice-Presidents in order of their election),
shall, at the request of the President or in his absence or inability or refusal
to act, perform the duties of the President, and when so acting shall have all
of the powers of and be subject to all of the restrictions upon the President.
(d) Secretary. The Secretary shall: (i) keep the minutes of the
proceedings of the stockholders, the Board of Directors and any committees of
the Board; (ii) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (iii) be custodian of the
Corporate records and the seal of the Corporation; (iv) keep at the
Corporation's registered office or principal place of business a record
containing the names and addresses of all shareholders and the number and class
of shares held by each, unless such record shall be kept at the office of the
Corporation's transfer agent or registrar; (v) have general charge of the stock
books of the Corporation, unless the Corporation has a transfer agent; and (vi)
in general, perform all duties incident to the office of Secretary and such
other duties as from time to time may be assigned to him by the Chairman of the
Board, the President or the Board of Directors. Assistant Secretaries, if any,
shall have the same duties and powers, subject to supervision by the Secretary.
(e) Treasurer. The Treasurer shall: (i) be the principal financial officer
of the Corporation and have care and custody of all its funds, securities,
evidences of indebtedness and other personal property and deposit the same in
accordance with the instructions of the Board of Directors; (ii) receive and
give receipts and acquittances for monies paid in on account of the Corporation,
and pay out of the funds on hand all bills, payrolls and other just debts of the
Corporation of whatever nature of maturity; (iii) unless there is a controller,
be the principal accounting officer of the Corporation and as such prescribe and
maintain the methods and systems of accounting to be followed, keep complete
books and records of account, prepare and file all local, state and federal tax
returns, prescribe and maintain an adequate system of internal audit, and
prepare and furnish to the Chairman of the Board and the Board of Directors
statements of account showing the financial position of the Corporation and the
Results of its. operations; (iv) upon request of the board, make such reports to
it as may be required at any time; and (v) perform all other duties incident to
the office of Treasurer and such other duties as from time to time may be
assigned to him by the Chairman of the Board, the President or the Board of
Directors. Assistant Treasurers, if any, shall have the same powers and duties,
subject to supervision by the treasurer.
Section 8. Surety Bonds.
The Board of Directors may require any officer or agent of the Corporation
to execute to the Corporation a bond in such sums and with such sureties as
shall be satisfactory to the Board, conditioned upon the faithful performance of
his duties and for the restoration Of the Corporation of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
ARTICLE V
STOCK
Section 1. Certificates of Shares.
Each holder of stock of the Corporation shall be entitled to a stock
certificate signed by the President (or Vice-President if one is appointed) and
also by the Secretary or an assistant Secretary of the Corporation. The
certificates of shares shall be in such a form not inconsistent with the
Articles of Incorporation, as shall be prepared or approved by the Board of
Directors. All certificates shall be consecutively numbered. Each certificate
shall state upon its face that the Corporation is organized
7
<PAGE>
under the laws of the state of Nevada; the name of the person to whom issued;
the number and class of shares and the designation of the series, if any, which
such certificate represents; par value of each share represented by the
certificate, or a statement that the shares are without par value. The name of
the person owing the shares represented thereby, with the number of such shares
and the date of issue, shall be entered on the Corporation's books, and no
certificate shall be valid unless it be signed by the proper officers as set
forth above. The seal of the Corporation, or a facsimile thereof, may be affixed
to the stock certificates. The signatures of officers as above described on any
such certificate may be facsimiles of the certificate is countersigned by a
transfer agent or registered by a registrar both of which may be the
Corporation-itself or an employee of the Corporation.
Section 2. New Certificates:
All certificates surrendered to the Corporation shall be canceled and no
new certificates shall be issued, except to evidence transfer of stock from the
unissued stock or treasury of the Corporation, or in case of a lost certificate,
except upon posting of a bond of indemnity in such form and with such surety or
sureties and for such amount as shall be satisfactory to the Directors and upon
producing by affidavit or otherwise such evidence of loss or destruction as the
Board may require, until the former certificates for the same number of shares
have been surrendered and canceled.
Section 3. Transfer of Shares.
Shares in the capital stock of the Corporation shall be transferred only
on the books of the Corporation by the holder thereof in person, or by the
holder's attorney, upon surrender and cancellation of certificates for a like
number of shares. The delivery of a certificate of stack of this Corporation to
a bona fide purchaser or pledgee for value, together with a written transfer of
the same or a written power of attorney to sell, assign and transfer the same,
signed by the owner of the Certificate, shall be sufficient delivery to transfer
title against persons except the Corporation. No transfer of stock shall be
valid against the Corporation until it has been registered upon the books of the
Corporation.
Section 4. Closing of Transfer Books or Provisions for Record Date:
For purposes of determining shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of dividends, the stock transfer books may be closed by the
Board of Directors for a period not exceeding 60 days prior to such action. In
lieu of closing the stock transfer book, the Board of Directors may fax in
advance a day not less than 10 nor more than 60 days prior to the holding if any
such meeting of shareholders, or payment of dividends, as the day as of which
shareholders entitled to notice of and vote at such meetings, or to payment of
dividends, as the case may be, shall be determined.
Section 5. Regulations:
The Board of Directors shall have the power and authority to take all
action they deem expedient concerning the issue, transfer and registration of
certificates for shares of capital stock of the Corporation. The Board of
Directors may appoint a transfer agent and a registrar and may require all stock
certificates to bear the signature of such registrar.
Section 6. Restriction on Stock:
The Board or Directors may restrict any stock issued by giving the
Corporation of any shareholder "first right of refusal to purchase" the stock,
by making the stock redeemable or by restricting the transfer of the stock,
under such terms and in such manner as the Directors deem necessary and as are
not inconsistent with the Articles of Incorporation or the Nevada Corporation
Code. Any stock so restricted must carry a stamped legend setting out the
restriction or conspicuously noting the restriction and stating where it may be
found in the records of the Corporation.
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<PAGE>
ARTICLE VI
DIVIDENDS AND FINANCES
Section 1. Dividends:
Dividends may be declared by the Directors and paid out of any funds
legally available therefor under the Nevada Corporation Code, as may be deemed
advisable for time to time by the Board of Directors of the Corporation. Before
declaring any dividends, the Board of Directors may set aside out of net profits
as a reserve fund to meet contingencies or for other purposes deemed proper and
to the best interests of the Corporation.
Section 2. Monies:
The monies, securities and other valuable effects of the Corporation shall
be deposited in the name of the Corporation shall be deposited in the name of
the Corporation in such banks or trust companies as the Board of Directors shall
be designate and shall be drawn out or removed only as may be authorized by the
Board of Directors form time to time.
Section 3. Fiscal Year
Unless and until the Board of Directors by resolution shall determine
otherwise, the fiscal year of the Corporation shall begin on the first day of
July and end on the last day of June each year.
ARTICLE VII
SEAL
The Board of Directors shall provide a corporate seal which shall be in
the form of a circle and shall have inscribed thereon the name of the
Corporation and the words "SEAL, NEVADA," and shall be entrusted in the care of
the Secretary of such other officer of the Corporation as the Board of Directors
shall designate.
ARTICLE VIII
NOTICES
Section 1. Requirements:
Whenever a notice shall be required by the laws of Nevada or by these
Bylaws, such notice may be given in writing by depositing the same in the United
States mails in a postpaid, seal envelope addressed to the person for whom such
notice is intended to his or her home or other address, as the same shall appear
on the stock transfer books of the Corporation. A waiver of any notice in
writing, signed by a stockholder, director or officer, whether before, at or
after the time stated in such waiver for holding a meeting, shall be deemed the
equivalent of duly giving such notice.
Section 2. Waiver
By attending a meeting, a shareholder; (a) waives objection to lack of
notice or defective notice of such meeting unless the shareholder at the
beginning of the meeting, objects to the holding of the meeting or the
transacting of business at the meeting; (b) waives objection to consideration at
such meeting of a particular matter not within the purpose or purposes described
in the meeting notice unless the shareholder objects to considering the matter
when it is presented.
9
<PAGE>
By attending or participating in a regular or special meeting, a director
waives any required notice of such meeting unless the director, at the beginning
of the meeting, objects to the holding of the meeting or the transacting of
business at the meeting.
Section 3. Ratification:
The ratification or approval in writing of the minutes of any meeting of
shareholders, directors or officers shall have the same force and effect as if
the ratifying party were present in person and participated is said meeting.
ARTICLE IX
AMENDMENTS
Subject to repeal or change by action of the shareholders, or unless the
shareholders in amending or repealing a particular Bylaw expressly provide that
the Board or Directors may not amend or repeal such Bylaw, these Bylaws may be
altered, amended or repealed by resolution of a majority of the Board.
ARTICLE X
INDEMNIFICATION
Section 1. Definitions:
For the purpose of this Article X, the following terms shall have the
meanings set forth below:
(a) "Corporation" includes the Corporation and any domestic or
foreign predecessor entity of the Corporation in a merger, consolidation or
other transaction in which the predecessor's existence ceased upon consummation
of the transaction.
(b) "Director" means an individual who is or was a Director of the
Corporation and an individual who, while a director of the Corporation, is or
was servings at the Corporation's request as a Director, Officer, partner,
Trustee, Employee, or Agent of any other foreign or domestic corporation or of
any partnership, joint venture, trust, other enterprise or employee benefit
plan. A Director shall be considered to be serving an employee benefit plan at
the Corporation's request if his duties to the Corporation also impose duties on
or otherwise involve services by him to the plan or to participants in or
beneficiaries of the plan.
(c) "Expenses" include attorney fees.
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expense incurred with respect to a proceeding.
(e) "Official capacity", when used with respect to a director, means
the office of Director of the Corporation, and, when used with respect to an
individual other than a Director, means the office of the Corporation held by
the Officer or the employment or agency relationship undertaken by the employee
or agent on behalf of the Corporation. "Official capacity" does not include
service for any other foreign or domestic corporation or for any partnership,
joint venture, trust other enterprise or employee benefit plan.
(f) "Party" includes an individual who was, is, or is threatened to
be made a named defendant in a proceeding.
10
<PAGE>
(g) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative and
whether formal or formal.
Section 2. Permissive Indemnification:
(a) Except as provided is paragraph (d) of this Section 2,
the Corporation may indemnify against liability incurred in any proceeding an
individual made a party to the proceeding because he is or was a director if:
(i) he conducted himself in good faith; (ii) he reasonable believed: (A) in the
case of conduct in his official capacity with the Corporation, that his conduct
was in the Corporation's best interests; or (B) in all other cases, that his
conduct was at least not opposed to the Corporation's best interests; and (iii)
in the case of any criminal proceeding, he had no reasonable cause to believe
his conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan
for a purpose he reasonably believed to be in the interest of the participants
in or beneficiaries of the plan is conduct that satisfies the requirements of
subparagraph (B) of subparagraph (ii) of paragraph (a) of this Section 2. A
Director' s conduct with respect to any employee benefit plan for a purpose that
did not reasonably believe to be in the interests of the participants in or
beneficiaries of the plan shall be deemed not to satisfy the requirements of
subparagraph (i) of paragraph (a) of this Section 2.
(c) The termination of any proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, is not of
itself determinative that the individual did not meet the standard of conduct
set forth in paragraph (a) of this Section 2.
(d) The Corporation many not indemnify a director under this Section
2 either: (i) in connection with a proceeding by or in the right of the
Corporation in which the Director was adjudged liable to the Corporation; or
(ii) in connection with any proceeding charging improper personal benefit to the
Director, whether or not involving action in his official capacity, in which he
was adjudged liable on the basis that personal benefit was improperly received
by him.
(e) Indemnification permitted under this Section 2 in connection
with a proceeding by or in the right of the Corporation is limited to reasonable
expenses incurred in connection with this proceeding.
Section 3. Mandatory Indemnification:
Unless limited by the Articles of Incorporation, the Corporation shall be
required to indemnify a person who is or was a Director of the Corporation and
who was wholly successful, on the merits or otherwise, in defense of any
proceeding to which he was a party against reasonable expenses incurred by him
in connection with the proceeding.
Section 4. Court-Ordered Indemnification:
Unless limited by the Articles of Incorporation, a director who is or was
party to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers necessary,
may order indemnification in the following manner:
(a) If it is determined the Director is entitled to mandatory
indemnification under Section 3, the court shall order indemnification, in which
case the court shall also order the Corporation to pay the Director's reasonable
expenses incurred to obtain court-ordered indemnification.
(b) If it determines that the Director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances, whether
or not the Director met the standard of conduct set forth in paragraph (a) of
Section 2 or was adjudged liable in the circumstances described in
11
<PAGE>
paragraph (d) of Section 2, the court may order such indemnification as the
court deems proper; except that the indemnification with respect to any
proceeding in which liability Shall have been judged in the circumstances
described in paragraph (d) of Section 2 is limited to reasonable expenses
incurred.
Section 5. Determination:
(a) The Corporation may not indemnify a Director under Section 2
unless authorized in the specific case after a determination has been made that
indemnification of the Director is permissible in the circumstances because he
has met the standard of conduct set forth in paragraph (a) of Section 2.
(b) The determination required to be made by paragraph (a) of this
Section 5 shall be made: (i) by the Board of Directors by a majority vote of a
quorum, which quorum shall consist of Directors not parties to the proceeding;
or (ii) if a quorum cannot be obtained, by a majority vote of a committee of the
Board designated by the Board, which committee shall consist of two or more
directors not parties to the proceeding; except that directors who are parties
to the proceeding may participate in the designation of Directors for the
committee.
(C) If the quorum cannot be obtained or the committee cannot be
established under paragraph (b) of this Section 5, or even if a quorum is
obtained or a committee designated if such quorum or committee so directs, the
determination required to be made by paragraph (a) or this Section 5 shall be
made; (i) by independent legal counsel selected by a vote of the Board of
Directors or the committee in the manner specified in subparagraph (i) or (ii)
of paragraph (b) of this Section 5, or, if a quorum of the full Board cannot be
obtained and a committee cannot be established, by independent legal counsel
selected by a majority vote of the full Board; or (ii) by the shareholders.
(d) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible; except that, if the determination that
indemnification is permissible is made by independent legal counsel,
authorization of indemnification and evaluation as to reasonableness of expenses
shall be made by the body that selected said counsel.
Section 6. Payment in Advance.
(a) The Corporation may pay for or reimburse the reasonable expenses
incurred by a Director who is a party to the proceeding in advance of the final
disposition of the proceeding if: (i) the director furnishes the Corporation
with a written affirmation of his good-faith belief that he has met the standard
of conduct described in subparagraph (i) of paragraph (a) of Section 2; (ii) the
director furnishes the Corporation with a written undertaking, executed
personally or on behalf, to repay the advance if it is determined that he did
not meet such standard of conduct; (iii) a determination is made that the facts
then known to those making the determination would not preclude indemnification
under this Section 6.
(b) The undertaking required by subparagraph (ii) of paragraph (a)
of this Section 6 shall be an unlimited general obligation of the Director, but
need not be secured and may accepted without reference to financial ability to
make repayment.
Section 7. Indemnification of Officers, Employees, and Agents:
Unless limited by the Articles of Incorporation:
(a) An officer of the Corporation who is not a Director is entitled
to mandatory indemnification pursuant to Section 3 of this Article X and is
entitled to apply for court-ordered indemnification pursuant to Section 4 of
this Article X in each case to the same extent as a Director:
12
<PAGE>
(b) The Corporation may indemnify and advance expenses pursuant to
Section 6 of this Article X to an officer, employee or agent of the Corporation
who is not a Director to the same extent as a Director; and
(c) The Corporation may purchase and maintain insurance on behalf of
an individual who is or was a Director, Officer, employee, fiduciary or agent of
the Corporation and who, while a Director, Officer, employee, fiduciary or agent
of the Corporation, is or was serving at the request of the Corporation as a
Director Officer, partner, trustee, employee, fiduciary or agent of any other
foreign or domestic corporation or of any partnership joint venture, trust,
other enterprises or employee benefit plan against any liability asserted
against or incurred by him in any such capacity or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this section.
Section 9. Notice to Shareholders:
Any indemnification of or advance of expenses to a director in accordance
with this Article X, if arising out of a proceeding by or on behalf of the
Corporation, shall be reported in writing to the shareholders with or before the
notice of the next shareholders' meeting.
CERTIFICATE
I do hereby certify that I am Secretary of DigiTEC 2000, Inc., and I do
hereby certify that the above and foregoing Bylaws were duly adopted as the
Bylaws of said Corporation by the Board of Directors on February 26, 1997.
/s/ Diego Roca
------------------------------
Diego Roca, Secretary
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from June 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 727,197
<SECURITIES> 0
<RECEIVABLES> 1,928,227
<ALLOWANCES> 60,000
<INVENTORY> 218,877
<CURRENT-ASSETS> 2,826,115
<PP&E> 78,599
<DEPRECIATION> 14,202
<TOTAL-ASSETS> 3,526,723
<CURRENT-LIABILITIES> 3,462,802
<BONDS> 0
0
0
<COMMON> 4,858
<OTHER-SE> (66,611)
<TOTAL-LIABILITY-AND-EQUITY> 3,526,723
<SALES> 26,027,909
<TOTAL-REVENUES> 26,027,909
<CGS> 25,161,443
<TOTAL-COSTS> 2,040,749
<OTHER-EXPENSES> 1,305,970
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,480,253)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,480,253)
<DISCONTINUED> (1,069,261)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,549,514)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> (0.78)
</TABLE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
Aug 10 1995
DEAN HELLER SECRETARY OF STATE
No. /s/ Dean Heller
4011-87
ARTICLES OF MERGER
AND
AGREEMENT AND PLAN OF MERGER
OF
PROMOTEL, INC.
AND
PROMOTEL, INC.
AGREEMENT OF MERGER entered into on July 11, 1995 by PROMOTEL, INC.,
a Nevada corporation, and PROMOTEL, INC., an unrelated Delaware corporation, as
approved by the Board of Directors of each of said corporations:
R E C I T A L S:
A. The constituent corporations desire to merge into a single
corporation.
B. PromoTel, Inc., a Delaware corporation, (the "Disappearing
Corporation") filed it Certificate of Incorporation in the office of the
Secretary of State of Delaware on May 18, 1995 and has an authorized capital
stock consisting of Thirty Million (30,000,000) shares of Common Stock of the
par value of one/thousandth cent ($.00l) each, of which 8,000,000 shares of such
Common Stock are now issued and outstanding.
C. PromoTel, Inc., a Nevada Corporation, (the
1
<PAGE>
"Surviving Corporation") filed its Articles of Incorporation in the office of
the Secretary of State of Nevada on May 27, 1987 and has an authorized capital
stock consisting of One Hundred Million (100,000,000) Common Shares of the par
value of one/thousandth cent ($.001) each, and One Million (1,000,000) Preferred
Shares, amounting in the aggregate to One Hundred and One Thousand Dollars
($101,000.00), of which capital stock 8,856,215 shares are now issued and
outstanding.
D. The principal office of the Surviving Corporation in the state of
Nevada as the Effective Date of this merger, will be located c/o United
Corporate Services, and the name and address of its resident agent will be, as
the Effective Date of this merger, United Corporate Services, 841 East Second
Street, Carson City, Nevada 89701. The principal office of the Disappearing
Corporation in the state of Delaware is located c/o The Corporate Company, and
the name and address of its registered agent is The Corporate Company, 3
Chritine Center, 201 North Walnut Street, Wilmington, Delaware 19898.
E. The laws of the jurisdiction of incorporation of the Disappearing
Corporation and of the Surviving Corporation each permit the merger of a
business corporation of said respective jurisdiction with and into a business
corporation of another
2
<PAGE>
jurisdiction.
NOW, THEREFORE, the corporations, parties to this agreement, by and
between their respective Boards of Directors, in consideration of the mutual
covenants, agreements and provisions hereinafter contained, have agreed and do
hereby agree each with the other that the Disappearing Corporation merge into
The Surviving Corporation, and do hereby agree upon and prescribe the terms and
conditions of said merger and of carrying the same into effect, and the manner
and basis of causing the shares of the disappearing corporation to constitute or
be converted into shares of the surviving corporation as follows:
1. The Disappearing Corporation, hereby merges into the Surviving
Corporation.
2. The separate existence of the Disappearing Corporation shall
cease upon the effective date of the merger in accordance with the provisions of
the laws of the State of Delaware, the jurisdiction of incorporation of said
corporation. The effective date of the merger will be July 11, 1995.
3. The Articles of Incorporation of the Surviving Corporation are to
be and remain the Articles of Incorporation of the Surviving Corporation, to
continue in full force and effect until amended in the manner prescribed by the
General Corporation
3
<PAGE>
Law of Nevada.
4. The bylaws of the Surviving Corporation, upon the effective date
of the merger in the State of Nevada, shall be the bylaws of said Surviving
Corporation and shall Continue in full force and effect until changed, altered
or amended as therein provided and in the manner prescribed by the provisions of
the General Corporation Law of the State of Nevada.
5. The directors and officers in office of the Surviving
Corporation, upon the effective date of the merger in the State of Nevada, shall
continue to be the members of the board of directors and the officers of the
Surviving Corporation, all off whom shall hold their directorships and offices
until the election, choice, and qualification of their respective successors or
until their tenure is otherwise terminated in accordance with the bylaws of the
Surviving Corporation.
6. The Eight Million (8,000,000) shares of the Disappearing
Corporation outstanding prior to the merger shall, upon the completion of the
merger on the effective date thereof, be converted into Eight Million
(8,000,000) shares of the Common Stock of the Surviving Corporation. Each share
of the Surviving Corporation's Common Stock shall remain unchanged and holders
of the Surviving Corporation's Common Stock shall not be entitled to
4
<PAGE>
appraisal or dissenters' rights in connection with the merger.
7. The terms and conditions of the merger are as follows:
(a) The Disappearing Corporation shall pay all expenses of
carrying this agreement of merger into effect and of accomplishing the merger.
(b) Upon the date when this agreement shall become effective,
the separate existence of the Disappearing Corporation, shall cease, and the
Disappearing Corporation shall be merged into the Surviving Corporation, in
accordance with the provisions of this agreement, which Surviving Corporation
shall possess all the rights, privileges, powers and franchises as well of a
public as of a private nature and be subject to all the restrictions,
disabilities and duties of each of the corporations, parties to this agreement,
and all and singular, the rights, privileges, powers and franchises of each of
said corporations, and all property, real, personal and mixed, and all debts due
to each of such corporations on whatever account, as well for stock
subscriptions as all other things in action or belonging to each of the
constituent corporations shall be vested in the Surviving Corporation; and all
property rights and privileges, powers and
5
<PAGE>
franchises and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the respective
constituent corporations, and the title to any real or personal property,
whether by deed or otherwise, vested in any of said corporations, parties
hereto, shall not revert or be in any way impaired by reason of this merger,
provided that all rights of creditors and all liens upon the property of any of
said corporations, parties hereto, shall be preserved unimpaired, limited in
lien to the property affected by such liens immediately prior to the time of the
merger, and all debts, liabilities and duties of the Disappearing Corporation
shall thenceforth attach to the said Surviving Corporation and may be enforced
against it to the same extent as if said debts, liabilities and duties had been
incurred or contracted by it.
(d) If at any time the Surviving Corporation shall consider or
be advised that any further assignments or assurances in law or any things are
necessary or desirable to vest in said corporation, according to the terms
hereof, the title to any property or rights of said Disappearing Corporation,
the proper officers and directors of said Disappearing Corporation shall and
will execute and make all such proper assignments and assurances and do all
things necessary or proper to vest title in such
6
<PAGE>
property or rights in the Surviving Corporation, and otherwise to carry out the
purposes of this agreement of merger.
(e) (i) The Surviving Corporation reserves the right to amend,
alter, change or repeal any provision contained in this agreement of merger
which may be contained in the Articles of Incorporation of a corporation
organized under the laws of the State of Nevada in the manner now or hereafter
prescribed by said laws of the State of Nevada, and all rights conferred upon
stockholders herein are granted subject to this reservation.
(ii) Notwithstanding the foregoing, this agreement of merger
may be amended at any time prior to the Effective Time, by written agreement of
the Boards of Directors of each of the Disappearing Corporation and the
Surviving Corporation.
8. The mode of carrying this merger into effect is as follows:
(a) This Agreement and Plan of Merger is signed by at least a
majority of the directors of each corporation that is a party to this merger.
(b) This agreement has been approved by the holders of
Ninety-two (92%) of the outstanding stock of the Surviving Corporation and One
Hundred (1O0%) percent of the Disappearing Corporation.
7
<PAGE>
(a) This agreement of merger is required to be authorized,
adopted, or approved, as the case may be, by the shareholders of the
Disappearing corporation in accordance with the laws of the State of Delaware.
The shareholders of the Disappearing Corporation have the right to dissent and
seek appraisal for the fair value of their shares.
(d) This agreement has been submitted to the shareholders of
the Disappearing Corporation for their written consent as provided by Section
228 of the Delaware General Corporation Law. Shareholders of the Disappearing
Corporation representing not less than a majority of each class of the issued
and outstanding shares of said corporation entitled to vote thereon (even though
their right to vote be otherwise restricted or denied) shall be required for the
adoption of this agreement.
(e) After this agreement has been duly adopted by the
respective shareholders of each constituent corporation, that fact shall be set
forth in a certificate attached to the agreement by the secretary or assistant
secretary of each such corporation, and the agreement so adopted and certified
shall be signed by the president or vice-president and the secretary or
assistant secretary of each corporate party hereto and acknowledged by the
president or vice president of each corporate party hereto to be
8
<PAGE>
the respective act, deed and agreement of each such corporation, and the
agreement so certified and acknowledged shall be filed in the office of the
respective Secretary of State of Delaware and Nevada and a copy thereof duly
certified by the Secretary of State shall be recorded in the office of the Clerk
of Carson City, and shall be effective from the filing thereof in the office of
the Secretary of State of Nevada.
9. In the event that the merger herein provided for shall have been
fully authorized in accordance with the provisions of the laws of the
jurisdictions of incorporation of the Disappearing Corporation and the Surviving
Corporation, the Disappearing Corporation and the Surviving Corporation hereby
agree that they will cause to be executed and filed and/or recorded any document
or documents prescribed by the laws of the State of Nevada and of the State of
Delaware and that they will cause to be performed all necessary acts therein and
elsewhere to effectuate the merger (the "Effective Time").
10. Anything contained herein to the contrary notwithstanding, this
Agreement and Plan of Merger may be terminated and the merger abandoned at any
time prior to the Effective Time, whether before or after approval and adoption
by the shareholders of the Disappearing Corporation, without liability
9
<PAGE>
on the part of either party to the other (i) by mutual consent of the Boards of
Directors of the constituent corporations, (ii) at the option of either of the
constituent corporations, if there is threatened, instituted or pending any
suit, action, investigation, inquiry or other proceeding by or before any court
or governmental or regulatory or administrative agency or commission requesting
or looking toward on order, injunction, or similar order which prohibits the
consummation or the transactions contemplated by this Agreement and Plan of
Merger, or (iii) at the option of the Surviving Corporation if there should be
any action, matter or thing which in the opinion of the Board of Directors of
the Surviving Corporation would impose any material limitation on the Surviving
Corporation effectively succeeding to or exercising full rights of ownership of
the Disappearing Corporation or the business or the assets of the Disappearing
Corporation.
11. The Disappearing Corporation agrees to conduct its business in
the ordinary and usual course prior to the consummation of the merger and the
Effective Time.
12. The Board of Directors and the proper officers of the
Disappearing Corporation and of the Surviving Corporation, respectively, are
hereby authorized, empowered and directed to do any and all acts and things, and
to make, execute, deliver, file,
10
<PAGE>
and/or record any and all instruments, papers and documents which shall be or
become necessary, proper or convenient to carry out or put into effect any of
the provisions of this Agreement of Merger or of the merger herein provided for.
IN WITNESS WHEREOF, the parties to this Agreement, pursuant to
authority duly given by their respective boards of directors, have caused these
presents to be executed by the president, secretary and a majority of the
directors of each party hereto, and the corporate seal affixed.
PROMOTEL, INC.
(the Surviving Corporation)
By: /s/ Bradley R. Wilson
--------------------------------
Bradley R. Wilson, President
and Director
X /s/ Steven A. Sanders
--------------------------------
Steven A. Sanders, Secretary
and Director
(Corporate Seal)
ATTEST:
/s/ Phyllis R. Gottesman
- ------------------------
Sworn to before me this 11 day
of July, 1995.
/s/ James Eisberg
--------------------------------
Notary Public
JAMES EISSERG
Notary Public, State of New York
No. 6164215
Qualified in New York County
Commission Expires February 28, 1997
RECEIVED
AUG 10 1995
Secretary of State
11
<PAGE>
PROMOTEL, INC.
(the Disappearing Corporation)
By: /s/ Frank C. Magliato
------------------------------------
Frank C. Magliato, President
By: /s/ Frank C. Magliato
------------------------------------
Frank C. Magliato, Sole Director
Corporate Seal
ATTEST:
/s/ Phyllis R. Gottesman
- ------------------------
Sworn to before me this 11 day
of July, 1995.
/s/ James Eisberg
--------------------------------
Notary Public
JAMES EISBERG
Notary Public, State of New York
No. 6164215
Qualified in New York County
Commission Expires February 28, 1997
RECEIVED
AUG 10 1995
Secretary of State
12
SUBLEASE AGREEMENT
BETWEEN
VANITY FAIR INTIMATES, INC., SUBLANDLORD
AND
PROMO TEL, INC., SUBTENANT
THIS SUBLEASE, made as of the 16 day of October, 1996, between Vanity Fair
Intimates, Inc., a New York corporation, having an office at 5-9 West 37th
Street, New York, New York (hereinafter referred to as "Sublandlord") and Promo
Tel, Inc., a Nevada corporation, having an office at 500 Fifth Ave, Suite 424,
NY, NY (hereinafter referred to as "Subtenant").
W I T N E S S E T H:
WHEREAS:
A. By lease, dated May 15, 1993 (the "5th Floor Lease") and May 19, 1993
(the "4th Floor Lease"; collectively with the 5th Floor Lease, the "Lease"),
8-14 West 38th Street Corp., by its agent, Time Equities, Inc. ("Landlord")
leased to Sublandlord certain space in the building known as 8-16 West 38th
Street, New York, New York; and
B. Sublandlord and Subtenant desire to consummate a subleasing of certain
space so leased to Sublandlord in 8-16 West 38th Street, New York, New York on
the terms and conditions contained in this Sublease.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, it is hereby agreed as follows:
1. Premises. Sublandlord hereby subleases to Subtenant the entire fourth
and fifth floors in the building (the "Building") located at and known as 8-16
West 38th Street, New York, New York, more specifically referred to on the floor
plans attached hereto as Exhibit A (hereinafter referred to as the "Premises").
The Premises shall be delivered to Subtenant in broom-clean condition.
2. Term. The term of this Sublease shall commence on the later to occur of
(i) the date that both the entire fourth and fifth floors of the Building are
available for the occupancy of Subtenant or (ii) the day following the receipt
of Landlord's written consent to this Sublease pursuant to Paragraph 6 hereof
(the "Commencement Date") and shall expire on March 28, 2001 (the "Expiration
Date"), subject to rights of earlier termination as specifically set forth
herein.
3. Fixed Rent. Notwithstanding the determination of the Commencement Date
pursuant to Article 2 hereof, payment of the fixed rent (the "Fixed Rent") for
the Premises during the term of this Sublease shall commence on July 1, 1997,
with respect to the fourth floor of the Building (i.e., one-half of the Fixed
Rent payable under the schedule set forth below), and September 1, 1997, with
respect to the fifth floor of the Building (i.e., one half of the Fixed Rent
payable under the schedule set forth below); (the "Rent Commencement Dates"),
and end on the Expiration Date, to be paid by Subtenant to Sublandlord, at
Sublandlord's office (or such
2
<PAGE>
other location as Sublandlord shall designate) in lawful money of the United
States, on the first day of each month following the respective Rent
Commencement Dates during the Sublease term, without notice or demand or any
set-off, off-set, abatement or reduction in the amounts and manner set forth
below:
Rent Commencement Date at the rate of $290,000.00
February 28, 1998 per annum payable in monthly
installments of $24,166.67
March 1, 1998 - $297,250.00
February 28, 1999 per annum payable in monthly
installments of $24,770.83
March 1, 1999 - $304,681.25
February 29, 2000 per annum payable in monthly
installments of $25,390.10
March 1, 2000 - $312,298.28
February 28, 2001 per annum payable in monthly
installments of $26,024.86
March 1, 2001 - $320,105.74
March 28, 2001 per annum payable in a monthly
installments of $26,675.48
Notwithstanding the foregoing, in the event of (i) damage to the Premises
by fire or other casualty or (ii) condemnation of the Premises, the rent payable
under this Sublease shall be reduced by the same proportionate amount and in the
same manner that the rent payable by Sublandlord to Landlord is reduced under
the Lease.
4. Additional Rent. A. Subtenant shall also pay Sublandlord all costs,
charges, monies and expenses of Sublandlord under the Lease that are denominated
as Additional Rent under the Lease (referred to herein as "Additional Rent")
within ten (10) days of notice from Sublandlord (unless otherwise specified
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herein), in lawful money of the United States, without any set-off, off-set,
abatement or reduction. Notwithstanding the foregoing, Subtenant shall not be
liable to Sublandlord for any Additional Rent (i) to the extent that such
Additional Rent is due to acts or omissions of Sublandlord or (ii) with respect
to, or in connection with, the Porter Wage Payment Rider annexed to the 5th
Floor Lease as Rider No. 4.
(a) with respect to the determination of "Tax Payments" payable by
Sublandlord throughout the Sublease term, as that term is defined in Rider No. 3
to the Lease (1) the term "Tenant's Percentage" shall mean 19.735% for the
entire Premises and (2) the term "Base Tax Year" shall mean the twelve month
calendar year period commencing on January 1, 1997 and ending on December 31,
1997.
B. Additional Rent payable under this Paragraph shall be based upon Real
Estate Tax escalation statements or other notices that Subtenant receives from
Landlord or Sublandlord. Subtenant shall have the right to question the
propriety of or the basis for any such escalation statement to the extent that,
and under the terms by which, Sublandlord has such right pursuant to the Lease.
In the event that Sublandlord does not have such right, Sublandlord shall be
under no obligation to contest any such escalation statement. In any event,
Sublandlord shall, at the written request of Subtenant, furnish to Subtenant
copies of escalation statements or notices it receives from Landlord.
C. Notwithstanding Paragraph 3 hereof, Subtenant shall pay
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Sublandlord on demand all Additional Rent payable hereunder with respect to
Subtenant's occupancy of the Premises commencing on the Commencement Date,
including, but not limited to, all amounts payable by Subtenant to Sublandlord
hereunder for the furnishing of electric current to the Premises pursuant to
Paragraph 5 below.
5. Electricity. With respect to electricity, Sublandlord is not
responsible for providing electricity to the Premises. A meter or meters have
been installed for purposes of measuring electrical consumption of the Premises
and Subtenant shall pay Sublandlord as Additional Rent any and all amounts
payable by Sublandlord to Landlord under the Lease for the furnishing of
electricity to the Premises. In addition to the metering charges described
herein for electricity for the Premises, the Subtenant shall pay Sublandlord as
Additional Rent (i) its share of the reasonable out-of pocket administrative
costs of reading the sub-meters on a monthly basis incurred by Landlord and
(ii) its "Proportionate Share" of the cost of electricity consumed in the public
portions ("Public Light and Power") of the Building. For purposes of this
Sublease, "Proportionate Share" shall mean 19.735% of the Public Light and
Power. For purposes of this Paragraph, all amounts payable by Subtenant to
Sublandlord hereunder for the furnishing of electric current to the Premises
shall commence as of the Commencement Date.
6. Landlord's Consent. Sublandlord represents and Subtenant acknowledges
that Landlord must consent in writing to this Sublease for it to be a valid and
binding agreement between the parties hereto. In connection therewith, after
this Sublease has been
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executed by both Sublandlord and Subtenant, and Subtenant has paid Sublandlord
all monies due hereunder, Sublandlord shall deliver this Sublease to Landlord
within seven (7) days of such execution and payment and shall in good faith use
reasonable efforts to have Landlord consent in writing to this Sublease. If such
written consent of Landlord is not obtained from Landlord and delivered to
Subtenant within thirty (30) days of the date a fully executed copy of this
Sublease is delivered to Landlord, then Subtenant shall have the option of
cancelling this Sublease by delivering written notice of such cancellation to
Sublandlord within three (3) business days of the end of the aforesaid thirty
(30) day period. In the event of the exercise of such cancellation option by
Subtenant, this Sublease shall be deemed null and void and of no further force
and effect and Sublandlord shall promptly return to Subtenant all monies paid to
Sublandlord hereunder.
7. Lease. Except as otherwise expressly provided herein or to the extent
inconsistent with this Sublease and except for the obligation to pay fixed rent
under the Lease, all of the terms, covenants, conditions and provisions in the
Lease are hereby incorporated in, and made a part of this Sublease and such
rights and obligations as are contained in the Lease are hereby imposed upon the
respective parties hereto to the extent the same relate to the Premises and
Subtenant's use of the Premises; this Sublease being substituted for the term
"Lease" set forth in the Lease, the Sublandlord herein being substituted for the
Landlord named in the Lease and the Subtenant herein being substituted for the
Tenant
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named in the Lease; provided, however, that the Sublandlord herein shall not be
liable for any defaults by, or obligations of, Landlord except as specifically
set forth herein and any reference to "Landlord" in the Lease with respect to
the furnishing of services, utilities, repairs and facilities shall be deemed to
refer to Landlord rather than Sublandlord. Notwithstanding the foregoing,
Sublandlord agrees to perform its obligations under the Lease to the extent such
obligations are not obligations of the Subtenant under this Sublease, including
Sublandlord's obligation to pay Fixed Annual Rent to Landlord (provided
Subtenant is not In default under this Sublease and has paid Sublandlord all
Fixed Rent and Additional Rent due hereunder). If the 4th Floor Lease or the 5th
Floor Lease shall be terminated for any reason during the term hereof, then and
in that event this Sublease shall thereupon automatically terminate with respect
to the floor subject to such lease termination only (unless both the 4th Floor
and 5th Floor Leases are terminated in which case this entire Sublease shall
automatically terminate) and Sublandlord shall have no liability to Subtenant by
reason thereof (unless such termination was due to Sublandlord's default under
the Lease). Subtenant shall accede to Sublandlord's rights relating to an
improper termination of the Lease by Landlord. Upon the termination of this
Sublease, Subtenant shall surrender and deliver the Premises in the same good
condition and repair as Subtenant received the Premises on the Commencement
Date, reasonable wear and tear excepted. Notwithstanding anything contained `in
this Sublease to the
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contrary, Subtenant agrees that Sublandlord may at any time after the date
hereof surrender either the 4th Floor Lease or the 5th Floor Lease or both to
Landlord, provided that the Landlord shall deliver a written agreement to
Subtenant providing that notwithstanding such surrender the Landlord shall not
disturb Subtenant's occupancy of the relevant portion of the Premises so long as
Subtenant is not in default hereunder if Subtenant shall at Landlord's election
either (i) attorn to Landlord as if Landlord were Sublandlord hereunder on the
same terms and conditions contained herein or (ii) enter into a lease with
Landlord for the remaining term of the Sublease on the same terms and conditions
contained herein.
8. Renewal. Subtenant shall not have any right or option to extend or
renew the term of this Sublease.
9. As Is. Subtenant has examined the Premises, is aware of the physical
condition thereof and agrees to take the same "as is" in its condition as of the
date hereof, subject to normal wear and tear, with the understanding that except
as set forth in Paragraph 16 hereof there shall be no obligation on the part of
the Sublandlord to incur any expense whatsoever in connection with the
preparation of the Premises for Subtenant's occupancy thereof and Sublandlord
shall have no obligation to perform any alterations, improvements, repairs or
decorations either at the time possession is given to Subtenant or any other
time during the term of this Sublease.
10. Use. Subtenant agrees that the Premises shall be used
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and occupied only for general office purposes in connection with Subtenant's
business and consistent with a first-class office building pursuant to the
terms of the Lease. Subtenant shall comply with the certificate of occupancy
relating to the Premises and with all laws, statutes, ordinances, regulations
and requirements of all federal, state and municipal governments and the board
of fire underwriters and/or the fire insurance rating organization or similar
organization performing the same or similar function, whether now or hereafter
in force, applicable to the Premises pursuant to the terms of the Lease.
11. Landlord's Approval. Except as otherwise specifically provided herein,
whenever in this Sublease, Subtenant is required to obtain Sublandlord's consent
or approval, Subtenant understands that Sublandlord may be required by the terms
of the Lease to first obtain the consent or approval of Landlord. Sublandlord
agrees to use its reasonable efforts to cooperate with Subtenant in obtaining
any such consent or approval of Landlord. If Landlord should refuse such consent
or approval and if such consent is required under the Lease, Sublandlord shall
be released of any obligation to grant its consent or approval whether or not
Landlord's refusal, in Subtenant's opinion, is arbitrary or unreasonable or
improper under the Lease. Subtenant agrees that Sublandlord shall not be
required to dispute any determinations or other assertions or claims of Landlord
regarding the obligations of Sublandlord under the Lease for which Subtenant is
or may be responsible under the terms of this Sublease. Should Sublandlord elect
not to dispute any such
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determinations, assertions or claims by Landlord, Sublandlord hereby grants
Subtenant such right as Sublandlord would have had to dispute the same in its
own name, without Sublandlord's consent, and the right to resolve such disputes
to its own satisfaction, provided that Subtenant shall bear any and all costs
and expenses of any such dispute and/or settlement and shall indemnify, defend
and hold Sublandlord harmless from and against all liability, loss, damage or
expense, including, without limitation, reasonable attorney's fees, which
Sublandlord shall suffer or incur by reason of such action, and, provided
further, that Sublandlord shall not be bound without its consent, which it will
not unreasonably withhold, by any settlement, agreement or resolution reached by
Subtenant and Landlord in regard to any such dispute, or by any decree, judgment
or penalty resulting therefrom.
12. Repairs: Services. A. Subtenant acknowledges that it shall, at all
times during the term of this Sublease, at its own cost and expense, take good
care of the Premises and promptly make all repairs thereto and to the Building,
whether structural or non-structural in nature, to the extent caused by or
resulting from the carelessness, omission, neglect or improper conduct of
Subtenant, Subtenant's servants, employees, invitees or licensees. All the
aforesaid repairs shall be of quality or class equal to the work or construction
existing immediately prior to the occurrence of such damage. Sublandlord
acknowledges that as of the date hereof the Premises is in compliance with the
Lease with respect to repairs. Subtenant acknowledges that except to the extent
of Subtenant's
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obligations hereunder, all services, repairs, restorations, equipment and access
to and for the Premises and the Building to be provided or performed by the
"Landlord" under the Lease and any insurance coverage of the Building, will in
fact be provided by Landlord and Sublandlord shall have no obligation during the
term of this Sublease to provide any such services, repairs, restorations,
equipment, access or insurance except to the extent that any damage, injury or
cost is directly caused by the wrongful acts or omissions of the Sublandlord.
Subtenant agrees to look solely to Landlord for the furnishing of such services,
repairs, restorations, equipment, access and insurance with respect to the
Premises. Sublandlord shall in any event be liable to Subtenant (except to the
extent that any damage, injury or cost is directly caused by the wrongful acts
or omissions of the Sublandlord) nor shall the obligations of Subtenant
hereunder be impaired or the performance thereof excused because of any failure
or delay on Landlord's part in furnishing such services, repairs, restorations,
equipment, access or insurance. If Landlord shall default in any of its
obligations to Sublandlord with respect to the Building or Premises, Subtenant
shall be entitled to participate with Sublandlord in the enforcement of
Sublandlord's rights against Landlord, but Sublandlord shall have no obligation
to bring any action or proceeding or to take any steps to enforce Sublandlord's
rights against Landlord. If, after written request from Subtenant, Sublandlord
shall fail or refuse to take appropriate action for the enforcement of
Sublandlord's rights against Landlord with respect
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to the Premises within a reasonable period of time considering the nature of
Landlord's default, Subtenant shall have the right to take such action in its
own name and for that purpose only and only to such extent, all of the rights of
Sublandlord under the Lease hereby are conferred upon and assigned to Subtenant
and Subtenant hereby is subrogated to such right to the extent that the same
shall apply to the Premises. If any such action against Landlord in Subtenant's
name shall be barred by reason of lack of privity, nonassignability or
otherwise, Subtenant may take such action in Sublandlord's name provided
Subtenant has obtained the prior written consent of Sublandlord, which consent
shall not be unreasonably withheld or delayed, provided that Subtenant hereby
agrees that Subtenant shall indemnify, defend and hold Sublandlord harmless from
and against all liability, loss, damage or expense, including, with limitation,
reasonable attorneys' fees, which Sublandlord shall suffer or incur by reason of
such action by Subtenant.
B. Sublandlord shall deliver to Subtenant notice of any default claimed by
Sublandlord or any overlandlord promptly upon its receipt thereof. Anything
contained in any provisions of this Sublease to the contrary notwithstanding,
Subtenant agrees, with respect to the Premises, to comply with and remedy any
such default claimed by Landlord (not caused by Sublandlord) within the period
allowed to Sublandlord as Tenant under the Lease. Subtenant agrees to forward to
Sublandlord, upon receipt thereof, copies of any notices received by Subtenant
with respect to the Premises from
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Landlord or from any governmental authorities.
13. Subordination. This Sublease is subject and subordinate to the Lease
and to all ground or underlying leases and to all mortgages which may now or
hereafter affect such leases or the real property of which the Premises are a
part and all renewals, modifications, replacements and extensions of any of the
foregoing. This paragraph shall be self-operative and no further instrument of
subordination is required and to confirm such subordination, and Subtenant shall
execute promptly any certificate that Sublandlord may request.
14. Broker. A. Subtenant covenants, represents and warrants that Subtenant
has had no dealings or communications with any broker or agent in connection
with the consummation of this Sublease except with Julien J. Studley, Inc. and
the ATLAS organization (collectively, the "Broker") and Subtenant covenants and
agrees to hold harmless, indemnify and defend Sublandlord from and against any
and all claim, damage, cost, expense (including, without limitation, attorneys'
fees) or liability for breach of the foregoing representation. Sublandlord
agrees to pay the Broker, pursuant to a separate agreement, a commission for the
consummation of this Sublease.
B. Sublandlord covenants, represents and warrants that Sublandlord has had
no dealings or communications with any broker or agent in connection with the
consummation of this Sublease except with the Broker and Sublandlord covenants
and agrees to hold harmless, indemnify and defend Subtenant from and against any
and
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all claim, damage, cost, expense (including, without limitation, attorneys'
fees) or liability for breach of the foregoing representation.
15. Security. A. As security for the faithful performance and observance
by Subtenant of the terms, provisions, covenants and conditions of this
Sublease, Subtenant shall maintain in effect at all times during the term
hereof, except as provided hereinafter, One Hundred Thousand ($100,000.00)
Dollars as a security deposit (the "Security Deposit"). The Security Deposit
shall be deposited with Sublandlord by Subtenant in three installments at the
following intervals: $25,000.00 upon the execution of this Sublease; $25,000.00
upon the execution of this Sublease; $25,000.00 upon the delivery to Subtenant
by Sublandlord of the seventh floor of the building located at 5-9 ,West 37th
Street pursuant to the terms of that certain letter agreement, dated October __,
1996, between Sublandlord and Subtenant; and $50,000.00 on the Commencement
Date. Following the initial twelve (12) months, twenty-four (24) months and
thirty-six (36) months of the Sublease term, respectively, provided that
Subtenant shall not be in default hereunder (after applicable notice and grace
period) at any of such times, Sublandlord shall deduct twenty-five percent (25%)
of the Security Deposit from the amount of the Security Deposit remaining
deposited with Sublandlord at such times and shall credit such amount against
the Fixed Rent due to Sublandlord for the immediately following months (i.e.,
the 13th, 25th and 37th months) during the term hereof.
B. Upon a default by Subtenant under this Sublease after
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notice, if required, and an opportunity to cure, if provided, Sublandlord may
draw against the security deposit but only in such amounts as may be required to
cure such default.
C. In the event Subtenant defaults in respect of any of the terms,
provisions, covenants and conditions of this Sublease, including but not limited
to, the payment of Fixed Rent or Additional Rent, Sublandlord may use, apply or
retain the whole or any part of the Security Deposit to the extent required for
the payment of Fixed Rent and Additional Rent or any other sum as to which
Subtenant is in default or for any sum which Sublandlord may expend or may be
required to expend by reason of Subtenant's default in respect of any of the
terms, provisions, covenants, and conditions of this Sublease, including but not
limited to, any damages or deficiency accrued before or after summary
proceedings or other re-entry by Landlord. In the event Sublandlord applies or
retains any portion or all of the Security Deposit delivered hereunder,
Subtenant shall forthwith restore the amount so applied or retained so that at
all times the amount deposited shall not be less than the Security Deposit
required hereunder.
16. Alterations: Equipment Allowance. A. Subtenant may make no changes,
alterations, additions, improvements or decorations in, to or about the Premises
throughout the Sublease term without the Landlord's and Sublandlord's prior
written consent, such consent not to be unreasonably withheld or delayed by
Sublandlord where Landlord has consented thereto. Subtenant shall further ensure
that any alterations, improvements, additions or installations to
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<PAGE>
be completed by Subtenant at the inception of the Sublease term shall comply
with all applicable provisions of the Lease.
B. Sublandlord agrees to provide Subtenant with an allowance in the amount
of One Hundred Thousand $100,000.00) to be applied toward the aggregate purchase
price to be paid by Subtenant to Sublandlord for the purchase of certain
equipment and furniture presently within the Premises subsequent to the date
hereof pursuant to a separate purchase agreement between Sublandlord and
Subtenant, which purchase price shall equal the fair market value of such
equipment and furniture as mutually determined by the Sublandlord and Subtenant.
In the event that the purchase price of such equipment and furniture is less
than One Hundred Thousand Dollars ($l00,000.00), the remaining amount of the
equipment and furniture allowance shall be added to the Security Deposit, e.g.,
if the purchase price of the equipment and furniture is $75,000.00 the Security
Deposit shall automatically be increased to $125,000.00 without additional
payment by Subtenant. In the event that the fair market value of such equipment
and furniture cannot be mutually agreed upon by the Sublandlord and Subtenant,
any discrepancy will be finally determined by the Manager of Corporate Real
Estate for VF Corporation.
17. Non-Disturbance. So long as Subtenant pays all of the Fixed Rent and
Additional Rent due under this Sublease and performs all of Subtenant's other
obligations hereunder, Sublandlord shall not disturb or terminate Subtenant's
leasehold estate hereunder or Sublandlord's peaceful and quiet enjoyment of the
Premises,
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subject, however to the terms, provisions and obligations of the Lease and this
Sublease.
18. Security of Premises. Subtenant acknowledges that Subtenant shall be
solely responsible for securing and maintaining the security of the Premises and
that Sublandlord shall have no obligation or liability of any nature whatsoever
relating to the security of the premises.
19. Inapplicable Lease Provisions. A. For purposes of this Sublease the
following articles, sections or described portions of the Lease shall not be
deemed incorporated or made a part of the Sublease: the "Witnesseth" clauses
with respect to the description of the Demised Premises and the term of the
Lease, Article 2, the amount of security set forth under Article 34, the Fixed
Annual Rent Schedule, the second sentence of Article 38, the last sentence of
Section B of Article 43, subsection (ii) of Section B of Article 46, the last
sentence of Section B of Article 46, Section C of Article 46, the first sentence
of Section B of Article 47, Section C of Article 51, the third sentence of
Article 53, subsection (e)* of Article 58, paragraphs 1, 6, 10-17, 19 and 20 of
the Supplemental Rider to the 5th Floor Lease, paragraphs 1, 6, 11-15, the words
"and seventh" in the third sentence of 16, the seventh sentence of 16, 17-19,
21, 22 of the Supplemental Rider to the 4th Floor Lease, Rider No. 4 (Porter
Wage Payment Rider) to the 5th Floor Lease and Exhibits A, B and C.
B. For purposes of this Sublease the following articles or sections
of the 5th Floor Lease shall be amended as follows: the
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term "exclusive use" in paragraph 5 of the Supplemental Rider to the Lease shall
be construed to mean "mutual use with the tenant of the 7th floor" and the
figure "19.67%" in paragraph 8 of the Supplemental Rider shall be construed to
mean "9.835%".
20. Initial Payments. Concurrently with Subtenant's execution and delivery
of this Sublease, Subtenant shall pay Sublandlord the $25,000.00 initial
Security Deposit installment. Notwithstanding the foregoing, this Sublease shall
not be binding upon the parties and Sublandlord shall not grant Subtenant
possession of the Premises unless and until (a) it is signed by Sublandlord and
Subtenant, (b) Subtenant pays Sublandlord all monies due hereunder and (c)
Landlord consents to this Sublease. If, for any reason other than the bad faith
conduct of Subtenant, Landlord fails to consent to this Sublease and possession
of the Premises is not delivered to Subtenant, all sums paid by Subtenant to
Sublandlord shall be returned to Subtenant. Notwithstanding the foregoing, in
the event that Sublandlord cannot deliver possession of the fourth and fifth
floors of the Building to Subtenant by May 1, 1997, through no fault of
Subtenant and for reasons or causes which are within the control of Sublandlord
(excluding, without limitation, casualty or fire damage to the Premises,
condemnation of the Premises, strikes or other labor troubles, declaration of
national emergency, force majeure, etc.), Sublandlord shall pay Subtenant
$500.00 per day in liquidated damages for each day that delivery of the fourth
and fifth floors is delayed past May 1, 1997. Any such amount of liquidated
damages accruing to the
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benefit of Subtenant shall be credited against the Fixed Rent due to
Sublandlord. In the event that Sublandlord cannot so deliver possession of the
fourth and fifth floors of the Building to Subtenant by September 1, 1997, then
this Sublease shall be deemed null and void and of no further force and effect
as of such date and the Security Deposit paid to Sublandlord by Subtenant shall
be returned to Subtenant.
21. Assignment. Subtenant shall not assign, encumber, transfer or further
sublet its interest in this Sublease or otherwise allow the Premises to be
used by others, without the prior written consent of Sublandlord and Landlord,
and unless any such assignment, encumbrance, transfer, subletting or allowance
complies with the conditions set forth under Article 50 of the Lease. In the
event of a permitted assignment, sub-sublet or transfer hereunder, in which
Subtenant receives consideration in excess of the rent payable to Landlord by
Sublandlord under the Lease, Subtenant shall pay to Sublandlord, as Additional
Rent hereunder, all amounts payable to Landlord by Sublandlord pursuant to
Section L. of Paragraph 50 of the Lease.
22. Insurance. A. Subtenant shall obtain and keep in full force and effect
during the Sublease term, at its own cost and expense, to protect Subtenant,
Sublandlord, Landlord, any lessor, any mortgagee, and any of their respective
agents, as insureds or additional insureds, public liability insurance and
insurance for all property within the Premises in accordance with the terms of
the 4th Floor Lease and the 5th Floor Lease.
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B. Nothing contained in this Sublease shall relieve Subtenant from
liability that may exist as a result of damage to the Premises from fire or
other casualty, but each party shall look first to any insurance in its favor
before making any claim against the other party for recovery for loss or damage
to the Premises resulting from fire or other casualty. To the extent that such
insurance is in force and collectible and to the extent permitted by law,
Sublandlord and Subtenant each hereby releases and waives all right of recovery
against the other or anyone claiming through or under the other by way of
subrogation or otherwise. The foregoing release and waiver shall be in force
only if the insurance policies of the Sublandlord and Subtenant provide that
such release or waiver does not invalidate the insurance. If the inclusion of
said provision would involve an additional expense, either party, at its
expense, may require such provision to be inserted in the other's policy.
23. Hold-Over. Upon the termination of this Sublease, Subtenant shall
quit and surrender the Premises to Sublandlord broom-clean and in the order,
condition and repair of the Premises as existed at the Commencement Date, except
for ordinary wear and tear, and in accordance with the applicable provisions of
the Lease. If the Premises are not surrendered upon the termination of the
Lease, Subtenant hereby indemnifies and holds harmless Sublandlord from and
against all loss, cost, liability, claim, damage and expense (including, without
limitation, reasonable attorneys' fees) resulting from delay by Subtenant in so
rendering
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the Premises (exclusive of delays directly caused by Sublandlord), and
Subtenant, at the option of Sublandlord, shall be deemed to be occupying the
premises as a tenant from month to month, at a monthly rental equal to the
monthly rental payable by Sublandlord to Landlord in the event of a "hold-over"
occupancy under Paragraph 40 of the Lease (one and one-half times the aggregate
of the Fixed Annual Rent and Additional Rent payable by Sublandlord to Landlord
during the last month of the Lease term) and Subtenant shall be subject to all
of the other terms of this Sublease insofar as the same are applicable to a
month to month tenancy. Subtenant's obligations under this Paragraph shall
survive the termination of the Sublease.
24. Default. A. In the event that Subtenant shall default in the
performance of any of the terms, covenants and conditions on its part to be
performed or observed under this Sublease and the same are not cured at least
five (5) days prior to the expiration of the time for the curing thereof under
the Lease, or if the said default or omission shall be of a nature that the same
cannot be completely cured or remedied within such period, and if Tenant shall
not have diligently commenced curing such default within such period and shall
not thereafter with reasonable diligence and in good faith proceed to remedy or
cure such default, then the Sublandlord shall have the same rights and remedies
with respect to such default as are given to Landlord under the Lease with
respect to defaults by the Tenant under the Lease, all with the same force and
effect as though the provisions of the Lease with respect to
21
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defaults and the rights and remedies of Landlord thereunder in the event thereof
were set forth at length herein; provided, however, that if Subtenant shall
default in the performance of any of the Subtenant's obligations hereunder or
under the Lease, Sublandlord, without thereby waiving such default, may, at
Sublandlord's option, perform the same for the account and at the expense of
Subtenant. If Sublandlord makes any expenditures or incurs any obligations for
the payment of money, including, without limitation, attorneys' fees, in
instituting; prosecuting or defending any action or proceeding, by reason of any
default of Subtenant under this Sublease, such sums paid or obligations
incurred, with interest thereon at the rate of 1.25% per month, computed from
the date such expenditure was made or obligation incurred to and including the
date of payment, shall be deemed to be Additional Rent and shall be paid by
Subtenant to Sublandlord on demand.
B. Modifying Section B of Article 47 of the Lease, if Subtenant shall fail
to pay all or any part of any installment of Fixed Rent and/or Additional Rent
for more than five (5) days after the same shall have become due and payable,
the Tenant shall pay as Additional Rent promptly upon demand by Sublandlord a
late charge of five (5) cents for each dollar of the amount of any Fixed Rent
and/or Additional Rent which shall not have been paid to Sublandlord within such
five (5) days after becoming due and payable.
C. Supplementing Article 17 of the Lease, the phrases "either by force or
otherwise" and "or otherwise" are reinserted where
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previously deleted in subsection (2) thereof.
25. Air-conditioning. A. Throughout the term hereof, Subtenant shall
repair and maintain all air-conditioning equipment serving solely the premises
and located within the premises at its sole cost and expense, e.g., the
individual air-conditioning units located on the fourth and fifth floors.
Subtenant shall also pay Sublandlord, within ten (10) days of written request,
two-thirds of all costs incurred by Sublandlord for the repair and maintenance
of all air-conditioning equipment `which is part of the common equipment that
serves the fourth, fifth and seventh floors of the Building (e.g., the cost of
maintenance for the cooled water tower on fourth floor), which repair and
maintenance shall be provided by Sublandlord pursuant to a repair and
maintenance agreement with a third party contractor, provided, however, that if
the common air-conditioning equipment which serves the fourth, fifth and
seventh floors of the Building shall fail to function properly due to
Subtenant's misuse or negligent use of any air-conditioning equipment, and the
payment for the repair of such malfunction is not covered by said repair and
maintenance agreement, Subtenant shall be responsible for all costs and expenses
of repairing such malfunction.
B. Subtenant shall pay Sublandlord, within ten (10) days of written
request, two-thirds (2/3) of all costs incurred in operating the common
air-conditioning equipment serving the fourth, fifth and seventh floors of the
Building, including, without limitation, all additional electricity charges
relating to the use
23
<PAGE>
of such equipment, i.e., the charges for the electricity used in the operation
of the cooled water tower on the fourth floor as measured by a separate
submeter.
C. All payments to be made to Sublandlord by Subtenant pursuant to
Paragraphs A and B of this Article shall be deemed Additional Rent.
26. Notice. Any notice, demand or communication which under the terms of
this Sublease or under any statute or regulation must or may be given or made by
the parties hereto, shall be in writing and given or made in person or by
priority service delivery of a nationally recognized overnight courier or by
mailing the same by registered or certified mail, return receipt requested,
addressed to the party for whom intended at its address as aforesaid, provided,
however, that a copy of any notice, demand or communication given or made to
Sublandlord hereunder shall also be given in the same manner to Mr. Michael
Martin, VF Corporation, Inc., 1047 N. Park Road, Wyomissing, PA 19610 and that a
copy of any notice, demand or communication given or made to Subtenant hereunder
shall also be given in the same manner to Peter Korda, Esq., Orrick Herrington &
Sutcliff, 666 Fifth Ave., New York, NY 10103. Either party may designate such
new or other address to which such notices, demands or communications thereafter
shall be given made or mailed by notice given in the manner prescribed herein.
Any notice, demand or communication shall be deemed given or served, as the case
may be, on three business days after the date of posting thereof, or if hand
delivered, on the date of
24
<PAGE>
delivery, or if by priority service of any nationally recognized overnight
courier, on the next business day after delivery to such courier.
27. Entire Agreement. This Sublease constitutes the entire agreement
between the parties and all representations and understandings have been merged
herein.
28. Lease Surrender. In the event of the surrender of the Lease to
Landlord and the execution of a non-disturbance agreement by Landlord pursuant
to Article 7 hereof, Sublandlord shall be and hereby is relieved and freed of
all obligations of Sublandlord under this Sublease.
29. Successors and Assigns. This Sublease shall inure to the benefit of
all parties hereto, their successors and permitted assigns.
30. Amendment. This Sublease may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
31. Counterparts. This Sublease may be executed in one or more
counterparts, all of which taken together shall constitute a single agreement.
32. Estoppel. Sublandlord affirms that, the Lease is in full force and
effect, and to the knowledge of Sublandlord, there exists no material default by
Landlord or Sublandlord under the Lease and no condition currently exists which,
with the passage of time, would constitute a material default under the Lease.
25
<PAGE>
33. Default by Sublandlord. In the event of a default by Sublandlord under
the Lease for failure to pay Fixed or Additional Rent thereunder (assuming
Tenant is not in default under this Sublease and has timely paid all Fixed Rent
and Additional Rent due hereunder), Sublandlord shall remedy such default in the
manner and within the time period set forth in the Lease. In the event
Sublandlord fails to so remedy such default and the 4th Floor Lease and/or the
5th Floor Lease shall be terminated by Landlord because of such default,
Subtenant shall have such remedies as Subtenant is entitled to at law.
IN WITNESS WHEREOF, Sublandlord and Subtenant have executed this Sublease
as of the day and year first above written.
SUBLANDLORD:
VANITY FAIR INTIMATES, INC.
By: /s/ L. M. Parnalis
------------------------------
SUBTENANT:
PROMO TEL, INC.
By: /s/ Frank Magliato
------------------------------
Name/Title: Frank Magliato, President
26
<PAGE>
EXHIBIT A
[Graphic Omitted]
[Floor Plan - 4th Floor]
<PAGE>
EXHIBIT A
[Graphic Omitted]
[Floor Plan - 5th Floor]
<PAGE>
[Letterhead of ORRICK, HERRINGTON & SUTCLIFFE LLP]
October 31, 1996
VIA HAND DELIVERY
Mr. Frank Magliato
Chief Executive Officer
PromoTel, Inc.
500 Fifth Avenue, Suite 424
New York, New York 10110
Re: Sublease of 4th and 5th Floors at 8-16 West 38th Street ("Permanent
Space") and Sublease of 7th Floor at 5-9 West 37th Street
("Temporary Space")
Dear Frank:
I have just learned that the overlandlord for the Temporary Space
consented to your sublease yesterday, October 30, 1996, and therefore your
sublease of the Temporary Space commences today.
I have enclosed for your records original executed copies of the sublease
for the Permanent Space and the sublease for the Temporary Space. I have also
enclosed a copy of a letter in which the overlandlord for the Permanent Space
consents to your sublet of that space. I am awaiting a copy of the Temporary
Space overlandlord's approval (I have received a copy of the signed signature
page to the Consent to Sublet).
Finally, I have enclosed for your records copies of the overlease for the
Temporary Space and two overleases (4th floor and 5th floor) for the Permanent
Space. These overleases are incorporated into your subleases, except as provided
in your subleases. I draw your attention to Paragraph 43 in the overlease for
the Temporary Space and Paragraph 45 in the overleases for the Permanent Space.
These paragraphs set forth the insurance coverage requirements with which you
must comply. As I indicated to you previously, prior to moving into the
Temporary Space or the Permanent Space, as applicable, you must provide the
sublandlord (Vanity Fair Intimates, Inc.) and applicable overlandlords with
certificates of insurance. For the Temporary Space, you must have Vanity Fair
Intimates, Inc. (sublandlord), 5-9 West 37th Street Limited Partnership
(overlandlord) and Olmstead Properties, Inc.
<PAGE>
ORRICK, HERRINGTON
& SUTCLIFFE LLP
Mr. Frank Magliato
October 31, 1996
Page 2
(agent) named as additional insureds. For the Permanent Space, you must have
Vanity Fair Intimates, Inc. (sublandlord), 8-14 West West 38th Street Corp.
(overlandlord) and Time Equities, Inc. (agent), named as additional insureds.
You may contact Mark Stein at Olmstead Properties, (212) 564-6662, ext.
220, to make arrangements with regard to moving into the Temporary Space.
Please do not hesitate to call me at (212) 506-5084 if you have any
questions.
It has been a pleasure representing you on this matter.
Very truly yours,
/s/ David M. Traitel
David M. Traitel
(Not admitted in New York,
awaiting admission)
Enclosures
cc: Rubi Finkelstein, Esq.
Peter Korda, Esq.
Facsimile of letter only to Frank Magliato
2
<PAGE>
[Letterhead of Time Equities, Inc]
October 21, 1996
Jack Schulman, Esq.
Brief Kesselman Knapp & Schulman, LLP
Attorneys At Law
805 Third Avenue
New York, New York 10022
Re: Sublease of fourth and fifth floors of 8-16 West 38th Street, New
York, NY
Dear Mr. Schulman:
I am writing to you on behalf of 8-14 West 38th Street Corp. ("Landlord").
The Landlord hereby consents to the sublease dated October 14, 1996 by and
between Vanity Fair Intimates, Inc. and Promo Tel, Inc. for the entire fourth
and fifth floors of 8-16 West 38th Street, New York, New York subject to and
conditional upon the following provisions:
1) Landlord shall receive a certificate of insurance from Promo Tel,
Inc. listing "8-14 West 38th Street Corp." and "Time Equities, Inc.,
As Agent" as additional insureds with respect to public liability
insurance;
2) Landlord shall receive evidence reasonably satisfactory to Landlord
that "Vanity Fair Mills, Inc." changed its name to "Vanity Fair
Intimates, Inc."; and,
3) Landlord shall receive plans and a New York City Department of
Buildings application for its review and signature for the
construction related to the sublease. The plans shall include a
demising wall on the fifth floor to be built on the property line
separating 5-9 West 37th Street and 8-16 West 38th Street and the
separation of any building systems (i.e., electric,, heat,
sprinkler, etc.) that cross over from 8-16 West 38th Street to 5-9
West 37th Street.
<PAGE>
If you wish to discuss the foregoing further, please contact me.
Sincerely yours,
8-14 WEST 38th STREET CORP.
BY: TIME EQUITIES, INC., AS AGENT
By /s/ Richard Recny
------------------------------
Richard Recny
Director of Asset Management
cc: Marc Weiss
<PAGE>
VANITY FAIR INTIMATES, INC.
5-9 West 37th Street
New York, New York
October 11, 1996
Mr. Frank Magliato
Promo Tel, Inc.
500 Fifth Avenue, Suite 424
NY, NY 10110
Re: Sublease of 4th and 5th Floors, 8-16 West 38th Street (the
"Permanent Space"); Sublease of 7th Floor, 5-9 West 37th Street (the
"Temporary Premises")
Dear Mr. Magliato:
In connection with that certain sublease (the "Permanent Sublease"), dated
October 16, 1996, between Vanity Fair Intimates, as Sublandlord ("Sublandlord"),
and Promo Tel, Inc., as Subtenant ("Subtenant"), for the first above referenced
space, Sublandlord and Subtenant hereby agree as follows:
1. Temporary Sublease. Sublandlord hereby temporarily subleases to
Subtenant the entire seventh floor of the building located at 5-9 West 37th
Street (the "Temporary Sublease") for a term commencing on later to occur of (a)
October 22, 1996 or (b) the day following the landlord's consent of such
temporary leasing, if required (the "Commencement Date), and terminating on the
date that both the fourth and fifth floors of the Permanent Space are available
to Subtenant pursuant to the terms of the Permanent Sublease ("Expiration
Date"). Notwithstanding the foregoing, in no event shall the Expiration Date be
later than September 15, 1997.
2. Fixed Rent. During the term of this Temporary Sublease, no fixed rent
shall be payable by Subtenant to Sublandlord with respect to the Temporary
Premises.
3. Lease. Except as otherwise expressly provided herein or to the extent
inconsistent with this Temporary Sublease, all of the terms, covenants,
conditions and provisions in that certain overlease, dated July 1, 1986, as
amended, between Time Equities, Inc., agent, as landlord ("Landlord"), and
Sublandlord, as tenant (the "Lease"), are hereby incorporated in, and made a
part of this Temporary Sublease and such rights and obligations as are contained
in the Lease are hereby imposed upon the respective parties hereto to the extent
the same relate to the Temporary Premises and Subtenant's use of the Temporary
Premises; this Temporary Sublease being substituted for the term "Lease" set
forth in the Lease, the Sublandlord herein being substituted for the Landlord
named in the
<PAGE>
Lease and the Subtenant herein being substituted for the Tenant named in the
Lease; provided, however, that the Sublandlord herein shall not be liable for
any defaults by, or obligations of, Landlord except as specifically set forth
herein and any reference to "Landlord" in the Lease with respect to the
furnishing of services, utilities, access, repairs and facilities shall be
deemed to refer to Landlord rather than Sublandlord. Notwithstanding the
foregoing, throughout the term of this Temporary Sublease Subtenant shall not be
responsible for any Porter Wage Payments or Tax Payments as such terms are
defined under the Lease.
4. Additional Rent. Subtenant shall pay Sublandlord all costs, charges,
monies and expenses of Sublandlord under the Lease that are denominated as
Additional Rent under the Lease which are allocable to the term of this
Temporary Sublease.
5. Electricity. Subtenant shall pay Sublandlord a flat fee of One Thousand
($1,000.00) per month as additional rent for its consumption of electricity
within the Temporary Premises during the term hereof to be payable on the first
day of each month. There shall be no other charges due Sublandlord for the
consumption of electricity by Subtenant within the Temporary Premises during the
term of this Temporary Sublease.
6. Landlord's Consent. Sublandlord and Subtenant acknowledge that Landlord
must consent to this Temporary Sublease for this Sublease to be a valid and
binding agreement between the parties hereto. Sublandlord shall deliver this
Temporary Sublease to Landlord within three (3) business days of its full
execution for its approval. If such written consent is not obtained from
Landlord within fifteen (15) days of the date of delivery to Landlord, then
Subtenant shall have the option of cancelling this Sublease by delivering
written notice of such cancellation within three (3) days of the end of the
aforesaid fifteen (15) day period to Sublandlord. In the event of the exercise
of such cancellation option both this Temporary Sublease and the Permanent
Sublease shall be deemed null and void and of no further force and effect and
Sublandlord shall promptly return to Subtenant all monies paid to Sublandlord
under the Permanent Sublease.
7. As Is. Subtenant has examined the Premises, is aware of the physical
condition thereof and agrees to take the same "as is" in its condition as of the
date hereof, subject to normal wear and tear. Subtenant agrees that the
Temporary Premises shall be used and occupied only for general office purposes
in connection with Subtenant's business pursuant to the terms of the Lease.
Notwithstanding the foregoing, the Temporary Premises shall be delivered to
Subtenant in a broom-clean condition.
8. Security. As security for the faithful performance and observance by
Subtenant of the terms, provisions, covenants and conditions of this Temporary
Sublease, Subtenant hereby authorizes
2
<PAGE>
Sublandlord to make use of the Security Deposit paid to Sublandlord under the
Permanent Sublease in the event of a default under this Temporary Sublease. Upon
such a default by Subtenant hereunder, after the Subtenant receives such notice
and opportunity to cure as provided under the Lease, Sublandlord may draw
against the Security Deposit pursuant to the terms of the Permanent Sublease.
9. Inapplicable Lease Provisions. For purposes of this Sublease the
following articles, sections or described portions of the Lease shall not be
deemed incorporated or made a part of this Temporary Sublease:
(a) The Base Lease: the "Witnesseth" clauses with respect to the
definition of the demised premises and the term of the Lease, Article 2, the
amount of security set forth under Article 34, Article 48, the Rent Schedule
(Exhibit A), the entire Porter Wage Payment Rider to the Lease and paragraphs 1,
2, 4, 6, 9, 12, 13, 14 of the Supplemental Rider to the Lease and Landlord's
Work Letter.
(b) First Modification to Lease: Paragraphs A, B, C, D, E, F (1-3, 4a and
the last two sentences of 4d), J, K, L, M, N, S and W of Article SECOND, Article
FOURTH, Article FIFTH, Article SIXTH, Article EIGHTH, Article NINTH and Article
TENTH.
(c) Second Modification to Lease: Article FIRST, Article SECOND, Article
THIRD, Article FOURTH, the second, third and fourth paragraphs of Article FIFTH,
Sections A, B, C, D and E of Article SIXTH, Sections (1) -- (6) of Article
SEVENTH, Article EIGHTH, Article NINTH and Article TENTH.
10. Hold--Over. If the Temporary Premises are not surrendered upon the
termination of this Temporary Sublease in the order, condition and repair as
existed at the Commencement Date (except for ordinary wear and tear), Subtenant
hereby indemnifies and holds harmless Sublandlord from and against all loss,
cost, liability, claim, damage and expense (including, without limitation,
reasonable attorneys' fees) resulting from any delay by Subtenant in so
rendering the Premises (exclusive of delays directly caused by Sublandlord), and
Subtenant, at the option of Sublandlord, shall be deemed to be occupying the
Premises as a tenant from month to month, at a monthly rental equal to the
monthly rental payable by Sublandlord to Landlord in the event of a "hold--over"
occupancy under Paragraph 38 of the Lease.
11. Cross--Default. Subtenant hereby acknowledges and agrees that any
default by Subtenant under the Permanent Sublease shall constitute a default by
Subtenant under this Temporary Sublease. Furthermore, in the event that the
Permanent Sublease shall terminate for any reason during the term hereof, this
Sublease shall likewise terminate in the same manner.
3
<PAGE>
12. Consent for Permanent Space. Notwithstanding the foregoing provisions
of this Temporary Sublease, Sublandlord and Subtenant agree that the landlord
for the Permanent Space must consent in writing to the Permanent Sublease for
this Temporary Sublease to continue to be a valid and binding agreement between
the parties hereto. If such consent is not obtained from such landlord within
the required time period set forth in the Permanent Sublease and said Sublease
is terminated, then this Temporary Sublease shall be automatically be deemed
null and void and of no further force and effect and, if Subtenant is in
possession of the Temporary Premises at such time, Subtenant shall vacate the
Temporary Premises pursuant to the terms hereof and pay Sublandlord all amounts
owed hereunder, each within ten (10) days from the date of termination of the
Permanent Sublease.
13. Indemnification. Subtenant agrees to hold harmless, indemnify and
defend Sublandlord from and against any and all claim, damage, cost, expense
(including, without limitation attorneys' fees) or liability ("Claims") arising
from or related to its breach of any of the provisions hereof, including without
limitation, any Claims in connection with or arising from any damage to the
Temporary Premises caused by the acts or omissions of the Subtenant (apart from
ordinary wear and tear).
14. Estoppel. Sublandlord affirms that, the Lease is in full force and
effect, and to the knowledge of Sublandlord, there exists no material default by
Landlord or Sublandlord under the Lease and no condition currently exists which,
with the passage of time, would constitute a material default under the Lease.
15. Default by Sublandlord. In the event of a default by Sublandlord under
the Lease for failure to pay Fixed or Additional Rent thereunder (assuming
Tenant is not in default under this Sublease and has timely paid all Fixed Rent
and Additional Rent due hereunder), Sublandlord shall remedy such default in the
manner and within the time period set forth in the Lease. In the event
Sublandlord fails to so remedy such default and the Lease shall be terminated by
Landlord because of such default, Subtenant shall have such remedies as
Subtenant is entitled to at law.
16. Miscellaneous. The parties hereto agree as follows: (a) Subtenant
shall be solely responsible for securing and maintaining the security of the
Temporary Premises and that Sublandlord shall have no obligation or liability of
any nature whatsoever relating thereto; (b) Subtenant shall not assign,
encumber, transfer or further sublet its interest in this Temporary Sublease or
otherwise allow the Temporary Premises to be used by others; (c) this Temporary
Sublease constitutes the entire agreement between the parties relating to the
subject matter hereof; (d) this Sublease shall inure to the benefit of all
parties hereto, their successors and permitted assigns; and (e) this Temporary
Sublease may not be changed orally, but only by an agreement in writing signed
by the
4
<PAGE>
parties hereto.
If the foregoing correctly represents the agreement between the parties
hereto, please sign this letter agreement in the space provided below and return
it to the undersigned, at which time it will becoming a binding agreement
between the parties.
Very truly yours,
VANITY FAIR INTIMATES, INC.
By: /s/ L. M. Parnalis
-----------------------
L. M. Parnalis
Accepted and Agreed to as of
this 16 day of October, 1996
PROMO TEL, INC.
By: /s/ Frank Magliato
-----------------------
Frank Magliato
Chief Executive Officer
5
PROMISSORY NOTE
$2,405,000 January 20, 1996
For value received, TECLink, Inc. (hereinafter referred to as the
"Borrower") promises to pay to the order of Promo Tel, Inc. (hereinafter
referred to as the "Company"), or Order, the principal sum of Two Million Four
Hundred Five Thousand and no/100 Dollars ($2,405,000) with interest thereon from
August 1, 1996, until paid, at the rate per annum of six percent (6%).
Principal and interest shall be payable as follows:
Two Hundred Fifty Thousand Dollars ($250,000) to be paid within ten
(10) days of completion of the private placement of securities of
the Borrower with the balance of principal and interest to be paid
upon completion of the public offering of securities of the
Borrower, provided, however, that if either or both payments have
not been made as specified above, then all principal and interest
shall be due and payable on June 30, 1997.
Payment is not deemed made until the funds are collected and made
available to the Company. If payment is not made when due, the Company, at its
option, may declare this Note in default as set out below.
This Note is secured by a Security Agreement of even date herewith.
The Borrower shall be in default on this Note and any agreement securing
this Note if any one or more of the following occurs (hereinafter referred to as
"Default"):
(a) If the Borrower fails to make payment when due or in the amount due;
(b) If the Borrower fails to keep any promise contained in this Note,
the Security Agreement or any other written agreement with the
Company;
(c) If the Borrower makes any misrepresentation or provides any
financial information as required by any agreement with the Company
that is untrue at the time it was made or provided;
(d) If the Borrower liquidates or dissolves;
(e) If the Borrower should file any voluntary petition in bankruptcy or
if any bankruptcy or insolvency proceedings be commenced against the
Borrower.
<PAGE>
In the event of Default, the Company: may, without notice, accelerate the
due date of the Note, and make all unpaid principal, interest and all other
agreed charges immediately payable; may use any remedy it may have under state
or federal law; and/or may use any remedy provided to it under the Security
Agreement.
The Borrower may prepay the Note in full or in part at any time. Any
payments made hereunder shall first be applied to interest on the unpaid
principal balance at the rate herein specified and then to principal.
No waiver of any right by the Company shall be effective, unless in
writing and signed by the Company. No delay by the Company in the exercise of
any right shall affect such right, nor preclude future exercise of such or
similar rights. As used herein, the term "Company" shall be deemed to include
its successors and assigns and transferees, endorsees or future holders of this
Note.
The Borrower agrees to pay all costs of collection, including, but not
limited to, reasonable attorney's fees for the services of counsel employed
after maturity or Default to collect this note or any portion of the
indebtedness herein described.
The Borrower and any guarantor, surety endorser or other party who may now
or in the future be liable for payment of this note hereby waive notice of and
consent to any and all extensions of this note or any part hereof without
notice, and hereby waive presentment for payment, demand, protest and notice of
demand, protest and non-payment.
This note may not be changed orally, but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought.
Company acknowledges that this note shall bear no interest from January
20, 1996 until August 1, 1996.
IN WITNESS WHEREOF, the Borrower has caused its authorized officer to
execute this note on this 23rd day of July, 1996, to be effective commencing on
the day and year above written.
TECLINK, INC.
By: /s/ William G. Stark
----------------------------------
Name/Title: William G. Stark/President
2
<PAGE>
[Letterhead of TecLink]
August 29, 1996
Mr. Frank Magliato
Promo Tel, Inc.
500 Fifth Ave, Ste 424
New York, NY 10110
Dear Frank,
Attached is an amended payment schedule for the $2,405,000 note payable between
TECLink, Inc. and Promo Tel, Inc. The amended schedule provides for recognizing
a payment of $100,000 to Promo Tel, Inc. on January 29, 1996 as a payment
against the note. The deposit of $50,000 on February 16, 1996 is applied against
the purchase price of the assets as stated in the purchase agreement. The
amended schedule provides for a payment of $250,000 within ten (10) days of
closing our Private Placement Offering, on or about October 10, 1996. It
provides for an additional note payment of $1,000,000 at the time of the closing
of our Initial Public Offering, anticipated for on or about December 31, 1996.
The remaining balance plus accrued interest would be made in equal monthly
payments of $49,171.85 beginning January 31, 1997 through December 31, 1998. As
stated in the original note, interest would accrue at 6% per annum beginning
August 1, 1996. I've also attached a schedule which discounts the note for book
purposes.
Please acknowledge agreement with the amended payment schedule as outlined
above and shown on the attached schedule by signing below and returning a signed
copy to me for my records.
Sincerely,
/s/ Suzanne J. Wilkinson
Suzanne J. Wilkinson, C.P.A.
Chief Financial Officer
Promo Tel, Inc. agrees to amended the payment terms of the $2,405,000 Promissory
Note executed by TECLink, Inc. to Promo Tel, Inc., to reflect the payment terms
as outlined above and as shown in the attached payment schedule.
/s/ Frank Magliato 9/5/96
- ----------------------------- --------------
Frank Magliato, President Date
Promo Tel, Inc.
<PAGE>
TECLink, Inc.
Note Payable to Promo Tel, Inc.
Actual Payment Schedule per Amended Note
<TABLE>
<CAPTION>
6.00%
Beginning Ending Number Interest Interest Accrued Total
Date Balance Additions Payments Balance of Days Expense Payments Interest Payments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/20/96 - 2,455,000.00 2,455,000.00 -
1/29/96 2,455,000.00 (100,000.00) 2,355,000.00 9 (100,000.00)
2/16/96 2,355,000.00 (50,000.00) 2,305,000.00 18 (50,000.00)
2/29/96 2,305,000.00 2,305,000.00 13 -
3/31/96 2,305,000.00 2,305,000.00 31 -
4/30/96 2,305,000.00 2,305,000.00 30 -
5/31/96 2,305,000.00 2,305,000.00 31 -
6/30/96 2,305.000.00 2,305,000.00 30 -
- ------------------------------------------------------------------------------------------------------------------------------------
7/31/96 2,305,000.00 2,305,000.00 31 -
8/31/96 2,305,000.00 2,305,000.00 31 11,746.03 11,746.03 -
9/30/96 2,305,000.00 2,305,000.00 30 11,367.12 23,113.15 -
- ------------------------------------------------------------------------------------------------------------------------------------
10/10/96 2,305,000.00 (250,000.00) 2,055,000.00 10 3,789.04 26,902.19 (250,000.00)
10/31/96 2,055,000.00 2,055,000.00 21 7,093.97 33,996.16 -
11/30/96 2,055,000.00 2,055,000.00 30 10,134.25 44,130.41 -
12/31/96 2,055,000.00 54,602.47 (1,000,000.00) 1,109,602.47 31 10,472.05 (54,602.47) (0.00) (1,000,000.00)
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/97 1,109,602.47 (43,517.44) 1,066,085.03 31 5,654.41 (5,654.41) (0.00) (49,171.85)
2/28/97 1,066,085.03 (44,264.94) 1,021,820.09 28 4,906.91 (4,906.91) (0.00) (49,171.85)
3/31/97 1,021,820.09 (43,964.77) 977,855.33 31 5,207.08 (5,207.08) (0.00) (49,171.85)
- ------------------------------------------------------------------------------------------------------------------------------------
4/30/97 977,855.33 (44,349.55) 933,505.78 30 4,822.30 (4,822.30) (0.00) (49,171.85)
5/31/97 933,505.78 (44,414.81) 889,090.97 31 4,757.04 (4,757.04) (0.00) (49,171.85)
6/30/97 889,090.97 (44,787.29) 844,303.68 30 4,384.56 (4,384.56) (0.00) (49,171.85)
- ------------------------------------------------------------------------------------------------------------------------------------
7/31/97 844,303.68 (44,869.37) 799,434.31 31 4,302.48 (4,302.48) (0.00) (49,171.85)
8/31/97 799,434.31 (45,098.02) 754,336.29 31 4,073.83 (4,073.83) (0.00) (49,171.85)
9/30/97 754,336.29 (45,451.84) 708,884.45 30 3,720.01 (3,720.01) (0.00) (49,171.85)
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/97 708,884.45 (45,559.45) 663,325.00 31 3,612.40 (3,612.40) (0.00) (49,171.85)
11/30/97 663,325.00 (45,900.66) 617,424.34 30 3,271.19 (3,271.19) (0.00) (49,171.85)
12/31/97 617,424.34 (46,025.52) 571,398.82 31 3,146.33 (3,146.33) (0.00) (49,171.85)
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/98 571,398.82 (46,260.06) 525,138.75 31 2,911.79 (2,911.79) (0.00) (49,171.85)
2/28/98 525,138.75 (46,754.77) 478,383.98 28 2,417.08 (2,417.08) (0.00) (49,171.85)
3/31/98 478,383.98 (46,734.06) 431,649.92 31 2,437.79 (2,437.79) (0.00) (49,171.85)
- ------------------------------------------------------------------------------------------------------------------------------------
4/30/98 431,649.92 (47,043.17) 384,606.76 30 2,128.68 (2,128.68) (0.00) (49,171.85)
5/31/98 384,606.76 (47,211.94) 337,394.82 31 1,959.91 (1,959.91) (0.00) (49,171.85)
6/30/98 337,394.82 (47,507.99) 289,886.84 30 1,663.86 (1,663.86) (0.00) (49,171.85)
- ------------------------------------------------------------------------------------------------------------------------------------
7/31/98 289,886.84 (47,694.62) 242,192.22 31 1,477.23 (1,477.23) (0.00) (49,171.85)
8/31/98 242,192.22 (47,937.66) 194,254.55 31 1,234.19 (1,234.19) (0.00) (49,171.85)
9/30/98 194,254.55 (48,213.88) 146,040.67 30 957.97 (957.97) (0.00) (49,171.85)
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/98 146,040.67 (48,427.64) 97,613.03 31 744.21 (744.21) (0.00) (49,171.85)
11/30/98 97,613.03 (48,690.47) 46,922.56 30 481.38 (481.38) (0.00) (49,171.85)
12/31/98 46,922.56 (48,922.56) 0.00 31 249.30 (249.30) (0.00) (49,171.86)
---------------------------------------------------------------------------------------------------------------------------
Totals 2,509,602.47 (2,509,602.47) 125,124.41 (125,124.41) (2,580,124.41)
</TABLE>
<PAGE>
TECLink, Inc.
Note Payable to Promo Tel, Inc.
<TABLE>
<CAPTION>
Balances for General Ledger
25000 25001 80000 25000 25001
---------------------------------------- ---------------------------------------
Beginning Balance 3.595156% Ending Balance
---------------------------------------- ---------------------------------------
Gross Discount Net Interest Gross Imputed Net
Date Note on Note Note Payments Expense Note Interest Note
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/20/96 2,580,124.41 (125,124.41) 2,455,000.00 -- -- 2,580,124.41 (125,124.41) 2,455,000.00
1/29/96 2,580,124.41 (125,124.41) 2,455,000.00 (100,000.00) 2,287.22 2,480,124.41 (122,837.19) 2,357,287.22
2/16/96 2,480,124.41 (122,837.19) 2,357,287.22 (50,000.00) 4,397.14 2,430,124.41 (118,440.05) 2,311,684.36
2/29/96 2,430,124.41 (118,440.05) 2,311,684.36 -- 3,111.69 2,430,124.41 (115,328.36) 2,314,796.05
3/31/96 2,430,124.41 (115,328.36) 2,314,796.05 -- 7,420.19 2,430,124.41 (107,908.17) 2,322,216.24
4/30/96 2,430,124.41 (107,908.17) 2,322,216.24 -- 7,180.83 2,430,124.41 (100,727.34) 2,329,397.07
5/31/96 2,430,124.41 (100,727.34) 2,329,397.07 -- 7,420.19 2,430,124.41 (93,307.15) 2,336,817.26
6/30/96 2,430,124.41 (93,307.15) 2,336,817.26 -- 7,180.83 2,430,124.41 (86,126.32) 2,343,998.09
- --------------------------------------------------------------------------------------------------------------------------
7/31/96 2,430,124.41 (86,126.32) 2,343,998.09 -- 7,420.19 2,430,124.41 (78,706.13) 2,351,418.28
8/31/96 2,430,124.41 (78,706.13) 2,351,418.28 -- 7,420.19 2,430,124.41 (71,285.94) 2,358,838.47
9/30/96 2,430,124.41 (71,285.94) 2,358,838.47 -- 7,180.83 2,430,124.41 (64,105.11) 2,366,019.30
- --------------------------------------------------------------------------------------------------------------------------
10/10/96 2,430,124.41 (64,105.11) 2,366,019.30 (250,000.00) 2,393.61 2,180,124.41 (61,711.50) 2,118,412.91
10/31/96 2,180,124.41 (61,711.50) 2,118,412.91 -- 4,509.47 2,180,124.41 (57,202.03) 2,122,922.38
11/30/96 2,180,124.41 (57,202.03) 2,122,922.38 -- 6,442.10 2,180,124.41 (50,759.93) 2,129,364.48
12/31/96 2,180,124.41 (50,759.93) 2,129,364.48 (1,000,000.00) 6,656.83 1,180,124.41 (44,103.10) 1,136,021.31
- --------------------------------------------------------------------------------------------------------------------------
1/31/97 1,180,124.41 (44,103.10) 1,136,021.31 (49,171.85) 3,603.42 1,130,952.56 (40,499.68) 1,090,452.88
2/28/97 1,130,952.56 (40,499.68) 1,090,452.88 (49,171.85) 3,119.09 1,081,780.71 (37,380.59) 1,044,400.12
3/31/97 1,081,780.71 (37,380.59) 1,044,400.12 (49,171.85) 3,303.13 1,032,608.86 (34,077.46) 998,531.40
- --------------------------------------------------------------------------------------------------------------------------
4/30/97 1,032,608.86 (34,077.46) 998,531.40 (49,171.85) 3,051.28 983,437.01 (31,026.18) 952,410.83
5/31/97 983,437.01 (31,026.18) 952,410.83 (49,171.85) 3,002.85 934,265.16 (28,023.33) 906,241.83
6/30/97 934,265.16 (28,023.33) 906,241.83 (49,171.85) 2,760.68 885,093.31 (25,262.65) 859,830.66
- --------------------------------------------------------------------------------------------------------------------------
7/31/97 885,093.31 (25,262.65) 859,830.66 (49,171.85) 2,702.56 835,921.46 (22,560.09) 813,361.37
8/31/97 835,921.46 (22,560.09) 813,361.37 (49,171.85) 2,552.42 786,749.61 (20,007.67) 766,741.94
9/30/97 786,749.61 (20,007.67) 766,741.94 (49,171.85) 2,324.78 737,577.76 (17,682.89) 719,894.87
- --------------------------------------------------------------------------------------------------------------------------
10/31/97 737,577.76 (17,682.89) 719,894.87 (49,171.85) 2,252.13 688,405.91 (15.430.76) 672,975.15
11/30/97 688,405.91 (15,430.76) 672,975.15 (49,171.85) 2,034.19 639,234.06 (13,396.57) 625,837.49
12/31/97 639,234.06 (13,396.57) 625,837.49 (49,171.85) 1,951.85 590,062.21 (11,444.72) 578,617.49
- --------------------------------------------------------------------------------------------------------------------------
1/31/98 590,062.21 (11,444.72) 578,617.49 (49,171.85) 1,801.71 540,890.36 (9,643.01) 531,247.35
2/28/98 540,890.36 (9,643.01) 531,247.35 (49,171.85) 1,491.74 491,718.51 (8,151.27) 483,567.24
3/31/98 491,718.51 (8,151.27) 483,567.24 (49,171.85) 1,501.42 442,546.66 (6.649.85) 435,896.81
- --------------------------------------------------------------------------------------------------------------------------
4/30/98 442,546.66 (6,649.85) 435,896.81 (49,171.85) 1,307.69 393,374.81 (5,342.16) 388,032.65
5/31/98 393,374.81 (5,342.16) 388,032.65 (49,171.85) 1,201.14 244,202.96 (4,141.02) 340,061.94
6/30/98 344,202.96 (4,141.02) 340,061.94 (49,171.85) 1,017.09 295,031.11 (3,123.93) 291,907.18
- --------------------------------------------------------------------------------------------------------------------------
7/31/98 295,031.11 (3,123.93) 291,907.18 (49,171.85) 900.85 245,859.26 (2,223.08) 243,636.18
8/31/98 245,859.26 (2,223.08) 243,636.18 (49,171.85) 750.71 196,687.41 (1,472.37) 195,215.04
9/30/98 196,687.41 (1,472.37) 195,215.04 (49,171.85) 581.20 147,515.56 (891.17) 146,624.39
- --------------------------------------------------------------------------------------------------------------------------
10/31/98 147,515.56 (891.17) 146,624.39 (49,171.85) 450.43 98,343.71 (440.74) 97,902.97
11/30/98 98,343.71 (440.74) 97,902.97 (49,171.85) 290.60 49,171.86 (150.14) 49,021.72
12/31/98 49,171.86 (150.14) 49,021.72 (49,171.86) 150.14 0.00 0.00 0.00
---------------------------------------------------------------------------------------------------------------
Totals (2,580,124.41) 125,124,41
</TABLE>
Current Long Term
Date Portion Portion
- ------------------------------------------
1/20/96
1/29/96
2/16/96
2/29/96 1,270,395.93 1,044,400.12
3/31/96 1,323,684.84 998,531.40
4/30/96 1,376,986.24 952,410.83
5/31/96 1,430,575.43 906,241.83
6/30/96 1,484,167.43 859,830.66
- ------------------------------------------
7/31/96 1,538,056.91 813,361.37
8/31/96 1,592,096.53 766,741.94
9/30/96 1,646,124.43 719,894.87
- ------------------------------------------
10/10/96
10/31/96 1,449,947.23 672,975.15
11/30/96 1,503,526.99 625,837.49
12/31/96 557,403.82 578,617.49
- ------------------------------------------
1/31/97 559,205.53 531,247.35
2/28/97 560,832.88 483,567.24
3/31/97 562,634.59 435,896.81
- ------------------------------------------
4/30/97 564,378.18 388,032.65
5/31/97 566,179.89 340,061.94
6/30/97 567,923.48 291,907.18
- ------------------------------------------
7/31/97 569,725.19 243,636.18
8/31/97 571,526.90 195,215.04
9/30/97 573,270.48 146,624.39
- ------------------------------------------
10/31/97 575,072.18 97,902.97
11/30/97 576,815.77 49,021.72
12/31/97 578,617.49 0.00
- ------------------------------------------
1/31/98 531,247.35 --
2/28/98 483,567.24 --
3/31/98 435,896.81 --
- ------------------------------------------
4/30/98 388,032.65 --
5/31/98 340,061.94 --
6/30/98 291,907.18 --
- ------------------------------------------
7/31/98 243,636.18 --
8/31/98 195,215.04 --
9/30/98 146,624.39 --
- ------------------------------------------
10/31/98 97,902.97 --
11/30/98 -49,021.72 --
12/31/98 0.00 --
-------------------------------
Totals
The total amount of each payment should be charged to general ledger 25000 A
monthly journal entry should be made to charge interest expense (G/L 80000) and
credit discount (G/L 25001) according to the above schedule.
8/28/96
<PAGE>
BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
This Bill of Sale, Assignment and Assumption Agreement ("Bill of Sale") is
made and entered into by and between TECLink, Inc. (the "Buyer") and Promo Tel,
Inc. (the "Seller") on this 23rd day of July, 1996, to be effective as of
January 20, 1996 (the "Effective Date").
WITNESSETH:
WHEREAS, Seller is a party to that certain Agreement for Purchase and Sale
of Assets by and between Seller and Buyer dated July 23, 1996, which is to be
effective for all purposes as of the Effective Date (the "Agreement"); and
WHEREAS, Seller, pursuant to the Agreement, desires to sell, assign,
transfer, convey and deliver to Buyer, as of the Effective Date the property as
more fully described on Exhibit A (the "Subject Property") attached hereto and
made a part hereof.
WHEREAS, the Seller and Buyer believe that it is in the mutual interest to
enter into this Bill of Sale;
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein and in the Agreement, the parties hereto agree as follows:
1. As of the Effective Date, Seller hereby assigns, grants, conveys,
transfers and delivers unto Buyer, and Buyer's successors and assigns, all of
Seller's right, title and interest in the Subject Property, free and clear of
all liens and encumbrances, except for trade payables incurred in the ordinary
course of business and certain payments for software licenses and rights of use
which are part of the Subject Property, as set forth in the Agreement.
2. Seller covenants that it will execute such further documentation as is
necessary to fully effectuate the transfer of title to the Subject Property to
Buyer.
<PAGE>
3. Seller hereby transfers to the fullest extent allowed by law or
contract any and all existing warranty rights to the Subject Property which
Seller may have against vendors and agrees to fully cooperate and assist Buyer
in making any warranty claims that may be available to Buyer with respect to the
Subject Property.
4. After execution hereof, Seller and Buyer will take all appropriate
action and execute other documents, instruments or conveyances which may be
reasonably necessary to carry out any of the provisions of the Agreement.
5. This Agreement shall be governed by and interpreted by the laws of the
State of Mississippi.'
6. All covenants and agreements contained in this Agreement shall be
binding upon and inure to the benefit of the respective successors and permitted
assigns of the parties, whether so expressed or not.
7. This Agreement may be executed in one or more counterparts any one of
which may not contain the signatures of more than one party but all of which are
taken together shall constitute one in the same agreement.
SELLER: BUYER:
PROMO TEL, INC. TECLINK, INC.
By: /s/ Frank C. Magliato By: /s/ William G. Stark
---------------------- ------------------------
Name: Frank C. Magliato Name: William G. Stark
Title: President Title: President
2
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made this 23rd day of July, 1996, is made and
entered into by Promo Tel, Inc. ("Creditor") and TECLink, Inc. ("Debtor") with
an effective date of January 20, 1996 (the "Effective Date").
WHEREAS, Debtor is indebted to Creditor in the principal amount of
$2,405,000 pursuant to that certain promissory note dated as of the Effective
Date (the "Note").
NOW, THEREFORE, the parties agree as follows:
ARTICLE I.
SECURED OBLIGATIONS
This Security Agreement is given to secure the due and punctual payment of
the amounts owing under the Note and any other extensions of credit to Debtor by
Creditor and the due and punctual performance of all other obligations under
this Security Agreement, together with any extensions and renewals of the
foregoing obligations (collectively the "Secured Obligations").
ARTICLE II.
SECURITY INTEREST
As security for the due and punctual payment and satisfaction of the
Secured Obligations, Debtor hereby assigns to Creditor and grants to Creditor a
continuing security interest in the following property of Debtor, whether now or
hereafter owned, existing, acquired or arising and wherever now or hereafter
located: (a) all accounts and all goods whose sale, lease or other disposition
by Debtor has given rise to accounts; (b) all chattel paper, instruments,
documents, general intangibles and contract rights, including, without
limitation, all patents, patent applications, trademarks, trademark
applications, tradenames, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, tax refund claims, claims against carriers
and shippers, guarantee claims, contracts rights, security interests, security
deposits and any rights to indemnification; (c) all inventory; (d) all goods
(other than inventory), including, without limitation, equipment, vehicles and
fixtures; (e) all deposits and cash and any other property of Debtor; and (f)
all additions and accessions to, substitutions for, and replacements, products
and proceeds of the foregoing property, including, without limitation, proceeds
of all insurance policies insuring the foregoing property, and all of Debtor's
books and records relating to any of the foregoing and to Debtor's business.
<PAGE>
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Debtor hereby represents, warrants and agrees to and with Creditor as
follows:
(a) Debtor has title to the Collateral and has the corporate power
and authority to assign and convey the same to Creditor. The security
interest in the Collateral granted to Creditor herein is a first-priority
security interest in and encumbrance on all rights, title and interest of
Debtor in and to the Collateral;
(b) All books and records concerning the Collateral are located at
700 S. West Street, Jackson, Mississippi 39201.
(c) Debtor will take or cause to be taken all necessary and
appropriate action to protect and preserve the value of and its rights,
title and interest in and to the Collateral and its proceeds, including,
without limitation, payment of all taxes, fees, assessments, insurance
premiums and other charges that may be imposed on or relate to the
Collateral. Debtor will maintain all Collateral in as good a condition as
existing on the date hereof subject to reasonable wear and tear;
(d) Debtor will not, without the prior written consent of Creditor,
sell, lease, or assign (other than in the ordinary course of business) any
of the Collateral or create or permit to exist any lien on or security
interest in any Collateral to or in favor of anyone other than Creditor;
(e) Debtor will provide 30 days prior written notice to Creditor of
any change in, addition to, or discontinuance of Debtor's principle place
of business, the location of the Collateral, or the location of Debtor's
books and records pertaining to the Collateral;
(f) So long as any liability to Creditor is outstanding, Debtor will
not borrow from anyone or pledge or grant any security interest in any of
its properties or assets, directly or indirectly, to anyone except
Creditor or permit any lien or encumbrance to attach to any of the
Collateral, and Debtor will not issue or authorize the issuance of any
stock or other equity interest in Debtor without the prior written consent
of Creditor, which consent, if granted, may be conditioned upon prepayment
of principal in an amount equal to the full proceeds from any offering and
issuance of additional stock or other equity participations;
(g) Debtor warrants to Creditor that Debtor has full power and
authority to enter into this Security Agreement and the transaction
contemplated hereby and all corporate and, if required, shareholder,
action has been taken to authorize the officers or officer executing this
Security Agreement, and the Note secured hereby, to bind the corporation
and that Debtor will execute any further assurances, instruments,
financing statements, continuation statements and other documents
<PAGE>
necessary or desirable to perfect and continue the perfection of a prior
first lien security interest in the Collateral; and
(h) Regarding Collateral which is equipment, in the event that there
shall be filed, perfected, or sought to be enforced in the future any
statutory or common law lien in favor of landlords, materialmen,
mechanics, laborers, warehousemen or other storers of property, Debtor
shall promptly discharge such lien in a manner that results in Creditor
having a first and prior lien on and security interest in the Collateral.
ARTICLE IV.
EVENTS OF DEFAULT
Debtor shall be in default under this Agreement: (a) when it has made any
material misrepresentation in connection with or has failed to pay or perform
any of its obligations, agreements or affirmations under this Agreement or the
Note; (b) when any event occurs which results in acceleration of the maturity of
the indebtedness of Debtor under any agreement with any person, including the
Note; or (c) upon the dissolution, termination of existence or business failure
of Debtor, or the appointment of a receiver for any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding in bankruptcy or insolvency by or against Debtor; or (d) when
Creditor in good faith deems itself insecure and its prospect of payment
impaired.
ARTICLE V.
CREDITOR'S RIGHTS EXCLUSIVE OF DEFAULT
Debtor agrees that during the term of this Security Agreement Creditor
shall be entitled to exercise any or all of the following rights:
(a) Creditor may enter upon Debtor's premises, or wherever the
Collateral may be (subject to the rights of the owner of premises not
owned or controlled by Debtor to condition or prevent such entry) at any
reasonable time to inspect the Collateral and to inspect the books and
records pertaining to the Collateral, and Debtor shall assist Creditor in
making any such inspection;
(b) At its option, Creditor may (but shall not be obligated to) from
time to time (i) discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on the Collateral, (ii) perform
any other agreement of Debtor hereunder that Debtor shall fail to perform
and take any other reasonable action that Creditor deems necessary for the
maintenance or preservation of any of the Collateral or its interest
therein. Debtor agrees to reimburse Creditor within ten (10) days of
demand for any payment made or reasonable expenses incurred by Creditor
pursuant to the foregoing authorization.
<PAGE>
ARTICLE VI.
REMEDIES ON DEFAULT
Upon the occurrence of an Event of Default as described in Article IV
hereof, Creditor may, in its sole discretion (i) declare all of the Secured
Obligations to be immediately due and payable, (ii) proceed immediately to
exercise any and all of Creditor's rights, powers and privileges with respect to
the Collateral, including, without limitation, the right to repossess or sell or
otherwise dispose of the Collateral or any part thereof in such manner as
Creditor in its sole discretion may choose, or (iii) exercise any other right or
remedy available to Creditor under the applicable Uniform Commercial Code or
otherwise available by agreement, at law or in equity. All rights and remedies
specified herein are cumulative and are in addition to such other rights and
remedies as are available to Creditor. Debtor agrees, upon request by Creditor,
to assemble the Collateral at a location reasonably convenient to Creditor and
to make such Collateral available to Creditor. Debtor authorizes Creditor upon
the occurrence of an Event of Default to enter the premises where the Collateral
is located and to take possession of and remove any such Collateral without
further notice or demand and without institution of legal proceedings. Any
requirement imposed by law for reasonable notification of any intended
disposition of the Collateral shall be deemed reasonably and properly made if
given in accordance with the provisions of Section 9.10 hereof at least ten (10)
days prior to any public sale of the Collateral or the time after which any
private sale or other intended disposition of the Collateral is to be made.
ARTICLE VII.
APPLICATION OF PROCEEDS
The proceeds from the sale of or other realization on the Collateral
pursuant to Article VI hereof shall be applied as follows:
(a) First, to the payment of all costs and expenses incurred by
Creditor in connection with such sale or other realization including,
without limitation, reasonable attorneys fees and all reasonable court
costs and to the repayment of all advances by Creditor hereunder for the
account of Debtor and the payment of all reasonable costs and expenses
paid or incurred by Creditor in connection with this Security Agreement or
in the exercise of any right or remedy hereunder, to the extent that such
advances, costs and expenses shall not have been previously paid to
Creditor upon its demand to Debtor therefor;
(b) Second, to the payment in full of the Note, including both
principal and interest accrued to the date of payment;
<PAGE>
(c) Third, to Creditor in payment in full of any remaining Secured
Obligations; and
(d) Fourth, to Debtor or to the person or entity legally entitled
thereto.
ARTICLE VIII.
MISCELLANEOUS
9.1 Financing Statements and Power of Attorney. Debtor irrevocably hereby
makes, constitutes and appoints Creditor as Debtor's true and lawful attorney in
fact to execute such financing statements, documents and other agreements and
instrument and to do such other things and acts as may be necessary to preserve
and perfect Creditor's security interest in the Collateral. Upon payment in full
of the Secured Obligations and the termination of this Security Agreement,
Creditor shall execute and deliver to Debtor such termination statements as
Debtor shall reasonably request.
9.2 Termination of Agreement. Debtor may terminate this Security Agreement
and Creditor shall release its security interest in the Collateral upon the
payment in full of all of the Secured Obligations.
9.3 Survival of Representations and Warranties. All representations and
warranties contained herein or made by or furnished on behalf of Debtor in
connection herewith shall survive the execution and delivery of this Security
Agreement.
9.4 Modification. No modification, amendment or alteration of any
provision of this Security Agreement shall be effective unless contained in a
written agreement signed by the parties hereto, and then such modification,
amendment or alteration shall be effective only in the specific instances and
for the specific purposes for which given.
9.5 Successors and Assigns. This Security Agreement shall bind and inure
to the benefit of the parties hereto and their respective successors and
assigns; provided, however, Creditor shall have no right to assign its rights or
obligations hereunder to any person or entity.
9.6 Further Assurances. Upon the request of Creditor, Debtor shall duly
execute and deliver, at the cost and expense of Debtor, such further instruments
as may be necessary or proper, in the judgment of Creditor, to carry out the
provisions and purposes of this Security Agreement or to perfect, protect and
preserve the security interest of Creditor in the Collateral or in any portion
thereof.
9.7 Time of Essence. Time is of the essence in interpreting and performing
this Security Agreement.
<PAGE>
9.8 Costs of Enforcement. Debtor will pay to Creditor all reasonable costs
and expenses, including attorney's fees, necessary for the enforcement of any of
the provision of this Security Agreement.
9.9 No Waiver. No delay or failure on the part of Creditor in the exercise
of any right, power or privilege under this Security Agreement shall impair any
such right, power or privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of such right, power or
privilege shall preclude the further exercise of such right, power or privilege
or the exercise of any other right, power or privilege. No waiver shall be valid
against Creditor unless made in writing and signed by Creditor, and then only to
the extent expressly specified therein.
9.10 Notices. Any notices or other communications required or permitted
hereunder shall be deemed sufficiently given on the date sent, if sent by
overnight courier, by facsimile with reasonable evidence of receipt, or by
certified mail, postage prepaid, addressed as follows:
Creditor: Promo Tel, Inc.
500 Fifth Avenue, Suite 424
New York, NY 10110
Fax (212) 944-2829
Debtor: TECLink, Inc.
700 5. West Street, Suite 201
Jackson, MS 39201
Fax (601) 354-0124
or to such other address as either Creditor or Debtor may designate by notice to
the other.
9.11 Severability. If any part of any provision contained in this Security
Agreement shall be invalid or unenforceable under applicable law, said part
shall be ineffective to the extent of such invalidity only, without in any way
affecting the remaining parts of said provisions or the remaining provisions.
9.12 Choice of Law. This Security Agreement shall be governed by and
interpreted in accordance with the laws of the State of Mississippi.
9.13 Descriptive Headings. The descriptive headings of the several
articles and sections of this Security Agreement are inserted for convenience
only and do not constitute a part of this Security Agreement.
9.14 Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which, taken together, shall constitute one and the same instrument.
<PAGE>
9.15 Entire Agreement. This Security Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof and any
prior agreements, whether written or oral, with respect thereof, are expressly
superseded hereby.
WITNESS the signatures of the parties hereto through their duly authorized
officers.
CREDITOR: DEBTOR:
PROMO TEL, INC. TECLINK, INC.
By: /s/ Frank Magliato By: /s/ William G. Stark
<PAGE>
AGREEMENT FOR PURCHASE
AND SALE OF ASSETS
THIS AGREEMENT, (the "Agreement') is made and entered into this 23rd day
of July, 1996, with an effective date of the transactions as described herein of
January 20, 1996 (the "Effective Date"), by and between Promo Tel, Inc., a
Nevada corporation ("Promo Tel") and TECLink, Inc., a Nevada corporation
("TECLink").
WHEREAS, Promo Tel s the owner of certain tangible and intangible property
and assets which TECLink desires to purchase or acquire the right to possess and
use as of the Effective Date; and
WHEREAS, Promo Tel is willing to sell to TECLink the property and assets
or the right to possess and use portions of the same as of the Effective Date;
and
WHEREAS, the parties desire to enter into this Agreement to act forth the
terms and conditions of the transaction:
NOW THEREFORE, in consideration of the foregoing and the mutual promises
and covenants contained herein IT HAS BEEN AND IT HEREBY IS AGREED as follows:
1. Definition of Subject Property. The term "Subject Property" as used
herein shall mean the property and assets, tangible and intangible, which are
listed on Exhibit A hereto.
2. Sale. Transfer and Assignment of Subject Property.
(a) As of the Effective Date, Promo Tel hereby sells, assigns, transfers,
conveys and delivers to TECLink, and TECLink accepts, all of the right, title
and interest in and to the Subject Property listed on Exhibit A.
(b) Regarding the Subject Property that consists of contracts and
licenses, including but not limited to software licenses, whether exclusive or
nonexclusive, Promo Tel hereby sells, transfers and assigns and TECLink accepts
such contracts and licenses, including but not limited to all of Promo Tel's
rights under that certain Distributorship Agreement between Promo Tel and Hughes
Network Systems for DirecPC Services and Equipment dated December 12, 1995, (the
"Hughes Project").
(c) Except as set forth in Section 9, TECLink shall assume no liabilities
other than:
(i) the royalties and license obligations as set forth in Section
5 hereof; and
(ii) trade payables associated with the Subject Property incurred
in the normal course of business.
3. Purchase Price.
(a) The aggregate purchase price (the "Purchase Price") for the Subject
Property is Two Million Four Hundred Fifty-Five Thousand Dollars ($2,455,000).
The Purchase Price is to be paid by TECLink to Promo Tel as follows:
(i) Fifty Thousand Dollars ($50,000) which was paid by TECLink to
Promo Tel on the Effective Date, the receipt of which is
hereby acknowledged by Promo Tel; and
(ii) A promissory note (the "Note") payable by TECLink to Promo Tel
in the principal amount of Two Million Four Hundred Five
Thousand Dollars ($2,405,000) bearing interest and six percent
(6%) per annum with payments to be made as follows: one
<PAGE>
payment of Two Hundred Fifty Thousand Dollars ($250,000) upon
completion of the proposed private placement of securities of
TECLink with the balance of principal and interest to be paid
upon completion of an initial public offering of securities of
TECLink; provided, however, if either or both payments have
not been made as specified above, then all principal and
interest accrued thereon shall be due and payable on June 30,
1997.
(b) The parties agree that the Purchase Price shall be reduced in the
event that any of the Subject Property is missing or inoperable, with such
reduction to be made to the principal amount of the Note. The parties agree that
the period of evaluation of the Subject Property for the purposes above shall
last until September 30, 1996, and that the parties shall negotiate in good
faith as to such reductions.
4. Allocation of Purchase Price. Promo Tel and TECLink agree to report the
acquisition and sale of the Subject Property in accordance with Exhibit B hereto
in their respective financial records, statements and forms prepared or filed
pursuant to reporting requirements under the Internal Revenue code of 1986, as
amended.
5. Royalties and License Fees. TECLink acknowledges that it has been
informed that certain of the Subject Property which are license agreements and
similar rights of use are subject to rents, royalties or license fees payable to
others. TECLink agrees to and assumes the obligation to either: (i) pay these
fees; or (ii) reimburse Promo Tel for the payment of these fees, as the case may
be.
6. Representations of Promo Tel. Promo Tel hereby represents and warrants
to TECLink that:
(a) With respect to the Subject Property (other than Subject Property
consisting of licenses and/or similar rights of use): (i) it has good and
marketable title thereto; and (ii) it has conveyed the Subject Property to
TECLink free and clear of all encumbrances as of the Effective Date.
(b) With respect to the Subject Property which is composed of licenses
and/or rights of use: (i) it has the right to possess and use this portion of
the Subject Property; and (ii) Promo Tel has assigned to TECLink the legal right
to possess this portion of the Subject Property and to use the same in
connection with TECLink's business operations as of the Effective Date.
(c) As of the Effective Date, the Subject Property was in good and
workable condition.
(d) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary corporate action on the part of Promo Tel. This
Agreement has been duly executed and delivered by Promo Tel and constitutes the
valid and binding obligation of Promo Tel enforceable against Promo Tel in
accordance with its terms.
(e) The execution and delivery of this Agreement by Promo Tel and the
performance by Promo Tel of its obligations hereunder will not violate or
conflict with, or constitute a breach or default under, or result in the
creation or imposition of any lien under, (i) the certificate of Incorporation
or By-laws of Promo Tel, (ii) any statute, law, regulation or rule applicable to
Promo Tel, or (iii) any contract, agreement, lease, mortgage, judgment, order,
decree or other instrument to which Promo Tel is a party or by which Promo Tel
is bound.
7. Security Interest in Subject Property. Promo Tel shall have a Security
Interest in the Subject Property to secure payment of the Purchase Price and
TECLink agrees to execute a Security Agreement and execute filing statements
under the Uniform Commercial Code sufficient to perfect a security interest in
favor of Promo Tel in the Subject Property.
8. Documentation. Promo Tel shall deliver to TECLink a Bill of Sale,
Assignment and Assumption Agreement effective as of the Effective Date conveying
good and marketable title to the Subject
2
<PAGE>
Property and assigning and conveying all contracts, licenses and other rights of
use which are Subject Property, all of the foregoing free and clear of all liens
and encumbrances.
9. Indemnification. The parties agree that the following indemnification
provisions shall apply:
(a) Promo Tel shall defend, indemnify and hold TECLink and any of its
affiliates, directors, officers, employees, or representatives harmless from,
against and in respect of any and all claims, demands, lawsuits, proceeding,
losses, assessments, fines, penalties, administrative orders, obligations,
costs, expenses, liabilities and damages, including interest, penalties and
reasonable attorney's fees (all of the foregoing hereinafter referred to
collectively as ("Claims"), which arise, result from or are related to Promo
Tel's breach of, or failure to perform, any of its representations, warranties,
covenants, commitments, agreements or obligations under this Agreement or in any
writing, certificate, exhibit, schedule, statement, list, report, instrument, or
other document furnished or delivered to TECLink in connection with this
Agreement (including, without limitation, any misrepresentation in, or omission
from, this Agreement or any writing, certificate, exhibit, schedule, statement,
list or report to TECLink in connection with this Agreement.
(b) TECLink shall defend, indemnify and hold Promo Tel and any of its
affiliates, directors, officers, employees, or representatives harmless from,
against and in respect of any and ail claims, demands, lawsuits, proceeding,
losses, assessments, fines, penalties, administrative orders, obligations,
costs, expenses, liabilities and damages, including interest, penalties and
reasonable attorney's fees (all of the foregoing hereinafter referred to
collectively as ("Claims"), which arise, result from or are related to Promo
Tel's breach of, or failure to perform, any of its representations, warranties,
covenants, commitments, Agreements or obligations under this Agreement or in any
writing, certificate, exhibit, schedule, statement, list, report, instrument, or
other document furnished or delivered to Promo Tel in connection with this
Agreement (including, without limitation, any misrepresentation in, or omission
from, this Agreement or any writing, certificate, exhibit, schedule, statement,
list or report to Promo Tel in connection with this Agreement;
(c) Promo Tel shall indemnify and hold TECLink and any of its affiliates,
directors, officers, employees, or representatives harmless from all Claims
associated with the Subject Property incurred or relating to periods prior to
the Effective Date and TECLink shall indemnify and hold Promo Tel and any of its
affiliates, directors, officers, employees, or representatives harmless from all
Claims associated with the Subject Property incurred or relating to periods
after the Effective Date.
(d) Promo Tel and TECLink each acknowledge existence of the Claims against
each of the parties (as defendants) made by Heritage Graphics, Inc. ("Heritage")
in a suit filed by Heritage in the Circuit Court of Hinds County, Mississippi,
styled Heritage Graphics, Inc. vs. Telephone Electronics Corporation, d/b/a
TECLink, Promo Tel, Inc. and TECLink, Inc. (the "Heritage Case"). The parties
agree that each has conducted its own investigation of such claim.
Notwithstanding any provision to the contrary herein, Promo Tel agrees to
indemnify and hold TECLink and any of its affiliates, directors, officers,
employees, or representatives harmless from all Claims associated with the
Heritage Case which accrued prior to January 20, 1996, and TECLink agrees to
indemnify and hold Promo Tel and any of its affiliates, directors, officers,
employees, or representatives harmless from all claims associated with the
Heritage Case which accrued subsequent to January 20, 1996.
10. Arbitration. Promo Tel and TECLink each agree to provide the other
with written notice of any claimed breach of the Agreement. The party receiving
the notice of alleged breach shall have thirty (30) days to cure the breach. If
after thirty (30) days no resolution has been achieved, the involved parties
shall arbitrate the dispute in Jackson, Mississippi utilizing the services and
Rules and Regulation of the American Arbitration Association.
11. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon receipt if delivered personally, by telex
or facsimile, with reasonable evidence of receipt the next day if by express
mail, or five days after being sent by registered or certified mail, return
receipt
3
<PAGE>
requested, postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice provided
that such notice shall be effective only upon receipt thereof):
In the case of Promo Tel:
Promo Tel, Inc.
500 Fifth Avenue
Suite #424
New York, New York 10110
FAX: (212) 944-8888
ATTN.: Frank Magliato
and in the case of TECLink:
TECLink, Inc.
700 S. West Street
Suite 220
Jackson, Mississippi 39201
FAX: (601) 354-0124
ATTN:. William G. Stark
Any party may at any time direct in writing that all communications or
particular communications or particular types of communications be delivered to
a different address or addressee other than those specified herein by notifying
the other party in the manner prescribed herein for the giving of notice.
12. Benefit. This Agreement shall be binding upon the parties and their
respective successors, assigns and legal representatives.
13. Assignment. Neither the Agreement nor any rights therein may be
assigned by either party without the prior written consent of the other party;
which consent shall not be unreasonably withheld. Any such attempted assignment
without such consent shall be void.
14. Entirety and Amendments. The Agreement constitutes the entire
agreement and understanding of the parties. The Agreement may only be amended in
writing executed by the parties.
15. Law. The Agreement shall be governed by and construed under the laws
of Mississippi.
16. Further Assurances. Each of the parties shall execute and deliver, at
its own expense, such further instruments of transfer and conveyance, documents
and certificates as may be reasonably required for it to consummate all of the
matters contemplated by this Agreement.
17. Hughes Proportional Payment. The parties agree that for each item of
the Subject Property sold out of Purchaser's inventory which is related to the
Hughes Project, the Purchaser shall remit to Seller fifty three percent (53%) of
the amount collected from such sale within thirty (30) days of Purchaser's
receipt thereof, up to a total of Two Hundred Eighty Five Thousand Dollars
($285,000).
4
<PAGE>
IN WITNESS THEREOF, the parties have duly executed this Agreement as of
the date first written above.
Promo Tel, Inc.
By: /s/ Frank Magliato
----------------------
Name: Frank Magliato
Title: President
TECLink, Inc.
By: /s/ William G. Stark
------------------------
Name: William G. Stark
Title: President
5
<PAGE>
EXHIBIT A
SUBJECT PROPERTY
Certain assets being utilized, or capable of being utilized, in the
Internet access business consisting of all of Promo Tel's right, title and
interest in the following property made a part hereof to the following:
(1) U.S. Trademark Application (Serial Number 75/004054) relating to the
name "TECLink".
(2) Assets described on Schedule A attached hereto and made a part
hereof and all of Promo Tel's rights under that certain
Distributorship Agreement between Promo Tel and Hughes Network
Systems for DirecPC Services and Equipment dated December 12, 1995.
(3) Customer lists.
(4) Contract right to purchase MCI services which were transferred to
Promo Tel by Telephone Electronics Corporation ("TEC") pursuant to
that certain Asset Purchase Agreement between such parties dated as
of May 1, 1996, provided under TEC's MCI Carrier Contract (the "MCI
Contract"). Promo Tel shall cause TEC to designated TECLink as an
"affiliate" under the MCI Contract, provided however, that TECLink
shall comply with all the terms and conditions of such contract and
the rules and procedures set forth by TEC's MCI Contract
administrator. This right shall terminate upon expiration of the MCI
Contract. TEC shall have the right, in its sole discretion, to
modify or terminate the MCI Contract in its entirety.
A-1
<PAGE>
EXHIBIT B
ALLOCATION OF PURCHASE PRICE
B-1
<PAGE>
TECLink, Inc.
Schedule Of Assets Purchased from Promo Tel, Inc.
20-Jan-96
<TABLE>
<CAPTION>
G/L # Date Vendor Description Location Amount Totals
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12000 10/10/95 Access Graphics 12 Mac Netscape Lin 700 S West St 317.05
12000 12/4/95 Access Graphics 76 PC Netscape Lin 700 S West St 1,918.36
12000 1/3/96 Netscape 10,000 Copies by Contract 700 S West St 92,000.00
12000 8/22/95 Hughes 20 DirecPC Kits 700 S West St 31,070.80
12000 9/18/95 Hughes DirecPC Access Cards 700 S West St 7,620.36
12000 12/21/95 Access Graphics Navigator 1.2 Win, Media Only 700 S West St 1,359.85
12000 9/29/95 Access Graphics Netscape Diskettes (58 Units) 700 S West St 1,403.94
12000 12/18/95 Access Graphics Software- Navigator 700 S West St 1,361.27
12000 5/31/96 Hughes DirecPC Kits Warehouse 535,000.00
Total Inventory 672,051.63
15000 1/11/96 Tech Data 3 EXB 8205 XL 8 MM 5GB 7GB OSCAR 4,470.00
15000 11/24/95 Insight 4300 Micropolis API/ Wide
SCSI Bare Kit FELIX 1,389.00
15000 11/10/95 Insight Computers DAT Tapes - 4300 MB MICROPOLIS FELIX 1,965.00
15000 9/8/95 Microage SparcServer 1000E - Printer
Server FELIX FELIX 84,156.57
Total Servers 91,980.57
15001 12/1/95 UUNET 1 Cisco 2501 Routers Monroe 1,621.20
15001 12/1/95 UUNET 1 Cisco 2501 Routers & 7 DSERV I DSERV Monroe 16,173.65
15001 1/13/96 The Cabling Company 8 Port Ethernet Hub 374.50
15001 12/20/95 Anixter Brothers DSU, CSU & SYSIV 2 16 Port
Total Controls Oxford (Dallas, Monroe) 20,952.78
15001 1/11/96 Tech Data 1 Fast Etherlink PC-1 & 47ONS
8 Chip Gold 670.00
15001 12/8/95 Anixter Brothers Routers Oxford 672.50
15001 1/1/96 Progressive Technologies 2 551-ESF CSU With Cables 2,232.00
15001 12/8/95 Anixter Brothers Routers Oxford 509.48
15001 10/17/95 UUNET Cisco Routers 4,863.60
Total Routers 48,069.71
15002 8/16/95 US Robotics 1 48 Port Total Control 700 S West St 52,999.74
15002 11/21/95 US Robotics 2 48 Port Total Controls Oxford 80,528.64
15002 2 48 Port Total Controls Adj to Original Schedule (81,090.24)
15002 11/24/95 US Robotics 4 48 Port Total Controls Oxford 161,272.93
15002 12/27/95 US Robotics 6 48 Port Total Controls 700 S West St 243,272.32
15002 2 16 Port Total Controls Adj to Original Schedule (35,333.12)
Total Total Controls 421,650.27
15005 9/15/95 Robert Anderson DS-1 Channel Bank-700SW Street 700 S West St 2,500.00
15005 12/1/95 Tech Data Corporation Interconnect Cables 700 S West St 4,893.85
15005 1/6/95 Progressive Technologies Interconnect Cables 700 S West St 2,166.00
15005 11/8/95 Tech Data Corporation Interconnect Cables-700 SW Street 700 S West St 8,389.06
15005 11/17/95 Progressive Technologies Interconnect Cables-700 SW Street 700 S West St 2,112.00
15005 11/6/95 Tech Data Corporation Interconnect Cables-700 SW Street 700 S West St 435.50
15005 10/9/95 C & L Communications LGS Clam Package 700 S West St 4,869.71
15005 6/9/95 Anderson, Ron Satellite Equipment Misc 700 S West St 2,868.02
15005 11/30/95 US Robotics Total Control - Fans - TecLink Oxford 2,021.60
Total Other Communications Equipment 30,255.74
15100 12/1/95 Pilner Office Supply, Inc. Furniture Oxford 1,597.95
15100 Lockers Operator Center 2,749.75
15100 1/25/95 Kelly's Office Furniture Office Furniture 1,581.46
15100 7/13/95 Frank Venturi Carpets Various Furniture - @ Highway 80 Storage 1,410.80
15100 8/17/95 Kelly's Office Furniture Various Furniture - Highway 80 Storage 1,107.45
15100 7/1/95 Kelly's Office Furniture Various Furniture- Office Furniture Storage 6,075.46
Total Office Furniture 14,522.87
15101 10/30/95 Heritage Graphics 1 PowerMac 8500 & 2 PowerBook 5300s 700 S West St 14,507.98
15101 5/26/95 Sam's Wholesale 7 Pentium 90 computers & 5 Modems 700 S West St 17,144.61
15101 COMPUTER DELL P90 SET-UP* 700 S West St 2,154.50
15101 COMPUTER DELL P90 SET-UP* 700 S West St 2,154.50
15101 10/13/95 Heritage Graphics NEC INTERFACE & NEC PORTABLE CD ROM Cold Room 1,225.88
15101 10113/95 Insight 5 P120 CONFIGURED SYSTEMS 700 S West St 21,379.00
15101 1211/95 Heritage Graphics PowerBook 5300 & accessories 700 S West St 3,135.80
15101 PRINTER, OTC W/PEDESTAL 700 S West St 1,328.17
15101 5/16/95 Anderson, Ron Cybermax - Executive Max P120
Computer Package 700 S West St 3,333.00
15101 6/14/95 Anderson, Ron Gateway 2000 Pentium Tech Room 2,411.00
15101 7/24/95 Anderson, Ron HP DeskJet 1200C & HP ScanJet DeskJet Stolen,
Scanjet A1 A 2,519.94
15101 5/12/95 Anderson, Ron - Sam's Pentium 90 System 700 S West St 2,726.36
</TABLE>
Page 1 of 4
<PAGE>
TECLink, Inc.
Schedule Of Assets Purchased from Promo Tel, Inc.
20-Jan-96
<TABLE>
<CAPTION>
G/L # Date Vendor Description Location Amount Totals
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Office Computer Equipment 74,020,74
15102 Telephone System-Intercall Keyset
50 Stations 700 S West St 15,000.00
15102 TIME CLOCK 700 S West St 1,431.95
Total Office Equipment 16,431.95
15103 1/3/96 Netscape Netscape Server Software 700 S West St 5,003.00
15103 12/1/95 Heritage Graphics Virtual Web Page Software-
Banking Industry 700 S West St 4,023.20
15103 8/18/95 UUNET Software - System Network Services 700 S West St 2,920.00
15103 TECDirect Plug-n-Play Software 700 S West St 212,482.98
Total Software >= $1,000 224,429.18
17200 5/31/96 Ron Anderson Patents on Software 425,000.00
Total Patents & Trademarks 425,000.00
18000 1/20/96 Customer Base Customer Base as of 1/20/96 1371 Customers @ $400 548,400.00
18000 Intersys Technologies Less: Original customer base (29,400.00)
18000 Additional Goodwill-for Rounding
purposes 1,927.36
18000 Intersys Technologies Original Assets Purchased by TEC
from Intersys 116,500.00
Total Goodwill 637,427.36
20000 Accounts Payable Netscape (92,000.00)
20000 Accounts Payable US Robotics (162,181.55)
Total Accounts Payable (254,181.55)
BALANCE SHEET EFFECT 2,401.658.47
64000 Boards, Cork - 8 700 S West St 95.01
64000 Boards, White - 13 700 S West St 670.05
64000 Heater, Small - 3 700 S West St 35.87
64000 Paper Cutter 700 S West St 50.00
64000 12/18/95 Heritage Graphics Stationery 700 S West St 1,653.47
64000 Stapler, Heavy-Duty 25.00
Total Office Supplies 2,529.40
64020 12/8/95 Jim Hill Exp - Sams Club CD-ROM Drive Oxford 533.93
64020 12/1/95 Heritage Graphics Ethermac PC Card 700 S West St 433.09
64020 1/23/96 Jim Hill Router Cables For Jackson 700 S West St 248.80
64020 1/23/96 Jim Hill Router Cables For Oxford 123.41
64020 1/8/96 Graybar STM-8 Siemon Co, 4pr Cable Tester 700 S West St 213.35
64020 5/12195 Sams Uninterruptable Power Supply 700 S West St 245.03
Total Computer Supplies 1,795.61
64200 8/30/95 RA Software City Norton Utilities, AntiVirus 700 S West St 133.92
64200 11/22/95 Access Graphics Tech Software For Switch 700 S West St 471.95
64200 11/30/95 Access Graphics Tech Software For Switch 700 S West St 124.75
Total Software < $1,000 730.62
64300 CALCULATOR, CANON -6 700 S West St 117.79
64300 CALCULATOR, SHARP -7 700 S West St 161.92
64300 CALCULATOR, TEXAS INS 700 S West St 27.50
64300 CALCULATOR, TI 700 S West St 30.30
64300 CALCULATOR, VICTOR -3 700 S West St 64.29
64300 CAMERA, SURVEILLANCE 700 S West St 44.52
64300 CAMERA, SURVEILLANCE 700 S West St 44.52
64300 CART TECH ROOM 147.34
64300 COPIER, SAVIN 700 S West St 997.33
64300 8/11195 RA Office Depot FAX MACHINE JACKSON, MS 536.87
64300 11/18195 Signature Financial Fax Machine - Dallas 757.74
64300 FAX MACHINE, CANON ACCOUNTING 350.00
64300 10/7/95 RA Office Depot Fax Machine, Hewlett Packard JACKSON, MS 690.92
64300 FAX MACHINE, PANASONIC EXECUTIVE OFFICE 250.00
64300 FAX MACHINE, PANASONIC RECEPTION/EXECUTIVE 350.00
64300 PROJECTOR, OVERHEAD Conference Room 146.73
64300 SCREEN, OVERHEAD PROJECTOR TRAINING ROOM 50.00
64300 TIME CLOCK, LATHEM 700 S West St 150.00
64300 TYPEWRITER, BROTHER 700 S West St 100.00
</TABLE>
Page 2 of 4
<PAGE>
TECLink, Inc.
Schedule Of Assets Purchased from Promo Tel, Inc.
20-Jan-96
<TABLE>
<CAPTION>
G/L # Date Vendor Description Location Amount Totals
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
64300 TYPEWRITER, SMITH CORONA 700 S West St 100.00
Total Office Equipment < $1,000 5,117.77
64310 CPU M SOUTH UNIT(REN)486 CUSTOMER SERVICE 250.00
64310 CPU M SOUTH UNIT 386 RECEPTION, EXECUTIVE 250.00
64310 CPU M SOUTH UNIT(STIMPY)486 OC OFF 8 250.00
64310 CPU, MITSUBA 286 CUSTOMER SERVICE 250.00
64310 CPU, MITSUBA 286 OPERATOR CENTER 250.00
64310 KEYBOARD, COMPUADD MTV CYBERLOG ROOM 35.00
64310 KEYBOARD, EDM TECH ROOM 35.00
64310 KEYBOARD, FPC CUSTOMER SERVICE 35.00
64310 KEYBOARD, FPC OPERATOR CENTER 35.00
64310 KEYBOARD, FPC OPERATOR CENTER 35.00
64310 KEYBOARD, FPC OPERATOR CENTER 35.00
64310 KEYBOARD, KEYTRONIC OP SUPV 35.00
64310 KEYBOARD, KEYTRONIC Personnel 35.00
64310 KEYBOARD, KEYTRONIC RECEPTION, EXECUTIVE 35.00
64310 8/1/95 RA Office Depot Modem & Various JACKSON, MS 288.89
64310 MODEM, PRACTICAL RECEPTION, EXECUTIVE 100.00
64310 MONITOR, COMPAQ VGA RECEPTION/EXECUTIVE 200.00
64310 MONITOR, HENNESSY VGA EXECUTIVE/SECRETARY 200.00
64310 MONITOR, HENNESSY VGA OC OFF S 200.00
64310 MONITOR, HENNESSY VGA OC POS 43 200.00
64310 MONITOR, HENNESSY VGA RECEPTION/DOWN 200.00
64310 MONITOR, NEC MULTISYNC OC SUPV 200.00
64310 MONITOR, NEC MULTISYNC OC SUPV 200.00
64310 7/16/95 RA Office Depot Printer, Citizen Portable JACKSON, MS 342.39
64310 PRINTER, EPSON OC OFF 2 125.00
64310 PRINTER, EPSON OC OFF 3 125.00
64310 PRINTER, HEWLETT PACKARD Personnel 200.00
64310 PRINTER, HEWLETT PACKARD
LASERJET III OC SUPV 600.00
64310 PRINTER, NEC MARKETING 125.00
Total Computer Equipment < $1,000 4,871.28
64350 BOOKCASE, 2 SHELF METAL - 10 Various 573.90
64350 BOOKCASE, 3 SHELF METAL - 2 Various 148.47
64350 BOOKCASE, 4 SHELF METAL OC/LAURA DAVIS 88.12
64350 BOOKCASE, 4 SHELF WOOD - 3 Various 227.25
64350 BOOKCASE, LIGHT OAK - 3 700 S West St 334.65
64350 CABINET, STOCK OC/SUPPLY CLOSET 120.59
64350 CHAIR, ARM SIDE - 48 Various 4,089.70
64350 CHAIR, EXECUTIVE - 8 Various 962.52
64350 CHAIR, HIGH BACK EXECUTIVE - 10 700 S West St 929.70
64350 CHAIR, KITCHEN (15) KITCHEN/LOUNGE 149.59
64350 CHAIR, ROLLING TALL OPERATOR CENTER 100.76
64350 CHAIR, SECRETARIAL - 55 700 S West St 6,013.46
64350 CHAIR, SIDE TAN CLOTH EXECUTIVE OFFICE 148.28
64350 CHAIR, STUFFED EXECUTIVE/OFFICE 85.74
64350 CHAIR, STUFFED EXECUTIVE/OFFICE 85.74
64350 CHAIR, STUFFED SWIVEL 700 S West St 128.99
64350 CHAIR, VINYL COVERED KITCHEN/LOUNGE 75.75
64350 CHAIR, VINYL COVERED KITCHEN/LOUNGE 75.75
64350 CREDENZA, WOOD - 5 Various 721.36
64350 DESK, WOODEN 5 DRAWER OC/LAURA DAVIS 200.00
64350 DESK, WOOD - 4 Various 728.92
64350 DISHWASHER, GE KITCHEN/LOUNGE 115.00
64350 FILE, 2 DRAWER - 27 Various 3,674.32
64350 FILE, 4 DRAWER OC OFF 6 150.00
64350 FILE, 4 DRAWER OC OFF 6 74.51
64350 FILE, 4 DRAWER OC/LAURA DAVIS 74.51
64350 FILE, LATERAL 2 DRAWER - 10 Various 2,111.55
64350 FILE, LATERAL 4 DRAWER - 5 700 S West St 2,305.57
64350 LADDER, WOODEN CYBERLOG ROOM 75.00
64350 LAMP, BLACK EXECUTIVE, OFFICE 50.00
64350 LOCK, KEYMASTER EXECUTIVE/RECEPTION 200.00
64350 MAIL BOX RECEPTION/DOWN 15.00
64350 MICROWAVE, SHARP KITCHEN/LOUNGE 181.89
</TABLE>
Page 3 of 4
<PAGE>
TECLink, Inc.
Schedule Of Assets Purchased from Promo Tel, Inc.
20-Jan-96
<TABLE>
<CAPTION>
G/L # Date Vendor Description Location Amount Totals
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
64350 OPENER, CAN KITCHEN/LOUNGE 10.00
64350 Pictures, Paintings - Various Various 450.00
64350 RACK, TAPE STORAGE TECH ROOM 252.26
64350 REFRIGERATOR KITCHEN/LOUNGE 300.00
64350 REFRIGERATOR, MINI EXECUTIVE/SECRETARY 75.00
64350 STAND, PRINTER WOOD OC OFF 7 35.00
64350 STOVE, GENERAL ELECTRIC KITCHEN/LOUNGE 250.00
64350 TABLE, CARD BROWN ELEVATOR CLOSET 25.00
64350 TABLE, CONFERENCE 10' Conference Room 300.00
64350 TABLE, CONFERENCE 12' TRAINING ROOM 375.00
64350 TABLE, CONFERENCE 12' TRAINING ROOM 325.00
64350 TABLE, FOLDING 5' WHITE ACCT/SALLY INMAN 20.00
64350 TABLE, FOLDING 6' BROWN CYBERLOG ROOM 20.00
64350 TABLE, FOLDING 6' BROWN TECH ROOM 20.00
64350 TABLE, FOLDING 8' BROWN STAIRWELL 20.00
64350 TABLE, FOLDING 8' BROWN STAIRWELL 20.00
64350 TABLE, FOLDING 9' BROWN ELEVATOR CLOSET 20.00
64350 TABLE, FOLDING 9' BROWN STAIRWELL 20.00
64350 TABLE, ROUND Conference Room 20.00
64350 TABLE, SMALL - 9 Various 675.00
64350 TABLE/DESK -12 Various 1,500.00
64350 TABLES, ROUND SIX KITCHEN/LOUNGE 150.00
64350 TOASTER KITCHEN/LOUNGE --
64350 WORKSTATION, ADJUSTABLE - 48 Various 8,400.00
Total Office Furnishings < $1,000 38,296.85
--------------------------
2,455,000.00 2,455,000.00
==========================
</TABLE>
Page 4 of 4
<PAGE>
TECLink, Inc.
Journal Entry Required to Record Purchase of Assets
from Promo Tel, Inc.
As of 1/20/96
For the Accounting Period 1/96
12000 Inventory 672,051.63
15000 Servers 91,980.57
15001 Routers 48,069.71
15002 Total Controls 421,650.27
15005 Other Communications Equipment 30,255.74
15100 Office Furniture 14,522.87
15101 Office Computer Equipment 74,020.74
15102 Office Equipment 16,431.95
15103 Software > =1,000 224,429.18
17200 Patents 425,000.00
18000 Goodwill 637,427.36
20000 Accounts Payable (254,181.55)
25000 Current Portion Notes Payable (2,455,000.00)
64000 Office Supplies Expense 2,529.40
64020 Computer Supplies Expense 1,795.61
64200 Software <= $1,000 Expense 730.62
64300 Office Equipment Expense 5,117.77
64310 Computer Equipment Expense 4,871.28
64350 Office Furnishings Expense 38,296.85
Net 0.00
<PAGE>
Reconciliation to Assets Purchased by Promo Tel from TEC
Original Assets Purchased 1,667,216.97
Add: Additional Assets Purchased
Intellectual Property purchased by
Promo Tel from Ron Anderson 425,000.00
Additional DirecPC Kits purchased by
Promo Tel from Hughes 535,000.00
960,000.00
Less: Assets Not Purchased
<TABLE>
<CAPTION>
Date Vendor Description Location Amount
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Unidentified Equipment
- ------------------------------------------------------------------------------------------------------------------------------------
CONCENTRATOR, LATTISNET TECH ROOM 1,515.30
CONCENTRATOR, LATTISNET TECH ROOM 1,354.59
10/17/95 RA CompUSA Miscellaneous ADDISON, TX 1,943.03
8/4/95 RA Insight Direct No Detail - Misc Equipment TEMPE, AZ 4,551.00
8/14/95 Signature Financial COPIER AND COMPUTER EQUIPMENT - DALLAS DALLAS, TX 3,873.04
CONCENTRATOR, SYNOPTICS ELEVATOR CLOSET 2,604.80
8/1/95 SOLONET EQUIPMENT PALM BAY, FL 2,865.00
- ------------------------------------------------------------------------------------------------------------------------------------
Equipment Stolen from Phoenix office
- ------------------------------------------------------------------------------------------------------------------------------------
10/13/95 Heritage Graphics POWERMAC JACKSON, MS 20,664.68
9/20/95 Heritage Graphics POWERMAC SET-UP JACKSON, MS 6,712.96
8/14/95 Anderson, Ron INSIGHT - P120 CONFIGURED SYSTEM TEMPE, AZ 4,949.00
8/14/95 Anderson, Ron INSIGHT - P120 CONFIGURED SYSTEM TEMPE, AZ 4,610.00
10/27/95 Anderson Data Projections EZShow 840 Data/Video & Dukane O/H Projector HOUSTON, TX 3,410.00
- ------------------------------------------------------------------------------------------------------------------------------------
Unauthorized Software
- ------------------------------------------------------------------------------------------------------------------------------------
10/15/95 Heritage Graphics Development/Software & Sales/Marketing Mac Software 12,840.00
10/31/95 Heritage Graphics Development/Software & Sales/Marketing Mac Software 12,840.00
11/30/95 Heritage Graphics Development/Software & Sales/Marketing Mac Software 12,840.00
12/15/95 Heritage Graphics Development/Software & Sales/Marketing Mac Software 12,640.00
11/5/95 Heritage Graphics Development/Software & Sales/Marketing Mac Software 588.50
12/1/95 Heritage Graphics Software Development Installer Package Mac Software 37,450,00
- ------------------------------------------------------------------------------------------------------------------------------------
Asynchronous Technologies, Inc. Assets
- ------------------------------------------------------------------------------------------------------------------------------------
1/18/96 Insight 7 Adapted Busmaster Kits & 7 2 MB VRam 4,193.00
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
12/21/95 University Business Center Deposit 650.00
10/9/95 B. Vanderford Electric Electrical Work 700 South West St. 1,338.30
12/31/95 Heritage Graphics Heritage Development Software Marketing Expense 240.75
12/31/95 Heritage Graphics Heritage Development Software Oxford Advertising 749.00
1/1/96 University Business Center Install Phone System 832.53
7/31/95 Ron Anderson Exp Unidentified 700 South West St 1,826.89
9/6/95 RA Office Depot Miscellaneous JACKSON, MS 492.13
9/11/95 RA Office Depot Miscellaneous JACKSON, MS 806.21
10/7/95 RA Office Depot Miscellaneous JACKSON, MS 176.27
10/23/95 RA Pinnacle Micro Miscellaneous IRVINE, CA 214.00
12/24/95 RA Computer City Miscellaneous HOUSTON, TX 59.21
10/6/95 Microage Miscellaneous Equipment 700 South West St. 684.80
9/16/95 RA Mounting Hardware UNKNOWN 522.17
9/22/95 RA Motorola Phone Equipment CHICAGO, IL 281.62
7/22195 RA CompUSA Various Equipment SCOTTSDALE, AZ 846.41
12/2/95 Plumb Line Work at Oxford site 7,713.14
12/7/95 Rowland Heat & Air Work at Oxford site 4,066.00
(174,144.33)
Total Assets Purchased by TECLink from Promo Tel 2,453,072.64
============
</TABLE>
Page 1 of 1
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
WORLD ACCESS SOLUTIONS, INC.
AS SELLER
AND
META3, INC.
AS PURCHASER
- --------------------------------------------------------------------------------
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is entered into effective the
1st day of October, 1997 (the "Effective Date"), by and between WORLD ACCESS
SOLUTIONS, INC., a Mississippi Corporation ("Seller") qualified and doing
business in the State of Mississippi, and META3, INC., a Mississippi Corporation
qualified and doing business in the State of Mississippi ("Purchaser"), who
declare, covenant and agree that:
1. RECITALS. Seller is engaged in the business of providing computer
services to certain users (the "Business"). Seller desires to sell and Purchaser
desires to purchase the division of the computer Business which engages in the
business and activities of providing a standard Internet access connection on
the terms and conditions and for the consideration described below.
2. DEFINITIONS. As used in this Agreement, the following terms shall have
the meanings set forth below:
2.1 "Closing" shall mean the closing of the transaction in the
offices of Taylor, Covington & Smith, P.A. on the Closing Date (defined below)
or at such other place as may be mutually agreed upon by the parties hereto.
2.2 "Closing Date" shall mean on or before October 15, 1997 on or
accruing after October 1, 1997, or such other earlier date as Seller and
Purchaser may agree.
2.3 LEFT BLANK INTENTIONALLY
2.4 "Purchased Assets" shall mean the following properties and
assets of Seller used or associated with the Business including, but not limited
to, the dial up customer base, all other current or potential customers, all
accounts receivable on or accruing after October 1, 1997 (less an allowance for
doubtful accounts), all necessary accounts payable accruing on or after October
1, 1997, all equipment supporting the dial up base, accounts payable that are
current and necessary to operate the business (no bills originating with
Teclink, Inc. shall be assumed by Purchaser), all licenses, documentation,
support contracts, warranties and guaranties, leasehold rights, agreements,
hardware, software (including object and source code in machine readable and
listing form), internal documentation, training materials, proprietary rights,
franchise rights, goodwill and prepaid assets beginning on October 1, 1997.
2.4.1 The current list of customers subscribing to the standard
Internet access connection, containing approximately four thousand six hundred
(4,600) customers, each subscribing at an average monthly rate of Seventeen
Dollars ($17.00).
<PAGE>
2.4.2 The following expenses are specifically excluded from the
Purchased Assets and are not assumed by Purchaser: All obligations or
liabilities of Seller, except for those specifically assumed by Purchaser, and
the DIRECPC inventory.
2.5 "Purchase Price" shall have the meaning ascribed to it in
Section 4.1.
3. SALE OF PROPERTIES AND ASSETS. At the Closing, Seller will sell,
transfer, assign, convey and deliver to Purchaser, and Purchaser will purchase,
accept and acquire from Seller all of the Purchased Assets.
4. PURCHASE PRICE.
4.1 Purchase Price. The purchase price for the Purchased Assets (the
"Purchase Price") shall be as follows: Ten Dollars ($10.00) per subscriber over
an ten (10) month period.
4.1.1 Purchaser shall also pay for any prepaid assets agreed
to in writing by Purchaser prorated as of October 1, 1997.
4.2 The number of dial up subscribers shall be counted as of the
first day of October, 1997. The Attrition Rule, as defined in Section 4.2 below,
shall commence on November 1, 1997.
4.3. Payment. The Purchase Price shall be paid in monthly
installments from funds received without reservation from the dial up
subscribers beginning on November 15, 1997, and continuing on the same day of
each succeeding month until August 15, 1998. All payments shall be reduced by
(1) any accounts payable assumed by Purchaser relating to services or goods
accruing prior to October 1, 1997, paid by Purchaser on Seller's behalf and (2)
the Attrition Rule ("Attrition Rule") which rule shall mean that all customers
lost or terminating their account during the first half of the Purchase Period
shall be the responsibility of Seller and all customers lost or terminating
their accounts during the second half of the Purchase Period shall be the
responsibility of Purchaser. Seller will also be compensated, pursuant to
Paragraph 4.1, for any net accounts provisioned during the first half of the
Purchase Period. Notwithstanding anything contained herein to the contrary, the
Attrition Rule shall apply only to existing Points of Presence ("POPS") of
Seller as of October 1, 1997. The Purchase Price shall be reduced by any
accounts payable accrued prior to Purchaser's purchase of the Purchased Assets.
Purchaser will assume those operating expenses that are necessary to the
operation of the Purchased Assets in Purchaser's sole discretion beginning on
October 1, 1997. Unnecessary expenses will be terminated by Purchaser.
-3-
<PAGE>
4.3.1 Purchaser agrees to generate a detailed customer ledger
at the end of each month during the first half of the Purchaser Period and
account for the increase or decrease in the number of customer accounts during
each month of the first half of the Purchase Period.
5. CLOSING DOCUMENTS AND REQUIREMENTS: FURTHER ASSURANCES.
5.1 Closing Responsibilities of Sel1er. At the Closing, Seller shall
deliver to Purchaser:
5.1.1 A bill of sale executed by Seller, conveying the
Purchased Assets, free and clear of any liens or encumbrances, in the form and
substance attached as Exhibit "A".
5.1.2 Certificates authorizing the execution and delivery of
this Agreement to Seller and the carrying out of the provisions hereof duly
authorized by the Board of Directors of Seller and authorized by Seller's
shareholders.
5.1.3 Such documents, certificates and opinions as may be
required by Purchaser evidencing that all of the Purchased Assets are free and
clear of all liens, encumbrances or restrictions whatsoever.
5.1.4 Bills of Sale or verified receipts of purchase where
appropriate for all of the Purchased Assets.
5.1.5 Execute and deliver to Purchaser such instruments as may
be required to carry out the intent and purpose of this Agreement.
5.1.6 Deliver to Purchaser such data, papers and information
as may be requested by Purchaser to assist Purchaser in the use of the Purchased
Assets.
5.2 Closing Responsibilities of Purchaser. At the Closing, Purchaser
shall deliver to Seller:
5.2.1 A Promissory Note evidencing the obligation of
Purchaser.
5.2.2 A Certificate of Authority from the Board of Directors
of Purchaser authorizing the execution of this Agreement and the Promissory Note
as set forth hereinabove.
-4-
<PAGE>
5.3 Further Assurances. Following the Closing, at the request of
Purchaser, Seller shall deliver any further instruments of transfer and take all
reasonable action as may be necessary or appropriate (i) to vest in Purchaser
good and marketable title to the Purchased Assets, free and clear of any liens
or encumbrances, and (ii) to transfer to Purchaser all licenses, agreements,
contract rights, accounts, premiums, and permits necessary for the operation of
the Business and the Purchased Assets.
6. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and
warrants to Purchaser as follows:
6.1 Existence and Good Standing. Seller is a Nevada corporation
existing and in good standing and qualified to do business under the laws of the
State of Mississippi. Seller has the power to own its properties and the
Purchased Assets and to carry on its business as now being conducted. Seller is
duly qualified to do business in and is in good standing in all jurisdictions in
which the character or the location of the properties owned or leased by Seller
or the nature of the business conducted by Seller makes such qualification
necessary.
6.2 Corporate Authority and Approvals. Seller has the corporate
power and authority to make, execute, deliver and perform this Agreement, and
this Agreement has been duly authorized and approved by all required corporate
action of Seller. This Agreement has been duly executed and delivered by Seller
and constitutes a legal, valid and binding obligation enforceable against Seller
in accordance with its terms.
6.3 Ownership: Exclusivity. No person other than Purchaser has any
right or option to acquire any ownership rights or equity in and to the
Purchased Assets.
6.4 Financial Statements. The financial statements of Seller that
have been provided to Purchaser have been prepared on a basis consistent with
that of the preceding years or periods and to the best of Seller's knowledge,
fairly represent in all material respects the financial position of Seller and
the results of its operations as of the dates and for the periods indicated.
6.5 Litigation. Except for those matters described in Section 11
below, there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or, to the best knowledge,
information and belief of Seller, any investigation by) any governmental or
other instrumentality or agency, pending or, to the best knowledge, information
and belief of Seller, threatened against or affecting the Business, or any of
the Purchased Assets, which could materially and adversely affect the right or
ability of the Seller or Purchaser to carry on the Business as now being
conducted, or which could materially and adversely affect the condition,
-5-
<PAGE>
whether financial or otherwise, or properties of the Business. Neither the
Seller nor the Business is subject to any judgment, order or decree entered in
any lawsuit or proceeding which may have a materially adverse effect on any of
their operations or business practices.
6.6 Title to Property; Encumbrances. Seller has good, valid and
marketable title to the Purchased Assets, subject to no encumbrance, lien,
charge or other restriction of any kind or character.
6.7 Restrictive Documents. Seller is not subject to any charter,
bylaws, mortgage, lien, lease agreement, instrument, order of law, rule
regulation, judgment or decree, or any other restriction of any kind or
character, which would prevent consummation of the transactions contemplated by
this Agreement.
6.8 Subsidiaries. Seller has no subsidiaries.
6.9 Broker's or Finder's Fee. No agent, broker, person or firm
acting on behalf of Seller is or will be entitled to any commission or broker's
or finder's fee from any of the parties hereto, nor from any person controlling,
controlled by, or under common control with any of the parties hereto, in
connection with any of the transactions contemplated by this Agreement.
6.10 Non-Encumbrance. There is no suit, action or claim that the
computer technology, software, proprietary rights, dial up customer base, or any
of the Purchased Assets or any portion thereof, or the exercise of any rights
related thereto or to the Purchased Assets do not infringe any patents,
copyrights, trade secrets, trademarks or other proprietary rights of third
parties.
6.11 Sales Taxes. Any sales taxes which may be payable in connection
with the transfer of any of Seller's assets shall be borne solely by Seller, who
shall certify to Purchaser that all such taxes have been paid and hold Purchaser
harmless therefor.
7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Except as set forth in
this Agreement, Purchaser makes no representation or warranty, express or
implied, with respect to any of the transactions contemplated by this Agreement
or with respect to the Purchaser or its businesses, the Purchased Assets,
financial condition or liabilities, or with respect to any other matter
whatsoever. Seller has and will have no claim against Purchaser except for a
breach of an express representation, warranty or covenant of Purchaser under
this Agreement. Purchaser represents and warrants to Seller as follows:
-6-
<PAGE>
7.1 Existence and Good Standing of Purchaser; Power and Authority.
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Mississippi and is duly registered to do business
in the State of Mississippi. Purchaser has the corporate power and authority to
make, execute, deliver and perform this Agreement.
7.2 Authority. This Agreement has been duly authorized and approved
by all required corporate action of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and constitutes a legal, valid and binding
obligation enforceable against Purchaser in accordance with its terms.
8. COVENANTS OF SELLER. Seller covenants and agrees that from the
Effective Date to the Closing Date:
8.1 Cooperation. Seller will cause the sale contemplated by this
Agreement to be consummated and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties which may
be necessary or reasonably required in order for Seller to effect the
transactions contemplated hereby.
8.2 Dispositions and Encumbrances on Purchased Assets. Seller will
not, directly or indirectly, dispose of any of the Purchased Assets other than
in the ordinary course of business. Seller will not, directly or indirectly,
further encumber any of the Purchased Assets.
9. COVENANTS OF PURCHASER. Purchaser covenants and agrees that from the
Effective Date to the Closing Date:
9.1 Cooperation. Prior to the Closing, Purchaser shall use its best
efforts to cause the sale contemplated by this Agreement to be consummated and,
without limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties which may be necessary or reasonably required in
order for Purchaser to effect the transactions contemplated hereby.
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. All obligations of
Seller under this Agreement are subject to the fulfillment, at the option of
Seller, at or prior to the Closing Date, of each of the following conditions:
10.1 Representations and Warranties True. The representations and
warranties of Purchaser herein contained shall be true on and as of the Closing
Date with the same force and effect as though made on and as of said date.
-7-
<PAGE>
10.2 Performance of Purchaser. Purchaser shall have performed all of
its obligations and agreements and complied with all of its covenants contained
in this Agreement to be performed and complied with by the Purchaser prior to
the Closing Date.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. All obligations
of Purchaser under this Agreement are subject to the fulfillment, at the option
of the Purchaser, at or prior to the Closing Date, of each of the following
conditions:
11.1 Representations and Warranties True. The representations and
warranties of Seller herein contained shall be true on and as of the Closing
Date with the same force and effect as though made on and as of said date.
11.2 Performance of Seller. Seller shall have performed all of its
obligations and agreements and complied with all of its covenants contained in
this Agreement to be performed and complied with by it prior to the Closing
Date.
11.3 LEFT BLANK INTENTIONALLY.
11.4 Satisfactory Investigation of Pending Lawsuit. Purchaser shall
have conducted a reasonable investigation into the lawsuit currently pending
against Teclink, Inc. and more particularly that lawsuit styled Heritage
Graphics, Inc. et. al. v Telephone Electronics Corporation et. al. and shall
have determined, pursuant to said investigation, that the circumstances
surrounding the lawsuit will not adversely effect the consummation of this
transaction. Seller hereby represents, covenants and warrants that said lawsuit
will have no adverse impact on the Purchased Assets and that same is not a lien
or encumbrance on said Purchased Assets.
11.5 Due Diligence. Satisfactory completion of such due diligence
investigation concerning the Purchased Assets as shall be required by Purchaser.
Purchaser shall be permitted to review and obtain copies of such documents,
records, bank accounts, customer records, flash reports, active user lists, data
bases, or other records it deems necessary in Purchaser's sole discretion.
Purchaser shall also be permitted to interview, for due diligence purposes, such
individuals or representatives of such companies or entities as it deems
necessary in its sole discretion to ascertain the condition and value of the
Purchased Assets.
11.6 Non-Encumbrance. Seller shall not sell, encumber or pledge any
of its assets or the Purchased Assets. Seller shall not reduce the access fees,
charges, support contracts or other sources of income from the date of the
execution of this Agreement.
-8-
<PAGE>
Further, there shall be no increase in compensation payable from the date of the
execution hereof.
12. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties set forth in or incorporated by reference into
this Agreement shall survive the Closing and thereafter be fully effective and
enforceable. The respective representations and warranties set forth in this
Agreement shall not be affected by any investigation, verification or approval
by any party hereto or by anyone on behalf of such party. The respective
covenants and agreements set forth in this Agreement, except those covenants and
agreements that are required by this Agreement to be fully kept, performed and
discharged on or before the Closing, shall survive the Closing and thereafter be
fully effective and enforceable.
13. INDEMNIFICATION.
13.1 Indemnification by Seller. Seller and shareholder, Digitec
2000, Inc. both individually and jointly, shall protect, defend, indemnify and
hold harmless Purchaser with respect to any losses, claims, damages, liabilities
or related expenses (including, but not limited to, reasonable attorney's fees
and expenses) to which Purchaser may become subject as a result of: (i) the
breach of any of the representations, warranties, covenants or agreements made
by Seller in this Agreement; (ii) non-compliance by Seller with any bulk sales
act which may apply to the transactions contemplated by this Agreement; and
(iii) any third party claim or claims made or threatened against Purchaser to
the extent such claim or claims are based upon any act, omission or occurrence
with respect to the Business or the Purchased Assets, including any liability
arising out of the pending litigation styled Heritage Graphics Corporation, Inc.
et. al. v Telephone Electronics Corporation et. al. Further, Purchaser shall
have the right to set off against any amount owed to Seller any and all amounts,
including attorney fees and costs, expended by Purchaser in defending any claim,
lawsuit or dispute contemplated herein.
13.2 Indemnification by Purchaser. Purchaser will protect, defend,
indemnify and hold harmless Seller with respect to any losses, claims, damages,
liabilities or related expenses (including, but not limited to, reasonable
attorney's fees and expenses) to which Seller or its officers or employees, may
become subject as a result of: (i) the breach of any of the representations,
warranties, covenants or agreements made by Purchaser in and under this
Agreement; and (ii) any third party claim or claims made or threatened against
Seller arising out of any loss, injury or damage due to an act or omission of
Purchaser on and subsequent to the Effective Date with respect to the Business.
Purchaser shall not be responsible for past due, delinquent or questionable
debts or obligations of Seller.
-9-
<PAGE>
13.3 Indemnification Procedure. The party or parties seeking
indemnification under this section (the "Indemnitee") shall notify the party or
parties against whom such indemnification is being sought (the "Indemnitor") of
any such breach or claim, with reasonable promptness, but not later than fifteen
(15) calendar days after receipt of notice of such claim, and solely in the case
of third party claims, the Indemnitor or its legal representative shall have, at
its election, the right to settle or defend any such matter involving any such
asserted liability through counsel of Indemnitor's choosing and at its expense.
Such notice and opportunity to settle or defend, if applicable, shall be a
condition precedent to any liability of Indemnitor for third party claims under
this section. If the Indemnitor undertakes to settle or defend any third party
claims under this section, it shall notify the Indemnitee in writing promptly of
its intention to do so, and Indemnitee shall fully cooperate with Indemnitor and
its counsel in the settlement or defense thereof. If the Indemnitor elects to
settle such third party claim, and the Indemnitee shall reject the terms of such
settlement, the Indemnitee shall be responsible for defending such claim,
including, without limitation, selecting legal counsel and negotiating terms of
settlement. The Indemnitee shall be responsible for the payment of all fees of
legal counsel so selected by it. In such event, the Indemnitor shall be
responsible hereunder for the loss, liability or judgment incurred in such third
party claim only to the extent of the amount of settlement therefore approved by
the Indemnitor and rejected by the Indemnitee.
14. EXPENSES. Seller and Purchaser shall each pay their own expenses
including, without limitation, fees and expenses of agents, representatives,
counsel, accountants and other experts, incidental to the preparation and
consummation of this Agreement. Purchaser and Seller shall bear equally the
costs associated with filings, title searches, lien searches, title insurance
premiums or other ordinary closing costs. Ad valorem taxes on the Purchased
Assets will be pro rated as of the Effective Date.
15. DESTRUCTION OR DAMAGE OF PROPERTY. If a material amount of the
tangible Purchased Assets are destroyed by fire, flood or other casualty prior
to the Closing, Purchaser shall have the option to: (i) cancel this Agreement;
or (ii) proceed with the Closing, and accept the Purchased Assets subject to the
damage. In such latter event, Seller shall assign to Purchaser all of its rights
to insurance proceeds payable due to such destruction. In such case, the
Purchase Price shall be adjusted to reflect any deficiency in insurance
proceeds. Seller represents that the Purchased Assets are insured for at least
the Purchase Price and that said insurance is subject to no mortgage, lien or
other restriction whatsoever. By execution of this Agreement, Seller hereby
assigns to Purchaser all rights and funds associated with all insurance
pertaining to the Purchased Assets.
-10-
<PAGE>
16. TERMINATION.
16.1 By Mutual Consent. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated by mutual consent of
all parties hereto.
16.2 By Seller. Seller may terminate this Agreement if any of the
conditions to Closing contained in Section 10 shall not have been satisfied or
waived prior to Closing.
16.3 By Purchaser. Purchaser may terminate this Agreement if any of
the conditions to Closing contained in Section 11 shall have not been satisfied
or waived prior to the Closing.
17. MISCELLANEOUS. The following shall also apply to this Agreement:
17.1 Notice. Any notice, permission, approval, demand or request
affecting any obligations or terms must be in writing and shall be deemed to be
given on the date: (i) delivered by hand, or (ii) two (2) business days after
being mailed by certified mail, return receipt requested.
17.2 Addresses. All mailings shall be to the address of the party
shown or to any subsequent address in the United states of America requested:
SELLER:
World Access Solutions, Inc.
_____________________________
_____________________________
PURCHASER:
Meta3, Inc.
1450 Deposit Guaranty National Bank Plaza
14th Floor
Jackson, Mississippi 39201
-11-
<PAGE>
with a copy to:
William C. Smith III
Taylor, Covington & Smith, P.A.
Post Office Box 3509
Jackson, Mississippi 39207
17.3 Gender. The singular and plural and any gender shall include
the other.
17.4 No Waiver. No waiver of any condition, obligation or other term
shall constitute a waiver of any other, or a waiver of a subsequent right to
demand strict compliance with all conditions, obligations and terms.
17.5 Specific Performance. Purchaser may enforce this Agreement by
specific performance. Time is of the essence hereof.
17.6 Cumulative Rights. The rights and remedies herein reserved by
or granted to the parties are distinct, separate and cumulative, and the
exercise of any one of them shall not be deemed to preclude, waive or prejudice
the parties' right to exercise any or all others. Whether or not specifically
enumerated in this Agreement, the parties reserve all rights and remedies at law
and in equity, and nothing contained in this Agreement shall be construed as a
limitation of any rights or remedies.
17.7 Entire Agreement. This Agreement, including the documents and
instruments referred to herein:
17.7.1 constitutes the entire Agreement and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter of this Agreement;
17.7.2 is not intended to confer upon any other person any
rights or remedies;
17.7.3 may be executed in two or more counterparts which
together shall constitute a single agreement.
17.7.4 shall inure to the benefit of, being binding upon and
enforceable against the heirs, legal representatives, successors, transferees
and assigns of the parties hereto; and
-12-
<PAGE>
17.7.5 maybe amended only by mutual agreement of the parties
hereto in writing.
17.8 Headings. The headings and table of contents contained in this
Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement.
17.9 Interpretation: No Presumption. All parties acknowledge that
this Agreement has been reviewed and negotiated by all parties and their
attorneys and other representatives and, therefore, no presumption shall arise
favoring any party by virtue of the authorship of any of its provisions.
17.10 Seller states and represents that there are no contracts
exceeding thirty (30) days in duration obligating Seller or it successors and
assigns in any manner.
18. ASSIGNMENT. Purchaser may assign its rights under this Agreement to
any entity controlled by Purchaser.
19. LAWS. This Agreement shall be construed according to the laws of the
State of Mississippi.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one in the same instrument.
21. EMPLOYEES. Purchaser makes no representation as to the continued
employment of any employee of Seller. Seller represents and warrants that it has
no employment agreements in effect with any of its employees and that all
employees are employees at will.
22. SURVIVABILITY. The terms and conditions, including but not limited to
all representations, warranties and indemnifications, shall survive the closing
hereof.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
SELLER:
WORLD ACCESS SOLUTIONS, INC.
By: /s/ Frank Magliato
------------------------------
Frank Magliato
President
By: /s/ Suzanne Wilkinson
------------------------------
Suzanne Wilkinson
Executive Vice President
By: /s/ Keith McGowan
------------------------------
Keith McGowan
Vice President of Finance
AGREED TO AND APPROVED BY:
DIGITEC 2000, INC.
By: /s/ Frank Magliato
-------------------------------
Frank Magliato
President
PURCHASER:
META3, INC.
By: /s/ James Smith
------------------------------
James V. Smith
President
-14-
<PAGE>
ASSIGNMENT OF GUARANTIES AND WARRANTIES
THIS ASSIGNMENT made as of this first day of October, 1997 between WORLD
ACCESS SOLUTIONS, INC., a Nevada corporation (herein, the "Assignor"), and
META-3, INC., a Mississippi corporation (herein, the "Assignee").
RECITALS:
A. Effective contemporaneously herewith, Assignor has conveyed to Assignee
certain property (the "Purchased Assets") described in that certain Asset
Purchase Agreement By And Between World Access Solutions, Inc. As Seller And
Meta-3, Inc. As Purchaser (the "Agreement"). The Agreement is incorporated
herein by reference in aid hereof.
B. In connection with the sale of the Purchased Assets, Assignor agreed to
transfer, convey and assign to Assignee all Guaranties and Warranties with
respect to the Purchased Assets (the "Guaranties and Warranties").
C. Assignor possesses all right, title and interest in and to the
Guaranties and Warranties, and Assignor desires to sell, assign, convey, and
transfer the Guaranties and Warranties, and Assignee desires to accept said
sale, assignment, conveyance, and transfer upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the purchase of the Purchased Assets
and of the mutual covenants herein set forth and for Ten Dollars ($10.00) and
other good and valuable consideration, the parties hereto agree as follows:
1. Assignor hereby sells, assigns, and transfers to Assignee all of
the Assignor's interest in and to all of Assignor's Guaranties and
Warranties in favor of Assignor for all personal property conveyed to
Assignee, including but not limited to the Purchased Assets.
2. This Assignment shall be binding on the successors and assigns of
the parties hereto. The parties hereto shall execute such further and
additional documents as may be necessary to evidence or carry out the
provisions of the Assignment.
<PAGE>
3. To the extent that any conflict should arise between the terms
and conditions of this Assignment and the Agreement, the terms and
conditions of the Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have executed or have caused this
Assignment to be executed on the day and year set forth above.
AGREED TO AND APPROVED BY: ASSIGNOR:
DIGITEC 2000, INC., A Nevada WORLD ACCESS SOLUTIONS, INC.,
Corporation A Nevada Corporation
By: /s/ Frank Magliato By: /s/ Frank Magliato
----------------------------- ------------------------------
Frank Magliato Frank Magliato
President President
By: /s/ Suzanne Wilkinson
------------------------------
Suzanne Wilkinson
Executive Vice President
By: /s/ Keith McGowan
-----------------------------
Keith McGowan
V.P. of Finance
ASSIGNEE:
META-3, INC.
A Mississippi Corporation
By: /s/ James Smith
------------------------------
James V. Smith
President
-2-
<PAGE>
BILL OF SALE AND ASSIGNMENT
KNOW All PERSONS BY THESE PRESENTS:
THAT WORLD ACCESS SOLUTIONS, INC., a Nevada corporation, ("Grantor") for
good and valuable consideration paid by META-3, INC., a Mississippi Corporation
("Grantee"), the receipt and sufficiency of which are hereby acknowledged, has
ASSIGNED, TRANSFERRED, SET OVER AND DELIVERED, and by these presents does ASSIGN
TRANSFER, SET OVER AND DELIVER unto Grantee all of the following:
1. The Purchased Assets (hereinafter the "Purchased Assets") as defined
in that certain Asset Purchase Agreement By And Between WORLD ACCESS
SOLUTIONS, INC., As Seller and META-3, INC., As Purchaser (herein
after "Agreement"), said Agreement being incorporated herein by
reference in aid hereof. Without limiting the generality of the
foregoing, the Purchased Assets shall include all domain
registrations, telephone lines, telephone numbers and telephone
systems wheresoever located.
2. All contracts, rights or benefits applicable or relating to or
necessary for the operation of the Purchased Assets.
Grantor has full right to sell and transfer the above described Purchased
Assets.
Grantor warrants that the Purchased Assets are free and clear of all
security interests, liabilities, obligations and encumbrances.
Grantor warrants that there are no judgments against Grantor in any court
of the State of Mississippi, the United States of America and there are no
replevins, attachments, executions, or other writs or processes issued against
it; that it has not filed
<PAGE>
any petition in bankruptcy, nor has any petition in bankruptcy been filed
against it, and that it has not been adjudicated a bankrupt.
IN WITNESS WHEREOF, Grantor has caused this Bill of Sale to be executed
effective as of October 1, 1997.
AGREED TO AND APPROVED BY: GRANTOR:
DIGITEC 2000, INC., a Nevada WORLD ACCESS SOLUTIONS, INC.,
Corporation a Nevada Corporation
By: /s/ Frank Magliato By: /s/ Frank Magliato
------------------------------- ------------------------------
Frank Magliato Frank Magliato
President President
By: /s/ Suzanne Wilkinson
------------------------------
Suzanne Wilkinson
Executive Vice President
By: /s/ Keith McGowan
--------------------------------
Keith McGowan
V.P. of Finance
-2-
<PAGE>
ASSIGNMENT OF LEASES
KNOW ALL MEN BY THESE PRESENTS:
THAT WORLD ACCESS SOLUTIONS, INC., a Nevada corporation ("Assignor"), in
consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, does hereby effective October 1, 1997 (the "Effective Date"),
assign, transfer and set over absolutely unto META-3, INC., a Mississippi
corporation ("Assignee"), that certain lease described on the attached Exhibit
"A" and all other leases related to or necessary for the operation of the
Purchased Assets as defined in that certain Asset Purchase Agreement By And
Between WORLD ACCESS SOLUTIONS, INC. As Seller And META-3, INC. As Purchaser
(the "Agreement"), together with any and all right, title, interest or benefit
thereunder. Said Agreement is incorporated herein by reference in aid hereof.
The Assignor hereby agrees to indemnify and hold Assignee harmless from and
against any claim, demand, liability, cost or expense asserted against Assignee
(including, without limitation, and by way of example only, reasonable
attorney's fees, disbursements and amounts paid in settlement of claims) arising
out of failure of Assignor to perform its obligations under the Leases during
the period prior to the date of this Assignment.
To the extent that any conflict should arise between the terms and
conditions of this Assignment and the Agreement, the terms and conditions of the
Agreement shall control.
<PAGE>
IN WITNESS WHEREOF, Assignor has caused its hand to be set effective this
first day of October, 1997.
AGREED TO AND APPROVED BY: ASSIGNOR:
DIGITEC 2000, INC., a Nevada WORLD ACCESS SOLUTIONS, INC.,
Corporation a Nevada Corporation
By: /s/ Frank Magliato By: /s/ Frank Magliato
------------------------------ ------------------------------
Frank Magliato Frank Magliato
President President
By: /s/ Suzanne Wilkinson
------------------------------
Suzanne Wilkinson
Executive Vice President
By: /s/ Keith McGowan
------------------------------
Keith McGowan
V.P. of Finance
-2-
<PAGE>
EXHIBIT "A"
LEASES
That certain Lease Agreement dated May 16, 1997 by and between The
Independent Order of Foresters, a Canadian corporation, and WORLD ACCESS
SOLUTIONS, INC.
<PAGE>
ASSIGNMENT OF INTANGIBLES
THIS ASSIGNMENT made as of the first day of October, 1997, between WORLD
ACCESS SOLUTIONS, INC., a Nevada corporation (herein the "Assignor"), and
META-3, INC., a Mississippi corporation (herein the "Assignee").
RECITALS:
A. Effective as of the date hereof, Assignor has conveyed to Assignee
certain property (the "Purchased Assets") described in that certain Asset
Purchase Agreement By And Between World Access Solutions, Inc. As Seller And
Meta-3, Inc. As Purchaser (the "Agreement"), said Agreement being incorporated
herein by reference in aid hereof.
B. In connection with the sale of the Purchased Assets, Assignor agreed to
transfer, convey and assign to Assignee all of its transferable rights in any
intangibles and intellectual property with respect to the Purchased Assets (the
"Intangibles"). The Intangibles are described on Exhibit "A" which is attached
hereto and incorporated herein by reference.
C. Assignor desires to sell, assign, convey, and transfer all of its
rights in the Intangibles, and Assignee desires to accept said sale, assignment,
conveyance, and transfer upon the terms and conditions hereinafter set forth
NOW, THEREFORE, in consideration of the purchase of the Property and of
the mutual covenants herein set forth and for Ten Dollars ($10.00) and other
good and valuable consideration, the parties hereto agree as follows:
1. Assignor hereby sells, assigns, and transfers to Assignee all of
Assignor's interest in and to the Intangibles in favor of Assignor.
2. This Assignment shall be binding on the successors and assigns of
the parties hereto. The parties hereto shall execute such further and
additional documents as may be necessary to evidence or carry out the
provisions of this Assignment.
<PAGE>
3. To the extent that any conflict should arise between the terms
and conditions of this Assignment and the Agreement, the terms and
conditions of the Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Assignment to be properly executed on the day and year set forth
above.
AGREED TO AND APPROVED BY: ASSIGNOR:
DIGITEC 2000, INC., a Nevada WORLD ACCESS SOLUTIONS, INC.,
Corporation a Nevada Corporation
By: /s/ Frank Magliato By: /s/ Frank Magliato
---------------------------- ------------------------------
Frank Magliato Frank Magliato
President President
By: /s/ Suzanne Wilkinson
------------------------------
Suzanne Wilkinson
Executive Vice President
By: /s/ Keith McGowan
----------------------------
Keith McGowan
V.P. of Finance
ASSIGNEE:
META-3, INC.
A Mississippi Corporation
By: /s/ James Smith
------------------------------
James V. Smith
President
-2-
<PAGE>
EXHIBIT "A"
1. All domain registrations
2. All names, titles, services marks, logos, trademarks for use in press
releases or promotionals concerning the purchase of the Purchased Assets
by META-3, INC.
3. All media related materials, including current advertising in place, phone
listings, marketing plans, drawings, manuals and information related to
the sale of the Purchased Assets to META-3, INC.
4. All rights to plans, specifications, design criteria and architectural
plans for improvements at the office of WORLD ACCESS SOLUTIONS, INC. in
Capitol Towers in Jackson, Mississippi.
<PAGE>
ASSIGNMENT OF CONTRACTS
KNOW ALL MEN BY THESE PRESENTS:
THAT WORLD ACCESS SOLUTIONS, INC., a Nevada corporation ("Assignor"), in
consideration of the sum of Ten and No/1000 Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, does hereby effective as of October 1, 1997 (the "Effective
Date"), assign, transfer and set over absolutely unto META-3, INC., a
Mississippi Corporation ("Assignee"), all of the Assignor's right, title and
interest in and to those certain contracts related to or necessary for the
operation of the Purchased Assets as defined in that certain Asset Purchase
Agreement By And Between WORLD ACCESS SOLUTIONS, INC. As Seller And META-3, INC.
As Purchasers (the "Agreement") which Agreement is incorporated herein by
reference in aid hereof. The Assignor hereby agrees to indemnify and hold
Assignee harmless from and against any claim, demand, liability, cost or expense
asserted against, Assignee (including, without limitation, and by way of example
only, reasonable attorney's fees, disbursements and amounts paid in settlement
of claims) arising out of the failure of Assignor to perform its obligations
under the Contracts during the period prior to the date of this Assignment.
To the extent that any conflict should arise between the terms and
conditions of this Assignment and the Agreement, the terms and conditions of the
Agreement shall control.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have caused their hands and
sea1s to be set as of the first day of October, 1997.
AGREED TO AND APPROVED BY: ASSIGNOR:
DIGITEC 2000, INC., a Nevada WORLD ACCESS SOLUTIONS, INC.,
Corporation a Nevada Corporation
By: /s/ Frank Magliato By: /s/ Frank Magliato
------------------------------ ------------------------------
Frank Magliato Frank Magliato
President President
By: /s/ Suzanne Wilkinson
------------------------------
Suzanne Wilkinson
Executive Vice President
By: /s/ Keith McGowan
------------------------------
Keith McGowan
V.P. of Finance
ASSIGNEE:
META-3, INC.
A Mississippi Corporation
By: /s/ James Smith
------------------------------
James V. Smith
President
-2-
<PAGE>
NOTE
Jackson, Mississippi
October 1, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order of WORLD
ACCESS SOLUTIONS, INC., a Nevada corporation, an amount equal to a sum to be
derived pursuant to the terms and conditions of that certain Asset Purchase
Agreement By And Between WORLD ACCESS SOLUTIONS, INC. As Seller And META-3, Inc.
As Purchaser (the "Agreement") effective the first day of October, 1997 said
Agreement being incorporated herein by reference in aid hereof, being due and
payable as follows:
Payable in ten (10) monthly installments, beginning November 15,
1997, with an installment being due and payable on the same day of
each and every month thereafter until the entire balance is paid in
full.
All installments are payable in lawful money of the United States of
America, which shall be legal tender for public and private debts at the time of
payment, at the office of the payee in New York, New York or at such other place
as the holder hereof may designate in writing.
Said funds shall be paid solely from funds received by Meta3, Inc. without
restriction or reservation from the dial-up customer base and are subject to set
offs and other adjustments as set forth in the Agreement, including without
limitation, and by way of example only, payments made by Meta3, Inc. to the
Internal Revenue Service, Bell South or payments made or expenses incurred as a
result of the Heritage Graphic litigation.
<PAGE>
To the extent that any conflict should arise between the terms and
conditions of this Note and the Agreement, the terms and conditions of the
Agreement shall control.
PURCHASER:
META-3, Inc.
A Mississippi Corporation
By: /s/ James Smith
------------------------------
James V. Smith
President
-2-
<PAGE>
BILL OF SALE AND ASSIGNMENT
KNOW All PERSONS BY THESE PRESENTS:
THAT WORLD ACCESS SOLUTIONS, INC., a Nevada corporation, ("Grantor") for
good and valuable consideration paid by META-3, INC., a Mississippi Corporation
("Grantee"), the receipt and sufficiency of which are hereby acknowledged, has
ASSIGNED, TRANSFERRED, SET OVER AND DELIVERED, and by these presents does ASSIGN
TRANSFER, SET OVER AND DELIVER unto Grantee all of the following:
1. The Purchased Assets (hereinafter the "Purchased Assets") as defined
in that certain Asset Purchase Agreement By And Between WORLD ACCESS
SOLUTIONS, INC., As Seller and META-3, INC., As Purchaser (herein
after "Agreement"), said Agreement being incorporated herein by
reference in aid hereof. Without limiting the generality of the
foregoing, the Purchased Assets shall include all domain
registrations, telephone lines, telephone numbers and telephone
systems wheresoever located.
2. All contracts, rights or benefits applicable or relating to or
necessary for the operation of the Purchased Assets.
Grantor has full right to sell and transfer the above described Purchased
Assets.
Grantor warrants that the Purchased Assets are free and clear of all
security interests, liabilities, obligations and encumbrances.
Grantor warrants that there are no judgments against Grantor in any court
of the State of Mississippi, the United States of America and there are no
replevins, attachments, executions, or other writs or processes issued against
it; that it has not filed
<PAGE>
any petition in bankruptcy, nor has any petition in bankruptcy been filed
against it, and that it has not been adjudicated a bankrupt.
IN WITNESS WHEREOF, Grantor has caused this Bill of Sale to be executed
effective as of October 1, 1997.
AGREED TO AND APPROVED BY: GRANTOR:
DIGITEC 2000, INC., a Nevada WORLD ACCESS SOLUTIONS, INC.,
Corporation a Nevada Corporation
By: /s/ Frank Magliato By: /s/ Frank Magliato
----------------------------- ------------------------------
Frank Magliato Frank Magliato
President President
By: /s/ Keith McGowan By: /s/ Suzanne Wilkinson
------------------------------ ------------------------------
Keith McGowan Suzanne Wilkinson
V.P. of Finance Executive Vice President
-2-
AGREEMENT AND PLAN OF REORGANIZATION
OF
PROMO TEL, INC.
THIS AGREEMENT AND PLAN OR REORGANIZATION ("Agreement") is made and entered into
between and among the designated parties as of the latest of the respective
execution dates listed in the execution section below.
RECITALS
WHEREAS, Promo Tel, Inc. is a Nevada corporation ("Promo Tel") presently engaged
in the telecommunications industry through the marketing and distribution of
pre-paid telephone calling cards and other telecommunication products and
services; and
WHEREAS, Promo Tel, Inc. and a group of persons and entities ("Transferor(s)"),
with knowledge, expertise, tangible property, intellectual property, trade
secrets, contractual rights, and interests in ongoing business operations all
involved in or related to the telecommunications industry ("Subject
Properties"), have originated a plan of acquisition and development program for
Promo Tel ("Development Program") under which Promo Tel would acquire the
Subject Properties in exchange for Shares of Promo Tel's Common Stock under the
Agreement in a corporate reorganization ("Reorganization") which would
constitute a nontaxable property exchange under the provisions of Section 351 of
the Internal Revenue Code; and
WHEREAS, as part of the Development Program the Common Stock of Promo Tel will
be registered under the Section 12(g) of the Securities Exchange Act of 1934 and
qualified for trading in the over-the-counter market; and
WHEREAS, Promo Tel and the Transferors desire to enter into the Agreement
pursuant to which the Transferors will transfer and assign to Promo Tel the
Subject Property in exchange for Shares of Promo Tel's Common Stock;
NOW THEREFORE, in consideration of the foregoing and the mutual promises and
convenants set forth herein IT HAS BEEN AND IT HEREBY IS AGREED as follows:
1. Mutual Agreement to Transfer Property and to Issue Stock. Each of the
Transferors hereby agrees to transfer, convey and assign to Promo Tel their
respective interests in the Subject Property as hereinafter identified in
exchange for the specified number of Shares of Promo Tel's Common Stock which
Promo Tel hereby agrees to issue and deliver to the Transferors. The exchange of
the assignments of the Subject Property and the Promo Tel Common Stock shall
take place at the Closing of the Agreement.
2. Identification of Transferors and Interests in Subject Property and
Specification of Promo Tel Common Stock to be Issued. The identification of the
Transferors, a description of their respective interests in the Subject Property
to be conveyed to Promo Tel and the number of Shares of Promo Tel's Common Stock
to be issued to each Transferor is as follows:
A. Transferor Carolyn J. Alvarado. Transferor Carolyn J. Alvarado of Long
Beach, New York will transfer, convey and assign to Promo Tel the Subject
Property described in Exhibit A to the Agreement in exchange for 2,250,000
shares of Promo Tel's Common Stock.
B. Transferor Ronald D. Anderson Sr. Transferor Ronald D. Anderson. Sr.
will transfer, convey and assign to Promo Tel all right, title and interest in
and to the Subject Property described in Exhibit B to the Agreement and (iv) all
of its right, title and interest in and
<PAGE>
to the Subject Property described on exhibit B to the Agreement, all in exchange
for 2,250,000 shares of Promo Tel's Common Stock.
C. Transferor Bayway, Ltd. Transferor Bayway, Ltd. will transfer, convey
and assign to Promo Tel all of its right, title and interest in and to the
Subject Property described in Exhibit C to the Agreement in exchange for
1,750,000 shares of Promo Tel's Common Stock;
D. Transferor CLST, Ltd. Transferor CLST, Ltd. will transfer, convey and
assign to Promo Tel all of its right, title and interest in and to the Subject
Property described in Exhibit C to the Agreement in exchange for 1,750,000
shares of Promo Tel's Common Stock;
E. Transferor Frank C. Magliato. Transferor Frank C. Magliato will
transfer, convey and assign to Promo Tel all of his rights, title and interest
in and to the Subject Property described in Exhibit C, in exchange for 3,500,000
shares of Promo Tel's Common Stock;
F. Transferor Meylan, Ltd. Transferor Meylan, Ltd. will transfer, convey
and assign to Promo Tel all of its right, title and interest in and to the
Subject Property described in Exhibit C to the Agreement in exchange for
1,750,000 shares of Promo Tel's Common Stock;
G. Transferor Lori Ann Perri. Transferor Lori Ann Perri will transfer,
convey and assign to Promo Tel all of her rights, title and interest in and to
the Subject Property described in Exhibit C to the Agreement in exchange for
350,000 shares of Promo Tel's Common Stock;
H. Transferor Public Access Telephone Company, Inc. Transferor Public
Access Telephone Company, Inc. will transfer, convey and assign to Promo Tel all
of the rights, title and interest in and to the Subject Property described in
Exhibit C to the Agreement in exchange for 1,750,000 shares of Promo Tel's
Common Stock;
I. Transferor Diego Roca. Transferor Diego Roca will transfer, convey and
assign to Promo Tel all of his right, title and interest in and to the Subject
Property described in Exhibit C to the Agreement in exchange for 300,000 shares
of Promo Tel's Common Stock;
J. Transferor Gary P. Stukes. Transferor Gary P. Stukes will transfer,
convey and assign to Promo Tel all of its right, title and interest in and to
the Subject Property described in Exhibit C to the Agreement in exchange for
150,000 shares of Promo Tel's Common Stock;
K. Transferor Telecorp Holdings, Inc. Transferor Telecorp Holdings, Inc.
will transfer, convey and assign to Promo Tel all of its right, title and
interest in and to the Subject Property described in Exhibit A to the Agreement
in exchange for 2,500,000 shares of Promo Tel's Common Stock;
L. Transferor Total Tech, Ltd. Transferor Total Tech, Ltd. will transfer,
convey, and assign to Promo Tel all of its right, title and interest in and to
the Subject Property described in Exhibit A to the Agreement in exchange for
1,750,000 shares of Promo Tel's Common Stock;
M. Transferor Michael H. Wirpel. Transferor Michael H. Wirpel will
transfer, convey and assign to Promo Tel all of its right, title and interest in
and to the Subject Property described in Exhibit C to the Agreement in exchange
for 125,000 shares of Promo Tel's Common Stock.
All of the above described property interests to be acquired by Promo Tel shall
constitute Subject Property as defined herein.
3. General Representation of Transferors. Each of the Transferors hereby
represents and warrants to Promo Tel and each of the other Transferors that: (a)
each Transferor has good and marketable title to the interest(s) in the Subject
Property being conveyed to Promo Tel by that Transferor (b) each Transferor will
convey the above listed interest(s) in the Subject Property to
2
<PAGE>
Promo Tel free and clear of all encumbrances; (c) each Transferor is the sole
owner of the interest(s) in the Subject Property being conveyed hereunder and no
other person or entity will have an interest in or to the Common Stock of Promo
Tel to be received hereunder; and (d) each Transferor will execute and deliver
to Promo Tel such documentation evidencing the conveyance of the interest(s) in
the Subject Property in such form as counsel for Promo Tel may reasonably
require.
4. General Representation of Promo Tel. Promo Tel hereby represents and warrants
that: (a) it is a Nevada corporation in good standing; (b) it is in the process
of qualifying to do business in the states where its business so requires; (c)
its present authorized capital Stock consists of 100,000,000 Shares of $.001 par
value Common Stock and 1,000,000 Shares of $.001 par value Preferred Stock; (d)
as of the date of the Agreement there are no Shares of its Preferred Stock
outstanding and there are no outstanding options or other rights to acquire any
Shares of Promo Tel's Preferred; (e) as of April 1, 1996 it had outstanding
13,354,249 Shares of its Common Stock and is committed to issue an additional
5,000,000 Shares of Common Stock in conversion of payment of promissory notes
aggregating $500,000 (these notes were issued for $500,000 in cash) at $0.10 per
share; therefor (f) other than as set out in 4(e) there are no outstanding
options or other rights to acquire any Shares of Promo Tel's Common Stock except
for Shares to be issued pursuant to the Agreement; (g) prior to July of 1995
Promo Tel was in a dormant state and since that time it has engaged in active
operations involving the marketing and distribution of prepaid telephone cards
and other telecommunications products and services; (h) during the period from
August 1, 1995 through December 31, 1995 its gross revenues from operations was
approximately $6,800,000; and (i) during the period from August 15, 1995 to
December 31, 1995 it has received $1,000,000 in investment capital, $500,000
from the sale of 5,000,000 Shares of its Common Stock and $500,000 for
promissory notes (which will be converted into 5,000,000 Shares of Common
Stock), substantially all of which has been expended in its operations in its
efforts in the Development Program. Promo Tel further agrees and warrants that
as of the closing date it will not have outstanding any of its capital Stock or
rights to acquire such Stock other than as described in this paragraph 4.
5. Transferors' Investment Representations. Each Transferor hereby acknowledges,
represents and/or agrees that: (a) the Transferor is acquiring all Shares of
Common Stock of Promo Tel to be issued under the Agreement ("Common Stock") for
the Transferor's own account for investment and not with a view to distribution;
(b) the sale or transfer of the Common Stock or any interest therein is severely
restricted; (c) the sale of the Shares of Common Stock hereunder has not been
registered under the Securities Act of 1933 or the securities law of any other
jurisdiction; (d) the Shares of Common Stock cannot be sold or transferred by a
Transferor or any other person or entity unless they are subsequently registered
under applicable laws or an exemption from registration is available; (e) Promo
Tel is not required to register the Shares of Common Stock or to make any
exemption from registration available accordingly, Subscriber must bear the
economic risk of his investment for an indefinite period of time; and (f) Promo
Tel may cause the following legend or one similar thereto to be set forth on
each certificate representing the Common Stock.
"The Shares represented by this Certificate have not been registered under the
Securities Act of 1933 ("Act") and are "restricted securities" as that term is
defined in Rule 144 under the Act. The Shares may not be offered for sale, sold
or otherwise transferred except pursuant to an effective registration statement
under the Act or pursuant to an effective registration statement under the Act
or pursuant to an exemption from registration under the Act, the availability of
which is to be established to the satisfaction of the Company.
6. Promo Tel's Development Program. The Development Program of Promo Tel
includes, (a) the acquisition of the Subject Property from the Transferors under
the Agreement; (b) the expansion of Promo Tel's present activities; (c) the
development of a new business involving the sale of products and service which
will enable the users of personal computers to avail themselves of
communications on the Internet through satellite communications and the
3
<PAGE>
development of other telecommunication services and products utilizing the
Subject Property; (e) the registration of Promo Tel's Common Stock under Section
12(g) of the Securities Exchange Act of 1934, and the qualification of its
Common Stock for trading in the over-the-counter market. Promo Tel and the
Transferors agree that they will use their best efforts and due diligence to
carry out the Promo Tel Development Program.
7. Speculative Nature of Investment. The Transferors each hereby acknowledge
that they understand that an investment in the Common Stock of Promo Tel is
speculative and subject to a high degree of risk and that they have reviewed the
risk factor involved in the investment including: (a) that the success of the
Promo Tel Development Program is dependent upon Promo Tel's acquisition of
substantial amounts of additional cash to finance its operations of which there
is no assurance; (b) Promo Tel will face significant actual and potential
competition, much of which will be from organizations with established
businesses, reputations and greater capital and personnel resources than Promo
Tel; (c) a substantial portion of the present and proposed business of Promo Tel
is highly volatile in nature and there is no assurance they will be able to
expand or retain their present level of activities; (d) the proposed sale of
products and service to owners of personal computers for communicating on the
Internet Promo Tel will be developing a new business involving new technology
and/or new uses for existing technology and an investment in such a new venture
is inherently speculative; (e) Promo Tel has not conducted or received any
definite study of the potential market acceptance of proposed personal computer
- - Internet business, and thus, has no assurance of its market acceptance even if
Promo Tel is successful in its development; (f) the exchange ratios for the
issuance of Promo Tel's Common Stock for the Subject Property has been
determined by negotiations between the Transferors and Promo Tel and were not
based upon any specific recognized criteria or value; (g) it is not now possible
to definitely determine the price at which Promo Tel will be able to raise the
necessary additional working capital for the Development Program. Accordingly, a
Transferor faces a risk of future dilution in the value of the investment as
well as a risk of loss of the Transferred Subject Property if sufficient
additional capital does not become available; and (h) the telecommunications
industry is subject To a substantial degree of government regulation and future
changes in the regulation could adversely affect the operations of Promo Tel.
8. Closing of the Reorganization. The Closing Date shall be such time and date
and the closing shall be held at such place as the parties mutually agree; but
in the absence of such Agreement shall be held at the offices of Promo Tel at
10:00 AM (local time) on April ___, 1996. At the Closing (a) the Transferors
will deliver to Promo Tel all certificates, assignments and other documents
which may be necessary and appropriate to transfer and convey the interest in
the Subject Property as listed in paragraph 2 of the Agreement, all in Form and
substance reasonably satisfactorily to counsel for Promo Tel; and (b) Promo Tel
shall deliver to the Transferors certificates evidencing the Shares of Promo
Tel's Common Stock to be issued to the Transferors pursuant to paragraph 2 of
the Agreement together with such other documents. If any which may be necessary
and appropriate to accomplish the delivery of the Common Stock all in form and
substance reasonable satisfactory to the Transferors or their counsel.
9. Conditions to Promo Tel's Obligations to Close. All obligations of Promo Tel
to be performed at the Closing are subject to the fulfillment, prior to or at
the Closing, of each of the conditions hereinafter set forth in this. Nothing in
this shall limit or restrict any rights or remedies which Promo Tel may have by
reason of any misrepresentation, breach of warranty or non fulfillment of any
convenant. Agreement or obligation by the Transferors under or pursuant to this
Agreement. These conditions to the performance by Promo Tel of its obligations
are.
A. The representations and warranties of the Transferors Agreement or in
writing, certificate, schedule, exhibit, statement, list, report, instrument or
other document furnished or delivered to Promo Tel pursuant to the terms hereof
shall be materially true and correct and as of the Closing as fully as if such
representations and warrants had been made of given at the Closing.
4
<PAGE>
B. The Transferors of at least the Subject Property listed in sub-paragraphs 2A,
B, C, D, E, F, K and L shall be willing and able to complete the transfers of
that Subject Property at the Closing. If any of the other Transferors of the
Subject Property listed in Paragraph 2 is or are not willing and able to
complete the transfer of their Subject Property Promo Tel shall be obligated to
complete the reorganization without the participation of the non-complying
Transferor(s) provided the Reorganization would then still qualify as a
nontaxable exchange under Section 351 of the Internal Revenue Code;
C. The Transferors shall have performed and complied with all covenants and
conditions required by the Agreement to be performed or complied with by them
prior to or at the Closing;
D. Promo Tel shall have received from the Transferors at or prior to the
Closing, all of the certificates, assignments and other documents required to be
delivered pursuant to paragraph 9 hereof;
E. No event shall have occurred prior to the Closing, including without
limitation, loss of or damage to any of the Subject Property which in the
reasonable judgment of Promo Tel, materially and adversely affects the value of
the Subject Property whether or not any such event is covered by insurance;
F. No action or proceeding by any person, entity administrative agency or public
authority shall be pending or threatened against any Part hereto, to restrain,
prohibit or nullify the consummation of the transactions contemplated herein, or
wherein an unfavorable judgment, decree or order would prevent or make unlawful
the fulfillment of this Agreement or performance thereunder; and
G. The Transferors shall have obtained in writing all requisite consents from
third parties with respect to the sale, conveyance, transfer, or assignment of
the Subject Property hereunder.
10. Conditions to the Transferor's Obligations to Close. All obligations of the
Transferors to be performed at the Closing are subject to the fulfillment, prior
to or at the Closing, of each of the conditions hereinafter set forth in this
paragraph 11. Nothing in this paragraph 11 shall limit or restrict any rights or
remedies which the Transferors may have by reason of any misrepresentation,
breach of warrant or non fulfillment of any covenant by Promo Tel under this
Agreement. These conditions or the performance by the Transferors of their
obligations are:
A. The representations and warranties of Promo Tel contained in this Agreement
or in any writing, certificate, schedule, exhibit, statement, list report,
instrument or other document furnished or delivered to ITD or Shareholders
pursuant to the terms of this Agreement shall be true at and as of the Closing
as fully as if such representations and warrants had been made or given at the
Closing;
B. The Transferors of at least the Subject Property listed in sub-paragraphs 2A,
B, C, D, E, F, K and L shall be willing and able to complete the transfers of
that Subject Property at the Closing. If any of the other Transferors of the
Subject Property listed in Paragraph 2 is or are not willing and able to
complete the transfer of their Subject Property Promo Tel shall be obligated to
complete the reorganization without the participation or the non-complying
Transferor(s) provided the Reorganization would then still qualify as a
nontaxable exchange under Section 351 of the Internal Revenue Code;
C. Promo Tel shall have performed and complied with Agreements and conditions
required by this Agreement to be performed or complied with by Promo Tel prior
to or at the Closing;
5
<PAGE>
D. The Transferors shall have received from Promo Tel, at or prior to the
Closing, all of the certificates, instruments and other documents required to be
delivered pursuant to paragraph 9 hereof.
E. The execution and delivery of this Agreement by Promo Tel, and the
performance of its convenants and obligations under it, shall have been duly
authorized by all necessary corporate action;
F. No event shall have occurred prior to the Closing, including, without
limitation, loss of or damage to any of the assets of Promo Tel which, in the
reasonable judgment the Transferors, materially and adversely affects the value
of Promo Tel and or the business thereof, whether or not such event is covered
by insurance; and
G. No action or proceeding by any person, entity, administrative agency or
public authority shall be pending or threatened against any Part hereto, to
restrain, prohibit or nullify the consummation of the transactions contemplated
herein, or wherein an unfavorable judgment, decree or order would prevent or
make unlawful the fulfillment of this Agreement or performance hereunder.
11. Mutual Indemnification. The parties agree that the following mutual
indemnification provision shall apply:
A. The Transferors shall jointly severally, defend, indemnity and hold Prom Tel
harmless from, against and in respect of any and all claims, demands, lawsuits,
proceeding, losses, assessments, fines, penalties, administrative orders,
obligations, costs, expenses, liabilities and damages, including interest,
penalties and reasonable attorney's fees (all of the foregoing hereinafter
referred to collectively as the ("Claims"), which arise or result from related
to the Transferors breach of, or failure to perform, any of their
representations, warranties, covenants, commitments Agreements or obligations
under this Agreement or in any writing, certificate, exhibit, schedule,
statement, list, report, instrument, or other document furnished or delivered to
Promo Tel in connection with this Agreement (including, without limitation, any
misrepresentation in, or omission from, this Agreement or any writing,
certificate, exhibit, schedule, statement, list report to Promo Tel in
connection with this Agreement; and
B. Promo Tel shall jointly severally, defend, indemnify and hold Prom Tel
harmless from, against and in respect of any and all claims, demands, lawsuits,
proceeding, losses, assessments, fines, penalties, administrative orders,
obligations, costs, expenses, liabilities and damages, including interest,
penalties and reasonable attorney's fees (all of the foregoing hereinafter
referred to collectively as the ("Claims"), which arise or result from related
to the Transferors breach of, or failure to perform, any of their
representations, warranties, covenants, commitments Agreements or obligations
under this Agreement or in any writing, certificate, exhibit, schedule,
statement, list, report, instrument, or other document furnished or delivered to
Promo Tel in connection with this Agreement (including, without limitation, any
misrepresentation in, or omission from, this Agreement or any writing,
certificate, exhibit, schedule, statement, list report to Promo Tel in
connection with this Agreement; and
12. Arbitration Promo Tel and each of the Transferor agree to provide the other
with written notice of any claimed breach of the Agreement. The party receiving
the notice of alleged breach shall have five days to cure the breach. If after
the 30 days no resolution has been achieved the involved parties shall arbitrate
the dispute utilizing the services and Rules and Regulation of the American
Arbitrator Association.
13. Execution. The Agreement may be executed in counter parts and each or such
counterparts have for all purposes be deemed to be an original altogether only
one (1) Agreement. The Effective date hereof shall be the date of the last
necessary signature hereto.
6
<PAGE>
14. Notices. All notices required to be given thereunder relating to the
Agreement shall be in writing and shall be deemed to have been duly given on the
date of receipt if sent by overnight delivery to the Part to whom notice is to
be given, and property addressed, to the other parties at the address set forth
opposite their execution of the Agreement below. Any Party may at any time
direct in writing that all communications or particular communications or
particular types of communications be delivered to a different address or
addressee other than those specified herein by notifying the other Parties in
the manner prescribed herein for the giving of notice.
15. Assignment. This Agreement shall inure to the benefit of and be binding on
the Transferors. Promo Tel and their respective successors, assigns, legal
representatives and heirs. This Agreement shall not be assigned by any
Transferor without the prior written consent of Promo Tel. Any attempted
assignment without such consent shall be void.
16. Entirety and Amendments. The Agreement constitutes the entire contract.
Agreement and understanding of the parties. The Agreement may only be amended in
writing executed by the parties.
17. Law. The Agreement shall be governed by and construed under the laws of
Colorado.
18. Taxation. It is the intent and understanding of the parties that the
transaction will constitute a "nontaxable exchange of property" under the
provisions of Section 351 of the Internal Revenue Code. Promo Tel and the
Transferors agree to each take such action as reasonably necessary to carry out
this understanding.
In witness whereof, the parties to the Agreement have duly executed it as of the
respective dates set forth below.
Dated: April 22, 1996 Promo Tel, Inc.
Address:
Promo Tel, Inc.
500 Fifth Avenue, Suite 424 By: /s/ Frank Magliato
New York, NY 10110 -----------------------------
Frank Magliato, President
Dated: April___,1996 Carolyn J. Alvarado
Address:
257 West Olive Street
Long Beach, NY 11561 By: /s/ Carolyn J. Alvarado
-----------------------------
Carolyn J. Alvarado
Dated: April 22,1996 Ronald D Anderson, Sr.
Address:
Ronald D. Anderson Sr.
Anderson Engineering By: /s/ Ronald Anderson
120 Lakeview Court ------------------------------
Jackson, MI 39213 Ronald D. Anderson, Sr.
Dated: April _____,1996 Bayway, Ltd.
Address:
Cynthia Dell
Bayway, Ltd. By: /s/ Cynthia Dell
500 Fifth Avenue, Suite -----------------------------
New York, NY 10110 Cynthia Dell
7
<PAGE>
14. Notices. All notices required to be given thereunder relating to the
Agreement shall be in writing and shall be deemed to have been duly given on the
date of receipt if sent by overnight delivery to the Part to whom notice is to
be given, and property addressed, to the other parties at the address set forth
opposite their execution of the Agreement below. Any Party may at any time
direct in writing that all communications or particular communications or
particular types of communications be delivered to a different address or
addressee other than those specified herein by notifying the other Parties in
the manner prescribed herein for the giving of notice.
15. Assignment. This Agreement shall inure to the benefit of and be binding on
the Transferors. Promo Tel and their respective successors, assigns, legal
representatives and heirs. This Agreement shall not be assigned by any
Transferor without the prior written consent of Promo Tel. Any attempted
assignment without such consent shall be void.
16. Entirety and Amendments. The Agreement constitutes the entire contract.
Agreement and understanding of the parties. The Agreement may only be amended in
writing executed by the parties.
17. Law. The Agreement shall be governed by and construed under the laws of
Colorado.
18. Taxation. It is the intent and understanding of the parties that the
transaction will constitute a "nontaxable exchange of property" under the
provisions of Section 351 of the Internal Revenue Code. Promo Tel and the
Transferors agree to each take such action as reasonably necessary to carry out
this understanding.
In witness whereof, the parties to the Agreement have duly executed it as of the
respective dates set forth below.
Dated: April 22, 1996 Promo Tel, Inc.
Address:
Promo Tel, Inc.
500 Fifth Avenue, Suite 424 By: /s/ Frank Magliato
New York, NY 10110 -----------------------------
Frank Magliato, President
Dated: April 22, 1996 Carolyn J. Alvarado
Address:
257 West Olive Street
Long Beach, NY 11561 By: /s/ Carolyn Alvarado
-----------------------------
Carolyn J. Alvarado
Dated: April 22,1996 Ronald D Anderson, Sr.
Address:
Ronald D. Anderson Sr.
Anderson Engineering By: /s/ Ronald D. Anderson, Sr.
120 Lakeview Court ------------------------------
Jackson, MI 39213 Ronald D. Anderson, Sr.
Dated: April 22, 1996 Bayway, Ltd.
Address:
Cynthia Dell
Bayway, Ltd. By: /s/ Cynthia Dell
500 Fifth Avenue, Suite -----------------------------
New York, NY 10110 Cynthia Dell
7
<PAGE>
Dated: April 22, 1996 CLST, Ltd.
Address:
Robert Oosterwyk
C/O Promo Tel, Inc. By: /s/ Robert Oosterwyk
CLST, Ltd. -----------------------------
500 Fifth Avenue, Suite 424 Robert Oosterwyk
New York, NY 10110
Dated: April 22, 1996 Frank Magliato
Address:
Frank Magliato
Promo Tel, Inc. By: /s/ Frank Magliato
500 Fifth Avenue, Suite 424 -----------------------------
New York, NY 10110 Frank Magliato
Dated: April 23, 1996 Meylan, Ltd.
Address:
John V. Broadbent
Meylan. Ltd. By: /s/ John Broadbent
C/O Promo Tel, Inc. -----------------------------
500 Fifth Avenue, Suite 424 John V. Broadbent
New York, NY 10110
Dated: April 23, 1996 Lori Ann Perri
Address:
Lori Ann Perri
Promo Tel, Inc. By: /s/ Lori Ann Perri
500 Fifth Avenue, Suite 424 -----------------------------
New York, NY 10110 Lori Ann Perri
Dated: April 22, 1996 Public Access Telephone Company,
Address: Inc.
Stephen Saunders, President
Public Access Telephone Company, Inc.
3507 North Central Avenue, Suite 503 By:
Phoenix, AZ 85012 /s/ Stephen Saunders
-----------------------------
Stephen Saunders, President
Dated: April 22, 1996 Diego Roca
Address:
Diego Roca
Promo Tel, Inc. By: /s/ Diego Roca
500 Fifth Avenue, Suite 424 -----------------------------
New York, NY 10110 Diego Roca
8
<PAGE>
Dated: April 22, 1996 CLST, Ltd.
Address:
Robert Oosterwyk
C/O Promo Tel, Inc. By: /s/ Robert Oosterwyk
CLST, Ltd. -----------------------------
500 Fifth Avenue, Suite 424 Robert Oosterwyk
New York, NY 10110
Dated: April 22, 1996 Frank Magliato
Address:
Frank Magliato
Promo Tel, Inc. By: /s/ Frank Magliato
500 Fifth Avenue, Suite 424 -----------------------------
New York, NY 10110 Frank Magliato
Dated: April 23, 1996 Meylan, Ltd.
Address:
John V. Broadbent
Meylan. Ltd. By: /s/ John V. Broadbent
C/O Promo Tel, Inc. -----------------------------
500 Fifth Avenue, Suite 424 John V. Broadbent
New York, NY 10110
Dated: April 23, 1996 Lori Ann Perri
Address:
Lori Ann Perri
Promo Tel, Inc. By: /s/ Lori Ann Perri
500 Fifth Avenue, Suite 424 -----------------------------
New York, NY 10110 Lori Ann Perri
Dated: April 22,1996 Public Access Telephone Company,
Address: Inc.
Stephen Saunders, President
Public Access Telephone Company, Inc.
3507 North Central Avenue, Suite 503 By:
Phoenix, AZ 85012 /s/ Stephen Saunders
-----------------------------
Stephen Saunders, President
Dated: April 22, 1996 Diego Roca
Address:
Diego Roca
Promo Tel, Inc. By: /s/ Diego Roca
500 Fifth Avenue, Suite 424 -----------------------------
New York, NY 10110 Diego Roca
8
<PAGE>
Dated: April 22, 1996 Telecorp Holdings, Inc.
Address:
Frank Magliato, President
Telecorp Holdings, Inc. By: /s/ Frank Magliato
C/O Promo Tel, Inc. -----------------------------
500 Fifth Avenue, Suite 424 Frank Magliato
New York, NY 10110
Dated: April 23, 1996 Total Tech, Ltd.
Address:
Simon K. Hearn
Total Tech, Ltd. By: /s/ Simon K. Hearn
C/O Promo Tel, Inc. -----------------------------
500 Fifth Avenue, Suite 424 Simon K. Hearn
New York, NY 10110
9
<PAGE>
EXHIBIT A
TO
AGREEMENT AND PLAN OF REORGANIZATION
OF
PROMOTEL, INC.
SUBJECT: PROPERTY OF CAROLYN J. ALVARADO, TELECORP FUNDING, INC.
AND TOTAL TECH LTD.
The Subject Property to be conveyed to PromoTel, Inc. pursuant to the
Agreement under subparagraphs 2A, K and L by Transferors Carolyn J. Alvarado,
Telecorp Holdings, Inc. and Total Tech, Ltd. shall consist of all of his right,
title, and interest in and to the intellectual and intangible properties
described below, including without limitation, all customers, data bases,
concepts, idea, trade secrets, designs, drawings, copyrights, (and/or rights to
apply therefore), research data and any other documentation relating to the
following electronic and telecommunication devices projects and concepts; and
Transferor hereby relinquishes and grants to PromoTel, Inc. any and all
rights, title or interest that Transferor may have, may possess, or may become
legally entitled to in the property hereinbelow described and assigned by
Transferor to PromoTel, Inc. Transferor warrants and specifies that it has all
rights title and interest in the property hereinbelow described, and that the
transfer thereof to PromoTel violates no federal, state, or other laws, but that
the property belongs exclusively and solely to Transferor. Transferor agrees to
hold PromoTel, Inc. harmless and free and clear of any and all legal attacks
upon the property assigned by Transferor to PromoTel as hereinbelow described.
a. trade secrets, knowledge, customer bases, data bases, contacts and
sales programs for the sale of long distance prepaid telephone debit
cards; and
b. trade secrets, knowledge, customer bases, data bases, contacts and
sales programs for the sale of other products in the
telecommunications industry
The above list is complete and accurate.
Dated: April 22, 1996 /s/ Carolyn J. Alvarado
----------------------------------
Carolyn J. Alvarado
Dated: April 22, 1996 /s/ Frank Magliato
----------------------------------
Telecorp Holdings, Inc.
Dated: April 23, 1996 /s/ Simon K. Hearn
----------------------------------
Total Tech Ltd.
10
<PAGE>
EXHIBIT B
TO
AGREEMENT AND PLAN OF REORGANIZATION
OF
PROMOTEL, INC.
SUBJECT: PROPERTY OF RONALD D. ANDERSON, SR.
The Subject Property to be conveyed to PromoTel, Inc. pursuant to the
Agreement under subparagraph 2.8 by Transferor Ronald D. Anderson, Sr., shall
consist of all of his right, title, and interest in and to the intellectual and
intangible properties described below, including without limitation, all
concepts, idea, trade secrets, designs, drawings, copyrights, patented materials
(and/or rights to apply therefore), research data and any other documentation
relating to the following electronic and telecommunication devices projects and
concepts:
Transferor hereby relinquishes and grants to PromoTel, Inc. any and all
rights, title or interest that Transferor may have, may possess, or may become
legally entitled to in the property hereinbelow described and assigned by
Transferor to PromoTel, Inc. Transferor warrants and specifies that it has all
rights title and interest in the property hereinbelow described, and that the
transfer thereof to PromoTel violates no federal, state, or other laws, but that
the property belongs exclusively and solely to Transferor. Transferor agrees to
hold PromoTel, Inc. harmless and free and clear of any and all legal attacks
upon the property assigned by Transferor to PromoTel as hereinbelow described:
a. Internet Tunneling and Alternate Routing for Third Party Destination
Information
b. Alternate routing and Internet Origination and Termination of
Primary Call
c. Alternate routing for Multimedia to Third Party Destination
d. Alternate routing for Multimedia Organization and Termination of
Primary Information Requests
e. Transmitting Packet Data-TCP/IP for Internet Alternate Routing to
Satellite Uplink
f. Design for Satellite Use of Transponder Internet Services
g. Design for Internet Services Via Alternate Sources to Hughes Turbo
Internet
h. Design for Hughes Network Gateway Servers as Tunneling Servers for
Uplink
i. Compression of TCP/IP Packet Internet Services for Uplink Loading on
Galaxy 4 Transponder
j. Redesign of Hughes Network Services, DirecPC Primary Installation
Software
k. Redesign of Auto Install for DirecPC Software and Windows 3.1
l. Redesign of Auto Install for DirecPC Software and Windows 3.11
m. Redesign of Auto Install for DirecPC Software and Windows 95
n. Redesign Application of DirecPC Software
o. Redesign Application of DirecPC NDIS Driver for Windows
p. National Internet Service for Applications to Universities and
Educational Facilities
q. National Internet Service for 1-800 Access
r. National Internet Services for Local Access
The above list is complete and accurate
Date: April 23, 1996 /s/ Ronald D. Anderson, Sr.
----------------------------------
Ronald D Anderson, Sr.
11
<PAGE>
EXHIBIT C
TO
AGREEMENT AND PLAN OF REORGANIZATION
OF
PROMOTEL, INC.
The Subject Property to be conveyed to Promo Tel, Inc. pursuant to the
Agreement under subparagraph 2 C, D, E, F, G. I, J and M shall consist of all of
their right, title and interest in and to the intellectual and intangible
properties described below, including without limitation, all concepts, idea,
trade secrets, designs, drawings, copyrights, (and/or rights to apply
therefore), research data and any other documentation relating to the following
electronic and telecommunication devices projects and concepts; and
Transferor hereby relinquishes and grants to PromoTel, Inc. any and all
rights, title or interest that Transferor may have, may possess, or may become
legally entitled to in the property hereinbelow described and assigned by
Transferor to PromoTel, Inc. transferor warrants and specifies that it has all
rights, title and interest in the property hereinbelow described, and that the
transfer thereof to PromoTel violates no federal, state or other laws, but that
the property belongs exclusively and solely to Transferor. Transferor agrees to
hold PromoTel, Inc. harmless and free and clear of any and all legal attacks
upon the property assigned by Transferor to Promo as hereinbelow described:
Trade secrets, knowledge, customer bases, data bases, contacts and sales
programs for:
a.) sale of long distance services - switched and dedicated and/or
b.) sale of 800 services - switched and dedicated and/or
c.) sale of prepaid telephone card products and/or
d.) distribution of prepaid telephone cards through wholesale channels
and/or
e.) sale of carrier services and/or
f.) distribution of telecommunications products through network marketing
programs and/or
g.) sale of alternate access - local loop bypass and/or
h.) sale of interactive voice response products and/or
i.) sale of satellite uplink/downlink products for international
origination and termination and/or
j.) sale of promotional telecommunications products and/or
k.) sale of printing and graphic services for telephone card products
and/or
l.) marketing campaigns for telecommunications hardware and software
and/or
m.) public relation and marketing campaigns for telecommunications
companies and/or
n.) investment banking for telecommunications companies and/or
o.) corporate financing for telecommunications companies and/or
p.) developing business plans and strategies for telecommunications
companies and/or
q.) filing federal and state tariffs for telecommunications services
The above list is complete and accurate.
Dated: April 23, 1996 /s/ Cynthia Dell
----------------------------------
Bayway Ltd.
Dated: April ____, 1996 /s/ Robert Oosterwyk
----------------------------------
CLIST, Ltd.
12
<PAGE>
Dated: April 22, 1996 /s/ Frank Magliato
----------------------------------
Frank Magliato
Dated: April 23, 1996 /s/ John V. Broadbent
----------------------------------
Meylan, Ltd.
Dated: April 23, 1996 /s/ Lori Ann Perri
----------------------------------
Lori Perri
Dated: April 22, 1996 /s/ Diego Roca
----------------------------------
Diego Roca
Dated: April __, 1996
----------------------------------
Gary Stukes
Dated: April ___, 1996
----------------------------------
Michael Wirpel
13
<PAGE>
MUTUAL RELEASE
THIS MUTUAL RELEASE between and among DigiTEC 2000, Inc., a Nevada
Corporation formerly known as PromoTEL, Inc. ("DigiTEC") and Frank C. Magliato
("Magliato") (the business address of DigiTEC and Magliato is 500 Fifth Avenue,
Suite 424, New York, New York 10110) and "ROA" a New Jersey Corporation and Gary
P. Stukes ("Stukes") (The business address of ROA and Stukes is 61 Winay
Terrace, Long Valley, New Jersey 07853) has been executed by them on the dates
set forth below opposite their signatures and becomes effective on the latest
such execution date.
RECITALS
WHEREAS, Stukes was formerly associated with DigiTEC as an officer and
director and during that association contemplated transferring certain assets to
DigiTEC for stock and/or options to purchase stock, and
WHEREAS, the contemplated asset transfer by Stukes was not and is not to
be concluded, and
WHEREAS, the associates between Stukes and DigiTEC has been terminated and
parties have agreed to mutually release each other from any and all claims or
liabilities between themselves;
NOW THEREFORE, in consideration of the foregoing and the mutual promises
and covenants contained herein, IT HAS BEEN AND IT HEREBY IS AGREED as follows:
1. DigiTEC and Magliato hereby, individually and jointly release and
relinquish any and all claims, rights and choses in action, now known or
unknown, which they have or may have against Stukes and/or ROA, including. but
without 1imitation of this Release, any such claims, rights or choses in action
relating to the proposed transfer of assets by Stukes to DigiTEC set forth
above.
2. Stukes and ROA hereby release and relinquish any and all claims,
individually and jointly release and relinquish any and all claims, rights and
choses in action, now known or unknown, which they have or may have against
DigiTEC and/or Magliato, including, but without limitation of this Release, any
such claims, rights or choses in action relating to the proposed transfer of
assets by Stukes to DigiTEC set forth above.
<PAGE>
3. DigiTEC agrees that it will not issue or file with the Internal Revenue
Service any form 1099 indicating that Stukes or ROA received any income from
DigiTEC for any stock, stock options, or similar items. DigiTEC further agrees
to defend or indemnify Stukes or ROA from any additional income taxes assessed
against either of them for any stock, stock options, or similar items from
DigiTEC, including any professional fees paid to contest such additional
taxation assessment.
4. Stukes and ROA consent and agree that DigiTEC may cancel and void any
stock certificate or stock option which may have been prepared in contemplation
of the completion of the proposed asset transfer from Stukes to DigiTEC
5. This release shall be binding upon the parties hereto, their assigns,
heirs or legal representatives.
IN WITNESS WHEREOF, this Release has been executed by the parties (in the
case of the corporate parties by their duly authorized officers) on the dates
set forth below.
DigiTEC 2000, Inc.
Dated December 13, 1996 By /s/ Frank C. Magliato
--------------------------------
Frank C. Magliato, President
Dated December 13, 1996 By /s/ Frank C. Magliato
--------------------------------
Frank C. Magliato, Individually
ROA
Dated December 13, 1996 By /s/ Gary P. Stukes
--------------------------------
Gary P. Stukes, President
Dated December 13, 1996 By /s/ Gary P. Stukes
--------------------------------
Gary P. Stukes, Individually
<PAGE>
AMENDMENT
TO
AGREEMENT AND PLAN OF REORGANIZATION
OF
PROMOTEL, INC.
THIS AMENDMENT to the Agreement and Plan of Reorganization between
PromoTel, Inc. ("PromoTel") and the other parties designated as "Transferor(s)"
therein (PromoTel and the Transferors are hereinafter the "Parties") dated April
23, 1996 (which agreement as originally executed is hereinafter referred to as
the "Original Agreement" and as modified by this amendment is hereinafter
referred to as the "Amended Agreement") is hereby amended and modified as set
forth below pursuant to the consent and agreement of the parties evidenced by
their execution hereof.
RECITALS
WHEREAS, under the Original Agreement the Transferors conveyed and
assigned to PromoTel the Subject Property for which the Transferors were to
receive the respective numbers of shares of the Common Stock of PromoTel
specified therein in a transaction designed to constitute a non-taxable exchange
under Section 351 of the Internal Revenue Code; and
WHEREAS, the Parties have been advised that if the transaction is
completed as provided in the Original Agreement PromoTel and/or certain of the
Transferors will or may incur material detrimental accounting and/or financial
consequences; and
WHEREAS, the Parties desire to enter into this Amendment to the Agreement
to modify the consideration to be given to the Transferors by PromoTel in
exchange for the Subject Property:
NOW THEREFORE, in consideration of the foregoing, the mutual promises and
covenants contained herein and the execution hereof by the respective Parties,
IT HAS BEEN AND IT HEREBY IS AGREED as follows:
1. Designation of Group A Transferors. Transferors Bayway, Ltd., CLST,
Ltd., Meylan, Ltd., Public Access Telephone Company, Inc., Telecorp Holdings,
Inc., and Total Tech, Ltd. are hereby designated as the "Group A Transferor(s)".
<PAGE>
2. Designation of Group B Transferors. Transferors Carolyn J. Alvarado,
Ronald D. Anderson, Sr., Frank C. Magliato, Lori Ann Perri, Diego Roca, Gary P.
Stukes, and Michael H. Wirpel are hereby designed as the "Group B
Transferor(s)".
3. Change of Consideration to Transferors. It is agreed that instead of
receiving shares of the Common Stock of PromoTel as specified in the Original
Agreement, the Transferors shall receive options to purchase shares of the
Common Stock of PromoTel as follows; Transferors shall receive an option to
purchase one and one-quarter shares for each share they would have received
under the Original Agreement.
4. Options. The options to be issued to the Group A Transferors shall have
an exercise price of $.25 per share and those to be issued to the Group B
Transferors shall have an exercise price of $2.20 per share (110% of the market
value of the shares on April 23, 1996.) Except for the exercise price and the
registration rights set forth in Paragraph 5 below, all options to be issued to
the Transferors shall be issued on the same terms and conditions which are as
follows: (a) the options shall be for a term of five years commencing April 23,
1996; (b) the options may be exercised in whole or in part during their term;
(c) the options are callable by PromoTel upon 30 days written notice at a call
price of $.10 for each option to purchase one share of PromoTels common stock;
(d) both the options and the shares to be issued thereunder upon exercise shall
be acquired as "restricted securities" under the Securities Act of 1933 and
subject to the Transferors' investment representations set forth in Paragraph 5
of the Original Agreement; (e) the options shall contain the usual and customary
anti-dilution provisions; (f) all references in the Amended Agreement to the
Common Stock of PromoTel are to such as of April 23, 1996; and (g) the form of
options, the number of shares covered thereby and these exercise prices which
are issued and delivered to the Transferors shall be adjusted to reflect any
recapitalization of PromoTel which may have occurred since April 23, 1996.
5. Registration Rights. The Parties agree that the options to purchase
shares of Common Stock of PromoTel to be issued to the Transferors shall contain
the appropriate and customary language granting to the Transferors rights to the
registration of the sale of the Common Stock underlying the options under the
Securities Act of 1933, as amended ("1933 Act"), as follows:
A. Group A Transferors. At any time after October 23, 1997, the holders of
the options to purchase a majority of the shares underlying the options issued
to the Group A Transferors and/or shares already purchased pursuant thereto
shall have a one-time right to demand that PromoTel file an appropriate
Registration Statement with the Securities and Exchange Commission under the
1933 Act with respect to the sale of the shares underlying the options issued to
the Group A Transferors at PromoTel's cost and expense; and
B. Group B Transferors. PromoTel agrees that once its Common Stock has
been registered under Section 12(g) of the Securities Exchange Act of 1934, it
will file a
<PAGE>
Registration Statement on the appropriate form with the Securities and Exchange
Commission to register the sale of the shares of the Common Stock of PromoTel
underlying the options to be issued to the Group B Transferors and to keep such
Registration Statement effective as long as reasonably necessary.
6. Taxation Reimbursement. PromoTel agrees that it will be responsible to
pay or to reimburse the Transferors for the amount of their respective income
tax liability, if any, for accepting the options under the Amended Agreement
instead of the shares of common stock under the original agreement.
7. Status of Origina1 Agreement. Except as changed or modified herein and
with this deletion of Paragraph 18 thereof, the Original Agreement remains in
full force and effect.
8. Cooperation. The Parties hereby agree to cooperate fully with each
other to complete the actions necessary to enable PromoTel to issue and deliver
to the Transferors the stock options provided for herein, including the return
by the Transferors to PromoTel any stock certificates which may have been issued
under the Original Agreement.
IN WITNESS WHEREOF, the Parties to the Amended Agreement have duly executed it
as of the respective dates set forth below.
Dated: December 15, 1996. PromoTel, Inc.
By /s/ Frank C. Magliato
----------------------------
Frank C. Magliato
President
Dated: December 15, 1996. Carolyn J. Alvarado
----------------------------
Dated: December 15, 1996. Ronald D. Anderson, Sr.
/s/ Ronald D. Anderson, Sr.
-----------------------------
FIRST AMENDMENT TO AGREEMENT
This First Amendment to Agreement (this "Amendment") dated as of November
1, 1996, by and between TELEPHONE ELECTRONICS CORPORATION, a Mississippi
Corporation ("Transferor") and DIGITEC 2000, INC. formerly known as PROMO TEL,
INC., a Nevada Corporation ("Promo Tel");
RECITALS
WHEREAS, Transferor and Promo Tel previously executed that certain
Agreement dated as of May 1, 1996 (the "Agreement"), and
WHEREAS, Transferor pursuant to the Agreement previously received shares
of Promo Tel's common stock (the "Stock") in exchange for the transfer of
certain Transferor's property (the "Property") to Promo Tel; and
WHEREAS, Transferor and Promo Tel now agree to adjust the amount of Stock
and Property; and
WHEREAS, Promo Tel has since the effective date of the Agreement effected
a one-for-six reverse stock split (the "Reverse Split") and change of name; and
WHEREAS, Promo Tel and Transferor desire to enter into this Amendment,
pursuant to which Transferor will transfer and assign to Promo Tel a certain
number of the shares of the Stock, Promo Tel will reassign certain Property and
the Reverse Split and name change will be recognized.
NOW THEREFORE, in consideration of the foregoing and the mutual promises
and covenants set forth herein, it has been and it is hereby agreed as follows:
1) Transferor Action: Effective on June 30, 1996 (the "Effective
Date"), Transferor shall be deemed to have transferred, conveyed and
reassigned to Promo Tel all of Transferor's right, title and
interest in and to 781,554 shares of Stock;
2) Promo Tel Action: As of the Effective Date, Promo Tel shall be
deemed to have relinquished and reassigned the following rights, all
as further specified on Exhibit A:
a) Rights to certain equipment located in Jackson, Mississippi;
b) Certain operating expenses;
c) Equipment removed from Phoenix, Arizona location;
d) Unlicensed software;
<PAGE>
3) Certificates: The exchange between the parties of certificates
representing the original Stock and the Stock to be reassigned
should occur within five (5) business days from the date hereof
Transferor does hereby deliver Certificate Number 618 for 9,632,312
shares to Promo Tel. Promo Tel shall deliver a certificate (the "New
Certificate") in the amount of 1,475,126.33 shares (representing
8,850,758 shares as effected by the Reverse Split) to Transferor.
Upon each party's receipt of the respective certificate the
reassignment shall be deemed complete.
4) Reverse Split: Transferor acknowledges the Reverse Split and change
of Promo Tel's corporate name. Transferor agrees that the New
Certificate will be accepted as containing the appropriate number of
shares of Stock after giving effect to the reassignment and
subsequent Reverse Split.
5) Effect: To the extent not specifically amended herein the Agreement
shall remain in full force and effect and unaltered by the terms and
conditions contained herein.
6) Counterparts: This Amendment shall be executed in any number of
counterparts each of which shall constitute but one original
Amendment.
TELEPHONE ELECTRONICS CORPORATION
BY: /s/ Robert J. Healea
---------------------------
ROBERT J. HEALEA
ITS: VICE PRESIDENT
DIGITEC 2000, INC. F/K/A PROMO TEL, INC.
BY: /s/ Diego E. Roca
---------------------------
DIEGO E ROCA
ITS: VICE PRESIDENT
<PAGE>
PROMO TEL, INC.
SCHEDULE OF ASSETS NOT TRANSFERRED
OCTOBER 14, 1996
<TABLE>
<CAPTION>
UNIDENTIFIED EQUIPMENT LOCATION AMOUNT
<S> <C> <C> <C>
CONCENTRATOR, LATTISNET TECH ROOM $ 1,515.30
CONCENTRATOR, LATTISNET TECH ROOM 1,354.59
MISCELLANEOUS ADDISON, TX 1,943.03
NO DETAIL - MISC EQUIPMENT TEMPE, AZ 4,551.00
COPIER AND COMPUTER DALLAS DALLAS, TX 3,873.04
CONCENTRATOR SYNOPTICS ELEVATOR CLOSET 2,604.80
SOLONET EQUIPMENT PALM BAY, FL 2,865.00
----------
TOTAL UNIDENTIFIED EQUIPMENT $18,706.76
EQUIPMENT STOLEN FROM PHOENIX
POWERMAC SETUP JACKSON, MS $ 6,712.96
INSIGHT - P120 CONFIGURED SYSTEM TEMPE, AZ 4,949.00
INSIGHT - P120 CONFIGURED SYSTEM TEMPE, AZ 4,610.00
EZSHOW 840 DATA/VIDEO & DUKANE O/H PROJECTOR HOUSTON, TX 3,410.00
----------
TOTAL EQUIPMENT STOLEN FROM PHOENIX, AZ 19,681.96
UNAUTHORIZED SOFTWARE - HERITAGE
HERITAGE DEVELOPMENT/MARKETING 12,840.00
HERITAGE DEVELOPMENT/MARKETING 12,840.00
HERITAGE DEVELOPMENT/MARKETING 12,840.00
HERITAGE DEVELOPMENT/MARKETING 12,840.00
HERITAGE DEVELOPMENT/MARKETING 588.50
HERITAGE DEVELOPMENT/MARKETING 37,450,00
----------
TOTAL UNAUTHORIZED SOFTWARE - HERITAGE 99,398.50
OPERATING EXPENSES
ELECTRICAL WORK JACKSON, MS $ 1,338.30
HERITAGE DEVELOPMENT SOFTWARE JACKSON, MS 240.75
RON ANDERSON EXP 1,826.89
MISCELLANEOUS JACKSON, MS 492.13
MISCELLANEOUS JACKSON, MS 806.21
MISCELLANEOUS JACKSON, MS 176.27
MISCELLANEOUS IRVINE, CA 214.00
MISCELLANEOUS HOUSTON, TX 59.21
MISCELLANEOUS JACKSON, MS 684.80
MOUNTING HARDWARE UNKNOWN 522.17
PHONE EQUIPMENT CHICAGO, IL 281.62
EQUIPMENT SCOTTSDALE, AZ 846.41
----------
TOTAL OPERATING EXPENSES 7,498.76
----------
TOTAL ASSETS NOT TRANSFERRED TO TEC 135,275.98
==========
</TABLE>
E-2
<PAGE>
TEC Amendment
<PAGE>
Promo Tel, Inc.
June 30, 1996
Memo re: Acquisition of Assets from TEC
On May 1, 1996 Promo Tel entered into an agreement with Telephone Electronics
Corp. ("TEC") for the purchase of:
Description Cost to TEC
Office equipment (consisting of desks, chairs,
credenzas, bookcases, file cabinets, workstations,
computers, computer monitors, keyboards, laser printers,
fax machines and other miscellaneous supplies) $76,839*
Computer file servers (including advanced internet and
intranet software applications and corresponding
telecommunication equipment, hardware and accessories) 1,355,000*
Software, hardware and development technology and
equipment for use in the establishment of high-speed,
satellite-to-home computer data services for individual
consumers. 351,716*
----------
$1,783,555
----------
The aforementioned dollar amounts were listed in schedules supplied to Promo Tel
from TEC and represent the original cost to TEC (not adjusted for depreciation).
These assets were initially put in use by TEC sometime in the beginning of
calendar 1996. Frank Magliato, President of Promo Tel, negotiated with TEC to
have such assets reflected at their net book value (adjusted for estimated
accumulated depreciation) [HANDWRITING ILLEGIBLE]. In doing so, Promo Tel and
TEC agreed on an adjusted net amount of $l,667,217. This is evidenced by the
fact that TEC agreed to accept 9,632,312** shares of Promo Tel common stock at a
fixed price per share of $0.173085825** (as indicated in Exhibit B to the
agreement between Promo Tel and TEC).
* Per Exhibits A-1, A-2, A-3 of Promo Tel/TEC agreement (Perm File)
** Per Exhibit B of Promo Tel/TEC agreement (Perm File)
<PAGE>
AGREEMENT
This Agreement (the "Agreement"), dated as of May 1, 1996, by and between
Telephone Electronics Corporation, a Mississippi Corporation ("Transferor") and
Promo Tel, Inc., a Nevada Corporation ("Promo Tel").
RECITALS
WHEREAS, Promo Tel is presently engaged in the telecommunications industry
through the marketing and distribution of pre-paid telephone calling cards and
other telecommunication products and services; and
WHEREAS, the Transferor has knowledge, expertise, tangible property,
intellectual property, trade secrets, contractual rights, and interests in
ongoing business operations all involved in or related to the telecommunications
industry, specifically relating to its business division known as TecLink (the
"Subject Properties"), and which Promo Tel proposes to acquire in exchange for
shares of Promo Tel's common stock (the "Shares")
WHEREAS, Promo Tel has engaged in a corporate reorganization ("Reorganization")
which constituted a nontaxable property exchange under the provisions of Section
351 of the Internal Revenue Code; and
WHEREAS, Promo Tel and Transferor desire to enter into the Agreement pursuant to
which the Transferor will transfer and assign to Promo Tel the Subject Property
in exchange for the Shares (the "Transaction").
NOW THEREFORE, in consideration of the foregoing and the mutual promises and
covenants set forth herein IT HAS BEEN AND IT HEREBY IS AGREED as follows:
1. Mutual Agreement to Transfer Property and to Issue Stock. The Transferor
hereby agrees to transfer, convey and assign to Prom Tel its interest in the
Subject Property as hereinafter identified in exchange for the specified number
of Shares of which Promo Tel hereby agrees to issue and deliver to the
Transferor. The exchange of the assignments of the Subject Property and the
Shares shall take place at the Closing of the Agreement.
2. Identification of Subject Property and Specification of Promo Tel Common
Stock to be Issued. The identification and a description of the Subject Property
to be conveyed to Promo Tel and the number of Shares to be issued to Transferor
is as shown on Exhibit A and Exhibit B,
1
<PAGE>
respectively, attached hereto and made a part hereof.
3. General Representations of Transferor. The Transferor hereby represents and
warrants to Promo Tel that: (a) it is a Mississippi corporation in good
standing, (b) except as set forth herein, Transferor has good and marketable
title to the interest(s) in the Subject Property being conveyed to Promo Tel by
Transferor; (c) Transferor will convey the interest(s) in the Subject Property
to Promo Tel free and clear of all encumbrances; (d) Transferor is the sole
owner of the Subject Property being conveyed hereunder and no other person or
entity will have an interest in or to the Shares of Promo Tel to be received
hereunder; (e) Transferor will execute and deliver to Promo Tel such
documentation evidencing the conveyance of the interest(s) in the Subject
Property in such form as counsel for Promo Tel may reasonably require; (f) the
execution and delivery of this Agreement by Transferor, and the performance of
its covenants and obligations hereunder have been duly authorized by all
necessary corporate action of Transferor and such Agreement represents the legal
and binding obligations of Transferor; and (g) Transferor agrees to comply with
and make all filings required by securities laws and to cooperate with and
assist Promo Tel with its securities filings with respect to Transferor.
4. General Representations of Promo Tel. Promo Tel hereby represents and
warrants that: (a) it is a Nevada corporation in good standing; (b) it is in the
process of qualifying to do business in the states where its business so
requires and where the failure to have so qualified would not have a material
adverse effect on Promo Tel, its businesses taken as a whole or the Shares; (c)
its present authorized capital stock consists of 100,000,000 shares of $.001 par
value common stock and 1,000,000 shares of $.001 par value preferred stock
("Preferred"); (d) as of the date of the Agreement there are no shares of its
preferred stock outstanding and there are no outstanding options or other rights
to acquire any shares of Preferred; (e) as of April 25, 1996 Promo Tel had
outstanding 33,529,249 Shares of its common stock and is committed to issue an
additional 5,000,000 Shares of Common Stock in conversion of payment of
promissory notes aggregating $500,000 (such notes were issued for $500,000 in
cash) at $0.10 per share; (f) other than as set out in Section 4(e) there are no
outstanding options or other rights to acquire any Shares except for Shares to
be issued pursuant to this Agreement; (g) prior to July of 1995 Promo Tel was in
a dormant state and since that time it has engaged in active operations
involving the marketing and distribution of prepaid telephone cards and other
telecommunications products and services; (h) during the period from August 1,
1995 through December 31, 1995 Promo Tel's gross revenues from operations was
approximately $6,800,000; (i) during the period from August 15, 1995 to December
31, 1995 Promo Tel has received $1,000,000 in investment capital, $500,000 from
the sale of 5,000,000 Shares of its common stock
2
<PAGE>
and $500,000 for promissory notes (such notes to be converted into 5,000,000
Shares of common stock), substantially all of which has been expended in its
operations in its efforts in Promo Tel's development program; and (j) the
execution and delivery of this Agreement by Promo Tel, and the performance of
its covenants and obligations hereunder have been duly authorized by all
necessary corporate action of Promo Tel and such Agreement represents the legal
and binding obligations of Promo Tel.
Promo Tel further agrees and warrants that as of the Closing (as defined below)
it will not have outstanding any of its capital stock or rights, options or
other obligations to acquire such Shares or Preferred other than as described in
this Section 4.
5. Transferor's Investment Representations. Transferor hereby acknowledges,
represents and/or agrees that: (a) Transferor is acquiring all Shares to be
issued under the Agreement (the "Stock") for the Transferor's own account for
investment and not with a view to distribution; (b) the sale or transfer of the
Stock or any interest therein is severely restricted; (C) the delivery of the
Stock hereunder has not been registered under the Securities Act of 1933 or the
securities law of any other jurisdiction; (d) the Stock cannot be sold or
transferred by Transferor or any other person or entity unless they are
subsequently registered under applicable laws or an exemption from registration
is available; (e) although Promo Tel is required under certain circumstances to
register the Shares of Common Stock as set forth below, it is not required to
make any exemption from registration available and accordingly, Transferor must
bear the economic risk of this investment for an indefinite period of time; and
(f) Promo Tel may cause the following legend or one similar thereto to be set
forth on each certificate representing the Stock:
"The Shares represented by this Certificate have not been registered
under the Securities Act of 1933 ("Act") and are "restricted
securities" as that term is defined in Rule 144 under the Act. The
Shares may not be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under the Act
or pursuant to an effective registration statement under the Act or
pursuant to an exemption from registration under the Act, the
availability of which is to be established to the satisfaction of
the Company."
6. Promo Tel's Securities Representations. (a) Promo Tel intends to pursue the
registration of its Shares under Section 12(g) of the Securities Exchange Act of
1934 (the "Exchange Act"), and the qualification of such
3
<PAGE>
Shares for trading in the over-the-counter market; (b) all Shares previously
delivered to the holders thereof are, and the Stock to be delivered will be duly
and validly issued, fully paid and non assessable and were either registered
with the SEC under the Act or issued in full legal compliance with a lawful
exemption from registration; (c) Promo Tel has been and will be at the time of
delivery of the Stock in full compliance with all Federal and State securities
laws; and (d) Promo Tel agrees that it shall not use the names or marks of
Transferor or any of Transferor's subsidiaries, directors, officers or
representatives without the prior written consent of Transferor, except as
required by securities laws pertaining to Share ownership, provided however,
that Transferor shall be entitled to require simultaneous notice thereof.
7. Speculative Nature of Investment. Transferor hereby acknowledges that it
understands that an investment in the Stock is speculative and subject to a high
degree of risk and that it has reviewed the risk factors involved in the
investment including: (a) that the success of the Promo Tel is dependent upon
Promo Tel's acquisition of substantial amounts of additional cash to finance its
operations of which there is no assurance; (b) Promo Tel will face significant
actual and potential competition, much of which will be from organizations with
established businesses, reputations and greater capital and personnel resources
than Promo Tel; (c) a substantial portion of the present and proposed business
of Promo Tel is highly volatile in nature and there is no assurance Promo Tel
will be able to expand or retain its present level of activities; (d) Promo Tel
will be developing a new business involving new technology and/or new uses for
existing technology and an investment in such a new venture is inherently
speculative; (e) Promo Tel has not conducted or received any definite study of
the potential market acceptance of proposed personal computer - Internet
business, and thus, has no assurance of its market acceptance even if Promo Tel
is successful in its development; (f) the exchange ratios for the issuance of
the Stock for the Subject Property has been determined by negotiations between
the Transferor and Promo Tel and were not based upon any specific recognized
criteria or value; (g) it is not now possible to definitely determine the price
at which Promo Tel will be able to raise the necessary additional working
capital for Promo Tel, accordingly, Transferor faces risk of future dilution in
the value of the investment as well as a risk of loss of the transferred Subject
Property if sufficient additional capital does not become available; and (h) the
telecommunications industry is subject to a substantial degree of government
regulation and future changes in such regulation could adversely affect the
operations of Promo Tel.
8. Closing. The closing date shall be such time and date (the "Closing")
4
<PAGE>
and shall be held at such place as the parties mutually agree; but in the
absence of such Agreement shall be held at the offices of Transferor at 10:00 AM
(local time) on May 1, 1996. At the Closing (a) the Transferor will deliver to
Promo Tel all certificates, assignments and other documents which may be
necessary and appropriate to transfer and convey its interest in the Subject
Property as listed in Section 2 of this Agreement, all in form and substance
reasonably satisfactorily to counsel for Promo Tel; and (b) Promo Tel shall
deliver to the Transferor certificates evidencing the Stock to be issued to the
Transferor pursuant to paragraph 2 of this Agreement together with such other
documents, if any , which may be necessary and appropriate to accomplish the
delivery of the Stock all in form and substance reasonably satisfactory to the
Transferor or its counsel.
9. Conditions to Promo Tel's Obligations to Close. All obligations of Promo Tel
to be performed at the Closing are subject to the fulfillment, prior to or at
the Closing, of each of the conditions hereinafter set forth in this Section 9.
Nothing in this Section 9 shall limit or restrict any rights or remedies which
Promo Tel may have by reason of any misrepresentation, breach of warranty or non
fulfillment of any covenant, agreement or obligation by the Transferor under or
pursuant to this Agreement. These conditions to the performance by Promo Tel of
its obligations are:
(a) The representations and warranties of the Transferor contained in this
Agreement or in any writing, certificate, schedule, exhibit, statement, list,
report, instrument or other document furnished or delivered to Promo Tel
pursuant to the terms hereof shall be materially true and correct and as of the
Closing as fully as if such representations and warrants had been made or given
at the Closing;
(b) The Transferor shall have performed and complied with all covenants and
conditions required by the Agreement to be performed or complied with by it
prior to or at the Closing;
(c) Promo Tel shall have received from the Transferor at or prior to the
Closing, all of the certificates, assignments and other documents required to be
delivered pursuant to Section 9 hereof;
(d) No event shall have occurred prior to the Closing, including without
limitation, loss of or damage to any of the Subject Property which in the
reasonable judgment of Promo Tel, materially and adversely affects the value of
the Subject Property whether or not any such event is covered by insurance;
provided however that any dispute, claims or lawsuits involving (i) Thomas
Gould or Heritage Graphics, Inc. ("Heritage") (a "Heritage Claim")
5
<PAGE>
(ii) U.S. Robotics ("USR") (a "USR Claim") , (iii) Suns, Inc. of Phoenix,
Arizona ("Suns") (a "Suns Claim") and/or (iv) Netscape ("Netscape") (a "Netscape
Claim") shall not be grounds for Promo Tel's refusal to proceed to Closing;
(e) No action or proceeding by any person, entity, administrative agency or
public authority shall be pending or threatened against any party hereto, to
restrain, prohibit or nullify the consummation of the transactions contemplated
herein, or wherein an unfavorable judgment, decree or order would prevent or
make unlawful the fulfillment of this Agreement or performance thereunder other
than any Heritage Claim, USR Claim and/or Netscape Claim; and
(f) The Transferor shall have obtained in writing all requisite consents (if
any) from third parties with respect to the sale, conveyance, transfer, or
assignment of the Subject Property hereunder, except those relating to any
Heritage Claim, USR Claim, Suns Claim and/or Netscape Claim.
10. Conditions to the Transferor's Obligations to Close. All obligations of the
Transferor to be performed at the Closing are subject to the fulfillment, prior
to or at the Closing, of each of the conditions hereinafter set forth in this
Section 10. Nothing in this Section 10 shall limit or restrict any rights or
remedies which the Transferor may have by reason of any misrepresentation,
breach of warranty or non fulfillment of any covenant agreement or obligation by
Promo Tel under or pursuant to this Agreement. These conditions to the
performance by the Transferor of its obligations are:
(a) The representations and warranties of Promo Tel contained in this Agreement
or in any writing, certificate, schedule, exhibit, statement, list report,
instrument or other document furnished or delivered to Transferor pursuant to
the terms of this Agreement shall be true at and as of the Closing as fully as
if such representations and warrants had been made or given at the Closing;
(b) Promo Tel shall have performed and complied with agreements and conditions
required by this Agreement to be performed or complied with by Promo Tel prior
to or at the Closing;
(c) The Transferor shall have received from Promo Tel, at or prior to the
Closing, all of the certificates, instruments and other documents required to be
delivered pursuant to the terms hereof;
6
<PAGE>
(d) No event shall have occurred prior to the Closing, including, without
limitation, loss of or damage to any of the assets of Promo Tel which, in the
reasonable judgment the Transferor, materially and adversely affects the value
of Promo Tel and or the business thereof or the Stock, whether or not such event
is covered by insurance other than any Heritage Claim, USR Claim and/or Netscape
Claim; and
(e) No action or proceeding by any person, entity, administrative agency or
public authority shall be pending or threatened against any party hereto, to
restrain, prohibit or nullify the consummation of the transactions contemplated
herein, or wherein an unfavorable judgment, decree or order would prevent or
make unlawful the fulfillment of this Agreement or performance hereunder, other
than any Heritage Claim, USR Claim and/or Netscape Claim.
11. Indemnification. The parties agree that the following indemnification
provisions shall apply:
(a) The Transferor shall defend, indemnify and hold Prom Tel harmless from,
against and in respect of any and all claims, demands, lawsuits, proceeding,
losses, assessments, fines, penalties, administrative orders, obligations,
costs, expenses, liabilities and damages, including interest, penalties and
reasonable attorney's fees (all of the foregoing hereinafter referred to
collectively as ("Claims"), which arise, result from or are related to the
Transferor's breach of, or failure to perform, any of its representations,
warranties, covenants, commitments, agreements or obligations under this
Agreement or in any writing, certificate, exhibit, schedule, statement, list,
report, instrument, or other document furnished or delivered to Promo Tel in
connection with this Agreement (including, without limitation, any
misrepresentation in, or omission from, this Agreement or any writing,
certificate, exhibit, schedule, statement, list or report to Promo Tel in
connection with this Agreement.
(b) Promo Tel shall defend, indemnify and hold Transferor harmless from, against
and in respect of any and all claims, demands, lawsuits, proceeding, losses,
assessments, fines, penalties, administrative orders, obligations, costs,
expenses, liabilities and damages, including interest, penalties and reasonable
attorney's fees (all of the foregoing hereinafter referred to collectively as
("Claims"), which arise, result from or are related to Promo Tel's breach of, or
failure to perform, any of its representations, warranties, covenants,
commitments, Agreements or obligations under this Agreement or in any writing,
certificate, exhibit, schedule, statement, list, report, instrument, or other
document furnished or delivered to Promo Tel in
7
<PAGE>
connection with this Agreement (including, without limitation, any
misrepresentation in, or omission from, this Agreement or any writing,
certificate, exhibit, schedule, statement, list or report to Transferor in
connection with this Agreement;
(c) Transferor shall indemnify and hold Promo Tel harmless from all Claims
associated with the Subject Property, including but not limited to the Heritage
Claim, incurred or relating to periods prior to the Effective Time (as defined
below) and Promo Tel shall indemnify and hold Transferor harmless from all
Claims associated with the Subject Property, including but not limited to the
Heritage Claim incurred or relating to periods after the Effective Time; and
(d) In the event Netscape seeks to make Claims against Transferor, Promo Tel
agrees to indemnify and hold Transferor harmless from any Netscape Claim.
12. Arbitration. Promo Tel and Transferor agree to provide the other with
written notice of any claimed breach of the Agreement. The party receiving the
notice of alleged breach shall have five days to cure the breach. If after the
30 days no resolution has been achieved the involved parties shall arbitrate the
dispute utilizing the services and Rules and Regulation of the American
Arbitration Association. Such arbitration shall be binding and shall be
conducted in Atlanta, Georgia.
13. Execution. The Agreement may by executed in counterparts and each of such
counterparts shall, for all purposes, be deemed to be an original but altogether
only one (1) Agreement. The effective time (the "Effective Time") of the
Transaction shall be 11:59 P.M. Central Time on January 20, 1996, provided
however, that delivery of Stock shall not be required until the Closing or as
soon thereafter as Promo Tel's transfer agent is capable of delivery thereof.
14. Notices. All notices required to be given thereunder relating to the
Agreement shall be in writing and shall be deemed to have been duly given on the
date of receipt if sent by overnight delivery to the party to whom notice is to
be given, and properly addressed, at the address set forth below. Any party may
at any time direct in writing that all communications or particular
communications or particular types of communications be delivered to a different
address or addressee other than those specified herein by notifying the other
party in the manner prescribed herein for the giving of notice.
8
<PAGE>
15. Assignment. This Agreement shall inure to the benefit of and be binding on
the Transferor, Promo Tel and their respective successors, assigns, legal
representatives and heirs. This Agreement shall not be assigned by any party
without the prior written consent of the other party. Any attempted assignment
without such consent shall be void.
16. Entirety, Amendments and Relationship. The Agreement constitutes the entire
contract, Agreement and understanding of the parties. The Agreement may only be
amended in writing executed by the parties. The parties agree that the
relationship created herein is that of assignor (Transferor) and assignee (Promo
Tel). Nothing herein shall be construed, nor shall anything be implied as
creating any additional relationships between the parties, including but not
limited to, that of partner, joint venturer, contractor, agent or otherwise.
17. Law. The Agreement shall be governed by and construed under the laws of
Mississippi.
18. Piggy-Back Registration and Other Rights. (a) Transferor shall have, at its
option, "piggy back" registration rights to require the Stock to be registered
under the 1933 Act on a pro rata basis to the total number of Shares involved in
such registration, if, within three years of the Closing, Promo Tel files a
registration statement under such Act covering Shares of common stock on Form S-
1, S-2 or S-3; provided, however, that such registration rights shall not be
effective if the offering to be registered by Promo Tel is an underwritten
public offering and the underwriter advises Transferor to the effect that the
inclusion of the Stock as part of the underwriting would adversely affect the
underwriter's ability to make the offering; (b) in the event Frank Magliato
("Principal") enters into an agreement for the private transfer, sale or
exchange of his shares of common stock, he agrees that he shall not enter such
agreement without including the Stock on a pro-rata basis (i.e. if Principal
proposes to transfer 50% of his shares he must cause the transferee to contract
to purchase 50% of the Stock from Transferor).
19. Heritage Claim. (a) Promo Tel and Transferor each acknowledge existence of
the Heritage Claim which could result in litigation against each of the parties
by Heritage and counter-claims by the parties against Heritage. The parties
agree that each has conducted its own investigation of such claim and Promo Tel
agrees to accept all risks associated with the Heritage Claim as the same
pertains to Promo Tel, TECLink, Inc. and any of their affiliates, directors,
officers, employees or representatives. The parties agree to bear their own
expenses and cooperate in any such litigation and
9
<PAGE>
further agree not to file any cross-claims against each other in such
litigation, the same being expressly assumed and released by each party hereto.
The parties specifically agree to indemnify and hold each other harmless in
accordance with Section 11(c) with regard to the Heritage Claim.
(b) The parties acknowledge and agree that the Subject Property contains
$88,810.00 in developmental software (the "Software") involved in the Heritage
Claim. Promo Tel acknowledges, understands and agrees that certain issues have
arisen with respect to Transferor's ability to reproduce, use, sell and/or
distribute the Software without infringing upon proprietary rights of Apple
Computer, Progressive Network or other developers which may have obtained rights
from such companies. The transfer of the Software is made without any warranties
on the part of Transferor, the same being specifically disclaimed by Transferor.
Promo Tel accepts the Software without warranty and acknowledges and agrees this
is a specific exception to Section 3(b) above. Notwithstanding the foregoing,
Transferor shall maintain primary responsibility for resolution of the Heritage
Claim as it pertains to the Software. In the event it is determined that the
Software infringes upon other's rights, Promo Tel shall be entitled to an
Adjustment (as defined below). In no event shall Transferor shall be responsible
for paying developer or licensing fees to any person or entity claiming any
infringement unless mutually agreed by the parties hereto. The obligations
contained in this Section 19(b) are Transferor's sole obligations with respect
to the Software.
20. Adjustments. (a) Transferor acknowledges that as a result of the Software,
the USR Claim and/or the Suns Claim that it may be responsible to make an
adjustment ("Adjustment") in the number of Shares received from Promo Tel by
delivery and reassignment of certain Shares to Transferor. In the event of an
Adjustment, Transferor shall be responsible for delivery of a certificate or
certificates representing the Stock determined by dividing the total amount of
any Adjustment by the Promo Tel Stock Price (as defined in Exhibit B).
(b) The parties agree that the following Adjustments shall be the only
Adjustments to the Stock received by Transferor: (i) the Software - not to
exceed $88,810.00 (ii) the USR Claim - an amount determined by a pro rata
portion of any price reduction (from the present pricing of $840.00 per port)
offered by USR with respect to equipment which is the subject of the USR Claim
and (iii) the Suns claim - $18,436.04.
(c) With respect to the Suns, Promo Tel shall be responsible for pursuing
10
<PAGE>
Suns in order to have certain equipment shipped to Promo Tel and/or paid for by
Suns. In the event Promo Tel is unable to obtain such equipment or payment
thereof within a reasonable period of time after reasonable efforts on its part,
it shall give notice to Transferor and shall be entitled to an Adjustment
thereof.
(d) With respect to the USR Claim, the parties agree that when such Claim is
resolved, the parties will simultaneously issue checks to USR in order to
promptly and fully resolve such Claim.
(e) In the event of an Adjustment, unless the parties agree otherwise, should
such Adjustment result in Promo Tel's not qualifying as an "affiliate" under the
MCI Contract (as defined in Exhibit A) then Transferor shall no longer be
required to offer Promo Tel the contract rights set forth on Exhibit A, Number
6.
21. Non-Prohibition. Nothing contained herein shall be construed as prohibiting
Transferor or any of its subsidiaries or affiliates from entering into or
continuing any existing telecommunications or other business, including but not
limited to, any Internet access business or otherwise. Promo Tel acknowledges
and agrees that it is not receiving any non-competition covenants or agreements
from Transferor.
IN WITNESS WHEREOF, the parties to the Agreement have duly executed it as set
forth below.
PROMO TEL:
PROMO TEL, INC.
By: /s/ Frank Magliato
-----------------------------
Frank Magliato, President
TRANSFEROR:
TELEPHONE ELECTRONICS
CORPORATION
By: /s/ Walter J. Frank, Jr.
-----------------------------
Walter J. Frank, Jr.
Executive Vice President
11
<PAGE>
EXHIBIT A
SUBJECT PROPERTY
Certain assets being utilized, or capable of being utilized, in
Transferor's Internet access business consisting of all of Transferor's right,
title and interest (as qualified in the Agreement, attached hereto and made a
part hereof to the following:
1) Federal Service Mark (Serial Number 75/004054) relating to the name
"TECLink" and more fully described on that certain Filing Receipt
for Trade Mark Applicant, attached hereto and made a part hereof.
2) Fixed Assets consisting of those assets formerly belonging to
Transferor's subsidiary, TEC Operator Services, Inc., and more fully
described on Schedule A-1 attached hereto and made a part hereof.
3) Assets consisting of hardware, software and intangibles relating to
Transferor's Internet access business and more fully described on
Schedule A-2 attached hereto and made a part hereof.
4) Assets consisting of hardware, software, trade secrets and other
intangibles relating to Transferor's investment in the Hughes
Project and more fully described on Schedule A-3 attached hereto and
made a part hereof.
5) Customer lists and accounts receivable (for periods subsequent to
the Effective Time) relating to Transferor's Internet access
business consisting of 1,371 customers.
6) Contract right to purchase MCI services pursuant to Transferor's MCI
Carrier Contract (the "MCI Contract"). TEC shall designate Promo Tel
as an "affiliate" under the MCI Contract, provided however, that
Promo Tel shall comply with all the terms and conditions of such
contract and the rules and procedures set forth by Transferor's MCI
Contract administrator. This right shall terminate upon expiration
of the MCI Contract. Transferor shall have the right, in its sole
discretion, to modify or terminate the MCI Contract in its entirety.
<PAGE>
700 SOUTH WEST STREET - 2ND FLOOR
FIXED ASSET INVENTORY - ITEMS LOCATED FROM ORIGINAL DECEMBER 6, 1995 INVENTORY
April 24, 1996
ASSET # OR
# ASSIGNED DESCRIPTION LOCATION FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
696 BOARD, CORK KITCHEN/LOUNGE 18.79
- --------------------------------------------------------------------------------
588 BOARD, CORK BACK WALL OPERATOR CENTER 18.79
- --------------------------------------------------------------------------------
100387 BOARD, CORK OC OFF 5 18.79
- --------------------------------------------------------------------------------
100375 BOARD, CORK OC 4.99
- --------------------------------------------------------------------------------
100381 BOARD, CORK KITCHEN/LOUNGE 4.99
- --------------------------------------------------------------------------------
100423 BOARD, CORK OC OFF 3 4.99
- --------------------------------------------------------------------------------
100425 BOARD, CORK BACK WALL OPERATOR CENTER 18.99
- --------------------------------------------------------------------------------
927 BOARD, CORK 2 X 3 OC OFF 9 4.68
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
110 BOARD, WHITE OC OFF 4 49.78
- --------------------------------------------------------------------------------
126 BOARD, WHITE OC OFF 7 49.78
- --------------------------------------------------------------------------------
179 BOARD, WHITE OC OFF 6 49.78
- --------------------------------------------------------------------------------
251 BOARD, WHITE OC/LAURA DAVIS 49.78
- --------------------------------------------------------------------------------
269 BOARD, WHITE EXECUTIVE CONFERENCE 49.78
- --------------------------------------------------------------------------------
340 BOARD, WHITE TRAINING ROOM 49.78
- --------------------------------------------------------------------------------
341 BOARD, WHITE TRAINING ROOM 49.78
- --------------------------------------------------------------------------------
948 BOARD, WHITE OC OFF 5 49.78
- --------------------------------------------------------------------------------
100010 BOARD, WHITE OC OFF 9 65.65
- --------------------------------------------------------------------------------
100022 BOARD, WHITE OC OFF 8 55.65
- --------------------------------------------------------------------------------
100038 BOARD, WHITE OC OFF 1 60.95
- --------------------------------------------------------------------------------
100226 BOARD, WHITE OC 49.78
- --------------------------------------------------------------------------------
100083 BOARD, WHITE WOODEN CASE EXECUTIVE, OFFICE 49.78
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
\-------------------------------------------------------------------------------
125 BOOKCASE, 2 SHELF METAL TRAINING 57.39
- --------------------------------------------------------------------------------
194 BOOKCASE, 2 SHELF METAL OC SUPV 57.39
- --------------------------------------------------------------------------------
207 BOOKCASE, 2 SHELF METAL OC OFF 3 57.39
- --------------------------------------------------------------------------------
242 BOOKCASE, 2 SHELF METAL OC OFF 2 57.39
- --------------------------------------------------------------------------------
244 BOOKCASE, 2 SHELF METAL HOWARD GRAYIN 57.39
- --------------------------------------------------------------------------------
288 BOOKCASE, 2 SHELF METAL OC 57.39
- --------------------------------------------------------------------------------
358 BOOKCASE, 2 SHELF METAL OC 57.39
- --------------------------------------------------------------------------------
382 BOOKCASE, 2 SHELF METAL TRAINING ROOM 57.39
- --------------------------------------------------------------------------------
750 BOOKCASE, 2 SHELF METAL OC OFF 7 57.39
- --------------------------------------------------------------------------------
857 BOOKCASE, 2 SHELF METAL CUSTOMER SERVICE 57.39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
359 BOOKCASE, 3 SHELF METAL OC 70.93
- --------------------------------------------------------------------------------
823 BOOKCASE, 3 SHELF METAL OC OFF 3 77.54
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
828 BOOKCASE, 4 SHELF METAL OC/LAURA DAVIS 88.12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
170 BOOKCASE, 4 SHELF WOOD OC OFF 5 75.75
- --------------------------------------------------------------------------------
195 BOOKCASE, 4 SHELF WOOD OC OFF 3 75.75
- --------------------------------------------------------------------------------
243 BOOKCASE, 4 SHELF WOOD OC OFF 4 75.75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100008 BOOKCASE, LIGHT OAK OC OFF 8 111.55
- --------------------------------------------------------------------------------
100061 BOOKCASE, LIGHT OAK EXECUTIVE, SECRETARY 111.55
- --------------------------------------------------------------------------------
100204 BOOKCASE, LIGHT OAK CUSTOMER SERVICE/MKT 111.55
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
589 CABINET, STOCK OC/SUPPLY CLOSET 120.59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
198 CALCULATOR, CANON OC OFF 2 21.83
- --------------------------------------------------------------------------------
Page 1 of 9
A-1
<PAGE>
700 SOUTH WEST STREET - 2ND FLOOR
FIXED ASSET INVENTORY - ITEMS LOCATED FROM ORIGINAL DECEMBER 6, 1995 INVENTORY
April 24, 1996
ASSET # OR
# ASSIGNED DESCRIPTION LOCATION FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
382 CALCULATOR, CANON OC 21.63
- --------------------------------------------------------------------------------
906 CALCULATOR, CANON PERSONNEL/DONNETTE MAYU 17.75
- --------------------------------------------------------------------------------
925 CALCULATOR, CANON CUSTOMER SERVICE/MKT 17.76
- --------------------------------------------------------------------------------
100078 CALCULATOR, CANON TECH ROOM 21.25
- --------------------------------------------------------------------------------
100206 CALCULATOR, CANON CUSTOMER SERVICE 17.76
- --------------------------------------------------------------------------------
77 CALCULATOR, SHARP TECH ROOM 8.17
- --------------------------------------------------------------------------------
100011 CALCULATOR, SHARP OC OFF 8 22.50
- --------------------------------------------------------------------------------
100056 CALCULATOR, SHARP RECEPTION, EXECUTIVE 26.25
- --------------------------------------------------------------------------------
100080 CALCULATOR, SHARP EXECUTIVE, SECRETARY 26.25
- --------------------------------------------------------------------------------
100184 CALCULATOR, SHARP OC CLOSET/NIU 26.25
- --------------------------------------------------------------------------------
100202 CALCULATOR, SHARP HOWARD GRAYLIN 26.25
- --------------------------------------------------------------------------------
100239 CALCULATOR, SHARP OCC OFF 3 26.25
- --------------------------------------------------------------------------------
100207 CALCULATOR, TEXAS INS CUSTOMER SERVICE 27.50
- --------------------------------------------------------------------------------
123 CALCULATOR, TI ANGIE SCOTT 30.30
- --------------------------------------------------------------------------------
155 CALCULATOR, VICTOR PERSONNEL/GLORIA SMITH 21.43
- --------------------------------------------------------------------------------
205 CALCULATOR, VICTOR OC OFF 5 21.43
- --------------------------------------------------------------------------------
241 CALCULATOR, VICTOR OC OFF 1 21.43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
778 CAMERA, SURVEILLANCE ENTRANCE 44.52
- --------------------------------------------------------------------------------
779 CAMERA, SURVEILLANCE ENTRANCE 44.52
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
928 CART TECH ROOM 147.34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
104 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
112 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
182 CHAIR, ARM SIDE EXECUTIVE/SECRETARY 80.46
- --------------------------------------------------------------------------------
197 CHAIR, ARM SIDE CUSTOMER SERVICE 80.46
- --------------------------------------------------------------------------------
215 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
232 CHAIR, ARM SIDE OC OFF 4 80.46
- --------------------------------------------------------------------------------
248 CHAIR, ARM SIDE TRAINING 80.46
- --------------------------------------------------------------------------------
249 CHAIR, ARM SIDE TRAINING 80.46
- --------------------------------------------------------------------------------
250 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
295 CHAIR, ARM SIDE OC OFF 7 80.46
- --------------------------------------------------------------------------------
324 CHAIR, ARM SIDE OC OFF 3 80.46
- --------------------------------------------------------------------------------
325 CHAIR, ARM SIDE TRAINING 80.46
- --------------------------------------------------------------------------------
326 CHAIR, ARM SIDE OC OFF 5 80.46
- --------------------------------------------------------------------------------
327 CHAIR, ARM SIDE OC 80.46
- --------------------------------------------------------------------------------
328 CHAIR, ARM SIDE OC 80.46
- --------------------------------------------------------------------------------
329 CHAIR, ARM SIDE OC OFF 8 80.46
- --------------------------------------------------------------------------------
330 CHAIR, ARM SIDE OC OFF 6 80.46
- --------------------------------------------------------------------------------
332 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
333 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
334 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
335 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
336 CHAIR, ARM SIDE OC OFF 7 80.46
- --------------------------------------------------------------------------------
337 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
338 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
339 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
342 CHAIR, ARM SIDE TECH ROOM 80.46
- --------------------------------------------------------------------------------
350 CHAIR, ARM SIDE OC OFF 1 80.46
- --------------------------------------------------------------------------------
351 CHAIR, ARM SIDE CUSTOMER SERVICE 80.46
- --------------------------------------------------------------------------------
393 CHAIR, ARM SIDE OC/LAURA DAVIS 109.16
- --------------------------------------------------------------------------------
637 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
638 CHAIR, ARM SIDE TRAINING ROOM 80.46
- --------------------------------------------------------------------------------
648 CHAIR, ARM SIDE CYBERLOG ROOM 80.46
- --------------------------------------------------------------------------------
Page 2 of 9
A-1
<PAGE>
700 SOUTH WEST STREET - 2ND FLOOR
FIXED ASSET INVENTORY - ITEMS LOCATED FROM ORIGINAL DECEMBER 6, 1995 INVENTORY
April 24, 1996
ASSET # OR
# ASSIGNED DESCRIPTION LOCATION FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
738 CHAIR, ARM SIDE CUSTOMER SERVICE 80.45
- --------------------------------------------------------------------------------
749 CHAIR, ARM SIDE OC OFF 3 80.45
- --------------------------------------------------------------------------------
751 CHAIR, ARM SIDE TRAINING ROOM 80.45
- --------------------------------------------------------------------------------
807 CHAIR, ARM SIDE MARKETING/JOHN MAGOWAN 93.60
- --------------------------------------------------------------------------------
808 CHAIR, ARM SIDE MARKETING/ANGIE SCOTT 93.60
- --------------------------------------------------------------------------------
818 CHAIR, ARM SIDE HOWARD GRAYLIN 93.60
- --------------------------------------------------------------------------------
851 CHAIR, ARM SIDE JOHN MAGOWAN 93.60
- --------------------------------------------------------------------------------
859 CHAIR, ARM SIDE CUSTOMER SERVICE/MKT 93.60
- --------------------------------------------------------------------------------
862 CHAIR, ARM SIDE HOWARD GRAYLIN 93.60
- --------------------------------------------------------------------------------
870 CHAIR, ARM SIDE CUSTOMER SERVICE/MKT 93.60
- --------------------------------------------------------------------------------
874 CHAIR, ARM SIDE CUSTOMER SERVICE/MKT 93.60
- --------------------------------------------------------------------------------
100317 CHAIR, ARM SIDE ACCT/LISA GANT 99.22
- --------------------------------------------------------------------------------
100322 CHAIR, ARM SIDE JOHN MAGOWAN 99.22
- --------------------------------------------------------------------------------
100489 CHAIR, ARM SIDE CUSTOMER SERVICE 99.22
- --------------------------------------------------------------------------------
100493 CHAIR, ARM SIDE OC OFF 4 99.22
- --------------------------------------------------------------------------------
100514 CHAIR, ARM SIDE CUSTOMER SERVICE/MKT 99.22
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
88 CHAIR, EXECUTIVE OC OFF 8 117.91
- --------------------------------------------------------------------------------
171 CHAIR, EXECUTIVE TECH ROOM 117.91
- --------------------------------------------------------------------------------
180 CHAIR, EXECUTIVE OC OFF 4 117.91
- --------------------------------------------------------------------------------
192 CHAIR, EXECUTIVE OC OFF 5 117.91
- --------------------------------------------------------------------------------
299 CHAIR, EXECUTIVE JULI HOLTON 117.91
- --------------------------------------------------------------------------------
642 CHAIR, EXECUTIVE TECH ROOM 117.91
- --------------------------------------------------------------------------------
744 CHAIR, EXECUTIVE OC/LAURA DAVIS 117.91
- --------------------------------------------------------------------------------
845 CHAIR, EXECUTIVE CUSTOMER SERVICE/MKT 137.15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
253 CHAIR, HIGH BACK EXECUTIVE EXECUTIVE CONFERENCE 92.97
- --------------------------------------------------------------------------------
254 CHAIR, HIGH BACK EXECUTIVE EXECUTIVE CONFERENCE 92.97
- --------------------------------------------------------------------------------
256 CHAIR, HIGH BACK EXECUTIVE EXECUTIVE CONFERENCE 92.97
- --------------------------------------------------------------------------------
257 CHAIR, HIGH BACK EXECUTIVE EXECUTIVE CONFERENCE 92.97
- --------------------------------------------------------------------------------
258 CHAIR, HIGH BACK EXECUTIVE EXECUTIVE CONFERENCE 92.97
- --------------------------------------------------------------------------------
259 CHAIR, HIGH BACK EXECUTIVE OC OFF 5 92.97
- --------------------------------------------------------------------------------
260 CHAIR, HIGH BACK EXECUTIVE EXECUTIVE CONFERENCE 92.97
- --------------------------------------------------------------------------------
261 CHAIR, HIGH BACK EXECUTIVE OC OFF 7 92.97
- --------------------------------------------------------------------------------
262 CHAIR, HIGH BACK EXECUTIVE EXECUTIVE CONFERENCE 92.97
- --------------------------------------------------------------------------------
263 CHAIR, HIGH BACK EXECUTIVE EXECUTIVE CONFERENCE 92.97
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
319 CHAIR, KITCHEN (15) KITCHEN/LOUGNE 148.59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
109 CHAIR, ROLLING TALL OPERATOR CENTER 100.76
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
85 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
127 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
139 CHAIR, SECRETARIAL TECH ROOM 100.76
- --------------------------------------------------------------------------------
140 CHAIR, SECRETARIAL OC OFF 2 100.76
- --------------------------------------------------------------------------------
151 CHAIR, SECRETARIAL OC POS 6 100.76
- --------------------------------------------------------------------------------
191 CHAIR, SECRETARIAL OC SUPV 100.76
- --------------------------------------------------------------------------------
213 CHAIR, SECRETARIAL OC POS 26 100.76
- --------------------------------------------------------------------------------
294 CHAIR, SECRETARIAL TECH ROOM 100.76
- --------------------------------------------------------------------------------
370 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
371 CHAIR, SECRETARIAL OC SUPV 100.76
- --------------------------------------------------------------------------------
391 CHAIR, SECRETARIAL OC POS 5 100.76
- --------------------------------------------------------------------------------
406 CHAIR, SECRETARIAL OC POS 15 100.76
- --------------------------------------------------------------------------------
Page 3 of 9
A-1
<PAGE>
700 SOUTH WEST STREET - 2ND FLOOR
FIXED ASSET INVENTORY - ITEMS LOCATED FROM ORIGINAL DECEMBER 6, 1995 INVENTORY
April 24, 1996
ASSET # OR
# ASSIGNED DESCRIPTION LOCATION FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
412 CHAIR, SECRETARIAL OC POS 11 100.76
- --------------------------------------------------------------------------------
418 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
430 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
436 CHAIR, SECRETARIAL OC POS 32 100.76
- --------------------------------------------------------------------------------
448 CHAIR, SECRETARIAL OC POS 45 100.76
- --------------------------------------------------------------------------------
454 CHAIR, SECRETARIAL RECEPTION/EXECUTIVE 100.76
- --------------------------------------------------------------------------------
472 CHAIR, SECRETARIAL IC IFF 2 100.76
- --------------------------------------------------------------------------------
478 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
490 CHAIR, SECRETARIAL TECH ROOM 100.76
- --------------------------------------------------------------------------------
526 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
538 CHAIR, SECRETARIAL OC POS 4 100.76
- --------------------------------------------------------------------------------
564 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
622 CHAIR, SECRETARIAL OC POS 27 100.76
- --------------------------------------------------------------------------------
630 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
633 CHAIR, SECRETARIAL OC POS 31 100.76
- --------------------------------------------------------------------------------
649 CHAIR, SECRETARIAL OC POS 17 100.76
- --------------------------------------------------------------------------------
722 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
724 CHAIR, SECRETARIAL OC POS 40 100.76
- --------------------------------------------------------------------------------
735 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
757 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
934 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
935 CHAIR, SECRETARIAL OC 100.76
- --------------------------------------------------------------------------------
937 CHAIR, SECRETARIAL OC POS 12 100.76
- --------------------------------------------------------------------------------
969 CHAIR, SECRETARIAL OC POS 13 100.76
- --------------------------------------------------------------------------------
970 CHAIR, SECRETARIAL OC POS 30 100.76
- --------------------------------------------------------------------------------
975 CHAIR, SECRETARIAL OC POS 2 100.76
- --------------------------------------------------------------------------------
978 CHAIR, SECRETARIAL OC POS 14 100.76
- --------------------------------------------------------------------------------
979 CHAIR, SECRETARIAL OC POS 22 100.76
- --------------------------------------------------------------------------------
980 CHAIR, SECRETARIAL OC POS 33 100.76
- --------------------------------------------------------------------------------
981 CHAIR, SECRETARIAL OC POS 10 148.28
- --------------------------------------------------------------------------------
982 CHAIR, SECRETARIAL RECEPTION/EXECUTIVE 117.22
- --------------------------------------------------------------------------------
983 CHAIR, SECRETARIAL OC SUPV 146.28
- --------------------------------------------------------------------------------
984 CHAIR, SECRETARIAL OC POS 21 100.76
- --------------------------------------------------------------------------------
985 CHAIR, SECRETARIAL CUSTOMER SERV. TECH ROOM 100.76
- --------------------------------------------------------------------------------
987 CHAIR, SECRETARIAL OC POS 24 100.76
- --------------------------------------------------------------------------------
988 CHAIR, SECRETARIAL OC POS 20 148.28
- --------------------------------------------------------------------------------
100456 CHAIR, SECRETARIAL OC POS 43 148.28
- --------------------------------------------------------------------------------
100458 CHAIR, SECRETARIAL OC 148.28
- --------------------------------------------------------------------------------
100460 CHAIR, SECRETARIAL OC POS 37 148.28
- --------------------------------------------------------------------------------
100461 CHAIR, SECRETARIAL OC 148.28
- --------------------------------------------------------------------------------
19 CHAIR, SECRETARIAL OPERATOR CENTER 148.28
- --------------------------------------------------------------------------------
43 CHAIR, SECRETARIAL OPERATOR CENTER 148.28
- --------------------------------------------------------------------------------
110 CHAIR, SECRETARIAL OPERATOR CENTER 148.28
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
103 CHAIR, SIDE TAN CLOTH EXECUTIVE OFFICE 148.28
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
301 CHAIR STUFFED EXECUTIVE OFFICE 85.74
- --------------------------------------------------------------------------------
302 CHAIR STUFFED EXECUTIVE OFFICE 85.74
- --------------------------------------------------------------------------------
309 CHAIR STUFFED SWIVEL ELMER SMITHER, JR. 128.99
- --------------------------------------------------------------------------------
316 CHAIR, VINYL COVERED KITCHEN/LOUNGE 75.75
- --------------------------------------------------------------------------------
314 CHAIR, VINYL COVERED KITCHEN/LOUNGE 75.75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100098 CONCENTRATOR, LATTISNET TECH ROOM 1,515.30
- --------------------------------------------------------------------------------
100099 CONCENTRATOR, LATTISNET TECH ROOM 1,354.59
- --------------------------------------------------------------------------------
886 CONCENTRATOR, SYNOPTICS ELEVATOR CLOSET 2,804.80
- --------------------------------------------------------------------------------
Page 4 OF 9
A-1
<PAGE>
700 SOUTH WEST STREET - 2ND FLOOR
FIXED ASSET INVENTORY - ITEMS LOCATED FROM ORIGINAL DECEMBER 6, 1995 INVENTORY
April 24, 1996
ASSET # OR
# ASSIGNED DESCRIPTION LOCATION FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
772 COPIER, SAVIN RECEPTION/EXECUTIVE 997.33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
64 COMPUTER DELL P90 SET-UP * OPERATOR CENTER 2154.50
- --------------------------------------------------------------------------------
100 COMPUTER DELL P90 SET-UP * OPERATOR CENTER 2154.50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100117 CPU M SOUTH UNIT(REN)485 CUSTOMER SERVICE 250.00
- --------------------------------------------------------------------------------
100059 CPU M SOUTH UNIT \386 RECEPTION, EXECUTIVE 250.00
- --------------------------------------------------------------------------------
100118 CPU M SOUTH UNIT(STIMPY)486 OC OFF 8 250.00
- --------------------------------------------------------------------------------
100155 CPU, MITSUBA 286 CUSTOMER SERVICE 250.00
- --------------------------------------------------------------------------------
104 CPU, MITSUBA 286 OPERATOR CENTER 250.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
178 CREDENSA, WOOD OC OFF 5 142.84
- --------------------------------------------------------------------------------
238 CREDENSA, WOOD OC OFF 4 142.84
- --------------------------------------------------------------------------------
296 CREDENSA, WOOD EXECUTIVE OFFICE 142.84
- --------------------------------------------------------------------------------
840 CREDENSA, WOOD EXECUTIVE/SECRETARY 142.84
- --------------------------------------------------------------------------------
100003 CREDENSA, WOOD OC/LAURA DAVIS 150.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
344 CUTTER, PAPER GENERAL AREA 50.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100002 DESK, WOODEN 3 DRAWER OC/LAURA DAVIS 200.00
- --------------------------------------------------------------------------------
172 DESK, WOOD OC OFF 5 182.23
- --------------------------------------------------------------------------------
238 DESK, WOOD OC OFF 4 182.23
- --------------------------------------------------------------------------------
296 DESK, WOOD EXECUTIVE OFFICE 182.23
- --------------------------------------------------------------------------------
641 DESK, WOOD EXECUTIVE/SECRETARY 182.23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
52 DISHWASHER, GE KITCHEN/LOUNGE 115.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100216 FAX MACHINE, CANNON ACCOUNTING 350.00
- --------------------------------------------------------------------------------
292 FAX MACHINE, PANASONIC RECEPTION/EXECUTIVE 350.00
- --------------------------------------------------------------------------------
100064 FAX MACHINE, PANASONIC EXECUTIVE OFFICE 250.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
51 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
82 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
106 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
121 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
153 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
196 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
204 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
281 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
353 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
354 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
357 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
396 FILE, 2 DRAWER 131.91 131.91
- --------------------------------------------------------------------------------
726 FILE, 2 DRAWER OC 131.91
- --------------------------------------------------------------------------------
810 FILE, 2 DRAWER OC OFF 4 136.14
- --------------------------------------------------------------------------------
822 FILE, 2 DRAWER HOWARD GRAYLIN 136.14
- --------------------------------------------------------------------------------
849 FILE, 2 DRAWER CUSTOMER SERVICE/MKT 136.14
- --------------------------------------------------------------------------------
887 FILE, 2 DRAWER OC 136.14
- --------------------------------------------------------------------------------
Page 5 of 9
A-1
<PAGE>
700 SOUTH WEST STREET - 2ND FLOOR
FIXED ASSET INVENTORY - ITEMS LOCATED FROM ORIGINAL DECEMBER 6, 1995 INVENTORY
April 24, 1996
ASSET # OR
# ASSIGNED DESCRIPTION LOCATION FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
959 FILE, 2 DRAWER CUSTOMER SERVICE 127.20
- --------------------------------------------------------------------------------
960 FILE, 2 DRAWER CUSTOMER SERVICE/MKT 127.20
- --------------------------------------------------------------------------------
100032 FILE, 2 DRAWER OC OFF 5 127.20
- --------------------------------------------------------------------------------
100044 FILE, 2 DRAWER OC OFF 5 131.91
- --------------------------------------------------------------------------------
100048 FILE, 2 DRAWER OC OFF 6 127.20
- --------------------------------------------------------------------------------
100330 FILE, 2 DRAWER RECEPTION/DOWN 127.20
- --------------------------------------------------------------------------------
100336 FILE, 2 DRAWER CUSTOMER SERVICE 241.68
- --------------------------------------------------------------------------------
100340 FILE, 2 DRAWER CUSTOMER SERVICE/MKT 150.94
- --------------------------------------------------------------------------------
100341 FILE, 2 DRAWER JOHN MCGOWAN 127.20
- --------------------------------------------------------------------------------
100357 FILE, 2 DRAWER CUSTOMER SERVICE 127.20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
773 FILE, 4 DRAWER OC/LAURA DAVIS 74.51
- --------------------------------------------------------------------------------
774 FILE, 4 DRAWER OC OFF 6 74.51
- --------------------------------------------------------------------------------
100045 FILE, 4 DRAWER OC OFF 6 150.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
64 FILE, LATERAL 2 DRAWER OC OFF 8 156.89
- --------------------------------------------------------------------------------
109 FILE, LATERAL 2 DRAWER OC OFF 7 271.89
- --------------------------------------------------------------------------------
138 FILE, LATERAL 2 DRAWER OC OFF 2 156.69
- --------------------------------------------------------------------------------
392 FILE, LATERAL 2 DRAWER OC OFF 1 156.69
- --------------------------------------------------------------------------------
703 FILE, LATERAL 2 DRAWER RECEPTION/EXECUTIVE 156.69
- --------------------------------------------------------------------------------
704 FILE, LATERAL 2 DRAWER RECEPTION/EXECUTIVE 156.69
- --------------------------------------------------------------------------------
705 FILE, LATERAL 2 DRAWER OC 156.69
- --------------------------------------------------------------------------------
963 FILE, LATERAL 2 DRAWER RECEPTION/DOWN 264.50
- --------------------------------------------------------------------------------
100005 FILE, LATERAL 2 DRAWER OC/LAURA DAVIS 363.13
- --------------------------------------------------------------------------------
100342 FILE, LATERAL 2 DRAWER JOHN MCGOWAN 271.89
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
381 FILE, LATERAL 4 DRAWER OC OFF 1 363.13
- --------------------------------------------------------------------------------
830 FILE, LATERAL 4 DRAWER OC 396.96
- --------------------------------------------------------------------------------
949 FILE, LATERAL 4 DRAWER OC OFF 5 505.82
- --------------------------------------------------------------------------------
100024 FILE, LATERAL 4 DRAWER OC OFF 1 534.24
- --------------------------------------------------------------------------------
100082 FILE, LATERAL 4 DRAWER EXECUTIVE, SECRETARY 505.82
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
742 HEATER, SMALL OC 11.84
- --------------------------------------------------------------------------------
743 HEATER, SMALL CUSTOMER SERVICE 11.84
- --------------------------------------------------------------------------------
1 944 HEATER, SMALL CUSTOMER SERVICE 12.19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100258 KEYBOARD, COMPUADD MTV CYBERLOG ROOM 35.00
- --------------------------------------------------------------------------------
100228 KEYBOARD, EDM TECH ROOM 35.00
- --------------------------------------------------------------------------------
100181 KEYBOARD, FPC CUSTOMER SERVICE 35.00
- --------------------------------------------------------------------------------
48 KEYBOARD, FPC OPERATOR CENTER 35.00
- --------------------------------------------------------------------------------
49 KEYBOARD, FPC OPERATOR CENTER 35.00
- --------------------------------------------------------------------------------
89 KEYBOARD, FPC OPERATOR CENTER 35.00
- --------------------------------------------------------------------------------
100057 KEYBOARD, KEYTRONIC RECEPTIOIN, EXECUTIVE 35.00
- --------------------------------------------------------------------------------
100154 KEYBOARD, KEYTRONIC OP SUPV 35.00
- --------------------------------------------------------------------------------
100176 KEYBOARD, KEYTRONIC PERSONNEL/DONNETTE MAY 35.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100361 LADDER, WOODEN CYBERLOG ROOM 75.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100066 LAMP, BLACK EXECUTIVE, OFFICE 50.00
- --------------------------------------------------------------------------------
Page 6 of 9
A-1
<PAGE>
700 SOUTH WEST STREET - 2ND FLOOR
FIXED ASSET INVENTORY - ITEMS LOCATED FROM ORIGINAL DECEMBER 6, 1995 INVENTORY
April 24, 1996
ASSET # OR
# ASSIGNED DESCRIPTION LOCATION FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
681 LOCK KEYMASTER EXECUTIVE/RECEPTION 200.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
688 LOCKKERS, (25 STACKS OF 8) OC 2,749.75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100179 MAIL BOX RECEPTION/DOWN 15.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
51 MICROWAVE, SHARP KITCHEN/LOUNGE 181.89
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100058 MODEM, PRACTICAL RECEPTION, EXECUTIVE 100.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
685 MONITOR, COMPAQ,VGA RECEPTION/EXECUTIVE 200.00
- --------------------------------------------------------------------------------
879 MONITOR, HENNESSY VGA OC OFF 5 200.00
- --------------------------------------------------------------------------------
100119 MONITOR, HENNESSY VGA OC POS 43 200.00
- --------------------------------------------------------------------------------
100195 MONITOR, HENNESSY VGA RECEPTION/DOWN 200.00
- --------------------------------------------------------------------------------
100250 MONITOR, HENNESSY VGA EXECUTIVE/SECRETARY 200.00
- --------------------------------------------------------------------------------
510 MONITOR, NEC MULTISYNC OC SUPV 200.00
- --------------------------------------------------------------------------------
572 MONITOR, NEC MULTISYNC OC SUPV 200.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
312 OPENER, CAN KITCHEN/LOUNGE 10.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100427 PICTURE EXECUTIVE/CONFERENCE 100.00
- --------------------------------------------------------------------------------
100377 PICTURE, 30"X40" BACKWALL OPERATOR CENTER 50.00
- --------------------------------------------------------------------------------
100378 PICTURE, 30"X40" BACKWALL OPERATOR CENTER 50.00
- --------------------------------------------------------------------------------
100379 PICTURE, 30"X40" EXECUTIVE/RECEPTION 50.00
- --------------------------------------------------------------------------------
100388 PICTURE, 30"X40" OUTSIDE MAIN OFFICE 50.00
- --------------------------------------------------------------------------------
100482 PICTURE, LARGE EXECUTIVE/RECEPTION 100.00
- --------------------------------------------------------------------------------
100373 PICTURES OC 50.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100035 PRINTER, EPSON OC OFF 3 125.00
- --------------------------------------------------------------------------------
100040 PRINTER, EPSON OC OFF 2 125.00
- --------------------------------------------------------------------------------
283 PRINTER, HEWLETT PACKARD PERSONNEL/DONNETTE MAY 200.00
- --------------------------------------------------------------------------------
100075 PRINTER, HEWLETT PACKARD OC SUPV 600.00
- --------------------------------------------------------------------------------
LASERJET II
- --------------------------------------------------------------------------------
221 PRINTER, NEC MARKETING 125.00
- --------------------------------------------------------------------------------
100217 PRINTER, OTC W/PEDESTAL ACCOUNTING 1,328.17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
681 PROJECTOR, OVERHEAD EXECUTIVE CONFERENCE 148.73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
916 RACK, TAPE STORAGE TECH ROOM 252.26
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
306 REFRIGERATOR KETCHEN/LOUNGE 300.00
- --------------------------------------------------------------------------------
787 REFRIGERATOR, MINI EXECUTIVE/SECRETARY 75.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
683 SCREEN, OVERHEAD PROJECTOR TRAINING ROOM 50.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100023 STAND, PRINTER WOOD OC OFF 7 35.00
- --------------------------------------------------------------------------------
Page 7 of 9
A-1
<PAGE>
700 SOUTH WEST STREET - 2ND FLOOR
FIXED ASSET INVENTORY - ITEMS LOCATED FROM ORIGINAL DECEMBER 6, 1995 INVENTORY
April 24, 1996
ASSET # OR
# ASSIGNED DESCRIPTION LOCATION FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
345 STAPLER, HEAVY-DUTY GENERAL AREA 25.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
310 STOVE, GENERAL ELECTRIC KITCHEN/LOUNGE 250.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
255 TABLE, CONFERENCE 10' EXECUTIVE CONFERENCE 300.00
- --------------------------------------------------------------------------------
322 TABLE, CONFERENCE 12' TRAINING ROOM 375.00
- --------------------------------------------------------------------------------
323 TABLE, CONFERENCE 12' TRAINING ROOM 325.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
53 TABLE, CARD BROWN ELEVATOR CLOSET 25.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
343 TABLE, FOLDING 6' WHITE ACCT/SALLY INMAN 20.00
- --------------------------------------------------------------------------------
264 TABLE, FOLDING 6' BROWN TECH ROOM 20.00
- --------------------------------------------------------------------------------
702 TABLE, FOLDING 6' BROWN CYBERLOG ROOM 20.00
- --------------------------------------------------------------------------------
68 TABLE, FOLDING 6' BROWN STAIRWELL 20.00
- --------------------------------------------------------------------------------
65 TABLE, FOLDING 6' BROWN STAIRWELL 20.00
- --------------------------------------------------------------------------------
100294 TABLE, FOLDING 9' BROWN ELEVATOR CLOSET 20.00
- --------------------------------------------------------------------------------
100295 TABLE, FOLDING 9' BROWN STAIRWELL 20.00
- --------------------------------------------------------------------------------
268 TABLE, ROUND EXECUTIVE CONFERENCE 20.00
- --------------------------------------------------------------------------------
101 TABLE, SMALL OC 75.00
- --------------------------------------------------------------------------------
102 TABLE, SMALL RECEPTION/EXECUTIVE 75.00
- --------------------------------------------------------------------------------
150 TABLE, SMALL PERSONNEL/GLORIA SMITH 75.00
- --------------------------------------------------------------------------------
212 TABLE, SMALL OC OFF 2 75.00
- --------------------------------------------------------------------------------
222 TABLE, SMALL OC OFF 1 75.00
- --------------------------------------------------------------------------------
285 TABLE, SMALL RECEPTION/EXECUTIVE 75.00
- --------------------------------------------------------------------------------
286 TABLE, SMALL RECEPTION/EXECUTIVE 75.00
- --------------------------------------------------------------------------------
100065 TABLE, SMALL EXECUTIVE, OFFICE 75.00
- --------------------------------------------------------------------------------
100492 TABLE, SMALL OC 75.00
- --------------------------------------------------------------------------------
137 TABLE/DESK OC OFF 7 75.00
- --------------------------------------------------------------------------------
280 TABLE/DESK RECEPTION/EXECUTIVE 125.00
- --------------------------------------------------------------------------------
291 TABLE/DESK OC OFF 8 125.00
- --------------------------------------------------------------------------------
397 TABLE/DESK OC POS 62 125.00
- --------------------------------------------------------------------------------
752 TABLE/DESK OC 125.00
- --------------------------------------------------------------------------------
833 TABLE/DESK DOROTHY WRIGHT 125.00
- --------------------------------------------------------------------------------
852 TABLE/DESK CUSTOMER SERVICE/MKT 125.00
- --------------------------------------------------------------------------------
876 TABLE/DESK RECEPTION/DOWN 125.00
- --------------------------------------------------------------------------------
967 TABLE/DESK OC POS 62 125.00
- --------------------------------------------------------------------------------
100017 TABLE/DESK OC POS 36 125.00
- --------------------------------------------------------------------------------
100420 TABLE/DESK OC 125.00
- --------------------------------------------------------------------------------
804 TABLE/DESK, 6' HOWARD GRAYLIN 125.00
- --------------------------------------------------------------------------------
317 TABLES ROUND SIX KITCHEN/LOUNGE 150.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NONE TELEPHONE SYSTEM - INTERCALL PHONE ROOM 16,000.00
KEYSET/50 STATI
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
888 TIME CLOCK OPERATOR CENTER 1,431.95
- --------------------------------------------------------------------------------
100180 TIME CLOCK, LATHEM RECEPTION/DOWN 150.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
311 TOASTER KITCHEN/LOUNGE -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
287 TYPEWRITER, BROTHER PERSONNEL 100.00
- --------------------------------------------------------------------------------
100056 TYPEWRITER, SMITH CORONA RECEPTION, EXECUTIVE 100.00
- --------------------------------------------------------------------------------
Page 8 of 9
A-1
<PAGE>
700 SOUTH WEST STREET - 2ND FLOOR
FIXED ASSET INVENTORY - ITEMS LOCATED FROM ORIGINAL DECEMBER 6, 1995 INVENTORY
April 24, 1996
ASSET # OR
# ASSIGNED DESCRIPTION LOCATION FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
149 WORKSTATION, ADJUSTABLE TRAINING 175.00
- --------------------------------------------------------------------------------
168 WORKSTATION, ADJUSTABLE OC POS 84 175.00
- --------------------------------------------------------------------------------
587 WORKSTATION, ADJUSTABLE OC 175.00
- --------------------------------------------------------------------------------
405 WORKSTATION, ADJUSTABLE OC POS 1 175.00
- --------------------------------------------------------------------------------
411 WORKSTATION, ADJUSTABLE PC POS 2 175.00
- --------------------------------------------------------------------------------
417 WORKSTATION, ADJUSTABLE PC POS 3 175.00
- --------------------------------------------------------------------------------
429 WORKSTATION, ADJUSTABLE PC POS 5 175.00
- --------------------------------------------------------------------------------
435 WORKSTATION, ADJUSTABLE PC POS 6 175.00
- --------------------------------------------------------------------------------
441 WORKSTATION, ADJUSTABLE PC POS 7 175.00
- --------------------------------------------------------------------------------
447 WORKSTATION, ADJUSTABLE PC POS 8 175.00
- --------------------------------------------------------------------------------
453 WORKSTATION, ADJUSTABLE PC POS 9 175.00
- --------------------------------------------------------------------------------
459 WORKSTATION, ADJUSTABLE PC POS 10 175.00
- --------------------------------------------------------------------------------
465 WORKSTATION, ADJUSTABLE PC POS 11 175.00
- --------------------------------------------------------------------------------
471 WORKSTATION, ADJUSTABLE PC POS 12 175.00
- --------------------------------------------------------------------------------
477 WORKSTATION, ADJUSTABLE PC POS 13 175.00
- --------------------------------------------------------------------------------
483 WORKSTATION, ADJUSTABLE PC POS 14 175.00
- --------------------------------------------------------------------------------
489 WORKSTATION, ADJUSTABLE PC POS 15 175.00
- --------------------------------------------------------------------------------
495 WORKSTATION, ADJUSTABLE PC POS 16 175.00
- --------------------------------------------------------------------------------
501 WORKSTATION, ADJUSTABLE PC POS 17 175.00
- --------------------------------------------------------------------------------
507 WORKSTATION, ADJUSTABLE PC POS 28 175.00
- --------------------------------------------------------------------------------
513 WORKSTATION, ADJUSTABLE PC POS 19 175.00
- --------------------------------------------------------------------------------
619 WORKSTATION, ADJUSTABLE PC POS 20 175.00
- --------------------------------------------------------------------------------
531 WORKSTATION, ADJUSTABLE PC POS 22 175.00
- --------------------------------------------------------------------------------
537 WORKSTATION, ADJUSTABLE PC POS 23 175.00
- --------------------------------------------------------------------------------
543 WORKSTATION, ADJUSTABLE PC POS 24 175.00
- --------------------------------------------------------------------------------
548 WORKSTATION, ADJUSTABLE PC POS 25 175.00
- --------------------------------------------------------------------------------
553 WORKSTATION, ADJUSTABLE PC POS 26 175.00
- --------------------------------------------------------------------------------
558 WORKSTATION, ADJUSTABLE PC POS 27 175.00
- --------------------------------------------------------------------------------
663 WORKSTATION, ADJUSTABLE PC POS 28 175.00
- --------------------------------------------------------------------------------
569 WORKSTATION, ADJUSTABLE PC POS 29 175.00
- --------------------------------------------------------------------------------
575 WORKSTATION, ADJUSTABLE PC POS 30 175.00
- --------------------------------------------------------------------------------
580 WORKSTATION, ADJUSTABLE PC POS 59 175.00
- --------------------------------------------------------------------------------
585 WORKSTATION, ADJUSTABLE WORKSTATION 32 175.00
- --------------------------------------------------------------------------------
590 WORKSTATION, ADJUSTABLE WORKSTATION 58 175.00
- --------------------------------------------------------------------------------
595 WORKSTATION, ADJUSTABLE WORKSTATION 34 175.00
- --------------------------------------------------------------------------------
600 WORKSTATION, ADJUSTABLE OC POS 35 175.00
- --------------------------------------------------------------------------------
605 WORKSTATION, ADJUSTABLE OC OFF 3 175.00
- --------------------------------------------------------------------------------
610 WORKSTATION, ADJUSTABLE WORKSTATION 37 175.00
- --------------------------------------------------------------------------------
615 WORKSTATION, ADJUSTABLE WORKSTATION 38 175.00
- --------------------------------------------------------------------------------
620 WORKSTATION, ADJUSTABLE WORKSTATION 39 175.00
- --------------------------------------------------------------------------------
625 WORKSTATION, ADJUSTABLE WORKSTATION 40 175.00
- --------------------------------------------------------------------------------
629 WORKSTATION, ADJUSTABLE WORKSTATION 41 175.00
- --------------------------------------------------------------------------------
631 WORKSTATION, ADJUSTABLE WORKSTATION 43 175.00
- --------------------------------------------------------------------------------
100432 WORKSTATION, ADJUSTABLE WORKSTATION 61 175.00
- --------------------------------------------------------------------------------
100434 WORKSTATION, ADJUSTABLE WORKSTATION 44 175.00
- --------------------------------------------------------------------------------
100436 WORKSTATION, ADJUSTABLE WORKSTATION 48 175.00
- --------------------------------------------------------------------------------
100437 WORKSTATION, ADJUSTABLE WORKSTATION 47 175.00
- --------------------------------------------------------------------------------
100439 WORKSTATION, ADJUSTABLE WORKSTATION 33 175.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL 78,838.58
- ----------------------------------------------------------------------==========
- --------------------------------------------------------------------------------
* LSI ASSET - ALL OTHER ASSETS ARE THE PROPERTY OF TFC
- --------------------------------------------------------------------------------
Page 9 of 9
A-1
<PAGE>
TECLink, Inc.
Schedule of Assets
April 30, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Invoice
DATE Number Check Vendor Description
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
05/20/95 None 17056 Sam's Wholesale 7 Pentium 90 computers & 6 modems
- ------------------------------------------------------------------------------------------------------------------------------------
07/01/95 1970 17647 Kelly's Office Furniture Various Furniture - Office Furniture
- ------------------------------------------------------------------------------------------------------------------------------------
07/13/95 11915 1 Frank Ventun Carpets Various Furniture - @ Highway 80
- ------------------------------------------------------------------------------------------------------------------------------------
07/31/95 Various Graybar Expenses Plus Capital
- ------------------------------------------------------------------------------------------------------------------------------------
08/16/95 315867 17507 US Robotics 40 Port Total Control
- ------------------------------------------------------------------------------------------------------------------------------------
08/17/95 1402 17647 Kelly's Office Furniture Various Furniture - Highway 80
- ------------------------------------------------------------------------------------------------------------------------------------
08/18/95 [Illegible] 7 UUNET Software - System Network Services
- ------------------------------------------------------------------------------------------------------------------------------------
09/08/95 [Illegible] 14 Microage SparcServer 1000E - Printer Server
- ------------------------------------------------------------------------------------------------------------------------------------
09/15/95 [Illegible] 25 Robert Anderson DS-1 Channel Bank - 700 SW Street
- ------------------------------------------------------------------------------------------------------------------------------------
09/28/95 [Illegible] 1008 Access Graphics Netscape Diskettes (58 Units)
- ------------------------------------------------------------------------------------------------------------------------------------
10/08/95 [Illegible] 1015 Microage 700 SW Street
- ------------------------------------------------------------------------------------------------------------------------------------
10/09/95 1630-0010-0 1016 B. Vanderford Electric Hwy 80
- ------------------------------------------------------------------------------------------------------------------------------------
10/09/95 107734 1019 C & L Communications [Illegible] Package
- ------------------------------------------------------------------------------------------------------------------------------------
10/10/95 [Illegible] Access Graphics 12 Mac Netscape Lic
- ------------------------------------------------------------------------------------------------------------------------------------
10/13/95 [Illegible] Heritage Graphics Creative Design - Logo
- ------------------------------------------------------------------------------------------------------------------------------------
10/15/95 [Illegible] Heritage Graphics Development/Software & Sales/Marketing
- ------------------------------------------------------------------------------------------------------------------------------------
10/20/95 [Illegible] 17982 Heritage Graphics 1 PowerMac 0600 & 2 PowerBook 6300a
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/95 [Illegible] Heritage Graphics Development/Software & Sales/Marketing
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/95 [Illegible] Heritage Graphics Creative Design - Sign
- ------------------------------------------------------------------------------------------------------------------------------------
11/02/95 [Illegible] Heritage Graphics Creative Design - Brochure
- ------------------------------------------------------------------------------------------------------------------------------------
11/02/95 [Illegible] Heritage Graphics Creative Design - Brochure
- ------------------------------------------------------------------------------------------------------------------------------------
11/03/95 [Illegible] Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
11/03/95 [Illegible] Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
11/08/95 [Illegible] 1038 Heritage Graphics
- ------------------------------------------------------------------------------------------------------------------------------------
11/08/95 [Illegible] 1043 Progressive Technologies Interconnect Cables
- ------------------------------------------------------------------------------------------------------------------------------------
11/08/95 [Illegible] 1046 Tech Data Corporation Interconnect Cables - 700 SW Street
- ------------------------------------------------------------------------------------------------------------------------------------
11/08/95 [Illegible] 1052 Tech Data Corporation Interconnect Cables - 700 SW Street
- ------------------------------------------------------------------------------------------------------------------------------------
11/10/95 [Illegible] 1095 Insight Computers DAT Tapes - 4300 MB MICROPOLIS
- ------------------------------------------------------------------------------------------------------------------------------------
11/17/95 [Illegible] 1058 Progressive Technologies Interconnect Cables - 700 SW Street
- ------------------------------------------------------------------------------------------------------------------------------------
11/18/95 None 1081 Signature Financial Fax Machine - Dallas
- ------------------------------------------------------------------------------------------------------------------------------------
11/21/95 [Illegible] US Robotics Total Control 96 Port - TecLink
- ------------------------------------------------------------------------------------------------------------------------------------
11/22/95 [Illegible] 1161 Access Graphics Tech Software For Switch
- ------------------------------------------------------------------------------------------------------------------------------------
11/24/95 [Illegible] 1148 Insight 4300 Micropolis [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
11/24/95 [Illegible] US Robotics Total Control 192 Port - TecLink
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/95 [Illegible] 1161 Access Graphics Tech Software For Switch
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/95 [Illegible] Heritage Graphics Development/Software & Sales/Marketing
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/95 356399 1097 US Robotics Total Control - Fans - TecLink
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] Heritage Graphics Software Development Installer Package
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 9007150 Heritage Graphics Furniture Rental
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 9007096 Heritage Graphics Creating Virtual Web Page Software
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 99005633 Heritage Graphics Creating Virtual Web Page Software
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Unpaid Unpaid Capitalized Expensed
DATE Location Paid TEC TECLink
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
05/20/95 700 SouthWest St. 17,144.81 17,144.81
- ---------------------------------------------------------------------------------------------------------------
07/01/95 Storage [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
07/13/95 Storage 1,410.80 1,410.80
- ---------------------------------------------------------------------------------------------------------------
07/31/95 700 SouthWest St. [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
08/16/95 700 SouthWest St. 52,999.74 52,999.74
- ---------------------------------------------------------------------------------------------------------------
08/17/95 Storage 1,107.46 1,107.46
- ---------------------------------------------------------------------------------------------------------------
08/18/95 700 SouthWest St. 2,920.00 2,920.00
- ---------------------------------------------------------------------------------------------------------------
09/08/95 700 SouthWest St. 64,158.57 64,158.57
- ---------------------------------------------------------------------------------------------------------------
09/15/95 700 SouthWest St. 2,500.00 2,500.00
- ---------------------------------------------------------------------------------------------------------------
09/28/95 700 SouthWest St. 1,403.94 1,403.94
- ---------------------------------------------------------------------------------------------------------------
10/08/95 700 SouthWest St. 664.80 664.80
- ---------------------------------------------------------------------------------------------------------------
10/09/95 700 SouthWest St. 1,338.30 1,338.30
- ---------------------------------------------------------------------------------------------------------------
10/09/95 700 SouthWest St. 4,069.71 4,069.71
- ---------------------------------------------------------------------------------------------------------------
10/10/95 317.05 317.05
- ---------------------------------------------------------------------------------------------------------------
10/13/95 1,476.07 1,476.07
- ---------------------------------------------------------------------------------------------------------------
10/15/95 23,540.00 12,840.00 10,700.00
- ---------------------------------------------------------------------------------------------------------------
10/20/95 700 SouthWest St. [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
10/31/95 23,540.00 12,840.00 10,700.00
- ---------------------------------------------------------------------------------------------------------------
10/31/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
11/02/95 1,161.32 1,161.32
- ---------------------------------------------------------------------------------------------------------------
11/02/95 1,104.03 1,104.03
- ---------------------------------------------------------------------------------------------------------------
11/03/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
11/03/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
11/08/95 700 SouthWest St. [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
11/08/95 700 SouthWest St. 2,166.00 2,166.00
- ---------------------------------------------------------------------------------------------------------------
11/08/95 700 SouthWest St. 435.50 435.50
- ---------------------------------------------------------------------------------------------------------------
11/08/95 700 SouthWest St. [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
11/10/95 700 SouthWest St. [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
11/17/95 700 SouthWest St. 2,112.00 2,112.00
- ---------------------------------------------------------------------------------------------------------------
11/18/95 757.74 757.74
- ---------------------------------------------------------------------------------------------------------------
11/21/95 Oxford [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
11/22/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
11/24/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
11/24/95 Oxford 181,272.93 181,272.93
- ---------------------------------------------------------------------------------------------------------------
11/30/95 124.75 124.75
- ---------------------------------------------------------------------------------------------------------------
11/30/95 23,540.00 12,840.00 10,700.00
- ---------------------------------------------------------------------------------------------------------------
11/30/95 Oxford [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/01/95 454.75 454.75
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
1
A-2
<PAGE>
TECLink, Inc.
Schedule of Assets
April 30, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Invoice
DATE Number Check Vendor Description
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/01/95 99007100 Heritage Graphics Creating Virtual Web Page Software
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] Heritage Graphics Creating Virtual Web Page Software
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] Heritage Graphics Creating Virtual Web Page Software
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 99007052 Heritage Graphics Shipping
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 9007157 Heritage Graphics Travel Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] Heritage Graphics PowerBook 5300 & accessories
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] Heritage Graphics [Illegible] PC Card
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 74739,75012 1070 [Illegible] Office Supply, Inc. Furniture
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] 1071 Tech Data Corporation Interconnect Cables
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 u02774 [Illegible] UUNET 1 Cisco 2501 Routers & 7 DSERV
- ------------------------------------------------------------------------------------------------------------------------------------
12/01/95 u02774 [Illegible] UUNET 1 Cisco 2501 Routers
- ------------------------------------------------------------------------------------------------------------------------------------
12/02/95 142262 [Illegible] Plumb Line Work at Oxford site
- ------------------------------------------------------------------------------------------------------------------------------------
12/04/95 702956 Access Graphics 76 PC Netscape Lan
- ------------------------------------------------------------------------------------------------------------------------------------
12/07/95 [Illegible] [Illegible] Rowland Heating & Air Condition Work at Oxford site
- ------------------------------------------------------------------------------------------------------------------------------------
12/08/95 147-220620 1147 Anixler Brothers Routers
- ------------------------------------------------------------------------------------------------------------------------------------
12/08/95 147-220619 1147 Anixler Brothers Routers
- ------------------------------------------------------------------------------------------------------------------------------------
12/08/95 None 1107 Jim Hill Exp Rept. - Sams Club CD-ROM Drive
- ------------------------------------------------------------------------------------------------------------------------------------
12/12/95 7001 Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
12/12/95 None 1077 Office Depot & Various Inventory Disks for Software
- ------------------------------------------------------------------------------------------------------------------------------------
12/15/95 [Illegible] Heritage Graphics Development/Software & Sales/Marketing
- ------------------------------------------------------------------------------------------------------------------------------------
12/18/95 [Illegible] 1151 Access Graphics Software - Navigator
- ------------------------------------------------------------------------------------------------------------------------------------
12/18/95 [Illegible] Heritage Graphics Software
- ------------------------------------------------------------------------------------------------------------------------------------
12/18/95 [Illegible] Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
12/20/95 147-220945 1147 Anixler Brothers [Illegible] CSU & [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
12/21/95 [Illegible] 1151 Access Graphics Navigator 1.2 Win, Media Only
- ------------------------------------------------------------------------------------------------------------------------------------
12/21/95 None [Illegible] University Business Center [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
12/27/95 [Illegible] US Robotics Total Control [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] Heritage Graphics Rent & Telephone Expense
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 6377 Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 6942 Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 6943 Heritage Graphics Creative Design
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] Heritage Graphics Heritage Development Software
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] Heritage Graphics Creating Virtual Web Page Software
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] Heritage Graphics Heritage Development Software
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] Heritage Graphics Travel Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
01/01/96 [Illegible] [Illegible] Progressive Technologies [Illegible] Cables
- ------------------------------------------------------------------------------------------------------------------------------------
01/01/96 None 1121 University Business Center Install Phone System
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Unpaid Unpaid Capitalized Expensed
DATE Location Paid TEC TECLink
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12/01/95 181.90 181.90
- ---------------------------------------------------------------------------------------------------------------
12/01/95 2,295.15 2,295.15
- ---------------------------------------------------------------------------------------------------------------
12/01/95 272.05 272.05
- ---------------------------------------------------------------------------------------------------------------
12/01/95 12.64 12.64
- ---------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/01/95 3,185.00 3,185.00
- ---------------------------------------------------------------------------------------------------------------
12/01/95 433.09 433.09
- ---------------------------------------------------------------------------------------------------------------
12/01/95 Oxford 1,697.96 1,697.96
- ---------------------------------------------------------------------------------------------------------------
12/01/95 700 SouthWest St. 4,093.05 4,093.05
- ---------------------------------------------------------------------------------------------------------------
12/01/95 [Illegible] [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/01/95 Monroe 1,621.20 1,621.20
- ---------------------------------------------------------------------------------------------------------------
12/02/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/04/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/07/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/08/95 Oxford 672.50 672.50
- ---------------------------------------------------------------------------------------------------------------
12/08/95 Oxford 509.48 509.48
- ---------------------------------------------------------------------------------------------------------------
12/08/95 Oxford 533.93 533.93
- ---------------------------------------------------------------------------------------------------------------
12/12/95 112.05 112.05
- ---------------------------------------------------------------------------------------------------------------
12/12/95 700 SouthWest St. 706.18 706.18
- ---------------------------------------------------------------------------------------------------------------
12/15/95 23,540.00 12,640.00 10,700.00
- ---------------------------------------------------------------------------------------------------------------
12/18/95 700 SouthWest St. 1,351.27 1,851.27
- ---------------------------------------------------------------------------------------------------------------
12/18/95 700 SouthWest St. 1,853.47 1,853.47
- ---------------------------------------------------------------------------------------------------------------
12/18/95 97.91 97.91
- ---------------------------------------------------------------------------------------------------------------
12/20/95 Oxford 20,952.78 20,952.78
- ---------------------------------------------------------------------------------------------------------------
12/21/95 1,359.85 1,359.85
- ---------------------------------------------------------------------------------------------------------------
12/21/95 650.00 650.00
- ---------------------------------------------------------------------------------------------------------------
12/27/95 700 SouthWest St. 81,090.77 162,181.55 243,272.32
- ---------------------------------------------------------------------------------------------------------------
12/31/95 84.53 84.53
- ---------------------------------------------------------------------------------------------------------------
12/31/95 1,275.00 1,275.00
- ---------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/31/95 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
12/31/95 211.88 211.88
- ---------------------------------------------------------------------------------------------------------------
12/31/95 171.74 171.74
- ---------------------------------------------------------------------------------------------------------------
12/31/95 84.59 84.59
- ---------------------------------------------------------------------------------------------------------------
12/31/95 84.53 84.53
- ---------------------------------------------------------------------------------------------------------------
12/31/95 749.00 749
- ---------------------------------------------------------------------------------------------------------------
12/31/95 454.75 454.75
- ---------------------------------------------------------------------------------------------------------------
12/31/95 240.75 240.75
- ---------------------------------------------------------------------------------------------------------------
12/31/95 989.90 989.90
- ---------------------------------------------------------------------------------------------------------------
01/01/96 2,232.00 2,232.00
- ---------------------------------------------------------------------------------------------------------------
01/01/96 832.53 832.53
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
2
A-2
<PAGE>
TECLink, Inc.
Schedule of Assets
April 30, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Invoice
DATE Number Check Vendor Description
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
01/02/96 [Illegible] Heritage Graphics Color Prints
- ------------------------------------------------------------------------------------------------------------------------------------
01/03/96 Contra Netscape Contract 10,000 copies of Netscape Software
- ------------------------------------------------------------------------------------------------------------------------------------
01/03/96 [Illegible] 1159 Netscape Servers
- ------------------------------------------------------------------------------------------------------------------------------------
01/08/96 [Illegible] 1158 Graybar [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
01/11/96 [Illegible] 1164 Tech Data [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
01/11/96 [Illegible] 1164 Tech Data [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
01/13/96 [Illegible] 1156 The Cabling Company [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
01/18/96 [Illegible] 1167 Insight [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
01/23/96 None 1117 Jim Hill Router Cables For Jackson
- ------------------------------------------------------------------------------------------------------------------------------------
01/23/96 None 1117 Jim Hill Router Cables For Oxford
- ------------------------------------------------------------------------------------------------------------------------------------
01/25/96 [Illegible] 1110 Kelly's Office Furniture Office Furniture
- ------------------------------------------------------------------------------------------------------------------------------------
Intersys Technologies Original [Illegible] purchase
- ------------------------------------------------------------------------------------------------------------------------------------
Intersys Technologies Less: Original customer base
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Customer Base [Illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Unadjusted Total
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Adjustment - TECLink Liability
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Total
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Unpaid Unpaid Capitalized Expensed
DATE Location Paid TEC TECLink
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
01/02/96 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
01/03/96 700 SouthWest St. 92,000.00 92,000.00
- ---------------------------------------------------------------------------------------------------------------
01/03/96 700 SouthWest St. 5,003.00 5,003.00
- ---------------------------------------------------------------------------------------------------------------
01/08/96 213.35 213.35
- ---------------------------------------------------------------------------------------------------------------
01/11/96 4,470.00 4,470.00
- ---------------------------------------------------------------------------------------------------------------
01/11/96 670.00 670.00
- ---------------------------------------------------------------------------------------------------------------
01/13/96 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
01/18/96 4,193.00 4,193.00
- ---------------------------------------------------------------------------------------------------------------
01/23/96 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
01/23/96 [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
01/25/96 1,581.48 1,581.48
- ---------------------------------------------------------------------------------------------------------------
116,500.00 116,500.00
- ---------------------------------------------------------------------------------------------------------------
(28,400.00) (28,400.00)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
548,400.00 548,400.00
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
[Illegible] 477,651.11 [Illegible] [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
(28,400.00)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
[Illegible] 477,651.11 [Illegible] [Illegible] [Illegible]
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
A-2
<PAGE>
HUGHES PROJECT
ANALYSIS OF ITEMS PAID BY TEC PARENT FOR HUGHES PROJECT
FOR THE PERIOD ENDED APRIL 10, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE &
DEVELPMENT
DATE DESCRIPTION LOCATION EQUIPMENT COSTS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ITEMS PAID
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4/25/95 RA - KINKO'S COPY CENTER JACKSON, MS 49.43 49.43
- ------------------------------------------------------------------------------------------------------------------------------------
4/27/95 RA - LITTLE TOKYO (ANDERSON/DILLION/LEONA/TATUM) JACKSON, MS 106.23 106.23
- ------------------------------------------------------------------------------------------------------------------------------------
5/1/95 RA - RADIO SHACK - 5 OUTLET TELEPHONE STRIP JACKSON, MS 32.07 32.07
- ------------------------------------------------------------------------------------------------------------------------------------
5/3/95 RA - TRAVEL 2000 - BLACK 48 EXP COVER GAITHERSBURG, MD 42.00 42.00
- ------------------------------------------------------------------------------------------------------------------------------------
5/3/95 RA - FLAMING PIT (MR B SCOTT) GAITHERSBURG, MD 48.75 48.75
- ------------------------------------------------------------------------------------------------------------------------------------
5/5/95 RA - SOFTWARE CITY - ACTIONI 3.0 (WIN 3.5) PHOENIX, AZ 148.80 148.80
- ------------------------------------------------------------------------------------------------------------------------------------
5/12/95 RA - SAM'S CLUB - PENTIUM 90 JACKSON, MS 2,726.36 2,726.36
- ------------------------------------------------------------------------------------------------------------------------------------
5/12/95 RA - SAM'S CLUB - POWER SUPPLY JACKSON, MS 245.03 245.03
- ------------------------------------------------------------------------------------------------------------------------------------
5/12/95 RA - SAM'S CLUB - 100 DISKS JACKSON, MS 64.19 64.19
- ------------------------------------------------------------------------------------------------------------------------------------
5/12/95 BARBARA SCOTT - CONSULTING (MAY 1 - 12) JACKSON, MS 1,538.46 1,538.46
- ------------------------------------------------------------------------------------------------------------------------------------
5/16/95 RA - CROWN STERLING SUITES PHOENIX, AZ 1,055.79 1,055.79
- ------------------------------------------------------------------------------------------------------------------------------------
5/16/95 RA - CYBERMAX - EXECUTIVE MAX P-120 COMPUTER PACKAGE ALLENTOWN, PA 3,333.00 3,333.00
- ------------------------------------------------------------------------------------------------------------------------------------
5/18/95 RA - STEAMERS (ANDERSON, TOOKE) PHOENIX, AZ 19.86 19.86
- ------------------------------------------------------------------------------------------------------------------------------------
5/19/95 RA - BEST BUY - WEB AUTHOR CAMELBACK, AZ 107.04 107.04
- ------------------------------------------------------------------------------------------------------------------------------------
5/19/95 RA - SOFTWARE CITY - MIRO VIDEO PHOENIX, AZ 584.82 584.82
- ------------------------------------------------------------------------------------------------------------------------------------
5/19/95 RA - SOFTWARE CITY - ADOBE PREMIERE 4.0 PHOENIX, AZ 459.22 459.22
- ------------------------------------------------------------------------------------------------------------------------------------
5/20/95 RA - PINNACLE PEAK PATIO (ANDERSON, MORTON, HAWAKINGS) SCOTTSDALE, AZ 118.42 118.42
- ------------------------------------------------------------------------------------------------------------------------------------
5/21/95 RA - TARGET - CONNECTOR HARDWARE PHOENIX, AZ 155.20 155.20
- ------------------------------------------------------------------------------------------------------------------------------------
5/21/95 RA - IL FORNO (ANDERSON, TOOKE, CHAPLIN) PHOENIX, AZ 65.84 65.84
- ------------------------------------------------------------------------------------------------------------------------------------
5/24/95 RA - OFFICE DEPOT - FAX PAPER JACKSON, MS 13.47 13.47
- ------------------------------------------------------------------------------------------------------------------------------------
5/28/95 RA - CENTURY CELLUNET TELEPHONE BILL JACKSON, MS 27.94 27.94
- ------------------------------------------------------------------------------------------------------------------------------------
5/28/95 RA - CENTURY CELLUNET TELEPHONE BILL JACKSON, MS 49.17 49.17
- ------------------------------------------------------------------------------------------------------------------------------------
5/30/95 RA - DOUBLETREE HOTEL COLORADO SPRINGS, CO 340.91 340.91
- ------------------------------------------------------------------------------------------------------------------------------------
6/2/95 RA - PCN/HUGHES MEETING ROOM ? 200.00 200.00
- ------------------------------------------------------------------------------------------------------------------------------------
6/9/95 KRIS RICHARDSON - CONSULTING (JUNE 1 - 9) JACKSON, MS 452.09 452.09
- ------------------------------------------------------------------------------------------------------------------------------------
6/9/95 JAMES FOSTER - CONSULTING (MAY 26 - JUNE 9) JACKSON, MS 557.70 557.70
- ------------------------------------------------------------------------------------------------------------------------------------
6/9/95 BARBARA SCOTT - CONSULTING (MAY 26 - JUNE 9) JACKSON, MS 769.23 769.23
- ------------------------------------------------------------------------------------------------------------------------------------
6/9/95 RA - RADIO SHACK - SATELLITE EQUIP FOR HUGHES PATENT PROJECT JACKSON, MS 2,868.02 2,868.02
- ------------------------------------------------------------------------------------------------------------------------------------
6/10/95 RA - OFFICE DEPOT - ROAD & BUSINESS ATLASES JACKSON, MS 99.99 99.99
- ------------------------------------------------------------------------------------------------------------------------------------
6/14/95 RA - GATEWAY 2000 PENTIUM 90 SET-UP DES MOINES, IA 2,411.00 2,411.00
- ------------------------------------------------------------------------------------------------------------------------------------
6/16/95 RA - MCTA JACKSON, MS 86.62 86.62
- ------------------------------------------------------------------------------------------------------------------------------------
6/19/95 RA - DATASTORM PCP FOR WIN 2.11 UPGRADE TO 3.5 COLUMBIA, MO 153.00 153.00
- ------------------------------------------------------------------------------------------------------------------------------------
6/22/95 RA - NEC ANTENNA ? 26.75 26.75
- ------------------------------------------------------------------------------------------------------------------------------------
6/24/95 RA - MONTELEONE HOTEL NEW ORLEANS, LA 539.34 539.34
- ------------------------------------------------------------------------------------------------------------------------------------
6/26/95 ROBBINS, BERLINER, & CARSON (RETAINER) LOS ANGELES, CA 15,000.00 15,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
6/28/95 RA - CENTURY CELLUNET TELEPHONE BILL JACKSON, MS 39.82 39.82
- ------------------------------------------------------------------------------------------------------------------------------------
6/28/95 RA - CENTURY CELLUNET TELEPHONE BILL JACKSON, MS 11.73 11.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1 of 10
A-3
<PAGE>
HUGHES PROJECT
ANALYSIS OF ITEMS PAID BY TEC PARENT FOR HUGHES PROJECT
FOR THE PERIOD ENDED APRIL 10, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE &
DEVELPMENT
DATE DESCRIPTION LOCATION EQUIPMENT COSTS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
6/28/95 RA - CENTURY CELLUNET TELEPHONE BILL JACKSON, MS 146.31 146.31
- ------------------------------------------------------------------------------------------------------------------------------------
7/14/95 RA - TICO'S - CHARLES DUGAN, CHARLES EAGAN, ECHO STAR RIDGELAND, MS 81.82 81.82
- ------------------------------------------------------------------------------------------------------------------------------------
7/14/95 RA - MAGUNDI'S RESTAURANT - JEFF ALLEGREZZA,
JAMES FOSTER, JIM HILL JACKSON, MS 20.90 20.90
- ------------------------------------------------------------------------------------------------------------------------------------
7/16/95 RA - CAB FARE LOS ANGELES, CA 42.00 42.00
- ------------------------------------------------------------------------------------------------------------------------------------
7/16/95 RA - CAB FARE LOS ANGELES, CA 30.00 30.00
- ------------------------------------------------------------------------------------------------------------------------------------
7/16/95 RA - OFFICE DEPOT - CITIZEN PORTABLE PRINTER JACKSON, MS 342.39 342.39
- ------------------------------------------------------------------------------------------------------------------------------------
7/16/95 RA - HYATT REGENCY LOS ANGELES, CA 644.32 644.32
- ------------------------------------------------------------------------------------------------------------------------------------
7/16/95 RA - MCTA JACKSON, MS 99.56 99.56
- ------------------------------------------------------------------------------------------------------------------------------------
7/16/95 RA - MCTA JACKSON, MS 957.65 957.65
- ------------------------------------------------------------------------------------------------------------------------------------
7/16/95 RA - ALTEX ELECTRONICS - MISC ? 16.00 16.00
- ------------------------------------------------------------------------------------------------------------------------------------
7/18/95 RA - WALDENBOOKS - UNSPECIFIED ? 51.91 51.91
- ------------------------------------------------------------------------------------------------------------------------------------
7/19/95 RA - CROWN STERLING SUITES PHOENIX, CA 493.50 493.50
- ------------------------------------------------------------------------------------------------------------------------------------
7/19/95 RA - BUDGET RENTAL CAR PHOENIX, AZ 174.97 174.97
- ------------------------------------------------------------------------------------------------------------------------------------
7/20/95 RA - BEST BUY - NETSCNAUPER & INTERNTBOX 2 PHOENIX, CA 133.79 133.79
- ------------------------------------------------------------------------------------------------------------------------------------
7/20/95 RA - STAPLES - EASEL PHOENIX, AZ 21.40 21.40
- ------------------------------------------------------------------------------------------------------------------------------------
7/22/95 RA - COMPUSA - VARIOUS SCOTTSDALE, AZ 846.41 233.32 1,079.73
- ------------------------------------------------------------------------------------------------------------------------------------
7/22/95 RA - BORDERS BOOKS - VARIOUS PHOENIX, AZ 293.79 293.79
- ------------------------------------------------------------------------------------------------------------------------------------
7/23/95 RA - PARKING JACKSON, MS 45.50 45.50
- ------------------------------------------------------------------------------------------------------------------------------------
7/24/95 RA - OFFICE DEPOT - DESKJET 1200C & HP SCAN JET JACKSON, MS 2,519.94 2,519.94
- ------------------------------------------------------------------------------------------------------------------------------------
7/24/95 RA - MS VALLEY GAS - 116 LAKEVIEW COURT JACKSON, MS 5.94 5.94
- ------------------------------------------------------------------------------------------------------------------------------------
7/25/95 RA - ENTERGY - 116 LAKEVIEW CT JACKSON, MS 161.22 161.22
- ------------------------------------------------------------------------------------------------------------------------------------
7/26/95 RA - BORDERS BOOKS - VARIOUS SOFTWARE PHOENIX, AZ 188.24 188.24
- ------------------------------------------------------------------------------------------------------------------------------------
7/26/95 RA - CENTURY CELLUNET JACKSON, MS 109.46 109.46
- ------------------------------------------------------------------------------------------------------------------------------------
7/26/95 RA - PARKING JACKSON, MS 13.00 13.00
- ------------------------------------------------------------------------------------------------------------------------------------
7/26/95 RA - COMPUSA - ACCU 16 BIT ISASCSI-I ADDISON, TX 108.24 108.24
- ------------------------------------------------------------------------------------------------------------------------------------
7/27/95 RA - GRAYBAR - MISC JACKSON, MS 36.73 36.73
- ------------------------------------------------------------------------------------------------------------------------------------
7/30/95 RA - MODEM EXCHANGE DIFF - NO RECEIPT JACKSON, MS 32.10 32.10
- ------------------------------------------------------------------------------------------------------------------------------------
8/1/95 SOLONET EQUIPMENT PALM BAY, FL 2,865.00 2,865.00
- ------------------------------------------------------------------------------------------------------------------------------------
8/1/95 RA - SOFTWARE ETO - IDEPRO-ISA JACKSON, MS 74.89 74.89
- ------------------------------------------------------------------------------------------------------------------------------------
8/1/95 RA - OFFICE DEPOT - MODEM & VARIOUS JACKSON, MS 288.89 611.66 900.55
- ------------------------------------------------------------------------------------------------------------------------------------
8/4/95 RA - MCTA JACKSON, MS 367.31 367.31
- ------------------------------------------------------------------------------------------------------------------------------------
8/4/95 RA - INSIGHT DIRECT - ROUTERS TEMPE, AZ 4,551.00 4,551.00
- ------------------------------------------------------------------------------------------------------------------------------------
8/5/95 RA - FERNANDO'S RESTAURANT JACKSON, MS 116.60 116.60
- ------------------------------------------------------------------------------------------------------------------------------------
8/6/95 RA - RADIO SHACK - MISC JACKSON, MS 7.46 7.46
- ------------------------------------------------------------------------------------------------------------------------------------
8/6/95 RA - OFFICE DEPOT - MISC SOFTWARE JACKSON, MS 384.75 384.75
- ------------------------------------------------------------------------------------------------------------------------------------
8/7/95 RA - MCI JACKSON, MS 35.49 35.49
- ------------------------------------------------------------------------------------------------------------------------------------
8/7/95 RA - FUEL JACKSON, MS 15.06 15.06
- ------------------------------------------------------------------------------------------------------------------------------------
8/8/95 RA - AMERICAN EXPRESS - AMERICA ONLINE JACKSON, MS 33.90 33.90
- ------------------------------------------------------------------------------------------------------------------------------------
8/8/95 RA - AMERICAN EXPRESS - EWORLD JACKSON, MS 8.95 8.95
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 10
A-3
<PAGE>
HUGHES PROJECT
ANALYSIS OF ITEMS PAID BY TEC PARENT FOR HUGHES PROJECT
FOR THE PERIOD ENDED APRIL 10, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE &
DEVELPMENT
DATE DESCRIPTION LOCATION EQUIPMENT COSTS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
8/8/95 RA - AMERICAN EXPRESS - NETCOM JACKSON, MS 19.95 19.95
- ------------------------------------------------------------------------------------------------------------------------------------
8/8/95 RA - AMERICAN EXPRESS - COMPUSERVE JACKSON, MS 9.95 9.95
- ------------------------------------------------------------------------------------------------------------------------------------
8/8/95 RA - INSIGHT DIRECT - NO DETAIL TEMPE, AZ 59.00 59.00
- ------------------------------------------------------------------------------------------------------------------------------------
8/9/95 RA - DIREC TV SUBSCRIPTION JACKSON, MS 381.89 381.89
- ------------------------------------------------------------------------------------------------------------------------------------
8/9/95 RA - MADISON ACE HARDWARE - MISC MADISON, MS 59.05 59.05
- ------------------------------------------------------------------------------------------------------------------------------------
8/9/95 RA - MADISON ACE HARDWARE - MISC MADISON, MS 5.22 5.22
- ------------------------------------------------------------------------------------------------------------------------------------
8/9/95 RA - RADIO SHACK - MISC JACKSON, MS 17.63 17.63
- ------------------------------------------------------------------------------------------------------------------------------------
8/10/95 RA - AT&T GOLD CARD - MAC PC SOFTWARE JACKSON, MS 75.58 75.58
- ------------------------------------------------------------------------------------------------------------------------------------
8/10/95 RA - ELECTRIC WORLD MISC AURORA, CO 61.25 61.25
- ------------------------------------------------------------------------------------------------------------------------------------
8/11/95 RA - OFFICE DEPOT - FAX JACKSON, MS 536.87 536.87
- ------------------------------------------------------------------------------------------------------------------------------------
8/11/95 RA - LITTLE TOKYO JACKSON, MS 53.63 53.63
- ------------------------------------------------------------------------------------------------------------------------------------
8/12/95 RA - HOLIDAY INN RICHARDSON, TX 133.34 133.34
- ------------------------------------------------------------------------------------------------------------------------------------
8/13/95 RA - HOLIDAY INN EXPRESS ADDISON, TX 72.32 72.32
- ------------------------------------------------------------------------------------------------------------------------------------
8/13/95 RA - HOLIDAY INN EXPRESS ADDISON, TX 72.32 72.32
- ------------------------------------------------------------------------------------------------------------------------------------
8/14/95 RA - COURTYARD ? 64.15 64.15
- ------------------------------------------------------------------------------------------------------------------------------------
8/14/95 RA - COURTYARD ? 64.15 64.15
- ------------------------------------------------------------------------------------------------------------------------------------
8/14/95 RA - AJO AL'S PHOENIX, AZ 61.50 61.50
- ------------------------------------------------------------------------------------------------------------------------------------
8/14/95 RA - BOOKSTAR - PROAUDIO SPECTRUM PHOENIX, AZ 37.41 37.41
- ------------------------------------------------------------------------------------------------------------------------------------
8/14/95 RA - SOFTWARE CITY - MISC SOFTWARE PHOENIX, AZ 533.53 533.53
- ------------------------------------------------------------------------------------------------------------------------------------
8/14/95 RA - INSIGHT - P120 CONFIGURED SYSTEM TEMPE, AZ 4,610.00 4,610.00
- ------------------------------------------------------------------------------------------------------------------------------------
8/14/95 RA - INSIGHT - P120 CONFIGURED SYSTEM TEMPE, AZ 4,949.00 4,949.00
- ------------------------------------------------------------------------------------------------------------------------------------
8/14/95 SURANET SUBSCRIPTION SERVICE BALTIMORE, MD 3,317.55 3,317.55
- ------------------------------------------------------------------------------------------------------------------------------------
8/14/95 SIGNATURE FINANCIAL - COPIER AND COMPUTER EQUIPMENT - DALLAS DALLAS, TX 3,873.04 23.36 3,896.40
- ------------------------------------------------------------------------------------------------------------------------------------
8/15/95 RA - BUDGET CAR RENTAL PHOENIX, AZ 41.34 41.34
- ------------------------------------------------------------------------------------------------------------------------------------
8/18/95 RA - VIRGILIO'S RESTAURANT MADISON, MS 62.54 62.54
- ------------------------------------------------------------------------------------------------------------------------------------
8/19/95 RA - SUTHERLAND LUMBER - TOOLS JACKSON, MS 184.02 184.02
- ------------------------------------------------------------------------------------------------------------------------------------
8/20/95 RA - UTILITY BILL - LAKE LORMAN JACKSON, MS 62.27 62.27
- ------------------------------------------------------------------------------------------------------------------------------------
8/20/95 RA - UTILITY BILL - 116 LAKEVIEW COURT JACKSON, MS 142.66 142.66
- ------------------------------------------------------------------------------------------------------------------------------------
8/22/95 ROBBINS, BERLINER, & CARSON RETAINER LOS ANGELES, CA 25,000.00 25,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
8/22/95 HUGHES NETWORK SYSTEMS - 20 DIRECPC ACCESS KITS & MISC GERMANTOWN, MD 31,070.80 31,070.80
- ------------------------------------------------------------------------------------------------------------------------------------
8/24/95 RA - SOUTH CENTRAL BELL JACKSON, MS 39.15 39.15
- ------------------------------------------------------------------------------------------------------------------------------------
8/24/95 RA - CITY GROCERY OXFORD, MS 89.23 89.23
- ------------------------------------------------------------------------------------------------------------------------------------
8/24/95 RA - HOLIDAY INN OXFORD, MS 80.66 80.66
- ------------------------------------------------------------------------------------------------------------------------------------
8/24/95 RA - HOLIDAY INN OXFORD, MS 202.85 202.85
- ------------------------------------------------------------------------------------------------------------------------------------
8/24/95 GRAYBAR - MISC JACKSON, MS 790.53 790.53
- ------------------------------------------------------------------------------------------------------------------------------------
8/27/95 RA - FUEL JACKSON, MS 44.54 44.54
- ------------------------------------------------------------------------------------------------------------------------------------
8/29/95 GRAYBAR - MISC GRAYBAR JACKSON, MS 170.12 170.12
- ------------------------------------------------------------------------------------------------------------------------------------
8/29/95 RA - BUDGET CAR RENTAL PHOENIX, AZ 160.30 160.30
- ------------------------------------------------------------------------------------------------------------------------------------
8/29/95 RA - PARKING PHOENIX, AZ 26.00 26.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 10
A-3
<PAGE>
HUGHES PROJECT
ANALYSIS OF ITEMS PAID BY TEC PARENT FOR HUGHES PROJECT
FOR THE PERIOD ENDED APRIL 10, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE &
DEVELPMENT
DATE DESCRIPTION LOCATION EQUIPMENT COSTS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
8/30/95 RA - SOFTWARE CITY - NORTON UTILITIES/ANTI-VIRUS/MISC CABLES PHOENIX, AZ 133.92 357.71 491.63
- ------------------------------------------------------------------------------------------------------------------------------------
9/1/95 RA - DFW MINI-STORE DALLAS, TX 91.11 91.11
- ------------------------------------------------------------------------------------------------------------------------------------
9/1/95 RA - NICK'S RESTAURANT - ED MEEKS JACKSON, MS 83.90 83.90
- ------------------------------------------------------------------------------------------------------------------------------------
9/4/95 RA - SOUTH CENTRAL BELL JACKSON, MS 110.09 110.09
- ------------------------------------------------------------------------------------------------------------------------------------
9/4/95 RA - SKEEN PLUMBING & GAS CO MADISON, MS 339.03 339.03
- ------------------------------------------------------------------------------------------------------------------------------------
9/6/95 JAMES HILL PAID RADIO SHACK AND GRAYBAR MISC JACKSON, MS 49.67 49.67
- ------------------------------------------------------------------------------------------------------------------------------------
9/6/95 RA - OFFICE DEPOT JACKSON, MS 492.13 492.13
- ------------------------------------------------------------------------------------------------------------------------------------
9/6/95 RA - MISC JACKSON, MS 18.95 18.95
- ------------------------------------------------------------------------------------------------------------------------------------
9/7/95 RA - CAFE NEW ORLEANS - ED MEEK, DR COOK OXFORD, MS 32.49 32.49
- ------------------------------------------------------------------------------------------------------------------------------------
9/7/95 RA - BRAVO - TOM GOULD JACKSON, MS 22.28 22.28
- ------------------------------------------------------------------------------------------------------------------------------------
9/7/95 RA - HOLIDAY INN OXFORD, MS 61.83 61.83
- ------------------------------------------------------------------------------------------------------------------------------------
9/7/95 RA - HOLIDAY INN OXFORD, MS 63.38 63.38
- ------------------------------------------------------------------------------------------------------------------------------------
9/8/95 ROBBINS, BERLINER, & CARSON LOS ANGELES, CA 25,000.00 25,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
9/8/95 RA - EL CHARRO MEXICAN RESTAURANT - ED MEEK, JAMES FOSTER BATESVILLE, MS 32.66 32.66
- ------------------------------------------------------------------------------------------------------------------------------------
9/11/95 RA - OFFICE DEPOT JACKSON, MS 806.21 31.59 837.80
- ------------------------------------------------------------------------------------------------------------------------------------
9/13/95 RA - BRICK OVEN - DR COOK, DR SWAGNKER RIDGELAND, MS 44.56 44.56
- ------------------------------------------------------------------------------------------------------------------------------------
9/14/95 RA - COURTYARD MARRIOTT GAITHERSBURG, MD 86.90 86.90
- ------------------------------------------------------------------------------------------------------------------------------------
9/15/95 DELTA AIRLINES - FLIGHTS TO DALLAS & PHOENIX VARIOUS 1,741.00 1,741.00
- ------------------------------------------------------------------------------------------------------------------------------------
9/15/95 SOUTHWESTERN BELL JACKSON, MS 245.55 245.55
- ------------------------------------------------------------------------------------------------------------------------------------
9/15/95 RA - REGENCY CAB BALTIMORE, MD 65.00 65.00
- ------------------------------------------------------------------------------------------------------------------------------------
9/15/95 RA - JACKSON INTERNATIONAL AIRPORT JACKSON, MS 13.00 13.00
- ------------------------------------------------------------------------------------------------------------------------------------
9/16/95 RA - MCTA JACKSON, MS 122.01 122.01
- ------------------------------------------------------------------------------------------------------------------------------------
9/16/95 RA - MCTA JACKSON, MS 63.13 63.13
- ------------------------------------------------------------------------------------------------------------------------------------
9/16/95 RA - UNKNOWN - MOUNTING HARDWARE UNKNOWN 522.17 522.17
- ------------------------------------------------------------------------------------------------------------------------------------
9/16/95 RA - NORTHPARK OUTDOOR - MOUNTING HARDWARE RIDGELAND, MS 38.51 38.51
- ------------------------------------------------------------------------------------------------------------------------------------
9/18/95 HERITAGE GRAPHICS - MARKETING JACKSON, MS 802.50 802.50
- ------------------------------------------------------------------------------------------------------------------------------------
9/18/95 HUGHES NETWORK SYSTEMS - DIRECPC ACCESS KIT GERMANTOWN, MD 7,620.36 7,620.36
- ------------------------------------------------------------------------------------------------------------------------------------
9/19/95 FEDERAL EXPRESS JACKSON, MS 176.25 176.25
- ------------------------------------------------------------------------------------------------------------------------------------
9/20/95 HERITAGE GRAPHICS - POWERMAC SET-UP JACKSON, MS 6,712.96 6,712.96
- ------------------------------------------------------------------------------------------------------------------------------------
9/20/95 RA - LAKE LORMAN UTILITIES DIST CANTON, MS 74.65 74.65
- ------------------------------------------------------------------------------------------------------------------------------------
9/20/95 RA - BIG 4 RESTAURANTS - M PEAVEY, C PEAVEY UNKNOWN 129.00 129.00
- ------------------------------------------------------------------------------------------------------------------------------------
9/20/95 RA - MAGUNDI'S - JIM HILL, SUSAN JAMES JACKSON, MS 22.63 22.63
- ------------------------------------------------------------------------------------------------------------------------------------
9/21/95 RA - A,T,&T JACKSON, MS 17.98 17.98
- ------------------------------------------------------------------------------------------------------------------------------------
9/21/95 RA - THE BROADMOOR COLORADO SPRINGS, CO 280.94 280.94
- ------------------------------------------------------------------------------------------------------------------------------------
9/22/95 STEPHENS, BERG, & LASATER - VARIOUS LEGAL LOS ANGELES, CA 7,253.50 7,253.50
- ------------------------------------------------------------------------------------------------------------------------------------
9/22/95 RA - THE BROADMOOR COLORADO SPRINGS, CO 0.75 0.75
- ------------------------------------------------------------------------------------------------------------------------------------
9/22/95 RA - MOTOROLA - EQUIPMENT FOR PHONE CHICAGO, IL 281.62 281.62
- ------------------------------------------------------------------------------------------------------------------------------------
9/22/95 RA - VILLAGE MARKET SNOWMASS, CO 28.53 28.53
- ------------------------------------------------------------------------------------------------------------------------------------
9/22/95 RA - THE BROADMOOR DRUG STORE - COMPUTER BOOKS COLORADO SPRINGS, CO 29.25 29.25
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4 of 10
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<PAGE>
HUGHES PROJECT
ANALYSIS OF ITEMS PAID BY TEC PARENT FOR HUGHES PROJECT
FOR THE PERIOD ENDED APRIL 10, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE &
DEVELPMENT
DATE DESCRIPTION LOCATION EQUIPMENT COSTS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
9/22/95 RA - VILLAGE MARKET - JOE MITCHELL SNOWMASS, CO 28.53 28.53
- ------------------------------------------------------------------------------------------------------------------------------------
9/23/95 RA - JACKSON INTERNATIONAL AIRPORT JACKSON, MS 13.00 13.00
- ------------------------------------------------------------------------------------------------------------------------------------
9/24/95 RA - MCTA JACKSON, MS 233.95 233.95
- ------------------------------------------------------------------------------------------------------------------------------------
9/24/95 RA - COUNTRY GENERAL BRIGHTON, CO 60.42 60.42
- ------------------------------------------------------------------------------------------------------------------------------------
9/24/95 RA - LAFAMILIA RESTAURANT - CHARLES EAGAN FT LUPTON, CO 39.66 39.66
- ------------------------------------------------------------------------------------------------------------------------------------
9/24/95 RA - UNKNOWN UNKNOWN 56.00 56.00
- ------------------------------------------------------------------------------------------------------------------------------------
9/25/95 RA - GRAYBAR - MISC JACKSON, MS 75.62 75.62
- ------------------------------------------------------------------------------------------------------------------------------------
9/25/95 RA - MAGUNDI'S - JEFF JAMES, JIM HILL JACKSON, MS 30.67 30.67
- ------------------------------------------------------------------------------------------------------------------------------------
9/25/95 RA - FUEL JACKSON, MS 16.43 16.43
- ------------------------------------------------------------------------------------------------------------------------------------
9/26/95 RA - CENTURY CELLUNET JACKSON, MS 54.24 54.24
- ------------------------------------------------------------------------------------------------------------------------------------
9/26/95 RA - CENTURY CELLUNET JACKSON, MS 90.99 90.99
- ------------------------------------------------------------------------------------------------------------------------------------
9/26/95 RA - BUDGET RENTAL CARS HOUSTON, TX 41.77 41.77
- ------------------------------------------------------------------------------------------------------------------------------------
9/26/95 RA - LA QUINTA HOUSTON, TX 84.14 84.14
- ------------------------------------------------------------------------------------------------------------------------------------
9/26/95 RA - CENTURY CELLUNET JACKSON, MS 72.44 72.44
- ------------------------------------------------------------------------------------------------------------------------------------
9/26/95 RA - CENTURY CELLUNET JACKSON, MS 7.22 7.22
- ------------------------------------------------------------------------------------------------------------------------------------
9/27/95 RA - FUDDRUCKERS - BOB HESTON, DICK LYONS MCI HOUSTON, TX 33.68 33.68
- ------------------------------------------------------------------------------------------------------------------------------------
9/28/95 RA - WILSON WORLD IRVING, TX 114.82 114.82
- ------------------------------------------------------------------------------------------------------------------------------------
9/29/95 RA - GRAYBAR - MISC JACKSON, MS 235.84 235.84
- ------------------------------------------------------------------------------------------------------------------------------------
9/29/95 RA - TICO'S - MICHAEL BAKER, TOM GOULD, JOHN HELMS RIGDELAND, MS 116.79 116.79
- ------------------------------------------------------------------------------------------------------------------------------------
9/29/95 RA - CHEVRON FLORA, MS 30.67 30.67
- ------------------------------------------------------------------------------------------------------------------------------------
9/29/95 RA - ENTERGY JACKSON, MS 125.71 125.71
- ------------------------------------------------------------------------------------------------------------------------------------
10/1/95 RA - DIAL-A-PAGE RUSSELVILLE, AR 33.68 33.68
- ------------------------------------------------------------------------------------------------------------------------------------
10/1/95 RA - BELLSOUTH JACKSON, MS 80.11 80.11
- ------------------------------------------------------------------------------------------------------------------------------------
10/2/95 FEDERAL EXPRESS JACKSON, MS 110.25 110.25
- ------------------------------------------------------------------------------------------------------------------------------------
10/2/95 RA - MANHATTAN'S UPTOWN - DR NORTON, DR LAMIER KANSAS STATE U MANHATTAN, KS 142.31 142.31
- ------------------------------------------------------------------------------------------------------------------------------------
10/2/95 RA - SMITH AIRPORT SHOPS ATLANTA, GA 31.47 31.47
- ------------------------------------------------------------------------------------------------------------------------------------
10/4/95 RA - MCTA JACKSON, MS 568.87 568.87
- ------------------------------------------------------------------------------------------------------------------------------------
10/4/95 RA - BUDGET RENTAL CARS KANSAS CITY, MO 151.34 151.34
- ------------------------------------------------------------------------------------------------------------------------------------
10/4/95 RA - PARADIES SHOPS KANSAS CITY, MO 10.29 10.29
- ------------------------------------------------------------------------------------------------------------------------------------
10/4/95 RA - PARADIES SHOPS KANSAS CITY, MO 47.77 47.77
- ------------------------------------------------------------------------------------------------------------------------------------
10/4/95 RA - PARADIES SHOPS KANSAS CITY, MO 15.92 15.92
- ------------------------------------------------------------------------------------------------------------------------------------
10/4/95 RA - BELLSOUTH JACKSON, MS 41.02 41.02
- ------------------------------------------------------------------------------------------------------------------------------------
10/4/95 RA - BELLSOUTH JACKSON, MS 192.34 192.34
- ------------------------------------------------------------------------------------------------------------------------------------
10/5/95 RA - MS VALLEY GAS JACKSON, MS 5.92 5.92
- ------------------------------------------------------------------------------------------------------------------------------------
10/5/95 RA - JACKSON INTERNATIONAL AIRPORT JACKSON, MS 19.50 19.50
- ------------------------------------------------------------------------------------------------------------------------------------
10/6/95 RA - MCTA JACKSON, MS 60.82 60.82
- ------------------------------------------------------------------------------------------------------------------------------------
10/6/95 RA - DIRECT TV JACKSON, MS 25.50 25.50
- ------------------------------------------------------------------------------------------------------------------------------------
10/7/95 RA - MCI JACKSON, MS 47.34 47.34
- ------------------------------------------------------------------------------------------------------------------------------------
10/7/95 RA - OFFICE DEPOT JACKSON, MS 176.27 176.27
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 5 of 10
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<PAGE>
HUGHES PROJECT
ANALYSIS OF ITEMS PAID BY TEC PARENT FOR HUGHES PROJECT
FOR THE PERIOD ENDED APRIL 10, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE &
DEVELPMENT
DATE DESCRIPTION LOCATION EQUIPMENT COSTS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
10/8/95 RA - RICHELIEU NEW ORLEANS, LA 495.54 495.54
- ------------------------------------------------------------------------------------------------------------------------------------
10/8/95 RA - TORTORTICI'S - C L MAYMOED, HOWARD TOOKE, FRANK MAGLIOTIUO NEW ORLEANS, LA 106.05 106.05
- ------------------------------------------------------------------------------------------------------------------------------------
10/8/95 RA - HOTEL PROVINCIAL NEW ORLEANS, LA 18.33 18.33
- ------------------------------------------------------------------------------------------------------------------------------------
10/9/95 RA - TUJAGUE'S - HOWARD TOOKE NEW ORLEANS, LA 81.97 81.97
- ------------------------------------------------------------------------------------------------------------------------------------
10/9/95 RA - MARGARITAVILLE N O - CL MAYMOED NEW ORLEANS, LA 39.13 39.13
- ------------------------------------------------------------------------------------------------------------------------------------
10/10/95 GRAYBAR - MISC JACKSON, MS 8.38 8.38
- ------------------------------------------------------------------------------------------------------------------------------------
10/11/95 RA - MAGUNDI'S - JEFF AL JACKSON, MS 12.31 12.31
- ------------------------------------------------------------------------------------------------------------------------------------
10/13/95 INSIGHT - 5 P120 CONFIGURED SYSTEMS TEMPE, AZ 21,379.00 21,379.00
- ------------------------------------------------------------------------------------------------------------------------------------
10/13/95 HERITAGE GRAPHICS - MARKETING JACKSON, MS 1,379.50 1,379.50
- ------------------------------------------------------------------------------------------------------------------------------------
10/13/95 HERITAGE GRAPHICS - NEC INTERFACE & NEC PORTABLE CD ROM JACKSON, MS 1,225.88 1,225.88
- ------------------------------------------------------------------------------------------------------------------------------------
10/13/95 HERITAGE GRAPHICS - POWERMAC JACKSON, MS 20,664.68 20,664.68
- ------------------------------------------------------------------------------------------------------------------------------------
10/13/95 HERITAGE GRAPHICS - MARKETING JACKSON, MS 4,039.63 4,039.63
- ------------------------------------------------------------------------------------------------------------------------------------
10/13/95 RA - HOTEL ST MARIE NEW ORLEANS, LA 27.40 27.40
- ------------------------------------------------------------------------------------------------------------------------------------
10/15/95 SOUTHWESTERN BELL JACKSON, MS 84.44 84.44
- ------------------------------------------------------------------------------------------------------------------------------------
10/16/95 RA - MCTA JACKSON, MS 16.63 16.63
- ------------------------------------------------------------------------------------------------------------------------------------
10/17/95 UUNET - 3 CISCO ROUTERS FAIRFAX, VA 4,863.60 4,863.60
- ------------------------------------------------------------------------------------------------------------------------------------
10/17/95 RA - COMPUSA ADDISON, TX 1,943.03 138.54 2,081.57
- ------------------------------------------------------------------------------------------------------------------------------------
10/20/95 RA - JACKSON INTERNATIONAL AIRPORT JACKSON, MS 19.50 19.50
- ------------------------------------------------------------------------------------------------------------------------------------
10/21/95 RA - A,T,&T JACKSON, MS 26.77 26.77
- ------------------------------------------------------------------------------------------------------------------------------------
10/21/95 RA - TICO'S - DAVID ROACH, DR COOK, ED MEEK RIDGELAND, MS 159.48 159.48
- ------------------------------------------------------------------------------------------------------------------------------------
10/23/95 RA - PINNACLE MICRO IRVINE, CA 214.00 214.00
- ------------------------------------------------------------------------------------------------------------------------------------
10/24/95 DELTA AIRLINES - JAN - MCI - BWI - DFW VARIOUS 3,238.00 3,238.00
- ------------------------------------------------------------------------------------------------------------------------------------
10/25/95 HERITAGE GRAPHICS - MARKETING JACKSON, MS 703.00 703.00
- ------------------------------------------------------------------------------------------------------------------------------------
10/25/95 RA - JACKSON INTERNATIONAL AIRPORT JACKSON, MS 6.50 6.50
- ------------------------------------------------------------------------------------------------------------------------------------
10/27/95 RA - AMID CABS LOS ANGELES, CA 51.00 51.00
- ------------------------------------------------------------------------------------------------------------------------------------
10/27/95 RA - OMNI HOTEL LOS ANGELES, CA 213.29 213.29
- ------------------------------------------------------------------------------------------------------------------------------------
10/28/95 RA - HARVEY HOTEL ADDISON, TX 130.56 130.56
- ------------------------------------------------------------------------------------------------------------------------------------
10/30/95 HERITAGE GRAPHICS - MARKETING JACKSON, MS 339.36 339.36
- ------------------------------------------------------------------------------------------------------------------------------------
10/30/95 JAMES FOSTER EXPENSES JACKSON, MS 707.41 707.41
- ------------------------------------------------------------------------------------------------------------------------------------
10/30/95 BARBARA SCOTT EXPENSES JACKSON, MS 275.04 275.04
- ------------------------------------------------------------------------------------------------------------------------------------
10/30/95 RA - JACKSON INTERNATIONAL AIRPORT JACKSON, MS 26.00 26.00
- ------------------------------------------------------------------------------------------------------------------------------------
11/1/95 BAY SPRINGS TELEPHONE CO BAY SPRINGS, MS 246.95 246.95
- ------------------------------------------------------------------------------------------------------------------------------------
11/1/95 DIAL-A-PAGE RUSSELVILLE, AR 25.14 25.14
- ------------------------------------------------------------------------------------------------------------------------------------
11/15/95 SOUTHWESTERN BELL JACKSON, MS 112.16 112.16
- ------------------------------------------------------------------------------------------------------------------------------------
11/16/95 DELTA AIRLINES - HOU-DAL-LAX-IAD-BWI VARIOUS 5,136.00 5,136.00
- ------------------------------------------------------------------------------------------------------------------------------------
11/21/95 JAMES FOSTER MILEAGE JACKSON, MS 397.80 397.80
- ------------------------------------------------------------------------------------------------------------------------------------
11/21/95 FEDERAL EXPRESS JACKSON, MS 62.00 62.00
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/95 BAY SPRINGS TELEPHONE CO BAY SPRINGS, MS 591.56 591.56
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/95 BOLES, BOLES, & RYAN MONROE, LA 1,211.25 1,211.25
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 6 of 10
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<PAGE>
HUGHES PROJECT
ANALYSIS OF ITEMS PAID BY TEC PARENT FOR HUGHES PROJECT
FOR THE PERIOD ENDED APRIL 10, 1996
<TABLE>
<CAPTION>
SOFTWARE &
DEVELPMENT
DATE DESCRIPTION LOCATION EQUIPMENT COSTS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
12/10/95 BELLSOUTH JACKSON, MS 572.33 572.33
- ------------------------------------------------------------------------------------------------------------------------------------
12/15/95 DELTA AIR LINES JACKSON, MS 9,800.00 9,800.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/15/95 SOUTHWESTERN BELL TELEPHONE JACKSON, MS 95.82 95.82
- ------------------------------------------------------------------------------------------------------------------------------------
12/30/95 BAY SPRINGS TELEPHONE COMPANY BAY SPRINGS, MS 411.92 411.92
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 RA - EXPENSES UNLOCATED AND UNIDENTIFIED JACKSON, MS 119.40 119.40
- ------------------------------------------------------------------------------------------------------------------------------------
1/15/96 DIAL-A-PAGE JACKSON, MS 63.00 63.00
- ------------------------------------------------------------------------------------------------------------------------------------
1/29/96 BELLSOUTH JACKSON, MS 94.00 94.00
- ------------------------------------------------------------------------------------------------------------------------------------
1/29/96 FEDERAL EXPRESS JACKSON, MS 162.50 162.50
- ------------------------------------------------------------------------------------------------------------------------------------
1/29/96 STEPHENS, BERG, & LASSATER LOS ANGELES, CA 172.48 172.48
- ------------------------------------------------------------------------------------------------------------------------------------
12/11/95 STEPHENS, BERG, & LASATER LOS ANGELES, CA 9,245.59 9,245.59
- ------------------------------------------------------------------------------------------------------------------------------------
12/20/95 STEPHENS, BERG, & LASATER LOS ANGELES, CA 3,159.00 3,159.00
- ------------------------------------------------------------------------------------------------------------------------------------
10/7/95 RA - OFFICE DEPORT - HP FAX JACKSON, MS 690.92 690.92
- ------------------------------------------------------------------------------------------------------------------------------------
10/27/95 RA - DATA PROJECTIONS - EZ SHOW 840 DATA/VIDEO & DUKANE O/H PROJ HOUSTON, TX 3,410.00 3,410.00
- ------------------------------------------------------------------------------------------------------------------------------------
11/1/95 AIR LAUREL FLIGHT - LAUREL - MONROE - JXN - WASHINGTON - JXN - LAUR JACKSON, MS 13,055.31 13,055.31
- ------------------------------------------------------------------------------------------------------------------------------------
11/1/95 HERITAGE GRAPHICS - SATELITTE CATALOG/SOFTWARE JACKSON, MS 2,046.38 2,046.38
- ------------------------------------------------------------------------------------------------------------------------------------
11/2/95 RA - COURTYARD MARRIOTT GAITHERSBURG, MD 168.98 168.98
- ------------------------------------------------------------------------------------------------------------------------------------
11/3/95 RA - B DALTON BOOKSELLER - BOOKS BY DAVID BRINKLEY & CHARLES KU GAITHERSBURG, MD 39.85 39.85
- ------------------------------------------------------------------------------------------------------------------------------------
11/4/95 RA - BUDGET SEARS CAR RENTAL ARLINGTON, VA 95.35 95.35
- ------------------------------------------------------------------------------------------------------------------------------------
11/4/95 RA - JACKSON INTERNATIONAL AIRPORT JACKSON, MS 3.50 3.50
- ------------------------------------------------------------------------------------------------------------------------------------
11/4/95 RA - COMMISSIONS/PASCHALS UNIT ATLANTA, GA 4.60 4.60
- ------------------------------------------------------------------------------------------------------------------------------------
11/5/95 RA - HOLIDAY INN OXFORD, MS 64.31 64.31
- ------------------------------------------------------------------------------------------------------------------------------------
11/5/95 RA - HOLIDAY INN OXFORD, MS 97.96 97.96
- ------------------------------------------------------------------------------------------------------------------------------------
11/5/95 RA - MAGUNDI'S - JEFF ALLEGREZZA, JOHN HELMS JACKSON, MS 15.55 15.55
- ------------------------------------------------------------------------------------------------------------------------------------
11/5/95 RA - FLAMING PIT GAITHERSBURG, MD 48.85 48.85
- ------------------------------------------------------------------------------------------------------------------------------------
11/6/95 RA - BUDGET SEARS CAR RENTAL DALLAS, TX 18.68 18.68
- ------------------------------------------------------------------------------------------------------------------------------------
11/6/95 RA - SPEEDWAY RIDGELAND, MS 13.91 13.91
- ------------------------------------------------------------------------------------------------------------------------------------
11/6/95 RA - ROYAL INN DALLAS, TX 65.42 65.42
- ------------------------------------------------------------------------------------------------------------------------------------
11/7/95 RA - OMNI RICHARDSON - 2 SHINER BOCK RICHARDSON, TX 6.50 6.50
- ------------------------------------------------------------------------------------------------------------------------------------
11/7/95 RA - OMNI HOTEL RICHARDSON, TX 211.81 211.81
- ------------------------------------------------------------------------------------------------------------------------------------
11/7/95 RA - OMNI HOTEL RICHARDSON, TX 190.97 190.97
- ------------------------------------------------------------------------------------------------------------------------------------
11/8/95 RA - OMNI HOTEL CHICAGO, IL 297.70 297.70
- ------------------------------------------------------------------------------------------------------------------------------------
11/9/95 RA - CAB RECEIPT NEW YORK, NY 45.00 45.00
- ------------------------------------------------------------------------------------------------------------------------------------
11/10/95 RA - SHELL MADISON, MS 25.81 25.81
- ------------------------------------------------------------------------------------------------------------------------------------
11/11/95 RA - SOFTWARE, ETC - MAP N GO RIDGELAND, MS 48.14 48.14
- ------------------------------------------------------------------------------------------------------------------------------------
11/12/95 RA - FUEL JACKSON, MS 22.03 22.03
- ------------------------------------------------------------------------------------------------------------------------------------
11/13/95 RA - SHERATON METAIRIE, LA 201.47 201.47
- ------------------------------------------------------------------------------------------------------------------------------------
11/13/95 RA - COMPUSA - MISC SOFTWARE/BOOKS METAIRIE, LA 750.19 750.19
- ------------------------------------------------------------------------------------------------------------------------------------
11/15/95 RA - MACARONI GRILL JACKSON, MS 29.10 29.10
- ------------------------------------------------------------------------------------------------------------------------------------
11/15/95 RA - YELLOW CAB UNKNOWN 65.00 65.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 7 of 10
A-3
<PAGE>
HUGHES PROJECT
ANALYSIS OF ITEMS PAID BY TEC PARENT FOR HUGHES PROJECT
FOR THE PERIOD ENDED APRIL 10, 1996
<TABLE>
<CAPTION>
SOFTWARE &
DEVELPMENT
DATE DESCRIPTION LOCATION EQUIPMENT COSTS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
11/16/95 RA - ACE LIMOUSINE SERVICE CHICAGO, IL 72.00 72.00
- ------------------------------------------------------------------------------------------------------------------------------------
11/16/95 RA - JACKSON INTERNATIONAL AIRPORT JACKSON, MS 13.00 13.00
- ------------------------------------------------------------------------------------------------------------------------------------
11/17/95 RA - US POSTAL SERVICE RIDGELAND, MS 38.40 38.40
- ------------------------------------------------------------------------------------------------------------------------------------
11/20/95 RA - GRIDLEY'S - HOWARD TOOKE, FRANK MEGLEOTTO, JOHN HELMS JACKSON, MS 102.16 102.16
- ------------------------------------------------------------------------------------------------------------------------------------
11/20/95 RA - MAGUNDI'S - JEFF ALLEGREZZA, JAMES FOSTER JACKSON, MS 11.55 11.55
- ------------------------------------------------------------------------------------------------------------------------------------
11/20/95 RA - NICK'S RESTAURANT - FRANK MEGLEOTTO, HOWARD TOOKE, TOM GO JACKSON, MS 166.91 166.91
- ------------------------------------------------------------------------------------------------------------------------------------
11/20/95 RA - SOFTWARE, ETC - NTSCPNVG1.2 RIDGELAND, MS 48.14 48.14
- ------------------------------------------------------------------------------------------------------------------------------------
11/21/95 RA - VIRGILIO'S - EL BROWN MADISON, MS 33.06 33.06
- ------------------------------------------------------------------------------------------------------------------------------------
11/24/95 RA - BUDGET SEARS CAR RENTAL DALLAS, TX 36.01 36.01
- ------------------------------------------------------------------------------------------------------------------------------------
11/24/95 RA - JACKSON INTERNATIONAL AIRPORT JACKSON, MS 5.50 5.50
- ------------------------------------------------------------------------------------------------------------------------------------
11/25/95 RA - FUEL JACKSON, MS 94.21 94.21
- ------------------------------------------------------------------------------------------------------------------------------------
11/25/95 RA - PARKING UNKNOWN 41.36 41.36
- ------------------------------------------------------------------------------------------------------------------------------------
11/25/95 RA - SUTHERLANDS LUMBER - 16IN 2.0 CU SAW W JACKSON, MS 144.45 144.45
- ------------------------------------------------------------------------------------------------------------------------------------
11/29/95 RA - HAL & MAL'S - JOHN HELMS JACKSON, MS 14.74 14.74
- ------------------------------------------------------------------------------------------------------------------------------------
11/29/95 RA - OFFICE DEPOT - SUPPLIES JACKSON, MS 30.31 30.31
- ------------------------------------------------------------------------------------------------------------------------------------
11/29/95 RA - JACKSON INTERNATIONAL AIRPORT JACKSON, MS 20.50 20.50
- ------------------------------------------------------------------------------------------------------------------------------------
11/29/95 RA - RENAISSANCE ATLANTA ATLANTA, GA 185.82 185.82
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/95 RA - KINKO'S JACKSON, MS 7.97 7.97
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/95 RA - HOLIDAY INN ORANGEBURG, NY 120.46 120.46
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/95 RA - BUDGET RENTAL CARS NEWARK, NJ 147.21 147.21
- ------------------------------------------------------------------------------------------------------------------------------------
12/1/95 DIAL-A-PAGE JACKSON, MS 31.50 31.50
- ------------------------------------------------------------------------------------------------------------------------------------
12/1/95 RA - TICO'S - TOM GOULD, JOHN HELMS JACKSON, MS 68.32 68.32
- ------------------------------------------------------------------------------------------------------------------------------------
12/1/95 RA - WORTH & WORTH LTD - TAN DRIFTER NEW YORK, NY 64.95 64.95
- ------------------------------------------------------------------------------------------------------------------------------------
12/1/95 RA - UNKNOWN PARKING UNKNOWN 54.00 54.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/1/95 RA - US POSTAL SERVICE JACKSON, MS 20.41 20.41
- ------------------------------------------------------------------------------------------------------------------------------------
12/1/95 RA - CAB RECEIPTS NEW YORK, NY 60.00 60.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/2/95 RA - W.P. LOUNGE UNKNOWN 1.85 1.85
- ------------------------------------------------------------------------------------------------------------------------------------
12/5/95 RA - GOOD EATS GRILL - JOHN HELMS, PHIL GEURIN JACKSON, MS 21.82 21.82
- ------------------------------------------------------------------------------------------------------------------------------------
12/5/95 RA - SHELL JACKSON, MS 13.96 13.96
- ------------------------------------------------------------------------------------------------------------------------------------
12/6/95 RA - YVETTE CHICAGO, IL 94.48 94.48
- ------------------------------------------------------------------------------------------------------------------------------------
12/6/95 RA - GOLDER CAB CO UNKNOWN 45.00 45.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/7/95 RA - SAINT GERMAIN BAKERY & CAFE - LARRY MEEKS, LLOD BARRETTS CHICAGO, IL 39.53 39.53
- ------------------------------------------------------------------------------------------------------------------------------------
12/7/95 RA - JIFFY CABS PHOENIX, AZ 54.00 54.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/7/95 RA - CROWN STERLING SUITES PHOENIX, AZ 186.80 186.80
- ------------------------------------------------------------------------------------------------------------------------------------
12/8/95 RA - BORDERS BOOKS - MISC SOFTWARE & BOOKS CAMELBACK, AZ 157.37 157.37
- ------------------------------------------------------------------------------------------------------------------------------------
12/8/95 RA - OMNI HOTELS CHICAGO, IL 542.04 542.04
- ------------------------------------------------------------------------------------------------------------------------------------
12/9/95 RA - MS PARKING ASSOC JACKSON, MS 24.00 24.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/9/95 RA - EXXON PEARL, MS 14.94 14.94
- ------------------------------------------------------------------------------------------------------------------------------------
12/9/95 RA - CAB RECEIPT UNKNOWN 62.00 62.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 8 of 10
A-3
<PAGE>
HUGHES PROJECT
ANALYSIS OF ITEMS PAID BY TEC PARENT FOR HUGHES PROJECT
FOR THE PERIOD ENDED APRIL 10, 1996
<TABLE>
<CAPTION>
SOFTWARE &
DEVELPMENT
DATE DESCRIPTION LOCATION EQUIPMENT COSTS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/1/95 RA - MIK AND MOT'S JACKSON, MS 66.16 66.16
- ------------------------------------------------------------------------------------------------------------------------------------
12/13/95 RA - RED ARROW CAR WASH HATTIESBURG, MS 11.66 11.66
- ------------------------------------------------------------------------------------------------------------------------------------
12/14/95 RA - LITTLE TOKYO JACKSON, MS 32.43 32.43
- ------------------------------------------------------------------------------------------------------------------------------------
12/16/95 RA - SOFTWARE, ETC - MSACCS95UPG RIDGELAND, MS 106.99 106.99
- ------------------------------------------------------------------------------------------------------------------------------------
12/18/95 RA - STIRLING TECHNOLOGIES - SHIELD 3 FOR WINDOWS 3.1 CHICAGO, IL 630.00 630.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/19/95 RA - COMPUSA - ACEC ACECAT II TABLE ADDISON, TX 108.24 108.24
- ------------------------------------------------------------------------------------------------------------------------------------
12/19/95 RA - COMPUSA - MISC SOFTWARE AND CD'S ADDISON, TX 270.53 270.53
- ------------------------------------------------------------------------------------------------------------------------------------
12/20/95 RA - CENTRAL PARKING JACKSON, MS 19.00 19.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/21/95 RA - SERVICE MERCHANDISE - 1 MWS KINETIC QTZ STRAP JACKSON, MS 213.97 213.97
- ------------------------------------------------------------------------------------------------------------------------------------
12/21/95 RA - SERVICE MERCHANDISE - CALL DISPLAY 85 & CALLER ID JACKSON, MS 116.42 116.42
- ------------------------------------------------------------------------------------------------------------------------------------
12/22/95 RA - LA PLACITA - GARY OWENS (ROCKY MT SOFTWARE) BRIGHTON, CO 48.57 48.57
- ------------------------------------------------------------------------------------------------------------------------------------
12/23/95 RA - COMPUTER CITY WESTMINSTER, CO 30.10 30.10
- ------------------------------------------------------------------------------------------------------------------------------------
12/23/95 RA - COMPUTER CITY - MISC SOFTWARE WESTMINSTER, CO 537.71 537.71
- ------------------------------------------------------------------------------------------------------------------------------------
12/23/95 RA - KMART CENTER - SOFTWARE - NO SUPPORTING DOCUMENTATION JACKSON, MS 196.76 196.76
- ------------------------------------------------------------------------------------------------------------------------------------
12/24/95 RA - COMPUSA - MISC AURORA, CO 114.51 114.51
- ------------------------------------------------------------------------------------------------------------------------------------
12/24/95 RA - COMPUTER CITY HOUSTON, TX 59.21 142.75 201.96
- ------------------------------------------------------------------------------------------------------------------------------------
12/26/95 RA - COMPUSA - MISC ADDISON, TX 221.84 221.84
- ------------------------------------------------------------------------------------------------------------------------------------
12/26/95 RA - COMPUSA - MISC ADDISON, TX 1,281.28 1,281.28
- ------------------------------------------------------------------------------------------------------------------------------------
12/26/95 RA - OMNI HOTEL RICHARDSON, TX 27.98 27.98
- ------------------------------------------------------------------------------------------------------------------------------------
12/26/95 RA - OMNI HOTEL RICHARDSON, TX 375.50 375.50
- ------------------------------------------------------------------------------------------------------------------------------------
12/26/95 RA - COMMUNIGROUP JACKSON, MS 187.87 187.87
- ------------------------------------------------------------------------------------------------------------------------------------
12/28/95 RA - BUDGET RENTAL CARS DALLAS, TX 154.34 154.34
- ------------------------------------------------------------------------------------------------------------------------------------
12/29/95 RA - MAYFLOWER CAFE JACKSON, MS 39.53 39.53
- ------------------------------------------------------------------------------------------------------------------------------------
1/6/96 RA - OFFICE DEPOT JACKSON, MS 24.72 24.72
- ------------------------------------------------------------------------------------------------------------------------------------
11/14/96 RA - TEXACO HAMMOND, LA 22.88 22.88
- ------------------------------------------------------------------------------------------------------------------------------------
1/29/96 DELTA AIRLINES - RON ANDERSON VARIOUS 3,167.00 3,167.00
- ------------------------------------------------------------------------------------------------------------------------------------
1/29/96 JAMES FOSTER JACKSON, MS 128.99 128.99
- ------------------------------------------------------------------------------------------------------------------------------------
2/12/96 BOLES, BOLES, & RYAN MONROE, LA 138.75 138.75
- ------------------------------------------------------------------------------------------------------------------------------------
2/12/96 BAY SPRINGS TELEPHONE CO BAY SPRINGS, MS 471.73 471.73
- ------------------------------------------------------------------------------------------------------------------------------------
2/12/96 SOUTHWESTERN BELL JACKSON, MS 85.99 85.99
- ------------------------------------------------------------------------------------------------------------------------------------
10/3/95 HERITAGE GRAPHICS - DEVELOPMENT - SOFTWARE JACKSON, MS 1,819.00 1,819.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/1/95 HERITAGE GRAPHICS - CREATING SOFTWARE JACKSON, MS 7,026.69 7,026.69
- ------------------------------------------------------------------------------------------------------------------------------------
12/1/95 HERITAGE GRAPHICS - CREATING SOFTWARE JACKSON, MS 1,273.30 1,273.30
- ------------------------------------------------------------------------------------------------------------------------------------
12/1/95 HERITAGE GRAPHICS - SATELLITE CATALOG/SOFTWARE JACKSON, MS 13,631.80 13,631.80
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 HERITAGE GRAPHICS - DEVELOPING SOFTWARE JACKSON, MS 5,457.00 5,457.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 HERITAGE GRAPHICS - FREIGHT JACKSON, MS 233.81 233.81
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 HERITAGE GRAPHICS - INSTALL DOWNLINK JACKSON, MS 214.00 214.00
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/95 HERITAGE GRAPHICS - DESIGN CONCEPT/OVERTIME JACKSON, MS 3,060.00 3,060.00
- ------------------------------------------------------------------------------------------------------------------------------------
10/27/95 HERITAGE GRAPHICS - FILM, DESIGN & PRODUCTION JACKSON, MS 179.50 179.50
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 9 of 10
A-3
<PAGE>
HUGHES PROJECT
ANALYSIS OF ITEMS PAID BY TEC PARENT FOR HUGHES PROJECT
FOR THE PERIOD ENDED APRIL 10, 1996
<TABLE>
<CAPTION>
SOFTWARE &
DEVELPMENT
DATE DESCRIPTION LOCATION EQUIPMENT COSTS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/27/95 HERITAGE GRAPHICS - FILM, DESIGN & PRODUCTION JACKSON, MS 145.00 145.00
- ------------------------------------------------------------------------------------------------------------------------------------
10/27/95 HERITAGE GRAPHICS - FILM, DESIGN & PRODUCTION JACKSON, MS 378.50 378.50
- ------------------------------------------------------------------------------------------------------------------------------------
12/1/95 HERITAGE GRAPHICS - SATELLITE CATALOG/SOFTWARE JACKSON, MS 2,046.38 2,046.38
- ------------------------------------------------------------------------------------------------------------------------------------
2/23/96 BELLSOUTH JACKSON, MS 94.00 94.00
- ------------------------------------------------------------------------------------------------------------------------------------
2/26/96 SOUTHWESTERN BELL JACKSON, MS 81.77 81.77
- ------------------------------------------------------------------------------------------------------------------------------------
1/15/96 SOUTHWESTERN BELL JACKSON, MS 95.82 95.82
- ------------------------------------------------------------------------------------------------------------------------------------
2/29/96 BAY SPRINGS TELEPHONE COMPANY JACKSON, MS 239.99 239.99
- ------------------------------------------------------------------------------------------------------------------------------------
3/10/96 BELLSOUTH JACKSON, MS 94.00 94.00
- ------------------------------------------------------------------------------------------------------------------------------------
3/10/96 MITCHELL, SILBERBERG & KNUPP LOS ANGELES, CA 1,155.00 1,155.00
- ------------------------------------------------------------------------------------------------------------------------------------
3/10/96 SOUTHWESTERN BELL JACKSON, MS 79.48 79.48
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4/10/96 TOTAL ITEMS PAID 139,232.71 212,482.98 351,715.69
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ITEMS NOT PAID
- ------------------------------------------------------------------------------------------------------------------------------------
- - -
- ------------------------------------------------------------------------------------------------------------------------------------
4/10/96 TOTAL ITEMS NOT PAID
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4/10/96 GRAND TOTAL 139,232.71 212,482.98 351,715.69
- -------------------------------------------------------------------------------------------------===================================
</TABLE>
Page 10 of 10
A-3
<PAGE>
EXHIBIT B
PROMO TEL SHARES
Promo Tel shall deliver 9,632,312 Shares of its common stock (the
"Stock"). The price of the Stock (the "Promo Tel Stock Price") has been fixed at
$.173085825 per Share.
NOTE SATISFACTION AND RELATED AGREEMENTS
BETWEEN TECLINK, INC. ("Borrower") and DIGITEC 2000, INC., a Nevada corporation,
formerly known as Promo Tel, Inc. ("Company") entered into as June 1, 1997.
RECITALS
A. On July 23, 1996, Borrower and the Company entered into that certain
Agreement for Purchase and Sale of Assets ("Purchase Agreement") to be effective
as of January 20, 1996 ("Effective Date"). All capitalized terms not defined
herein shall have the meaning set forth in the Purchase Agreement.
B. In connection with the Purchase Agreement, on July 23, 1996, Borrower and the
Company entered into that certain Bill of Sale, Assignment and Assumption
Agreement effective on the Effective Date.
C. In connection with the Purchase Agreement, on July 23, 1996, Borrower
executed and delivered to Company a promissory note in the principal amount of
$2,405,000 effective on the Effective Date ("Note").
D. As security for its obligations under the Note, on July 23, 1996, Borrower
and the Company entered into that certain Security Agreement effective on the
Effective Date ("Security Agreement").
E. Borrower is in Default under the Note and the Security Agreement.
F. Borrower and Company desire to provide for satisfaction of the Note, on the
terms and conditions specified herein.
AGREEMENT
1. Acceleration of Note.
Exhibit A sets forth the schedule of all payments made by Borrower to the
Company under the Note and sets forth the current amount outstanding including
accrued and unpaid interest as of the date hereof ("Remaining Balance"). Company
hereby accelerates the due date of the Note and makes all of the Remaining
Balance immediately payable.
2. Satisfaction by Borrower.
(a) Company agrees to accept from Borrower, and Borrower agrees to transfer to
the Company, in full or partial satisfaction of the Note, as determined below,
all of the assets of the Borrower, described on Exhibit B ("Assets") by the
execution and delivery of the Warranty Bill of Sale and Assignment Agreement
attached as Exhibit C.
<PAGE>
(b) In connection with the transfer of the Assets to the Company, Company agrees
to assume the liabilities of Borrower described on Exhibit D ("Assumed
Liabilities").
(c) The Note shall be satisfied, and Borrower shall be forever discharged and
released therefrom, in an amount equal to Assets minus the Assumed Liabilities,
as specified on Exhibit E, and as adjusted by the parties within 90 days hereof
to reflect any decrease in Asset value deemed by the parties to have occurred
due to the transfer made hereby.
(d) Any Remaining Balance not satisfied in accordance with the above shall
continue to be immediately due and payable under the Note and interest shall
accrue thereon and Company shall continue to maintain all of its rights under
the Note with respect thereto and any unsatisfied amount shall continue to be
secured under the terms of the Security Agreement.
3. Representations by Borrower
(a) Borrower represents and warrants that it has good and marketable title to
the Assets and that it has conveyed the Subject Property to Company free and
clear of all liens and encumbrances as of the date hereof, excluding Company's
rights under the Security Agreement.
(b) Borrower has sufficient rights in and to the Assets necessary to the
operation of its business and the right to transfer such rights to Company
without the consent of any third party.
(c) As of the date hereof, the Assets are in good and workable condition.
(d) The execution, delivery and performance of this Agreement has been duly
authorized by all necessary corporate and shareholder action by Borrower. This
Agreement and exhibits have been duly executed and delivered by Borrower and
constitute the valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms.
(e) The execution and delivery of this Agreement by Borrower and the performance
by Borrower of its obligations hereunder will not violate or conflict with, or
constitute a breach or default under, or result in the creation or imposition of
any lien under (I) the Certificate of Incorporation or by-laws of Borrower, (ii)
any statute, law, regulation or rule applicable to Borrower, or (iii) any
contract, agreement, lease, mortgage, judgment, order, decree or other
instrument to which Borrower is a party or by which Borrower is bound.
4. Indemnification by Borrower
Borrower shall defend, indemnify and hold Company and any of its affiliates,
directors, officers, employees or representatives harmless from, against and in
all respect of any and all claims, demands, lawsuits, proceeding, losses,
assessments, fines, penalties, administrative orders, obligations, costs,
expenses, liabilities and damages, including interest, penalties and reasonable
attorneys' fees (collectively, "Claims") which arise, result from or are related
to Borrower's breach of, or failure to perform, any of its representations,
warranties, covenants, commitments, agreements or obligations under this
Agreement or in any writing, certificate, exhibit, schedule, statement, list,
report, instrument or other document furnished or delivered to Company in
connection with this Agreement and from all Claims associated with the Assets
incurred or relating
2
<PAGE>
to periods prior to the date hereof.
5. Heritage
The parties hereby confirm to each other that Section 9(d) of the Purchase
Agreement shall continue to apply to the Heritage Case.
6. Hughes
The parties acknowledge that existence of the claims by Borrower against Hughes
Network Systems as further described on Exhibit F ("Hughes Case"). Borrower
agrees that Company shall bear no liability in connection with the Hughes Case
and agrees to indemnify and defend Company therefrom pursuant to Borrower's
indemnification obligation set forth above. Company agrees that Borrower shall
be entitled to any and all proceeds in connection with its claim against Hughes.
7. Notices
Unless otherwise provided in this Agreement, all notices, demands, requests,
approvals or other communications which may be or are required to be given,
served or sent pursuant to this Agreement shall be in writing in the English
language and shall be hand-delivered, mailed by registered or certified mail,
return receipt requested, postage prepaid, or delivered by a recognized
commercial courier, directed to the parties at such addresses as are set forth
on the signature page hereof. Each party may designate by notice in writing a
new address to which any communication may thereafter be so given, served or
sent. Each communication which shall be mailed or delivered in the manner
described above, shall be deemed sufficiently given, served, sent or received
for all purposes at such time as it is delivered to the addressee (with the
return receipt or the delivery receipt being deemed conclusive evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
8. Assignment
Neither the Agreement nor any rights therein may be assigned by either party
without the express prior written consent of the other party; which consent
shall not be unreasonably withheld. Any such attempted assignment without such
consent shall be void. Subject to the above, this Agreement shall be binding
upon the parties and their respective successors, assigns and legal
representatives.
9. Entire Agreement
This Agreement, which includes and incorporates by reference all appendices and
supplements hereto, constitutes the entire understanding and contract between
the parties and supersedes any and all prior and contemporaneous, oral or
written representations, communications, understandings and agreements between
the parties with respect to the subject matter hereof, all of which
representations, communications, understandings and agreements are hereby
canceled to the extent they are not specifically merged herein. The parties
acknowledge and agree that neither of the parties is entering into this
Agreement on the basis of any representations or promises not expressly
contained herein. Notwithstanding the foregoing, the Note and Security
3
<PAGE>
10. Severability
If any part, term or provision of this Agreement be held illegal, invalid or
unenforceable, such part, term or provision shall be deemed severable and shall
not affect the other provisions hereof, which other provisions shall remain in
full force and effect. To the extent that any part, term or provision of this
Agreement is held to be illegal, invalid or unenforceable because it is deemed
to be overbroad, that part, term or provision shall not be void but rather shall
be limited only to the extent required by applicable law and enforced as so
limited.
11. Amendments; Waiver
This Agreement may not be amended, altered or modified except by an instrument
in writing duly executed by both parties and such amendment, alteration or
modification shall become effective only when accepted by Supplier. The failure
or delay of either party at any time to enforce any provision of this Agreement
shall in no way affect its right thereafter to require complete performance by
the other party. Any waiver to be effective must be in writing. The execution of
this Agreement by Company shall not be deemed a waiver of any of its rights
under the Note or Security Agreement.
12. Governing Law; Arbitration
This Agreement and the provisions herein contained shall be governed exclusively
by, and construed and interpreted exclusively in accordance with the laws of the
State of Mississippi. The parties agree to arbitrate any disputes hereunder in
accordance with paragraph 10 of the Purchase Agreement.
13. Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one and the same
instrument.
14, Further Assurances
Each of the parties shall execute and deliver, at its own expense, such further
instruments of transfer and conveyance, documents and certificates as may be
reasonably required for it to consummate all of the matters contemplated by this
Agreement.
IN WITNESS THEREOF, the parties have duly executed this Agreement as of the date
first written above.
4
<PAGE>
DIGITEC 2000 INC.
By: /s/ Frank C. Magliato
-----------------------------
Name: Frank C. Magliato
-----------------------------
Title: President
-----------------------------
TECLINK, INC.
By: /s/ Suzanne J. Wilkinson
-----------------------------
Name: Suzanne J. Wilkinson
-----------------------------
Title: President
-----------------------------
5
<PAGE>
EXHIBIT A
PAYMENTS MADE UNDER THE NOTE AND REMAINING BALANCE DUE UNDER THE NOTE
<PAGE>
EXHIBIT A
Promissory Note $2,405,000
----------
Payments:
November, 1996 100,000
November, 1996 100,000
November, 1996 100,000
----------
300,000
----------
Outstanding Principal ----------
Balance, May 31, 1997 $2,105,000
Accrued Interest:
August 1, 1996 to November 1, 1996 36,075
November 2, 1996 to May 31, 1997 73,675
Outstanding Principal ----------
and Interest - May 31, 1997 $2,214,750
==========
<PAGE>
EXHIBIT B
ASSETS TRANSFERRED
<PAGE>
EXHIBIT B
ASSETS TRANSFERRED
Cash:
Petty Cash 607
Cash - Citibank 0
Cash - TNB Operating 0
Cash - Palm Beach 0
Cash - TNB - A/P Disb 0
Cash - TNB - Payroll 0
Cash - Bank Draft Clearing 0
Cash - Savings 0
-----------
607
-----------
Accounts Receivable 177,964
Less: Reserve (59,404)
-----------
118,560
-----------
-----------
Inventory 197,550
-----------
-----------
Prepaid expenses 2,714
-----------
Property and Equipment:
Servers 32,634
Routers 18,848
Total Controls 105,000
Other Communications equipment 17,134
Furnitures and Fixtures 23,246
Office Computers 167,179
Other Office equipment 410
Software 10,754
Accumulated Depreciation 0
Reserve (20,000)
-----------
Total - Property and Equipment 355,204
-----------
Intangibles: -----------
Customer List 598,261
-----------
Deposits 5,000
-----------
Total Assets $ 1,277,895
===========
<PAGE>
WARRANTY BILL OF SALE AND ASSIGNMENT AGREEMENT
FROM
TECLINK, INC. TO/AND BETWEEN DigiTEC 2000, Inc., Nevada corporation
Effective Date: June 1, 1997
1. Transfer
KNOW ALL MEN BY THESE PRESENTS, that Teclink, Inc. ("Seller"), for the
consideration set forth in that certain Note Satisfaction and Related Agreements
of even date herewith, the receipt and sufficiency of which is hereby
acknowledged, has this day sold, conveyed, transferred and assigned, and by
these presents does hereby sell, convey, transfer and assign to DigiTEC 2000,
Inc., a Nevada corporation ("Buyer"), its successors and assigns forever, all of
Seller's right, title and interest in, to and under all the assets of its
business, whether real, personal, tangible or intangible, including without
limitation the assets listed on Exhibit A attached hereto (the "Assets").
TO HAVE AND TO HOLD, all said Assets hereby sold, conveyed, transferred and
assigned to the Buyer for its own use, benefit and behalf forever.
2. Good Title
Seller hereby warrants to the Buyer and to its successors and assigns that there
in hereby transferred to Buyer good title to the Assets, free and clear of all
liens or other encumbrances and that it will warrant and defend such title
forever against all claims and demands whatsoever. Seller acknowledges and
agrees that Buyer has not assumed any liabilities of Seller.
3. Appointment as Attorneys
For the consideration aforesaid, the Seller hereby constitutes and appoints the
Buyer, its successors and assigns, the true and lawful attorneys for the Seller,
with full power of substitution, in the name of the Seller, but on behalf of and
for the benefit of the Buyer, (a) to institute and prosecute, in the name of the
Seller or otherwise, all proceedings which the Buyer may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in or to the
Assets, (b) to defend and compromise any and all actions, suits or proceeding in
respect of any of the Assets, except with respect to any claim, action, suit or
proceeding in respect of the Assets the liability for which has been retained by
the Seller, and (c) to do all such acts and things in relation thereto as the
Buyer shall deem advisable. The Seller hereby declares that the foregoing powers
are coupled with an interest and shall be revocable by the Seller or by its
dissolution or in any manner or for any reason.
4. Further Assurances
For the consideration aforesaid, the Seller, for itself, its successors and
assigns has covenanted and by this Warranty Bill of Sale and Assignment and
Related Agreements does covenant with the Buyer, its successors and assigns,
that the Seller, its successors and assigns, will do, execute and deliver, or
will cause to be done, executed and delivered, all such further acts, documents
or instruments of transfer, conveyance or assignment as shall be necessary and
appropriate to vest in or confirm to the Buyer, its successors and assigns, all
and singular, the Assets hereby assigned and transferred which the Buyer, its
successors and assigns, reasonably require.
<PAGE>
5. Authority
Each party represents and warrants that it has the requisite corporate power and
authority to enter into this Warranty Bill of Sale and Assignment Agreement and
to undertake its obligations hereunder, and that this Warranty Bill of Sale and
Assignment Agreement has been executed and delivered by a duly authorized
officer, and is the binding obligation of such party enforceable in accordance
with its terms.
6. Governing Law
This Warranty Bill of Sale and Assignment Agreement shall be governed
exclusively by, and construed and interpreted exclusively in accordance with the
laws of the State of Mississippi. The parties agree to arbitrate any disputes
hereunder in accordance with paragraph 10 of the Purchase Agreement (as defined
in the Note Satisfaction and Related Agreements.
2
<PAGE>
IN WITNESS WHEREOF, this Warranty Bill of Sale and Assignment Agreement
has been duly executed on behalf of the Seller by its President and attested by
its Secretary this 1st day of June, 1997.
TECLINK, INC.
By: /s/ Suzanne J. Wilkinson
--------------------------------
Name: Suzanne J. Wilkinson
Title: President
Attest:
/s/ Suzanne J. Wilkinson
- --------------------------------
Name: Suzanne J. Wilkinson
Title: Secretary
<PAGE>
IN WITNESS WHEREOF, this Warranty Bill of Sale and Assignment and Related
Agreements has been duly executed on behalf of the Buyer by its President and
attested by its Secretary this 1 day of June, 1997.
DIGITEC 2000, INC.
By: /s/ Frank C. Magliato
--------------------------------
Name: Frank C. Magliato
Title: President
Attest:
/s/ Diego Roca
- --------------------------------
Name: Diego Roca
Title: Secretary
<PAGE>
EXHIBIT A TO WARRANTY BILL OF SALE AND ASSIGNMENT AGREEMENT
DESCRIPTION OF ASSETS SOLD
<PAGE>
EXHIBIT D
ASSUMED LIABILITIES
<PAGE>
EXHIBIT D
LIABILITIES ASSUMED
Accounts Payable 267,971
Other Liabilities 245,154
--------
Total Liabilities $513,125
========
<PAGE>
EXHIBIT E
AMOUNT OF NOTE SATISFIED UNDER THIS AGREEMENT
<PAGE>
WORLD ACCESS
ACQUIRED OTHER LIABILITIES
MAY 31, 1997
Micro Age Note Payable $ 69,213
0
0
Due to DigiTEC 2000, Inc. 0
Other 5,268
Netscape Accounts Payable 25,409
Accrued TOWP 15,495
Accrued Payroll Tax Liability 129,769
--------
$245,154
========
<PAGE>
EXHIBIT E
Promissory Note $2,405,000
----------
Payments:
November, 1996 100,000
November, 1996 100,000
November, 1996 100,000
----------
300,000
----------
Outstanding Principal ----------
Balance, May 31, 1997 $2,105,000
Accrued Interest:
August 1, 1996 to November 1, 1996 36,075
November 2, 1996 to May 31, 1997 73,675
Outstanding Principal ----------
and Interest - May 31, 1997 $2,214,750
Net Assets Acquired (1) 764,770
----------
Amount considered outstanding $1,449,980
==========
(1) If DigiTEC 2000, Inc. sells such assets within six months from June
1, 1997, any difference in value from such sale will be used to adjust
this amount.
The borrower hereby grants an assignment of proceeds received from any
settlement from the Hughes Case equal to the outstanding balance of the Note.
Any proceeds received greater than the outstanding balance of the note will
become the Borrower's property without any encumbrances from DigiTEC 2000, Inc.
INDEPENDENT DISTRIBUTOR AGREEMENT
THIS INDEPENDENT DISTRIBUTOR AGREEMENT (this "Agreement") is made and
entered into as of the 25th day of September, 1997 (the "Effective Date"), by
and between PREMIERE COMMUNICATIONS, INC., a Florida corporation ("Premiere"),
and DIGITEC 2000, INC., a Nevada corporation ("Distributor").
WITNESSETH:
WHEREAS, Distributor desires to purchase from Premiere prepaid telephone
cards with a retail value of Six Million Dollars ($6,000,000.00) (the "Cards"),
and to market and sell such Cards to individuals and business customers
(hereinafter referred to collectively as "Customers" and individually, as a
"Customer") so that such Customers may access the services listed on Exhibit A
attached hereto (the "Services"); and
WHEREAS, the Cards will be marketed under the names "F/X Mexico" (the "F/X
Card") and "DigiTEC Direct" (the "DigiTEC Card"), for the prices set forth on
Exhibit A attached hereto;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and intending to be legally bound by this Agreement, Premiere
and Distributor agree as follows:
1. RELATIONSHIP
a. Premiere appoints Distributor, and Distributor accepts such
appointment, as its non-exclusive distributor for the sale to
Customers of the Cards.
b. This Agreement does not create an employment agreement, joint
venture or partnership between the parties hereto, and neither party
has any right nor any authority to act on behalf of the other beyond
that expressly granted herein. Distributor shall conduct its
business at its own initiative, responsibility and expense.
c. During the term of this Agreement and thereafter, Premiere reserves
the right, without obligation or liability to Distributor for
payment of compensation or otherwise, to market the Services,
whether through its own representatives, through other independent
representative(s) or otherwise.
<PAGE>
2. TERM
a. This Agreement shall become effective as of the Effective Date and
shall continue in effect until the later of (i) six (6) months after
the date the last batch of Cards is activated and (ii) one (1) year
after the Effective Date.
b. Either party may terminate this Agreement (i) if the other party
becomes insolvent, makes an assignment for the benefit of creditors
or files a petition for reorganization under bankruptcy law; (ii) if
a petition in bankruptcy is filed by or against the other party and
not dismissed within sixty (60) days thereafter; or (iii) if the
other party is in breach of a material term or provision of this
Agreement and such material breach or default is not cured within
thirty (30) days after the other party receives notice of such
breach or default.
3. COMMISSIONS. Distributor hereby purchases the Cards from Premiere for an
amount equal to Six Million Dollars ($6,000,000.00), which shall be paid
for by the delivery of a Promissory Note in the form attached hereto as
Exhibit B (the "Note"), Premiere shall pay Distributor commissions
("Commissions") equal to thirty-eight and one-half percent (38.5%) of the
retail value of each F/X Card sold by Distributor and forty-one and
three-quarters percent (41.75%) of the retail value of each DigiTEC Card
sold by Distributor. The Commission on the sale of a Card shall be
considered paid to Distributor at the time Distributor makes a prepayment
under the Note with respect to such Card, in which case Distributor shall
be considered to have paid to Premiere under the Note the full retail
value of such Card, and Premiere shall be considered to have paid the
Commission to Distributor.
4. DISTRIBUTOR'S RESPONSIBILITIES. Distributor agrees to:
a. Market the Cards in accordance with the prices set forth on Exhibit
A attached hereto.
b. Provide customer service to Customers.
c. Maintain documents and records ("Records") relating to the sales of
Cards to Customers for a period of not less than twelve (12) months
or such other longer period as may be required by applicable law,
rule or regulation, and produce such documents, with the exception
of customer lists, within a reasonable period of time upon request
of Premiere.
2
<PAGE>
d. Deliver to Premiere exemption certificates with respect to
applicable state sales and use taxes and federal excise and
communications taxes on the sale of the Cards.
e. Cooperate in the collection, compilation and maintenance of data
required to be reported by Premiere or its shareholders pursuant to
any federal regulation order.
5. PREMIERE'S RESPONSIBILITIES. Premiere agrees to:
a. Provide two (2) 800 numbers to Distributor, one in English and one
in Spanish, for Customers to access the Services.
b. The Services shall be available to Customers twenty-four (24) hours
a day, seven days a week.
c. Distributor understands that the availability of service depends
solely upon third party providers, and Premiere neither warrants nor
is responsible for the performance or acts of those third party
service providers. Service providers frequently add, delete, change
and reconfigure or re-tariff their products or services, and
Premiere cannot warrant their performance or the continued provision
of third party provided services.
6. USE OF NAMES. Distributor shall provide to Premiere for its prior review
and written approval, all promotions, advertising or other materials using
or displaying the name of Premiere.
7. CONFIDENTIAL INFORMATION
a. The parties understand and agree that the terms and conditions of
this Agreement, all documents referenced herein, communications
between the parties regarding this Agreement or the Services
described herein (including price quotes for any Services provided
to Customers), and Customer and account information (collectively
"Confidential Information") are confidential as between Distributor
and Premiere.
b. A party shall not disclose Confidential Information unless subject
to discovery or disclosure pursuant to a law, rule, regulation or
legal process, or to any other party other than the directors,
officers and employees of a party or distributors of a party
including their respective investment bankers, lenders, lawyers,
accountants, insurance carriers or prospective purchasers who have
agreed not to disclose such Confidential Information.
3
<PAGE>
Violation by a party or its distributors of the foregoing provisions
shall entitle the non-disclosing party, at its option, to obtain
injunctive relief without a showing of irreparable harm or injury
and without bond.
c. The parties further agree that any press release, advertisement or
publication generated by a party regarding this Agreement, Cards or
the Services or in which a party desires to mention the name of the
other party or the other party's parent or affiliated company(ies),
will be submitted to the non-publishing party for its written
approval prior to publication.
d. The provisions of this Section 7 shall be effective as of the
Effective Date and shall remain in full force and effect during the
period of this Agreement and for a period of one (1) year after
termination of this Agreement.
e. After the expiration of this Agreement or the termination of this
Agreement by either party for any reason, upon request of a party,
the other party shall return to the requesting party any physical or
written records containing Confidential Information of the
requesting party then in its possession.
8. INDEMNIFICATION
a. Distributor agrees to indemnify and hold Premiere harmless from any
and all claims, actions, damages, expenses and other liabilities,
including reasonable attorneys' fees and costs of litigation,
resulting from Distributor's acts, omissions or misrepresentations
in violation of this Agreement.
b. Premiere agrees to indemnify and hold Distributor harmless from any
and all claims, actions, damages, expenses and other liabilities,
including reasonable attorneys' fees and the costs of litigation,
resulting from Premiere's acts, omissions or misrepresentations in
violation of this Agreement.
9. LIMITED LIABILITY. IN NO EVENT WILL A PARTY'S PERFORMANCE OF FAILURE TO
PERFORM ITS OBLIGATIONS HEREUNDER RESULT IN SUCH PARTY'S LIABILITY TO THE
OTHER PARTY OR ANY THIRD PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
PUNITIVE OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING WITHOUT LIMITATION,
LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS, LOSS OF GOODWILL OR LOSS OF
BASED ON ANY THEORY OR TORT, BREACH OF CONTRACT OR STATUTE OF WHETHER AT
LAW OR IN EQUITY.
4
<PAGE>
10. Termination. Either party may terminate this Agreement if the other party
is in breach or default of a material term or provision of this Agreement
and such material breach or default is not cured within three (3) days
after the other party receives notice of such breach or default.
11. GENERAL PROVISIONS
a. Assignment. Distributor may not assign this Agreement in whole or in
part without the prior written consent of Premiere, which may be
given or withheld in the sole discretion of Premiere; provided, that
Distributor may enter into agreements to market and sell the Cards.
b. Amendment. This Agreement can be modified only by a written
amendment signed Distributor and Premiere and shall not be modified
or supplemented by any course of dealing or trade usage.
c. Force Majeure. Neither party shall be held liable for any delay or
failure in performance of any part of this Agreement because of
circumstances beyond its control such as acts of God, acts of civil
or military authorities, cable cuts, embargoes, epidemics, war,
terrorist acts, riots, insurrections, fire, explosions, earthquakes,
nuclear accidents, floods, or other major environmental
disturbances, power blackouts, strikes, or from any other cause of
whatsoever kind arising without its actual fault.
d. Choice of Law; Forum Selection. This Agreement is governed by the
laws of the State of Georgia without regard to choice of law
principles. Any legal action or proceeding with respect to this
Agreement may only be brought in the Courts of the State of Georgia
in and for the County of Fulton or the United States of America in
the Northern District of Georgia.
e. Agency Orders. All obligations under this Agreement shall be subject
to legislation and to valid and applicable government agency orders,
regulations, tariff provisions, and decisions and orders of courts
of competent jurisdiction.
f. Severability. Both parties agree that it is not the intention of
either party to violate public policy, state or federal statutory or
common laws, and that if any sentence, paragraph, clause or
combination thereof in this Agreement is in violation of the same,
such paragraph, clause or sentence, or combination of the same shall
be inoperative, and the remainder of this Agreement shall remain
binding upon the parties hereto.
g. Authority. Each party represents and warrants that it has the
requisite corporate power and authority to enter into this Agreement
and undertake
5
<PAGE>
its obligations hereunder, and that this Agreement has been executed
and delivered by its duly authorized officer, and is the binding
obligation of such party enforceable in accordance with its terms.
h. Notice. All notices, requests, or other communications under this
Agreement shall be in writing and shall be deemed to have been duly
given when delivered in person or deposited in the United States
Mail, certified or registered, return receipt requested, or
nationally recognized overnight mail service, addressed as follows:
To Premiere: Premiere Communications, Inc.
3399 Peachtree Road, N.E.
The Lenox Bldg., Suite 400
Atlanta, GA 30326
Attention: Patrick G. Jones
To Distributor: DigiTEC 2000, Inc.
8 West 38th Street
5th Floor
New York, NY 10018
Attention: Frank C. Magliato
i. Entire Agreement. This Agreement, including Exhibits A and B
attached hereto, constitutes the complete statement of the
understandings between The parties regarding the subject matter
hereof and supersedes all proposals and prior agreements (oral or
written) between the parties relating thereto.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
PREMIERE COMMUNICATIONS, INC. DIGITEC 2000, INC.
By /s/ Patrick Jones By /s/ Frank Magliato
---------------------------- ----------------------------
Title: Sr. V.P. Title: Pres.
------------------------- -------------------------
<PAGE>
The Services consist of domestic and international long distance to the
countries set forth on pages A-2 through A-9. The prices for the FX Card are set
forth on pages A-2 through A-5, and the prices for the DigiTEC Card are set
forth on pages A-6 through A-9. All prices are based on whole minute billing.
EXHIBIT A
<PAGE>
PLAN COUNTRYCOD COUNTRY BASE1STMIN BASEMIN
2 930 AFGHANISTAN 0.00 0.00
2 355 ALBANIA 0.89 0.99
2 213 ALGERIA 0.99 0.99
2 684 AMERICAN SAMOA 1.09 0.99
2 336 ANDORRA 0.49 0.99
2 244 ANGOLA 1.29 0.99
2 809497 ANGUILLA 0.59 0.99
2 672 ANTARCTICA/NORFOLK/CHRISTMS IS 0.00 0.00
2 268 ANTIGUA 0.57 0.99
2 54 ARGENTINA 0.79 0.99
2 374 ARMENIA 0.00 0.00
2 297 ARUBA 0.79 0.99
2 247 ASCENSION ISLAND 1.69 0.99
2 61 AUSTRALIA 0.39 0.99
2 43 AUSTRIA 0.55 0.99
2 994 AZERBAIJAN 1.29 0.99
2 242 BAHAMAS 0.39 0.99
2 973 BAHRAIN 0.99 0.99
2 880 BANGLADESH 1.55 0.99
2 246 BARBADOS 0.69 0.99
2 375 BELARUS 1.29 0.99
2 32 BELGIUM 0.29 0.99
2 501 BELIZE 0.99 0.99
2 229 BENIN 1.50 0.99
2 441 BERMUDA 0.49 0.99
2 975 BHUTAN 1.89 0.99
2 591 BOLIVIA 0.99 0.99
2 387 BOSNIA/HERZEGOVINA 0.85 0.99
2 267 BOTSWANA 1.39 0.99
2 55 BRAZIL 0.79 0.99
2 809494 BRITISH VIRGIN ISLANDS 0.69 0.99
2 673 BRUNEI 1.49 0.99
2 359 BULGARIA 0.89 0.99
2 226 BURKINA FASO 1.89 0.99
2 257 BURUNDI 3.29 0.99
2 855 CAMBODIA 2.07 0.99
2 237 CAMEROON 1.43 0.99
2 204 CANADA 0.29 0.99
2 238 CAPE VERDE ISLANDS 1.32 0.99
2 809555 CARRIBEAN DIRECTORY ASSISTANCE 0.00 0.00
2 345 CAYMAN ISLANDS 0.59 0.99
2 236 CENTRAL AFRICAN REPUBLIC 3.58 0.99
2 235 CHAD REPUBLIC 3.29 0.99
2 56 CHILE 0.69 0.99
2 86 CHINA 0.99 0.99
2 57 COLOMBIA 0.65 0.99
2 269 COMOROS 0.00 0.00
2 242 CONGO 0.00 0.00
2 682 COOK ISLAND 0.00 0.00
2 506 COSTA RICA 0.79 0.99
2 385 CROATIA 0.89 0.99
2 53 CUBA 0.85 0.99
2 357 CYPRUS 0.99 0.99
2 42 CZECH/SLOVAKIA 0.59 0.99
2 45 DENMARK 0.29 0.99
2 246 DIEGO GARCIA 1.69 0.99
2 253 DJIBOUTI 1.89 0.99
2 767 DOMINICA 0.59 0.99
A-2
<PAGE>
2 809208 DOMINICAN REPUBLIC 0.45 0.99
2 593 ECUADOR 0.69 0.99
2 20 EGYPT 0.95 0.99
2 503 EL SALVADOR 0.69 0.99
2 240 EQUATORIAL GUINEA 3.25 0.99
2 291 ERITREA 2.49 0.99
2 372 ESTONIA 0.79 0.99
2 251 ETHIOPIA 1.73 0.99
2 298 FAEROE ISLANDS 0.85 0.99
2 500 FALKLAND ISLANDS 2.94 0.99
2 679 FIJI ISLANDS 1.99 0.99
2 358 FINLAND 0.49 0.99
2 33 FRANCE 0.39 0.99
2 596 FRENCH ANTILLES 1.19 0.99
2 594 FRENCH GUIANA 0.00 0.00
2 689 FRENCH POLYNESIA 0.00 0.00
2 241 GABON REPUBLIC 0.00 0.00
2 220 GAMBIA 1.31 0.99
2 995 GEORGIA 1.17 0.99
2 49 GERMANY 0.29 0.99
2 233 GHANA 0.89 0.99
2 350 GIBRALTAR 1.47 0.99
2 30 GREECE 0.79 0.99
2 299 GREENLAND 0.83 0.99
2 809407 GRENADA 0.69 0.99
2 590 GUADALOUPE 0.89 0.99
2 671 GUAM 0.29 0.99
2 5399 GUANTANAMO BAY 0.00 0.00
2 502 GUATEMALA 0.69 0.99
2 224 GUINEA, PEOPLES REPUBLIC OF 2.19 0.99
2 245 GUINEA-BISSAU 1.99 0.99
2 592 GUYANA 1.29 0.99
2 509 HAITI 0.69 0.99
2 504 HONDURAS 0.89 0.99
2 852 HONG KONG 0.39 0.99
2 36 HUNGARY 0.59 0.99
2 354 ICELAND 0.79 0.99
2 91 INDIA 0.85 0.99
2 62 INDONESIA 0.99 0.99
2 871 INMARSAT-ALL REGIONS 0.00 0.00
2 98 IRAN 1.29 0.99
2 964 IRAQ 1.49 0.99
2 353 IRELAND 0.59 0.99
2 972 ISRAEL 0.85 0.99
2 39 ITALY 0.49 0.99
2 225 IVORY COAST 1.39 0.99
2 809202 JAMAICA 0.69 0.99
2 81 JAPAN 0.39 0.99
2 962 JORDAN 0.89 0.99
2 254 KENYA 1.12 0.99
2 686 KIRIBATI 1.39 0.99
2 650 KOREA, NORTH 2.99 0.99
2 82 KOREA, REPUBLIC OF (SOUTH) 0.49 0.99
2 965 KUWAIT 0.99 0.99
2 856 LAOS 1.59 0.99
2 371 LATVIA 0.89 0.99
2 961 LEBANON 1.39 0.99
2 266 LESOTHO 1.55 0.99
2 231 LIBERIA 0.79 0.99
2 218 LIBYA 0.99 0.99
A-3
<PAGE>
2 370 LITHUANIA 0.69 0.99
2 352 LUXEMBOURG 0.49 0.99
2 853 MACAU 1.13 0.99
2 389 MACEDONIA 1.45 0.99
2 261 MADAGASCAR 3.27 0.99
2 265 MALAWI 1.21 0.99
2 60 MALAYSIA 0.79 0.99
2 960 MALDIVES, REPUBLIC OF 2.99 0.99
2 223 MALI REPUBLIC 2.39 0.99
2 356 MALTA 0.89 0.99
2 692 MARSHALL ISLANDS 1.65 0.99
2 222 MAURITANIA 2.18 0.99
2 230 MAURITIUS 2.31 0.99
2 2696 MAYOTTE IS 1 79 0.99
2 52161 MEXICO-ZONE 1 0.17 0.99
2 52862 MEXICO-ZONE 2 0.24 0.99
2 52632 MEXICO-ZONE 3 0.34 0.99
2 52140 MEXICO-ZONE 4 0.39 0.99
2 52123 MEXICO-ZONE 5 0.39 0.99
2 52120 MEXICO-ZONE 6 0.39 0.99
2 5210 MEXICO-ZONE 7 0.39 0.99
2 52232 MEXICO-ZONE 8 0.39 0.99
2 691 MICRONESIA 1.87 0.99
2 373 MOLDOVA 1.62 0.99
2 3393 MONACO 0.00 0.00
2 976 MONGOLIA 2.72 0.99
2 664 MONTSERRAT 0.59 0.99
2 212 MOROCCO 0.89 0.99
2 258 MOZAMBIQUE 1.60 0.99
2 95 MYANAMAR/BURMA 0.00 0.00
2 264 NAMIBIA 1.40 0.99
2 674 NAURU 1.60 0.99
2 977 NEPAL 1.98 0.99
2 31 NETHERLANDS 0.35 0.99
2 599 NETHERLANDS ANTILLES 0.44 0.99
2 809469 NEVIS 0.59 0.99
2 687 NEW CALEDONIA 1.51 0.99
2 64 NEW ZEALAND 0.39 0.99
2 505 NICARAGUA 0.89 0.99
2 227 NIGER REPUBLIC 1.89 0.99
2 234 NIGERIA 0.79 0.99
2 683 NIUE ISLAND 1.89 0.99
2 47 NORWAY 0.49 0.99
2 968 OMAN 2.05 0.99
2 92 PAKISTAN 1.19 0.99
2 680 PALAU REPUBLIC 2.70 0.99
2 507 PANAMA 0.89 0.99
2 675 PAPUA NEW GUINEA 1.15 0.99
2 595 PARAGUAY 0.99 0.99
2 51 PERU 0.89 0.99
2 63 PHILIPPINES 0.89 0.99
2 48 POLAND 0.69 0.99
2 351 PORTUGAL 0.69 0.99
2 787 PUERTO RICO 0.25 0.99
2 974 QATAR 1.35 0.99
2 262 REUNION ISLAND 2.62 0.99
2 40 ROMANIA 0.89 0.99
2 7 RUSSIA 0.79 0.99
2 250 RWANDA 2.28 0.99
2 290 SAINT HELENA 2.92 0.99
A-4
<PAGE>
2 809465 SAINT KITTS 0.69 0.99
2 758 SAINT LUCIA 0.69 0.99
2 508 SAINT PIERRE/MIQUELON 0.69 0.99
2 809456 SAINT VINCENT 0.69 0.99
2 670 SAIPAN 0.69 0.99
2 378 SAN MARINO 0.89 0.99
2 239 SAO TOME 1.39 0.99
2 966 SAUDI ARABIA 0.99 0.99
2 221 SENEGAL REPUBLIC 1.69 0.99
2 248 SEYCHELLES ISLANDS 2.31 0.99
2 232 SIERRA LEONE 1.83 0.99
2 65 SINGAPORE 0.39 0.99
2 386 SLOVENIA 0.98 0.99
2 677 SOLOMON ISLANDS 1.49 0.99
2 252 SOMALIA 0.00 0.00
2 27 SOUTH AFRICA 0.69 0.99
2 34 SPAIN 0.59 0.99
2 94 SRI LANKA 1.29 0.99
2 249 SUDAN 1.99 0.99
2 597 SURINAME 1.39 0.99
2 268 SWAZILAND 1.39 0.99
2 46 SWEDEN 0.39 0.99
2 41 SWITZERLAND 0.39 0.99
2 963 SYRIA 1.89 0.99
2 886 TAIWAN 0.49 0.99
2 255 TANZANIA 1.69 0.99
2 66 THAILAND 0.99 0.99
2 228 TOGO, REPUBLIC OF 1.75 0.99
2 676 TONGA ISLANDS 2.02 0.99
2 809619 TRINIDAD & TOBAGO 0.69 0.99
2 216 TUNISIA 1.19 0.99
2 90 TURKEY 0.69 0.99
2 809941 TURKS/CAICOS ISLANDS 0.59 0.99
2 688 TUVALU 2.09 0.99
2 256 UGANDA 1.47 0.99
2 380 UKRAINE 0.99 0.99
2 971 UNITED ARAB EMIRATES 0.79 0.99
2 44 UNITED KINGDOM 0.39 0.99
2 598 URUGUAY 0.89 0.99
2 678 VANUATU 1.58 0.99
2 58 VENEZUELA 0.49 0.99
2 84 VIETNAM 1.49 0.99
2 809513 VIRGIN ISLANDS 0.00 0.00
2 681 WALLIS AND FUTINA 0.29 0.99
2 685 WESTERN SAMOA 1.76 0.99
2 967 YEMEN ARAB REPUBLIC 0.89 0.99
2 243 ZAIRE 1.49 0.99
2 260 ZAMBIA 0.00 0.00
2 263 ZIMBABWE 0.00 0.00
2 690 TOKELAU 0.00 0.00
2 379 VATICAN CITY 0.00 0.00
2 381 YUGOSLOVIA 0.89 0.99
A-5
<PAGE>
PLAN COUNTRYCOD COUNTRY BASE1STMIN BASEMIN
1 930 AFGHANISTAN 0.00 0.00
1 355 ALBANIA 0.00 0.00
1 213 ALGERIA 0.00 0.00
1 684 AMERICAN SAMOA 0.00 0.00
1 336 ANDORRA 0.00 0.00
1 244 ANGOLA 0.00 0.00
1 809497 ANGUILLA 1.58 0.59
1 672 ANTARCTICA/NORFOLK/CHRISTMS IS 0.00 0.00
1 268 ANTIGUA 1.56 0.57
1 54 ARGENTINA 1.58 0.59
1 374 ARMENIA 0.00 0.00
1 297 ARUBA 1.98 0.99
1 247 ASCENSION ISLAND 0.00 0.00
1 61 AUSTRALIA 1.28 0.29
1 43 AUSTRIA 1.54 0.55
1 994 AZERBAIJAN 0.00 0.00
1 242 BAHAMAS 1.28 0.29
1 973 BAHRAIN 0.00 0.00
1 880 BANGLADESH 0.00 0.00
1 246 BARBADOS 1.58 0.59
1 375 BELARUS 0.00 0.00
1 32 BELGIUM 1.28 0.29
1 501 BELIZE 1.98 0.99
1 229 BENIN 0.00 0.00
1 441 BERMUDA 0.00 0.00
1 975 BHUTAN 0.00 0.00
1 591 BOLIVIA 1.78 0.79
1 387 BOSNIA/HERZEGOVINA 0.00 0.00
1 267 BOTSWANA 0.00 0.00
1 55 BRAZIL 1.58 0.59
1 809494 BRITISH VIRGIN ISLANDS 1.58 0.59
1 673 BRUNEI 0.00 0.00
1 359 BULGARIA 0.00 0.00
1 226 BURKINA FASO 0.00 0.00
1 257 BURUNDI 0.00 0.00
1 855 CAMBODIA 0.00 0.00
1 237 CAMEROON 0.00 0.00
1 204 CANADA 0.46 0.18
1 238 CAPE VERDE ISLANDS 2.31 1.32
1 809555 CARRIBEAN DIRECTORY ASSISTANCE 0.00 0.00
1 345 CAYMAN ISLANDS 0.00 0.00
1 236 CENTRAL AFRICAN REPUBLIC 4.57 3.58
1 235 CHAD REPUBLIC 0.00 0.00
1 56 CHILE 1.58 0.59
1 86 CHINA 1.88 0.89
1 57 COLOMBIA 1.44 0.45
1 269 COMOROS 0.00 0.00
1 242 CONGO 0.00 0.00
1 682 COOK ISLAND 0.00 0.00
1 506 COSTA RICA 1.68 0.69
1 385 CROATIA 0.00 0.00
1 53 CUBA 1.48 0.49
1 357 CYPRUS 0.00 0.00
1 42 CZECH/SLOVAKIA 0.00 0.00
1 45 DENMARK 1.28 0.29
1 246 DIEGO GARCIA 0.00 0.00
1 253 DJIBOUTI 0.00 0.00
1 767 DOMINICA 1.58 0.59
A-6
<PAGE>
1 809208 DOMINICAN REPUBLIC 1.26 0.27
1 93 ECUADOR 1.58 0.59
1 20 EGYPT 1.94 0.95
1 503 EL SALVADOR 1.58 0.59
1 240 EQUATORIAL GUINEA 0.00 0.00
1 291 ERITREA 0.00 0.00
1 372 ESTONIA 0.00 0.00
1 251 ETHIOPIA 0.00 0.00
1 298 FAEROE ISLANDS 0.00 0.00
1 500 FALKLAND ISLANDS 0.00 0.00
1 679 FIJI ISLANDS 0.00 0.00
1 358 FINLAND 0.00 0.00
1 33 FRANCE 1.28 0.29
1 596 FRENCH ANTILLES 0.00 0.00
1 594 FRENCH GUIANA 0.00 0.00
1 689 FRENCH POLYNESIA 0.00 0.00
1 241 GABON REPUBLIC 0.00 0.00
1 220 GAMBIA 2.08 1.09
1 995 GEORGIA 0.00 0.00
1 49 GERMANY 1.28 0.29
1 233 GHANA 1.88 0.89
1 350 GIBRALTAR 0.00 0.00
1 30 GREECE 1.68 0.69
1 299 GREENLAND 0.00 0.00
1 809407 GRENADA 1.68 0.69
1 590 GUADALOUPE 1.88 0.89
1 671 GUAM 0.00 0.00
1 5399 GUANTANAMO BAY 0.00 0.00
1 502 GUATEMALA 1.58 0.59
1 224 GUINEA, PEOPLES REPUBLIC OF 0.00 0.00
1 245 GUINEA-BISSAU 0.00 0.00
1 592 GUYANA 2.28 1.29
1 509 HAITI 1.48 0.49
1 504 HONDURAS 1.78 0.79
1 852 HONG KONG 1.28 0.29
1 36 HUNGARY 1.58 0.59
1 354 ICELAND 0.00 0.00
1 91 INDIA 1.68 0.69
1 62 INDONESIA 1.98 0.99
1 871 INMARSAT-ALL REGIONS 0.00 0.00
1 98 IRAN 0.00 0.00
1 964 IRAQ 0.00 0.00
1 353 IRELAND 1.38 0.39
1 972 ISRAEL 1.78 0.79
1 39 ITALY 1.38 0.39
1 225 IVORY COAST 2.38 1.39
1 809202 JAMAICA 1.44 0.45
1 81 JAPAN 1.28 0.29
1 962 JORDAN 1.88 0.89
1 254 KENYA 2.11 1.12
1 686 KIRIBATI 0.00 0.00
1 850 KOREA, NORTH 0.00 0.00
1 82 KOREA, REPUBLIC OF (SOUTH) 1.48 0.49
1 965 KUWAIT 1.98 0.99
1 856 LAOS 0.00 0.00
1 371 LATVIA 0.00 0.00
1 961 LEBANON 0.00 0.00
1 266 LESOTHO 0.00 0.00
1 231 LIBERIA 0.00 0.00
1 218 LIBYA 0.00 0.00
A-7
<PAGE>
1 370 LITHUANIA 1.68 0.69
1 352 LUXEMBOURG 0.00 0.00
1 853 MACAU 0.00 0.00
1 389 MACEDONIA 0.00 0.00
1 261 MADAGASCAR 0.00 0.00
1 265 MALAWI 0.00 0.00
1 60 MALAYSIA 1.78 0.79
1 960 MALDIVES, REPUBLIC OF 0.00 0.00
1 223 MALI REPUBLIC 0.00 0.00
1 356 MALTA 0.00 0.00
1 692 MARSHALL ISLANDS 0.00 0.00
1 222 MAURITANIA 0.00 0.00
1 230 MAURITIUS 0.00 0.00
1 2696 MAYOTTE IS 0.00 0.00
1 52161 MEXICO-ZONE 1 1.44 0.45
1 52862 MEXICO-ZONE 2 1.44 0.45
1 52632 MEXICO-ZONE 3 1.44 0.45
1 52140 MEXICO-ZONE 4 1.44 0.45
1 52123 MEXICO-ZONE 5 1.44 0.45
1 52120 MEXICO-ZONE 6 1.44 0.45
1 5210 MEXICO-ZONE 7 1.44 0.45
1 52232 MEXICO-ZONE 8 1.44 0.45
1 691 MICRONESIA 0.00 0.00
1 373 MOLDOVA 0.00 0.00
1 3393 MONACO 0.00 0.00
1 976 MONGOLIA 0.00 0.00
1 664 MONTSERRAT 1.58 0.59
1 212 MOROCCO 1.88 0.89
1 258 MOZAMBIQUE 0.00 0.00
1 95 MYANAMAR/BURMA 0.00 0.00
1 264 NAMIBIA 0.00 0.00
1 674 NAURU 0.00 0.00
1 977 NEPAL 0.00 0.00
1 31 NETHERLANDS 1.34 0.35
1 599 NETHERLANDS ANTILLES 1.43 0.44
1 809469 NEVIS 1.58 0.59
1 687 NEW CALEDONIA 0.00 0.00
1 64 NEW ZEALAND 1.38 0.39
1 505 NICARAGUA 1.88 0.89
1 227 NIGER REPUBLIC 0.00 0.00
1 234 NIGERIA 1.68 0.69
1 683 NIUE ISLAND 0.00 0.00
1 47 NORWAY 1.38 0.39
1 968 OMAN 0.00 0.00
1 92 PAKISTAN 1.78 0.79
1 680 PALAU REPUBLIC 0.00 0.00
1 507 PANAMA 1.78 0.79
1 675 PAPUA NEW GUINEA 0.00 0.00
1 595 PARAGUAY 1.98 0.99
1 51 PERU 1.78 0.79
1 63 PHILIPPINES 1.58 0.59
1 48 POLAND 1.58 0.59
1 351 PORTUGAL 1.68 0.69
1 787 PUERTO RICO 0.46 0.18
1 974 QATAR 0.00 0.00
1 262 REUNION ISLAND 0.00 0.00
1 40 ROMANIA 1.88 0.89
1 7 RUSSIA 1.68 0.69
1 250 RWANDA 1.88 0.89
1 290 SAINT HELENA 0.00 0.00
A-8
<PAGE>
1 809465 SAINT KITTS 0.00 0.00
1 758 SAINT LUCIA 1.58 0.59
1 508 SAINT PIERRE/MIQUELON 0.00 0.00
1 809456 SAINT VINCENT 1.58 0.59
1 670 SAIPAN 0.00 0.00
1 378 SAN MARINO 0.00 0.00
1 239 SAO TOME 0.00 0.00
1 966 SAUDI ARABIA 0.00 0.00
1 221 SENEGAL REPUBLIC 2.68 1.69
1 248 SEYCHELLES ISLANDS 0.00 0.00
1 232 SIERRA LEONE 0.00 0.00
1 65 SINGAPORE 1.28 0.29
1 386 SLOVENIA 0.00 0.00
1 677 SOLOMON ISLANDS 0.00 0.00
1 252 SOMALIA 0.00 0.00
1 27 SOUTH AFRICA 1.68 0.69
1 34 SPAIN 1.48 0.49
1 94 SRI LANKA 0.00 0.00
1 249 SUDAN 0.00 0.00
1 597 SURINAME 0.00 0.00
1 268 SWAZILAND 0.00 0.00
1 46 SWEDEN 1.28 0.29
1 41 SWITZERLAND 1.28 0.29
1 963 SYRIA 0.00 0.00
1 886 TAIWAN 1.38 0.39
1 255 TANZANIA 0.00 0.00
1 66 THAILAND 1.88 0.89
1 228 TOGO, REPUBLIC OF 0.00 0.00
1 676 TONGA ISLANDS 0.00 0.00
1 809619 TRINIDAD & TOBAGO 1.58 0.59
1 216 TUNISIA 0.00 0.00
1 90 TURKEY 1.68 0.69
1 809941 TURKS/CAICOS ISLANDS 0.00 0.00
1 688 TUVALU 0.00 0.00
1 256 UGANDA 0.00 0.00
1 380 UKRAINE 0.00 0.00
1 971 UNITED ARAB EMIRATES 1.78 0.79
1 44 UNITED KINGDOM 1.28 0.29
1 598 URUGUAY 1.88 0.89
1 678 VANUATU 0.00 0.00
1 58 VENEZUELA 1.38 0.39
1 84 VIETNAM 0.00 0.00
1 809513 VIRGIN ISLANDS 0.00 0.00
1 681 WALLIS AND FUTINA 0.00 0.00
1 685 WESTERN SAMOA 0.00 0.00
1 967 YEMEN ARAB REPUBLIC 1.88 0.89
1 243 ZAIRE 0.00 0.00
1 260 ZAMBIA 0.00 0.00
1 263 ZIMBABWE 0.00 0.00
1 690 TOKELAU 0.00 0.00
1 379 VATICAN CITY 0.00 0.00
1 381 YUGOSLOVIA 0.00 0.00
A-9
<PAGE>
INDEPENDENT DISTRIBUTOR AGREEMENT
THIS INDEPENDENT DISTRIBUTOR AGREEMENT (this "Agreement") is made and
entered into us of the 26th day of September, 1997 (the "Effective Date"), by
and between PREMIERE COMMUNICATIONS, INC., a Florida corporation ("Premiere"),
and DIGITEC 2000, INC., a Nevada corporation ("Distributor").
WITNESSETH:
WHEREAS, Distributor desires to act as a distributor to market and sell
prepaid telephone cards with a retail value of Seventy-Five Million Dollars
($75,000,000.00) (the "Cards") to individuals and business customers
(hereinafter referred to collectively as "Customers" and individually as a
"Customer") so that such Customers may access the services listed on Exhibit A
attached hereto (the "Services"); and
WHEREAS, the Cards will be marketed under the names "F/X Mexico" (the "F/X
Card") and "DigiTEC Direct" (the "DigiTEC Card"), for the prices set forth on
Exhibit A attached hereto, and under such other names as designated by
Distributor;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and intending to be legally bound by this Agreement, Premiere
and Distributor agree as follows:
1. RELATIONSHIP
a. Premiere appoints Distributor, and Distributor accepts such
appointment, as its non-exclusive distributor for the sale to
Customers of the Cards.
b. This Agreement does not create an employment agreement, joint
venture or partnership between the parties hereto, and neither party
has any right nor any authority to act on behalf of the other beyond
that expressly granted herein. Distributor shall conduct its
business at its own initiative, responsibility and expense.
c. During the term of this Agreement and thereafter, Premiere reserves
the right, without obligation or liability to Distributor for
payment of compensation or otherwise, to market the Services,
whether through its
<PAGE>
own representatives, through other independent representative(s) or
otherwise.
2. TERM
a. This Agreement shall become effective as of the Effective Date and
shall continue in effect until the later of (i) six (6) months after
the date the last batch of Cards is activated and (ii) one (1) year
after the Effective Date.
b. Either party may terminate this Agreement (i) if the other party
becomes insolvent, makes an assignment for the benefit of creditors
or files a petition for reorganization under bankruptcy law; (ii) if
a petition in bankruptcy is filed by or against the other party and
not dismissed within sixty (60) days thereafter; or (iii) if the
other party is in breach of a material term or provision of this
Agreement and such material breach or default is not cured within
thirty (30) days after the other party receives notice of such
breach or default.
3. COMMISSIONS. Premiere shall pay Distributor commissions ("Commissions")
equal to thirty-eight and one-half percent (38.5%) of the retail value of
each F/X Card sold by Distributor and forty-one and three-quarters percent
(41.75%) of the retail value of each DigiTEC Card sold by Distributor, and
commissions on other Cards as mutually agreed to by Premiere and
Distributor. Commissions for the sale of Cards shall be paid to
Distributor at the time Distributor remits to Premiere an amount equal to
the retail value of such Cards, less the commissions on such Cards, and
the Commissions shall be paid to Distributor by Distributor retaining such
Commissions. Payments for the Cards shall be made pursuant to Exhibit B
attached hereto. Premiere may offset against Distributor's Commissions any
amounts that Distributor may owe to Premiere under this Agreement or any
other agreement. Starting January 1, 1998, Distributor agrees to sell
Cards with a retail value of at least Four Million Dollars ($4,000,000)
each month. In the event that Distributor has not sold all of the Cards by
August 31, 1998, then DigiTEC shall promptly pay to Premiere an amount
equal to the retail value of the unsold Cards less the Commissions that
would have been payable on such Cards.
4. DISTRIBUTOR'S RESPONSIBILITIES. Distributor agrees to:
a. Market the Cards, negotiate sales in accordance with the prices set
forth on Exhibit A attached hereto, and purchase and deliver the
Cards.
2
<PAGE>
b. Provide customer service to Customers.
c. Maintain documents and records ("Records") relating to the sales of
Cards to Customers for a period of not less than twelve (12) months
or such other longer period as may be required by applicable law,
rule or regulation, and produce such documents, with the exception
of customer lists, within a reasonable period of time upon request
of Premiere.
d. Deliver to Premiere exemption certificates with respect to
applicable state sales and use taxes and federal excise and
communications taxes on the sale of the Cards.
e. Cooperate in the collection, compilation and maintenance of data
required to be reported by Premiere or its shareholders pursuant to
any federal regulation order.
5. PREMIERE'S RESPONSIBILITIES. Premiere agrees:
a. To provide two (2) 800 numbers to Distributor, one in English and
one in Spanish, for Customers to access the Services.
b. That the Services shall be available to Customers twenty-four (24)
hours a day, seven days a week.
Distributor understands that the availability of service depends solely
upon third party providers, and Premiere neither warrants nor is
responsible for the performance or acts of those third party service
providers. Service providers frequently add, delete, change and
reconfigure or re-tariff their products or services, and Premiere cannot
warrant their performance or the continued provision of third party
provided services.
6. USE OF NAMES. Distributor shall provide to Premiere for its prior review
and written approval, all promotions, advertising or other materials using
or displaying the name of Premiere.
7. CONFIDENTIAL INFORMATION
a. The parties understand and agree that the terms and conditions of
this Agreement, all documents referenced herein, communications
between the parties regarding this Agreement or the Services
described herein
3
<PAGE>
(including price quotes for any Services provided to Customers), and
Customer and account information (collectively "Confidential
Information"), are confidential as between Distributor and Premiere.
b. A party shall not disclose Confidential Information unless subject
to discovery or disclosure pursuant to a law, rule, regulation or
legal process, or to any other party other than the directors,
officers and employees of a party or distributors of a party
including their respective investment bankers, lenders, lawyers,
accountants, insurance carriers or prospective purchasers who have
agreed not to disclose such Confidential Information. Violation by a
party or its distributors of the foregoing provisions shall entitle
the non-disclosing party, at its option, to obtain injunctive relief
without a showing of irreparable harm or injury and without bond.
c. The parties further agree that any press release, advertisement or
publication generated by a party regarding this Agreement, Cards or
the Services or in which a party desires to mention the name of the
other party or the other party's parent or affiliated company(ies),
will be submitted to the non-publishing party for its written
approval prior to publication.
d. The provisions of this Section 7 shall be effective as of the
Effective Date and shall remain in full force and effect during the
period of this Agreement and for a period of one (1) year after
termination of this Agreement.
e. After the expiration of this Agreement or the termination of this
Agreement by either party for any reason, upon request of a party,
the other party shall return to the requesting party any physical or
written records containing Confidential Information of the
requesting party then in its possession.
8. INDEMNIFICATION
a. Distributor agrees to indemnify and hold Premiere harmless from any
and all claims, actions, damages, expenses and other liabilities,
including reasonable attorneys' fees and costs of litigation,
resulting from Distributor's acts, omissions or misrepresentations
in violation of this Agreement.
b. Premiere agrees to indemnify and hold Distributor harmless from any
and all claims, actions, damages, expenses and other liabilities,
including reasonable attorneys' fees and the costs of litigation,
resulting from
4
<PAGE>
Premiere's acts, omissions or misrepresentations in violation of
this Agreement.
9. LIMITED LIABILITY. IN NO EVENT WILL A PARTY'S PERFORMANCE OF FAILURE TO
PERFORM ITS OBLIGATIONS HEREUNDER RESULT IN SUCH PARTY'S LIABILITY TO THE
OTHER PARTY OR ANY THIRD PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
PUNITIVE OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING WITHOUT LIMITATION,
LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS, LOSS OF GOODWILL OR LOSS OF
BASED ON ANY THEORY OR TORT, BREACH OF CONTRACT OR STATUTE OF WHETHER AT
LAW OR IN EQUITY.
10. Termination. Either party may terminate this Agreement if the other party
is in breach or default of a material term or provision of this Agreement
and such material breach or default is not cured within ten (10) days
after the other party receives notice of such breach or default.
11. GENERAL PROVISIONS
a. Assignment. Distributor may not assign this Agreement in whole or in
part without the prior written consent of Premiere, which may be
given or withheld in the sole discretion of Premiere; provided, that
Distributor may enter into agreements to market and sell the Cards.
b. Amendment. This Agreement can be modified only by a written
amendment signed Distributor and Premiere and shall not be modified
or supplemented by any course of dealing or trade usage.
c. Force Majeure. Neither party shall be held liable for any delay or
failure in performance of any part of this Agreement because of
circumstances beyond its control such as acts of God, acts of civil
or military authorities, cable cuts, embargoes, epidemics, war,
terrorist acts, riots, insurrections, fire, explosions, earthquakes,
nuclear accidents, floods, or other major environmental
disturbances, power blackouts, strikes, or from any other cause of
whatsoever kind arising without its actual fault.
d. Choice of Law; Forum Selection. This Agreement is governed by the
laws of the State of Georgia without regard to choice of law
principles. Any legal action or proceeding with respect to this
Agreement may only
5
<PAGE>
be brought in the Courts of the State of Georgia in and for the
County of Fulton or the United States of America in the Northern
District of Georgia.
e. Agency Orders. All obligations under this Agreement shall be subject
to legislation and to valid and applicable government agency orders,
regulations, tariff provisions, and decisions and orders of courts
of competent jurisdiction.
f. Severability. Both parties agree that it is not the intention of
either party to violate public policy, state or federal statutory or
common laws, and that if any sentence, paragraph, clause or
combination thereof in this Agreement is in violation of the same,
such paragraph, clause or sentence, or combination of the same shall
be inoperative, and the remainder of this Agreement shall remain
binding upon the parties hereto.
g. Authority. Each party represents and warrants that it has the
requisite corporate power and authority to enter into this Agreement
and undertake its obligations hereunder, and that this Agreement has
been executed and delivered by its duly authorized officer, and is
the binding obligation of such party enforceable in accordance with
its terms.
h. Notice. All notices, requests, or other communications under this
Agreement shall be in writing and shall be deemed to have been duly
given when delivered in person or deposited in the United States
Mail, certified or registered, return receipt requested, or
nationally recognized overnight mail service, addressed as follows:
To Premiere: Premiere Communications, Inc.
3399 Peachtree Road, N.E.
The Lenox Bldg., Suite 400
Atlanta, GA 30326
Attention: Patrick G. Jones
To Distributor: DigiTEC 2000, Inc.
8 West 38th Street
5th Floor
New York, NY 10018
Attention: Frank C. Magliato
i. Entire Agreement. This Agreement, including Exhibits A and B
attached hereto, constitutes the complete statement of the
understandings between The parties regarding the subject matter
hereof and supersedes all proposals and prior agreements (oral or
written) between the parties relating thereto.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
PREMIERE COMMUNICATIONS, INC. DIGITEC 2000, INC.
By /s/ Patrick Jones By /s/ Frank Magliato
---------------------------- ----------------------------
Title: Sr. V.P. Title: Pres.
------------------------- -------------------------
7
<PAGE>
The Services consist of domestic and international long distance to the
countries set forth on pages A-2 through A-9. The prices for the FX Card are set
forth on pages A-2 through A-5, and the prices for the DigiTEC Card are set
forth on pages A-6 through A-9. All prices are based on whole minute billing.
EXHIBIT A
<PAGE>
PLAN COUNTRYCOD COUNTRY BASE1STMIN BASEMIN
2 930 AFGHANISTAN 0.00 0.00
2 355 ALBANIA 0.89 0.99
2 213 ALGERIA 0.99 0.99
2 684 AMERICAN SAMOA 1.09 0.99
2 336 ANDORRA 0.49 0.99
2 244 ANGOLA 1.29 0.99
2 809497 ANGUILLA 0.59 0.99
2 672 ANTARCTICA/NORFOLK/CHRISTMS IS 0.00 0.00
2 268 ANTIGUA 0.57 0.99
2 54 ARGENTINA 0.79 0.99
2 374 ARMENIA 0.00 0.00
2 297 ARUBA 0.79 0.99
2 247 ASCENSION ISLAND 1.69 0.99
2 61 AUSTRALIA 0.39 0.99
2 43 AUSTRIA 0.55 0.99
2 994 AZERBAIJAN 1.29 0.99
2 242 BAHAMAS 0.39 0.99
2 973 BAHRAIN 0.99 0.99
2 880 BANGLADESH 1.55 0.99
2 246 BARBADOS 0.69 0.99
2 375 BELARUS 1.29 0.99
2 32 BELGIUM 0.29 0.99
2 501 BELIZE 0.99 0.99
2 229 BENIN 1.50 0.99
2 441 BERMUDA 0.49 0.99
2 975 BHUTAN 1.89 0.99
2 591 BOLIVIA 0.99 0.99
2 387 BOSNIA/HERZEGOVINA 0.85 0.99
2 267 BOTSWANA 1.39 0.99
2 55 BRAZIL 0.79 0.99
2 809494 BRITISH VIRGIN ISLANDS 0.69 0.99
2 673 BRUNEI 1.49 0.99
2 359 BULGARIA 0.89 0.99
2 226 BURKINA FASO 1.89 0.99
2 257 BURUNDI 3.29 0.99
2 855 CAMBODIA 2.07 0.99
2 237 CAMEROON 1.43 0.99
2 204 CANADA 0.29 0.99
2 238 CAPE VERDE ISLANDS 1.32 0.99
2 809555 CARRIBEAN DIRECTORY ASSISTANCE 0.00 0.00
2 345 CAYMAN ISLANDS 0.59 0.99
2 236 CENTRAL AFRICAN REPUBLIC 3.58 0.99
2 235 CHAD REPUBLIC 3.29 0.99
2 56 CHILE 0.69 0.99
2 86 CHINA 0.99 0.99
2 57 COLOMBIA 0.65 0.99
2 269 COMOROS 0.00 0.00
2 242 CONGO 0.00 0.00
2 682 COOK ISLAND 0.00 0.00
2 506 COSTA RICA 0.79 0.99
2 385 CROATIA 0.89 0.99
2 53 CUBA 0.85 0.99
2 357 CYPRUS 0.99 0.99
2 42 CZECH/SLOVAKIA 0.59 0.99
2 45 DENMARK 0.29 0.99
2 246 DIEGO GARCIA 1.69 0.99
2 253 DJIBOUTI 1.89 0.99
2 767 DOMINICA 0.59 0.99
A-2
<PAGE>
2 809208 DOMINICAN REPUBLIC 0.45 0.99
2 593 ECUADOR 0.69 0.99
2 20 EGYPT 0.95 0.99
2 503 EL SALVADOR 0.69 0.99
2 240 EQUATORIAL GUINEA 3.25 0.99
2 291 ERITREA 2.49 0.99
2 372 ESTONIA 0.79 0.99
2 251 ETHIOPIA 1.73 0.99
2 298 FAEROE ISLANDS 0.85 0.99
2 500 FALKLAND ISLANDS 2.94 0.99
2 679 FIJI ISLANDS 1.99 0.99
2 358 FINLAND 0.49 0.99
2 33 FRANCE 0.39 0.99
2 596 FRENCH ANTILLES 1.19 0.99
2 594 FRENCH GUIANA 0.00 0.00
2 689 FRENCH POLYNESIA 0.00 0.00
2 241 GABON REPUBLIC 0.00 0.00
2 220 GAMBIA 1.31 0.99
2 995 GEORGIA 1.17 0.99
2 49 GERMANY 0.29 0.99
2 233 GHANA 0.89 0.99
2 350 GIBRALTAR 1.47 0.99
2 30 GREECE 0.79 0.99
2 299 GREENLAND 0.83 0.99
2 809407 GRENADA 0.69 0.99
2 590 GUADALOUPE 0.89 0.99
2 671 GUAM 0.29 0.99
2 5399 GUANTANAMO BAY 0.00 0.00
2 502 GUATEMALA 0.69 0.99
2 224 GUINEA, PEOPLES REPUBLIC OF 2.19 0.99
2 245 GUINEA-BISSAU 1.99 0.99
2 592 GUYANA 1.29 0.99
2 509 HAITI 0.69 0.99
2 504 HONDURAS 0.89 0.99
2 852 HONG KONG 0.39 0.99
2 36 HUNGARY 0.59 0.99
2 354 ICELAND 0.79 0.99
2 91 INDIA 0.85 0.99
2 62 INDONESIA 0.99 0.99
2 871 INMARSAT-ALL REGIONS 0.00 0.00
2 98 IRAN 1.29 0.99
2 964 IRAQ 1.49 0.99
2 353 IRELAND 0.59 0.99
2 972 ISRAEL 0.85 0.99
2 39 ITALY 0.49 0.99
2 225 IVORY COAST 1.39 0.99
2 809202 JAMAICA 0.69 0.99
2 81 JAPAN 0.39 0.99
2 962 JORDAN 0.89 0.99
2 254 KENYA 1.12 0.99
2 686 KIRIBATI 1.39 0.99
2 650 KOREA, NORTH 2.99 0.99
2 82 KOREA, REPUBLIC OF (SOUTH) 0.49 0.99
2 965 KUWAIT 0.99 0.99
2 856 LAOS 1.59 0.99
2 371 LATVIA 0.89 0.99
2 961 LEBANON 1.39 0.99
2 266 LESOTHO 1.55 0.99
2 231 LIBERIA 0.79 0.99
2 218 LIBYA 0.99 0.99
A-3
<PAGE>
2 370 LITHUANIA 0.69 0.99
2 352 LUXEMBOURG 0.49 0.99
2 853 MACAU 1.13 0.99
2 389 MACEDONIA 1.45 0.99
2 261 MADAGASCAR 3.27 0.99
2 265 MALAWI 1.21 0.99
2 60 MALAYSIA 0.79 0.99
2 960 MALDIVES, REPUBLIC OF 2.99 0.99
2 223 MALI REPUBLIC 2.39 0.99
2 356 MALTA 0.89 0.99
2 692 MARSHALL ISLANDS 1.65 0.99
2 222 MAURITANIA 2.18 0.99
2 230 MAURITIUS 2.31 0.99
2 2696 MAYOTTE IS 1 79 0.99
2 52161 MEXICO-ZONE 1 0.17 0.99
2 52862 MEXICO-ZONE 2 0.24 0.99
2 52632 MEXICO-ZONE 3 0.34 0.99
2 52140 MEXICO-ZONE 4 0.39 0.99
2 52123 MEXICO-ZONE 5 0.39 0.99
2 52120 MEXICO-ZONE 6 0.39 0.99
2 5210 MEXICO-ZONE 7 0.39 0.99
2 52232 MEXICO-ZONE 8 0.39 0.99
2 691 MICRONESIA 1.87 0.99
2 373 MOLDOVA 1.62 0.99
2 3393 MONACO 0.00 0.00
2 976 MONGOLIA 2.72 0.99
2 664 MONTSERRAT 0.59 0.99
2 212 MOROCCO 0.89 0.99
2 258 MOZAMBIQUE 1.60 0.99
2 95 MYANAMAR/BURMA 0.00 0.00
2 264 NAMIBIA 1.40 0.99
2 674 NAURU 1.60 0.99
2 977 NEPAL 1.98 0.99
2 31 NETHERLANDS 0.35 0.99
2 599 NETHERLANDS ANTILLES 0.44 0.99
2 809469 NEVIS 0.59 0.99
2 687 NEW CALEDONIA 1.51 0.99
2 64 NEW ZEALAND 0.39 0.99
2 505 NICARAGUA 0.89 0.99
2 227 NIGER REPUBLIC 1.89 0.99
2 234 NIGERIA 0.79 0.99
2 683 NIUB ISLAND 1.89 0.99
2 47 NORWAY 0.49 0.99
2 968 OMAN 2.05 0.99
2 92 PAKISTAN 1.19 0.99
2 680 PALAU REPUBLIC 2.70 0.99
2 507 PANAMA 0.89 0.99
2 675 PAPUA NEW GUINEA 1.15 0.99
2 595 PARAGUAY 0.99 0.99
2 51 PERU 0.89 0.99
2 63 PHILIPPINES 0.89 0.99
2 48 POLAND 0.69 0.99
2 351 PORTUGAL 0.69 0.99
2 787 PUERTO RICO 0.25 0.99
2 974 QATAR 1.35 0.99
2 262 REUNION ISLAND 2.62 0.99
2 40 ROMANIA 0.89 0.99
2 7 RUSSIA 0.79 0.99
2 250 RWANDA 2.28 0.99
2 290 SAINT HELENA 2.92 0.99
A-4
<PAGE>
2 809465 SAINT KITTS 0.69 0.99
2 758 SAINT LUCIA 0.69 0.99
2 508 SAINT PIERRE/MIQUELON 0.69 0.99
2 809456 SAINT VINCENT 0.69 0.99
2 670 SAIPAN 0.69 0.99
2 378 SAN MARINO 0.89 0.99
2 239 SAO TOME 1.39 0.99
2 966 SAUDI ARABIA 0.99 0.99
2 221 SENEGAL REPUBLIC 1.69 0.99
2 248 SEYCHELLES ISLANDS 2.31 0.99
2 232 SIERRA LEONE 1.83 0.99
2 65 SINGAPORE 0.39 0.99
2 386 SLOVENIA 0.98 0.99
2 677 SOLOMON ISLANDS 1.49 0.99
2 252 SOMALIA 0.00 0.00
2 27 SOUTH AFRICA 0.69 0.99
2 34 SPAIN 0.59 0.99
2 94 SRI LANKA 1.29 0.99
2 249 SUDAN 1.99 0.99
2 597 SURINAME 1.39 0.99
2 268 SWAZILAND 1.39 0.99
2 46 SWEDEN 0.39 0.99
2 41 SWITZERLAND 0.39 0.99
2 963 SYRIA 1.89 0.99
2 886 TAIWAN 0.49 0.99
2 255 TANZANIA 1.69 0.99
2 66 THAILAND 0.99 0.99
2 228 TOGO, REPUBLIC OF 1.75 0.99
2 676 TONGA ISLANDS 2.02 0.99
2 809619 TRINIDAD & TOBAGO 0.69 0.99
2 216 TUNISIA 1.19 0.99
2 90 TURKEY 0.69 0.99
2 809941 TURKS/CAICOS ISLANDS 0.59 0.99
2 688 TUVALU 2.09 0.99
2 256 UGANDA 1.47 0.99
2 380 UKRAINE 0.99 0.99
2 971 UNITED ARAB EMIRATES 0.79 0.99
2 44 UNITED KINGDOM 0.39 0.99
2 598 URUGUAY 0.89 0.99
2 678 VANUATU 1.58 0.99
2 58 VENEZUELA 0.49 0.99
2 84 VIETNAM 1.49 0.99
2 809513 VIRGIN ISLANDS 0.00 0.00
2 681 WALLIS AND FUTINA 0.29 0.99
2 685 WESTERN SAMOA 1.76 0.99
2 967 YEMEN ARAB REPUBLIC 0.89 0.99
2 243 ZAIRE 1.49 0.99
2 260 ZAMBIA 0.00 0.00
2 263 ZIMBABWE 0.00 0.00
2 690 TOKELAU 0.00 0.00
2 379 VATICAN CITY 0.00 0.00
2 381 YUGOSLOVIA 0.89 0.99
A-5
<PAGE>
PLAN COUNTRYCOD COUNTRY BASE1STMIN BASEMIN
1 930 AFGHANISTAN 0.00 0.00
1 355 ALBANIA 0.00 0.00
1 213 ALGERIA 0.00 0.00
1 684 AMERICAN SAMOA 0.00 0.00
1 336 ANDORRA 0.00 0.00
1 244 ANGOLA 0.00 0.00
1 809497 ANGUILLA 1.58 0.59
1 672 ANTARCTICA/NORFOLK/CHRISTMS IS 0.00 0.00
1 268 ANTIGUA 1.56 0.57
1 54 ARGENTINA 1.58 0.59
1 374 ARMENIA 0.00 0.00
1 297 ARUBA 1.98 0.99
1 247 ASCENSION ISLAND 0.00 0.00
1 61 AUSTRALIA 1.28 0.29
1 43 AUSTRIA 1.54 0.55
1 994 AZERBAIJAN 0.00 0.00
1 242 BAHAMAS 1.28 0.29
1 973 BAHRAIN 0.00 0.00
1 880 BANGLADESH 0.00 0.00
1 246 BARBADOS 1.58 0.59
1 375 BELARUS 0.00 0.00
1 32 BELGIUM 1.28 0.29
1 501 BELIZE 1.98 0.99
1 229 BENIN 0.00 0.00
1 441 BERMUDA 0.00 0.00
1 975 BHUTAN 0.00 0.00
1 591 BOLIVIA 1.78 0.79
1 387 BOSNIA/HERZEGOVINA 0.00 0.00
1 267 BOTSWANA 0.00 0.00
1 55 BRAZIL 1.58 0.59
1 809494 BRITISH VIRGIN ISLANDS 1.58 0.59
1 673 BRUNEI 0.00 0.00
1 359 BULGARIA 0.00 0.00
1 226 BURKINA FASO 0.00 0.00
1 257 BURUNDI 0.00 0.00
1 855 CAMBODIA 0.00 0.00
1 237 CAMEROON 0.00 0.00
1 204 CANADA 0.46 0.18
1 238 CAPE VERDE ISLANDS 2.31 1.32
1 809555 CARRIBEAN DIRECTORY ASSISTANCE 0.00 0.00
1 345 CAYMAN ISLANDS 0.00 0.00
1 236 CENTRAL AFRICAN REPUBLIC 4.57 3.58
1 235 CHAD REPUBLIC 0.00 0.00
1 56 CHILE 1.58 0.59
1 86 CHINA 1.88 0.89
1 57 COLOMBIA 1.44 0.45
1 269 COMOROS 0.00 0.00
1 242 CONGO 0.00 0.00
1 682 COOK ISLAND 0.00 0.00
1 506 COSTA RICA 1.68 0.69
1 385 CROATIA 0.00 0.00
1 53 CUBA 1.48 0.49
1 357 CYPRUS 0.00 0.00
1 42 CZECH/SLOVAKIA 0.00 0.00
1 45 DENMARK 1.28 0.29
1 246 DIEGO GARCIA 0.00 0.00
1 253 DJIBOUTI 0.00 0.00
1 767 DOMINICA 1.58 0.59
A-6
<PAGE>
1 809208 DOMINICAN REPUBLIC 1.26 0.27
1 93 ECUADOR 1.58 0.59
1 20 EGYPT 1.94 0.95
1 503 EL SALVADOR 1.58 0.59
1 240 EQUATORIAL GUINEA 0.00 0.00
1 291 ERITREA 0.00 0.00
1 372 ESTONIA 0.00 0.00
1 251 ETHIOPIA 0.00 0.00
1 298 FAEROE ISLANDS 0.00 0.00
1 500 FALKLAND ISLANDS 0.00 0.00
1 679 FIJI ISLANDS 0.00 0.00
1 358 FINLAND 0.00 0.00
1 33 FRANCE 1.28 0.29
1 596 FRENCH ANTILLES 0.00 0.00
1 594 FRENCH GUIANA 0.00 0.00
1 689 FRENCH POLYNESIA 0.00 0.00
1 241 GABON REPUBLIC 0.00 0.00
1 220 GAMBIA 2.08 1.09
1 995 GEORGIA 0.00 0.00
1 49 GERMANY 1.28 0.29
1 233 GHANA 1.88 0.89
1 350 GIBRALTAR 0.00 0.00
1 30 GREECE 1.68 0.69
1 299 GREENLAND 0.00 0.00
1 809407 GRENADA 1.68 0.69
1 590 GUADALOUPE 1.88 0.89
1 671 GUAM 0.00 0.00
1 5399 GUANTANAMO BAY 0.00 0.00
1 502 GUATEMALA 1.58 0.59
1 224 GUINEA, PEOPLES REPUBLIC OF 0.00 0.00
1 245 GUINEA-BISSAU 0.00 0.00
1 592 GUYANA 2.28 1.29
1 509 HAITI 1.48 0.49
1 504 HONDURAS 1.78 0.79
1 852 HONG KONG 1.28 0.29
1 36 HUNGARY 1.58 0.59
1 354 ICELAND 0.00 0.00
1 91 INDIA 1.68 0.69
1 62 INDONESIA 1.98 0.99
1 871 INMARSAT-ALL REGIONS 0.00 0.00
1 98 IRAN 0.00 0.00
1 964 IRAQ 0.00 0.00
1 353 IRELAND 1.38 0.39
1 972 ISRAEL 1.78 0.79
1 39 ITALY 1.38 0.39
1 225 IVORY COAST 2.38 1.39
1 809202 JAMAICA 1.44 0.45
1 81 JAPAN 1.28 0.29
1 962 JORDAN 1.88 0.89
1 254 KENYA 2.11 1.12
1 686 KIRIBATI 0.00 0.00
1 850 KOREA, NORTH 0.00 0.00
1 82 KOREA, REPUBLIC OF (SOUTH) 1.48 0.49
1 965 KUWAIT 1.98 0.99
1 856 LAOS 0.00 0.00
1 371 LATVIA 0.00 0.00
1 961 LEBANON 0.00 0.00
1 266 LESOTHO 0.00 0.00
1 231 LIBERIA 0.00 0.00
1 218 LIBYA 0.00 0.00
A-7
<PAGE>
1 370 LITHUANIA 1.68 0.69
1 352 LUXEMBOURG 0.00 0.00
1 853 MACAU 0.00 0.00
1 389 MACEDONIA 0.00 0.00
1 261 MADAGASCAR 0.00 0.00
1 265 MALAWI 0.00 0.00
1 60 MALAYSIA 1.78 0.79
1 960 MALDIVES, REPUBLIC OF 0.00 0.00
1 223 MALI REPUBLIC 0.00 0.00
1 356 MALTA 0.00 0.00
1 692 MARSHALL ISLANDS 0.00 0.00
1 222 MAURITANIA 0.00 0.00
1 230 MAURITIUS 0.00 0.00
1 2696 MAYOTTE IS 0.00 0.00
1 52161 MEXICO-ZONE 1 1.44 0.45
1 52862 MEXICO-ZONE 2 1.44 0.45
1 52632 MEXICO-ZONE 3 1.44 0.45
1 52140 MEXICO-ZONE 4 1.44 0.45
1 52123 MEXICO-ZONE 5 1.44 0.45
1 52120 MEXICO-ZONE 6 1.44 0.45
1 5210 MEXICO-ZONE 7 1.44 0.45
1 52232 MEXICO-ZONE 8 1.44 0.45
1 691 MICRONESIA 0.00 0.00
1 373 MOLDOVA 0.00 0.00
1 3393 MONACO 0.00 0.00
1 976 MONGOLIA 0.00 0.00
1 664 MONTSERRAT 1.58 0.59
1 212 MOROCCO 1.88 0.89
1 258 MOZAMBIQUE 0.00 0.00
1 95 MYANAMAR/BURMA 0.00 0.00
1 264 NAMIBIA 0.00 0.00
1 674 NAURU 0.00 0.00
1 977 NEPAL 0.00 0.00
1 31 NETHERLANDS 1.34 0.35
1 599 NETHERLANDS ANTILLES 1.43 0.44
1 809469 NEVIS 1.58 0.59
1 687 NEW CALEDONIA 0.00 0.00
1 64 NEW ZEALAND 1.38 0.39
1 505 NICARAGUA 1.88 0.89
1 227 NIGER REPUBLIC 0.00 0.00
1 234 NIGERIA 1.68 0.69
1 683 NIUE ISLAND 0.00 0.00
1 47 NORWAY 1.38 0.39
1 968 OMAN 0.00 0.00
1 92 PAKISTAN 1.78 0.79
1 680 PALAU REPUBLIC 0.00 0.00
1 507 PANAMA 1.78 0.79
1 675 PAPUA NEW GUINEA 0.00 0.00
1 595 PARAGUAY 1.98 0.99
1 51 PERU 1.78 0.79
1 63 PHILIPPINES 1.58 0.59
1 48 POLAND 1.58 0.59
1 351 PORTUGAL 1.68 0.69
1 787 PUERTO RICO 0.46 0.18
1 974 QATAR 0.00 0.00
1 262 REUNION ISLAND 0.00 0.00
1 40 ROMANIA 1.88 0.89
1 7 RUSSIA 1.68 0.69
1 250 RWANDA 1.88 0.89
1 290 SAINT HELENA 0.00 0.00
A-8
<PAGE>
1 809465 SAINT KITTS 0.00 0.00
1 758 SAINT LUCIA 1.58 0.59
1 508 SAINT PIERRE/MIQUELON 0.00 0.00
1 809456 SAINT VINCENT 1.58 0.59
1 670 SAIPAN 0.00 0.00
1 378 SAN MARINO 0.00 0.00
1 239 SAO TOME 0.00 0.00
1 966 SAUDI ARABIA 0.00 0.00
1 221 SENEGAL REPUBLIC 2.68 1.69
1 248 SEYCHELLES ISLANDS 0.00 0.00
1 232 SIERRA LEONE 0.00 0.00
1 65 SINGAPORE 1.28 0.29
1 386 SLOVENIA 0.00 0.00
1 677 SOLOMON ISLANDS 0.00 0.00
1 252 SOMALIA 0.00 0.00
1 27 SOUTH AFRICA 1.68 0.69
1 34 SPAIN 1.48 0.49
1 94 SRI LANKA 0.00 0.00
1 249 SUDAN 0.00 0.00
1 597 SURINAME 0.00 0.00
1 268 SWAZILAND 0.00 0.00
1 46 SWEDEN 1.28 0.29
1 41 SWITZERLAND 1.28 0.29
1 963 SYRIA 0.00 0.00
1 886 TAIWAN 1.38 0.39
1 255 TANZANIA 0.00 0.00
1 66 THAILAND 1.88 0.89
1 228 TOGO, REPUBLIC OF 0.00 0.00
1 676 TONGA ISLANDS 0.00 0.00
1 809619 TRINIDAD & TOBAGO 1.58 0.59
1 216 TUNISIA 0.00 0.00
1 90 TURKEY 1.68 0.69
1 809941 TURKS/CAICOS ISLANDS 0.00 0.00
1 688 TUVALU 0.00 0.00
1 256 UGANDA 0.00 0.00
1 380 UKRAINE 0.00 0.00
1 971 UNITED ARAB EMIRATES 1.78 0.79
1 44 UNITED KINGDOM 1.28 0.29
1 598 URUGUAY 1.88 0.89
1 678 VANUATU 0.00 0.00
1 58 VENEZUELA 1.38 0.39
1 84 VIETNAM 0.00 0.00
1 809513 VIRGIN ISLANDS 0.00 0.00
1 681 WALLIS AND FUTINA 0.00 0.00
1 685 WESTERN SAMOA 0.00 0.00
1 967 YEMEN ARAB REPUBLIC 1.88 0.89
1 243 ZAIRE 0.00 0.00
1 260 ZAMBIA 0.00 0.00
1 263 ZIMBABWE 0.00 0.00
1 690 TOKELAU 0.00 0.00
1 379 VATICAN CITY 0.00 0.00
1 381 YUGOSLOVIA 0.00 0.00
A-9
<PAGE>
DigiTEC 2000, Inc.
Procedures Regarding Activations, Payments and Trouble Tickets
Set forth below are the procedures concerning activations, payments and
trouble tickets with respect to the Independent Distributor Agreement dated
September ___, 1997.
1. Activation requests received by Premiere by twelve noon on a
business day will be activated on the same day.
2. Activation requests received by Premiere between twelve noon and
5:30 p.m. on a business day will be activated by 8:30 a.m. the next
business day.
3. Payment for activated cards will be made as follows:
(a) 50% of the retail value of cards less applicable commissions
activated on day one will be due by wire transfer by 5:00 p.m.
on day five. For example, if cards with a retail value of
$50,000 with a commission of 38.5% are activated on a Monday,
$15,375 will be due by wire transfer by 5:00 p.m. on Friday.
If the fifth day falls on a weekend or holiday, the wire
transfer will be due the next business day.
(b) The 50% balance will be due on the tenth day after activation
by check, with the day of activation counted as day one. In
the above example, a $15,375 check would need to be received
by Premiere by the following Wednesday.
4. No cards will be activated unless all payments are current.
5. If a wire transfer is not received by day five or a check by day
ten, Premiere will notify DigiTEC and if the wire transfer or check,
as the case may be, is not received by the close of business on the
day following the date of notice, the cards related to such payment
will be deactivated.
(a) If a check is returned NSF, a wire transfer in the amount of
such check must be initiated by DigiTEC promptly after
notification by Premiere. If the wire transfer is not received
by Premiere by the close of business on the day following the
date of notification, the cards related to such check will be
deactivated.
6. Activation requests should be faxed to Mike Shanahan at (404)
231-3880. Mike's phone number is (404) 262-8518, and he will be the
primary contact person at Premiere. The other contact people at
Premiere are Liz Warfford (404/262-8529) and Julianne Vaio
(404/262-8435).
EXHIBIT B
1 of 2
<PAGE>
7. Trouble tickets should be faxed to Meghan Harris at (404) 233-0976.
Her phone number is (404) 262-8416. All system inquiries should be
directed to Meghan also. If Meghan is not available, Jason Furst
(404/504-2155) should be contacted. If a problem cannot be resolved
through Meghan and/or Jason, you should call Sonya Smith
(404/262-8455) or Nici Rioux (404/262-8492). Attached is Premiere's
"After Hours Escalation Information," which contains phone numbers
to be used during non-business hours.
2 of 2
<PAGE>
PROMISSORY NOTE
$6,000,000.00 September 25, 1997
DIGITEC 2000, INC., a Nevada corporation (hereinafter referred to as
"Debtor"), for value received, hereby promises to pay to the order of PREMIERE
COMMUNICATIONS, INC., a Florida corporation (hereinafter referred to as
"Payee"), the principal sum of SIX MILLION AND 00/100 DOLLARS ($6,000,000.00),
without interest, on December 31, 1997. Any principal of this Note not paid when
due shall bear interest after such due date until paid at the rate of fifteen
percent (15%) per annum, compounded monthly, and Debtor shall pay all costs of
collection. The principal hereof and the interest thereon are payable at 3399
Peachtree Road, Suite 400, Atlanta, GA 30326, or at such other place as Payee
may from time to time designate to Debtor in writing, in coin or currency of the
United States of America.
Prepayment. Debtor may, at any time and from time to time, prepay all or
any portion of the principal of this Note remaining unpaid, without penalty or
premium. Debtor shall prepay the principal of this Note by wire transfer in an
amount equal to 50% of the retail value of a Card on the third (3rd) day after
it is activated (with the day of activation counting as day one), and 50% of the
retail value of such Card by check on the seventh (7th) day after it is
activated. Debtor shall have the right to offset against such prepayment the
amount of any commissions due Debtor with respect to such Card pursuant to that
certain Independent Distributor Agreement of even date by and between Payee and
Debtor.
Events of Default. If any of the following events (an "Event of Default")
shall occur and be continuing for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise), then this Note shall thereupon be and become,
forthwith due and payable, without any further notice or demand of any kind
whatsoever, all of which are hereby expressly waived:
(a) If Debtor defaults in the payment of principal or interest on this
Note when and as the same shall become due and payable; or
(b) If Debtor makes an assignment for the benefit of creditors or admits
in writing its inability to pay its debts generally as they become due; or
(c) If an order, judgment or decree is entered adjudicating Debtor
bankrupt or insolvent; or
(d) If Debtor petitions or applies to any tribunal for the appointment of
a trustee or receiver of Debtor, or of any substantial part of the assets of
Debtor, or commences any proceedings relating to Debtor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect; or
<PAGE>
(e) If any such petition or application is filed, or any such proceedings
are commenced, against Debtor, and Debtor by any act indicates its approval
thereof, consent thereto, or acquiescence therein, or an order is entered
appointing any such trustee or receiver, or approving the petition in any such
proceedings, and such order remains unstayed and in effect for more than ninety
(90) days.
Waiver. Any failure on the part of Payee at any time to require the
performance by Debtor of any of the terms or provisions hereof, even if known,
shall in no way affect the right thereafter to enforce the same, nor shall any
failure of Payee to insist on strict compliance with the terms and conditions
hereof be taken or held to be a waiver of any succeeding breach or of the right
of Payee to insist on strict compliance with the terms and conditions hereof.
Time. Time is of the essence.
Notices. All notices, requests, demands and other communications to Debtor
hereunder shall be in writing and shall be deemed to have been duly given and
delivered when delivered in person, when mailed postage prepaid by registered or
certified mail with return receipt requested, when delivered by overnight
delivery service, or when delivered by facsimile, to DigiTEC 2000, Inc., 8 West
38th Street, 5th Floor, New York, NY 10018 (fax no. (212)730-1247), or to such
other address or facsimile number as Debtor may designate to Payee as set forth
herein.
Applicable Law. This Note shall be governed by, and enforced and
interpreted in accordance with, the laws of the State of Georgia. Debtor hereby
submits to the jurisdiction of the courts of Georgia, both state and federal,
and waives any objection to venue with respect to actions brought in such
courts.
IN WITNESS WHEREOF, Debtor has executed this Note under seal as of the
date first set forth above.
DIGITEC 2000, INC.
By: /s/ Frank Magliato
---------------------------
Title: Frank Magliato
------------------------
(CORPORATE SEAL)
INDEPENDENT MASTER DISTRIBUTOR AGREEMENT
THIS INDEPENDENT MASTER DISTRIBUTOR AGREEMENT (this "Agreement") is made
and entered into as of the 13th day of January 1997, (the "Effective Date") by
and between DIGITEC 2000, INC., a Nevada corporation, and Carlos Gomez, an
individual and CG COM, INC., a New York corporation ("Master Distributor").
WITNESSETH:
WHEREAS, DigiTEC manufactures and sells the TEC Direct prepaid telephone
cards issued jointly with Frontier Communications Corporation; and
WHEREAS, Master Distributor desires to act as a Master Distributor to
market and sell the prepaid telephone cards (the "Cards") to individuals and
business customers (hereinafter referred to collectively as "Customers" and
individually as a "Customer"), through which such Customers may access the
services listed on Exhibit A attached hereto (the "Services") for the prices set
forth on Exhibit A:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and intending to be legally bound by this Agreement, DIGITEC
and Master Distributor agree as follows:
1. RELATIONSHIP
a DIGITEC appoints Master Distributor, and Master Distributor accepts
such appointment, for the sale to Customers of the Cards. Subject to
meeting the sales volume requirements in Paragraph 4 and the terms
and conditions of this Agreement, Master Distributor shall have
exclusive distribution in the State of New York. Master Distributor
shall have 120 days to stop marketing cards not produced by DIGITEC
and market DIGITEC's Cards exclusively. After 120 days, DIGITEC at
its sole option shall allow for additional 30 day extensions.
Additionally, DIGITEC shall place its employees at the office of the
Master Distributor to fulfill its own business. DIGITEC will refer
its TEC Direct sales in the exclusive area to Master Distributor.
Master Distributor will be the Master Distributor in all other
states. In the states where DIGITEC has no current Master
Distributor, DIGITEC shall also refer its TEC Direct sales to Master
Distributor.
b This Agreement does not create an employment agreement, joint
venture or partnership between the parties hereto, and neither party
has any right nor any authority to act on behalf of the other beyond
that expressly
<PAGE>
granted herein. Master Distributor shall conduct its business at its
own initiative, responsibility and expense.
c During the term of this Agreement and thereafter, DIGITEC reserves
the right, without obligation or liability to Master Distributor for
payment of compensation or otherwise, to market the Services,
whether through its own representatives, through other independent
representative(s) or otherwise.
2. TERM
a This Agreement shall become effective as of the Effective Date and
shall continue in effect until the later of two (2) years after the
Effective Date with an option to extend the Agreement for an
additional year.
b Either party may terminate this Agreement (i) if the other party
becomes insolvent, makes an assignment for the benefit of creditors
or files a petition for reorganization under bankruptcy law; (ii) if
a petition in bankruptcy is filed by or against the other party and
not dismissed within sixty (60) days thereafter; or (iii) if the
other party is in breach of a material term or provision of this
Agreement and such material breach or default is not cured within
thirty (30) days after the other party receives notice of such
breach or default.
3. COMMISSIONS. Provided that Master Distributor purchases a minimum of
wholesale value per month of cards in accordance with Paragraph 4, DIGITEC shall
pay Master Distributor commissions ("Commissions") equal to thirty-six percent
(36) of (a) the face value of each Card sold by Master Distributor where Master
Distributor has delivered to DIGITEC exemption certificates ("Certificates")
with respect to applicable states and use taxes and federal excise and
communications taxes ("Taxes") on the sale of such Cards, or (b) the face value
of each Card sold by Master Distributor less applicable Taxes where Master
Distributor has not delivered Certificates to DIGITEC with respect to such
Cards. Commissions for the sale of a Card shall be paid to Master Distributor at
the time Distributors remit to DIGITEC, in readily available funds, an amount
equal to the face value of such Cards, less the commissions on such Cards.
DIGITEC may offset against Master Distributor's Commissions any amounts that
Master Distributors may owe to DIGITEC under this Agreement.
As additional commission DIGITEC will allow Master Distributor 0.25% of
its monthly sales for advertising and promotional purposes provided that Master
Distributor complies with the terms and conditions under Paragraphs 6 and 7.
<PAGE>
4. SALES VOLUME REQUIREMENTS. Master Distributor agrees to the following minimum
monthly sales volume levels:
First Month: $1.0 Million
Second Month: $2.0 Million
Third Month: $3.0 Million
Fourth Month: $4.0 Million
Fifth Month and Thereafter: $5.0 million
5. MASTER DISTRIBUTOR'S RESPONSIBILITIES. Master Distributor agrees to
a Market the "TEC Direct Phone Card," to the Master Distributor
existing customer base, negotiate sales in accordance with the
prices set forth on Exhibit A attached hereto, and deliver the
Cards.
b Cooperate in the collection, compilation and maintenance of data
required to be reported by DIGITEC or its shareholders pursuant to
any federal regulation or order.
c Maintain documents and records ("Records") relating to the sales of
Cards to Customers for a period of not less than twelve (12) months
or such other longer period as may be required by applicable law,
rule or regulation, and produce such documents, with the exception
of customer lists, within a reasonable period of time upon request
of DIGITEC.
5. DIGITEC'S RESPONSIBILITIES. DIGITEC agrees to:
a Master Distributor understands that the availability of service
depends solely upon third party providers, and DIGITEC neither
warrants nor is responsible for the performance or acts of those
third party service providers.
b Provide customer service to Customers.
c Taxes will be the responsibility of Frontier Communications under
Paragraph 5.4 of its agreement with DIGITEC attached as Exhibit B.
Master Distributor will be responsible to collect state sales tax
exemption certificates.
d Provided that Master Distributor maintains its monthly minimum
revenues, DIGITEC shall issue it or its designees 50,000 stock
options.
<PAGE>
6. USE OF NAMES. Master Distributor shall provide to DIGITEC and Frontier
Communications, Inc. for their prior review and written approval, all
promotions, advertising or other materials using or displaying the name of
DIGITEC, TEC Direct or Frontier.
7. CONFIDENTIAL INFORMATION
a The parties understand and agree that the terms and conditions of
this Agreement, all documents referenced herein, communications
between the parties regarding this Agreement or the Services
described herein (including price quotes for any Services provided
to Customers), and Customer and account information (collectively
"Confidential Information"), are confidential as between Master
Distributor and DIGITEC.
b A party shall not disclose Confidential Information unless subject
to discovery or disclosure pursuant to a law, rule, regulation or
legal process, or to any other party or Master Distributors of a
party including their respective investment bankers, lenders,
lawyers, accountants, insurance carriers or prospective purchaser
who have agreed not to disclose such Confidential Information.
Violation by a party or its Master Distributors of the foregoing
provisions shall entitle the non-disclosing party, at its option, to
obtain injunctive relief without a showing of irreparable harm or
injury and without bond.
c The parties further agree that any press release, advertisement or
publication generated by a party regarding this Agreement, Cards or
the Services or in which a party desires to mention the name of the
other party or the other party's parent or affiliated company(ies),
will be submitted to the non-publishing party for its written
approval prior to publication.
d The provisions of this Section 7 shall be effective as of the
Effective Date and shall remain in full force and effect during the
period of this Agreement and for a period of one (1) year after
termination of this Agreement.
e After the expiration of this Agreement or the termination of this
Agreement by either party for any reason, upon request of a party,
the other party shall return to the requesting party any physical or
written records containing Confidential Information of the
requesting party then in its possession.
<PAGE>
8. INDEMNIFICATION
a Master Distributor agrees to indemnify and hold DIGITEC harmless
from any and all claims, actions, damages, expenses and other
liabilities, including reasonable attorneys' fees and costs of
litigation, resulting from Master Distributor's acts, omissions or
misrepresentations in violation of this Agreement.
b DIGITEC agrees to indemnify and hold Master Distributor harmless
from any and all claims, actions, damages, expenses and other
liabilities, including reasonable attorneys' fees and the costs of
litigation, resulting from DIGITEC's acts, omissions or
misrepresentations in violation of this Agreement.
9. LIMITED LIABILITY. In no event will a party's performance or failure to
perform its obligations hereunder result in such party's liability to the
other party or any third party for any indirect, special, incidental,
punitive, or consequential losses or damages, including without
limitation, loss of revenue, loss of customers or clients, loss of
goodwill or loss of profits arising in any manner from this agreement
whether based on any theory or tort, breach of contract or statute of
whether at law or in equity.
10. OPTION TO PURCHASE CG COMM INC.
DIGITEC shall have the option to purchase CG COMM at a purchase price of
$5.0 million or its average monthly sales volume computed after the initial ramp
up period, whichever is greater. For purposes of calculating monthly sales
volume, any accounts originating from DIGITEC'S customer base shall be excluded
from CG COMM's monthly sales volume. IF DIGITEC exercises its option, Master
Distributor will be excluded from the business for a period of two years.
11. GENERAL PROVISIONS
a Assignment. Master Distributor may not assign this Agreement in
whole or in part without the prior written consent of , which may be
given or withheld in the sole discretion of DIGITEC; provided, that
Master Distributor may enter into agreements to market and sell the
Cards.
b Amendment. This Agreement can be modified only by a written
amendment signed Master Distributor and DIGITEC and shall not be
modified or supplemented by any course of dealing or trade usage.
<PAGE>
c Force Majeure. Neither party shall be held liable for any delay or
failure in performance of any part of this Agreement because of
circumstances beyond its control such as acts of God, acts of civil
or military authorities, cable cuts, embargoes, epidemics, war,
terrorist acts, riots, insurrections, fire, explosions, earthquakes,
nuclear accidents, floods, or other major environmental
disturbances, power blackouts, strikes, or from any other cause or
whatsoever kind arising without its actual fault.
d Choice of Law; Forum Selection. This Agreement is governed by the
laws of the State of New York without regard to choice of law
principles. Any legal action or proceeding with respect to this
Agreement may only be brought in the Courts of the State of New York
in and for the County of New York.
e Agency Orders. All obligations under this Agreement shall be subject
to legislation and to valid and applicable government agency orders,
regulations, tariff provisions, and decisions and orders of courts
of competent jurisdiction.
f Severability. Both parties agree that it is of the intention of
either party to violate public policy, state or federal statutory or
common laws, and that if any sentence, paragraph, clause or
combination thereof in this Agreement is in violation of the same,
such paragraph, clause or sentence, or combination of the same shall
be inoperative, and the remainder of this Agreement shall remain
binding upon the parties hereto.
g Authority. Each party represents and warrants that it has the
requisite corporate power and authority to enter into this agreement
and undertake its obligations hereunder, and that this Agreement has
been executed and delivered by its duly authorized, and is the
binding obligation of such party enforceable in accordance with its
terms.
h Notice. All notices, requests, or other communications under this
Agreement shall be in writing and shall be deemed to have been duly
given when delivered in person or deposited in the United States
Mail, certified or registered, return receipt requested, or
nationally recognized overnight mail service, addressed as follows:
To Master Distributor: CG Com, Inc.
3262 Westchester Avenue
Bronx, New York 10467
Attention: Carlos Gomez
<PAGE>
Carlos Gomez
3262 Westchester Avenue
Bronx, New York 10467
Fax: 718 829 5876
To DIGITEC: DIGITEC 2000, INC.
500 Fifth Avenue
Suite 424
New York, NY 10110
Attention: Frank C. Magliato
Fax: 212 944 2829
i Entire Agreement. This Agreement, including Exhibits A and B
attached hereto, constitutes the complete statement of the
understandings between the parties regarding the subject matter
hereof and supersedes all proposals and prior agreements (oral or
written) between the parties relating thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
DIGITEC 2000, INC. CG COM, INC.
By /s/ Frank Magliato By /s/ Carlos Gomez
---------------------------- ----------------------------
Title: Frank Magliato, President Title: Pres
------------------------- -------------------------
/s/ Carlos Gomez
----------------------------------
Carlos Gomez
DIGITEC 2000, INC.
EMPLOYMENT AGREEMENT
(FRANK MAGLIATO)
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of May 1,
1997 (the "Effective Date") by and between DigiTEC 2000, Inc., a Nevada
corporation, with an office at 8 West 38th Street, Fifth Floor, New York, New
York 10018 ("Company"), and Frank Magliato, with an address of 2 Whispering
Pines Road, Hohokus, New Jersey 07423 ("Executive"). The Company requires
execution of this Agreement by Executive as a condition to employing Executive.
RECITALS
Executive is currently employed by the Company as its President and CEO and
serves as Chairman of the Board of Directors of the Company.
Company and Executive desire to enter into this Agreement to provide additional
financial security and benefits to Executive, to encourage Executive to continue
employment with Company, and to enhance the motivation of Executive to increase
the profitability of Company.
In consideration of the mutual covenants herein, and in consideration of the
continuing employment of Executive with Company, the parties agree as follows:
AGREEMENT
1. Duties and Scope of Employment. Company shall employ the Executive in the
position of President and Chief Executive Officer, with such duties and
responsibilities as in effect as of the Effective Date; provided, however,
that the Board of Directors of the Company (the "Board") shall have the
right to revise such responsibilities from time to time as the Board may
deem necessary or appropriate. Such duties and responsibilities shall be
commensurate with Executive's past practices and consistent with his
position as President and Chief Executive Officer. If any such revision
constitutes "Involuntary Termination" as defined in paragraph 5(c) of this
Agreement, the Executive shall be entitled to benefits upon such
Involuntary Termination as provided under this Agreement.
2. Restriction on Outside Business Activities. During employment, Executive
shall devote Executive's full energies, interest, abilities, and
productive time to the performance of duties for Company and shall not,
without Company's prior written consent:
(a) render to others services of any kind, or engage in any other
business activity that would materially interfere with the
performance of Executive's duties under this Agreement;
(b) perform any services, directly or indirectly, whether as an
employee, consultant, independent contractor, for any person or
entity competing, directly or indirectly with Company;
(c) own, directly or indirectly, whether as partner, creditor,
shareholder, or otherwise, any interest in any entity competing,
directly or indirectly, with Company;
(d) promote, participate, or engage in any activity or other business
competitive with Company; compete, directly or indirectly, with any
products or services marketed or offered by Company; or
(e) engage in any activity which could be deemed to be a conflict of
interest.
Nothing herein contained shall prevent or be construed as preventing the
Executive from holding or purchasing five (5%) percent or less of any
class of stock or securities of a corporation which is listed on a
national securities exchange or regularly traded in the over-the-counter
market, or
-1-
<PAGE>
making other investments or participating in business ventures not in
competition with the business of the Company, as long as such investments
and business ventures shall not require any significant time during normal
business hours and do not conflict with Executive's duties and obligations
to the Company as provided in this Agreement.
3. Term of Employment. This Agreement shall commence on the Effective Date
and shall continue until the earliest of (a) June 30, 2000, or (b) until
such times as notice of non-renewal or termination of this Agreement is
given in writing by either Company or Executive to the other (the
"Termination Event"). The parties may renew this Agreement in their sole
discretion.
4. Executive's Compensation and Benefits.
(a) Base Salary. Company shall pay a base salary to Executive as noted
below, payable semi-monthly in arrears or at such other intervals as
other employees are paid. Such salary shall be reviewed at least
annually and may be increased from to time, in the sole discretion
of the Board. Base salary to the executive will be as follows:
For the year ended June 30,
1998 $175,000
1999 $200,000
2000 $250,000
(b) Bonus. For each fiscal year while this Agreement is in effect, the
Executive shall be paid a bonus (the "Performance Bonus") equal to
two (2) percent of the Company's adjusted annual net income before
depreciation and amortization interest and income tax, as determined
by the Company's independent auditors in connection with each fiscal
year's audit. Such payment shall be made within thirty (30) days
after such determination. Executive shall be eligible for the
Performance Bonus only if the Executive is in an employee of the
Company in good standing during the entire applicable fiscal year
and on the date the payment is due, except in the event of an
Involuntary Termination, in which case the Executive shall be paid
the Performance Bonus for each applicable fiscal year after the
Involuntary Termination as further specified below. Payment of the
Performance Bonus for the current fiscal year as of the Effective
Date shall be prorated based on the number of months remaining in
the current fiscal year. The Company reserves the right to implement
a bonus plan document to further describe the Performance Bonus
which Executive acknowledges and agrees may place additional
restrictions on the payment of the Performance Bonus consistent with
reasonable industry practice. The Board may from time to time award
Executive additional bonuses in its sole and absolute discretion.
(c) Benefits. During employment, Executive shall receive all benefits
generally available to Company's other employees of like position
when and as Executive becomes eligible for them. The Executive shall
be entitled to participate in any and all fringe benefits and/or
plans, generally afforded to other employees of the Company (to the
extent the Executive otherwise qualifies therefore under the
specific terms and conditions of each such benefit), including,
without limitation, savings or profit sharing plans, deferred
compensation plans, pension and other retirement plans (e.g. 401k),
supplemental retirement or excess benefit plans, stock option,
incentive or other bonus plans, group disability, life insurance,
and medical insurance plans, which are, or which may become
available generally to senior personnel of the Company, subject in
each case to the generally applicable terms and conditions of the
plan or program in question and to the determination of the Board or
any committee administering such plan or program. Participation
shall be consistent with Executive's position with Company.
(d) Vacation. The Executive shall be entitled to four (4) weeks paid
vacation time during each year of this Agreement or such additional
vacation as may be permitted from time to time by
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Company policy. Executive shall not be permitted to carry over
unused vacation time from one year to another.
(e) Expenses. The Company shall reimburse the Executive for all
reasonable business and travel expenses actually incurred by or paid
by the Executive in the performance of services on behalf of the
Company, in accordance with the Company's expense reimbursement
policy as in effect from time to time.
(f) Other Payments. In the event that any payment or benefit received or
to be received by the Executive pursuant to this Agreement or
otherwise from the Company (collectively, the "Payments") would be
subject to the excise tax (or interest or penalties related thereto)
imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar or successor provision (the
"Excise Tax"), the Company shall pay to the Executive within ninety
(90) days of the date of Executive's termination of employment (or,
if earlier, within ninety (90) days of the date the Executive
becomes subject to the Excise Tax), an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax and any federal (and
state and local) income tax on the Payments, shall be equal to the
Payments minus all applicable taxes on the Payments. For purposes of
determining whether any of the Payments will be subject to the
Excise Tax and the amount of Excise Tax, (i) any other payments or
benefits received or to be received in connection with a change of
control of the Company or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company), shall be treated as
"parachute payments" within the meaning of Section 280(G)(b)(2) of
the Code or any similar or successor provision, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) or any
similar or successor provision shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the
Company such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
within the meaning of Section 280G(b) or any similar or successor
provision of the Code in excess of the base amount within the
meaning of Section 280g(b)(3) or any similar or successor provision
of the Code, or are otherwise not subject to the Excise Tax; (ii)
the amount of the Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of
the Payments or (B) the amount of the excess parachute payments
within the meaning of Section 280G(b)(l) (after applying clause (i)
above), and (iii) the value of any non-cash benefits or a deferred
payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of Section 280G(d)(3) and
(4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest nominal marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest nominal
marginal rate of taxation in the state and locality of the
Executive's residence on the date of termination of Executive's
employment, net of the maximum reduction in federal income taxes
which could be obtained from deducting of such state and local
taxes. In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time
of termination of Executive's employment, the Executive shall repay
to the Company at the time that the amount of such reduction in
Excise Tax is finally determined the portion of the Gross-Up Payment
attributable to the Excise Tax and federal (and state and local)
income tax imposed on the Gross-Up Payment being repaid by the
Executive if such repayment results in a reduction in Excise Tax
and/or a federal (and state and local) income tax deduction plus
interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at
the time of termination of the Executive's employment (including by
reason of a payment the existence or amount of which cannot be
determined at the date of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined. The Company may
contest any claim by the Internal Revenue Service which would
require the payment of the Gross-Up Payment hereunder, provided that
the
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Company shall bear directly all costs and expenses (including
interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of any such
claim and payment of costs and expenses.
5. Termination of Employment; Severance.
(a) By Death or Disability.
(i) Executive's employment shall terminate automatically upon the
death of Executive. Company shall pay or provide to
Executive's beneficiaries or estate, as appropriate, the
compensation as of the date of death and benefits to which
Executive is entitled through the end of the pay period in
which death occurs and thereafter Company's obligations shall
terminate except as noted below.
(ii) If, in the sole opinion of Company, Executive shall be
prevented from properly performing Executive's duties by
reason of any physical or mental incapacity for a period of
more than six (6) months in the aggregate or four (4)
consecutive months in any twelve-month period, then, to the
extent permitted by law, Executive's employment shall
terminate on, and the compensation and benefits to which
Executive is entitled shall be paid or provided up through,
the last day of the month in which the day evidencing
incapacity (as determined above) occurs and thereafter
Company's obligations shall terminate except as noted below.
(iii) In the event of termination for death or disability, Executive
shall not be entitled to receive severance or other benefits
except (A) those (if any) as may then be established and
applicable under the Company's then-existing severance and
other benefits plans and policies at the time of such death or
disability, (B) benefits required by applicable laws, (C) a
prorated portion of the Performance Bonus based on the last
day of the month in which the death or the incapacity (as
determined above) occurs, and (D) in the case of death, the
Executive's base compensation for a period of twenty-six (26)
weeks shall be paid to the Executive's surviving spouse, or,
if none, to the Executive's estate.
(iv) In the event of termination for disability, the Executive
shall be entitled to the benefits provided under the Company's
then-existing disability or extended sick pay plan, for so
long as Executive continues to be disabled under this
Agreement or benefits otherwise terminate under such plan,
whether or not Executive is deemed to be disabled under such
plan.
(b) By Company for Cause; Voluntary Resignation.
(i) Company may terminate, without liability, Executive's
employment for cause (as defined below) at any time and
without notice. Company shall pay Executive the compensation
to which Executive is entitled through the end of the day of
such termination and thereafter Company's obligations shall
terminate. Termination shall be for cause if Executive's
employment is terminated by Company because of:
(A) any act or failure to act by Executive which involves
bad faith conduct by Executive and which is to the
material detriment of Company;
(B) Executive's willful refusal or willful failure to act in
accordance with any lawful and reasonable direction or
order of Company;
(C) Executive's exhibiting material unfitness or material
unavailability for service to Company (other than by
reason of Executive's death or disability);
(D) Executive's materially unsatisfactory performance,
material misconduct, dishonesty or theft, habitual
material neglect, material carelessness or material
incompetence in the performance of his duties for
Company;
(E) Executive's willful or intentional disclosure of
confidential information of Company, or any other
violation of paragraphs 6 or 7 below;
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(F) Executive's providing false information to Company in
connection with Executive's application for employment;
(G) Executive's violation of Company's policies regarding
insider trading;
(H) Executive's violation of Company's policies regarding
controlled substances;
(I) Executive's conviction of a crime, except a minor
traffic violation; or
(J) Executive's willfully or intentionally acting in any way
that has a direct, substantial and adverse effect on
Company's reputation.
(ii) If Executive's employment terminates by reason of the
Executive's voluntary resignation (and is not an Involuntary
Termination) or if the Executive is terminated for cause, then
the Executive shall not be entitled to receive severance or
any other benefits.
(c) Involuntary Termination. If, at any time during the term of this
Agreement, the Executive's employment terminates as a result of
Involuntary Termination (defined below), the Company shall pay the
Executive severance in the amount of one-twelfth of Executive's base
compensation at the time of such termination per month, for a period
beginning on the date of termination and ending on the date
specified in paragraph 3(a). The Executive shall receive the
Performance Bonus for each fiscal year or part thereof (in which
case, the Performance Bonus shall be prorated based on the number of
months of such period in the applicable fiscal year) during the such
period. The Executive shall also receive during such period and
Company-paid medical, disability and life insurance coverage as
provided to Executive immediately prior to the Executive's
termination, upon the terms and conditions, including deductibles
and co-payments, provided in the Company's then-existing plans,
policies and programs. In the event that Executive becomes employed
by another company, the Company shall not have any right of offset
or similar right against any earnings arising out of such subsequent
employment. Involuntary Termination shall mean:
(i) the continued assignment to Executive of any duties or the
continued material reduction of Executive's duties, either of
which is substantially inconsistent with the level of
Executive's position with the Company, for a period of thirty
(30) days after notice thereof from Executive to the Board
setting forth in reasonable detail the respects in which
Executive believes such assignments or duties are
substantially inconsistent with the level of Executive's
position;
(ii) a reduction in Executive's base compensation;
(iii) a reduction by the Company in the kind or level of employee
benefits (other than base compensation and bonus) to which
Executive is entitled immediately prior to such reduction with
the result that Executive's overall benefits package (other
than base compensation and bonus) is materially reduced (other
than any reduction applicable to other senior personnel of the
Company);
(iv) any purported termination of the Executive's employment by the
Company other than for cause or as a result of the Executive's
disability or death;
(v) the failure of the Company to obtain the assumption of this
Agreement by any successors as contemplated in paragraph 12;
or
(vi) any material breach by the Company of any material provision
of this Agreement which continues uncured for thirty (30) days
following notice thereof
provided that none of the foregoing shall constitute Involuntary
Termination to the extent that Executive has agreed thereto.
(d) Non-Renewal Without Cause. In the event that Company without cause
fails to offer to renew Executive's employment hereunder for at
least the same period of time as specified herein, and on
substantially similar terms, Company shall pay to Executive
severance in the amount of one-twelfth of Executive's base
compensation at the time of such non-renewal per month, for a period
of six (6) months beginning on the effective date of termination. In
the event that Executive becomes employed by another company, the
Company shall not have any right of offset or similar right against
any earnings arising out of such subsequent employment.
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<PAGE>
(e) Accrued Salary, etc. In the event of termination of Executive's
employment for any reason,
(i) the Company shall pay to Executive any unpaid base
compensation for periods prior to termination,
(ii) the Company shall pay the Executive all of the Executive's
accrued and unused vacation time through the date of
termination; and
(iii) following submission of proper expense reports by the
Executive, the Company shall reimburse the Executive for all
expenses reasonably and necessarily incurred by Executive in
connection with the business of the Company prior to
termination.
All of the above payments shall be made promptly upon termination,
and within the period of time mandated by law.
(f) Certain obligations of Employee on termination. Executive hereby
acknowledges and agrees that all personal property, including,
without limitation, all books, manuals, memorandums, policy
statements, correspondence (letters, telegrams, mailgrams), minutes
of meetings, agendas, InterOffice communications, forecasts,
analyses, working papers, charts, expense account reports, ledgers,
journals, financial statements, statements of accounts, data
compilations, records, reports, notes, memoranda, computer disks,
flow charts, computer documents and computer software, data sheets,
contracts, lists, and other documents, proprietary information, and
equipment furnished to or prepared by Executive in the course of or
incident to Executive's employment, belong exclusively to the
Company and shall be promptly returned to the Company upon
termination of Executive's employment for any reason.
6. Confidentiality and Non-Disclosure: Non-Solicitation
(a) For purposes of this paragraph, the following definitions shall
apply:
(i) Inventions shall mean all inventions, processes, methods,
formulas, techniques, improvements, modifications and
enhancements, whether or not patentable, made by Executive,
whether or not during the hours of Executive's employment or
with the use of Company's facilities, materials or personnel,
either solely or jointly, during Executive's employment by
Company and all inventions, processes, methods, formulas,
techniques, improvements, modifications and enhancements made
by Executive, during a period of one year after any
termination of Executive's employment, which relate directly
to the past, present or future business of Company and which
are within the scope of Executive's duties during the last 12
months of Executive's employment by Company.
(ii) Work Product shall mean all documentation, software, creative
works, know-how and information created, in whole or in part,
by Executive during Executive's employment by Company, whether
or not copyrightable or otherwise protectable, excluding
Inventions.
(iii) Trade Secrets shall mean compensation data, marketing
strategies, new material research, pending projects and
proposals, research and development, technological data, all
proprietary information, actual and potential, customer lists,
vendor lists, pricing and credit techniques, research and
development activities, documentation, software, know-how and
information relating to the past, present or future business
of Company or any plans relating to the foregoing, or relating
to the past, present or future business of a third party that
are disclosed to Company, which Company does not disclose to
third parties without restrictions on use or further
disclosure.
(b) Executive hereby:
(i) agrees to promptly disclose to Company all Inventions and keep
accurate records relating to the conception and reduction to
practice of all Inventions. Such records shall
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be the sole and exclusive property of Company, and the
Executive shall surrender possession of the records to Company
upon any suspension or termination of Executive's employment
with Company.
(ii) Executive hereby assigns to Company, without additional
consideration to Executive, the entire right, title and
interest in and to the Inventions and Work Product and in and
to all copyrights, patents, trademarks and any and all other
proprietary rights therein or based thereon. Executive agrees
that the Work Product shall be deemed to be a "work made for
hire." Executive shall execute all such assignments, oaths,
declarations and other documents as may be prepared by Company
to effect the foregoing.
(iii) agrees that Company, without additional consideration to
Executive, shall have the exclusive worldwide and perpetual
right to use and to make, use and sell products and/or
services derived from any Inventions or Work Product.
(c) Executive shall provide Company with all information, documentation,
and assistance Company may request to perfect, enforce or defend the
proprietary rights in or based on the Inventions, Work Product or
Trade Secrets. Company, in its sole discretion, shall determine the
extent of the proprietary rights, if any, to be protected in or
based on the Inventions, Work Product. and Trade Secrets. All such
information, documentation and assistance shall be provided by
Executive at no additional expense to Company, except for
out-of-pocket expenses which Executive incurred at Company's
request.
(d) During employment and thereafter, Executive shall treat Trade
Secrets on a confidential basis and not disclose them to others
without the prior written consent of Company or use Trade Secrets
for any purpose other than for the performance of services for
Company. Executive acknowledges that the Trade Secrets are the sole
and exclusive property of Company. Executive shall surrender
possession of all Trade Secrets to Company upon any suspension or
termination of Executive's employment with Company. If, after such
time, Executive becomes aware of any Trade Secrets in Executive's
possession, Executive shall immediately surrender those Trade
Secrets to Company.
(e) Executive acknowledges that the work force of the Company
constitutes a unique, valuable and special asset of the Company.
Therefore, Executive agrees that during his or her employment with
the Company, and for a period of one year following termination of
such employment for any reason, Executive shall not, directly or
indirectly, hire any current or future employee of the Company, or
solicit or induce or attempt to solicit or induce, any current or
future employee of the Company to terminate his or her employment
with the Company for any reason.
(f) In the event of a breach or threatened breach by the Executive of
the provisions of this paragraph 6, the Company shall be entitled to
an injunction restraining the Executive from any such breach.
Nothing herein contained shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company
for such breach or threatened breach, including the recovery of
damages from the Executive.
7. Restrictive Covenants.
(a) The Executive hereby acknowledges and recognizes the highly
competitive nature of the Company's business and accordingly agrees
that Executive will not from and after the date hereof, until the
Designated Date (as hereinafter defined) (i) engage, directly or
indirectly in any Competitive Activity, whether such engagement
shall be as an officer, director, employee, consultant, agent,
lender, stockholder, or other participant; or (ii) assist others in
engaging in any Competitive Activity. As used herein, the term
"Competitive Activity" shall mean and include the development,
distribution, sale, marketing and management of telecommunications
products, including, without limitation, consumer and corporate
prepaid telephone and cellular calling cards and other products and
services offered or planned to be offered by the Company during
Executive's employment with the Company.
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<PAGE>
(b) As used in paragraph 7, the "Designated Date" shall mean the
following:
(i) if the Executive voluntarily terminates employment with the
Company in violation of this Agreement, then the "Designated
Date" shall be the second (2nd) anniversary of the effective
date of such termination;
(ii) if the Company terminates this Agreement for cause, then the
"Designated Date" shall be the second (2nd) anniversary of the
effective date of such termination;
(iii) if the Company offers to renew this Agreement for at least the
same period of time as specified herein, and on substantially
similar terms, and the Executive declines, then the term
"Designated Date" shall be the second (2nd) anniversary of the
effective date of termination;
(iv) if the Company fails to offer to renew this Agreement for at
least the same period of time as specified herein, and on
substantially similar terms, without cause, then the term
"Designated Date" shall mean the effective date of
termination; or
(v) in the event of an Involuntary Termination, then the term
"Designated Date" shall mean the effective date of such
termination.
(c) It is the desire and intent of the parties that the provisions of
this paragraph 7 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction
which enforcement is sought. Accordingly, if any particular
provision of this paragraph 7 shall be adjudicated to be invalid or
unenforceable, such provision of this paragraph 7 shall be deemed
amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable, such deletion to apply only with respect
to the operation of such provisions of this paragraph 7 in the
particular jurisdiction in which such adjudication is made. In
addition, if the scope of any restriction contained in this
paragraph 7 is too broad to permit enforcement thereof to its
fullest extent, then such restriction shall be enforced to the
maximum extent permitted by law, and the Executive hereby consents
and agrees that such restriction shall be enforced to the maximum
extent permitted by law, and the Executive hereby consents and
agrees that such scope may be judicially modified accordingly in any
proceeding brought to enforce such restriction.
(d) If there is a breach or threatened breach by the Executive of the
provisions of this paragraph 7, the Company shall be entitled to an
injunction restraining the Executive from any such breach. Nothing
herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available for such breach or threatened
breach or any other breach of this Agreement.
8. Executive Representations and Warranties. Executive represents and
warrants as of the date of his initial hiring by the Company and as of the
Effective Date:
(a) Executive has complied with any and all written and/or oral
conditions of Executive's former employment concerning resignation
and notice of resignation or termination of employment;
(b) Executive has returned to Executive's former employer all of the
former employer's property and confidential proprietary material and
that he or she will not disclose to Company, or use during
Executive's employment by Company, any of Executive's previous
employer's trade secrets and confidential proprietary information;
(c) Neither the execution of this Agreement, nor employment with
Company, nor performance of the duties required hereby will violate
any obligations of Executive to any former employer or breach any
agreement to keep in confidence information acquired by Executive
before Executive's employment by Company;
(d) Executive has not entered into, and will not enter into any
agreement, either written or oral, that conflicts with this
Agreement; and
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Executive understands and agrees that the representations and warranties
set forth in this paragraph are material inducements upon which Company
has relied in entering into this Agreement.
9. Survival. Certain provisions of this Agreement, including, without
limitation, paragraphs 4(f), 5(f), 6, 7, 8 and 11 are intended to continue
and survive termination or suspension of Executive's employment with
Company.
10. Notices.
(a) All notices required or permitted to be given under the provisions
of this Agreement shall be in writing and delivered personally or by
certified or registered mail, return receipt requested, postage
prepaid to the following persons at the following addresses, or to
such other persons at such other addresses as any party may request
by notice in writing to the other party to this Agreement:
If to Executive:
Frank Magliato
2 Whispering Pines Road
Hohokus, New Jersey 07423
If to Company:
DigiTEC 2000
8 West 38th Street, Fifth Floor
New York, New York 10018
(b) Any termination by the Company for cause or by the Executive as an
Involuntary Termination shall be communicated by a notice of
termination to the other party given in accordance with this
Agreement. Such notice shall indicate the specific termination
provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days
after the giving of such notice). The failure by the Executive to
include in any notice any fact or circumstance which contributes to
a showing of Involuntary Termination shall not waive any right of
the Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing Executive's rights hereunder.
11. Confidentiality. Except as required by applicable securities' or other
laws, neither party shall disclose the contents of this Agreement without
first obtaining the prior written consent of the other party. Executive
may disclose this Agreement to Executive's spouse, attorney and financial
advisors subject to the above confidentiality restriction.
12. Successors and Assigns. Any successor of the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's
business and/or assets shall assume the obligations under this Agreement
and agree expressly to perform the obligations under this Agreement in the
same manner and to the same extent as the Company would be required to
perform such obligations in the absence of such a succession. For all
purposes of this Agreement, the term "Company" shall include any successor
to the Company's business and/or assets which executes and delivers the
assumption agreement described above or which becomes bound by the terms
of this Agreement by operation of law.
13. Assignment. This Agreement is personal in nature and may not be assigned
or transferred by the Executive without the prior written consent of the
Company.
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14. Severability. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain
in full force and effect.
15. Entire Agreement; Integration; Amendments. The terms of this are intended
by the parties to be the final expression of their Agreement with respect
to the employment of Executive by Company and may not be contradicted by
evidence of any prior or contemporaneous agreement. This Agreement
constitutes the complete and exclusive statement of its terms and no
extrinsic evidence whatsoever may be introduced in any legal proceeding
involving this Agreement. This Agreement contains the entire agreement
between the parties and supersedes all prior oral, written and implied
agreements, understandings, commitments, and practices between the
parties, including all prior employment agreements, if any. No amendments
to this Agreement may be made except by a writing signed by both parties.
16. Choice of Law. The formation, construction, and performance of this
Agreement shall be construed in accordance with the laws of the State of
New York, without regard to principles of conflicts of law, and any action
relating to this Agreement or Executive's employment with Employer shall
be brought exclusively in the state or federal courts of the State of New
York.
17. Voluntary Execution. Executive acknowledges that Executive has read and
understands the Agreement, is fully aware of its legal effect, has not
acted in reliance upon any representations or promises made by Company
other than those contained in writing herein. The Executive has been
advised to obtain independent legal counsel regarding this Agreement and
the Executive is signing this Agreement knowingly and voluntarily.
18. No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation
of law, including without limitation bankruptcy, garnishments, attachment
or other creditor's process, and any action in violation of this paragraph
shall be void.
19. Employment Taxes. All payments made pursuant to this Agreement shall be
subject to withholding of applicable income and employment taxes.
20. Assignment by Company. The Company may assign its rights under this
Agreement to an affiliate, provided that the Company shall remain jointly
and severally liable under this Agreement, and provided further that no
assignment shall be made if the net worth of the assignee is less than the
net worth of the Company at the time of assignment. In the case of any
such assignment, the term "Company" when used in this Agreement shall mean
the corporation that actually employs the Executive.
21. Interest. In the event that the Company fails to make any payment
hereunder or afford any benefit when due, the Company shall pay interest
at the rate of the publicly announced prime rate of Citibank or its
successors plus 3% or, if lower, the maximum permitted by law.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the
day and year first above written.
Executive Company
By: /s/ Lori Perri
---------------------------
/s/ Frank Magliato Its: Lori Perri, Director
- ------------------------ ----------------------------
Frank Magliato
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DIGITEC 2000, INC.
EMPLOYMENT AGREEMENT
(DIEGO ROCA)
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of April
25, 1997 (the "Effective Date") by and between DigiTEC 2000, Inc., a Nevada
corporation, with an office at 8 West 38th Street, Fifth Floor, New York, New
York 10018 ("Company"), and Diego Roca, with an address of 8 Chelsea Road, Oak
Bridge, New Jersey 08857 ("Executive"). The Company requires execution of this
Agreement by Executive as a condition to employing Executive.
RECITALS
Executive is currently employed by the Company as its Vice President, Prepaid
Services.
Company and Executive desire to enter into this Agreement to provide additional
financial security and benefits to Executive, to encourage Executive to continue
employment with Company, and to enhance the motivation of Executive to increase
the profitability of Company.
In consideration of the mutual covenants herein, and in consideration of the
continuing employment of Executive with Company, the parties agree as follows:
AGREEMENT
1. Duties and Scope of Employment. Company shall employ the Executive in the
position of Vice President, Prepaid Services, with such duties and
responsibilities as in effect as of the Effective Date; provided, however,
that the Board of Directors of the Company (the "Board") shall have the
right to revise such responsibilities from time to time as the Board may
deem necessary or appropriate. Such duties and responsibilities shall be
commensurate with Executive's past practices and consistent with his
position as Vice President, Prepaid Services. If any such revision
constitutes "Involuntary Termination" as defined in paragraph 5(c) of this
Agreement, the Executive shall be entitled to benefits upon such
Involuntary Termination as provided under this Agreement.
2. Restriction on Outside Business Activities. During employment, Executive
shall devote Executive's full energies, interest, abilities, and
productive time to the performance of duties for Company and shall not,
without Company's prior written consent:
(a) render to others services of any kind, or engage in any other
business activity that would materially interfere with the
performance of Executive's duties under this Agreement;
(b) perform any services, directly or indirectly, whether as an
employee, consultant, independent contractor, for any person or
entity competing, directly or indirectly with Company;
(c) own, directly or indirectly, whether as partner, creditor,
shareholder, or otherwise, any interest in any entity competing,
directly or indirectly, with Company;
(d) promote, participate, or engage in any activity or other business
competitive with Company; compete, directly or indirectly, with any
products or services marketed or offered by Company; or
(e) engage in any activity which could be deemed to be a conflict of
interest.
Nothing herein contained shall prevent or be construed as preventing the
Executive from holding or purchasing five (5%) percent or less of any
class of stock or securities of a corporation which is listed on a
national securities exchange or regularly traded in the over-the-counter
market, or making other investments or participating in business ventures
not in competition with the business
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of the Company, as long as such investments and business ventures shall
not require any significant time during normal business hours and do not
conflict with Executive's duties and obligations to the Company as
provided in this Agreement.
3. Term of Employment. This Agreement shall commence on the Effective Date
and shall continue until the earliest of (a) June 30, 2000, or (b) until
such times as notice of non-renewal or termination of this Agreement is
given in writing by either Company or Executive to the other (the
"Termination Event"). The parties may renew this Agreement in their sole
discretion.
4. Executive's Compensation and Benefits.
(a) Base Salary. Company shall pay a base salary to Executive as noted
below, payable semi-monthly in arrears or at such other intervals as
other employees are paid. Such salary shall be reviewed at least
annually and may be increased from to time, in the sole discretion
of the Board. Base salary to the executive will be as follows:
For the year ended June 30,
1998 $150,000
1999 $200,000
2000 $225,000
(b) Bonus. For each fiscal year while this Agreement is in effect, the
Executive shall be paid a bonus (the "Performance Bonus") equal to
one and one half (1.5) percent of the Company's adjusted annual net
income before depreciation and amortization interest and income tax,
as determined by the Company's independent auditors in connection
with each fiscal year's audit. Such payment shall be made within
thirty (30) days after such determination. Executive shall be
eligible for the Performance Bonus only if the Executive is in an
employee of the Company in good standing during the entire
applicable fiscal year and on the date the payment is due, except in
the event of an Involuntary Termination, in which case the Executive
shall be paid the Performance Bonus for each applicable fiscal year
after the Involuntary Termination as further specified below.
Payment of the Performance Bonus for the current fiscal year as of
the Effective Date shall be prorated based on the number of months
remaining in the current fiscal year. The Company reserves the right
to implement a bonus plan document to further describe the
Performance Bonus which Executive acknowledges and agrees may place
additional restrictions on the payment of the Performance Bonus
consistent with reasonable industry practice. The Board may from
time to time award Executive additional bonuses in its sole and
absolute discretion.
(c) Benefits. During employment, Executive shall receive all benefits
generally available to Company's other employees of like position
when and as Executive becomes eligible for them. The Executive shall
be entitled to participate in any and all fringe benefits and/or
plans, generally afforded to other employees of the Company (to the
extent the Executive otherwise qualifies therefore under the
specific terms and conditions of each such benefit), including,
without limitation, savings or profit sharing plans, deferred
compensation plans, pension and other retirement plans (e.g. 401k),
supplemental retirement or excess benefit plans, stock option,
incentive or other bonus plans, group disability, life insurance,
and medical insurance plans, which are, or which may become
available generally to senior personnel of the Company, subject in
each case to the generally applicable terms and conditions of the
plan or program in question and to the determination of the Board or
any committee administering such plan or program. Participation
shall be consistent with Executive's position with Company. Attached
as Exhibit is the stock option granted to Executive on April 25,
1997.
(d) Vacation. The Executive shall be entitled to four (4) weeks paid
vacation time during each year of this Agreement or such additional
vacation as may be permitted from time to time by
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Company policy. Executive shall not be permitted to carry over
unused vacation time from one year to another.
(e) Expenses. The Company shall reimburse the Executive for all
reasonable business and travel expenses actually incurred by or paid
by the Executive in the performance of services on behalf of the
Company, in accordance with the Company's expense reimbursement
policy as in effect from time to time.
(f) Other Payments. In the event that any payment or benefit received or
to be received by the Executive pursuant to this Agreement or
otherwise from the Company (collectively, the "Payments") would be
subject to the excise tax (or interest or penalties related thereto)
imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar or successor provision (the
"Excise Tax"), the Company shall pay to the Executive within ninety
(90) days of the date of Executive's termination of employment (or,
if earlier, within ninety (90) days of the date the Executive
becomes subject to the Excise Tax), an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax and any federal (and
state and local) income tax on the Payments, shall be equal to the
Payments minus all applicable taxes on the Payments. For purposes of
determining whether any of the Payments will be subject to the
Excise Tax and the amount of Excise Tax, (i) any other payments or
benefits received or to be received in connection with a change of
control of the Company or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company), shall be treated as
"parachute payments" within the meaning of Section 280(G)(b)(2) of
the Code or any similar or successor provision, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) or any
similar or successor provision shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the
Company such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
within the meaning of Section 280G(b) or any similar or successor
provision of the Code in excess of the base amount within the
meaning of Section 280g(b)(3) or any similar or successor provision
of the Code, or are otherwise not subject to the Excise Tax; (ii)
the amount of the Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of
the Payments or (B) the amount of the excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause (i)
above), and (iii) the value of any non-cash benefits or a deferred
payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of Section 280G(d)(3) and
(4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest nominal marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest nominal
marginal rate of taxation in the state and locality of the
Executive's residence on the date of termination of Executive's
employment, net of the maximum reduction in federal income taxes
which could be obtained from deducting of such state and local
taxes. In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time
of termination of Executive's employment, the Executive shall repay
to the Company at the time that the amount of such reduction in
Excise Tax is finally determined the portion of the Gross-Up Payment
attributable to the Excise Tax and federal (and state and local)
income tax imposed on the Gross-Up Payment being repaid by the
Executive if such repayment results in a reduction in Excise Tax
and/or a federal (and state and local) income tax deduction plus
interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at
the time of termination of the Executive's employment (including by
reason of a payment the existence or amount of which cannot be
determined at the date of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined. The Company may
contest any claim by the Internal Revenue Service
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which would require the payment of the Gross-Up Payment hereunder,
provided that the Company shall bear directly all costs and expenses
(including interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of
any such claim and payment of costs and expenses.
5. Termination of Employment; Severance.
(a) By Death or Disability.
(i) Executive's employment shall terminate automatically upon the
death of Executive. Company shall pay or provide to
Executive's beneficiaries or estate, as appropriate, the
compensation as of the date of death and benefits to which
Executive is entitled through the end of the pay period in
which death occurs and thereafter Company's obligations shall
terminate except as noted below.
(ii) If, in the sole opinion of Company, Executive shall be
prevented from properly performing Executive's duties by
reason of any physical or mental incapacity for a period of
more than six (6) months in the aggregate or four (4)
consecutive months in any twelve-month period, then, to the
extent permitted by law, Executive's employment shall
terminate on, and the compensation and benefits to which
Executive is entitled shall be paid or provided up through,
the last day of the month in which the day evidencing
incapacity (as determined above) occurs and thereafter
Company's obligations shall terminate except as noted below.
(iii) In the event of termination for death or disability, Executive
shall not be entitled to receive severance or other benefits
except (A) those (if any) as may then be established and
applicable under the Company's then-existing severance and
other benefits plans and policies at the time of such death or
disability, (B) benefits required by applicable laws, (C) a
prorated portion of the Performance Bonus based on the last
day of the month in which the death or the incapacity (as
determined above) occurs, and (D) in the case of death, the
Executive's base compensation for a period of twenty-six (26)
weeks shall be paid to the Executive's surviving spouse, or,
if none, to the Executive's estate.
(iv) In the event of termination for disability, the Executive
shall be entitled to the benefits provided under the Company's
then-existing disability or extended sick pay plan, for so
long as Executive continues to be disabled under this
Agreement or benefits otherwise terminate under such plan,
whether or not Executive is deemed to be disabled under such
plan.
(b) By Company for Cause; Voluntary Resignation.
(i) Company may terminate, without liability, Executive's
employment for cause (as defined below) at any time and
without notice. Company shall pay Executive the compensation
to which Executive is entitled through the end of the day of
such termination and thereafter Company's obligations shall
terminate. Termination shall be for cause if Executive's
employment is terminated by Company because of:
(A) any act or failure to act by Executive which involves
bad faith conduct by Executive and which is to the
material detriment of Company;
(B) Executive's willful refusal or willful failure to act in
accordance with any lawful and reasonable direction or
order of Company;
(C) Executive's exhibiting material unfitness or material
unavailability for service to Company (other than by
reason of Executive's death or disability);
(D) Executive's materially unsatisfactory performance,
material misconduct, dishonesty or theft, habitual
material neglect, material carelessness or material
incompetence in the performance of his duties for
Company;
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(E) Executive's willful or intentional disclosure of
confidential information of Company, or any other
violation of paragraphs 6 or 7 below;
(F) Executive's providing false information to Company in
connection with Executive's application for employment;
(G) Executive's violation of Company's policies regarding
insider trading;
(H) Executive's violation of Company's policies regarding
controlled substances;
(I) Executive's conviction of a crime, except a minor
traffic violation; or
(J) Executive's willfully or intentionally acting in any way
that has a direct, substantial and adverse effect on
Company's reputation.
(ii) If Executive's employment terminates by reason of the
Executive's voluntary resignation (and is not an Involuntary
Termination) or if the Executive is terminated for cause, then
the Executive shall not be entitled to receive severance or
any other benefits.
(c) Involuntary Termination. If, at any time during the term of this
Agreement, the Executive's employment terminates as a result of
Involuntary Termination (defined below), the Company shall pay the
Executive severance in the amount of one-twelfth of Executive's base
compensation at the time of such termination per month, for a period
beginning on the date of termination and ending on the date
specified in paragraph 3(a). The Executive shall receive the
Performance Bonus for each fiscal year or part thereof (in which
case, the Performance Bonus shall be prorated based on the number of
months of such period in the applicable fiscal year) during the such
period. The Executive shall also receive during such period and
Company-paid medical, disability and life insurance coverage as
provided to Executive immediately prior to the Executive's
termination, upon the terms and conditions, including deductibles
and co-payments, provided in the Company's then-existing plans,
policies and programs. In the event that Executive becomes employed
by another company, the Company shall not have any right of offset
or similar right against any earnings arising out of such subsequent
employment. Involuntary Termination shall mean:
(i) the continued assignment to Executive of any duties or the
continued material reduction of Executive's duties, either of
which is substantially inconsistent with the level of
Executive's position with the Company, for a period of thirty
(30) days after notice thereof from Executive to the Board
setting forth in reasonable detail the respects in which
Executive believes such assignments or duties are
substantially inconsistent with the level of Executive's
position;
(ii) a reduction in Executive's base compensation;
(iii) a reduction by the Company in the kind or level of employee
benefits (other than base compensation and bonus) to which
Executive is entitled immediately prior to such reduction with
the result that Executive's overall benefits package (other
than base compensation and bonus) is materially reduced (other
than any reduction applicable to other senior personnel of the
Company);
(iv) any purported termination of the Executive's employment by the
Company other than for cause or as a result of the Executive's
disability or death;
(v) the failure of the Company to obtain the assumption of this
Agreement by any successors as contemplated in paragraph 12;
or
(vi) any material breach by the Company of any material provision
of this Agreement which continues uncured for thirty (30) days
following notice thereof;
provided that none of the foregoing shall constitute Involuntary
Termination to the extent that Executive has agreed thereto.
(d) Non-Renewal Without Cause. In the event that Company without cause
fails to offer to renew Executive's employment hereunder for at
least the same period of time as specified herein, and on
substantially similar terms, Company shall pay to Executive
severance in the amount of one-twelfth of Executive's base
compensation at the time of such non-renewal per month, for a period
of six (6) months beginning on the effective date of termination. In
the event that
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Executive becomes employed by another company, the Company shall not
have any right of offset or similar right against any earnings
arising out of such subsequent employment.
(e) Accrued Salary. etc. In the event of termination of Executive's
employment for any reason,
(i) the Company shall pay to Executive any unpaid base
compensation for periods prior to termination,
(ii) the Company shall pay the Executive all of the Executive's
accrued and unused vacation time through the date of
termination; and
(iii) following submission of proper expense reports by the
Executive, the Company shall reimburse the Executive for all
expenses reasonably and necessarily incurred by Executive in
connection with the business of the Company prior to
termination.
All of the above payments shall be made promptly upon termination,
and within the period of time mandated by law.
(f) Certain obligations of Employee on termination. Executive hereby
acknowledges and agrees that all personal property, including,
without limitation, all books, manuals, memorandums, policy
statements, correspondence (letters, telegrams, mailgrams), minutes
of meetings, agendas, InterOffice communications, forecasts,
analyses, working papers, charts, expense account reports, ledgers,
journals, financial statements, statements of accounts, data
compilations, records, reports, notes, memoranda, computer disks,
flow charts, computer documents and computer software, data sheets,
contracts, lists, and other documents, proprietary information, and
equipment furnished to or prepared by Executive in the course of or
incident to Executive's employment, belong exclusively to the
Company and shall be promptly returned to the Company upon
termination of Executive's employment for any reason.
6. Confidentiality and Non-Disclosure: Non-Solicitation
(a) For purposes of this paragraph, the following definitions shall
apply:
(i) Inventions shall mean all inventions, processes, methods,
formulas, techniques, improvements, modifications and
enhancements, whether or not patentable, made by Executive,
whether or not during the hours of Executive's employment or
with the use of Company's facilities, materials or personnel,
either solely or jointly, during Executive's employment by
Company and all inventions, processes, methods, formulas,
techniques, improvements, modifications and enhancements made
by Executive, during a period of one year after any
termination of Executive's employment, which relate directly
to the past, present or future business of Company and which
are within the scope of Executive's duties during the last 12
months of Executive's employment by Company.
(ii) Work Product shall mean all documentation, software, creative
works, know-how and information created, in whole or in part,
by Executive during Executive's employment by Company, whether
or not copyrightable or otherwise protectable, excluding
Inventions.
(iii) Trade Secrets shall mean compensation data, marketing
strategies, new material research, pending projects and
proposals, research and development, technological data, all
proprietary information, actual and potential, customer lists,
vendor lists, pricing and credit techniques, research and
development activities, documentation, software, knowhow and
information relating to the past, present or future business
of Company or any plans relating to the foregoing, or relating
to the past, present or future business of a third party that
are disclosed to Company, which Company does not disclose to
third parties without restrictions on use or further
disclosure.
(b) Executive hereby:
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(i) agrees to promptly disclose to Company all Inventions and keep
accurate records relating to the conception and reduction to
practice of all Inventions. Such records shall be the sole and
exclusive property of Company, and the Executive shall
surrender possession of the records to Company upon any
suspension or termination of Executive's employment with
Company.
(ii) Executive hereby assigns to Company, without additional
consideration to Executive, the entire right, title and
interest in and to the Inventions and Work Product and in and
to all copyrights, patents, trademarks and any and all other
proprietary rights therein or based thereon. Executive agrees
that the Work Product shall be deemed to be a "work made for
hire." Executive shall execute all such assignments, oaths,
declarations and other documents as may be prepared by Company
to effect the foregoing.
(iii) agrees that Company, without additional consideration to
Executive, shall have the exclusive worldwide and perpetual
right to use and to make, use and sell products and/or
services derived from any Inventions or Work Product.
(c) Executive shall provide Company with all information, documentation,
and assistance Company may request to perfect, enforce or defend the
proprietary rights in or based on the Inventions, Work Product or
Trade Secrets. Company, in its sole discretion, shall determine the
extent of the proprietary rights, if any, to be protected in or
based on the Inventions, Work Product. and Trade Secrets. All such
information, documentation and assistance shall be provided by
Executive at no additional expense to Company, except for
out-of-pocket expenses which Executive incurred at Company's
request.
(d) During employment and thereafter, Executive shall treat Trade
Secrets on a confidential basis and not disclose them to others
without the prior written consent of Company or use Trade Secrets
for any purpose other than for the performance of services for
Company. Executive acknowledges that the Trade Secrets are the sole
and exclusive property of Company. Executive shall surrender
possession of all Trade Secrets to Company upon any suspension or
termination of Executive's employment with Company. If, after such
time, Executive becomes aware of any Trade Secrets in Executive's
possession, Executive shall immediately surrender those Trade
Secrets to Company.
(e) Executive acknowledges that the work force of the Company
constitutes a unique, valuable and special asset of the Company.
Therefore, Executive agrees that during his or her employment with
the Company, and for a period of one year following termination of
such employment for any reason, Executive shall not, directly or
indirectly, hire any current or future employee of the Company, or
solicit or induce or attempt to solicit or induce, any current or
future employee of the Company to terminate his or her employment
with the Company for any reason.
(f) In the event of a breach or threatened breach by the Executive of
the provisions of this paragraph 6, the Company shall be entitled to
an injunction restraining the Executive from any such breach.
Nothing herein contained shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company
for such breach or threatened breach, including the recovery of
damages from the Executive.
7. Restrictive Covenants.
(a) The Executive hereby acknowledges and recognizes the highly
competitive nature of the Company's business and accordingly agrees
that Executive will not from and after the date hereof, until the
Designated Date (as hereinafter defined) (i) engage, directly or
indirectly in any Competitive Activity, whether such engagement
shall be as an officer, director, employee, consultant, agent,
lender, stockholder, or other participant; or (ii) assist others in
engaging in any Competitive Activity. As used herein, the term
"Competitive Activity" shall mean and include the development,
distribution, sale, marketing and management of telecommunications
products, including, without limitation, consumer and corporate
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prepaid telephone and cellular calling cards and other products and
services offered or planned to be offered by the Company during
Executive's employment with the Company.
(b) As used in paragraph 7, the "Designated Date" shall mean the
following:
(i) if the Executive voluntarily terminates employment with the
Company in violation of this Agreement, then the "Designated
Date" shall be the second (2nd) anniversary of the effective
date of such termination;
(ii) if the Company terminates this Agreement for cause, then the
"Designated Date" shall be the second (2nd) anniversary of the
effective date of such termination;
(iii) if the Company offers to renew this Agreement for at least the
same period of time as specified herein, and on substantially
similar terms, and the Executive declines, then the term
"Designated Date" shall be the second (2nd) anniversary of the
effective date of termination;
(iv) if the Company fails to offer to renew this Agreement for at
least the same period of time as specified herein, and on
substantially similar terms, without cause, then the term
"Designated Date" shall mean the effective date of
termination; or
(v) in the event of an Involuntary Termination, then the term
"Designated Date" shall mean the effective date of such
termination.
(c) It is the desire and intent of the parties that the provisions of
this paragraph 7 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction
which enforcement is sought. Accordingly, if any particular
provision of this paragraph 7 shall be adjudicated to be invalid or
unenforceable, such provision of this paragraph 7 shall be deemed
amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable, such deletion to apply only with respect
to the operation of such provisions of this paragraph 7 in the
particular jurisdiction in which such adjudication is made. In
addition, if the scope of any restriction contained in this
paragraph 7 is too broad to permit enforcement thereof to its
fullest extent, then such restriction shall be enforced to the
maximum extent permitted by law, and the Executive hereby consents
and agrees that such restriction shall be enforced to the maximum
extent permitted by law, and the Executive hereby consents and
agrees that such scope may be judicially modified accordingly in any
proceeding brought to enforce such restriction.
(d) If there is a breach or threatened breach by the Executive of the
provisions of this paragraph 7, the Company shall be entitled to an
injunction restraining the Executive from any such breach. Nothing
herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available for such breach or threatened
breach or any other breach of this Agreement.
8. Executive Representations and Warranties. Executive represents and
warrants as of the date of his initial hiring by the Company and as of the
Effective Date:
(a) Executive has complied with any and all written and/or oral
conditions of Executive's former employment concerning resignation
and notice of resignation or termination of employment;
(b) Executive has returned to Executive's former employer all of the
former employer's property and confidential proprietary material and
that he or she will not disclose to Company, or use during
Executive's employment by Company, any of Executive's previous
employer's trade secrets and confidential proprietary information;
(c) Neither the execution of this Agreement, nor employment with
Company, nor performance of the duties required hereby will violate
any obligations of Executive to any former employer or breach any
agreement to keep in confidence information acquired by Executive
before Executive's employment by Company;
(d) Executive has not entered into, and will not enter into any
agreement, either written or oral, that conflicts with this
Agreement; and
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Executive understands and agrees that the representations and
warranties set forth in this paragraph are material inducements upon
which Company has relied in entering into this Agreement.
9. Survival. Certain provisions of this Agreement, including, without
limitation, paragraphs 4(f), 5(f), 6, 7, 8 and 11 are intended to continue
and survive termination or suspension of Executive's employment with
Company.
10. Notices.
(a) All notices required or permitted to be given under the provisions
of this Agreement shall be in writing and delivered personally or by
certified or registered mail, return receipt requested, postage
prepaid to the following persons at the following addresses, or to
such other persons at such other addresses as any party may request
by notice in writing to the other party to this Agreement:
If to Executive:
Diego Roca
8 Chelsea Road
Oak Bridge, New Jersey 08857
If to Company:
DigiTEC 2000
8 West 38th Street, Fifth Floor
New York, New York 10018
Att: Frank Magliato
(b) Any termination by the Company for cause or by the Executive as an
Involuntary Termination shall be communicated by a notice of
termination to the other party given in accordance with this
Agreement. Such notice shall indicate the specific termination
provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days
after the giving of such notice). The failure by the Executive to
include in any notice any fact or circumstance which contributes to
a showing of Involuntary Termination shall not waive any right of
the Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing Executive's rights hereunder.
11. Confidentiality. Except as required by applicable securities' or other
laws, neither party shall disclose the contents of this Agreement without
first obtaining the prior written consent of the other party. Executive
may disclose this Agreement to Executive's spouse, attorney and financial
advisors subject to the above confidentiality restriction.
12. Successors and Assigns. Any successor of the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's
business and/or assets shall assume the obligations under this Agreement
and agree expressly to perform the obligations under this Agreement in the
same manner and to the same extent as the Company would be required to
perform such obligations in the absence of such a succession. For all
purposes of this Agreement, the term "Company" shall include any successor
to the Company's business and/or assets which executes and delivers the
assumption agreement described above or which becomes bound by the terms
of this Agreement by operation of law.
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13. Assignment. This Agreement is personal in nature and may not be assigned
or transferred by the Executive without the prior written consent of the
Company.
14. Severability. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain
in full force and effect.
15. Entire Agreement: Integration: Amendments. The terms of this are intended
by the parties to be the final expression of their Agreement with respect
to the employment of Executive by Company and may not be contradicted by
evidence of any prior or contemporaneous agreement. This Agreement
constitutes the complete and exclusive statement of its terms and no
extrinsic evidence whatsoever may be introduced in any legal proceeding
involving this Agreement. This Agreement contains the entire agreement
between the parties and supersedes all prior oral, written and implied
agreements, understandings, commitments, and practices between the
parties, including all prior employment agreements, if any. No amendments
to this Agreement may be made except by a writing signed by both parties.
16. Choice of Law. The formation, construction, and performance of this
Agreement shall be construed in accordance with the laws of the State of
New York, without regard to principles of conflicts of law, and any action
relating to this Agreement or Executive's employment with Employer shall
be brought exclusively in the state or federal courts of the State of New
York.
17. Voluntary Execution. Executive acknowledges that Executive has read and
understands the Agreement, is fully aware of its legal effect, has not
acted in reliance upon any representations or promises made by Company
other than those contained in writing herein. The Executive has been
advised to obtain independent legal counsel regarding this Agreement and
the Executive is signing this Agreement knowingly and voluntarily.
18. No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation
of law, including without limitation bankruptcy, garnishments, attachment
or other creditor's process, and any action in violation of this paragraph
shall be void.
19. Employment Taxes. All payments made pursuant to this Agreement shall be
subject to withholding of applicable income and employment taxes.
20. Assignment by Company. The Company may assign its rights under this
Agreement to an affiliate, provided that the Company shall remain jointly
and severally liable under this Agreement, and provided further that no
assignment shall be made if the net worth of the assignee is less than the
net worth of the Company at the time of assignment. In the case of any
such assignment, the term "Company" when used in this Agreement shall mean
the corporation that actually employs the Executive.
21. Interest. In the event that the Company fails to make any payment
hereunder or afford any benefit when due, the Company shall pay interest
at the rate of the publicly announced prime rate of Citibank or its
successors plus 3% or, if lower, the maximum permitted by law.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties as
of the day and year first above written.
Executive Company
By: /s/ Frank Magliato
--------------------------------
Its: Frank Magliato, President
-------------------------------
/s/ Diego Roca
- --------------------------------
Diego Roca
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EXHIBIT A APRIL 25, 1997 STOCK OPTION CERTIFICATE
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CERTIFICATE 1997 NQ2
OPTION TO PURCHASE COMMON SHARES OF DIGITEC 2000, INC., A NEVADA CORPORATION
VOID AFTER 5:00 P.M., April 24, 2007, AS PROVIDED FOR HEREIN.
OPTIONEE: Diego Roca
EFFECTIVE DATE: April 25, 1997
NUMBER OF SHARES: 187,500
DIGITEC 2000, INC., A NEVADA CORPORATION, FORMERLY KNOWN AS PROMO TEL, INC. (the
"Company") intending to be legally bound, hereby grants to the Optionee named
above an option (the "Option") to purchase all or any part of an aggregate of
187,500 Common Shares, .01 par value ("Option Shares") of the Company.
1. Exercise Price. The Option shares may be purchased pursuant to this Option at
a price of $14.50 per share, subject to adjustment as set forth below.
2. Vesting. You may exercise all or any portion of the Option shares effective
April 25, 1997.
3. Exercise Procedure. To exercise this Option, or any part, the Optionee shall:
(a) surrender this Option Certificate to the Company at its principal office;
(b) deliver a notice (the "Exercise Notice") specifying the number of Option
Shares to be purchased; (c) pay the full exercise price for the Option Shares to
be purchased by certified or bank cashier's check made payable to the Company or
other form of payment acceptable to the Company; and (d) furnish to the Company
such other instruments or documents as it or its legal counsel may reasonably
require.
If less than all the Option Shares are purchased, the Company will issue, in
addition to the Option Shares, a certificate evidencing the number of Option
Shares still covered by this Option, or shall mark a notation on this Option
Certificate setting forth the number of Option Shares remaining unexercised.
4. Changes in Capitalization. If, prior to the exercise of this Option, the
outstanding shares of the capital stock of the Company shall be changed in
number or class or exchanged for a different number or kind of shares of stock
or other different number or kind of shares of stock or other securities of the
Company, whether by reason of recapitalization, reclassification,
reorganization, combination or split-up of shares or payment of a stock dividend
or other similar change in capitalization, affected without receipt of any
consideration by the Company, the remaining number of Option Shares and
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the purchase price shall be adjusted in a manner determined by the Board of
Directors of the Company so that the adjusted number of Option Shares and the
adjusted purchase price shall be the substantial equivalent of the remaining
number of Option Shares and the purchase price prior to the change.
5. Restrictions on Transfer. The Option is not transferable other than by will
or the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only by him or her. Optionee shall have no rights as a
stockholder until payment of the option price and issuance of Option Shares.
6. Expiration. The Option expires at 5:00 P.M. Eastern Time on April 24, 2007
("Expiration Date"). In the event that Optionee dies during the term of the
Option, Optionee's personal representatives may exercise any unexercised Options
(without regard to vesting), within one (1) year of Optionee's death. In the
event that Optionee's employment with the Company is terminated by the Company
as a result of a disability, Optionee may exercise any unexercised Options
vested at the time of any such termination for a period of one (1) year after
any such termination. In the event that Optionee's employment is terminated for
any other reason (except for cause as defined in that certain Employment
Agreement between Option and the Company dated effective May 1, 1997), all
outstanding unexercised options vested at the time of termination shall expire
ninety (90) days after such termination. In the event of termination for cause,
all outstanding unexercised options shall immediately expire on such
termination.
7. Securities' Laws. Optionee acknowledges that the Option Shares to be issued
pursuant to this Option are not presently registered under the Securities Act of
1933, as amended, and that the Company has no obligation to register the Option
Shares. The Optionee will comply with all applicable resale restrictions and
agrees not to transfer any Option Shares unless such transfer in the opinion of
counsel acceptable to the Company complies in all respects with applicable
federal and state securities' laws. Certificates issued for the Option Shares
shall bear legends which the Company deems appropriate.
8. No Right to Employment. Executive acknowledges and agrees that the granting
of this Option by itself does not create or imply any obligation of the Company
to employ Executive for any period of time.
9. Authority. The Company represents and warrants to Optionee that it has taken,
or will take, any and all necessary acts so that the Option is a valid and
binding obligation of the Company.
10. Administration. The Board will have the authority and discretion to
interpret the Option to make any determinations that it deems necessary or
advisable for the administration of the Option and to correct any defect or
omission or reconcile any inconsistency in the Option in the manner and to the
extent the Board deems necessary or advisable.
11. Governing Law. The formation, construction, and performance of this Option
Certificate shall be construed in accordance with the laws of the State of New
York,
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without regard to principles of conflicts of law, and any action relating to
this Option Certificate shall be brought exclusively in the state or federal
courts of the State of New York.
DIGITEC 2000, INC.
BY: /s/ Frank Magliato
---------------------------------
TITLE: President
------------------------------
DATE: April 25, 1997
-------------------------------
ACCEPTED AND AGREED TO BY:
/s/ Diego Roca
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DIEGO ROCA
DATE: April 25, 1997
-------------------------------
3
DIGITEC 2000, INC.
EMPLOYMENT AGREEMENT
(KEITH McGOWAN)
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of July 1, 1997 (the
"Effective Date") by and between DigiTEC 2000, Inc., a Nevada corporation, with
an office at 8 West 38th Street, Fifth Floor, New York, New York 10018
("Company"), and Keith McGowan, with an address of 6 Altamore Street, Melville,
NY 11747 ("Executive"). The Company requires execution of this Agreement by
Executive as a condition to employing Executive.
RECITALS
Executive is currently employed by the Company as its Vice President, Finance.
Company and Executive desire to enter into this Agreement to provide additional
financial security and benefits to Executive, to encourage Executive to continue
employment with Company, and to enhance the motivation of Executive to increase
profitability of Company.
In consideration of the mutual covenants herein, and in consideration of the
employment of Executive with Company, the parties agree as follows:
AGREEMENT
1. Duties and Scope of Employment. Company shall employ the Executive in the
position of Vice President, Finance, responsible for the day to day
financial and accounting operations of the Company; provided, however,
that the Board of Directors of the Company (the "Board") shall have the
right to revise such responsibilities from time to time as the Board may
deem necessary or appropriate. Such duties and responsibilities shall be
commensurate with Executive's past practices and consistent with his
position as Vice President, Finance.
2. Restriction on Outside Business Activities. During employment, Executive
shall devote Executive's full energies, interest, abilities, and
productive time to the performance of duties for Company and shall not,
without Company's prior written consent:
(a) render to others services of any kind, or engage in any other
business activity that would materially interfere with the
performance of Executive's duties under this Agreement;
(b) perform any services, directly or indirectly, whether as an
employee, consultant, independent contractor, for any person or
entity competing, directly or indirectly with Company;
(c) own, directly or indirectly, whether as partner, creditor,
shareholder, or otherwise, any interest in any entity competing,
directly or indirectly, with Company;
(d) promote, participate, or engage in any activity or other business
competitive with Company;
(e) compete, directly or indirectly, with any products or services
marketed or offered by Company; or
(f) engage in any activity which could be deemed to be a conflict of
interest.
Nothing herein contained shall prevent or be construed as preventing the
Executive from holding or purchasing five (5%) percent or less of any
class of stock or securities of a corporation which is listed on a
national securities exchange or regularly traded in the over-the-counter
market, or making other investments or participating in business ventures
not in competition with the business of the Company, as long as such
investments and business ventures shall not require any significant
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time during normal business hours and do not conflict with Executive's
duties and obligations to the Company as provided in this Agreement.
3. Term of Employment. This Agreement shall commence on the Effective Date
and shall continue until the earliest of (a) June 30, 2000, or (b) until
such time as a notice of non-renewal or termination of this Agreement is
given in writing by either Company or Executive to the other as specified
in paragraph 10(b). The parties may renew this Agreement in their sole
discretion.
4. Executive's Compensation and Benefits.
(a) Base Salary. Company shall pay a base salary to Executive as noted
below, payable semi-monthly in arrears or at such other intervals as
other employees are paid. Such salary shall be reviewed at least
annually and may be increased from to time, in the sole discretion
of the Board. Base salary to the executive will be as follows:
For the year ended June 30,
1998 $140,000
1999 $190,000
2000 $215,000
(a) Bonus Bonus. For each fiscal year while this Agreement is in effect,
the Executive shall be paid a bonus (the "Performance Bonus") equal
to one and one quarter (1.25) percent of the Company's adjusted
annual net income before depreciation and amortization interest and
income tax, as determined by the Company's independent auditors in
connection with each fiscal year's audit. Such payment shall be made
within thirty (30) days after such determination. Executive shall be
eligible for the Performance Bonus only if the Executive is in an
employee of the Company in good standing during the entire
applicable fiscal year and on the date the payment is due. The
Company reserves the right to implement a bonus plan document to
further describe the Performance Bonus which Executive acknowledges
and agrees may place additional restrictions on the payment of the
Performance Bonus consistent with reasonable industry practice. The
Board may from time to time award Executive additional bonuses in
its sole and absolute discretion.
(a) Benefits. During employment, Executive shall receive all benefits
generally available to Company's other employees of like position
when and as Executive becomes eligible for them. The Executive shall
be entitled to participate in any and all fringe benefits and/or
plans, generally afforded to other employees of the Company (to the
extent the Executive otherwise qualifies therefore under the
specific terms and conditions of each such benefit), including,
without limitation, savings or profit sharing plans, deferred
compensation plans, pension and other retirement plans (e.g. 401k),
supplemental retirement or excess benefit plans, stock option,
incentive or other bonus plans, group disability, life insurance,
and medical insurance plans, which are, or which may become
available generally to senior personnel of the Company, subject in
each case to the generally applicable terms and conditions of the
plan or program in question and to the determination of the Board or
any committee administering such plan or program. Participation
shall be consistent with Executive's position with Company.
(b) Vacation. The Executive shall be entitled to four (4) weeks paid
vacation time during each year of this Agreement or such additional
vacation as may be permitted from time to time by Company policy.
Executive shall not be permitted to carry over unused vacation time
from one year to another.
(c) Expenses. The Company shall reimburse the Executive for all
reasonable business and travel expenses actually incurred by or paid
by the Executive in the performance of services on behalf
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of the Company, in accordance with the Company's expense
reimbursement policy as in effect from time to time.
(d) Other Payments. In the event that any payment or benefit received or
to be received by the Executive pursuant to this Agreement or
otherwise from the Company (collectively, the "Payments") would be
subject to the excise tax (or interest or penalties related thereto)
imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar or successor provision (the
"Excise Tax"), the Company shall pay to the Executive within ninety
(90) days of the date of Executive's termination of employment (or,
if earlier, within ninety (90) days of the date the Executive
becomes subject to the Excise Tax), an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax and any federal (and
state and local) income tax on the Payments, shall be equal to the
Payments minus all applicable taxes on the Payments. For purposes of
determining whether any of the Payments will be subject to the
Excise Tax and the amount of Excise Tax, (i) any other payments or
benefits received or to be received in connection with a change of
control of the Company or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company), shall be treated as
"parachute payments" within the meaning of Section 280(G)(b)(2) of
the Code or any similar or successor provision, and all "excess
parachute payments" within the meaning of Section 280G(b)(l) or any
similar or successor provision shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the
Company such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
within the meaning of Section 280G(b) or any similar or successor
provision of the Code in excess of the base amount within the
meaning of Section 280g(b)(3) or any similar or successor provision
of the Code, or are otherwise not subject to the Excise Tax; (ii)
the amount of the Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of
the Payments or (B) the amount of the excess parachute payments
within the meaning of Section 280G(b)(l) (after applying clause (i)
above), and (iii) the value of any non-cash benefits or a deferred
payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of Section 280G(d)(3) and
(4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest nominal marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest nominal
marginal rate of taxation in the state and locality of the
Executive's residence on the date of termination of Executive's
employment, net of the maximum reduction in federal income taxes
which could be obtained from deducting of such state and local
taxes. In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time
of termination of Executive's employment, the Executive shall repay
to the Company at the time that the amount of such reduction in
Excise Tax is finally determined the portion of the Gross-Up Payment
attributable to the Excise Tax and federal (and state and local)
income tax imposed on the Gross-Up Payment being repaid by the
Executive if such repayment results in a reduction in Excise Tax
and/or a federal (and state and local) income tax deduction plus
interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at
the time of termination of the Executive's employment (including by
reason of a payment the existence or amount of which cannot be
determined at the date of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined. The Company may
contest any claim by the Internal Revenue Service which would
require the payment of the Gross-Up Payment hereunder, provided that
the Company shall bear directly all costs and expenses (including
interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of any such
claim and payment of costs and expenses.
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5. Termination of Employment; Severance.
(a) By Death or Disability.
(i) Executive's employment shall terminate automatically upon the
death of Executive. Company shall pay or provide to
Executive's beneficiaries or estate, as appropriate, the
compensation as of the date of death and benefits to which
Executive is entitled through the end of the pay period in
which death occurs and thereafter Company's obligations shall
terminate except as noted below.
(ii) If, in the sole opinion of Company, Executive shall be
prevented from properly performing Executive's duties by
reason of any physical or mental incapacity for a period of
more than six (6) months in the aggregate or four (4)
consecutive months in any twelve-month period, then, to the
extent permitted by law, Executive's employment shall
terminate on, and the compensation and benefits to which
Executive is entitled shall be paid or provided up through,
the last day of the month in which the day evidencing
incapacity (as determined above) occurs and thereafter
Company's obligations shall terminate except as noted below.
(iii) In the event of termination for death or disability, Executive
shall not be entitled to receive severance or other benefits
except (A) those (if any) as may then be established and
applicable under the Company's then-existing severance and
other benefits plans and policies at the time of such death or
disability, (B) benefits required by applicable laws, and (C)
a prorated portion of the Performance Bonus based on the last
day of the month in which the death or the incapacity (as
determined above) occurs, (D) in the case of death, the
Executive's base compensation for a period of twenty-six (26)
weeks shall be paid to the Executive's surviving spouse, or,
if none, to the Executive's estate.
(iv) In the event of termination for disability, the Executive
shall be entitled to the benefits provided under the Company's
then-existing disability or extended sick pay plan, for so
long as Executive continues to be disabled under this
Agreement or benefits otherwise terminate under such plan,
whether or not Executive is deemed to be disabled under such
plan.
(b) By Company for Cause; Voluntary Resignation.
(i) Company may terminate, without liability, Executive's
employment for cause (as defined below) at any time and
without notice. Company shall pay Executive the compensation
to which Executive is entitled through the end of the day of
such termination and thereafter Company's obligations shall
terminate. Termination shall be for cause if Executive's
employment is terminated by Company because of:
(A) any act or failure to act by Executive which involves
bad faith conduct by Executive and which is to the
material detriment of Company;
(B) Executive's willful refusal or willful failure to act in
accordance with any lawful and reasonable direction or
order of Company;
(C) Executive's exhibiting material unfitness or material
unavailability for service to Company (other than by
reason of Executive's death or disability);
(D) Executive's materially unsatisfactory performance,
material misconduct, dishonesty or theft, habitual
material neglect, material carelessness or material
incompetence in the performance of his duties for
Company;
(E) Executive's willful or intentional disclosure of
confidential information of Company, or any other
violation of paragraphs 6 or 7 below;
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(F) Executive's providing false information to Company in
connection with Executive's application for employment;
(G) Executive's violation of Company's policies regarding
insider trading;
(H) Executive's violation of Company's policies regarding
controlled substances;
(I) Executive's conviction of a crime, except a minor
traffic violation; or
(J) Executive's willfully or intentionally acting in any way
that has a direct, substantial and adverse effect on
Company's reputation.
(ii) If Executive's employment terminates by reason of
the Executive's voluntary resignation or if the
Executive is terminated for cause, then the
Executive shall not be entitled to receive
severance or any other benefits.
(d) Non-Renewal or Termination Without Cause. In the event that Company
without cause fails to offer to renew Executive's employment
hereunder for at least the same period of time as specified herein,
and on substantially similar terms, or in the event that Company at
any time terminates Executive's employment hereunder without cause,
Company as its sole obligation to Employee shall pay to Executive,
and Executive as his sole remedy shall accept, severance in the
amount of one-twelfth of Executive's base compensation at the time
of such non-renewal per month, for a period of six (6) months
beginning on the effective date of termination. In the event that
Executive becomes employed by another company, the Company shall not
have any right of offset or similar right against any earnings
arising out of such subsequent employment.
(e) Accrued Salary, etc. In the event of termination of Executive's
employment for any reason,
(i) the Company shall pay to Executive any unpaid base
compensation for periods prior to termination;
(ii) the Company shall pay the Executive all of the Executive's
accrued and unused vacation time through the date of
termination; and
(iii) following submission of proper expense reports by the
Executive, the Company shall reimburse the Executive for all
expenses reasonably and necessarily incurred by Executive in
connection with the business of the Company prior to
termination.
All of the above payments shall be made promptly upon termination,
and within the period of time mandated by law.
(f) Certain obligations of Employee on termination. Executive hereby
acknowledges and agrees that all personal property, including,
without limitation, all books, manuals, memorandums, policy
statements, correspondence (letters, telegrams, mailgrams), minutes
of meetings, agendas, interoffice communications, forecasts,
analyses, working papers, charts, expense account reports, ledgers,
journals, financial statements, statements of accounts, data
compilations, records, reports, notes, memoranda, computer disks,
flow charts, computer documents and computer software, data sheets,
contracts, lists, and other documents, proprietary information, and
equipment furnished to or prepared by Executive in the course of or
incident to Executive's employment, belong exclusively to the
Company and shall be promptly returned to the Company upon
termination of Executive's employment for any reason.
6. Confidentiality and Non-Disclosure; Non-Solicitation
(a) For purposes of this paragraph, the following definitions shall
apply:
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(i) Inventions shall mean all inventions, processes, methods,
formulas, techniques, improvements, modifications and
enhancements, whether or not patentable, made by Executive,
whether or not during the hours of Executive's employment or
with the use of Company's facilities, materials or personnel,
either solely or jointly, during Executive's employment by
Company and all inventions, processes, methods, formulas,
techniques, improvements, modifications and enhancements made
by Executive, during a period of one year after any
termination of Executive's employment, which relate directly
to the past, present or future business of Company and which
are within the scope of Executive's duties during the last 12
months of Executive's employment by Company.
(ii) Work Product shall mean all documentation, software, creative
works, know-how and information created, in whole or in part,
by Executive during Executive's employment by Company, whether
or not copyrightable or otherwise protectable, excluding
Inventions.
(iii) Trade Secrets shall mean compensation data, marketing
strategies, new material research, pending projects and
proposals, research and development, technological data, all
proprietary information, actual and potential, customer lists,
vendor lists, pricing and credit techniques, research and
development activities, documentation, software, know-how and
information relating to the past, present or future business
of Company or any plans relating to the foregoing, or relating
to the past, present or future business of a third party that
are disclosed to Company, which Company does not disclose to
third parties without restrictions on use or further
disclosure.
(b) Executive hereby:
(i) agrees to promptly disclose to Company all Inventions and keep
accurate records relating to the conception and reduction to
practice of all Inventions. Such records shall be the sole and
exclusive property of Company, and the Executive shall
surrender possession of the records to Company upon any
suspension or termination of Executive's employment with
Company.
(ii) Executive hereby assigns to Company, without additional
consideration to Executive, the entire right, title and
interest in and to the Inventions and Work Product and in and
to all copyrights, patents, trademarks and any and all other
proprietary rights therein or based thereon. Executive agrees
that the Work Product shall be deemed to be a "work made for
hire." Executive shall execute all such assignments, oaths,
declarations and other documents as may be prepared by Company
to effect the foregoing.
(iii) agrees that Company, without additional consideration to
Executive, shall have the exclusive worldwide and perpetual
right to use and to make, use and sell products and/or
services derived from any Inventions or Work Product.
(c) Executive shall provide Company with all information, documentation,
and assistance Company may request to perfect, enforce or defend the
proprietary rights in or based on the Inventions, Work Product or
Trade Secrets. Company, in its sole discretion, shall determine the
extent of the proprietary rights, if any, to be protected in or
based on the Inventions, Work Product and Trade Secrets. All such
information, documentation and assistance shall be provided by
Executive at no additional expense to Company, except for
out-of-pocket expenses which Executive incurred at Company's
request.
(d) During employment and thereafter, Executive shall treat Trade
Secrets on a confidential basis and not disclose them to others
without the prior written consent of Company or use Trade Secrets
for any purpose other than for the performance of services for
Company.
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Executive acknowledges that the Trade Secrets are the sole and
exclusive property of Company. Executive shall surrender possession
of all Trade Secrets to Company upon any suspension or termination
of Executive's employment with Company. If, after such time,
Executive becomes aware of any Trade Secrets in Executive's
possession, Executive shall immediately surrender those Trade
Secrets to Company.
(e) Executive acknowledges that the work force of the Company
constitutes a unique, valuable and special asset of the Company.
Therefore, Executive agrees that during his employment with the
Company, and for a period of one year following termination of such
employment for any reason, Executive shall not, directly or
indirectly, hire any current or future employee of the Company, or
solicit or induce or attempt to solicit or induce, any current or
future employee of the Company to terminate his or her employment
with the Company for any reason.
(f) In the event of a breach or threatened breach by the Executive of
the provisions of this paragraph 6, the Company shall be entitled to
an injunction restraining the Executive from any such breach.
Nothing herein contained shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company
for such breach or threatened breach, including the recovery of
damages from the Executive.
7. Restrictive Covenants.
(a) The Executive hereby acknowledges and recognizes the highly
competitive nature of the Company's business and accordingly agrees
that Executive will not from and after the date hereof, until the
Designated Date (as hereinafter defined) (i) engage, directly or
indirectly in any Competitive Activity, whether such engagement
shall be as an officer, director, employee, consultant, agent,
lender, stockholder, or other participant; or (ii) assist others in
engaging in any Competitive Activity. As used herein, the term
"Competitive Activity" shall mean and include the development,
distribution, sale, marketing and management of telecommunications
products, including, without limitation, consumer and corporate
prepaid telephone and cellular calling cards and other products and
services offered or planned to be offered by the Company during
Executive's employment with the Company.
(b) As used in paragraph 7, the "Designated Date" shall mean the
following:
(i) if the Executive voluntarily terminates employment with the
Company in violation of this Agreement, then the "Designated
Date" shall be the second (2nd) anniversary of the effective
date of such termination;
(ii) if the Company terminates this Agreement for cause, then the
"Designated Date" shall be the second (2nd) anniversary of the
effective date of such termination;
(iii) if the Company offers to renew this Agreement for at least the
same period of time as specified herein, and on substantially
similar terms, and the Executive declines, then the term
"Designated Date" shall be the second (2nd) anniversary of the
effective date of termination; or
(iv) if the Company fails to offer to renew this Agreement for at
least the same period of time as specified herein, and on
substantially similar terms, without cause, or terminates
Executive's employment hereunder without cause, then the term
"Designated Date" shall mean the effective date of
termination.
(c) It is the desire and intent of the parties that the provisions of
this paragraph 7 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction
which enforcement is sought. Accordingly, if any particular
provision of this paragraph 7 shall be adjudicated to be invalid or
unenforceable, such provision of this paragraph 7 shall be deemed
amended to delete therefrom the portion thus adjudicated to be
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invalid or unenforceable, such deletion to apply only with respect
to the operation of such provisions of this paragraph 7 in the
particular jurisdiction in which such adjudication is made. In
addition, if the scope of any restriction contained in this
paragraph 7 is too broad to permit enforcement thereof to its
fullest extent, then such restriction shall be enforced to the
maximum extent permitted by law, and the Executive hereby consents
and agrees that such restriction shall be enforced to the maximum
extent permitted by law, and the Executive hereby consents and
agrees that such scope may be judicially modified accordingly in any
proceeding brought to enforce such restriction.
(d) If there is a breach or threatened breach by the Executive of the
provisions of this paragraph 7, the Company shall be entitled to an
injunction restraining the Executive from any such breach. Nothing
herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available for such breach or threatened
breach or any other breach of this Agreement.
8. Executive Representations and Warranties. Executive represents and
warrants as of the Effective Date:
(a) Executive has complied with any and all written and/or oral
conditions of Executive's former employment concerning resignation
and notice of resignation or termination of employment;
(b) Executive has returned to Executive's former employer all of the
former employer's property and confidential proprietary material and
that he or she will not disclose to Company, or use during
Executive's employment by Company, any of Executive's previous
employer's trade secrets and confidential proprietary information;
(c) Neither the execution of this Agreement, nor employment with
Company, nor performance of the duties required hereby will violate
any obligations of Executive to any former employer or breach any
agreement to keep in confidence information acquired by Executive
before Executive's employment by Company;
(d) Executive has not entered into, and will not enter into any
agreement, either written or oral, that conflicts with this
Agreement; and
Executive understands and agrees that the representations and warranties
set forth in this paragraph are material inducements upon which Company
has relied in entering into this Agreement.
9. Survival. Certain provisions of this Agreement, including, without
limitation, paragraphs 5(f), 6, 7, 8 and 11 are intended to continue and
survive termination or suspension of Executive's employment with Company.
10. Notices.
(a) All notices required or permitted to be given under the provisions
of this Agreement shall be in writing and delivered personally or by
certified or registered mail, return receipt requested, postage
prepaid to the following persons at the following addresses, or to
such other persons at such other addresses as any party may request
by notice in writing to the other party to this Agreement:
If to Executive:
Keith McGowan
6 Altamore Street
Melville, N.Y. 11747
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<PAGE>
If to Company:
DigiTEC 2000
8 West 38th Street, Fifth Floor
New York, New York 10018
Att: Frank Magliato
(b) Any termination by either party hereunder shall be communicated by a
notice of termination to the other party given in accordance with
this Agreement. Such notice shall indicate the specific termination
provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days
after the giving of such notice).
11. Confidentiality. Except as required by applicable securities' or other
laws, neither party shall disclose the contents of this Agreement without
first obtaining the prior written consent of the other party. Executive
may disclose this Agreement to Executive's spouse, attorney and financial
advisors subject to the above confidentiality restriction.
12. Successors and Assigns.
(a) Any successor of the Company (whether direct or indirect and whether
by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the
same manner and to the same extent as the Company would be required
to perform such obligations in the absence of such a succession. For
all purposes of this Agreement, the term "Company" shall include any
successor to the Company's business and/or assets which executes and
delivers the assumption agreement described above or which becomes
bound by the terms of this Agreement by operation of law.
(b) This Agreement is personal in nature and may not be assigned or
transferred by the Executive without the prior written consent of
the Company.
13. Severability. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain
in full force and effect.
14. Entire Agreement; Integration; Amendments. The terms of this Agreement are
intended by the parties to be the final expression of their Agreement with
respect to the employment of Executive by Company and may not be
contradicted by evidence of any prior or contemporaneous agreement. This
Agreement constitutes the complete and exclusive statement of its terms
and no extrinsic evidence whatsoever may be introduced in any legal
proceeding involving this Agreement. This Agreement contains the entire
agreement between the parties and supersedes all prior oral, written and
implied agreements, understandings, commitments, and practices between the
parties, including all prior employment agreements, if any. No amendments
to this Agreement may be made except by a writing signed by both parties.
15. Choice of Law. The formation, construction, and performance of this
Agreement shall be construed in accordance with the laws of the State of
New York, without regard to principles of conflicts of law, and any action
relating to this Agreement or Executive's employment with Employer shall
be brought exclusively in the state or federal courts of the State of New
York.
16. Voluntary Execution. Executive acknowledges that Executive has read and
understands the Agreement, is fully aware of its legal effect, has not
acted in reliance upon any representations or promises made by Company
other than those contained in writing herein. The Executive has
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<PAGE>
been advised to obtain independent legal counsel regarding this Agreement
and the Executive is signing this Agreement knowingly and voluntarily.
17. No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation
of law, including without limitation bankruptcy, garnishments, attachment
or other creditor's process, and any action in violation of this paragraph
shall be void.
18. Employment Taxes. All payments made pursuant to this Agreement shall be
subject to withholding of applicable income and employment taxes.
19. Assignment by Company. The Company may assign its rights under this
Agreement to an affiliate, provided that the Company shall remain jointly
and severally liable under this Agreement, and provided further that no
assignment shall be made if the net worth of the assignee is less than the
net worth of the Company at the time of assignment. In the case of any
such assignment, the term "Company" when used in this Agreement shall mean
the corporation that actually employs the Executive.
20. Interest. In the event that the Company fails to make any payment
hereunder or afford any benefit when due, the Company shall pay interest
at the rate of the publicly announced prime rate of Citibank or its
successors plus 3% or, if lower, the maximum permitted by law.
- 10 -
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the
day and year first above written.
Executive Company
/s/ Keith McGowan
- --------------------------
Keith McGowan By: /s/ Frank Magliato
------------------------------
Its: /s/ Frank Magliato, President
-----------------------------
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<PAGE>
EXHIBIT A July 1, 1997 STOCK OPTION CERTIFICATE
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<PAGE>
CERTIFICATE 1997 NQ1
OPTION TO PURCHASE COMMON SHARES OF DIGITEC 2000, INC., A NEVADA CORPORATION
VOID AFTER 5:00 P.M., July 1,2007, AS PROVIDED FOR HEREIN.
OPTIONEE: Keith McGowan
EFFECTIVE DATE July 1, 1997
NUMBER OF SHARES: 200,000
DIGITEC 2000, INC., A NEVADA CORPORATION, (the "Company") intending to be
legally bound, hereby grants to the Optionee named above an option (the
"Option") to purchase all or any part of an aggregate of 200,000 Common Shares,
.01 par value ("Option Shares") of the Company.
1. Exercise Price. The Option shares may be purchased pursuant to this Option at
a price of $13.00 per share (closing price as of July 1, 1997), subject to
adjustment as set forth below.
2. Vesting. You may exercise:
(a) 22,222 Option Shares effective July 1, 1997;
(b) an additional 22,222 Option Shares effective September 30, 1997;
(c) an additional 22,222 Option Shares effective December 31, 1997;
(d) an additional 22,222 Option Shares effective March 31, 1998;
(e) an additional 22,222 Option Shares effective June 30, 1998;
(f) an additional 22,222 Option Shares effective September 30,1 1998;
(g) an additional 22,222 Option Shares effective December 31, 1998;
(h) an additional 22,222 Option Shares effective March 31, 1989; and
(i) the remaining 22,224 Option Shares effective June 30, 1999.
3. Exercise Procedure. To exercise this Option, or any part, the Optionee shall:
(a) surrender this Option Certificate to the Company at its principal office;
(b) deliver a notice (the "Exercise Notice") specifying the number of Option
Shares to be purchased;
(c) pay the full exercise price for the Option Shares to be purchased by
certified or bank cashier's check made payable to the Company or other form of
payment acceptable to the Company; and
(d) furnish to the Company such other instruments or documents as it or its
legal counsel may reasonably require.
If less than all the Option Shares are purchased, the Company will issue, in
addition to the Option Shares, a certificate evidencing the number of Option
Shares still covered by
<PAGE>
this Option, or shall mark a notation on this Option Certificate setting forth
the number of Option Shares remaining unexercised.
4. Changes in Capitalization. If, prior to the exercise of this Option, the
outstanding shares of the capital stock of the Company shall be changed in
number or class or exchanged for a different number or kind of shares of stock
or other different number or kind of shares of stock or other securities of the
Company, whether by reason of recapitalization, reclassification,
reorganization, combination or split-up of shares or payment of a stock dividend
or other similar change in capitalization, affected without receipt of any
consideration by the Company, the remaining number of Option Shares and the
purchase price shall be adjusted in a manner determined by the Board of
Directors of the Company so that the adjusted number of Option Shares and the
adjusted purchase price shall be the substantial equivalent of the remaining
number of Option Shares and the purchase price prior to the change.
5. Change of Control. In the event of a Change of Control (defined below), all
outstanding Option Shares shall become immediately exercisable. A Change in
Control shall be deemed to have occurred after the Effective Date if:
(a) any person as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the
Company, any subsidiary of the Company, or any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
subsidiary of the Company), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities in any transaction or series of transactions not
approved in advance by a vote of at least two-thirds (2/3) of the Board; (b)
during any period of three consecutive years (not including any period prior to
the effective date of this Option Certificate), individuals who at the beginning
of such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c), (d) or (e) of this
definition) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof; (c)
the stockholders of the Company approve a merger or consolidation of the Company
with any other company other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 65% of the
combined voting power of the voting securities of the Company (or such surviving
entity) outstanding immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no "person" (as above defined) acquires more
than 20% of the combined voting power of the Company's then outstanding
securities;
2
<PAGE>
(d) the stockholders of the Company adopt a plan of complete liquidation of the
Company or approve an agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets. For purposes of this clause
(d), the term "the sale or disposition by the Company of all or substantially
all of the Company's assets" shall mean a sale or other disposition transaction
or series of related transactions involving assets of the Company or of any
direct or indirect subsidiary of the Company (including the stock of any direct
or indirect subsidiary of the Company) in which the value of the assets or stock
being sold or otherwise disposed of (as measured by the purchase price being
paid therefor or by such other method as the Board determines is appropriate in
a case where there is no readily ascertainable purchase price) constitutes more
than two-thirds of the fair market value of the Company (as hereinafter
defined). For purposes of the preceding sentence, the "fair market value of the
Company" shall be the aggregate market value of the outstanding shares of Common
Stock of the Company (on a fully diluted basis) plus the aggregate market value
of the Company's other outstanding equity securities. The aggregate market value
of the shares of Common Stock (on a fully diluted basis) outstanding on the date
of the execution and delivery of a definitive agreement with respect to the
transaction or series of related transactions (the "Transaction Date") shall be
determined by the average closing price of the shares of Common Stock for the
ten trading days immediately preceding the Transaction Date or such other method
as the Board shall determine is appropriate. The aggregate market value of any
other equity securities of the Company shall be determined in a manner similar
to that prescribed in the immediately preceding sentence; or (e) any other event
determined by a vote of at least two-thirds (2/3) of the Board to constitute a
"Change of Control."
6. Restrictions on Transfer. The Option is not transferable other than by will
or the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only by him or her. Optionee shall have no rights as a
stockholder until payment of the option price and issuance of Option Shares.
7. Expiration. The Option expires at 5:00 P.M. Eastern Time on July 1, 2007
("Expiration Date"). In the event that Optionee dies during the term of the
Option, Optionee's personal representatives may exercise any unexercised Options
(without regard to vesting), within one (1) year of Optionee's death. In the
event that Optionee's employment with the Company is terminated by the Company
as a result of a disability, Optionee may exercise any unexercised Options
vested at the time of any such termination for a period of one (1) year after
any such termination. In the event that Optionee's employment is terminated for
any other reason (except for cause as defined in that certain Employment
Agreement between Option and the Company dated effective July 1, 1997), all
outstanding unexercised options vested at the time of termination shall expire
ninety (90) days after such termination. In the event of termination for cause,
all outstanding unexercised options shall immediately expire on such
termination.
8. Securities' Laws. Optionee acknowledges that the Option Shares to be issued
pursuant to this Option are not presently registered under the Securities Act of
1933, as amended, and that the Company has no obligation to register the Option
Shares. The
3
<PAGE>
Optionee will comply with all applicable resale restrictions and agrees not to
transfer any Option Shares unless such transfer in the opinion of counsel
acceptable to the Company complies in all respects with applicable federal and
state securities' laws. Certificates issued for the Option Shares shall bear
legends which the Company deems appropriate.
9. No Right to Employment. Executive acknowledges and agrees that the granting
of this Option by itself does not create or imply any obligation of the Company
to employ Executive for any period of time.
10. Authority. The Company represents and warrants to Optionee that it has
taken, or will take, any and all necessary acts so that the Option is a valid
and binding obligation of the Company.
11. Administration. The Board will have the authority and discretion to
interpret the Option to make any determinations that it deems necessary or
advisable for the administration of the Option and to correct any defect or
omission or reconcile any inconsistency in the Option in the manner and to the
extent the Board deems necessary or advisable.
12. Governing Law. The formation, construction, and performance of this Option
Certificate shall be construed in accordance with the laws of the State of New
York, without regard to principles of conflicts of law, and any action relating
to this Option Certificate shall be brought exclusively in the state or federal
courts of the State of New York.
DIGITEC 2000, INC.
BY: /s/ Frank Magliato
--------------------------
TITLE: President
DATE: July 1, 1997
ACCEPTED AND AGREED TO BY:
/s/ Keith McGOWAN
- ------------------------------
KEITH McGOWAN
DATE: July 1, 1997
4
EXHIBIT C
DIGITEC 2000, INC.
STOCK INCENTIVE PLAN
1. Establishment, Purpose and Types of Awards
Digitec 2000, Inc. hereby establishes the Digitec 2000, Inc. Stock
Incentive Plan (the "Plan"). The purpose of the Plan is to promote the long-term
growth and profitability of Digitec 2000, Inc. (the "Corporation") by (i)
providing key people with incentives to improve shareholder value and to
contribute to the growth and financial success of the Corporation, and (ii)
enabling the Corporation to attract, retain and reward the best available
persons for positions of substantial responsibility.
The Plan permits the granting of stock options (including incentive stock
options qualifying under Code section 422 and nonqualified stock options), stock
appreciation rights, restricted or unrestricted stock awards, or any combination
of the foregoing.
2. Definitions
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Affiliate" shall mean any entity, whether now or hereafter existing,
which controls, is controlled by, or is under common control with, the
Corporation (including, but not limited to, joint ventures, limited liability
companies, and partnerships). For this purpose, "control" shall mean ownership
of 50% or more of the total combined voting power of all classes of stock of the
entity.
(b) "Award" shall mean, individually or collectively, any stock option,
stock appreciation right or stock award.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Change in Control" shall mean the occurrence of any of the following
events:
(i) any person as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Corporation, any subsidiary of the
Corporation, or any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or any subsidiary
of the Corporation), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 20% or
more of the combined voting power of the Corporation's then
outstanding securities in any transaction or series of transactions
not approved in advance by a vote of at least two-thirds (2/3) of
the Board;
(ii) during any period of three consecutive years (not including any
period prior to the effective date of this Plan), individuals who,
at the beginning of such period, constitute the Board, and any new
director (other than a director designated by a person who has
entered into an agreement with the Corporation to effect a
transaction described in clause (i), (iii), (iv) or (v) of this
definition) whose election by the Board or nomination for election
by the Corporation's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
<PAGE>
(iii) the shareholders of the Corporation approve a merger or
consolidation of the Corporation with any other company other than a
merger or consolidation (1) which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
65% of the combined voting power of the voting securities of the
Corporation (or such surviving entity) outstanding immediately after
such merger or consolidation, or (2) effected to implement a
recapitalization of the Corporation (or similar transaction) in
which no "person" acquires more than 20% of the combined voting
power of the Corporation's then outstanding securities;
(iv) the shareholders of the Corporation adopt a plan of complete
liquidation of the Corporation or approve an agreement for the sale
or disposition by the Corporation of all or substantially all of the
Corporation's assets. For purposes of this clause (iv), the term
"the sale or disposition by the Corporation of all or substantially
all of the Corporation's assets" shall mean a sale or other
disposition transaction or series of related transactions involving
assets of the Corporation or of any direct or indirect subsidiary of
the Corporation (including the stock of any direct or indirect
subsidiary of the Corporation) in which the value of the assets or
stock being sold or otherwise disposed of (as measured by the
purchase price being paid therefor or by such other method as the
Board determines is appropriate in a case where there is no readily
ascertainable purchase price) constitutes more than two-thirds of
the fair market value of the Corporation (as hereinafter defined).
For purposes of the preceding sentence, the "fair market value of
the Corporation" shall be the aggregate Fair Market Value of the
outstanding shares of Common Stock of the Corporation (on a fully
diluted basis) plus the aggregate market value of the Corporation's
other outstanding equity securities. The aggregate market value of
any other equity securities of the Corporation shall be determined
in a manner similar to that prescribed hereunder for the
determination of the Fair Market Value of Common Stock; or
(v) any other event determined by a vote of at least two-thirds
(2/3) of the Board to constitute a "Change of Control."
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder and includes any amendments or
successor provisions thereto.
(f) "Committee" shall mean the committee of the Board appointed to
administer the Plan; provided, however, that all the members of such
committee shall constitute both "Non-Employee Directors" within the
meaning of Rule 16b-3, and "outside directors" within the meaning of Code
section 162(m). Notwithstanding the foregoing, until the Common Stock is
registered pursuant to Section 12 of the Exchange Act, the Board may, in
its discretion, reserve to itself any or all of the authority and
responsibility of the Committee. To the extent the Board reserves to
itself any such authority and responsibility, the term "Committee" as used
in this Plan shall be deemed to refer to the entire Board
(g) "Common Stock" shall mean shares of common stock of the Corporation,
par value of $0.001 per share.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" shall mean, as of any particular date, the fair
market value for each share of the Company's Common Stock as the Committee
shall in good faith determine to be appropriate; provided, however, that
in the event the Common Stock shall become registered under Section 12 of
the Exchange Act, then thereafter the Fair Market Value of the Company's
Common Stock for any purpose on a particular date shall mean the last
reported sale price per share of Common Stock, regular way, on such date
or, in case no such sale takes place on such date, the average of the
closing bid and asked
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<PAGE>
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on a national securities exchange or
included for quotation on the Nasdaq-National Market, or if the Common
Stock is not so listed or admitted to trading or included for quotation,
the last quoted price, or if the Common Stock is not so quoted, the
average of the high bid and low asked prices, regular way, in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or, if such system is
no longer in use, the principal other automated quotations system that may
then be in use or, if the Common Stock is not quoted by any such
organization, the last reported sale price, regular way, as furnished by a
professional market maker making a market in the Common Stock as selected
in good faith by the Committee or by such other source or sources as shall
be selected in good faith by the Committee. If, as the case may be, the
relevant date is not a trading day, the determination shall be made as of
the next preceding trading day. As used herein, the term "trading day"
shall mean a day on which public trading of securities occurs and is
reported in the principal consolidated reporting system referred to above,
or if the Stock is not listed or admitted to trading on a national
securities exchange or included for quotation on the Nasdaq-National
Market, any business day.
(j) "Grant Agreement" shall mean a written document memorializing the
terms and conditions of an Award granted pursuant to the Plan and shall
incorporate the terms of the Plan.
(k) "Parent" shall mean a corporation, whether now or hereafter existing,
within the meaning of the definition of "parent corporation" provided in
Code section 424(e), or any successor thereto.
(l) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange Act
on the effective date of the Plan, or any successor provision prescribing
conditions necessary to exempt the issuance of securities under the Plan
(and further transactions in such securities) from Section 16(b) of the
Exchange Act.
(m) "Subsidiary" and "Subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in section 424(f) of the
Code, or any successor thereto.
3. Administration
(a) Powers of the Committee. The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include authority, in its
sole and absolute discretion, to grant Awards under the Plan, prescribe Grant
Agreements evidencing such Awards and establish programs for granting Awards.
The Committee shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Committee shall deem appropriate; (v) modify, amend, extend or renew outstanding
Awards, or accept the surrender of outstanding Awards and substitute new Awards
(provided, however, that any modification that would materially adversely affect
any outstanding Award shall not be made without the consent of the grantee);
(vi) accelerate or otherwise change the time in which an Award may be exercised
or becomes payable and to waive or accelerate the lapse, in whole or in part, of
any restriction or condition with respect to such Award, including, but not
limited to, any restriction or condition with respect to the vesting or
exercisability of an Award following termination of any grantee's employment;
and (vii) establish objectives and conditions, if any, for earning Awards.
-3-
<PAGE>
The Committee shall have full power and authority, in its sole and
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan and for the conduct of its business as the
Committee deems necessary or advisable.
(b) Non-Uniform Determinations. The Committee's determinations under the
Plan (including without limitation, determinations of the persons to receive
Awards, the form, amount and timing of such Awards, the terms and provisions of
such Awards and the Grant Agreements evidencing such Awards) need not be uniform
and may be made by the Committee selectively among persons who receive, or are
eligible to receive, Awards under the Plan, whether or not such persons are
similarly situated.
(c) Limited Liability. To the maximum extent permitted by law, no member
of the Committee shall be liable for any action taken or decision made in good
faith relating to the Plan or any Award thereunder.
(d) Indemnification. To the maximum extent permitted by law and by the
Corporation's charter and by-laws, the members of the Committee shall be
indemnified by the Corporation in respect of all their activities under the
Plan.
(e) Effect of Committee`s Decision. All actions taken and decisions and
determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee's sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its shareholders, any participants in the
Plan and any other employee of the corporation, and their respective successors
in interest.
(f) Reliance on Reports. Each member of the Committee shall be fully
justified in relying or acting in good faith upon any report made by the
independent public accountants of the Corporation and its Affiliates, and upon
any other information furnished in connection with this Plan. In no event shall
any person who is or shall have been a member of the Committee be liable for any
determination made or other action taken or any omission to act in reliance upon
any such report or information.
4. Shares Available for the Plan; Maximum Awards
Subject to adjustments as provided in Section 7(d) of the Plan, the shares
of Common Stock that may be delivered, purchased or used for reference purposes
with respect to Awards granted under the Plan shall not exceed an aggregate of
600,000 shares of Common Stock. The Corporation shall reserve such number of
shares for Awards under the Plan, subject to adjustments as provided in Section
7(d) of the Plan. If any Award, or portion of an Award, under the Plan expires
or terminates unexercised, becomes unexercisable or is forfeited or otherwise
terminated, surrendered or canceled as to any shares, or if any shares of Common
Stock are surrendered to the Corporation in connection with any Award (whether
or not such surrendered shares were acquired pursuant to any Award), the shares
subject to such Award and the surrendered shares shall thereafter be available
for further Awards under the Plan; provided, however, that any such shares that
are surrendered to the Corporation in connection with any Award or that are
otherwise forfeited after issuance, and any shares subject to a stock
appreciation right the exercise of which resulted in the cancellation of an
option, shall not be available for purchase pursuant to incentive stock options
intended to qualify under Code section 422.
Subject to adjustments as provided in Section 7(d) of the Plan, the
maximum number of shares of Common Stock subject to Awards of any combination
that may be granted during any one fiscal year of the Corporation to any one
individual shall be limited to 100,000 shares. Such per-individual limit shall
not be adjusted to effect a restoration of shares of Common Stock with respect
to which the related Award is terminated, surrendered or canceled.
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<PAGE>
5. Participation
Participation in the Plan shall be open to all employees, officers,
directors and consultants of the Corporation, or of any Affiliate of the
Corporation, as may be selected by the Committee from time to time.
Notwithstanding the foregoing, participation in the Plan with respect to Awards
of incentive stock options shall be limited to employees of the Corporation or
of any Parent or Subsidiary of the Corporation.
6. Awards
The Committee, in its sole discretion, establishes the terms of all Awards
granted under the Plan. Awards may be granted individually or in tandem with
other types of Awards. All Awards are subject to the terms and conditions
provided in the Grant Agreement.
(a) Stock Options. The Committee may from time to time grant to eligible
participants Awards of incentive stock options as that term is defined in Code
section 422 or nonqualified stock options. Stock option Awards granted under the
Plan shall meet the following requirements:
(i) Grant Date. An incentive stock option must be granted within 10
years of the earlier of the Plan's adoption by the Board of Directors or
approval by the Corporation's shareholders. The "Grant Date" is the date
the Committee formally acts to grant an Award to a grantee or such other
date as the Committee shall so designate at the time of taking such formal
action.
(ii) Vesting Schedule. Except as otherwise provided by the Committee
in the Grant Agreement, stock options shall become exercisable (i.e.
vested) with respect to 25% of the shares of Common Stock subject to the
stock option on each anniversary of the Grant Date, ending with the fourth
anniversary. Notwithstanding the immediately preceding sentence, all
outstanding stock options shall become immediately exercisable upon a
Change in Control, except as otherwise provided by the Committee in the
Grant Agreement.
(iii) Exercise Price and Term. The exercise price of an incentive
stock option shall not be less than 100% of the Fair Market Value of the
shares on the date the stock option is granted and the term of the stock
option shall not exceed ten years. Notwithstanding the immediately
preceding sentence, the exercise price of any incentive stock option
granted to a grantee who owns (within the meaning of Code section
422(b)(6), after application of the attribution rules in Code section
424(d)) more than 10% of the total combined voting power of all classes of
shares of the Corporation, or its Parent or Subsidiary corporations, shall
be not less than 110% of the Fair Market Value of the Common Stock on the
Grant Date and the term of such stock option shall not exceed five years.
The exercise price of a nonqualified stock option shall be established by
the Committee, and the term of such stock option shall not exceed ten
years and one day. The date that the term of the stock option expires
pursuant to this paragraph is the "Expiration Date."
Notwithstanding the foregoing provisions of this subsection (iii),
in the event of the grantee's termination of employment or service with
the Corporation and its Affiliates, the stock option shall terminate in
its entirety, regardless of whether the stock option is vested in whole or
in part at that time, except as otherwise provided by the Committee in the
Grant Agreement; provided, however, that if the grantee terminates
employment or sex-vice by reason of death or disability within the meaning
of Code section 22(e)(3), the stock option shall remain exercisable (to
the extent exercisable by the grantee on the effective date of such
termination) for a period of one year, provided that (1) no portion of the
stock option that is not exercisable on the effective date of such
termination shall thereafter become exercisable and (2) no portion of the
stock option may be exercised after the Expiration Date.
-5-
<PAGE>
(iv) Maximum Grant. The aggregate Fair Market Value (determined as
of the Grant Date) of shares of Common Stock with respect to which all
incentive stock options first become exercisable by any grantee in any
calendar year under this or any other plan of the Corporation and its
Parent and Subsidiary corporations may not exceed $100,000 or such other
amount as may be permitted from time to time under Code section 422. To
the extent that such aggregate Fair Market Value shall exceed $100,000, or
other applicable amount, such stock options shall be treated as
nonqualified stock options.
(v) Grantee. Incentive stock options shall be issued only to
employees of the Corporation, or of a Parent or Subsidiary of the
Corporation.
(vi) Tandem Options Prohibited. An incentive stock option may not be
granted in tandem with a nonqualified option in such a manner that the
exercise of one affects a grantee's right to exercise the other.
(vii) Designation. No stock option shall be an incentive stock
option unless so designated by the Committee at the time of grant or in
the Grant Agreement evidencing such stock option.
(viii) Method of Exercise. A stock option may be exercised by
delivery to the Corporation of a written notice of exercise on any
business day, at the Corporation's principal office addressed to the
attention of the Corporate Secretary. Such notice shall specify the number
of shares for which the stock option is being exercised and shall be
accompanied by payment in full of the option price of the shares for which
the stock option is being exercised. However, if the Common Stock is
publicly traded, payment in full of the option price need not accompany
the written notice of exercise provided the notice directs that the stock
certificates for the shares issued upon the exercise be delivered to a
licensed broker acceptable to the Corporation as the agent for the
individual exercising the stock option and at the time the stock
certificates are delivered to the broker, the broker will tender to the
Corporation cash or cash equivalents acceptable to the Corporation equal
to the exercise price, and the Corporation determines that such procedure
satisfies the cashless exercise provisions of the Federal Reserve Board's
Regulation T.
Payment of the option price for the shares of Common Stock purchased
pursuant to the exercise of a stock option may be made, as determined by
the Committee and set forth in the Grant Agreement, as follows:
(1) in cash or by certified check payable to the order of the
Corporation;
(2) through the tender to the Corporation of shares of Common Stock,
which shall be valued, for purposes of determining the extent to which the
option price has been paid, at their Fair Market Value on the date of
exercise;
(3) by causing the Corporation to withhold shares of Common Stock
otherwise issuable pursuant to exercise of the stock option with a Fair
Market Value equal to the option price or any portion thereof; or
(4) by a combination of the foregoing methods or any other method
that the Committee may allow.
(ix) Issuance of Stock. Promptly after the exercise of a stock
option and the payment in full of the option price of the shares of Common
Stock covered thereby, the individual exercising the stock option shall be
entitled to the issuance of a stock certificate or certificates evidencing
such individual's ownership of such shares. A separate stock certificate
or certificates shall be issued for any shares purchased pursuant to the
exercise of a stock option which is an incentive stock option, which
-6-
<PAGE>
certificate or certificates shall not include any shares which were
purchased pursuant to the exercise of a stock option which is not an
incentive stock option. An individual holding or exercising a stock option
shall have none of the rights of a shareholder until the shares of Common
Stock covered thereby are filly paid and issued to such individual and,
except as provided in Section 7(d), no adjustment shall be made for
dividends or other rights for which the record date is prior to the date
of such issuance.
(b) Stock Appreciation Rights. The Committee may from time to time grant
to eligible participants Awards of Stock Appreciation Rights ("SAR"). An SAR
entitles the grantee to receive, subject to the provisions of the Plan and the
Grant Agreement, a payment having an aggregate value equal to the product of (i)
the excess of (A) the Fair Market Value on the exercise date of one share of
Common Stock over (B) the base price per share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. Payment by the Corporation of the amount receivable upon any
exercise of an SAR. may be made by the delivery of Common Stock or cash, or any
combination of Common Stock and cash, as determined in the sole discretion of
the Committee. If upon settlement of the exercise of an SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date.
(c) Stock Awards. The Committee may from time to time grant restricted or
unrestricted stock Awards to eligible participants in such amounts and for such
consideration, including no consideration or such minimum consideration as may
be required by law, as it determines. A stock Award may be paid in Common Stock,
in cash, or in a combination of Common Stock and cash, as determined in the sole
discretion of the Committee.
Each stock Award shall specify the applicable restrictions, if any, on
such shares of Common Stock, the duration of such restrictions, and the time or
times at which such restrictions shall lapse with respect to all or a specified
number of shares of Common Stock that are part of the Award. Notwithstanding the
foregoing, the Committee may reduce or shorten the duration of any restriction
applicable to any shares of Common Stock awarded to any grantee under the Plan.
Stock certificates with respect to restricted shares of Common Stock granted
pursuant to a stock Award may be issued at the time of grant of the stock Award,
subject to forfeiture if the restrictions do not lapse, or upon lapse of the
restrictions. If stock certificates are issued at the time of grant of the stock
Award, the certificates shall bear an appropriate legend with respect to the
restrictions applicable to such stock Award or, alternatively, the grantee may
be required to deposit the certificates with the Corporation during the period
of any restriction thereon and to execute a blank stock power or other
instrument of transfer therefor. Except as otherwise provided by the Committee,
during such period of restriction following issuance of stock certificates, the
grantee shall have all of the rights of a holder of Common Stock, including but
not limited to the rights to receive dividends (or amounts equivalent to
dividends) and to vote with respect to the restricted shares. If stock
certificates are issued upon lapse of restrictions on a stock Award, the
Committee may provide that the grantee will be entitled to receive any amounts
per share pursuant to any dividend or distribution paid by the Corporation on
its Common Stock to shareholders of record after grant of the stock Award and
prior to the issuance of the stock certificates.
7. Miscellaneous
(a) Withholding of Taxes. The Corporation may require, as a condition to
the grant of any Award under the Plan or exercise pursuant to such Award or to
the delivery of certificates for shares issued or payments of cash to a grantee
pursuant to the Plan or a Grant Agreement (hereinafter collectively referred to
as a "taxable event"), that the grantee pay to the Corporation, in cash or in
shares of Common Stock, including shares acquired upon grant of the Award or
exercise of the Award, valued at Fair Market Value on the date as of which the
withholding tax liability is determined, any federal, state or local taxes of
any kind required by law to be withheld with respect to any taxable event under
the Plan. The Corporation, to the extent permitted or required by law, shall
have the right to deduct from any payment of any kind (including salary or
bonus)
-7-
<PAGE>
otherwise due to a grantee any federal, state or local taxes of any kind
required by law to be withheld with respect to any taxable event under the Plan,
or to retain or sell without notice a sufficient number of the shares to be
issued to such grantee to cover any such taxes.
(b) Payment of Exercise Price. Payment of the exercise price for an Award
may be made in accordance with the terms of the Grant Agreement. The Corporation
may make or guarantee loans to grantees to assist grantees in exercising Awards
and satisfying any withholding tax obligations.
(c) Transferability. Except as provided below no Award granted under the
Plan shall be transferable by a grantee otherwise than by will or the laws of
descent and distribution, and an Award may be exercised during the lifetime of
the grantee only by the grantee or, during the period the grantee is under a
legal disability, by the grantee's guardian or legal representative.
Notwithstanding the preceding paragraph, the Committee may, in its
discretion, expressly provide that an Award other than an incentive stock option
or any Award that is linked to an incentive stock option may be transferred to
(i) members of the grantee's family; (ii) trusts for the benefit of such family
members; or (iii) partnerships whose only partners are such family members. No
consideration may be paid for any such transfer of Awards.
(d) Adjustments; Business Combinations. In the event of a
reclassification, recapitalization, stock split, stock dividend, combination of
shares, or other similar event, the maximum number and kind of shares reserved
for issuance or with respect to which Awards may be granted under the Plan as
provided in Section 4 shall be adjusted to reflect such event, and the Committee
shall make such adjustments as it deems appropriate and equitable in the number,
kind and price of shares covered by outstanding Awards made under the Plan, and
in any other matters which relate to Awards and which are affected by the
changes in the Common Stock referred to above.
(e) Termination, Amendment and Modification of the Plan. The Board,
without further approval of the shareholders, may terminate, amend or modify the
Plan or any portion thereof at any time. Notwithstanding the immediately
preceding sentence, no amendment may be made which materially changes the
requirements as to eligibility to receive incentive stock options or increases
the number of securities which may be issued pursuant to this Plan (except as
provided in Section 7(d)) without shareholder approval.
(f) Non-Guarantee of Employment or Service. Nothing in the Plan or in any
Grant Agreement thereunder shall confer any right on an individual to continue
in the employment or service of the Corporation or its Affiliates, or shall
interfere in any way with the right of the Corporation and its Affiliates to
terminate such employment or service at any time.
(g) Compliance with Securities Laws, Listing and Registration. Common
Stock shall not be issued with respect to an Award granted under the Plan unless
the exercise of such Award and the issuance and delivery of stock certificates
for such Common Stock pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933 and the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any national securities exchange or any listing or quotation
system established by the National Association of Securities Dealers, Inc.
("Nasdaq System") upon which the Common Stock may then be listed or quoted, and
shall be further subject to the approval of counsel for the Corporation with
respect to such compliance to the extent such approval is sought by the
Committee. If the Corporation determines that the listing, registration or
qualification upon any securities exchange or upon the Nasdaq System or under
any law, of shares subject to any Award is necessary or desirable as a condition
of, or in connection with, the granting of the Award or the issuance or purchase
of shares thereunder, no such Award may be exercised in whale or in part and no
restrictions on such Award shall lapse, unless such listing, registration or
qualification is effected free of any conditions not acceptable to the
Corporation.
-8-
<PAGE>
(h) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Corporation or its Affiliates from adopting or continuing
in effect other compensation arrangements (whether such arrangements be
generally applicable or applicable only in specific cases) as the Committee in
its discretion determines desirable, including without limitation the granting
of stock options, stock awards or stock appreciation rights otherwise than under
the Plan.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Corporation and a grantee or any other person. To the
extent that any grantee or other person acquires a right to receive payments
from the Corporation pursuant to an Award, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.
(j) Governing Law. The validity, construction and effect of the Plan, of
Grant Agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Committee relating to the
Plan or such Grant Agreements, and the rights of any and all persons having or
claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the State
of Nevada, without regard to its conflict of laws principles.
(k) Expenses. The expenses of implementing and administering the Plan
shall be borne by the Corporation and its Affiliates, pro rata.
(l) Fractional Shares. Any fractional shares concerning Awards shall be
eliminated at the time of payment or removal of restrictions by rounding down
for fractions of less than one-half and rounding up for fractions of equal to or
more than one-half. No cash settlements shall be made with respect to fractional
shares eliminated by rounding.
(m) Effective Date; Termination Date. The Plan is effective as of the date
on which the Plan was adopted by the Board, subject to approval of the
shareholders within twelve months before or after such date. No Award shall be
granted under the Plan after the close of business on the day immediately
preceding the tenth anniversary of the effective date of the Plan. Subject to
other applicable provisions of the Plan, all Awards made under the Plan prior to
such termination of the Plan shall remain in effect until such Awards have been
satisfied or terminated in accordance with the Plan and the terms of such
Awards.
Date Approved by the Board: 5/15/97
Date Approved by the Shareholders: ___________________
-9-
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Index
================================================================================
Report of independent certified public accountants S-2
Schedule II - valuation and qualifying accounts S-3
S-1
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors
and Stockholders of DigiTEC 2000, Inc.
(formerly Promo Tel, Inc.)
The audits referred to in our report dated October 22, 1997 relating to the
consolidated financial statements of DigiTEC 2000, Inc. and subsidiary, which is
contained in Item 13 of this Form 10, included the audits of the financial
statement schedule listed in the accompanying index for the period May 18, 1995
(inception) to June 30, 1995 and for the years ended June 30, 1996 and 1997.
This financial statement schedule is the responsibility of management. Our
responsibility is to express an opinion on this schedule based on our audits.
In our opinion, the financial statement Schedule II, Valuation and Qualifying
Accounts, presents fairly, in all material respects, the information set forth
therein.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, New York
October 22, 1997
S-2
<PAGE>
DigiTEC 2000, Inc.
and Subsidiary
(formerly Promo Tel, Inc.)
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
================================================================================================
Year ended June 30, 1997
- ------------------------------------------------------------------------------------------------
Balance at Charged to Balance at
beginning costs and Other end of
of period expenses changes Deductions period
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserves and allowances
deducted from asset
accounts:
Allowance for bad
debts $26,000 $34,000 $- $- $60,000
================================================================================================
Year ended June 30, 1996
- ------------------------------------------------------------------------------------------------
Reserves and allowances
deducted from asset
accounts:
Allowance for bad
debts $- $26,000 $- $- $26,000
================================================================================================
Period May 18, 1995 (inception) to June 30, 1995
- ------------------------------------------------------------------------------------------------
Reserves and allowances
deducted from asset
accounts:
Allowance for bad
debts $- $ - $- $- $ -
================================================================================================
</TABLE>
S-3
