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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) or the
Securities Exchange Act of 1934
Commission file number: 001-13749
Columbia Capital Corp.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 11-3210792
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(State of Incorporation) (I.R.S. Employer Identification No.)
2701 West Oakland Park Boulevard, Second Floor, Fort Lauderdale, Florida 33311
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(Address of Executive Offices)(Zip Code)
3020 N. W. 33rd Ave., Fort. Lauderdale, Fla. 33311
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(Former Address of Executive Offices and Zip Code)
Registrant's Telephone Number (954) 453-3170
with copies to:
Matthias & Berg LLP
Jeffrey P. Berg, Esq.
1990 South Bundy Drive, Suite 790
Los Angeles, California 90025
(310) 820-0083
Securities to be registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which each class is to be
to be so registered registered
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None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 (US) par value per share
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(Title of Class)
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THIS REGISTRATION STATEMENT ON FORM 10-SB/A (THE "REGISTRATION STATEMENT")
MAY BE DEEMED TO CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT").
FORWARD-LOOKING STATEMENTS IN THIS REGISTRATION STATEMENT OR HEREAFTER INCLUDED
IN OTHER PUBLICLY AVAILABLE DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION"), REPORTS TO THE COMPANY'S STOCKHOLDERS AND OTHER
PUBLICLY AVAILABLE STATEMENTS ISSUED OR RELEASED BY THE COMPANY INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE THE
COMPANY'S ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS
TO DIFFER FROM THE FUTURE RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH
FUTURE RESULTS ARE BASED UPON MANAGEMENT'S BEST ESTIMATES BASED UPON CURRENT
CONDITIONS AND THE MOST RECENT RESULTS OF OPERATIONS. THESE RISKS INCLUDE, BUT
ARE NOT LIMITED TO, THE RISKS SET FORTH HEREIN, EACH OF WHICH COULD ADVERSELY
AFFECT THE COMPANY'S BUSINESS AND THE ACCURACY OF THE FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN.
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of the Registration Statement on Form
10-SB filed with the Commission on December 30, 1997, as set forth in the pages
attached hereto:
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The following should be read in conjunction with the Consolidated Financial
Statements and the pro forma Consolidated Financial Statement of Columbia
Capital Corp., a Delaware corporation and the related notes thereto, contained
elsewhere in this Registration Statement. This Registration Statement contains
forward-looking statements which involve risks and uncertainties. Actual
results may differ significantly from the results discussed in the
forward-looking statements.
Columbia Capital Corp., a Delaware corporation ("Columbia"), operates
through its wholly-owned subsidiary, First Independent Computers, Inc., a Texas
corporation ("FICI"), which is a multi-faceted information service
organization. Unless stated otherwise, Columbia and FICI shall hereinafter be
referred to as the "Company."
The Company provides: (i) credit and debit card services; (ii) banking and
financial services; and (iii) document management and distribution services. The
services the Company provides to most of its customers serve as a link between
consumers, merchants and financial institutions by capturing the initial
transaction at the point of sale, giving the merchant credit for that
transaction, posting the transaction to the financial institution's accounts
receivable and general ledger and ultimately placing the transaction on the
customer's statement.
The Company concentrates on a niche market consisting of small to
medium-sized accounts that have not achieved adequate economies of scale to
operate their own in-house programs and systems. In addition, the Company seeks
strategic alliances with appropriate size banks, thrifts, credit unions,
insurance companies, merchants, utilities, government agencies and other service
companies whose success depends upon successful data management. See
"Description of Business - The Company's Business."
In an information-based economy, the critical common denominator of
transaction and data processing is spurring alliances between data processors
and previously non-associative businesses, such as health care service
organizations, utility providers, travel and tourism organizations and Internet
merchandising companies. The Company can provide these services from a central
location through a standard, common and economical on-line interface to each of
its customer's principal offices as if they were located within the same
building as the Company. This seamless and easy-to-use interface gives the
customer instantaneous access to the information needed to properly manage and
direct those services offered by the Company. This situation represents an
opportunity for growth in demand for the Company's products and services.
However, no assurance to this effect can be given. See "Description of
Business-Sales and Marketing" and "Description of Business-Competition."
The industry in which the Company competes is highly fragmented. The
Company believes that with its vast range of services and the Year 2000
compliance issues facing prospective customers, those banking and financial
institutions looking for a new and compliant solution will begin to migrate from
their in-house solutions to companies on an outsource basis. Management of the
Company believes that to succeed in competing for customers in its industry
segments the Company's factors for success are its capabilities, quality of
service, price, reputation and, in some cases, convenience of location to the
client. See "Description of Business-Year 2000 Dilemma and Compliance."
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HISTORY OF THE COMPANY
Columbia was organized under the laws of the State of Delaware on February
5, 1993, for the purpose of creating an entity to obtain capital and to seek
out, investigate and acquire interests in products and businesses with the
potential for profit. At inception, Columbia's business plan was to seek
investments and to form wholly-owned subsidiaries and distribute their
securities to Columbia's shareholders in an attempt to diversify the potential
acquisitions which could be made on behalf of Columbia's shareholders. Columbia
subsequently abandoned this business plan. In connection with its organization,
Columbia issued an aggregate of 2,175,000 shares of restricted Common Stock
to its original officers and directors for $12,500. In 1993, Columbia
completed a private offering of 325,000 shares of Common Stock at an offering
price of $0.20 per share, from which Columbia realized gross proceeds of
$65,000.
On February 28, 1997, Columbia determined that its two subsidiaries,
Central Capital Corp., and Hudson Resources, Inc., had no value and would hinder
Columbia's plans for acquisition. Therefore, the shares of the two subsidiaries
were sold for $1,361, to Lynn Dixon, Columbia's then principal shareholder. See
"Item 7 - Certain Relationships and Related Transactions."
FICI started operations in 1968 as Data Processing Center ("DPC"), which
was a division of First State Bank of Abilene and was in the business of
processing the financial records for several Abilene area banks, on an outsource
basis ("Outsourcing"). On October 21, 1983, DPC was incorporated in the State
of Texas; it changed its name to First Independent Computers, Inc. and became a
subsidiary of First Independent Bank Shares, Inc., the holding company of First
State Bank of Abilene, Texas ("SSI"). On September 11, 1987, all of the common
stock of FICI was sold to CCS Technologies, Inc. ("CCS") of Orlando, Florida.
On January 4, 1989, all of the common stock of FICI was sold by CCS to
Affiliated Computer Services, Inc. ("ACS") of Dallas, Texas. On February 14,
1991, all of the common stock of FICI was sold by ACS to a private group of
investors in Abilene, Texas. On May 31, 1994, all of the common stock of FICI
was sold by the private investor group back to SSI. FICI changed its business
services to those currently offered in or about April, 1994.
On April 28, 1997, all of the common stock of FICI (the "FICI Common
Stock") was sold by SSI to Glenn M. Gallant ("Gallant") and Douglas R. Baetz
("Baetz") for $1,600,000 in cash. SSI is a party unaffiliated with Messrs.
Baetz and Gallant. Messrs. Baetz and Gallant are, as of the date of this
Registration Statement, both directors and principal shareholders of the
Company. See "Item 4 - Security Ownership of Certain Beneficial Owners and
Management" and "Item 7 - Certain Relationships and Related Transactions."
On September 23, 1997, Columbia acquired all of the FICI Common Stock (the
"Acquisition") from Messrs. Baetz and Gallant. Pursuant to the terms of the
agreement of acquisition of the FICI Common Stock (the "Stock Purchase
Agreement") Messrs. Gallant and Baetz received 10,631,250 shares, par value
$0.001 per share of the common stock of Columbia (the "Common Stock") (after
Columbia effectuated a 1 for 2 reverse stock split of its common stock) in
exchange for the FICI Common Stock, which represented approximately 85% of
Columbia's then issued and outstanding Common Stock. In connection with the
purchase of the FICI common stock by the Company, 618,750 shares of Common Stock
were issued by the Company to Baytree Associates, Inc. ("Baytree"), which is not
an affiliate of Messrs. Baetz and Gallant, as a fee for services rendered to the
Company for arranging the transactions which were the subject of the Stock
Purchase Agreement. See "Item 7 - Certain Relationships and Related
Transactions."
THE COMPANY'S BUSINESS
The Company engages in the financial services business and provides: (i)
credit and debit card services; (ii) banking and financial services; and (iii)
document management and distribution services. The Company provides, to most of
its customers, in connection with the three areas of services listed above, a
link between
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consumers, merchants and financial institutions by capturing the initial
transaction at the point of sale, giving the merchant credit for that
transaction, posting the transaction to the financial institutions accounts
receivables and general ledger and ultimately placing the transaction on the
customer's statement.
According to The Nilson Report of March, 1998, as the world is rapidly
moving toward electronic information processing, annual credit and debit card
purchases in the United States have reached the $1 trillion mark. The
combination of growth in the number of transactions and the continuing general
trend toward Outsourcing data processing functions directly benefits the
Company. Outsourcing involves having a third party contractor perform a variety
of services or tasks, such as those provided by the Company to the issuer of the
credit and debit card. This trend is anticipated by management of the Company to
remain a source of increased business in the future. However, no assurance to
this effect can be given. The use of Outsourcing is expected by management to
continue and accelerate as a trend. However, no assurance to this effect can be
given. See "Description of Business-Sales and Marketing," "Description of
Business-Competition" and "Description of Business-Risk Factors."
HARDWARE AND SOFTWARE UPGRADING
Since the practical beginning of electronic data management, the Company's
wholly-owned subsidiary FICI has been actively involved in the development of
the data processing industry and in the testing and research of software
products in connection with such industry. The Company has a policy of hardware
and software upgrade and acquisition has been pursued in order to facilitate the
efficient processing required by the expansion of its credit card service
business. With the continued upgrade of equipment and software, management of
the Company believes that the Company has the capability to handle its recent
and significant growth in the number of credit card processing transactions, as
well as the further anticipated increase in volume of credit card processing
transactions, which are expected to occur during fiscal year 1998. However, no
assurance to this effect can be given.
Further, as of December 30, 1997, the Company completed restructuring of
its prices and fees charged for financial data processing and customer service.
This restructuring brings the Company's fees in line with the industry standard
of approximately $2.00 per account per month for financial data processing and
$3.00 per account per month for customer service. See "Description of
Business-Credit and Debit Card Services," "Item 2 - Management's Discussion and
Analysis or Plan of Operations" and "Item 7 - Certain Relationships and Related
Transactions."
Steps taken by the Company to insure that it will be able to provide the
efficient processing required by the expansion of the credit card service
business, include the recent installation of significant additional equipment
necessary to the operation of a full-service credit card transaction processing
company. The Company entered into a mainframe computer lease with IBM for 36
months, starting in October, 1997. The Company further upgraded its mainframe
computer CPU again in March, 1998 for its anticipated growth in business. The
latest upgrade was accomplished pursuant to the existing IBM lease, on a
co-terminus basis. The Company was able to accomplish this increase in
computing capacity with IBM by depositing an aggregate of $500,000 in the form
of certificates of deposit, $200,000 of which was drawn from a line of credit
(the "Line of Credit") supplied to the Company by Century Financial Group, Inc.
("Century"), an affiliate of Messrs. Baetz and Gallant, who are both directors
and the principal shareholders of the Company and who own all of the equity
securities of Century. The Company has licensed numerous software programs,
from unaffiliated third parties, to implement its business using its hardware,
both owned and leased and such new banking software systems have been installed.
See "Description of Business-The Company's Business," "Description of
Business-Year 2000 Dilemma and Compliance" and "Item 7 - Certain Relationships
and Related Transactions."
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YEAR 2000 DILEMMA AND COMPLIANCE
One of the major challenges facing the consumer financial data processing
services industry is the problem of Year 2000 compliance. The Year 2000 dilemma
deals with the underlying fact that many existing computer programs use only two
digits to identify a year in the date field. These programs were designed and
developed without considering the impact of the upcoming change in the 21st
century. If not corrected, many computer applications could fail or create
erroneous results by or at the Year 2000. The Year 2000 dilemma affects
virtually all companies and organizations, including the Company.
The philosophy and practice regarding upgrades of equipment and software,
in the opinion of management of the Company, allows the Company to offer a
meaningful alternative to existing and prospective customers as an outsource,
rather than such customers' attempting to perform these tasks in-house.
Management feels that an additional opportunity to bring in bank processing
customers exists by providing a solution to the Year 2000 dilemma. The Company's
new banking software is certified and fully Year 2000 compliant and, therefore,
a solution for banks facing this processing crisis. However, no assurance to
this effect can be given. See "Description of Business-Sales and Marketing" and
"Description of Business-Competition."
Prospective and existing customers must comply with numerous required
regulatory mandates and are faced with the Year 2000 dilemma. These mandates
include: regulatory exams and audits supervised by the Federal Deposit Insurance
Corporation ("FDIC"), Office of the Comptroller of the Currency of the United
States (the "OCC") and other state regulatory agencies, external audits by
independent third party auditors, proper disaster recovery planning and testing,
installation of proper procedures and controls, insurance that key personnel are
properly backed up so that reliance on key individuals for services are not
interrupted and a host of other issues. The removal of these overhead burdens
from the Company's existing and prospective customers, is a significant
marketing opportunity for the Company. See "Description of Business-Sales and
Marketing," "Description of Business-Competition" and "Description of
Business-Regulation of the Company's Business."
Over the past few years, the Company has attempted to actively address the
Year 2000 dilemma. The Company has had in place a project plan (the "Plan") and
project team reviewing all hardware and software, as necessary. The Company has
already made much of the investment needed to address the Year 2000 dilemma. As
of the date of this Registration Statement the cost to: (i) acquire, install and
implement these new software systems has been an aggregate of $162,000; and (ii)
acquire new hardware has been $5,000. See "Description of Business-Hardware and
Software Upgrading." The Company has also instituted policies and procedures
that require all new hardware and software acquired or licensed by the Company
to be Year 2000 compliant. As of the date of this Registration Statement, all
hardware is expected to be Year 2000 compliant by the fourth quarter of 1998. It
is management's opinion that any remaining Year 2000 issues are not significant
and should be able to be funded through normal operating revenue and income.
The Company estimates that until the Company has completed implementation of the
Plan, the Company anticipates expending an additional $207,000, which is
estimated to include $48,000 in software, $9,000 in new hardware and $150,000 on
other aspects of the implementation of the Plan. During the twelve months
following the date of this Registration Statement, the Company expects to expend
an additional $250,000 for capital expenditures to address the Plan. The
anticipated source of the funds for such expenditures is expected to be working
capital generated from operations of the Company. However, no assurance can be
given that the goals for the Plan can be achieved and if achieved, that the
amount necessary to achieve such goals will be limited to the amounts set forth
above or that the amounts will be generated from operations. See "Item 2 -
Management's Discussion and Analysis or Plan of Operation."
Specifically, to address this problem the Company has installed newly
acquired banking software systems, licensed from The Kirchman Corporation, an
unaffiliated third party ("Kirchman"), that provides a solution to the Year 2000
dilemma. The Company's new banking software is certified by Kirchman as fully
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Year 2000 compliant, and, therefore, a solution for other companies which are
facing the need to solve this impending crisis. These software upgrades are
system and application functional upgrades. However, no assurance can be given
that all Year 2000 issues have been solved by the acquisition of this software.
CREDIT AND DEBIT CARD SERVICES.
FICI provides a full range of card processing services for approximately
sixteen customers which consist of nine banks, three retailers and four
financial service organizations that do not operate their own in-house programs
and systems. PaySYS International Inc., ("PaySYS") has licensed the Company to
use its software known as CardPac-C- and VisionPLUS-C-, which addresses every
activity associated with credit card transaction processing. These software
packages provide specialized applications for customer credit, merchant
processing, credit bureau application processing, customer service, special
interchange processing, authorizations, transaction processing and collections.
In addition, FICI provides custom programming services on the licensed
application software for processing requirements that are unique to a customer's
business. The Company works closely with its customers to be a total solutions
provider. In providing a full range of credit card processing services, the
Company supports comprehensive card programs, including bankcard issuing and
acquiring (merchant services), co-branded, debit card, corporate card and
private label programs. The services include application processing, customer
service support, remittance processing, card embossing and production,
chargeback processing, billing and statement preparation, mail processing,
detailed reporting, account collections on behalf of its customers and merchant
services.
The Company has entered into multi-year agreements with most of its
customers. For the year ended December 31, 1997, BestBank of Colorado (-
"BestBank"), an unaffiliated third party which had a preexisting business
relationship with Messrs. Baetz and Gallant, accounted for 30%, Security State
Bank ("SSB"), a former affiliate of FICI, accounted for 27% and Pride Refining
Inc. ("Pride"), an unaffiliated third party, accounted for 16%, of 1997 gross
revenues. For the five month period ended May 31, 1998, BestBank accounted for
79%, Security State Bank accounted for 12% and Pride accounted for 4% of gross
revenue for such five month period. On May 8, 1998 the Company entered into an
agreement with Peak Card Management ("Peak"), an unaffiliated third party, to
service their credit and debit cards and merchant processing. It is estimated by
the Company that revenues to be derived from this agreement will aggregate
$1,250,000 for the balance of the fiscal year ended December 31, 1998 and
$2,500,000 for the fiscal years 1999 and 2000. However, no assurance to this
effect can be given. The loss of any of these customers could have a material
adverse effect upon the business of the Company.
Agreements between the Company and its customers provide that the Company
will perform data processing in order to provide to its customers computer
programming and other services in connection with the Company's programs with
MasterCard International, Inc. ("MasterCard"), Visa U.S.A., Inc. ("VISA") and
private label credit card operations. These agreements terminate at various
times during the period from May, 1998 through July 31, 2005, but automatically
renew for an unlimited number of successive years, unless notice of termination
is given by either party no less then 180 days prior to a designated termination
date.
During the year ended December 31, 1997, the Company's agreement with Clark
Refining, Inc. ("Clark"), an unaffiliated third party, expired and has not been
renewed. For the fiscal years ended December 31, 1996 and 1997 the revenue
derived by the Company from Clark was approximately $1,335,914 or 32% and
$530,224 or 11%, respectively. Further, SSB has been acquired since the
beginning of this fiscal year by a company that has its own data processing
operations. Management of the Company anticipates that the Company will retain
SSB's credit card and certain other processing business. However, no assurance
to this effect can be given. Management anticipates a loss of a portion of the
business of SSB, which loss is estimated by management to amount to
approximately $500,000 in annual revenue for fiscal year 1998. However, no
assurance can be given to this effect. Furthermore, revenues from Pride, were
$715,500 for the twelve months ended December 31, 1997 as compared to $804,000
for the twelve months ended December 31, 1996. This
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represented a decrease of 11% during 1997. This revenue decrease was due to a
decision of the management of Pride to take their computer processing activities
in-house. This removal of processing business from the Company to Pride is
being converted in stages and should be completed by the summer of 1999. Due to
the increase and the further expected increase in revenues from the Company's
credit card operations and bank processing, as discussed in the prior
paragraphs, the loss of the Pride revenue is not anticipated to have a material
adverse effect on total revenue for fiscal year 1998. However, no assurance to
this effect can be given. See "Item 2 - Management's Discussion and Analysis or
Plan of Operations."
AGREEMENTS WITH BESTBANK AND CENTURY FINANCIAL GROUP, INC. On October 1,
1997, the Company entered into a master agreement with BestBank (the "Master
Agreement") for processing and services for its customers with which BestBank
has entered in contractual agreements. A further agreement was entered into
with BestBank as of May 14, 1998, wherein the Company has agreed to provide core
processing to BestBank. BestBank is unaffiliated with the Company or any of its
affiliates.
BestBank is a Colorado state-chartered bank that operates primarily as a
provider of credit card and debit card programs. The primary contractor to
BestBank for such programs is Century, an affiliate of Messrs. Baetz and
Gallant, which handles such programs on a turn-key basis. BestBank oversees
Century's operations to monitor Century's compliance with all federal and state
laws and regulations. As a small community bank, BestBank competes in the
credit and debit card arena by targeting niche markets that have been overlooked
by major institutions. Management of the Company believes that a majority of
BestBank's income is derived from the Century-administered credit and debit card
programs.
Century offers turn-key solutions in the credit and debit card industries
for small banks wishing to enter this field. Century has developed credit card
programs for BestBank, Berthoud National Bank and First Premier Bank. For most
small banks, the cost of starting up a credit card program may be prohibitive.
The costs of development of such a program, the systems staffing and marketing
may take more capital than such small banks can prudently invest. Century can
assume risks that would not be reasonable and prudent for a small bank. Century
provides the marketing (directly or through related and unrelated third
parties), customer service, credit underwriting dispute resolution, collections
(through its and the Company's affiliate, Berwyn Holdings, Inc. ["Berwyn"]) and
data processing through the Company. In the event that the account becomes
delinquent, Century purchases the defaulted credit card receivables from the
bank at par.
Because the Master Agreement provides BestBank with fixed cost pricing for
services provided by the Company for credit and debit cards and merchant
processing, BestBank is able to market its programs and services to other
non-issuing entities. BestBank initiates new programs for card issuers while the
Company obtains the processing of these accounts through the marketing efforts
of BestBank. It is anticipated by management of the Company that as BestBank
adds new customers or new programs for existing customers, the Company will be
able to expand its own business operations. However, no assurance to this
effect can be given. As of May 31, 1998, the number of credit card accounts
serviced by the Company is 533,407 of which 493,259 are derived by the Company
pursuant to the Master Agreement with BestBank. BestBank has approximately
130,000 additional credit card accounts which are currently committed to a
competitor of the Company for processing, none of these accounts have been
transferred for servicing to the Company as of the date of this Registration
Statement. BestBank, has agreed, in principle, to begin conversion of these
accounts over to the Company as soon as practicable. However, no assurance can
be given that such accounts will be converted to the Company. See "Description
of Business-Sales and Marketing."
Further, Century's agreement with BestBank calls for the servicing of a
program for the introduction of debit cards, commencing on June 1, 1998. Berwyn
is in the process of setting up the VISA debit card program for BestBank for
this new program. Through the Company's Master Agreement with BestBank, the
Company will process and service this debit card program. This program will be
marketed by Financial Management Services, Inc. ("FMS"), an unaffiliated third
party. The debit cards are to be introduced through
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the national chain of check cashing retail outlets, Check Cashing Store, Inc.
("CCSI") owned by FMS. FMS is currently testing this program and expects to
market this program throughout the country over the next 12 months. The
delivery of the debit card product is expected to be completed by October, 1998
in over 3,500 stores in the United States. However, no assurance to this effect
can be given.
AGREEMENT WITH FISCRIP. On March 1, 1998, the Company entered into an
agreement with FiScrip, Inc., a Nevada corporation ("FiScrip"), which may be
deemed to be an affiliate of Messrs. Baetz and Gallant. FiScrip markets
processing services for Automatic Teller Machines ("ATM's") transactions, debit
terminal transactions and Electronic Benefits Transfer systems ("EBT")
transactions. FiScrip and its co-venturer, Norstar, Inc., of Orlando, Florida,
an unaffiliated third party, contract with independent sales organizations (
"ISO's") for deployment of terminals and services.
The Company is the sole provider of these services to FiScrip for operation
of these systems. The Company performs: (i) the daily settlement function which
consists of the reconciliation and balancing of these daily transactions
received so that funds are accounted for by the banks, merchants and the Federal
Reserve; (ii) monthly statement generation to merchants and ISO's reflecting all
transactions and associated fees; (iii) merchant and network adjustment
procedures, which process and reconcile all network and merchant adjustments
generated through automated clearing house transactions ("ACH") and other
transaction types; (iv) merchant telephone support through the use of a toll
free telephone support; and (iv) merchant terminal loading of software and
application processing for merchant approval of ATM and debit terminals.
FiScrip designs, programs and tests the software that is reloaded into
ATM's and debit card point-of-sale machines. FiScrip is one of four companies
certified by Deluxe Payment Systems, an unaffiliated third party, to process EBT
transactions. EBT is a new process and method of distributing federal e
ntitlements, initially including food stamps, welfare and social security
payments to beneficiaries. In place of printing and issuing checks and other
financial instruments, some beneficiaries of government entitlement programs
receive a debit style card (a "QUEST Card") which operates in the same manner as
an ATM or debit card. The beneficiary of the entitlement program uses this
federally issued card to purchase items utilizing the EBT system. The federal
government may eventually establish individual accounts which will be debited
when a beneficiary makes a withdrawal or purchase. However, no assurance can be
given as to when the federal government will establish this process. It is
expected by FiScrip that there will be substantial competition in the provision
of the service offered by FiScrip. No assurance can be given that FiScrip will
be successful in competing for this business; thus, the Company may not receive
the processing business anticipated by management of the Company to be derived
from EBT transactions.
The transactions based on this medium of exchange through FiScrip and the
Company are estimated to produce a gross transaction fee of between $0.06 to
$0.09, of which the Company will be paid a per transaction fee of $0.02 and a
fee of $3.50 per monthly statement generated by the Company. The transaction
fee is in addition to the merchant application and statement fees. However, no
assurance can be given as to the volume of transactions that will be processed
or rates at which such processing will take place. FiScrip is newly in operation
in connection with the EBT business, with no more than 5,000 transactions in
February, 7,000 transactions in March, 27,000 transactions in April and 47,000
transactions in May, 1998. FiScrip anticipates a significant increase in the
number of transaction, but no assurance to this effect can be given.
According to federal government surveys, it is anticipated that by the year
2000, 60% of the population of the United States will be receiving monthly
income issued electronically and accessible through the use of a QUEST Card.
However, no assurance to this effect can be given. The total dollar value of
EBT transactions (food stamps, aid to families with dependent children and
welfare) in 1998 is estimated by FiScrip to be $60 billion, with an average
transaction size of approximately $23.00, or approximately 450 million
transactions per year. FiScrip's target market share of total dollar volume of
EBT transactions is estimated
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to be $6 billion or 65 million transactions per year) by January 1, 2000.
However, no assurance can be given that there will be this volume of
transactions or that FiScrip will service such a volume of transactions.
The Social Security System will begin distributing benefits using EBT
beginning on January 1, 1999 and expects to have completed full implementation
of the distribution system for benefit distribution using EBT by January 2,
2002. The dollar value for all EBT transactions by the Social Security System
is expected to reach $470 billion annually. However, no assurance to this effect
can be given.
FiScrip has been certified by Citibank and Lockheed Martin as an EBT third
party processor according to federally established guidelines in twenty eight
states and two counties in California. Eleven other states will require simple
certification, which is anticipated to be completed in 1998. However, no
assurance to this effect can be given. FiScrip's EBT development plans include
full certification for six additional states as, if and when government
contracts are awarded to Lockheed Martin or Deluxe Payment Systems, both of
which are unaffiliated with the Company or FiScrip, for EBT transaction
processing.
PROCESSOR SERVICES. As a processor of credit card and banking transactions,
the Company assumes all responsibility for the processing systems, software
maintenance and compliance. The Company data processing center is staffed
twenty-four hours a day, seven days a week, and processes and balances all
incoming and outgoing file transmissions, provides ACH transmissions, daily
updates, reports, generates statements, microfiche reports and statements,
maintains system backup and provides customer support. Other processor services
include the issuance of user documentation explaining the features and
functionality of the processing system (card holder and merchant processing,
authorizations, collections and customer service). In addition, the Company
provides user training to its customers.
On-site and off-site backups of daily activity and systems are maintained.
In the event of a disaster, the Company has a hot site disaster recovery center
at its immediate disposal from IBM. A comprehensive disaster recovery plan and
testing of that plan are required in the regulatory environment that the
Company operates in, which is a part of the Company's policy of hardware upgrade
and acquisition in order to facilitate the efficient processing required by the
expansion of the card business and to create a solid foundation for the growth
of the Company and to maintain its goal of being a total solutions provider. See
"Description of Business-Regulation of the Company's Business."
Each customer is assigned a Client Support Specialist. These
representatives provide support and assistance to research problems, clarify
system functionality, setup new programs and promotions and training. All
banking customers of the Company have direct 24 hour, 7 day a week "helpdesk"
support from Kirchman. The Company provides on-site support during conversions
and major software enhancements or releases. The Company also provides
collection services to its customers. In addition, the Company has established
a business relationship with several full-time collection agencies and will
provide appropriate information at the customer's request. The Company provides
the capability to do file transfers to these agencies and, in several cases,
these agencies are on-line, real time connected to the collection management
system. Further, the Company offers a complete dispute resolution service to
its customers utilizing a state-of-the-art interchange tracking system. Service
representatives process all copy requests and chargebacks. In conjunction with
the chargeback processing procedures, service representatives perform other
fraud and risk management functions in an effort to assist the Company's
customer from being victimized by fraudulent and unscrupulous transactions. The
Company also provides over 350 standard reports that are readily available to
the customer. These reports can be generated daily, weekly, monthly, quarterly
or by special request. All of the standard reports are made available through
hard copy, microfiche and on-line. In addition, customized and ad hoc reporting
services are available to the customer.
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BANKCARD AND PRIVATE LABEL CARD PROCESSING SERVICES. The banking and
financial services and data processing component of the Company's operations are
equipped and capable of performing the "back room" operations for banks,
thrifts, credit unions, insurance companies, merchants, utilities,
government agencies and others. The Company provides full back room operations
for its customer's credit and debit products.
FICI'S BACKROOM SERVICES. The Company utilizes Search and Scoreware
software licensed from Fair Isaac-Registered Trademark-, to access the three
major credit bureaus and score applicants credit applications. The particular
credit data is entered into the credit decision management system and
transmitted directly to the credit bureau. Based on the customer's business
requirements, these applications are pre-screened and requested credit scoring
or reporting is secured from the credit bureau. Upon approval, an account is
automatically set up with the customer and the applicant is issued a credit
card. Applications that are declined are maintained in the database, and the
applicant is automatically sent a letter of notification. All records and
applications are retained for historical purposes based upon the customer's
requirements and appropriate requirements for regulatory purposes.
The Company offers its customers full customer service support, both
automated and service representative support. A fully automated system, using
voice response and direct talk software, allows credit card holders to activate
their cards, verify account balance information and report lost or stolen cards.
The voice response system immediately and automatically blocks accounts that
have been reported lost or stolen and prevents any additional transactions from
being authorized. With proper security and passwords the voice response system
automatically activates a credit card holder's card, relieving the service
representative from those tedious tasks and allowing the service representative
time to concentrate on assisting credit card holders with other important
concerns. Additionally, the Company offers a toll free telephone service to
process all other customer service calls. The service representative utilizes
the customer service management system to assist credit card holders in solving
their questions and concerns. The customer service management system allows the
customer to automate and custom-tailor the customer service processing. This
allows for efficient tracking and reporting of all customer service activities.
The Company utilizes several proprietary and third party networks for its
authorization, capture and merchant accounting services. Utilizing the merchant
processing system, the Company offers toll free telephone services and service
representatives to provide merchants the support needed for authorizations,
basic inquiries, researching disputes and settlement processing. The
warehousing and deployment of point of sale ("POS") terminals can be an
overwhelming task. Through the Company's strategic relationship with Triumphant
Enterprises, Inc. of Dallas, Texas, an unaffiliated third party, which is in the
business of terminal deployment, this task is accomplished and integrated with a
degree of certainty and accuracy.
A vital and important part of the Company's backroom services is the
assistance of the customer's daily balancing and reconciliation of the
processing solution. These processes are used daily to determine the settlement
with VISA, MasterCard, retailers and remittance of funds. Providing this
important service insures that the customer is getting cash management
information expeditiously and accurately for cash flow purposes.
CREDIT CARD PRODUCTION. The Company produces credit cards for its
customers, and such cards may be upgraded to include smart card personalization
as an additional service. The Company maintains a dual security system which
will meet VISA and MasterCard standards for card security and production. The
Company's software allows the customer to define various card types and programs
and to define special processing parameters for billing and statement
preparation. With the ability to provide multiple statement messages, the
statement is frequently used by the Company's customers to announce new
services, contests, and credit line increases. In addition, the Company may
design and customize the statements, which act as a basic marketing tool. Data
entry support can be supplied for customers who have special promotions and
other marketing events. The Company also offers direct marketing services.
Direct mail marketing items can be sent to any list of current or prospective
card holders. The Company's affiliation with other marketing
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organizations allow the Company to support multiple marketing programs including
both in-bound and out-bound telemarketing campaigns. These telemarketing
campaigns are designed to enhance and grow the customers' card base and to
efficiently handle the potentially large volume of specific calls. Various
programs can be custom tailored to focus upon a customer's particular needs and
specific market penetration.
BANKING AND FINANCIAL SERVICES
The Banking and Financial Services component of the Company performs the
processing and "backroom" operations of banks, thrifts, credit unions, insurance
companies, merchants, utilities, government agencies, and others. The Company
processes for 3 banks and financial institutions which represents, in the
aggregate, 20% of its gross billing for 1997 and 10.3% of its gross billing for
the five month period ended May 31, 1998. Although this segment does not
comprise a majority of the Company's revenues for 1997, or for the five month
period ended May 31, 1998, the Company believes that it can grow and expand this
line of business. However, no assurance to this effect can be given. See
"Description of Business-Sales and Marketing" and "Item 2-- Management's
Discussion and Analysis or Plan of Operation."
The financial institutions processing services from the Company begin with
the implementation of the processing system, proceeds with the customer's use
of the system and ends with other services offered by the Company. The
processing system retains the data for the total customer relationship, meaning
the customer is viewed from both sides of the balance sheet. This integrated
information is the foundation for an institution's improved risk management,
better marketing for product penetration and better servicing of the customer
base. The processing system manages all liabilities from checking accounts to
time deposits, each with capabilities that range from fixed rates to tiered
rates and from bonus rates to overdraft protection.
The Company provides proof and data entry services for all cash and transit
items for the customer. Checks, debit advices and credit advices are micr
encoded. On a daily basis, all items rejected are researched and re-entered to
insure that the customer receives full credit for all monetary items submitted.
Upon completion, the debit and credit captured data is electronically
transferred to the processing systems. After the capturing process, the Company
generates and creates the necessary cash letters for the financial institutions
and delivers such letters to the Federal Reserve according to their mandated
instructions and delivery times.
Using the processing system and in-house developed software, the Company
offers a full line of ACH services including: (i) payroll check deposits; (ii)
social security payments; (iii) deposits and withdrawals; (iv) corporate
transactions; (v) retail transactions; and (vi) return items and automated
reversals. Utilizing the Company's direct connection to the Federal Reserve
through the Fed Line, ACH transactions and wire transfers are completed.
DOCUMENT MANAGEMENT AND DISTRIBUTION SERVICES
The document management and distribution services the Company provides to
its customers simplify an otherwise overwhelming task of processing inbound and
outbound paper items. In document management, the Company offers processes for
producing and reducing the amount of paper reports and statements for the
customer, with its online tools for reports, microfiche processing and with the
acquisition of digital document technology and Computer Output to Laser Disk
("COLD") product. As of the date of this Registration Statement, the Company
processes over 800,000 mail pieces per month. The Company intends to increase
this business to over 3,500,000 pieces per month during the next year. However,
no assurance to this effect can be given. This increased volume is anticipated
to be generated from the growth of the other operations of the Company.
However, the Company expects to also add other customers with specific mailing
and distribution needs. However, no assurance to this effect can be given. See
"Description of Business-Sales and Marketing."
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Through licensed sophisticated software products, in conjunction with the
latest available hardware, the Company gives the customer an avenue into an
almost paperless world. These services include on-line real time access to its
daily reports and statements. The customer only needs to print locally those
items for which they wish to have hard copy. This on-line service of reports is
an efficient and time saving solution to the customer for viewing and retrieval
of data. The Company offers customers the opportunity to receive reports on
microfiche as well.
Besides the advantage of processing efficiency over traditional analog file
storage, the use of COLD storage and retrieval methodologies have application
for customer service operations. Through the Company, clients' Customer Service
Representatives will be able not only to inspect customer statements by line
item data, but will be able to retrieve, view and reference digitized images of
original documents on a real time basis. For added customer services, these
items may then be reprinted or faxed on demand. The customer's need for
manpower support is consequently, greatly reduced while increasing the
productivity of customer service personnel.
SALES AND MARKETING
The marketing goals of the Company are to expand the already created and
operating multi-faceted information service organization dedicated to the
provision of financial data processing, document management, electronic commerce
services and customer service. The Company has focused on customers, such as
denovo banks (banks in the process of being formed) and businesses in the credit
card industry that may be overwhelmed with new regulatory and related problems
and want to outsource their operations and not assume the significant overhead
associated with such business, particularly in connection with Year 2000
compliance. During the 1980's the trend for community banks was to bring their
processing in-house. Faced with the Year 2000 dilemma and ever increasing data
processing costs, these institutions are prime candidates to again contract
their processing to service companies such as the Company. Further, the Company
can process for institutions in all facets of their operations, although no
assurance can be given to this effect. See "Description of Business-Year 2000
Dilemma and Compliance."
Because the Company serves as a link between consumers, merchants and
financial institutions and has been and continues to concentrate on: (i) the
fulfillment of a niche market consisting of small to medium-sized accounts that
have not achieved adequate economy of scale to operate their own in-house
programs and systems; (ii) seeking out strategic alliances with appropriate
service companies whose advantage depends upon successful data management; and
(iii) providing a personalized customer-service oriented strategy, the Company
believes that its marketing approach will earn it a substantial number of new
customers and customer conversions. However, no assurance to this effect can be
given.
For small and denovo banks, credit card operations can be highly lucrative.
However, for most small banks, the cost of starting up a credit card program is
prohibitive because the costs of development of the program, the systems
staffing and marketing take more capital than the banks can prudently invest.
The Company can alleviate some of this cost and make a bank credit card
operation feasible in some cases, although no assurance can be given to this
effect.
A significant part of the sales of the Company's services are made by its
executive officers. Additionally, the marketing efforts of Century, Berwyn and
BestBank have resulted in a significant growth in the number of credit card
accounts being serviced by the Company. Management of the Company anticipates
that as Century, Berwyn and BestBank initiate new programs, either for
themselves or for credit card issuers, the Company will obtain the processing of
these accounts. However, no assurance to this effect can be given. In addition
to the foregoing, the Company receives referrals of possible customers from its
software vendors. See "Item 5 - Directors, Executive Officers, Promoters and
Control Persons."
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There has been a trend over the last several years for banks and other
financial institutions to consolidate, thereby causing a shrinkage in the number
of possible customers for the Company's services. The Company is partially
protected from this trend by having relatively long term agreements with its
customers. However, no assurance to this effect can be given. One such
consolidation is the recent purchase of SSB, causing an anticipated decline in
revenue from that customer to the Company. The effects of this industry trend
in consolidation could have a material adverse effect upon the Company's future
business prospects. However, the effects of this industry trend, in the opinion
of management, are off-set by the fact that there are approximately 300 denovo
banks currently in formation and there has been the introduction of new
financial instrument programs on a continuous basis. Many of such programs are
potential customers for the Company's services. It is uncertain whether the
Company will benefit from such new financial instrument programs. No assurance
can be given that the Company will be able to replace customers lost to
consolidations within the banking industry, and if the Company is successful in
replacing such customers, that such replacement customers will result in enough
revenue to off-set lost revenue and profits. See "Description of
Business-Credit and Debit Card Services," "Description of Business-Sales and
Marketing," "Description of Business-Competition" and "Item 7 - Certain
Relationships and Related Transactions."
COMPETITION
The industry segments in which the Company's business operates are highly
competitive. The Company competes with major and independent providers of
services in the credit card industry. Some of the companies with which the
Company competes are substantially larger, have more substantial histories,
backgrounds, experience and records of successful operations, greater financial,
technical, marketing and other resources, more employees and more extensive
facilities than the Company has or will have in the foreseeable future. In
addition, the Company competes with businesses that internally perform data
processing or other services offered by the Company.
The industry in which the Company competes is highly fragmented. The
Company believes that with its vast range of services and the Year 2000
compliance issues, those banking and financial institutions looking for a new
and compliant solution will begin to migrate from their in-house solutions to
companies on an outsource basis. Management of the Company believes that to
succeed in competing for customers in its industry segments the Company's
factors for success are its capabilities, quality of service, price, reputation
and, in some cases, convenience of location to the client.
The Company's ability to compete effectively may also depend on the
availability of capital. Many of the Company's competitors have access to
significantly greater capital and management resources then does the Company.
The Company is not aware of any competitor which provides the same range of
services as the Company. However, no assurance can be given that such
competitors do not exist. The Company's competitive capabilities are a fact of
the Company's state of the art credit and debit card software solutions systems
and a focus on a customer-service oriented approach for the small- to medium-
sized customers. Furthermore, management of the Company believes that the
Company enjoys an advantage as a total provider and can thereby offer these
services at a reduced costs to its customers. However, no assurance to this
effect can be given. See "Item 7 - Certain Relationships and Related
Transactions."
Further, with the focus of most of the Company's competitors being on
large, high-volume accounts, the Company has an added competitive advantage in
seeking out customers in the small to medium-sized card issuers market, which is
believed by management to comprise nearly 30% of the nearly 250 million accounts
which form the card industry in the United States. However, there is an
increasing industry trend of bank mergers and consolidations which may, over
time, cause the market for the Company's services to shrink and thus
significantly increase competition. See "Description of Business-Sales and
Marketing."
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EMPLOYEES
As of May 31, 1998, the Company had ninety (90) full-time employees,
including three (3) corporate executives, seventy-seven (77) operations persons,
ten (10) administrative personnel and four (4) part-time employees.
The Company intends to hire additional personnel as the development of the
Company's business makes such action appropriate. The loss of the services of
key personnel, including its three executive officers, could have a material
adverse effect on the Company's business. Since there is intense competition
for qualified personnel knowledgeable about the Company's industry, no assurance
can be given that the Company will be successful in retaining and recruiting
needed key personnel. The Company does not have key-man life insurance for any
of its employees.
The Company's employees are not represented by a labor union and are not
covered by a collective bargaining agreement. The Company believes that its
employee relations are good.
REGULATION OF THE COMPANY'S BUSINESS
Various aspects of the Company's businesses are subject to federal and
state regulation which, depending on the nature of any noncompliance, may result
in the suspension or revocation of licenses, registrations or certifications, as
well as the imposition of civil fines and criminal penalties. Since the
Company's services are performed on behalf of the customer and the Company does
not take possession of the receivables or funds collected from credit card
holders, the Company is not required to have any specific licensing or
registration in the states in which the Company's customers operate. However,
the Company is required to have the software and procedures that it utilizes be
in compliance with various regulations. Among such regulations are: Regulation
Z of the Truth in Lending Act and Regulation E of the Electronic Fund Transfers
Act. Furthermore, there are portions of the regulations of the FDIC that are
applicable to the activities of the Company, as are regulations of the OCC and
those of various state regulatory agencies. The Company believes that it is in
material compliance with all such regulations in accordance with the Federal
Financial Institutions Examination Council, Information Systems Examination
Handbook; and VISA and MasterCard certification and compliance mandates.
With respect to the above requirements, the Company has been audited
annually by banking examiners and third party auditors to monitor compliance
with all regulations. The Company has received satisfactory ratings on these
audits. During the current fiscal year, the Company's third party audit will be
expanded from a regulatory compliance review to a full Statement on Auditing
Standards ("SAS") 70 audit. This SAS 70 audit is being conducted to determine
whether all areas of the Company's processing procedures, application software
and internal controls are operating in compliance with prescribed independent
auditing standards. Management of the Company believes that the Company meets
all required standards and materially complies with all applicable regulations.
However, no assurance to this effect can be given.
RISK FACTORS
THIS REGISTRATION STATEMENT MAY BE DEEMED TO CONTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE REFORM ACT. FORWARD-LOOKING STATEMENTS IN
THIS REGISTRATION STATEMENT OR HEREAFTER INCLUDED IN OTHER PUBLICLY AVAILABLE
DOCUMENTS FILED WITH THE COMMISSION, REPORTS TO THE COMPANY'S STOCKHOLDERS AND
OTHER PUBLICLY AVAILABLE STATEMENTS ISSUED OR RELEASED BY THE COMPANY INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE THE
COMPANY'S ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS
TO DIFFER FROM THE FUTURE RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH
FUTURE RESULTS ARE BASED UPON MANAGEMENT'S BEST ESTIMATES BASED UPON CURRENT
CONDITIONS AND THE
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MOST RECENT RESULTS OF OPERATIONS. THESE RISKS INCLUDE, BUT ARE NOT LIMITED TO,
RISKS SET FORTH HEREIN, EACH OF WHICH COULD ADVERSELY AFFECT THE COMPANY'S
BUSINESS AND THE ACCURACY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
THERE IS A LIMITED PUBLIC MARKET FOR THE COMPANY'S COMMON STOCK. PERSONS
WHO MAY OWN OR INTEND TO PURCHASE SHARES OF COMMON STOCK IN ANY MARKET WHERE THE
COMMON STOCK MAY TRADE SHOULD CONSIDER THE FOLLOWING RISK FACTORS, TOGETHER WITH
OTHER INFORMATION CONTAINED ELSEWHERE IN THE COMPANY'S REPORTS, PROXY STATEMENTS
AND OTHER AVAILABLE PUBLIC INFORMATION, AS FILED WITH THE COMMISSION, PRIOR TO
PURCHASING OR SELLING SHARES OF THE COMMON STOCK:
NEED FOR ADDITIONAL CAPITAL FOR EXPANSION. The Company's business plan
contemplates continued expansion of operations from increased operational
capacity and to acquire additional and upgraded equipment and software based on
future perceived needs by management. There can be no assurances that the
Company will be able to generate business sources to meet existing operational
capacity or that the Company will generate sufficient positive cash flow or
develop additional sources of financing to continue the Company's business plan
of growth and expansion. Financing for such expansion may not be available to
the Company on commercially reasonable terms. In the event the Company cannot
obtain the additional financing needed to fulfill its acquisition strategy, the
Company may be unable to achieve its proposed expansion strategy. See "Item 2 -
Management's Discussion and Analysis or Plan of Operation."
RELIANCE ON AFFILIATES AS SOURCE OF BUSINESS. The recent growth in volume
of credit card processing transactions serviced by the Company is due to new
customers of the Company arranged for by Messrs. Baetz and Gallant and their
affiliates. Much of the anticipated short term future growth in the business of
the Company is expected to be derived from agreements with BestBank and FiScrip,
which were similarly arranged for by Messrs. Baetz and Gallant or their
affiliates. Messrs. Baetz and Gallant operate businesses in other aspects of
the credit card industry. No assurance can be given that such companies will
continue to do business with the Company in the future or that the basis upon
which they do business with the Company will be profitable to the Company. A
loss of involvement in the Company by Messrs. Baetz and Gallant could have a
material adverse effect upon the Company. Further, Century, an affiliate of
Messrs. Baetz and Gallant, has provided secured debt financing to the Company.
Should that debt go into default, Century could foreclose on its debt and the
control of all of the business of the Company could pass to Century, which could
have a material adverse effect upon the Company. See "Description of
Business-Competition" and "Item 7 - Certain Relationship and Related
Transactions."
RELIANCE ON CUSTOMERS. For the five months ended May 31, 1998, the Company
relies upon three customers for 86% of its gross revenues. The Company's
largest customer represents over 30% of the Company's revenue for the fiscal
year ended December 31, 1997 and 79% of the Company's gross revenue during the
five months ended May 31, 1998 and is expected to represent a larger percentage
of revenue in the future. If one or more of these customers were to cease doing
business with the Company, it could have a material adverse effect on the
Company's business. The Company's largest customer has committed to a five-year
contract which began on October 1, 1997. This customer and the anticipated
short term future growth in the business are derived, in part, from the Master
Agreement with BestBank which was arranged for by Messrs. Baetz and Gallant or
their affiliates. Management believes that the contract will be honored for the
full term and ultimately renewed. However, no assurance can be given to this
effect. See "Description of Business-Credit and Debit Card Services" and "Item
2 - Management's Discussions and Analysis or Plan of Operation."
ADVERSE TRENDS IN THE COMPANY'S BUSINESS. There has been a industry trend
over the last several years for banks and other financial institutions to
consolidate, thereby causing a shrinkage in the number of possible customers for
the Company's services. The Company is partially protected from this industry
trend by having relatively long term agreements with its customers. However, no
assurance to this effect can be given. One such consolidation is the recent
purchase of SSB, causing an anticipated decline in revenue from that account
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to the Company. The effects of this industry trend in consolidation could have
a material adverse effect upon the Company's future business prospects.
However, the effects of this industry trend, in the opinion of management, is
off-set by fact that there are approximately 300 denovo banks currently in
formation and there has been the introduction of new financial instrument
programs on a continuous basis. Many of such programs are potential customers
for the Company's services. It is uncertain whether the Company will benefit
from such new financial instrument programs. No assurance can be given that the
Company will be able to replace customers lost to consolidations within the
banking industry, and if the Company is successful in replacing such customers,
that such replacement customers will result in enough revenue to off-set lost
revenue and profits. See "Description of Business-Sales and Marketing."
GOVERNMENT REGULATION OF BUSINESS. Various aspects of the Company's
businesses are subject to federal and state regulation which, depending on the
nature of any noncompliance, may result in the suspension or revocation of
licenses, registrations or certifications, as well as the imposition of civil
fines and criminal penalties. Since the Company's services are performed on
behalf of the customer and the Company does not take possession of the
receivables or funds collected from credit card holders, the Company is not
required to have any specific licensing or registration in the states in which
the Company's customers operate. However, the Company is required to have the
software and procedures that it utilizes be in compliance with various
regulations. The Company believes that it is in material compliance with all
such regulations in accordance with the Federal Financial Institutions
Examination Council, Information Systems Examination Handbook; and VISA and
MasterCard certification and compliance mandates. However, no assurance to that
effect can be given. See "Description of Business-Regulation of Company's
Business."
COMPETITION. The credit card service industry is fragmented and highly
competitive. The Company directly and indirectly competes with other businesses,
including businesses in the credit card service industry. In many cases, these
competitors are larger and more firmly established than the Company. In
addition, many of such competitors have greater marketing and development
budgets and greater capital resources than the Company. Accordingly, there can
be no assurance that the Company will be able to achieve and maintain a
competitive position in the Company's industry. See "Description of
Business-Competition."
CERTAIN CONFLICTS OF INTEREST. Due to the nature of certain transactions
between Messrs. Gallant, Baetz and their affiliates, such as Century, Berwyn,
Access and FiScrip, and the Company, the terms under which these agreements were
negotiated may not be deemed to have been negotiated on an arm's length basis.
The nature of these relationships may be deemed to be a conflict of interest
between Messrs. Gallant, Baetz and their affiliates on the one hand and the
Company on the other hand. However, management of the Company believes that in
all such cases the terms of the agreements between the Company and any of these
affiliated entities are on terms at least equal to, if not better than, the
terms available from unaffiliated third parties. See "Item 7 - Certain
Relationships and Related Transactions."
DEPENDENCE ON SUBCONTRACTORS FOR MARKETING. The Company's success in
marketing its services and in the recent growth of its business and revenues has
been dependent upon various companies in the financial services business, some
of which are affiliated with Messrs. Baetz and Gallant. In addition to
affiliates of Messrs. Baetz and Gallant, BestBank has been a significant source
of expansion of the volume of business of the Company. Although the receipt of
business from these companies has significantly expanded the Company's business
and revenues and reduced the Company's investment in marketing, it may also
subject the Company to certain risks associated with reliance on others for
marketing, such as loss of business for reasons other than the cost or quality
of the Company's services. See "Description of Business-Sales and Marketing."
NEED FOR LIABILITY INSURANCE. The Company's products and services subject
the Company to potential exposure from customer claims in the event of financial
loss resulting from the operation of the Company's business. The Company
maintains insurance coverage from St. Paul Fire and Marine Insurance Company in
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the amount of $1,000,000 per occurrence and a $2,000,000 aggregate limit. Any
liability claim against the Company seeking damages in excess of the amount of
the Company's insurance coverage then in place, if any, could expose the Company
to damages or legal expenses which could be significant and which could have a
material adverse effect on the Company. The inability of the Company to retain
this insurance coverage or obtain adequate liability insurance coverage in the
future or the entry of a judgment against the Company in excess of available
insurance coverage could force the Company either to reduce operations or cease
business activities altogether. See "Description of Business."
DEPENDENCE ON KEY PERSONNEL. The Company is dependent upon the skills of
its management team and the relationships of key executive personnel. There is
strong competition for qualified personnel in the financial services industry
and an inability to continue to attract, retain and motivate key personnel could
adversely affect the Company's intended business. The Company does not have
employment agreements with its key personnel. There can be no assurances that
the Company will be able to retain its existing key personnel or to attract
additional qualified personnel. The Company does not have any key man life
insurance on any members of senior management, but will consider purchasing such
insurance when such insurance is deemed affordable. See "Item 5 - Directors,
Executive Officers, Promoters and Control Persons" and "Item 7 - Certain
Relationships and Related Transactions."
CONTROL BY PRINCIPAL STOCKHOLDERS. The Company's principal stockholders,
directors and executive officers of the Company and their affiliates control the
voting power of approximately 85% of the outstanding Common Stock. As a result
of such Common Stock ownership, such persons will be in a position to exercise
significant control with respect to the affairs of the Company and the election
of directors. See "Item 4 - Security Ownership of Certain Beneficial Owners and
Management."
LIMITED PUBLIC MARKET FOR COMMON STOCK. There is currently a limited
public market for the Company's Common Stock. Holders of the Company's Common
Stock may, therefore, have difficulty selling their Common Stock, should they
decide to do so. In addition, there can be no assurances that such markets will
continue or that any shares of Common Stock which may be purchased may be sold
without incurring a loss. Further, the market price for the Common Stock may be
volatile depending on a number of factors, including business performance,
industry dynamics, news announcements or changes in general economic conditions.
See" Part II --Item 1 - Market for Common Equity and Related Shareholder
Matters."
DISCLOSURE RELATING TO LOW-PRICED STOCKS. The Company's Common Stock is
currently listed for trading in the over-the-counter market on the NASD
Electronic Bulletin Board or in the "pink sheets" maintained by the National
Quotation Bureau, Inc., which are generally considered to be less efficient
markets than markets such as NASDAQ or other national exchanges, and which
may cause difficulty in conducting trades and in obtaining future financing.
The Company's securities are subject to the "penny stock rules" adopted
pursuant to Section 15 (g) of the Exchange Act. The penny stock rules apply
to non-NASDAQ companies whose common stock trades at less than $5.00 per
share or which have tangible net worth of less than $5,000,000 ($2,000,000 if
the company has been operating for three or more years). Such rules require,
among other things, that brokers who trade "penny stock" to persons other
than "established customers" complete certain documentation, make suitability
inquiries of investors and provide investors with certain information
concerning trading in the security, including a risk disclosure document and
quote information under certain circumstances. Many brokers have decided not
to trade "penny stock" because of the requirements of the penny stock rules
and, as a result, the number of broker-dealers willing to act as market
makers in such securities is limited. See "Part II --Item 1 - Market for
Common Equity and Related Shareholder Matters."
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LACK OF DIVIDENDS ON COMMON STOCK. The Company has paid no dividends on
its Common Stock as of the date of this Registration Statement and there are no
plans for paying dividends on the Common Stock in the foreseeable future. The
Company intends to retain earnings, if any, to provide funds for the expansion
of the Company's business. See "Part II--Item 1 - Market for Common Equity and
Related Shareholder Matters."
FUTURE ISSUANCES OF PREFERRED STOCK. The Company's Certificate of
Incorporation authorizes the issuance of preferred stock with such designation,
rights, preferences and privileges as may be determined from time to time by the
Board of Directors, without stockholder approval. In the event of issuance of
preferred stock, such issuance could be utilized, under certain circumstances,
as a method of discouraging, delaying or preventing a change in control of the
Company. Although the Company has no present intention to issue any shares of
its preferred stock, there can be no assurances that the Company will not do so
in the future. See "Part II --Item 1 - Market for Common Equity and Related
Shareholder Matters."
SHARES ELIGIBLE FOR FUTURE SALE; ISSUANCE OF ADDITIONAL SHARES. Future
sales of shares of Common Stock by the Company and its stockholders could
adversely affect the prevailing market price of the Common Stock. There are
currently 1,446,000 shares of Common Stock which are free trading shares or are
eligible to have the restrictive legend removed pursuant to Rule 144(k)
promulgated under the Securities Act. Sales of substantial amounts of Common
Stock in the public market, or the perception that such sales may occur, could
have a material adverse effect on the market price of the Common Stock.
Pursuant to its Certificates of Incorporation, the Company has the authority to
issue additional shares of Common Stock. The issuance of such shares could
result in the dilution of the voting power of the currently issued and
outstanding Common Stock. See "Part II--Item 1 - Market for Common Equity and
Related Shareholder Matters."
POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS. The Company's
Certificate of Incorporation includes certain provisions which are intended to
protect the Company's stockholders by rendering it more difficult for a person
or persons to obtain control of the Company without cooperation of the Company's
management. The Company is subject to the General Corporation Law of the State
of Delaware, including Section 203, an anti-takeover law enacted in 1988. In
general, the law restricts the ability of a publicly held Delaware corporation
from engaging in certain "business combinations" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder. Such provisions are often
referred to as "anti-takeover" provisions. The "anti-takeover" provisions in
the Certificate of Incorporation may delay, deter or prevent a takeover of the
Company which the stockholders may consider to be in their best interests,
thereby possibly depriving holders of the Company's Securities of certain
opportunities to sell or otherwise dispose of their securities at above-market
prices, or limit the ability of stockholders to remove incumbent directors as
readily as the stockholders may consider to be in their best interests. See
"Part II--Item 1 - Market for Common Equity and Related Shareholder Matters."
LIMITATIONS ON DIRECTOR LIABILITY. The Company's Certificate of
Incorporation provides, as permitted by governing Delaware law, that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
with certain exceptions. These provisions may discourage stockholders from
bringing suit against a director for breach of fiduciary duty and may reduce
the likelihood of derivative litigation brought by stockholders on behalf of
the Company against a director. See "Item 10 - Executive Compensation -
Indemnification of Officers and Directors."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS REGISTRATION STATEMENT, INCLUDING THE DISCLOSURES BELOW, CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES. WHEN USED HEREIN, THE TERMS "ANTICIPATES," "EXPECTS,"
"ESTIMATES," "BELIEVES" AND SIMILAR EXPRESSIONS, AS THEY RELATE TO THE COMPANY
OR ITS MANAGEMENT, ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS.
THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS MAY DIFFER MATERIALLY
FROM THOSE
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EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH MATERIAL DIFFERENCES INCLUDE THE FACTORS DISCLOSED
IN THE "RISK FACTORS" SECTION OF THIS REGISTRATION STATEMENT, WHICH READERS OF
THIS REGISTRATION STATEMENT SHOULD CONSIDER CAREFULLY.
OVERVIEW OF PRESENTATION. As of September 23, 1997, the Company entered
into the Stock Purchase Agreement with Messrs. Baetz and Gallant, pursuant to
which the Company issued an aggregate of 10,631,250 shares of the Common Stock
in exchange for 100% of the issued and outstanding FICI Common Stock. The
Company also issued 618,750 shares of Common Stock to a third party, which is
not an affiliate of Messrs. Baetz and Gallant, for services rendered to the
Company for arranging the transactions which are the subject of Stock Purchase
Agreement. In connection with the closing of the Stock Purchase Agreement, FICI
became the sole operating subsidiary of the Company.
In connection with the transactions relating to the Stock Purchase
Agreement and the acquisition of the FICI Common Stock by Messrs. Baetz and
Gallant, such persons obtained a controlling interest in FICI and, thereafter,
the Company. Therefore, for accounting purposes, the transactions relating to
the Stock Purchase Agreement are deemed to be transactions between entities
under common control. Accordingly, the business combination between the Company
and FICI was accounted for in a manner similar to a pooling of interests,
whereby the accounts of the entities involved were not revalued, but were
combined at their historical basis.
As of May 1, 1997, Messrs. Baetz and Gallant had acquired 100% of the
issued and outstanding capital stock of FICI for $1,600,000 in cash from
certain unaffiliated parties.
FICI's assets and liabilities have been restated at their estimated fair
market value as of May 1, 1997 on the balance sheet of FICI, which forms a part
of the Company's consolidated financial statements for the three months ended
March 31, 1998 and 1997 and the years ended December 31, 1997 and 1996, included
elsewhere herein at May 1, 1997, utilizing "pushdown accounting." Total assets
were $2,174,670 based on their fair market value as of May 1, 1997. The
difference between the fair market value of such assets and the $1,600,000
purchase price paid by Messrs. Baetz and Gallant for the FICI Common Stock, or
$973,924, was recorded on the Company's consolidated balance sheet as goodwill
as of May 1, 1997. The goodwill is anticipated to be amortized over 20 years
in accordance with generally accepted accounting principles, with a resulting
expense to the Company from goodwill amortization of $4,058 per month and
$48,696 per year over such period.
The Company has included in this Registration Statement: (i) the
consolidated financial statements of the Company for the three months ended
March 31, 1998 and 1997, and the years ended December 31, 1997 and 1996, which
include the consolidated balance sheets of the Company as of March 31, 1998 and
1997 and December 31, 1997 and 1996, and the related consolidated income
statements and statements of changes in shareholders' equity and cash flows for
the three month and one year periods then ended, respectively, and (ii) the
financial statements of FICI for the four months ended April 30, 1997 and the
year ended December 31, 1996, which include the balance sheets of FICI as of
April 30, 1997 and December 31, 1996, and the related income statements and
statements of changes in shareholders' equity and cash flows for the four month
and one year periods then ended, respectively.
The consolidated income statements of the Company for the three months
ended March 31, 1998 and 1997 and the years ended December 31, 1997 and 1996,
which form a part of the Company's consolidated financial statements for such
periods, reflect the results of operations of the parent holding company for the
year ended December 31, 1996 and the four months ended April 30, 1997, and the
consolidated results of operations of the parent holding company and FICI for
the three months ended March 31, 1998 and the eight months ended December 31,
1997.
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The income statements of FICI for the year ended December 31, 1996 and the
four months ended April 30, 1997, which form a part of FICI's financial
statements for such periods, reflect the results of operations of FICI for such
periods.
The Company has also included elsewhere in this Registration Statement the
unaudited pro forma consolidated financial statements of the Company for the
three months ended March 31, 1998 and 1997 and the years ended December 31, 1997
and 1996 (the "Pro Forma Financial Statements"). The Pro Forma Financial
Statements include, on an unaudited basis, the consolidated balance sheets of
the Company as of March 31, 1998 and 1997 and December 31, 1997 and 1996, and
the related consolidated income statements and statements of changes in
shareholders' equity and cash flows for the three month and one year periods
then ended, respectively, and have been presented to reflect a recapitalization
of FICI, with FICI as the acquiror of the Company as of September 23, 1997.
For purposes of the following discussion and analysis, the results of
operations for the three months ended March 31, 1998 and 1997 and the years
ended December 31, 1997 and December 31, 1996, have been presented from the
financial information set forth in the Pro Forma Financial Statements. The
following discussion reflects, on a pro forma basis, the consolidated results of
operations of the parent holding company and FICI for the three months ended
March 31, 1998 and the period from September 23, 1997 to December 31, 1997 and
the results of operations of FICI for the period from January 1, 1997 to
September 22, 1997 and the year ended December 31, 1996, as if FICI had acquired
the Company as of September 23, 1997. This method of presentation was set forth
herein to permit useful comparison between the aggregated three month periods
ended March 31, 1998 and 1997 and the one year periods ended December 31, 1997
and December 31, 1996 with respect to FICI, the Company's sole operating
subsidiary. Comparisons between the consolidated operations of the parent
holding company and FICI for the three months ended March 31, 1998 and the eight
month period ended December 31, 1997 and the operations of the parent holding
company during the four months ended April 30, 1997 and the twelve month period
ended December 31, 1996 are not meaningful because the parent holding company
had insignificant operations during such earlier periods.
CREDIT CARD PROCESSING AGREEMENTS. On June 30, 1997, a credit card
processing agreement (the "Clark Agreement") expired between the Company and
Clark. The Clark Agreement was the source of 26% and 32% of the Company's total
revenues during the six months ended June 30, 1997 and the year ended December
31, 1996, respectively.
As of October 25, 1997, the Company entered into the Master Agreement with
BestBank. The credit card portfolios represented by the Master Agreement
principally relate to certain portfolios controlled and directed by Messrs.
Baetz and Gallant, through their business relationships with BestBank, which is
not an affiliate of Messrs. Baetz and Gallant. The Master Agreement was the
source of 70% of the Company's gross revenues during the three months ended
December 31, 1997, 79% of the Company's gross revenues during the three months
ended March 31, 1998 and 79% of the Company's gross revenue during the five
months ended May 31, 1998.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH
31, 1997. Total operating revenues for the three months ended March 31, 1998
increased approximately 142% to $2,495,378 from $1,031,797 for the three months
ended March 31, 1997. Total operating revenues principally include: (i) credit
card processing revenues, and (ii) banking and financial services revenues.
Credit card processing revenues during the three months ended March 31,
1998 increased to $1,964,717 from $490,636 during the three months ended March
31, 1997. This increase primarily relates to the revenues associated with the
Master Agreement. The Master Agreement with Best Bank represented 92% of the
credit card revenues for the three months ended March 31, 1998. There were no
revenues associated with the Master Agreement in the three months ended March
31, 1997 because it was not put in place until
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October, 1997. Credit card processing revenues during the three months ended
March 31, 1997 primarily related to the Clark Agreement, which expired on June
30, 1997.
Banking and financial services revenues during the three months ended March
31, 1998 decreased to $228,196 from $237,717. This source of revenues generally
remained constant during the comparative periods because the Company maintained
its customer base and did not make significant marketing efforts to develop this
business segment. The Company intends to expand this line of business by
targeting banks and financial institutions based on the increased capacity of
the Company's equipment and hardware in connection with the upgraded lease with
IBM and the installation of the Kirchman Dimension 3000 banking software.
Revenues from Pride decreased to $95,000 for the three months ended March
31, 1998 from $201,000 for the three months ended March 31, 1997. This revenue
decrease was due to a decision of the management of Pride to take its computer
processing activities in-house. This removal of processing from the Company to
Pride is being converted in stages and should be completed by the summer of
1999. Due to the expected increase in revenues from the Company's credit card
operations and bank processing, the loss of the Pride revenue is not anticipated
to have a material adverse effect on total revenue for fiscal year 1998.
However, no assurance to this effect can be given.
Total operating expenses during the three months ended March 31, 1998
increased 83% to 1,851,541 from $1,011,111 during the three months ended March
31, 1997. Total operating expenses principally include: (i) cost of salaries
and employee benefits, (ii) equipment expenses, (iii) cost of office supplies
and services, (iv) rental and facilities maintenance expenses, and (v)
depreciation and amortization expenses, as follows:
Cost of salaries and employee benefits during the three months ended March
31, 1998 increased to $671,283 from $435,640 during the three months ended March
31, 1997. This increase primarily resulted from an increase of approximately 20
full time employees at March 31, 1998 from March 31, 1997 to enable the Company
to accommodate increased demand for credit card processing services relating to
the Master Agreement.
Equipment lease and maintenance expenses during the three months ended
March 31, 1998 increased to $509,951 from $331,904 during the three months ended
March 31, 1997. This increase primarily related to the negotiation of an
equipment lease with IBM to upgrade the Company's computer hardware and the
lease of Data Card 9000 credit card production equipment during the last quarter
of the year ended December 31, 1997.
Cost of office supplies and services, including professional and outside
services, during the three months ended March 31, 1998 increased to $456,903
from $167,292 during the three months ended March 31, 1997. This increase
related to the expanded volume of services provided by the Company as a result
of the Master Agreement.
Rental and facilities maintenance expenses during the three months ended
March 31, 1998 increased to $115,759 from $36,689 during the three months ended
March 31, 1997. This increase related to the negotiation of a new office lease
agreement in August, 1997 which increased the Company's office space from 22,000
square feet to 52,000 square feet.
In addition, depreciation and amortization expenses during the three months
ended March 31, 1998 increased to $44,753 from $21,489 during the three months
ended March 31, 1997. The increase related to the revaluation of the Company's
assets to fair market value on May 1, 1997 in connection with the completion of
the transactions relating to the Stock Purchase Agreement and equipment
purchases related to volume increases as a result of the Master Agreement.
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Other revenues and expenses resulted in total other expenses of $37,062
during the three months ended March 31, 1998, as compared to total other
expenses of $3,169 during the three months ended March 31, 1997. This increase
in expenses between the respective periods resulted from increased interest
expense of $45,938 in the first quarter of 1998 relating to Line of Credit, as
compared to $3,169 in the first quarter of 1997 relating to borrowings from
People's State Bank. In the first quarter of 1998, $8,876 of interest income
was netted against interest expense. There was no interest income earned during
the first quarter of 1997.
As a result of the foregoing, the Company experienced net income of
$402,171 during the three months ended March 31, 1998, as compared to net income
of $8,202 during the three months ended March 31, 1997. The Company experienced
income from operations of $643,837 during the three months ended March 31, 1998,
as compared to income from operations of $20,686 during the three months ended
March 31, 1997. Management believes this increase in income from operations
primarily resulted from increased revenue related to the conversion of the Best
Bank credit card portfolio in October, 1997. Due to economies of scale related
to the increased number of accounts processed, expenses increased at a much
lower percentage than revenues. Also, the Company's proposed business plan
contemplates the growth of revenues in connection with the Company's expansion
strategy. There can be no assurance that the Company's expansion strategy will
result in continued growth of demand for the Company's services or increased
revenues or profitability. See "Liquidity and Capital Resources."
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND DECEMBER
31, 1996. Total operating revenues for the year ended December 31, 1997
increased approximately 10% to $4,540,271 from $4,128,586 for the year ended
December 31, 1996. Total operating revenues principally include: (i) credit card
processing revenues, and (ii) banking and financial services revenues.
Credit card processing revenues during the year ended December 31, 1997
increased to $2,495,762 from $1,955,911 during the year ended December 31, 1996.
This increase primarily relates to the revenues associated with the Master
Agreement during the fourth quarter of the year ended December 31, 1997.
Moreover, the Clark Agreement had expired at the end of June, 1997 and the
Company had lost a significant source of revenues from the Clark Agreement which
was not replaced until October 25, 1997 with the commencement of the Master
Agreement.
Banking and financial services revenues during the year ended December 31,
1997 increased to $929,164 from $927,747. This source of revenues generally
remained constant during the comparative periods because the Company maintained
its customer base and did not make significant marketing efforts to develop this
business segment. The Company intends to expand this line of business by
targeting banks and financial institutions based on the increased capacity of
the Company's equipment and hardware in connection with the upgraded lease with
IBM.
Revenues from Pride, were $715,500 for the twelve months ended December 31,
1997 as compared to $804,000 for the twelve months ended December 31, 1996. This
represented a decrease of 11% during 1997. This revenue decrease was due to a
decision of the management of Pride to take their computer processing activities
in-house. This removal of processing from the Company to Pride is being
converted in stages and should be completed by the summer of 1999. Due to the
expected increase in revenues from the Company's credit card operations and bank
processing, the loss of the Pride revenue is not anticipated to have a material
adverse effect on total revenue for fiscal year 1998. However, no assurance to
this effect can be given. See "Item 1 - Description of Business-Credit and
Debit Card Services."
Total operating expenses during the year ended December 31, 1997 increased
28% to $5,018,465 from $3,927,496 during the year ended December 31, 1996.
Total operating expenses principally include: (i) cost of salaries and employee
benefits, (ii) equipment expenses, (iii) cost of office supplies and services,
(iv) rental and facilities maintenance expenses and (v) depreciation and
amortization expenses, as follows:
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Cost of salaries and employee benefits during the year ended December 31,
1997 increased to $2,027,449 from $1,644,534 during the year ended December 31,
1996. This increase primarily resulted from an increase of approximately 25
full time employees during the year ended December 31, 1997 to enable the
Company to accommodate increased demand for credit card processing services
relating to the Master Agreement.
Equipment lease and maintenance expenses during the year ended December 31,
1997 increased to $1,422,770 from $1,328,222 during the year ended December 31,
1996. This increase primarily related to the negotiation of an equipment lease
with IBM to upgrade the Company's computer hardware and the lease of Data Card
9000 credit card production equipment during the last quarter of the year ended
December 31, 1997.
Cost of office supplies and services, including professional and outside
services, during the year ended December 31, 1997 increased to $634,511 from
$531,482 during the year ended December 31, 1996. This increase related to the
expanded volume of services provided by the Company as a result of the Master
Agreement.
Rental and facilities maintenance expenses during the year ended December
31, 1997 increased to $288,243 from $139,443 during the year ended December 31,
1996. This increase related to the negotiation of a new office lease agreement
in August, 1997 which increased the Company's office space from 22,000 square
feet to 52,000 square feet. See "Item 3 - Description of Properties."
In addition, depreciation and amortization expenses during the year ended
December 31, 1997 increased to $237,704 from $111,826 during the year ended
December 31, 1996. The increase related to the revaluation of the Company's
assets to fair market value on May 1, 1997 in connection with the completion of
the transactions relating to the Stock Purchase Agreement.
Other revenues and expenses resulted in total other expenses of $251,635
during the year ended December 31, 1997 as compared to total other revenues of
$8,287 during the year ended December 31, 1996. This increase in expenses
between the respective years resulted primarily from: (i) increased interest
expense of $63,282 in 1997 relating to the Line of Credit and borrowings from
Peoples' State Bank, as compared to $15,684 in 1996 relating to borrowings
solely from Peoples' State Bank; (ii) acquisition costs of $186,921 relating to
the Stock Purchase Agreement in 1997 as compared to none in 1996; and (iii) a
sales tax refund of $23,971 in 1996 which did not occur in 1997.
As a result of the foregoing, the Company experienced a net loss of
$576,167 during the year ended December 31, 1997, as compared to net income of
$145,317 during the year ended December 31, 1996. The Company experienced
losses from operations of $478,194 during the year ended December 31, 1997 as
compared to income from operations of $201,090 during the year ended December
31, 1996. Management believes that this decrease in income from operations
primarily resulted from the loss of the Clark revenue at June 30, 1997 and
increased expense from the conversion of the BestBank credit card portfolio and
acquisition costs. Although the Company believes that some of the expenses
related to the acquisition costs may not be recurring, there can be no
assurances that comparable amounts of expenses may not arise in connection with
the development of the Company's proposed business plan, particularly as may
relate to any financings, acquisitions or development which may occur. However,
the Company's proposed business plan contemplates the growth of revenues in
connection with the Company's expansion strategy. There can be no assurance
that the Company's expansion strategy will result in continued growth of demand
for the Company's services or increased revenues or profitability. See
"Liquidity and Capital Resources."
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The Company had net operating loss carryforwards, as of December 31, 1997
and 1996, totaling approximately $359,438 and $30,005 for federal and state
income tax purposes, respectively. Utilization of the Company's net operating
loss may be subject to limitation under certain circumstances.
LIQUIDITY AND CAPITAL RESOURCES. At March 31, 1998, the ratio of current
assets to current liabilities as 1.03 to 1 compared to 0.82 to 1 at December 31,
1997.
The Company has historically financed its operations through the use of
working capital and loans to the Company. The Company's cash flow needs for the
quarter ended March 31, 1998 and the year ended December 31, 1997 were primarily
provided from operations and from the Line of Credit. At March 31, 1998, all
trade payables and receivables were current. At March 31, 1998, a $20,000
unallocated reserve for bad debts was carried by the Company. At March 31,
1998, prepaid expenses and inventories were $463,543 and are anticipated to be
expensed as used in the future. The net property and equipment was $580,546 at
March 31, 1998. Major capital additions during the three months ended March 31,
1998 were credit card equipment of $32,000 and personal computer system and
network upgrades of $21,000. Management believes that, as of March 31, 1998,
and for the foreseeable future, the Company will be able to finance costs of
current levels of operations from revenues and the Line of Credit.
On September 11, 1997, as a result of the reduced cash flow relating to the
expiration of the Clark Agreement on June 30, 1997, the Company entered into the
Line of Credit. The Line of Credit provides for an aggregate maximum amount of
$2,000,000 of credit, secured by all of the Company's assets, at an interest
rate of ten percent (10%) per annum. Century is not obligated to make advances
to the Company under the Line of Credit.
As of October 31, 1997, the Company had drawn down the principal amount of
$1,400,000 on the Line of Credit. The Line of Credit constituted a principal
source of cash flow during the period between the expiration of the Clark
Agreement and the commencement of the Master Agreement. As of March 31, 1998,
the principal outstanding obligation to Century on the Line of Credit had been
reduced to $900,000 from cash flow generated from the Company's operations.
Cash and cash equivalents were $312,828, as of March 31, 1998, as compared
to a $17,861 as of December 31, 1997. This increase was primarily attributable
to the availability of the Line of Credit and positive cash flow during the
quarter ended March 31, 1998.
As of March 31, 1998 and December 31, 1997, the Company had no long-term
borrowings.
As of March 31, 1998, the Company had short-term borrowings in the
aggregate amount of $900,000, as compared to $1,300,000 at December 31, 1997.
The decrease in short-term borrowings was attributable to payments on the Line
of Credit in the first quarter of 1998 generated through positive cash flow from
operations.
In October, 1997, the Company entered into a 36-month equipment lease with
IBM related to the Company's credit card processing operations. The Company
upgraded the equipment lease in March, 1998 to provide for continued increases
in the Company's processing volume and efficiencies, and expansion of business
operations. The Company financed the lease agreement by the pledge of
certificates of deposit in the aggregate amount of $500,000, $200,000 of which
had initially been drawn down from the Line of Credit and the balance of which
was generated by cash flow from operations.
The certificates of deposit are for one-year terms and are automatically
renewable for an additional year. The certificates of deposit bear varying
rates of interest based on the date of the establishment of the certificates of
deposit.
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Net cash provided (used) by operating activities was $937,825 and (
$299,625) for the three months ended March 31, 1998 and 1997, respectively. Net
cash provided by operations during the three months ended March 31, 1998
primarily consisted of net income from operations and increases in accruals and
accounts payable, deferred income taxes and depreciation and amortization,
offset by decreases in accruals and accounts receivable and deposits and prepaid
expenses. Net cash used by operations during the three months ended March 31,
1997 primarily consisted of net income and depreciation and amortization, offset
by decreases in accounts receivable, accruals and accounts payable and deposits
and prepaid expenses. Net cash provided (used) by operating activities was
($540,524) and $53,152 for the years ended December 31, 1997 and 1996,
respectively. Net cash (used) by operating activities during the year ended
December 31, 1997 primarily consisted of net losses, decreases in accruals and
accounts payable and increases in deferred income taxes, tax assets and deposits
and prepaid expenses, offset by depreciation and amortization and decreases in
accounts receivable. Net cash provided by operating activities during the year
ended December 31, 1996 primarily consisted of net income and depreciation and
amortization, offset by decreases in accounts receivable, accruals and accounts
payable and deposits and prepaid expenses.
Net cash (used) by investing activities was ($398,440) and ($48,629) for
the three month periods ended March 31, 1998 and 1997, respectively. In the
three months ended March 31, 1998, the Company utilized $98,440 to purchase
certain fixed assets, including the upgrade of the IBM equipment lease and
personal computer and network systems upgrades, and utilized $300,000 to invest
in the Certificates of Deposit which are pledged to finance the lease agreements
on the Company's main frame computer system. In the three months ended March
31, 1997, the Company utilized $48,629 to purchase certain fixed assets,
including office furniture, credit card computer equipment and computer
software. Net cash (used) by investing activities was ($373,058) and ($209,157)
for the years ended December 31, 1997 and 1996, respectively. In the year ended
December 31, 1997, the Company utilized $169,480 to purchase certain fixed
assets, including office furniture, credit card computer equipment and computer
software, and $203,578 to invest in the Certificates of Deposit which are
pledged to finance the lease agreements on the Company's main frame computer
system. In the year ended December 31, 1996, the Company utilized $209,157 to
purchase certain fixed assets, including the upgrade of existing computer
hardware and software and the purchase of additional computer hardware and
software.
Net cash provided (used) by financing activities was ($244,418) and
$354,023 for the three month periods ended March 31, 1998 and 1997,
respectively. In the three months ended March 31, 1998, the Company utilized
$400,000 to reduce the principal obligations underlying the Line of Credit,
which was offset by an increase of $155,582 in the Company's bank overdraft
position. In the three months ended March 31, 1998, the Company obtained
$385,580 from the Line of Credit which was utilized to finance the Company's
business operations, which was offset by a decrease of $31,557 in the Company's
bank overdraft position. Net cash provided by financing activities was $931,443
and $119,238 for the years ended December 31, 1997 and 1996, respectively. In
the year ended December 31, 1997, the Company utilized $963,000 from the Line of
Credit, to finance the Company's business operations, which was offset by a
decrease of $31,557 in the Company's bank overdraft position. In the year ended
December 31, 1996, the Company utilized $87,681 obtained from a line of credit
(net of payments) to finance the Company's business operations, and the Company
increased its bank overdraft position by $31,557.
The Company's business plan contemplates continued expansion of operations
from such increased operational capacity and to acquire additional and upgraded
equipment and software based on future perceived needs by management. There can
be no assurances that the Company will be able to generate business sources to
meet existing operational capacity or that the Company will generate sufficient
positive cash flow or develop additional sources of financing to continue the
Company's business plan of growth and expansion.
25
<PAGE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings Per Share,"
which is effective for financial statements issued for periods ending after
December 31, 1997. SFAS No. 128 requires public companies to present specific
disclosure of basic earnings per share and, if applicable, diluted earnings per
share, instead of primary and fully diluted earnings per share based on the
dilutive impacts of outstanding stock options or other convertible securities.
There was no material difference between reported earnings per share and diluted
earnings per share for the periods presented in the Company's financial
statements.
FASB recently issued SFAS No. 130, "Reporting Comprehensive Income," which
is required to be adopted for financial statements issued for periods beginning
after December 15, 1997. This statement establishes standards for the reporting
and display of comprehensive income and its components. Comprehensive income is
defined as revenue, expenses, gains and losses that, under generally accepted
accounting principles, are included in comprehensive income, but excluded from
net income (such as extraordinary and non-recurring gains and losses). SFAS No.
130 requires that items of comprehensive income be classified separately in the
financial statements. SFAS No. 130 also requires that the accumulated balance
of comprehensive income items be reported separately from retained earnings and
paid-in capital in the equity section of the balance sheet. SFAS No. 130 is not
anticipated to have a material effect on the Company's financial position or
results of operations.
FASB recently issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which is required to be adopted for
financial statements issued for periods beginning after December 15, 1997. SFAS
No. 131 is not required to be applied to interim financial statements in the
initial year of application. SFAS No. 131 requires that financial and
descriptive information about operating segments be reported. Generally,
financial information will be required to be reported on the basis that it is
used internally for evaluating segment performance and deciding how to allocate
resources to segments. SFAS No. 131 is not anticipated to have any effect on
the Company's financial position or results of operations.
ITEM 3. DESCRIPTION OF PROPERTY
The Company maintains offices at 2701 West Oakland Park Boulevard, Second
Floor, Fort Lauderdale, Florida 33311, where the Company utilizes 2,886 square
feet of office space at an annual cost of $45,881, including sales and use
taxes. This office space is leased from Century which may be deemed to be an
affiliate of Messrs. Baetz and Gallant, who are directors and principal
stockholders of the Company, for a period of 12 months or until November 30,
1998. Management of the Company believes that the terms of this lease are at
least as good as may be obtained from an unaffiliated third party. See "Item 7 -
Certain Relationships and Related Transactions."
The Company leases 52,248 square feet of office space located at 1157 North
5th, Abilene, Texas 79601, from SSI, formerly an affiliate of the Company, now
unaffiliated with the Company, at an aggregate monthly rental of $33,477. Most
of this leased office space is leased for a period of two years, from August 1,
1997 to July 31, 1999. A small portion of this office space is only leased for
one year, with the lease on that portion terminating on July 31, 1998. All
portions of the leased space are automatically renewable for a like period of
time, if notification of termination is not made by SSI to the Company or vice
versa, within 180 days prior to the expiration of the term of the lease. The
lease is subject to adjustment at the time of renewal if there is an increase in
the Consumer Price Index for the year prior to the renewal date. Furthermore,
SSI has granted to the Company a right of first refusal to lease any additional
office space that may become available at that address. See "Item 7 - Certain
Relationships and Related Transactions."
26
<PAGE>
On April 2, 1998, the Company acquired from an unaffiliated third party,
real property consisting of land and a 3,400 square foot building, located at
325 Hickory Street, Abilene, Texas 79601. This property was acquired by the
Company to act as a credit card embossing center as required by VISA and
MasterCard. The Company paid $68,000 to acquire the property and is in the
process of making approximately $140,000 of improvements to the building.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of June 10, 1998, the Company had issued and outstanding 12,725,000
shares of Common Stock. The following table reflects, as of June 10, 1998, the
beneficial Common Stock ownership of: (a) each director of the Company, (b) each
current named executive officer, (c) each person known by the Company to be a
beneficial owner of five percent (5%) or more of its Common Stock and (d) all
executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES(1) PERCENT
- ------------------------------------ ------------------- -------
<S> <C> <C>
Glenn M. Gallant
3020 N. W. 33rd Avenue
Fort Lauderdale, Florida 33311 5,315,625 41.77
Douglas R. Baetz
3020 N. W. 33rd Avenue
Fort Lauderdale, Florida 33311 5,315,625 41.77
Kenneth A. Klotz
1157 North 5th
Abilene, Texas 79601 2,000 (2)
Charles LaMontagne
1157 North 5th
Abilene, Texas 79601 6,000 (2)
Olan Beard
1157 North 5th
Abilene, Texas 79601 2,000 (2)
Robert M. Feldman
2720 Sonata Drive
Columbus, Ohio 43209 19,000 (2)
Donald L. Thone
5850 San Filipe, Suite 500
Houston, Texas 77057 -- (2)
All Directors and Officers as a Group
(7 persons) 10,660,250 83.77
</TABLE>
- --------------------
# Pursuant to the rules of the Commission, shares of Common Stock which
an individual or group has a right to acquire within 60 days pursuant to the
exercise of options or warrants are deemed to be outstanding for the purpose of
computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person shown in the table.
(1) These numbers give effect to a 1 for 2 reverse stock split which
occurred on September 23,
1997.
(2) Represents less than 1% of the issued and outstanding shares of the
Company.
27
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors of the Company currently have terms which will end at the
next annual meeting of the stockholders of the Company or until their successors
are elected and qualify, subject to their prior death, resignation or removal.
There is no familial relationship among any of the officers or directors of the
Company. The following reflects certain biographical information on the current
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME POSITION AGE
- ---- -------- ---
<S> <C> <C>
Glenn M. Gallant Secretary, Chairman of the
Board of Directors and Director 43
Douglas R. Baetz Director 47
Kenneth A. Klotz President and Director 53
Charles LaMontagne Chief Financial Officer
and Director 45
Olan Beard Vice President and Director 44
Robert M. Feldman Director 65
Donald L. Thone Director 52
</TABLE>
GLENN M. GALLANT has served as the Company's Chairman of the Board of
Director and Secretary since September 23, 1997. Mr. Gallant is a financier
with years of experience in development and management in a wide range of
industries. Together with Douglas R. Baetz, Mr. Gallant owns and supervises
the management of New SeaEscape Cruises, Inc., a cruise line operating from
South Florida, and Network Holdings International, Inc., a publicly-traded
sales organization that markets various travel products. In addition, Mr.
Gallant owns and supervises the operations for Berwyn, a credit card service
company and Century a credit card issuing company. There have been and will
continue to be significant business transactions between the Company, Mr.
Gallant and his affiliates. See "Item 7 - Certain Relationships and Related
Transactions."
DOUGLAS R. BAETZ has served as a director of the Company since September
23, 1997. Mr. Baetz is a financier with years of experience in development and
management in a wide range of industries. Together with Glenn Gallant, Mr.
Baetz owns and supervises the management of New SeaEscape Cruises, Inc., a
cruise line operation from South Florida and Network Holdings International,
Inc., a publicly-traded sales organization that markets travel products. In
addition, Mr. Baetz owns and supervises the operations for Berwyn, a credit card
service company and Century a credit card issuing company. There have been and
will continue to be significant business transactions between the Company, Mr.
Baetz and his affiliates. See "Item 7 - Certain Relationships and Related
Transactions."
KENNETH A. KLOTZ joined FICI in 1994 as President and Chief Executive
Officer. Mr. Klotz became a member of the Company's Board of Directors on
September 23, 1997 and has served as the Company's President and Chief Executive
Officer since that date. Mr. Klotz has worked extensively in the computer data
processing industry for over thirty years, generally focusing on the management
of information systems using mainframe computer equipment. Mr. Klotz has served
in key executive roles for the last fourteen years.
28
<PAGE>
CHARLES LAMONTAGNE joined FICI in 1994 as Senior Vice President of Banking
Services and Chief Financial Officer. Mr. LaMontagne became a member of the
Company's Board of Directors on September 23, 1997 and has served as the
Company's Senior Vice President of Banking Services since that date. On March
10, 1998, Mr. LaMontagne was appointed Chief Financial Officer of the Company.
Prior to joining FICI, Mr. LaMontagne worked in a variety of Texas banks and
refining companies for over nineteen years, generally focusing on controller
responsibilities. Mr. LaMontagne has extensive experience in a wide array of
issues pertaining to financial control and budgeting.
OLAN BEARD joined FICI in 1994 as Senior Vice President of Credit Card
Services and Chief Operations Officer. Mr. Beard became a member of the
Company's Board of Directors on September 23, 1997, and has served as the
Company's Senior Vice President and Chief Operations Officer since that date.
Prior to joining FICI, Mr. Beard worked in a variety of Texas banks for over
twenty years, gradually ascending the line of command, and serving in key
executive positions for the past sixteen years. Mr. Beard has extensive
experience in operations generally and in credit card operations particularly.
ROBERT FELDMAN, joined the Board of Directors of the Company on June 4,
1998. Mr. Feldman has been the President, Chief Executive Officer and Chairman
of the Board of Directors of Health & Leisure, Inc. a public Company from 1993
to the present. Mr. Feldman acts as a consultant in the health care industry.
Mr. Feldman holds a bachelor of Science Degree from Ohio State University in
Pharmacy.
DONALD L. THONE joined the Board of Directors on June 4, 1998. Mr. Thone
is President and Chief Executive Officer os Synagro Technologies, Inc., since
January, 1994. Mr. Thone has managed numerous companies in the environmental
industry. Mr. Thone holds a Bachelors of Science Degree from Arkansas Tech.
University in 1969 and an MED degree from Northeastern State University in 1975.
LIMITATION ON DIRECTORS' LIABILITIES.
Pursuant to the Company's Certificate of Incorporation and under Delaware
law, directors of the Company are not liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty, except for liability in
connection with a breach of duty of loyalty, for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, for
dividend payments or stock repurchases illegal under Delaware law or any
transaction in which a director has derived an improper personal benefit. See
"Part II - Item 5 - Indemnification of Directors and Officers."
ITEM 2. EXECUTIVE COMPENSATION
The Company does not have any written compensation agreements with any of
its executive officers.
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information concerning compensation of certain of the Company's executive
officers (the "Named Executives"), including the Company's Chief Executive
Officer and all executive officers whose total annual salary and bonus exceeded
$100,000, for the years ended December, 1997 and 1996:
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
--------------------------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (I)
Name and Other Restricted LTIP All Other
Principal Salary Bonus Compen- Awards Options/ Payouts Compen-
Position Year ($) ($) sation ($) SARs (#) ($) sation ($)
- -------- ---- ------ ----- ------- ------ ---------------------- ----------
Kenneth A. Klotz(1) 1997 86,000 -0- -0- 2,400 -- -- --
1996 86,000 -0- -0- 2,400 -- -- --
Lynn Dixon(2) 1997 -0- -0- -0- -0- -- -- --
1996 -0- -0- -0- -0- -- -- --
</TABLE>
(FOOTNOTES ON NEXT PAGE)
29
<PAGE>
(FOOTNOTES TO PRECEDING PAGE)
(1) Mr. Klotz was appointed as the Company's Chief Executive Officer on
September 23, 1997. Mr. Klotz's combined annualized base compensation during
the fiscal year ended December 31, 1997 was $86,000. Mr. Klotz does not have a
written employment agreement with the Company or FICI.
(2) Mr. Lynn Dixon served as Chief Executive Officer without compensation.
STOCK OPTION PLAN
As of March 25, 1998, the Company's Board of Directors approved a 1998
Stock Option Plan (the "Stock Option Plan"), which was approved by Board of
Directors on March 25, 1998 and will be submitted to the Shareholders for
approval at the next annual meeting of shareholders anticipated to take place
in the first half of 1998. The Company has reserved for issuance thereunder
an aggregate of 1,250,000 shares of Common Stock. The Stock Option Plan
provides for the grant to employees of the Company of incentive stock options
within the meaning of Section 422 of the Code, and for the grant to employees
and consultants of nonstatutory stock options. The Stock Option Plan limits
the number of shares that can be granted to any one individual in any fiscal
year to 125,000 shares. A description of the Stock Option Plan is set forth
below. The description is intended to be a summary of the material provisions
of the Stock Option Plan and does not purport to be complete.
GENERAL. The general purposes of the Stock Option Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to employees and consultants of the Company and
to promote the success of the Company's business. It is intended that these
purposes will be effected through the granting of stock options, which may be
either "incentive stock options" as defined in Section 422 of the Code, or
nonstatutory stock options.
The Stock Option Plan provides that options may be granted to the employees
(including officers and directors who are employees) and consultants of the
Company, or of any parent or subsidiary of the Company. Incentive stock options
may be granted only to employees. An employee or consultant who has been
granted an option may, if otherwise eligible, be granted additional options.
The Company has not granted any options to purchase shares of Common Stock under
the Stock Option Plan.
ADMINISTRATION OF AND ELIGIBILITY UNDER STOCK OPTION PLAN. The Stock
Option Plan, as adopted, provides for the issuance of options to purchase shares
of Common Stock to officers, directors, employees, independent contractors and
consultants of the Company and its subsidiaries as an incentive to remain in the
employ of or to provide services to the Company and its subsidiaries. The Stock
Option Plan authorizes the issuance of incentive stock options ("ISOs"),
non-qualified stock options ("NSOs") and stock appreciation rights ("SARs") to
be granted by a committee (the "Committee") to be established by the Board of
Directors to administer the Stock Option Plan, which will consist of at least
two (2) outside directors of the Company.
Subject to the terms and conditions of the Stock Option Plan, the Committee
will have the sole authority to determine: (a) the persons ("optionees") to whom
options to purchase shares of Common Stock and SARs will be granted, (b) the
number of options and SARs to be granted to each such optionee, (c) the price to
be paid for each share of Common Stock upon the exercise of each option, (d) the
period within which each option and SAR will be exercised and any extensions
thereof, and (e) the terms and conditions of each such stock option agreement
and SAR agreement which may be entered into between the Company and any such
optionee.
30
<PAGE>
All officers, directors and employees of the Company and its subsidiaries
and certain consultants and other persons providing significant services to the
Company and its subsidiaries will be eligible to receive grants of options and
SARs under the Stock Option Plan. However, only employees of the Company and
its subsidiaries are eligible to be granted ISOs.
STOCK OPTION AGREEMENTS. All options granted under the Stock Option Plan
will be evidenced by an option agreement or SAR agreement between the Company
and the optionee receiving such option or SAR. Provisions of such agreements
entered into under the Stock Option Plan need not be identical and may include
any term or condition which is not inconsistent with the Stock Option Plan and
which the Committee deems appropriate for inclusion.
INCENTIVE STOCK OPTIONS. Except for ISOs granted to stockholders
possessing more than ten percent (10%) of the total combined voting power of
all classes of the securities of the Company or its subsidiaries to whom such
ownership is attributed on the date of grant ("Ten Percent Stockholders"),
the exercise price of each ISO must be at least one hundred percent (100%) of
the fair market value of the Company's Common Stock as determined on the date
of grant. ISOs granted to Ten Percent Stockholders must be at an exercise
price of not less than one hundred ten percent (110%) of such fair market
value.
Each ISO must be exercised, if at all, within ten (10) years from the
date of grant, but, within five (5) years of the date of grant in the case of
ISO's granted to Ten Percent Stockholders. An optionee of an ISO may not
exercise an ISO granted under the Stock Option Plan so long as such person
holds a previously granted and unexercised ISO. The aggregate fair market
value (determined at time of the grant of the ISO) of the Common Stock with
respect to which the ISOs are exercisable for the first time by the optionee
during any calendar year shall not exceed $100,000.
As of the date of this Registration Statement, no ISO's have been granted.
NON-QUALIFIED STOCK OPTIONS. The exercise price of each NSO will be
determined by the Committee on the date of grant. The Company hereby
undertakes not to grant any non-qualified stock options under the Stock
Option Plan at an exercise price less than eighty five percent (85%) of the
fair market value of the Common Stock on the date of grant of any
non-qualified stock option under the Stock Option Plan. The exercise period
for each NSO will be determined by the Committee at the time such option is
granted, but in no event will such exercise period exceed ten (10) years from
the date of grant.
As of the date of this Registration Statement no NSO's have been granted.
STOCK APPRECIATION RIGHTS. Each SAR granted under the Stock Option Plan
will entitle the holder thereof, upon the exercise of the SAR, to receive from
the Company, in exchange therefor, an amount equal in value to the excess of the
fair market value of the Common Stock on the date of exercise of one share of
Common Stock over its fair market value on the date of exercise of one share of
Common Stock over its fair market value on the date of grant (or in the case of
an SAR granted in connection with an option, the excess of the fair market of
one share of Common Stock at the time of exercise over the option exercise price
per share under the option to which the SAR relates), multiplied by the number
of shares of Common Stock covered by the SAR or the option, or portion thereof,
that is surrendered.
SARs will be exercisable only at the time or times established by the
Committee. If an SAR is granted in connection with an option, the SAR will be
exercisable only to the extent and on the same conditions that the related
option could be exercised. The Committee may withdraw any SAR granted under the
Stock Option Plan at any time and may impose any conditions upon the exercise of
an SAR or adopt rules and regulations from time to time affecting the rights of
holders of SARs.
31
<PAGE>
As of the date of this Registration Statement, no SAR's have been granted.
TERMINATION OF OPTION AND TRANSFERABILITY. In general, any unexpired
options and SARs granted under the Stock Option Plan will terminate: (a) in the
event of death or disability, pursuant to the terms of the option agreement or
SAR agreement, but not less than six (6) months or more than twelve (12) months
after the applicable date of such event, (b) in the event of retirement,
pursuant to the terms of the option agreement or SAR agreement, but no less that
thirty (30) days or more than three months after such retirement date, or (c) in
the event of termination of such person other than for death, disability or
retirement, until thirty (30) days after the date of such termination. However,
the Committee may in its sole discretion accelerate the exercisability of any or
all options or SARs upon termination of employment or cessation of services.
The options and SARs granted under the Stock Option Plan generally will be
non-transferable, except by will or the laws of descent and distribution.
ADJUSTMENTS RESULTING FROM CHANGES IN CAPITALIZATION. The number of
shares of Common Stock reserved under the Stock Option Plan and the number
and price of shares of Common Stock covered by each outstanding option or SAR
under the Stock Option Plan will be proportionately adjusted by the Committee
for any increase or decrease in the number of issued and outstanding shares
of Common Stock resulting from any stock dividends, split-ups,
consolidations, recapitalizations, reorganizations or like event.
AMENDMENT OR DISCONTINUANCE OF STOCK OPTION PLAN. The Board of Directors
has the right to amend, suspend or terminate the Stock Option Plan at any time.
Unless sooner terminated by the Board of Directors, the Stock Option Plan will
terminate on December 31, 2006, the tenth anniversary date of the effectiveness
of the Stock Option Plan.
OTHER OPTIONS. As of the date of this Registration Statement, the Company
has granted options to purchase shares of the Company's Common Stock, to any
officer director or employee.
COMPENSATION OF DIRECTORS
The Company does not currently compensate directors for services rendered
as directors.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
The Company and its subsidiaries have no compensatory plans or arrangements
which relate to the resignation, retirement or any other termination of an
executive officer or key employee with the Company or a change in control of the
Company or a change in such executive officer's or key employee's
responsibilities following a change in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has no standing compensation committee or other
board committee performing equivalent functions.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 28, 1997, the Company determined that its two subsidiaries,
Central Capital Corp. and Hudson Resources, Inc. has no value and would hinder
the Company's plans for acquisition. Therefore, the shares of the two
subsidiaries were sold to Lynn Dixon, the Company's then principal shareholder,
for $1,361.
32
<PAGE>
On September 23, 1997, Columbia acquired all of the FICI Common Stock
from Messrs. Baetz and Gallant. Pursuant to the terms of the agreement of
acquisition of the FICI Common Stock, Messrs. Baetz and Gallant received
10,631,250 shares of Common Stock (after Columbia effectuated a 1 for 2
reverse stock split of its common stock) in exchange for the FICI Common
Stock, which represented approximately 85% of Columbia's then issued and
outstanding Common Stock.
On July 11, 1997, the Company entered into an agreement with Baytree, for
Baytree to act as an exclusive agent in connection with the possible merger or
reorganization of the Company with the Company. Baytree received from the
Company $150,000 in cash and 618,750 shares of the Company's Common Stock, as a
fee for services rendered to the Company for arranging the transactions which
are the subject of the Stock Purchase Agreement. Baytree is not an affiliate of
the Company or Messrs. Baetz and Gallant.
Messrs. Baetz and Gallant, directors and the largest shareholders of the
Company, have existing business relationships and affiliations involving
entities with which the Company is doing business. These business entities
include Century, Berwyn, Access Communications Corp. ("Access") and FiScrip.
All transactions between the Company and any of these affiliated entities may be
deemed to not be at arms' length. However, management of the Company believes
that in all such cases the terms of the agreements between the Company and any
of these affiliated entities are on terms at least equal to, if not better than,
the terms available from unaffiliated third parties.
On July 11, 1997, Messrs. Baetz and Gallant purchased FiScrip, which
produces software and firmware that drives ATMs and a wide-array of credit card
and debit card point-of-sale swipe machines. FiScrip has entered into and
agreement with the Company to provide services in connection with a certain
agreement that FiScrip has, with an unaffiliated third party. The transaction
fee is in addition to the merchant application and statement fees. EBT
transactions are estimated to produce a gross transaction fee of $0.06 to $0.09
per transaction, paid by the federal government, of which the Company will be
paid a per transaction fee of $0.02 and a fee of $3.50 per monthly statement
generated by the Company. This is in addition to certain other access fees that
the customer and merchant are charged.
The recent growth in volume of credit card processing transactions serviced
by the Company is due to new customers of the Company arranged for by Messrs.
Baetz and Gallant and their affiliates. Much of the anticipated short term
future growth in the business of the Company is expected to be derived from
agreements with BestBank and FiScrip, which were similarly arranged for by
Messrs. Baetz and Gallant or their affiliates. Messrs. Baetz and Gallant
operate businesses in other aspects of the credit card industry. No assurance
can be given that such companies will continue to do business with the Company
in the future or that the basis upon which they do business with the Company
will be profitable to the Company. A loss of involvement in the Company by
Messrs. Baetz and Gallant could have a material adverse effect upon the Company.
On September 11, 1997, the Company entered into the agreement for the Line
of Credit for aggregate maximums of $2,000,000 with Century. Century is not
required to make advances under the Line of Credit. The Line of Credit is
secured by all of the assets of the Company. The annual percentage rate charged
by Century to the Company is 10% PER ANNUM. The Company used this line of
credit for cash flow shortages before the October 25, 1997 conversion of the
BestBank card portfolio to the Company's processing system. As of October 31,
1997, the Company had drawn down on the Line of Credit to the extent of $
1,400,000. As of the date of this Registration Statement the Line of Credit
balance was $850,000. See "Item 2 - Management's Discussion and Analysis or
Plan of Operation."
The Company maintains offices at 2701 West Oakland Park Boulevard, Second
Floor, Fort Lauderdale, Florida 33311, where the Company utilizes 2,886 square
feet of office space at an annual cost of $45,881, including sales and use
taxes. This office space is leased from Century which may be deemed to
33
<PAGE>
be an affiliate of Messrs. Baetz and Gallant, for a period of 12 months or
November 30, 1998. Management of the Company believes that the terms of this
lease are on terms at least as good as may be obtained from an unaffiliated
third party.
The Company leases 52,248 square feet of office space located at 1157 North
5th, Abilene, Texas 79601, from SSI, formerly an affiliate of the Company, now
unaffiliated with the Company, at an aggregate monthly rental of $33,477. Most
of this leased office space is leased for a period of two years, from August 1,
1997 to July 31, 1999. A small portion of this office space is only leased for
one year, with the lease on that portion terminating on July 31, 1998. All
portions of the leased space are automatically released for a like period of
time if notification of termination is not made by SSI to the Company and vice
versa within 180 days prior to the expiration of the term of the lease. The
lease is subject to adjustment at the time of renewal if there is an increase in
the Consumer Price Index for the year prior to the renewal date. Furthermore,
SSI granted to the Company a right of first refusal to lease any additional
office space that may become available at that address.
As of the date of this Registration Statement, the Company continues to
provide to Security State Bank, a former affiliate of the Company, data
processing services. For the year ended December 31, 1997, the services so
provided by the Company amounted to $1,179,237 and for the five months ended May
31, 1998 the services provided by the Company amounted to $437,424.
On March 20, 1998, the Company entered into a consulting agreement with
Worldwide Corporate Finance ("Worldwide"). Worldwide, through its individual
affiliate. Michael Markow, provides the Company with consulting services,
including long term business, managerial and financial planning; investigating
and analysis in corporate reorganizations and expansion in merger and
acquisition opportunities; and the introduction of business opportunities for
credit card processing services. The consulting agreement expires on March 19,
1999. As the initial compensation for services, the Company granted to Mr.
Markow options to purchase up to 300,000 shares of Common Stock, which are the
subject of a currently effective registration statement, on the following terms
and conditions: (i) options to purchase up to 150,000 shares of Common Stock at
an exercise price of $0.95 per share, exercisable from April 1, 1998 until March
31, 1999; (ii) options to purchase up to 75,000 shares of Common Stock at an
exercise price of $0.95 per share, exercisable from June 19, 1998 until March
19, 1999; and (iii) options to purchase up to 75,000 shares of Common Stock at
an exercise price of $0.95 per share, exercisable from September 19, 1998 until
September 19, 1999. As June 10, 1998, Mr. Markow has exercise 225,000 of these
options.
Worldwide has elected to receive payment in the form of non-cash
transactions by exercising the options against amounts otherwise payable for
services rendered by Mr. Markow, in which the fee will be considered to be paid
in full by delivery to Mr. Markow of the shares underlying such options upon
exercise thereof.
Additional compensation, consisting of options to purchase up to 400,000
shares of Common Stock, have also been issued to Mr. Markow, which are the
subject of a currently effective registration statement, on the following terms
and conditions: (i) options to purchase up to 100,000 shares of Common Stock at
an exercise price of $1.70 per share, exercisable from April 1, 1998 until
August 31, 1998; (ii) options to purchase up to 100,000 shares of Common Stock
at an exercise price of $1.70 per share, exercisable from April 1, 1998 until
October 31, 1998; (iii) options to purchase up to 100,000 shares of Common Stock
at a per share exercise price equal to 85% of the closing bid market value of
the Common Stock on the date of exercise of such options, exercisable from April
1, 1998 until March 31, 1999; and (iv) options to purchase up to 100,000 shares
of Common Stock at a per share exercise price equal to 85% of the closing bid
market value of the Common Stock on the date of exercise of such options,
exercisable from April 1, 1998 until March 31, 2000.
34
<PAGE>
On March 20, 1998, the Company entered into an additional consulting
agreement with Worldwide which provides compensation relating to prospective
financing related transactions, in the form of restricted securities, on a
transaction by transaction basis.
On May 1, 1998, the Company entered into a three year agreement with
Access, a company whose common stock is owned by Messrs. Baetz and Gallant and
thus may be deemed to be an affiliate of the Company. Access is a reseller of
long distance telephone and other telecommunications services and products.
Access believes that it is able to offer its customers better rates on long
distance then they can obtain from major facilities-based carriers in exchange
for volume purchase commitments. However, no assurance to this effect can be
given The agreement designates Access as the carrier of choice and call for
Access to charge the Company $0.0525 per minute for all long distance calls.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 50,000,000 shares of $0.001 par value
Common Stock. Subject to those preferential rights, as may be determined by the
Board of Directors of the Company in the future in connection with the issuance
of a series of Preferred Stock, holders of Common Stock are entitled to cast one
vote for each share held of record, to receive such dividends as may be declared
by the Board of Directors out of legally available funds and to share ratably in
any distribution of the Company's assets after payment of all debts and other
liabilities, upon liquidation, dissolution or winding up. Stockholders do not
have preemptive rights or other rights to subscribe for additional shares, and
the Common Stock is not subject to redemption. The outstanding shares are
validly issued, fully paid and nonassessable.
Under Delaware law, each holder of a share of Common Stock is entitled to
one vote per share for each matter submitted to the vote of the stockholders,
and cumulative voting is allowed for the election of directors, if provided for
in the Certificate of Incorporation. The Company's Certificate of Incorporation
does not provide for cumulative voting.
PREFERRED STOCK
The Company's articles of incorporation authorizes the issuance of up to
5,000,000 shares of $0.001 par value preferred stock. There are no shares of
Preferred stock issued. The Company's board of directors has the power, without
further action by the holders of common stock, to designate the relative rights
and preferences of the preferred stock, and to issue the preferred stock in such
one or more series as designated by the board of directors. The designation of
rights and preferences could include preferences as to liquidation, redemption
and conversion rights, voting rights, dividends or other preferences, any of
which may be dilutive of the interest of the holders of the common stock or the
preferred stock of any other series. The issuance of preferred stock may have
the effect of delaying or preventing a change in control of the Company without
further shareholder action and may adversely affect the rights and powers,
including voting rights, of the holders of common stock. In certain
circumstances, the issuance of preferred stock could depress the market price of
the common stock. The board of directors effects a designation of each series of
preferred stock by filing with the Delaware Secretary of State a certificate of
designation defining the rights and preferences of each such series.
CERTAIN BUSINESS COMBINATION AND OTHER PROVISION OF CERTIFICATE OF INCORPORATION
As a Delaware corporation, the Company is currently subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporation Law
("Section 203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person
35
<PAGE>
or an affiliate, or associate of such person, who is an "interested stockholder"
for a period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person becoming an
interested stockholder, or the business combination, is approved by the Board of
Directors of the corporation before the person becomes an interested
stockholder; (ii) the interested stockholder acquired eighty five percent (85%)
or more of the outstanding voting stock of the corporation in the same
transaction that makes such person an interested stockholder (excluding shares
owned by persons who are both officers and directors of the corporation, and
shares held by certain employee stock ownership plans); or (iii) on or after the
date the person becomes an interested stockholder, the business combination is
approved by the corporation's board of directors and by the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the corporation's outstanding
voting stock at an annual or special meeting, excluding shares owned by the
interested stockholder. Under Section 203, an "interested stockholder" is
defined as any person who is: (i) the owner of fifteen percent (15%) or more of
the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and who was the owner of fifteen percent (15%) or
more of the outstanding voting stock of the corporation at any time within the
three year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or bylaws by action of
its stockholders to exempt itself from coverage, provided that such bylaw or
certificate of incorporation amendment shall not become effective until twelve
(12) months after the date it is adopted. The Company has not adopted such an
amendment to its Certificate of Incorporation or Bylaws.
The holders of shares of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor and, in the event of the liquidation or dissolution of the
Company, are entitled to share ratably in all assets remaining after payment of
liabilities. Holders of Common Stock have no preemptive rights and have no
rights to convert their Common Stock into any other securities of the Company.
No dividend has been declared or paid by the Company since its inception.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
COMMON STOCK
As of June 10, 1998, the authorized capital stock of the Company consisted
of 50,000,000 shares of common stock, par value $0.001 per share (the "Common
Stock") and 5,000,000 shares of preferred stock, par value $0.001 per share (the
"Preferred Stock"). As of June 10, 1998, there were issued and outstanding
12,725,000 shares of Common Stock and no shares of Preferred Stock have been
issued. See "Item 7 - Certain Relationships and Related Transactions."
The Company's Common Stock is listed for trading on the Over-The-Counter
Bulletin Board ("OTCB") maintained by the National Association of Securities
Dealers under the symbol "CLCK." The Company's Common Stock has a very limited
trading history and has only been quoted on the OTCB since July 28, 1997.
The following table sets forth quotations for the bid and asked prices for
the Company's Common Stock for the periods indicated below, based upon
quotations between dealers, without adjustments for retail mark-ups, mark-downs
or commissions, and therefore may not represent actual transactions:
36
<PAGE>
<TABLE>
<CAPTION>
BID PRICES ASKED PRICE
---------- -----------
HIGH LOW HIGH LOW
---- --- ---- ---
YEAR ENDING DECEMBER 31, 1997
<S> <C> <C> <C> <C>
3rd Quarter $3.50 $3.25 $5.25 $5.00
4th Quarter 1.375 1.00 1.50 1.25
YEAR ENDING DECEMBER 31, 1998
1st Quarter 2.00 0.875 2.50 1.125
</TABLE>
The bid and asked sales prices of the Company's Common Stock, as traded in
the over-the-counter market, on May 31, 1998, were $4.00 and $4.06,
respectively. These prices are based upon quotations between dealers, without
adjustments for retail mark-ups, mark-downs or commissions, and therefore may
not represent actual transactions.
TRANSFER AGENT
The transfer agent for the Company is Interwest Stock Transfer Co., Inc.,
1981 East 4800 South, Salt Lake City, Utah 84117.
ANNUAL REPORTS
The Company is currently subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549; at its New York
Regional Office, Room 1300, 7 World Trade Center, New York, New York, 10048; and
at its Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies of such materials can be obtained from the Public
Reference Section at prescribed rates. In addition, such materials may be
accessed electronically at the Commission's site on the World Wide Web, located
at http://www.sec.gov. The Company intends to furnish its stockholders with
annual reports containing audited financial statements and such other periodic
reports as the Company may determine to be appropriate or as may be required by
law.
DIVIDEND POLICY
The Company has paid no dividends on its Common Stock as of the date of
this Registration Statement and there are no plans for paying dividends on the
Common Stock in the foreseeable future. The Company intends to retain earnings,
if any, to provide funds for the expansion of the Company's business.
SHARES ELIGIBLE FOR FUTURE SALE
The shares issued to Messrs. Baetz and Gallant and Bay Tree are "restricted
securities" as that term is defined in Rule 144 promulgated under the Act. In
general, under Rule 144 as currently in effect, a person
37
<PAGE>
(or persons whose shares are aggregated) who has beneficially owned restricted
securities shares for a least one year, including persons who may be deemed
"affiliates" of the Company, as that term is defined under the Act, would be
entitled to sell within any three month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares or the average weekly
trading volume of shares during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain manner-of-sale provisions,
notice requirements and the availability of current public information about the
Company. A person who has not been an affiliate of the Company at any time
during the three months preceding a sale, and who has beneficially owned his
shares for at least one year, would be entitled under Rule 144 to see such
shares without regard to any volume limitations under Rule 144.
Future sales of shares of Common Stock by the Company and its stockholders
could adversely affect the prevailing market price of the Common Stock. As of
June 10, 1998, 12,725,000 shares of Common Stock which are free trading shares
or are eligible to have the restrictive legend removed pursuant to Rule 144(k)
promulgated under the Securities Act. Sales of substantial amounts of Common
Stock in the public market, or the perception that such sales may occur, could
have a material adverse effect on the market price of the Common Stock.
Pursuant to its Certificates of Incorporation, the Company has the authority to
issue additional shares of Common Stock. The issuance of such shares could
result in the dilution of the voting power of the currently issued and
outstanding Common Stock.
ITEM 2. LEGAL PROCEEDINGS
To the knowledge of management, there is no material litigation pending or
threatened against the Company, its subsidiaries or any of their executive
officers or directors.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
By letter dated December 4, 1997, the Company terminated David T.
Thompson, P.C. as independent certified accountants for the Company.
The Company's former independent certified accountants' annual report
covering the fiscal year ended December 31, 1996 did not include an adverse
opinion or disclaimer of opinion, and was not modified as to uncertainty, audit
scope or accounting principles. In connection with the audits of the most
recent fiscal year and during any subsequent interim periods preceding such
termination, there has not developed any disagreement between such former
independent certified accountants and management of the Company or other
reportable events which have not been resolved to the Company's former
independent certified accountants' satisfaction. David T. Thompson, P.C. had
been the Company's independent certified accountants since February, 1993.
As of December 4, 1997, the Company engaged Davis, Kinard & Co., P.C. as
the Company's independent auditors to replace David T. Thompson, P.C., whose
report with respect to the Company's financial statements for the fiscal years
ended December 31, 1996, has been included in this Registration Statement.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On September 23, 1997, the Company acquired all of FICI Common Stock from
Messrs. Baetz and Gallant in a reorganization and issued to Messrs Baetz and
Gallant 10,631,250 shares of Common Stock (after Columbia effectuated a 1 for 2
reverse stock split of its common stock) in exchange for the FICI Common Stock,
which represented approximately 85% of Columbia's then issued and outstanding
Common Stock. In connection with the purchase of the FICI common stock by the
Company, 618,750 shares of Common Stock were issued by the Company to Baytree as
a fee for services rendered to the Company for arranging the
38
<PAGE>
transactions which are the subject of the Stock Purchase Agreement. All of the
securities issued by the
39
<PAGE>
Company in these transactions were to "accredited investors" pursuant to Rule
506 promulgated under Regulation D of the Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and Bylaws designate the
relative duties and responsibilities of the Company's officers, establish
procedures for actions by directors and stockholders and other items. The
Company's Certificate of Incorporation and Bylaws also contain extensive
indemnification provisions which will permit the Company to indemnify its
officers and directors to the maximum extent provided by Delaware law.
A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or other
enterprise, against expenses, including amounts paid in settlement and
attorney's fees actually and reasonably incurred by him or her in connection
with the defense or settlement of the action or suit if he or she acted in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter as to which such a person has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement to the
corporation unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above, or in defense of any claim, issue or matter
therein, he or she must be indemnified by the corporation against expenses,
including attorney's fees, actually and reasonably incurred by him in connection
with the defense. Any indemnification under this section, unless ordered by a
court or advanced pursuant to this section, must be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances. The
determination must be made: (a) by the stockholders; (b) by the board of
directors by majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding; (c) if a majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding
so orders, by independent legal counsel in a written opinion; or (d) if a quorum
consisting of directors who were not parties to the action, suit or proceeding
cannot be obtained, by independent legal counsel in a written opinion.
The certificate of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he or she is not entitled to be indemnified
by the corporation. The provisions of this section do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
The indemnification and advancement of expenses authorized in or ordered by
a court pursuant to this section: (a) does not exclude any other rights to which
a person seeking indemnification or advancement of expenses may be entitled
under the certificate of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his or her official capacity or an
40
<PAGE>
action in another capacity while holding his or her office, except that
indemnification, unless ordered by a court pursuant to this section or for the
advancement of any director or officer if a final adjudication establishes that
his or her acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action; and (b) continues
for a person who has ceased to be a director, officer, employee or agent and
inures to the benefit of the heirs, executors and administrators of such a
person.
PART F/S
The following financial statements are provided:
The consolidated financial statements and related notes of Columbia Capital
Corp. and subsidiary for the three months ended March 31, 1998 and 1997 and the
years ended December 31, 1997 and 1996, including the consolidated balance
sheets at March 31, 1998 and 1997 and December 31, 1997 and 1996, and the
related consolidated income statements and statement of changes in shareholders'
equity and cash flows for the three months ended March 31, 1998 and 1997 and the
years ended December 31, 1997 and 1996.
The financial statements and related notes of First Independent Computers,
Inc., for the four months ended April 30, 1997 and the year ended December 31,
1996, including the balance sheets at April 30, 1997 and December 31, 1996 and
the related income statements, changes in shareholders' equity and cash flows
for the four months ended April 30, 1997 and the year ended December 31, 1996.
The unaudited pro forma consolidated financial statements of Columbia
Capital Corp. and subsidiary for the three months ended March 31, 1998 and 1997
and the year ended December 31, 1997 and 1996, including the consolidated pro
forma balance sheets at March 31, 1998 and 1997 and December 31, 1997 and 1996,
and the related consolidated pro forma income statements and statements of
changes in shareholders' equity and cash flows for the three months ended March
31, 1998 and 1997 and the year ended December 31, 1997 and 1998.
PART III
ITEM 1 INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit Description of Document
- ------- -----------------------
<S> <C>
2.1 Agreement and Plan of Reorganization (September 23, 1997)
3.1 Certificate of Incorporation, as amended
3.2 Bylaws
4.1 Specimen Stock Certificate
10.1 Lease Agreement (Fort Lauderdale, Florida)
10.2 Lease Agreement (Abilene, Texas)
10.3 Form of Data Processing Services Agreement
10.4 Financial Consulting Agreement with Michael Markow (March
20, 1998) (1)
10.5 Line of Credit Agreement
10.6 Stock Option Plan
16.1 Letter re Change of Certified Public Accountant;
David T. Thompson, P.C., dated December 4, 1997 (2)
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
- ----------------
</TABLE>
(1) Filed as part of a Registration Statement on Form S-8, dated April 14,
1998.
(2) Filed first as part of the Annual Report on Form 10-KSB for the year ended
December 31, 1997, as amended.
41
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLUMBIA CAPITAL CORP.
Dated: June 16, 1998 By: /s/Kenneth A. Klotz
----------------------------
Kenneth A. Klotz, President
Pursuant to the requirements of the Securities Exchange Act, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kenneth A. Klotz as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
and supplements to this Registration Statement, and to file the same with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
NAME TITLE DATE
- --------------------- --------- -------
/s/ Douglas R. Baetz Director June 16, 1998
- ---------------------
Douglas R. Baetz
/s/ Olan Beard Director June 16, 1998
- ---------------------
Olan Beard
/s/ Glenn M. Gallant Director June 16, 1998
- ---------------------
Glenn M. Gallant
/s/ Kenneth A. Klotz Director June 16, 1998
- ---------------------
Kenneth A. Klotz
/s/ Charles LaMontagne Director June 16, 1998
- ---------------------
Charles LaMontagne
/s/ Robert M. Feldman Director June 16, 1998
- ---------------------
Robert M. Feldman
/s/ Donald L. Thone Director June 16, 1998
- ---------------------
Donald L. Thone
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
COLUMBIA CAPITAL CORP.
The accompanying balance sheet of COLUMBIA CAPITAL CORP. as of March 31,
1998, and the related statements of income, retained earnings, and cash flows
for the year then ended were not audited by us and, accordingly, we do not
express an opinion on them.
The financial statements for the year ended December 31, 1997, were audited
by us, and we expressed an unqualified opinion on them in our report dated
January 21, 1998 (except for Note 13, as to which the date is March 20,
1998), but we have not performed any auditing procedures since that date.
DAVIS, KINARD & CO., P.C.
Abilene, Texas
May 22, 1998
F-1
<PAGE>
COLUMBIA CAPITAL CORP.
CONSOLIDATED BALANCE SHEETS
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1997 (AUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) (Audited)
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 312,828 $ 17,861
Interest bearing deposits with banks 603,578 303,578
Accounts receivable, net 568,842 522,538
Prepaid expenses and other assets 463,543 349,160
Deferred tax asset - 122,209
---------- ----------
Total current assets 1,948,791 1,315,346
Premises and equipment 661,039 562,598
Less accumulated depreciation 80,493 47,914
---------- ----------
Net property and equipment 580,546 514,684
Other assets
Deferred tax asset 52,033 52,033
Goodwill, net of accumulated amortization of $44,640 and 32,466 929,284 941,458
---------- ----------
Total other assets 981,317 993,491
---------- ----------
TOTAL ASSETS $3,510,654 $2,823,521
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Bank overdraft $ 155,582 $ -
Accounts payable 262,250 -
Accrued expenses and other liabilities 470,017 299,941
Federal income tax payable 100,314 -
Notes payable - related party 900,000 1,300,000
Accrued interest payable 8,329 11,589
---------- ----------
Total current liabilities 1,896,492 11,589
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; 50,000,000 shares
authorized; 12,500,000 issued and outstanding 12,500 12,500
Additional paid-in capital 1,681,230 1,681,230
Accumulated deficit (79,568) (481,739)
---------- ----------
Total shareholders' equity 1,614,162 1,211,991
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,510,654 $1,223,580
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-2
<PAGE>
COLUMBIA CAPITAL CORP.
CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1997 (AUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) (Audited)
---------- ----------
<S> <C> <C>
REVENUES
Pride revenue $ 95,000 $ 451,600
Credit card revenue 1,964,717 1,856,062
Banking revenue 228,196 613,049
Mail operations revenue 180,456 172,637
Courier revenue 21,885 66,730
Other 5,124 18,000
---------- ----------
Total revenues 2,495,378 3,178,078
EXPENSES
Salaries and employee benefits 671,283 1,448,629
Auto maintenance 4,813 18,187
Travel and entertainment 14,054 95,998
Equipment lease 390,449 709,530
Equipment maintenance 119,502 276,348
Facilities rent 105,190 217,867
Facilities maintenance 10,569 21,072
Depreciation 32,578 43,404
Amortization of goodwill 12,175 32,655
Insurance 13,723 26,939
Computer and office supplies 126,892 167,912
Postage and delivery fees 17,738 25,627
Telephone 155,840 125,313
Professional and outside services 123,843 126,339
Taxes 15,499 25,197
Other operating 37,393 106,780
---------- ----------
Total expenses 1,851,541 3,467,797
---------- ----------
INCOME (LOSS) FROM OPERATIONS 643,837 (289,719)
Other income (expense)
Interest, net (37,062) (57,019)
Costs related to acquisition - (186,921)
Net loss related to discontinued operations - (1,432)
---------- ----------
Total other income (expense) (37,062) (245,372)
---------- ----------
INCOME (LOSS) BEFORE TAX 606,775 (535,091)
Income tax expense (benefit) 204,604 (110,723)
---------- ----------
NET INCOME (LOSS) $ 402,171 $ (424,368)
---------- ----------
---------- ----------
Basic earnings per share $0.03 $(0.03)
---------- ----------
---------- ----------
Diluted earnings per share $0.03 $(0.03)
---------- ----------
---------- ----------
Average shares outstanding 12,500,000 12,500,000
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-3
<PAGE>
COLUMBIA CAPITAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1997 (AUDITED)
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
---------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1996 2,500,000 2,500 66,230 (57,371) 11,359
Effect of reverse stock split (1,250,000) (1,250) 1,250 - -
Equity acquired in stock exchange 11,250,000 11,250 1,588,750 - 1,600,000
Stock issued in exchange for services - - 25,000 - 25,000
Net loss - - - (424,368) (424,368)
---------- ------- ---------- -------- ----------
BALANCE - DECEMBER 31, 1997 (AUDITED) 12,500,000 12,500 1,681,230 (481,739) 1,211,991
Net income - - - 402,171 402,171
---------- ------- ---------- -------- ----------
BALANCE - MARCH 31, 1998 (UNAUDITED) 12,500,000 $12,500 $1,681,230 $(79,568) $1,614,162
---------- ------- ---------- -------- ----------
---------- ------- ---------- -------- ----------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-4
<PAGE>
COLUMBIA CAPITAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1997 (AUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) (Audited)
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 402,171 $ (424,368)
Adjustments to reconcile net income to
net cash provided by operations
Depreciation and amortization 44,753 76,059
Deferred income taxes 122,209 (110,723)
Increase (decrease) in
Accounts receivable (46,304) 54,010
Deposits and prepaid expenses (114,383) (181,901)
Decrease in
Accruals and accounts payable 529,379 62,685
----------- ----------
Net cash provided by (used in) operating activities 937,825 (524,238)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (98,440) (263,963)
Cash acquired in acquisition - 34,304
Investment in interest bearing deposit (300,000) (201,000)
----------- ----------
Net cash used in investing activities (398,440) (430,659)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net of payments (400,000) 963,000
Investment in interest bearing deposit 155,582 -
----------- ----------
Net cash provided by (used in) financing activities (244,418) 963,000
----------- ----------
NET INCREASE IN
CASH AND CASH EQUIVALENTS 294,967 8,103
Cash and cash equivalents at beginning of period 17,861 9,758
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 312,828 $ 17,861
----------- ----------
----------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 37,061 $ 57,019
NON CASH INVESTING AND FINANCING TRANSACTIONS:
Equity increase resulting from acquisition
Assets acquired $ - $2,201,382
Liabilities assumed - 601,382
----------- ----------
Net assets $ - $1,600,000
----------- ----------
----------- ----------
Stock issued in exchange for services $ - $ 25,000
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-5
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of Columbia Capital Corp. (the Company) and its wholly-owned subsidiary,
First Independent Computers, Inc. (the Subsidiary). Intercompany
accounts and transactions have been eliminated.
ORGANIZATION
The Company was organized under the laws of the State of Delaware on
February 5, 1993. The Company completed a private offering of its common
stock in November 1993 (See Note 2).
Central Capital Corp. (a former Subsidiary) was organized under the laws of
the State of Delaware on February 5, 1993. Hudson Resources, Inc. (a
former Subsidiary) was organized under the laws of the State of Delaware
on May 17, 1994. (See Note 3)
The Subsidiary was incorporated on October 21, 1983, pursuant to the
provisions of the Texas Business Corporation Act. The Subsidiary's
business activities include the processing of credit card purchases for
numerous businesses in various industries throughout the United States
and data processing for various banks. (See Note 5)
CASH AND CASH EQUIVALENTS
The Company considers investments with an original maturity of three
months or less to be cash equivalents.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
ACCOUNTS RECEIVABLE
The Company utilizes the allowance method for uncollectible accounts
receivable. Management estimates the uncollectible accounts and provides
for them in the allowance. The balance of the allowance for
uncollectible accounts was $20,000 at December 31, 1997.
REVENUE RECOGNITION
The Company recognizes revenue when services have been provided to the
customer.
F-6
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PROPERTY, PLANT AND EQUIPMENT
Fixed assets of the Company are reported at historical cost.
Depreciation and amortization on assets purchased are computed by the
following methods and useful lives:
<TABLE>
<S> <C> <C>
Furniture and fixtures Straight-line 5 years
Electronic equipment Straight-line 5-7 years
Automobiles Straight-line 3-5 years
Office equipment Straight-line 5 years
Computer software Straight-line 3 years
</TABLE>
Depreciation is computed using the straight line method over the
estimated useful lives for financial statement purposes and an
accelerated method of cost recovery over statutory recovery periods
for tax purposes. Repairs and maintenance are expensed, whereas
additions and improvements are capitalized.
INTANGIBLE ASSETS
Intangible assets are reported at historical cost and consist of
goodwill. Goodwill is amortized using the straight-line method over
20 years. The Company has adopted the provisions of SFAS 121, under
which the Company reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recovered. No provision for
impairment has been recognized with respect to the Company's long
lived assets.
PREPAID ASSETS
The Company has expenditures which benefit future periods which are
recorded as prepaid assets or deferred costs and are amortized on a
straight-line basis over the estimated or known period of benefit.
Such prepaid assets and deferred costs include prepaid insurance,
maintenance contracts, certain software licenses and supplies used in
the normal operation of business.
FEDERAL INCOME TAXES
Deferred tax assets and liabilities are recognized for deductible and
taxable temporary differences respectively. Temporary differences
are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets may be reduced
by a valuation allowance when and if, in the opinion of management,
the tax asset will, in part or in all, not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
F-7
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PER SHARE DATA
In February 1997, Statement of Financial Accounting Standards No.
128, "Earnings Per Share" (SFAS 128) was issued. Under SFAS 128, net
earnings per share ("EPS") are computed by dividing net earnings by
the weighted average number of shares of common stock outstanding
during the period. SFAS 128 replaces fully diluted EPS, which the
Company was not previously required to report, with EPS, assuming
dilution. The Company adopted SFAS 128 effective December 31, 1997.
There was no effect on loss per share from the implementation of SFAS
128 for the current period and the effect of this accounting change
on previously reported EPS data is not significant. The computation
of earnings (loss) per share of common stock is based on the weighted
average number of shares outstanding in 1998 and 1997 of 12,500,000,
adjusted retroactively to reflect the one for two reverse split
effective September 1, 1997. No potential common shares existed at
March 31, 1998 or December 31, 1997; therefore, basic loss per common
share equals loss per common share assuming dilution.
PREFERRED STOCK
The Company, under its articles of incorporation, has the authority
to issue up to five million (5,000,000) shares of preferred stock
with a par value of $.001 each, totaling five thousand dollars
($5,000). The Board of Directors is authorized to provide for the
issuance of the shares of preferred stock in series by filing a
certificate pursuant to the applicable law of the State of Delaware,
to establish the number of shares to be included in each such series,
and to fix the designations, powers, preferences rights and
limitations of the shares of each series.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
CASH AND SHORT-TERM INSTRUMENTS. The carrying amounts of cash and
short-term instruments approximate their fair value.
INTEREST BEARING DEPOSITS WITH BANKS. The carrying amounts of
interest bearing deposits with banks approximate their fair value.
ACCOUNTS RECEIVABLE. For accounts which are not past due greater
than 90 days and have no significant change in credit risk, fair
values are based on carrying values.
NOTES PAYABLE. The Company's notes payable arrangement bears a
variable interest rate and represents terms and conditions currently
available for the same or similar debt facility in the marketplace.
Thus, the fair value of notes payable approximates the carrying
amount.
F-8
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
NEW ACCOUNTING STANDARDS ADOPTED
In June 1997, Statements of Financial Accounting Standards (SFAS) No.
130, "Reporting of Comprehensive Income," was issued. This statement
requires that comprehensive income be reported in the basic
financial statements. Comprehensive income refers to the change in
equity during a period from transactions and events other than
investments by and distributions to owners. This statement applies
to fiscal years beginning after December 15, 1997. The Company
adopted SFAS 130 on January 1, 1998. The standard does not have a
material impact on the Company's current presentation of net income.
In June 1997, Statements of Financial Accounting Standards (SFAS) No.
131, "Disclosures about Segments of an Enterprise and Related
Information," was issued. This Statement requires that a public
business enterprise report financial and descriptive information
about its reportable operating segments. Financial information
should include a measure of segment profit or loss, certain specific
revenue and expense items, and segment assets. Descriptive
information should include detail on how segments were determined,
products and services provided by each, and any differences in the
measurements used in reporting segment information vs. those used in
the general-purpose financial statements. This statement is
effective for financial statements for periods beginning after
December 15, 1997. The Company adopted SFAS 131 on January 1, 1998.
The implementation of this standard did not have any impact on the
financial position or disclosures of the Company or results of its
operations.
NOTE 2: PRIVATE OFFERINGS OF COMMON STOCK
The Company offered shares of its common stock, $.001 par value, to a
limited number of qualified investors in 1993. The company sold
325,000 shares of common stock, at a price of $.20 per share for a
total of $65,000. The investors subscribed to a minimum of 1,000
shares. There was no minimum offering amount and there was no escrow
of any funds received from the offering and such funds were utilized
by the Company as they were received. Proceeds from the offering
were used to provide working capital to the Company.
NOTE 3: DISPOSITION OF FORMER SUBSIDIARIES CENTRAL CAPITAL CORP. AND
HUDSON RESOURCES, INC.
On February 28, 1997, the Company determined that its two subsidiary
corporations, Central Capital Corp. and Hudson Resources, Inc. had no
value and would hinder the Company in it's acquisition efforts.
Therefore, the two companies were sold to the Company's principal
shareholder, Mr. Lynn Dixon for nominal value. For accounting
purposes the Company treated the sold subsidiaries as discontinued
operations, effective February 28, 1997. The results of the
subsidiaries have been reported separately as a component of
discontinued operations in the income statement.
F-9
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: DISPOSITION OF FORMER SUBSIDIARIES CENTRAL CAPITAL CORP. AND
HUDSON RESOURCES, INC. - CONTINUED
The Company's investment in subsidiaries was sold for current book
value of $1,361 recognizing no gain or loss. Details of the net
assets and operations for the subsidiaries are presented below.
Former Subsidiaries Assets and Liabilities:
<TABLE>
<CAPTION>
February 28,
ASSETS 1997
------------
<S> <C>
Cash $ 1,109
Organization costs, net 252
------------
Total Assets $ 1,361
------------
------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Common stock $ 5,000
Contributed capital 23,609
Retained earnings (27,248)
------------
Total Liabilities and Stockholder's Equity $ 1,361
------------
------------
Subsidiaries Operations:
Legal and professional expense $ 1,400
Amortization expense 32
------------
Net loss related to discontinued operations $ (1,432)
------------
------------
</TABLE>
NOTE 4: AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
In a September 19, 1997 Certificate of Amendment to Certificate of
Incorporation, pursuant to the terms of an agreement and plan of
reorganization dated August 29, 1997, the Company effectuated a 1 for
2 reverse stock split as to its shares of common stock outstanding as
of September 1, 1997, which decreased the shares from 2,500,000 to
1,250,000. The Certificate of Amendment also resolved that the
Corporation shall, as amended, have the authority to issue fifty
million (50,000,000) shares of common stock with par value of $.001
each, totaling fifty thousand dollars ($50,000) and five million
(5,000,000) shares of preferred stock with par value of $.001 each,
totaling five thousand dollars ($5,000). The board of directors is
authorized, subject to limitations prescribed by law and the
provisions of this Article, to provide for the issuance of the shares
of preferred stock in series by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish the number of
shares, to fix the designations, powers, preferences, rights,
qualifications, limitations and/or restrictions, to be included in
each such series. At March 31, 1998 and December 31, 1997, there were
no preferred shares issued or outstanding.
F-10
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: ACQUISITION OF FIRST INDEPENDENT COMPUTERS, INC.
On April 30, 1997, Mr. Glenn M. Gallant and Mr. Douglas R. Baetz
purchased all of the issued and outstanding stock of First
Independent Computers, Inc. (FICI) then owned by Security Shares,
Inc., a bank holding company, for $1,600,000. The transaction was
accounted for utilizing "pushdown accounting", whereby all assets and
liabilities of FICI were restated at their estimated market value on
the purchase date. The excess of the total acquisition cost over the
fair value of net assets acquired was recorded as goodwill. Total
restated assets at May 1, 1997 amounted to $2,174,670, which included
$973,924 in goodwill to be amortized over an estimated benefit period
of twenty (20) years. Goodwill amortization expense amounts to
$4,058 monthly, with $12,175 of amortization expense included in the
period ending March 31, 1998 and $32,466 (from May 1, 1997 to
December 31, 1997) of amortization expense included in the year
ending December 31, 1997 results of operation.
Effective as of September 23, 1997, Columbia Capital Corp. (the
"Company") acquired all of the common stock (the "FICI Common Stock")
of the Company's operating subsidiary, First Independent Computers,
Inc. ("FICI") from Messrs. Douglas R. Baetz and Glenn M. Gallant.
Pursuant to the terms of the agreement of acquisition of the FICI
Common Stock, dated August 29, 1997 (the "Stock Purchase Agreement"),
Messrs. Gallant and Baetz received 10,631,250 shares of Common Stock
(after the Company effectuated a 1 for 2 reverse stock split of its
Common Stock) in exchange for the FICI Common Stock, which
represented approximately 85% of the Company's then issued and
outstanding Common Stock. In connection with the closing of the
Stock Purchase Agreement, the Company issued 618,750 shares of Common
Stock to Baytree Associates, Inc., a third party which is not an
affiliate of Messrs. Baetz and Gallant, as a fee for services
rendered to the Company for arranging the transactions which are the
subject of the Stock Purchase Agreement.
The accompanying financial statements have been presented, for
accounting purposes, as a recapitalization of FICI, with FICI as the
acquiror of the Company. Further, in connection the transactions
relating to the Stock Purchase Agreement and the acquisition of the
FICI Common Stock by Messrs. Baetz and Gallant, such persons obtained
a controlling interest in FICI and, thereafter, the Company.
Therefore, for accounting purposes, these transactions are deemed to
be transactions between entities under common control. Accordingly,
the business combination between the Company and FICI was accounted
for in a manner similar to a pooling of interests, whereby the
accounts of the entities involved were not revalued, rather they were
combined at their historical basis. The Company's consolidated
financial statements were restated to include the results of
operations of FICI from May 1, 1997, the acquisition date of FICI by
Messrs. Baetz and Gallant. There were no adjustments to net assets
of the combining companies necessary for either to adopt the same
accounting practices.
The following unaudited pro-forma consolidated results of operations
assume that the above acquisitions occurred on January 1, 1997 and
reflect the historical operations of the acquired business adjusted
for amortization of goodwill.
<TABLE>
<S> <C>
Net revenues $ 3,178,078
Net loss ( 397,212)
Net loss per share (.03)
</TABLE>
F-11
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: ACQUISITION OF FIRST INDEPENDENT COMPUTERS, INC. - CONTINUED
The pro-forma results of operations are not necessarily indicative of
the actual results of operations that would have occurred had the
acquisition actually occurred on January 1, 1997, or of results which
may occur in the future.
NOTE 6: FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at
March 31, 1998 were as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
----------- ----------
<S> <C> <C>
Financial assets:
Cash and interest bearing deposits with banks $ 916,406 $ 916,406
Accounts receivable 568,842 568,842
Financial liabilities:
Notes payable $ 900,000 $ 900,000
Accrued interest payable 37,062 37,062
</TABLE>
The method(s) and assumptions used to estimate the fair value of
financial instruments are disclosed in Note 1 "Fair Values of
Financial Instruments".
The estimated fair values of the Company's financial instruments at
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
----------- ----------
<S> <C> <C>
Financial assets:
Cash and interest bearing deposits with banks $ 321,439 $ 321,439
Accounts receivable 522,538 522,538
Financial liabilities:
Notes payable $1,300,000 $1,300,000
Accrued interest payable 11,589 11,589
</TABLE>
The method(s) and assumptions used to estimate the fair value of
financial instruments are disclosed in Note 1 "Fair Values of
Financial Instruments".
NOTE 7: INCOME TAXES
The Company files a consolidated federal income tax return; however,
federal income taxes are allocated between the Company and Subsidiary
based on statutory rates. The consolidated income tax benefit, as a
percentage of pretax earnings, differs from the statutory federal
income tax rate at March 31, 1998 and December 31, as follows:
F-12
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7: INCOME TAXES - CONTINUED
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
Statutory federal income tax rate 34.00% 34.00%
Reduction in tax rate resulting
from non-deductible expenses (2.85 ) (13.31 )
--------- ------------
Effective income tax rate 31.15% 20.69%
--------- ------------
--------- ------------
</TABLE>
The tax effects of temporary differences that gave rise to deferred
tax assets as of March 31, 1998:
<TABLE>
<S> <C>
Depreciation and amortization $52,033
------------
------------
</TABLE>
Activity related to deferred tax assets in the period ended March 31,
1998:
<TABLE>
<S> <C>
Balance at December 31, 1997 $ 174,242
Deferred income tax benefit utilized by first quarter profits 122,209
------------
Net deferred tax assets at March 31, 1998 $ 52,033
------------
------------
</TABLE>
The tax effects of temporary differences that gave rise to deferred
tax assets as of December 31, 1997:
<TABLE>
<S> <C>
Net operating loss carryforwards $ 122,209
Depreciation and amortization 52,033
------------
Total deferred tax assets $ 174,242
------------
------------
</TABLE>
Activity related to deferred tax assets in the year ended December
31, 1997:
<TABLE>
<S> <C>
Balance at December 31, 1996 $ 4,501
Valuation allowance (4,501)
------------
Net deferred tax assets at December 31, 1996 -
Deferred tax asset established on acquisition of Subsidiary 63,519
Deferred income tax benefit 110,723
------------
Net deferred tax assets at December 31, 1997 $ 174,242
------------
------------
</TABLE>
The Company had available consolidated net operating loss
carryforwards for federal income tax purposes of $359,438 for
December 31, 1997. A consolidated valuation allowance of $-0- was
established. The consolidated net operating loss carryforwards at
December 31, 1997 will expire as shown below.
F-13
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7: INCOME TAXES - CONTINUED
<TABLE>
<CAPTION>
Year Amount
---- ---------
<S> <C>
2008 $ 804
2009 4,297
2010 21,545
2011 3,359
2012 329,433
</TABLE>
The Company expects to utilize all or substantially all of the net
operating loss carryforwards in 1998.
NOTE 8: NOTES PAYABLE
The Subsidiary, has an operating line of credit through Century
Financial Group, Inc., a company owned by the Company's primary
shareholders. Century Financial Group, Inc. provides the Subsidiary
with a maximum operating line of credit of two million dollars
($2,000,000). Advances on the line of credit, not to exceed the
maximum limit, are made at the discretion of the Subsidiary's
management. The line of credit is secured by all assets of the
Subsidiary. The line of credit carries an annual percentage rate of
ten percent (10%). Under the terms of the line of credit, the
Subsidiary pays interest on a monthly basis with the unpaid principal
due at maturity, September 15, 1998. The outstanding balance on the
line of credit as of March 31, 1998 and December 31, 1997 was
$900,000 and $1,300,000.
NOTE 9: LEASE OBLIGATIONS
The Company has entered into various operating lease agreements.
Under terms of an operating lease with IBM Corporation, certificates
of deposit with a carrying value of $303,578 at March 31, 1998 and
December 31, 1997, were pledged as collateral against Bank One
letters of credit in favor of IBM.
At March 31, 1998 the future minimum payments for leased property
under these noncancellable lease agreements for each of the next five
years ending December 31, 2003, are as follows:
<TABLE>
<S> <C>
Remaining 1998 $ 943,735
1999 1,222,021
2000 1,004,384
2001 128,218
2002 109,965
2003 9,164
------------
Lease obligations $ 3,417,487
------------
------------
</TABLE>
F-14
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10: MARKET RISK AND CONCENTRATIONS
On June 30, 1997 the Subsidiary had a significant credit card
portfolio processing contract expire. This contract was not renewed.
The contract represented approximately one hundred thousand dollars
($100,000) or thirty percent (30%) of the Subsidiary's monthly
operating revenue, and its loss substantially affected the
Subsidiary's profitability. As a result, substantial operating
losses were recognized in the months July through October. For the
three months ended March 31, 1998, revenue from Security State Bank
(12%) and Best Bank (79%) accounted for approximately 91% of the
Company's total revenues. No other customers accounted for 10% or
more of the Company's total revenues. For the year ending December
31, 1997, revenue from Security State Bank (23%), Best Bank (28%) and
Pride (14%) accounted for approximately 68% of the Company's total
revenues. No other customers accounted for 10% or more of the
Company's total revenues.
On October 1, 1997 the Subsidiary entered into a five year contract
to process credit card activity and produce account statements for
Best Bank. This contract represents in excess of $500,000 per month
in additional operating revenue. In December, 1997, the Subsidiary
earned approximately five hundred thirty-five thousand ($535,000) on
the bank contract which represents seventy-two percent (72%) of total
revenue for the month.
NOTE 11: RELATED PARTY TRANSACTIONS
The Subsidiary continues to provide data processing services to
Security State Bank its former parent company. Additionally, the
Subsidiary continues to lease its office space, 52,248 square feet,
from Security State Bank at an annual cost of approximately $390,000.
Accounts receivable from Security State Bank amounted to $132,927 and
$134,403 at March 31, 1998 and December 31, 1997. On December 1,
1997, the Subsidiary entered into a lease agreement with The Century
Group, Inc., (the "Landlord"), owned by the Company's primary
shareholders
Glenn Gallant and Douglas Baetz, for office space located at 2701
West Oakland Park Boulevard, Ft. Lauderdale, Florida 33311. The term
of the lease is for one (1) year for the sum of thirty-one thousand
seven hundred forty-six dollars ($31,746), plus applicable sales and
use taxes. The Company also agrees to pay the Landlord, as additional
rent for its share of the operating expenses associated with the
premises. The Subsidiary's financing source, Century Financial Group,
Inc., is owned by the Company's primary shareholders, Glenn Gallant
and Douglas Baetz. Interest expense and accrued interest payable to
Century Financial Group, Inc. amounted to $37,062 and $53,561 as of
March 31, 1998 and December 31, 1997 respectively.
NOTE 12: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY
The following represents consolidated financial information of the
parent company as of March 31, 1998 presented utilizing the equity
method of accounting.
F-15
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY - CONTINUED
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEET:
ASSETS March 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,522 $ 1,689
Prepaid expenses and other assets 7,024 15,024
Federal income tax due from subsidiary 47,001 13,284
----------- -----------
Total current assets 57,547 29,997
Investment in subsidiary 1,842,590 1,379,969
----------- -----------
TOTAL ASSETS $ 1,900,137 $ 1,409,966
----------- -----------
----------- -----------
LIABILITIES
Accrued expenses and other liabilities $ 58,000 $ 5,000
Due to subsidiary 227,975 192,975
----------- -----------
Total current liabilities 285,975 197,975
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; 5,000,000 shares
authorized; 12,500,000 issued and outstanding 12,500 12,500
Capital surplus 1,681,230 1,681,230
Accumulated deficit (79,568) (481,739)
----------- -----------
Total shareholders' equity 1,614,162 1,211,991
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,900,137 $ 1,409,966
----------- -----------
----------- -----------
CONDENSED INCOME STATEMENT:
REVENUES
Undistributed earnings (loss) of subsidiary $ 462,621 $ (220,031)
----------- -----------
Total revenues 462,621 (220,031)
EXPENSES
Stockholder costs and fees 889 581
Professional and outside services 93,278 27,851
Amortization expense - 189
Costs related to acquisition - 186,921
Other operating - 647
----------- -----------
Total expenses 94,167 216,189
Net loss related to discontinued operations - (1,432)
----------- -----------
INCOME (LOSS) BEFORE FEDERAL INCOME TAX 368,454 (437,652)
Income tax benefit 33,717 (13,284)
----------- -----------
Net income (loss) $ 402,171 $ (424,368)
----------- -----------
----------- -----------
</TABLE>
F-16
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY - CONTINUED
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF CASH FLOWS:
March 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 402,171 $ (424,368)
Adjustments to reconcile net loss to
net cash provided by operations
Undistributed earnings in subsidiary (462,621) 220,031
Depreciation and amortization - 189
Increase in tax due from subsidiary (33,717) (13,284)
Prepaid expenses and other assets 8,000 (13,436)
Accruals and accounts payable 88,000 222,799
----------- -----------
Total adjustments (400,338) 416,299
----------- -----------
Net cash used by operating activities 1,833 (8,069)
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,833 (8,069)
Cash and cash equivalents at beginning of year 1,689 9,758
----------- -----------
CASH AND CASH EQUIVALENTS AT MARCH 31, 1998 $ 3,522 $ 1,689
----------- -----------
----------- -----------
</TABLE>
NOTE 13: CONSULTING AGREEMENT
The consulting agreement disclosed in prior financial statements has
been restated as follows:
On March 20, 1998, Columbia Capital Corp. entered into a consulting
agreement with Worldwide Corporate Finance ("Worldwide"). Worldwide,
through its individual affiliate, Michael Markow, provides the
Company with consulting services, including long term business,
managerial and financial planning; investigating and analysis in
corporate reorganizations and expansion in merger and acquisition
opportunities; and the introduction of business opportunities for
credit card processing services. The consulting agreement expires on
March 19, 1999. As the initial compensation for services, the
Company granted to Mr. Markow options to purchase up to 300,000
shares of Common Stock, which are the subject of a currently
effective registration statement, on the following terms and
conditions: (i) options to purchase up to 150,000 shares of Common
Stock at an exercise price of $0.95 per share, exercisable from April
1, 1998 until March 31, 1999; (ii) options to purchase up to 75,000
shares of Common Stock at an exercise price of $0.95 per share,
exercisable from June 19, 1998 until March 19, 1999; and (iii)
options to purchase up to 75,000 shares of Common Stock at an
exercise price of $0.95 per share, exercisable from September 19,
1998 until September 19, 1999.
Worldwide has elected to receive payment in the form of non-cash
transactions by exercising the options against amounts otherwise
payable for services rendered by Mr. Markow, in which the fee will be
considered to be paid in full by delivery to Mr. Markow of the shares
underlying such options upon exercise thereof.
F-17
<PAGE>
COLUMBIA CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: CONSULTING AGREEMENT - CONTINUED
Additional compensation, consisting of options to purchase up to
400,000 shares of Common Stock, has also been issued to Mr. Markow,
which is the subject of a currently effective registration statement,
on the following terms and conditions: (i) options to purchase up to
100,000 shares of Common Stock at an exercise price of $1.70 per
share, exercisable from April 1, 1998 until August 31, 1998; (ii)
options to purchase up to 100,000 shares of Common Stock at an
exercise price of $1.70 per share, exercisable from April 1, 1998
until October 31, 1998; (iii) options to purchase up to 100,000
shares of Common Stock at a per share exercise price equal to 85% of
the closing bid market value of the Common Stock on the date of
exercise of such options, exercisable from April 1, 1998 until March
31, 1999; and (iv) options to purchase up to 100,000 shares of Common
Stock at a per share exercise price equal to 85% of the closing bid
market value of the Common Stock on the date of exercise of such
options, exercisable from April 1, 1998 until March 31, 2000.
On March 20, 1998, the Company entered into an additional consulting
agreement with Worldwide relating to prospective financing
transactions. Compensation for these services will be paid in the
form of restricted securities and on a transaction by transaction
basis.
F-18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
FIRST INDEPENDENT COMPUTERS, INC.
We have compiled the accompanying balance sheet of FIRST INDEPENDENT
COMPUTERS, INC. as of March 31, 1997, and the related statements of income
and retained earnings and cash flows for the period then ended, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying March 31, 1998 financial statements and,
accordingly, do not express an opinion or any other form of assurance on them.
The financial statements for the year ended December 31, 1996, were audited
by us, and we expressed an unqualified opinion on them in our report dated
January 21, 1998, but we have not performed any auditing procedures since
that date.
DAVIS, KINARD & CO., P.C.
Abilene, Texas
May 22, 1998
F-19
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
BALANCE SHEETS
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1996 (AUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(Unaudited) (Audited)
---------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 5,769 $ -
Interest bearing deposits with banks 100,000 100,000
Accounts receivable, net 775,388 715,618
Prepaid expenses and other assets 276,921 187,551
----------- -----------
Total current assets 1,158,078 1,003,169
Premises and equipment 1,078,996 960,372
Less accumulated depreciation 706,652 615,168
----------- -----------
Net property and equipment 372,344 345,204
Other assets
Deposits - 2,563
----------- -----------
Total other assets - 2,563
----------- -----------
TOTAL ASSETS $1,530,422 $1,350,936
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Bank overdraft $ - $ 31,557
Accrued expenses and other liabilities 218,903 439,949
Federal income tax payable 14,476 -
Notes payable--related party 517,000 131,420
Accrued interest payable 1,109 351
----------- -----------
Total current liabilities 751,488 603,277
SHAREHOLDERS'S EQUITY
Common stock , $1 par value; 1,000 shares
authorized; 1,000 issued and outstanding 1,000 1,000
Additional paid-in capital 497,500 497,500
Retained earnings 280,434 249,159
----------- -----------
Total shareholders' equity 778,934 747,659
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,530,422 $1,350,936
----------- -----------
----------- -----------
</TABLE>
See accompanying notes and accountants report.
F-20
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
INCOME STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1996 (AUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(Unaudited) (Audited)
----------- ------------
<S> <C> <C>
REVENUES
Pride revenue $ 201,000 $ 804,000
Credit card revenue 490,636 1,955,911
Banking revenue 237,717 927,747
Mail operations revenue 70,025 292,074
Courier revenue 24,025 86,050
Other 8,394 62,804
----------- -----------
Total revenues 1,031,797 4,128,586
EXPENSES
Salaries and employee benefits 435,640 1,644,534
Auto maintenance 6,224 25,171
Travel and entertainment 19,762 46,580
Equipment lease 215,456 855,156
Equipment maintenance 116,448 473,066
Facilities rent 36,300 138,200
Facilities maintenance 389 1,243
Depreciation 21,489 108,905
Amortization of non-compete agreement - 2,542
Insurance 9,132 37,550
Computer and office supplies 62,672 279,157
Postage and delivery fees 9,677 28,473
Telephone 36,805 143,986
Professional and outside services 23,020 79,866
Taxes 9,386 30,683
Other operating 8,711 25,902
----------- -----------
Total expenses 1,011,111 3,921,014
----------- -----------
INCOME FROM OPERATIONS 20,686 207,572
Other income (expense)
Interest, net (3,169) (15,684)
Sales tax refund - 23,971
----------- -----------
Total other income (expense) (3,169) 8,287
----------- -----------
INCOME BEFORE TAX 17,517 215,859
Income tax expense 9,315 64,060
----------- -----------
NET INCOME $ 8,202 $ 151,799
----------- -----------
----------- -----------
Basic earnings per share $ 8.20 $ 151.80
----------- -----------
----------- -----------
Diluted earnings per share $ 8.20 $ 151.80
----------- -----------
----------- -----------
Average shares outstanding 1,000 1,000
----------- -----------
----------- -----------
</TABLE>
See accompanying notes and accountants report.
F-21
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1996 (AUDITED)
<TABLE>
<CAPTION>
Common Stock
----------------- Paid-In Retained
Shares Amount Capital Earnings Total
------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1995 1,000 $ 1,000 $ 497,500 $ 120,433 $ 618,933
Net income - - - 151,799 151,799
------ --------- --------- --------- ---------
BALANCE - DECEMBER 31, 1996
(AUDITED) 1,000 1,000 497,500 272,232 770,732
Net income - - - 8,202 8,202
------ --------- --------- --------- ---------
BALANCE - MARCH 31, 1997
(UNAUDITED) 1,000 $ 1,000 $ 497,500 $ 280,434 $ 778,934
------ --------- --------- --------- ---------
------ --------- --------- --------- ---------
</TABLE>
See accompanying notes and accountants report.
F-22
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1996 (AUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,202 $ 151,799
Adjustments to reconcile net income to
net cash provided by operations
Depreciation and amortization 21,489 111,447
Increase in
Accounts receivable (59,770) (126,783)
Deposits and prepaid expenses (63,734) (29,362)
Decrease in
Accruals and other liabilities (205,812) (23,771)
----------- -----------
Net cash provided by (used in) operating
activities (299,625) 83,330
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (48,629) (239,335)
----------- -----------
Net cash used in investing activities (48,629) (239,335)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net of payments 385,580 87,681
Increase (decrease) in bank overdraft (31,557) 31,557
----------- -----------
Net cash provided by financing activities 354,023 119,238
----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 5,769 (36,767)
Cash and cash equivalents at beginning of period - 36,767
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,769 $ -
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 3,169 $ 15,684
Taxes paid $ 5,956 64,060
</TABLE>
See accompanying notes and accountants report.
F-23
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
First Independent Computers, Inc. (The Company) was incorporated on
October 21, 1983, pursuant to the provisions of the Texas Business
Corporation Act. The Corporation was authorized to issue 1,000 shares of
no par value, Common Stock.
First Independent Computers Inc.'s business activity includes the
processing of credit card purchases for numerous businesses in various
industries throughout the United States and data processing for various
banks.
The shareholders of First Independent Computers, Inc. entered into an
agreement with Security Shares, Inc. to exchange First Independent
Computers, Inc. shares for common shares of Security Shares, Inc. The
exchange was effective with the close of business on May 31, 1994. The
exchange is for all of the issued and outstanding shares of First
Independent Computers, Inc.
Security Shares, Inc. entered into a purchase/sale agreement with Glenn
M. Gallant and Douglas R. Baetz for the purchase of all of First
Independent Computers, Inc.'s issued and outstanding stock currently
owned by Security Shares, Inc. The sale was to be effective with the
close of business on April 30, 1997.
CASH AND CASH EQUIVALENTS
The Company considers investments with an original maturity of three
months or less to be cash equivalents.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities. Actual results
could differ from those estimates.
ACCOUNTS RECEIVABLE
The Company utilizes the allowance method for uncollectible accounts
receivable. Management estimates the uncollectible accounts and
provides for them in the allowance. The balance of the allowance for
uncollectible accounts was $20,000 at March 31, 1997 and December 31,
1996.
PREPAID ASSETS
The Company has expenditures which benefit future periods which are
recorded as prepaid assets or deferred costs and are amortized on a
straight-line basis over the estimated or known period of benefit. Such
prepaid assets and deferred costs include prepaid insurance, maintenance
contracts, certain software licenses and supplies used in the normal
operation of business.
F-24
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
REVENUE RECOGNITION
The Company recognizes revenue when services have been provided to the
customer.
PROPERTY, PLANT AND EQUIPMENT
Fixed assets of the Company are reported at historical cost.
Depreciation and amortization on assets purchased are computed by the
following methods and useful lives:
<TABLE>
<S> <C> <C>
Furniture and fixtures Straight-line 5 years
Electronic equipment Straight-line 5-7 years
Automobiles Straight-line 3-5 years
Office equipment Straight-line 5 years
Computer Software Straight-line 3 years
</TABLE>
Depreciation is computed using the straight line method over the
estimated useful lives for financial statement purposes and an
accelerated method of cost recovery over statutory recovery periods for
tax purposes. Repairs and maintenance are expensed, whereas additions
and improvements are capitalized.
FEDERAL INCOME TAXES
Deferred tax assets and liabilities are recognized for deductible and
taxable temporary differences respectively. Temporary differences are
the differences between the reported amounts of assets and liabilities
and their tax bases. Deferred tax assets may be reduced by a valuation
allowance when and if, in the opinion of management, the tax asset will,
in part or in all, not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
CASH AND SHORT-TERM INSTRUMENTS. The carrying amounts of cash and
short-term instruments approximate their fair value.
INTEREST BEARING DEPOSITS WITH BANKS. The carrying amounts of interest
bearing deposits with banks approximate their fair value.
ACCOUNTS RECEIVABLE. For accounts which are not past due greater that
90 days and have no significant change in credit risk, fair values are
based on carrying values.
F-25
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
LONG TERM DEBT. The Company's long term debt arrangement bears a
variable interest rate and represents terms and conditions currently
available for the same or similar debt facility in the marketplace.
Thus, the fair value of long term debt approximates the carrying amount.
PER SHARE DATA
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding in 1997 and 1996 of 1,000.
ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1997, Statements of Financial Accounting Standards (SFAS) No.
130, "Reporting of Comprehensive Income," was issued. This statement
requires that comprehensive income be reported in the basic financial
statements. Comprehensive income refers to the change in equity during a
period from transactions and events other than investments by and
distributions to owners. This statement applies to fiscal years
beginning after December 15, 1997. This statement, if applied to the
December 31, 1997 financial statements, would not affect the
consolidated comprehensive net income. The Company plans to adopt SFAS
130 on January 1, 1998.
In June 1997, Statements of Financial Accounting Standards (SFAS) No.
131, "Disclosures about Segments of an Enterprise and Related
Information," was issued. This Statement requires that a public
business enterprise report financial and descriptive information about
its reportable operating segments. Financial information should include
a measure of segment profit or loss, certain specific revenue and
expense items, and segment assets. Descriptive information should
include detail about the way that the operating segments were
determined, the products and services provided by the operating
segments, differences between the measurements used in reporting segment
information and those used in the enterprise's general-purpose financial
statements, and changes in the measurement of segment amounts from
period to period. This statement is effective for financial statements
for periods beginning after December 15, 1997. The Company plans to
adopt SFAS 131 on January 1, 1998.
NOTE 2: RELATED PARTY TRANSACTIONS
During the period January 1 through December 31, 1996, the Company
recorded revenues of $1,245,119 billed to Security State Bank (balance
due at December 31, 1996 of $128,629), a related party.
During the period January 1 through March 31, 1997, the Company recorded
revenues of $304,214 billed to Security State Bank (balance due at March
31, 1997 of $119,801), a related party.
In addition, the Company leases its office space from Security State
Bank. Facilities Rent expense was $11,517 per month ($138,200 for the
period of January 1 to December 31, 1996), and $12,100 per month
($36,300 for the period of January 1 to March 31, 1997).
F-26
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3: LEASE OBLIGATIONS
The Company has entered into various operating lease agreements. Under
terms of an operating lease with IBM Corporation, certificates of
deposit with a carrying value of $102,578 at March 31, 1997, were
pledged as collateral against Bank One letters of credit in favor of IBM.
At March 31, 1997 the future minimum payments for leased property under
these noncancellable lease agreements for each of the next five years
ending December 31, 2002, are as follows:
<TABLE>
<S> <C> <C>
Remaining 1997 $ 640,453
1998 1,237,809
1999 1,222,021
2000 1,004,384
2001 128,218
2002 109,965
------------
Lease Obligation $ 4,342,850
------------
------------
</TABLE>
NOTE 4: NOTES PAYABLE
Notes payable consisted of the following at March 31, 1997, December 31,
1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
The company purchased software under a capital lease
and recorded the liability as a note payable dated
12/13/91 to IBM in the original amount of $157,783 at
16.29%, principal and interest due in 60 monthly
installments starting 2/01/92. $ - $ 1,420
A revolving line of credit dated 5/24/96 to The Peoples
State Bank, commitment of $250,000 at 9.25%, due on
demand with final maturity at 5/24/97. The note is secured
by accounts receivable. 250,000 130,000
A note payable dated 3/31/97 to The Peoples State Bank in
the original amount of $267,000 at 8.5%, principal and
interest due on demand with final maturity at 6/30/97. The
note is guaranteed by Security State Bank. 267,000
---------- ----------
Total notes payable $ 517,000 $ 131,420
---------- ----------
---------- ----------
</TABLE>
NOTE 5: INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities as of March 31, 1997 and
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Depreciation and amortization $(821) $(821)
---------- ---------
---------- ---------
</TABLE>
F-27
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5: INCOME TAXES - CONTINUED
Federal income taxes are based on statutory rates. The income tax
benefit/liability, as a percentage of pretax earnings, differs from the
statutory federal income tax rate at April 30 and December 31, as
follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Statutory federal income tax rate 34.00% 34.00%
Reduction in tax rate resulting
from non-deductible expenses (0.98) (4.32)
------- -------
Effective income tax rate 33.02% 29.68%
------- -------
------- -------
</TABLE>
Federal income tax expense at March 31 and December 31 is composed of :
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Current expense $9,315 $65,880
Deferred liability - (1,820)
------- -------
Total income tax expense $9,315 $64,060
------- -------
------- -------
</TABLE>
NOTE 6: FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments were as
follows at:
<TABLE>
<CAPTION>
March 31, 1997
---------------------
Carrying Fair
Amount Value
-------- --------
<S> <C> <C>
Financial assets:
Cash and interest bearing deposits with banks $105,769 $105,769
Accounts receivable 775,388 775,388
Financial liabilities:
Notes payable $517,000 $517,000
Accrued interest payable 37,062 37,062
</TABLE>
F-28
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6: FINANCIAL INSTRUMENTS - CONTINUED
The estimated fair values of the Company's financial instruments were as
follows at:
<TABLE>
<CAPTION>
December 31, 1996
---------------------
Carrying Fair
Amount Value
-------- --------
<S> <C> <C>
Financial assets:
Cash and interest bearing deposits with banks $100,000 $100,000
Accounts receivable 715,618 715,618
Financial liabilities:
Notes payable $131,420 $131,420
Accrued interest payable 351 351
</TABLE>
The method(s) and assumptions used to estimate the fair value of financial
instruments are disclosed in Note 1 "Fair Values of Financial
Instruments".
NOTE 7: CONCENTRATION RISK
During the period January 1 through December 31, 1996, the Company
recorded revenues of $804,000 billed to Pride Refining, Inc. (balance
due at December 31, 1996 of $61,469), a non-related party, and
$1,396,244 billed to Clark Refining, Inc. (balance due at December 31,
1996 of $98,705), a non-related party.
During the period January 1 through March 31, 1997, the Company recorded
revenues of $197,925 billed to Pride Refining, Inc. (balance due at
March 31, 1997 of $61,611), a non-related party, and $306,623 billed to
Clark Refining, Inc. (balance due at March 31, 1997 of $-0-), a
non-related party.
NOTE 8: SUBSEQUENT EVENTS
As of May 1, 1997, 100% of the Company's issued and outstanding stock
was purchased by Glenn M. Gallant and Douglas R. Baetz from Security
Shares, Inc.
On May 5, 1997, the Company's note payable of $267,000 with accrued
interest to date was paid in full.
On May 24, 1997, the Company's outstanding note payable balance of
$30,000 with accrued interest to date was paid in full.
On May 31, 1997, the Company recorded additional paid in capital of
$250,000 resulting from a cash deposit made by Glenn M. Gallant and
Douglas R. Baetz.
F-29
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8: SUBSEQUENT EVENTS - CONTINUED
At June 30, 1997 the Company's contract, to provide credit card
processing for Clark Refining, Inc., expired. Clark has indicated that
the contract will not be renewed.
The Company has renewed it's lease agreement with Security State Bank
effective August 1, 1997. The new lease agreement is for a period of
two (2) years consisting of 52,248 square foot of office and parking
space under lease. Total monthly rent, due in advance on the first day
of each month, beginning August 1, 1997, will be $33,447. The total
annual facilities rent expense under the new lease agreement will be
$401,364.
The Subsidiary, has extended to it an operating line of credit through
Century Financial Group, Inc., a company owned by the Company's primary
shareholders. Century Financial Group, Inc. provides the Subsidiary
with a maximum operating line of credit of two million dollars
($2,000,000). Advances on the line of credit, not to exceed the maximum
limit, are made at the discretion of the Subsidiary's management. The
line of credit is secured by all assets of the Subsidiary. The line of
credit carries an annual percentage rate of ten percent (10%). Under
the terms of the line of credit the Subsidiary will pay interest on a
monthly basis with the unpaid principal due at maturity, September 15,
1998. The outstanding balance on the line of credit as of December 31,
1997 was $1,300,000.
The Company continues to provide data processing services to a
subsidiary of its former parent company, Security State Bank.
Additionally, the Subsidiary continues to lease its office space,
52,248 square feet, from Security State Bank at an annual cost of
approximately $390,000. Accounts receivable from Security State Bank
amounted to $134,403 at December 31, 1997.
On December 1, 1997 the Subsidiary entered into a lease agreement with
The Century Group, Inc., (the "Landlord"), owned by the Company's
primary shareholders Glenn Gallant and Douglas Baetz, for office space
located at 2701 West Oakland Park Boulevard, Ft. Lauderdale, Florida
33311. The term of the lease is for one (1) year for the sum of
thirty-one thousand seven hundred forty-six dollars ($31,746), plus
applicable sales and use taxes. The Company also agrees to pay the
Landlord, as additional rent ("Additional Rent") for its share of the
operating expenses associated with the premises. The Subsidiary's
financing source, Century Financial Group, Inc., is owned by the
Company's primary shareholders, Glenn Gallant and Douglas Baetz.
Interest expense and accrued interest payable to Century Financial
Group, Inc. amounted to $53,561 and $-0- as of December 31, 1997.
On June 30, 1997 the Subsidiary had a significant credit card portfolio
processing contract expire. This contract was not renewed. The
contract represented approximately one hundred thousand dollars
($100,000) or thirty percent (30%) of the Subsidiary's monthly operating
revenue, and its loss substantially affected the Subsidiary's
profitability. As a result, substantial operating losses were
recognized the months July through October.
F-30
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8: SUBSEQUENT EVENTS - CONTINUED
On October 1, 1997 the Subsidiary entered into a five year contract to
process credit card activity and produce account statements for a bank.
This contract represents more than $500,000 per month in additional
operating revenue. In December, 1997, the Subsidiary earned
approximately five hundred thirty-five thousand ($535,000) on the bank
contract which represents seventy-two percent (72%) of total revenue for
the month.
On April 30, 1997, Mr. Glenn M. Gallant and Mr. Douglas R. Baetz
purchased all of the issued and outstanding stock of First Independent
Computers, Inc. (FICI) then owned by Security Shares, Inc., a bank
holding company, for $1,600,000. The transaction was accounted for
utilizing "pushdown accounting", whereby all assets and liabilities of
FICI were restated at their estimated market value on the purchase date.
The excess of the total acquisition cost over the fair value of net
assets acquired was recorded as goodwill. Total restated assets at May
1, 1997 amounted to $2,174,670, which included $973,924 in goodwill to
be amortized over an estimated benefit period of twenty (20) years.
Goodwill amortization expense amounts to $4,058 monthly, with $12,175 of
amortization expense included in the period ending March 31, 1998 and
$32,466 (from May 1, 1997 to December 31, 1997) of amortization expense
included in the year ending December 31, 1997 results of operation.
Effective September 22, 1997, under terms of the agreement and plan of
reorganization dated August 29, 1997, the Company acquired all of the
common stock of FICI from Mr. Glenn M. Gallant and Mr. Douglas R. Baetz
in exchange for 11,250,000 restricted shares of the Company's common
stock, of which 618,750 shares were to be issued to an unaffiliated
third party in exchange for services. The services, valued at $25,000,
are included in costs related to acquisition in the Consolidated Income
Statement with corresponding recognition in the Consolidated Statement
of Changes in Shareholders' Equity for the year ending December 31,
1997. The transaction gave Mr. Gallant and Mr. Baetz a controlling
interest in the Company. The transfer of FICI stock to the Company
represented a transaction between entities under common control. Mr.
Gallant and Mr. Baetz controlled the stock of FICI prior to the
transaction and the stock of the Company subsequent to the transaction.
Accordingly, the business combination was accounted for in a manner
similar to a pooling of interests, whereby the accounts of the entities
involved were not revalued, rather they were combined at their
historical basis. The Company's consolidated financial statements were
restated to include the results of operations of FICI from May 1, 1997,
the acquisition date of FICI by Mr. Gallant and Mr. Baetz. There were
no adjustments to net assets of the combining companies necessary for
either to adopt the same accounting practices.
F-31
<PAGE>
COLUMBIA CAPITAL CORP.
PRO FORMA CONSOLIDATED BALANCE SHEETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 17,861 $ --
Interest bearing deposits with banks 303,578 100,000
Accounts receivable, net 522,538 715,618
Prepaid expenses and other assets 349,160 254,126
Deferred tax asset 122,209 --
---------- ----------
Total current assets 1,315,346 1,069,744
Premises and equipment 562,598 960,372
Less accumulated depreciation 47,914 615,168
---------- ----------
Net property and equipment 514,684 345,204
Other assets
Deposit -- 2,563
Deferred tax asset 52,033 --
Goodwill, net of accumulated amortization of
$32,466 and $-0- 941,458 973,924
---------- ----------
Total other assets 993,491 976,487
---------- ----------
TOTAL ASSETS $2,823,521 $2,391,435
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Bank overdraft $ -- $ 31,557
Accrued expenses and other liabilities 299,941 439,949
Notes payable--related party 1,300,000 131,420
Accrued interest payable 11,589 351
---------- ----------
Total current liabilities 1,611,530 603,277
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; 50,000,000 shares
authorized; 12,500,000 issued and outstanding 12,500 12,500
Additional paid-in capital 1,681,230 1,681,230
Retained earnings (deficit) (481,739) 94,428
---------- ----------
Total shareholders' equity 1,211,991 1,788,158
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,823,521 $2,391,435
---------- ----------
---------- ----------
</TABLE>
The accompanying note is an integral part of
these pro forma consolidated financial statements.
F-32
<PAGE>
COLUMBIA CAPITAL CORP.
PRO FORMA CONSOLIDATED INCOME STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
REVENUES
Pride revenue $ 715,500 $ 804,000
Credit card revenue 2,495,762 1,955,911
Banking revenue 929,164 927,747
Mail operations revenue 269,307 292,074
Courier revenue 98,630 86,050
Other 31,908 62,804
----------- -----------
Total revenues 4,540,271 4,128,586
EXPENSES
Salaries and employee benefits 2,027,449 1,644,534
Auto maintenance 26,247 25,171
Travel and entertainment 118,587 46,580
Equipment lease 998,213 855,156
Equipment maintenance 424,557 473,066
Facilities rent 266,267 138,200
Facilities maintenance 21,976 1,243
Depreciation 205,049 108,905
Amortization 32,655 2,542
Insurance 39,148 37,550
Computer and office supplies 260,883 279,157
Postage and delivery fees 46,314 28,473
Telephone 170,553 143,986
Professional and outside services 156,761 79,866
Taxes 37,712 30,683
Other operating 186,094 32,384
----------- -----------
Total expenses 5,018,465 3,927,496
----------- -----------
INCOME (LOSS) FROM OPERATIONS (478,194) 201,090
Other income (expense)
Interest, net (63,282) (15,684)
Costs related to acquisition (186,921) --
Sales tax refund -- 23,971
Net loss related to discontinued operations (1,432) --
----------- -----------
Total other income (expense) (251,635) 8,287
----------- -----------
INCOME (LOSS) BEFORE TAX (729,829) 209,377
Income tax expense (benefit) (153,662) 64,060
----------- -----------
NET INCOME (LOSS) $(576,167) $ 145,317
----------- -----------
----------- -----------
Basic earnings (loss) per share $ (0.05) $ 0.01
----------- -----------
----------- -----------
Diluted earnings (loss) per share $ (0.05) $ 0.01
----------- -----------
----------- -----------
Average shares outstanding 12,500,000 12,500,000
----------- -----------
----------- -----------
</TABLE>
The accompanying note is an integral part of
these pro forma consolidated financial statements.
F-33
<PAGE>
COLUMBIA CAPITAL CORP.
PRO FORMA CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock Accumulated
------------------------- Paid-In Earnings
Shares Amount Capital (Deficit) Total
----------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1995 2,500,000 $2,500 $66,230 $ (50,889) $ 17,841
Effect of reverse stock split (1,250,000) (1,250) 1,250 - -
Equity acquired in stock exchange 11,250,000 11,250 1,588,750 - 1,600,000
Stock issued in exchange for services - - 25,000 - 25,000
Net income - - - 145,317 145,317
----------- --------- ---------- ------------ ------------
BALANCE - DECEMBER 31, 1996 12,500,000 12,500 1,681,230 94,428 1,788,158
Net loss - - - (576,167) (576,167)
----------- --------- ---------- ------------ ------------
BALANCE - DECEMBER 31, 1997 12,500,000 $12,500 $ 1,681,230 $ (481,739) $ 1,211,991
----------- --------- ---------- ------------ ------------
----------- --------- ---------- ------------ ------------
</TABLE>
The accompanying note is an integral part of
these pro forma consolidated financial statements.
F-34
<PAGE>
COLUMBIA CAPITAL CORP.
PRO FORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(576,167) $ 145,317
Adjustments to reconcile net income to
net cash provided by operations
Depreciation and amortization 237,704 62,751
Deferred income taxes (174,242) --
Decrease (increase) in accounts
receivable 193,080 (126,783)
Increase in deposits and prepaid
expenses (92,129) (4,362)
Decrease in accruals and other
liabilities (128,770) (23,771)
--------- ---------
Net cash (used in) provided by operating
activities (540,524) 53,152
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (169,480) (209,157)
Investment in interest bearing deposit (203,578) --
--------- ---------
Net cash used in investing activities (373,058) (209,157)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net of
payments 963,000 87,681
(Decrease) increase in bank overdraft (31,557) 31,557
--------- ---------
Net cash provided by financing activities 931,443 119,238
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 17,861 (36,767)
Cash and cash equivalents at beginning of
period -- 36,767
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 17,861 $ --
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 63,282 $ 15,684
Taxes paid $ 12,515 $ 64,060
</TABLE>
The accompanying note is an integral part of
these pro forma consolidated financial statements.
F-35
<PAGE>
COLUMBIA CAPITAL CORP.
PRO FORMA CONSOLIDATED BALANCE SHEETS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 312,828 $ 5,769
Interest bearing deposits with banks 603,578 100,000
Accounts receivable, net 568,842 775,388
Prepaid expenses and other assets 463,543 320,423
---------- ----------
Total current assets 1,948,791 1,201,580
Premises and equipment 661,039 1,078,996
Less accumulated depreciation 80,493 706,652
---------- ----------
Net property and equipment 580,546 372,344
Other assets
Deferred tax asset 52,033 --
Goodwill, net of accumulated
amortization of $44,640 and $-0- 929,284 973,924
---------- ----------
Total other assets 981,317 973,924
---------- ----------
TOTAL ASSETS $3,510,654 $2,547,848
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Bank overdraft $ 155,582 $ --
Accounts payable 262,250 --
Accrued expenses and other liabilities 470,017 218,903
Federal income tax payable 100,314 14,476
Notes payable--related party 900,000 517,000
Accrued interest payable 8,329 1,109
---------- ----------
Total current liabilities 1,896,492 751,488
SHAREHOLDERS' EQUITY
Common stock, $.001 par value;
50,000,000 shares authorized;
12,500,000 issued and outstanding 12,500 12,500
Additional paid-in capital 1,681,230 1,681,230
Accumulated earnings (deficit) (79,568) 102,630
---------- ----------
Total shareholders' equity 1,614,162 1,796,360
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $3,510,654 $2,547,848
---------- ----------
---------- ----------
</TABLE>
The accompanying note is an integral part of
these pro forma consolidated financial statements.
F-36
<PAGE>
COLUMBIA CAPITAL CORP.
PRO FORMA CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
---------- -----------
<S> <C> <C>
OPERATING REVENUE
Pride revenue $ 95,000 $ 201,000
Credit card revenue 1,964,717 490,636
Banking revenue 228,196 237,717
Mail operations revenue 180,456 70,025
Courier revenue 21,885 24,025
Other 5,124 8,394
---------- ----------
Total operating revenue 2,495,378 1,031,797
OPERATING EXPENSE
Salaries and employee benefits 671,283 435,640
Auto maintenance 4,813 6,224
Travel and entertainment 14,054 19,762
Equipment lease 390,449 215,456
Equipment maintenance 119,502 116,448
Facilities rent 105,190 36,300
Facilities maintenance 10,569 389
Depreciation 32,578 21,489
Amortization of goodwill 12,174 --
Insurance 13,724 9,132
Computer and office supplies 126,892 62,672
Postage and delivery fees 17,738 9,677
Telephone 155,840 36,805
Professional and outside services 123,843 23,020
Taxes 15,499 9,386
Other operating 37,393 8,711
---------- ----------
Total operating expense 1,851,541 1,011,111
---------- ----------
INCOME FROM OPERATIONS 643,837 20,686
Other expense
Interest, net (37,062) (3,169)
---------- ----------
Total other income (expense) (37,062) (3,169)
---------- ----------
INCOME BEFORE TAX 606,775 17,517
Income tax expense 204,604 9,315
---------- ----------
NET INCOME $ 402,171 $ 8,202
---------- ----------
---------- ----------
Basic earnings per share $ 0.03 $ 0.00
---------- ----------
---------- ----------
Diluted earnings per share $ 0.03 $ 0.00
---------- ----------
---------- ----------
Average shares outstanding 12,500,000 12,500,000
---------- ----------
---------- ----------
</TABLE>
The accompanying note is an integral part of
these pro forma consolidated financial statements.
F-37
<PAGE>
COLUMBIA CAPITAL CORP.
PRO FORMA CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common Stock Additional Retained
----------------------- Paid-In Earnings
Shares Amount Capital (Deficit) Total
---------- ------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1996 12,500,000 $12,500 $ 1,681,230 $ 94,428 $ 1,788,158
Net loss - - - (576,167) (576,167)
----------- -------- ------------ ----------- ------------
BALANCE - DECEMBER 31, 1997 12,500,000 12,500 1,681,230 (481,739) 1,211,991
Net income - - - 402,171 402,171
----------- -------- ------------ ----------- ------------
BALANCE - MARCH 31, 1998 12,500,000 $12,500 $ 1,681,230 $ (79,568) $ 1,614,162
----------- -------- ------------ ----------- ------------
----------- -------- ------------ ----------- ------------
</TABLE>
The accompanying note is an integral part of
these pro forma consolidated financial statements.
F-38
<PAGE>
COLUMBIA CAPITAL CORP.
PRO FORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 402,171 $ 8,202
Adjustments to reconcile net income to
net cash provided by operations
Depreciation and amortization 44,753 21,489
Deferred income taxes 122,209 -
Increase in accounts receivable (46,304) (59,770)
Increase in deposits and prepaid expenses (114,383) (63,734)
Increase (decrease) in accruals and accounts payable 529,379 (205,812)
---------- ----------
Net cash provided by (used in) operating activities 937,825 (299,625)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (98,440) (48,629)
Investment in interest bearing deposit (300,000) -
---------- ----------
Net cash used in investing activities (398,440) (48,629)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net of payments (400,000) 385,580
Investment in interest bearing deposit 155,582 (31,557)
---------- ----------
Net cash (used in) provided by financing activities (244,418) 354,023
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 294,967 5,769
Cash and cash equivalents at beginning of period 17,861 -
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 312,828 $ 5,769
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 37,061 $ 3,169
Taxes paid $ - $ 5,956
</TABLE>
The accompanying note is an integral part of
these pro forma consolidated financial statements.
F-39
<PAGE>
COLUMBIA CAPITAL CORP.
PRO FORMA INFORMATION
NOTE : BASIS OF PRESENTATION
The accompanying unaudited pro forma financial statements ("the
Statements") of Columbia Capital Corp. (the "Company") have been
prepared in accordance with presentation guidelines set forth for pro
forma financial statements. Therefore, they are not historical in
nature and do not include all information and footnotes necessary for a
fair presentation of financial position and results of operations and
cash flows in conformity with generally accepted accounting principles.
The Statements are not necessarily indicative of the financial position
and results of operations and cash flows that would have been attained
if the transactions or events had actually taken place on the date
depicted and should be read in conjunction with the related historical
financial information. The Statements present the financial position
and results of operations and cash flows as if the events, in the
following paragraphs, had occurred on January 1, 1996. However,
amortization expense for goodwill has not been stated on a pro forma
basis, but at its historic value of $32,466 for the eight months
beginning May 1, 1997 through December 31, 1997, and $-0- for the year
ended December 31, 1996. For the periods ended March 31, 1998 and 1997
amortization expense for goodwill is stated at its historic value of
$12,174 and $-0-, respectively. Additionally, accumulated depreciation
at December 31, 1997 associated with the restated fixed assets is shown
as if amounts accumulated through April 30, 1997 were netted against the
restated fixed assets at that date.
Effective September 23, 1997, the Company acquired all of the common
stock (the"FICI Common Stock") of the Company's operating subsidiary,
First Independent Computers, Inc. ("FICI") from Messrs. Douglas R.
Baetz and Glenn M. Gallant. Pursuant to the terms of the agreement of
acquisition of the FICI Common Stock, dated August 29, 1997 (the "Stock
Purchase Agreement"), Messrs. Gallant and Baetz received 10,631,250
shares of Common Stock (after the Company effectuated a 1 for 2 reverse
stock split of its Common Stock) in exchange for the FICI Common Stock,
which represented approximately 85% of the Company's then issued and
outstanding Common Stock. In connection with the closing of the Stock
Purchase Agreement, the Company issued 618,750 shares of Common Stock to
Baytree Associates, Inc., a third party which is not an affiliate of
Messrs. Baetz and Gallant, as a fee for services rendered to the Company
for arranging the transactions which are the subject of the Stock
Purchase Agreement.
On April 30, 1997, Messrs. Baetz and Gallant purchased all of the
issued and outstanding FICI Common Stock then owned by Security Shares,
Inc., a bank holding company, for $1,600,000. The transaction was
accounted for utilizing "push-down accounting," whereby all assets and
liabilities of FICI were restated at their estimated market value on the
purchase date. The excess of the total acquisition cost over the fair
value of net assets acquired was recorded as goodwill. Total restated
assets at May 1, 1997 amounted to $2,174,670, which included $973,924 in
goodwill to be amortized over an estimated benefit period of twenty (20)
years. Goodwill amortization expense amounts to $4,058 monthly.
F-40
<PAGE>
COLUMBIA CAPITAL CORP.
PRO FORMA INFORMATION
NOTE: BASIS OF PRESENTATION - CONTINUED
The Statements have been presented, for accounting purposes, as a
recapitalization of FICI, with FICI as the acquirer of the Company.
Further, in connection with the transactions relating to the Stock
Purchase Agreement and the acquisition of the FICI Common Stock by
Messrs. Baetz and Gallant, such persons obtained a controlling interest
in FICI and, thereafter, the Company. Therefore, for accounting
purposes, these transactions are deemed to be transactions between
entities under common control. Accordingly, the business combination
between the Company and FICI was accounted for in a manner similar to a
pooling of interests, whereby the accounts of the entities involved were
not revalued, rather they were combined at their historical basis. The
Company's historical consolidated financial statements were restated to
include the results of operations of FICI from May 1, 1997, the
acquisition date of FICI by Messrs. Baetz and Gallant. There were no
adjustments to net assets of the combining companies necessary for
either to adopt the same accounting practices.
F-41
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
COLUMBIA CAPITAL CORP.,
AND
FIRST INDEPENDENT COMPUTERS, INC.
<PAGE>
TABLE OF CONTENTS
1. Plan of Reorganization. . . . . . . . . . . . . . . . . . . . . . . . 1
2. Exchange of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Pre-Closing Events. . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Exchange of Securities. . . . . . . . . . . . . . . . . . . . . . . . 2
5. Post Acquisition Events . . . . . . . . . . . . . . . . . . . . . . . 3
6. Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
7. Delivery of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 3
8. Representations of FIC Shareholders . . . . . . . . . . . . . . . . . 3
9. Representations of FIC. . . . . . . . . . . . . . . . . . . . . . . . 4
10. Representations of Columbia and Dixon . . . . . . . . . . . . . . . . 5
11. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
12. Conditions Precedent to the Obligations of FIC. . . . . . . . . . . . 7
13. Conditions Precedent to the Obligations of Columbia . . . . . . . . . 9
14. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . .10
15. Nature and Survival of Representations. . . . . . . . . . . . . . . .10
16. Documents at Closing. . . . . . . . . . . . . . . . . . . . . . . . .10
17. Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
18. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Exhibit A - FIC Stockholder Schedule
Exhibit B - Amendment to Certificate of Incorporation
Exhibit C - Investment Letter
(i)
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (hereinafter the "Agreement") is
entered into effective as of this ____ day of August, 1997, by and among
Columbia Capital Corp., a Delaware corporation (hereinafter "Columbia"); Lynn
Dixon an officer, director and principal shareholder of Columbia (hereinafter
"Dixon"); First Independent Computers, Inc., a Texas corporation (hereinafter
"FIC"), and the owners of all the outstanding shares of common stock of FIC
(hereinafter the "FIC Stockholders").
RECITALS:
WHEREAS, the FIC Stockholders own all of the issued and outstanding common
stock of FIC which comprises 1,000 shares (the "FIC Common Stock"). Columbia
desires to acquire the FIC Common Stock solely in exchange for voting common
stock of Columbia, making FIC a wholly-owned subsidiary of Columbia; and
WHEREAS, the FIC Stockholders (as set forth on the attached Exhibit "A")
desire to acquire voting common stock of Columbia in exchange for the FIC Common
Stock, as more full set forth herein.
NOW THEREFORE, for the mutual consideration set out herein, and other good
and valuable consideration, the receipt of and legal sufficiency of which is
hereby acknowledged, the parties agree as follows:
AGREEMENT
1. PLAN OF REORGANIZATION. It is hereby agreed that all of the FIC
Common Stock shall be acquired by Columbia in exchange solely for Columbia
common voting stock (the "Columbia Shares"). It is the intention of the
parties hereto that all of the issued and outstanding shares of capital stock
of FIC shall be acquired by Columbia in exchange solely for Columbia common
voting stock and that this entire transaction qualify as an organizational
exchange under Section 351 of the Internal Revenue Code of 1986, as amended,
and related or other applicable sections thereunder and/or a corporate
reorganization under Section 368(a)(1)(B).
2. EXCHANGE OF SHARES. Columbia and FIC Stockholders agree that on the
Closing Date or at the Closing as hereinafter defined, the FIC Common Stock
shall be delivered at Closing to Columbia in exchange for the Columbia Shares,
after giving effect to a 1 for 2 reverse stock split as to all presently
outstanding shares of Columbia common stock, as follows:
<PAGE>
(a) The Columbia Shares will, on the Closing Date or at the Closing, be
delivered to FIC Stockholders in exchange for their FIC Common Stock on the
basis of 11,250 Columbia Shares for each outstanding share of the FIC Common
Stock.
(b) At Closing, Columbia shall, subject to the conditions set forth
herein, issue an aggregate of 11,250,000 shares of Columbia common stock to the
FIC Stockholders. The 11,250,000 shares and all future references herein to the
Columbia Shares are stated after giving effect to a 1 for 2 reverse stock split
of the currently outstanding shares of common stock of Columbia (the "Columbia
Reverse Stock Split").
(c) Each FIC Stockholder shall execute this Agreement.
(d) Unless otherwise agreed by Columbia and FIC this transaction shall
close only in the event Columbia is able to acquire all of the outstanding FIC
Common Stock.
3. PRE-CLOSING EVENTS. The Closing is subject to the completion of the
following:
(a) Columbia shall have authorized 50,000,000 shares of $.001 par value
common stock an 5,000,000 shares of $.001 par value preferred stock. The
preferred stock shall be subject to issuance in such series and with such
rights, preferences and designations as determined in the sole discretion of the
board of directors.
(b) Columbia shall have effectuated the Columbia Reverse Stock Split at or
prior to Closing, and shall have 1,250,000 shares of its common stock issued and
outstanding and no other shares of capital stock issued or outstanding.
(c) Columbia shall demonstrate to the reasonable satisfaction of FIC that
it has no material assets and no liabilities contingent or fixed.
4. EXCHANGE OF SECURITIES. As of the Closing Date each of the following
shall occur:
(a) Each share of FIC Common Stock issued and outstanding immediately
prior to the Closing Date shall be exchanged for 11,250 shares of Columbia
common stock. All such outstanding shares of FIC Common Stock shall be deemed,
after Closing, to be owned by Columbia. The holders of such certificates
previously evidencing shares of FIC Common Stock outstanding immediately prior
to the Closing Date shall cease to have any rights with respect to such shares
of FIC Common Stock except as otherwise provided herein or by law;
(b) Any shares of FIC Common Stock held in the treasury of FIC immediately
prior to the Closing Date shall automatically be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto;
(c) The 1,250,000 shares of Columbia common stock previously issued and
outstanding prior to the Closing will remain outstanding.
2
<PAGE>
5. POST-ACQUISITION EVENTS. Upon Closing, the following shall be
accomplished:
(a) Columbia shall file an amendment to its certificate of incorporation
with the Secretary of State of the State of Delaware in substantially the form
attached hereto as Exhibit "B" effecting an amendment to its certificate of
incorporation and to accomplish the Columbia Reverse Stock Split set forth in
the attached Exhibit "B".
(b) The resignation of the existing Columbia officers and directors and
appointment of new officers and directors as described in Section 12(f) hereof.
6. OTHER MATTERS.
(a) Except for the recapitalization of Columbia, including the Columbia
Reverse Stock Split, there shall be no stock dividend, stock split,
recapitalization, or exchange of shares with respect to or rights issued in
respect of, Columbia's capital stock after the date hereof and there shall be no
dividends paid on Columbia's capital stock after the date hereof, in each case
through and including the Closing Date.
(b) FIC shall have received all requisite director and shareholder
approval of all matters set forth herein, and no shareholder of FIC shall have
exercised any dissenters rights under applicable corporate law.
(c) Columbia shall have received all requisite shareholder approval of the
matters set forth herein.
7. DELIVERY OF SHARES. On or as soon as practicable after the Closing
Date, FIC will use its best efforts to cause the FIC Stockholders to surrender
for cancellation certificates representing their shares of FIC Common Stock,
against delivery of certificates representing the Columbia Shares for which the
shares of FIC Common Stock are to be exchanged at Closing.
8. REPRESENTATIONS OF FIC STOCKHOLDERS. FIC Stockholders hereby
represent and warrant each only as to its own FIC Common Stock, effective this
date and the Closing Date as follows:
(a) Except as may be set forth in Exhibit "A", the FIC Common Stock is
free from claims, liens, or other encumbrances, and at the Closing Date FIC
Stockholders will have good title and the unqualified right to transfer and
dispose of such FIC Common Stock.
(b) Each FIC Stockholder, respectively, is the sole owner of the issued
and outstanding FIC Common Stock as set forth in Exhibit "A";
(c) No FIC Stockholder has the present intent to sell or dispose of the
Columbia Shares and no FIC Stockholder is under a binding obligation, formal
commitment, or existing plan to sell or otherwise dispose of the Columbia
Shares.
3
<PAGE>
9. REPRESENTATIONS OF FIC. FIC hereby represents and warrants as follows,
which warranties and representations shall also be true as of the Closing Date:
(a) Except as noted on Exhibit "A", the FIC Stockholders listed on the
attached Exhibit "A" are the sole owners of record and beneficially of the
issued and outstanding common stock of FIC.
(b) FIC has no outstanding or authorized capital stock, warrants, options
or convertible securities other than as described in Exhibit "A", attached
hereto.
(c) The audited financial statements as of and for the four months ended
April 30, 1997, and years ended December 31, 1996 and 1995, which have been
delivered to Columbia (hereinafter referred to as the "FIC Financial
Statements") are complete and accurate and fairly present the financial
condition of FIC as of the dates thereof and the results of its operations for
the periods covered; subject to normal year-end adjustments in the case of the
April 30, 1997 statements. There are no material liabilities or obligations,
either fixed or contingent, not disclosed in the FIC Financial Statements or in
any exhibit thereto or notes thereto other than contracts or obligations in the
ordinary course of business; and no such contracts or obligations in the
ordinary course of business constitute liens or other liabilities which
materially alter the financial condition of FIC as reflected in the FIC
Financial Statements. FIC has good title to all assets shown on the FIC
Financial Statements subject only to dispositions and other transactions in the
ordinary course of business, the disclosures set forth therein and liens and
encumbrances of record. The FIC Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be indicated therein or in the notes thereto).
(d) Since the date of the FIC Financial Statements, there have not been
any material adverse changes in the financial position of FIC except changes
arising in the ordinary course of business, which changes will in no event
materially and adversely affect the financial position of FIC.
(e) FIC is not a party to any material pending litigation or, to its best
knowledge, any governmental investigation or proceeding, not reflected in the
FIC Financial Statements, and to its best knowledge, no material litigation,
claims, assessments or any governmental proceedings are threatened against FIC.
(f) FIC is in good standing in its state of incorporation, and is in good
standing and duly qualified to do business in each state where required to be so
qualified except where the failure to so qualify would have no material negative
impact on FIC.
(g) FIC has (or, by the Closing Date, will have filed) all material tax,
governmental and/or related forms and reports (or extensions thereof) due or
required to be filed and has (or will have) paid or made adequate provisions for
all taxes or assessments which have become due as of the Closing Date.
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(h) FIC has not materially breached any material agreement to which it is
a party. FIC has previously given Columbia copies or access thereto of all
material contracts, commitments and/or agreements to which FIC is a party
including all relationships or dealings with related parties or affiliates.
(i) FIC has no subsidiary corporations.
(j) FIC has made its corporate financial records, minute books, and other
corporate documents and records available for review to present management of
Columbia prior to the Closing Date, during reasonable business hours and on
reasonable notice.
(k) The execution of this Agreement does not materially violate or breach
any material agreement or contract to which FIC is a party and has been duly
authorized by all appropriate and necessary corporate action and FIC, to the
extent required, has obtained all necessary approvals or consents required by
any agreement to which FIC is a party.
(l) All information regarding FIC which is set forth in its Confidential
Business Plan dated July 1997, or otherwise delivered to Columbia by FIC for use
in connection with the transaction described herein is true, complete and
accurate in all material respects.
10. REPRESENTATIONS OF COLUMBIA AND DIXON. Columbia and Dixon hereby
jointly and severally represent and warrant as follows, each of which
representations and warranties shall continue to be true as of the Closing Date:
(a) As of the Closing Date, the Columbia Shares, to be issued and
delivered to the FIC Stockholders hereunder will, when so issued and delivered,
constitute, duly authorized, validly and legally issued shares of Columbia
common stock, fully-paid and nonassessable.
(b) Columbia has the corporate power to enter into this Agreement and to
perform its respective obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the board of directors of Columbia. The execution and
performance of this Agreement will not constitute a material breach of any
agreement, indenture, mortgage, license or other instrument or document to which
Columbia is a party and will not violate any judgment, decree, order, writ,
rule, statute, or regulation applicable to Columbia or its properties. The
execution and performance of this Agreement will not violate or conflict with
any provision of the certificate of incorporation or by-laws of Columbia.
(c) Columbia has delivered to FIC a true and complete copy of its audited
financial statements for the years ended December 31, 1996 and 1995, (the
"Columbia Financial Statements"). The Columbia Financial Statements are
complete, accurate and fairly present the financial condition of Columbia as of
the dates thereof and the results of its operations for the periods then ended.
There are no material liabilities or obligations either fixed or contingent not
reflected therein except as provided in subparagraph (e) below. The Columbia
financial
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statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present the financial position of Columbia as
of the dates thereof and the results of its operations and changes in financial
position for the periods then ended.
(d) Since December 31, 1996, there have not been any material adverse
changes in the financial condition of Columbia except advances by Dixon to pay
reasonable and ordinary expenses in connection with maintaining its corporate
status and pursuing the matters contemplated in this Agreement. Prior to
Closing such advances and all accounts payable and other liabilities of Columbia
shall be paid and satisfied.
(e) Columbia is not a party to or the subject of any pending litigation,
claims, or governmental investigation or proceeding not reflected in the
Columbia Financial Statements or otherwise disclosed herein, and there are no
lawsuits, claims, assessments, investigations, or similar matters, to the best
knowledge of Dixon, threatened or contemplated against or affecting Columbia,
its management or its properties.
(f) Columbia is duly organized, validly existing and in good standing
under the laws of the State of Delaware; has the corporate power to own its
property and to carry on its business as now being conducted and is duly
qualified to do business in any jurisdiction where so required except where the
failure to so qualify would have no material negative impact.
(g) Columbia has filed all federal, state, county and local income,
excise, property and other tax, governmental and/or related returns, forms, or
reports, which are due or required to be filed by it prior to the date hereof,
except where the failure to do so would have no material adverse impact on
Columbia, and has paid or made adequate provision in the Columbia Financial
Statements for the payment of all taxes, fees, or assessments which have or may
become due pursuant to such returns or pursuant to any assessments received.
Columbia is not delinquent or obligated for any tax, penalty, interest,
delinquency or charge.
(h) There are no existing options, calls, warrants, preemptive rights or
commitments of any character relating to the issued or unissued capital stock or
other securities of Columbia, except as contemplated in this agreement.
(i) The corporate financial records, minute books, and other documents and
records of Columbia have been made available to FIC prior to the Closing.
(j) Columbia has not breached, nor is there any pending, or to the
knowledge of management, any threatened claim that Columbia has breached, any of
the terms or conditions of any agreements, contracts or commitments to which it
is a party or by which it or its properties is bound. The execution and
performance hereof will not violate any provisions of applicable law or any
agreement to which Columbia is subject. Columbia hereby represents that it is
not a party to any material contract or commitment other than appointment
documents with
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its transfer agent, and that it has disclosed to FIC all relationships or
dealings with related parties or affiliates.
(k) Columbia common stock is eligible for quotation on the NASD Electronic
Bulletin Board and there are no stop orders in effect with respect thereto.
(l) All information regarding Columbia which has been provided to FIC in
the Columbia Information Statement dated August , 1997 or otherwise
disclosed to the public in connection with the transactions contemplated herein,
is true, complete and accurate in all material respects. Columbia and Dixon
make no representations or warranties regarding disclosures as to FIC or its
proposed business.
11. CLOSING. The Closing of the transactions contemplated herein shall
take place on such date (the "Closing") as mutually determined by the parties
hereto when all conditions precedent have been met and all required documents
have been delivered, which Closing shall be no later than September 30, 1997,
unless extended by mutual consent of all parties hereto. The "Closing Date" of
the transactions described herein (the "Acquisition"), shall be that date on
which all conditions set forth herein have been met and the Columbia Shares are
issued in exchange for the FIC Common Stock.
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF FIC. All obligations of
FIC under this Agreement are subject to the fulfillment, prior to or as of the
Closing and/or the Closing Date, as indicated below, of each of the following
conditions:
(a) The representations and warranties by or on behalf of Dixon and
Columbia contained in this Agreement or in any certificate or document delivered
pursuant to the provisions hereof shall be true in all material respects at and
as of the Closing and Closing Date as though such representations and warranties
were made at and as of such time.
(b) Columbia shall have performed and complied with all covenants,
agreements, and conditions set forth in, and shall have executed and delivered
all documents required by this Agreement to be performed or complied with or
executed and delivered by it prior to or at the Closing.
(c) On or before the Closing, the board of directors, and shareholders
representing a majority interest the outstanding common stock of Columbia, shall
have approved in accordance with applicable state corporation law the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein.
(d) On or before the Closing Date, Columbia shall have delivered to FIC
certified copies of resolutions of the board of directors and shareholders of
Columbia approving and authorizing the execution, delivery and performance of
this Agreement and authorizing all of the necessary and proper action to enable
Columbia to comply with the terms of this Agreement including the
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election of FIC's nominees to the Board of Directors of Columbia and all matters
outlined herein.
(e) The Acquisition shall be permitted by applicable state law and
Columbia shall have sufficient shares of its capital stock authorized to
complete the Acquisition.
(f) At Closing, the existing officers and directors of Columbia shall have
resigned in writing from all positions as directors and officers of Columbia
upon the election and appointment of the FIC nominees.
(g) At the Closing, all instruments and documents delivered to FIC and FIC
Stockholders pursuant to the provisions hereof shall be reasonably satisfactory
to legal counsel for FIC.
(h) The shares of restricted Columbia capital stock to be issued to FIC
Stockholders at Closing will be validly issued, nonassessable and fully-paid
under Delaware corporation law and will be issued in a nonpublic offering and
isolated transaction in compliance with all federal, state and applicable
securities laws.
(i) FIC shall have received the advice of its tax advisor, if deemed
necessary by FIC, that the exchange of shares is a tax free reorganization as to
the exchanging FIC shareholders.
(j) FIC shall have received all necessary and required approvals and
consents from required parties and its shareholders.
(k) At the Closing, Columbia shall have delivered to FIC an opinion of its
counsel dated as of the Closing to the effect that:
(i) Columbia is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation;
(ii) This Agreement has been duly authorized, executed and delivered
by Columbia and is a valid and binding obligation of Columbia enforceable
in accordance with its terms;
(iii) Columbia each through its board of directors and stockholders
has taken all corporate action necessary for performance under this
Agreement;
(iv) The documents executed and delivered by Columbia to FIC and FIC
Stockholders hereunder are valid and binding in accordance with their terms
and vest in FIC Stockholders, as the case may be, all right, title and
interest in and to the Columbia Shares to be issued pursuant to the terms
hereof, and the Columbia Shares when issued will be duly and validly
issued, fully-paid and nonassessable;
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(v) Columbia has the corporate power to execute, deliver and perform
under this Agreement;
(vi) Legal counsel for Columbia is not aware of any liabilities,
claims or lawsuits involving Columbia;
13. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF COLUMBIA. All obligations
of Columbia under this Agreement are subject to the fulfillment, prior to or at
the Closing, of each of the following conditions:
(a) The representations and warranties by FIC contained in this Agreement
or in any certificate or document delivered pursuant to the provisions hereof
shall be true in all material respects at and as of the Closing as though such
representations and warranties were made at and as of such time.
(b) FIC shall have performed and complied with, in all material respects,
all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing;
(c) FIC shall deliver on behalf of the FIC Stockholders a letter commonly
known as an "Investment Letter," signed by each of said shareholders, in
substantially the form attached hereto as Exhibit "C", acknowledging that the
Columbia Shares are being acquired for investment purposes.
(d) FIC shall deliver an opinion of its legal counsel to the effect that:
(i) FIC is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and is duly qualified
to do business in any jurisdiction where so required except where the
failure to so qualify would have no material adverse impact on FIC;
(ii) This Agreement has been duly authorized, executed and delivered
by FIC.
(iii) The documents executed and delivered by FIC and FIC
Stockholders to Columbia hereunder are valid and binding in accordance with
their terms and vest in Columbia all right, title and interest in and to
the FIC Common Stock, which stock is duly and validly issued, fully-paid
and nonassessable.
14. INDEMNIFICATION. For a period of one year from the Closing, Columbia
and Dixon agree to jointly and severally indemnify and hold harmless FIC, and
FIC agrees to indemnify and hold harmless Columbia and Dixon, at all times after
the date of this Agreement against and in respect of any liability, damage or
deficiency, all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses including attorney's fees incident to any of the foregoing,
resulting from any material misrepresentations made by an indemnifying party
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to an indemnified party, an indemnifying party's breach of covenant or
warranty or an indemnifying party's nonfulfillment of any agreement
hereunder, or from any material misrepresentation in or omission from any
certificate furnished or to be furnished hereunder.
15. NATURE AND SURVIVAL OF REPRESENTATIONS. All representations,
warranties and covenants made by any party in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby for one
year from the Closing. All of the parties hereto are executing and carrying out
the provisions of this Agreement in reliance solely on the representations,
warranties and covenants and agreements contained in this Agreement and not upon
any investigation upon which it might have made or any representation, warranty,
agreement, promise or information, written or oral, made by the other party or
any other person other than as specifically set forth herein.
16. DOCUMENTS AT CLOSING. At the Closing, the following documents shall
be delivered:
(a) FIC will deliver, or will cause to be delivered, to Columbia the
following:
(i) a certificate executed by the President and Secretary of FIC to
the effect that all representations and warranties made by FIC under this
Agreement are true and correct as of the Closing, the same as though
originally given to Columbia on said date;
(ii) a certificate from the state of incorporation of FIC dated at or
about the Closing to the effect that FIC is in good standing under the laws
of said state;
(iii) Investment Letters in the form attached hereto as Exhibit "C"
executed by each FIC Stockholder;
(iv) such other instruments, documents and certificates, if any, as
are required to be delivered pursuant to the provisions of this Agreement;
(v) certified copies of resolutions adopted by the shareholders and
directors of FIC authorizing this transaction; and
(vi) all other items, the delivery of which is a condition precedent
to the obligations of Columbia as set forth herein.
(vii) the legal opinion required by Section 13(d) hereof.
(b) Columbia will deliver or cause to be delivered to FIC:
(i) stock certificates representing the Columbia Shares to be issued
as a part of the stock exchange as described herein;
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(ii) a certificate of the President of Columbia, to the effect that
all representations and warranties of Columbia made under this Agreement
are true and correct as of the Closing, the same as though originally given
to FIC on said date;
(iii) certified copies of resolutions adopted by Columbia's board of
directors and Columbia's Stockholders authorizing the Acquisition and all
related matters;
(iv) certificate from the jurisdiction of incorporation of Columbia
dated at or about the Closing Date that Columbia is in good standing under
the laws of said state;
(v) opinion of Columbia's counsel as described in Section 12(k)
above;
(vi) such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement;
(vii) resignation of all of the existing officers and directors of
Columbia; and
(viii) all other items, the delivery of which is a condition
precedent to the obligations of FIC, as set forth in Section 13 hereof.
17. FINDER'S FEES. Columbia, represents and warrants to FIC, and FIC
represents and warrants to Columbia that neither of them, or any party acting on
their behalf, has incurred any liabilities, either express or implied, to any
"broker" of "finder" or similar person in connection with this Agreement or any
of the transactions contemplated hereby. In this regard, Columbia, on the one
hand, and FIC on the other hand, will indemnify and hold the other harmless from
any claim, loss, cost or expense whatsoever (including reasonable fees and
disbursements of counsel) from or relating to any such express or implied
liability.
18. MISCELLANEOUS.
(a) FURTHER ASSURANCES. At any time, and from time to time, after the
Closing Date, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Agreement.
(b) WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
(c) TERMINATION. All obligations hereunder may be terminated at the
discretion of either party's board of directors if (i) the closing conditions
specified in Sections 12 and 13 are not met by September 30, 1997, unless
extended, or (ii) any of the representations and warranties made herein have
been materially breached.
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(d) AMENDMENT. This Agreement may be amended only in writing as agreed to
by all parties hereto.
(e) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first class registered or certified mail, return receipt requested.
(f) HEADINGS. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) BINDING EFFECT. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(i) ENTIRE AGREEMENT. This Agreement and the attached Exhibits constitute
the entire agreement of the parties covering everything agreed upon or
understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(j) TIME. Time is of the essence.
(k) SEVERABILITY. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
(l) RESPONSIBILITY AND COSTS. All fees, expenses and out-of-pocket costs
and expenses, including, without limitation, fees and disbursements of counsel,
advisors and accountants, incurred by the parties hereto shall be borne solely
and entirely by the party that has incurred such costs and expenses.
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IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
COLUMBIA CAPITAL CORP.
By: /s/ Lynn Dixon
-------------------------------------
Lynn Dixon, President and Secretary
/s/ Lynn Dixon
----------------------------------------
Lynn Dixon, individually
FIRST INDEPENDENT COMPUTERS, INC.
By: By:
-------------------------------- -------------------------------------
Secretary President
SHAREHOLDERS OF FIRST INDEPENDENT
COMPUTERS, INC.
/s/ Douglas R. Baetz
----------------------------------------
Douglas R. Baetz
/s/ Glenn M. Gallant
----------------------------------------
Glenn M. Gallant
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COLUMBIA CAPITAL CORP.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
Columbia Capital Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
1ST: That by unanimous written consent of the Board of Directors of
Columbia Capital Corp., a resolution was duly adopted setting forth a proposed
amendment to the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and proposing approval by the stockholders of
said corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the FOURTH Article thereof so that, as amended said
Article shall read as set forth below:
FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is:
Fifty Million (50,000,000) Shares of Common Stock With Par Value of $.001
each, amounting in total to Fifty Thousand Dollars ($50,000.00) and Five
Million (5,000,000) Shares of Preferred Stock With Par Value of $.001 each,
amounting in total to Five Thousand Dollars ($5,000.00).
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article, to provide for the issuance of the
shares of preferred stock in series, and by filing a certificate pursuant
to the applicable law of the State ' of Delaware, to establish from time to
time the number of shares to be included in each such series, and to fix
the designations, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof.
2ND: The Corporation has effectuated a 1 for 2 reverse stock split as to
its shares of common stock outstanding as of September 1, 1997, which decreases
said shares from 2,500,000 shares to 1,250,000 shares. The reverse stock split
shall not change the authorized capital stock of the Corporation or par value
thereof from that authorized in the amended Fourth Article set forth above. No
fractional shares will be issued in connection with the reverse stock split and
all fractional interests will be rounded up to the next whole share. A
shareholder of the Corporation has contributed sufficient
<PAGE>
outstanding shares of the Corporation's common stock to offset shares issued in
lieu of fractional shares. The reverse stock split, without a corresponding
change in par value, reduces the capital of the Corporation by transferring
$1,250 of stated capital to capital surplus. The assets of the Corporation
remaining after such reduction in capital are sufficient to pay any debts of the
Corporation for which payment has not been otherwise provided.
3RD: That thereafter, pursuant to resolution of its Board of Directors, a
written approval by majority consent of the stockholders of said corporation was
duly received in accordance with the General Corporation law of the State of
Delaware, by which consent the necessary number of shares as required by statute
were voted in favor of the amendment.
4TH: That said amendment were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware, and the necessary number of shares as required by statute were voted
in favor of the amendment.
IN WITNESS WHEREOF, said Columbia Capital Corp., has caused this
certificate to be signed by Lynn Dixon, its President and its Secretary -
Treasurer, this IQ day of September, 1997.
By: /s/ Lynn Dixon
----------------------
Lynn Dixon, President and
Secretary - Treasurer
T37(a)certamn.coc
<PAGE>
BY-LAWS
OF
COLUMBIA CAPITAL CORP.
ARTICLE I - OFFICES
The principal office of the corporation in the State of Delaware shall be
located at 1013 Centre Road, Wilmington, Delaware, 19805. The corporation may
have such other offices, either within or without the State of incorporation as
the board of directors may designate or as the business of the corporation may
from time to time require.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held on such date as is
determined by the Board of Directors for the purpose of electing directors and
for the transaction of such other business as, may come before the meeting.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders of
not less than ten per cent of all the outstanding shares of the corporation
entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate any
place, either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or
if a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten nor more than thirty days before
the date of the meeting, either personally or by mail, by or at the direction of
the president, or the secretary, or the officer or persons calling the meeting,
to each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case, thirty days. If the stock transfer books shall
be closed for the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, such books shall be closedfor at least ten
days immediately preceding such meeting. In lieu of closing the stock transfer
books, the directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than thirty
days and, in case of a meeting of stockholders, not less than ten days prior to
the date on which the particular action requiring such determination of
stockholders is to be taken. If the stock transfer books are not closed and no
record date is fixed for the
<PAGE>
BY-LAWS
PAGE 2
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the directors declaring such dividend is adopted, as the case may
be, shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares of the
corporation shall make, at least days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting, or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each, which list, for a period of ten days prior to
such meeting, shall be kept on f ile at the principal ofifce of the
corporation or transfer agent and shall be subject to inspection by any
stockholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any stockholder during the whole time of the meeting. The
original stock transfer book shall be prima facie evidence as to who are the
stockholders entitled to examine such list or transfer books or to vote at the
meeting of stockholders.
7. QUORUM.
Unless otherwise provided by law, at any meeting of stockholders a majority
of the outstanding shares of the corporation entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of stockholders. If
less than said number of the outstanding shares are represented at a meeting, a
majority of the shares so represented may adjourn the meeting from time to time
without further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. The stockholders. present at
a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
8. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholders. Upon the demand of any stockholder, the vote
for directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the Certifi-
cate of Incorporation or the laws of this State.
10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall be as
follows:
1. Roll Call.
<PAGE>
BY-LAWS
PAGE 3
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by the same percentage of all
of the shareholders entitled to vote with respect to the subject matter thereof
as would be required to take such action at a meeting.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this State.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of directors of the corporation shall be no less than one or
such other minimum number as is required by law. Each director shall hold
office until the next annual meeting of stockholders and until his successor
shall have been elected and qualified.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice than
this by-law immediately after, and at the same place as, the annual meeting of
stockholders. The directors may provide, by resolution, the time and place for
the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of the
president or any director. The person or persons authorized to call special
meetings of the directors may fix the place for holding any special meeting of
the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least two days previously
thereto by written notice delivered personally, or by telegram or mailed to each
director at his business address. If mailed, such notice shall
<PAGE>
BY-LAWS
PAGE 4
be deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed to be delivered when the telegram is delivered to the telegraph
company. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
6. QUORUM.
At any meeting of the directors a majority shall constitute a quorum for
the transaction of business, but if less than said number is present at a
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or remova1 sha11 be e1ected to hold office f or the unexpired
term of his predecessor.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified
in the notice, the resignation shall take effect upon receipt thereof by the
board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance at
each regular or special meeting of the board may be authorized. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
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BY-LAWS
PAGE 5
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an executive
committee and other committees, each consisting of three or more directors.
Each such committee shall serve at the pleasure of the board.
ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a president, a vice-president, a
secretary and a treasurer, each of whom shall be elected by the directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the directors. Any one person may hold all offices or more than
one office.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgement the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
5. PRESIDENT.
The president shall be the principal executive officer of the corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the directors from time to time.
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BY-LAWS
PAGE 6
6. VICE-PRESIDENT.
In the absence of the president or in event of his death, inability or
refusal to act, the vice-president shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice-president shall perform such other
duties as from time to time may be assigned to him by the President or by the
directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these by-laws or as
required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and 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 president or by the directors.
8. TREASURER.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
9. SALARIES.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
<PAGE>
BY-LAWS
PAGE 7
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation, shall be signed
by such officer or officers, agent or agents of the corporation and in such
manner as shall from time to time be determined by resolution of the directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
other depositories as the directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form
as shall be determined by the directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by law
and by the directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the stockholders, the
number of shares and date of issue, shall be entered on the stock transfer books
of the corporation. All certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the directors may prescribe.
2. TRANSFERS OF SHARES.
a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and,accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall end on the last day of such month
in each year as the directors may prescribe.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
<PAGE>
BY-LAWS
PAGE 8
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal".
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XI - AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by action of the Board of Directors.
-------------------------------
Lynn Dixon, Secretary
<PAGE>
CERTIFICATE OF INCORPORATION
OF
COLUMBIA CAPITAL CORP.
FIRST. The name of this corporation shall be:
COLUMBIA CAPITAL CORP.
SECOND. Its registered office in the State of Delaware is to be located at
1013 Centre Road, in the City of Wilmington, County of New Castle and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
Fifty Million (50,000,000) Shares Of Common Stock With Par Value of $.001 each,
amounting in total to Fifty Thousand Dollars ($50,000.00) and Five Million
(5,000,000) Shares of Preferred Stock With Par Value of $.001 each, amounting in
total to Five Thousand Dollars ($5,000.00)
FIFTH. The name and address of the incorporator is as follows:
Jane S. Krayer
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt., amend
or repeal the by-laws.
SEVENTH. No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director
shall be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
IN WITNESS WHEREOF, The undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged this certificate of incorporation
this fifth day of February, A.D., 1993.
----------------------
Jane S. Krayer
Incorporator
<PAGE>
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
- --------------------------------------------------------------------------------
---------------------
CUSIP NO. 197351 20 8
---------------------
- ------ -------
NUMBER Columbia SHARES
2004 Capital Corp.
- ------ -------
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
--Shares of COLUMBIA CAPITAL CORP. Common Stock--
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of the duly authorized officers.
Dated:
- ------------------------------ ------------------------------
SECRETARY PRESIDENT
[SEAL]
- --------------------------------------------------------------------------------
INTERWEST TRANSFER CO. INC. COUNTERSIGNED & REGISTERED
-----------
<PAGE>
LEASE
THIS LEASE is a entered into as of December 1, 1997 by and between The
Century Group, Inc. , ( "Landlord" ) , whose address is 7177 W. Oakland Park
Blvd., Ft. Lauderdale, Florida, 33313 and First Independent Computer, Inc. (
"Tenant " ) whose address is 1157 North 5th, Abilene, TX 79601.
W I T N E S S E T H:
PREMISES
Section 1. For the rent and upon the agreements contained in this Lease,
Landlord leases to Tenant and Tenant rents from Landlord certain space
consisting of 2,886 rentable square feet (Premises"). The Premises are located
in a facility ("Building") known as The Century Building which is located at
2701 West Oakland Park Boulevard, Ft. Lauderdale, Florida 33311 ("Building
Site").
TERM
Section 2. Lease Term. The term of this Lease ("Term") shall commence on
the Commencement Date (as herein defined) and shall continue until 12:00 noon on
the date which is 12 months after the Commencement Date (hereinafter referred to
as the "Expiration Date"), unless this Lease is sooner terminated under any
other provision of this Lease. The Commencement Date means the earlier of (i)
the date on which Tenant takes possession of the Premises, or (ii) December 1,
1997, whichever shall first occur. Notwithstanding the foregoing, in the event
the Commencement Date begins on a day of the month other than the first day
thereof, the Expiration Date shall be computed starting with the first day of
the month following the month during the Commencement Date falls, Within thirty
(30) days after the Commencement Date, Tenant shall sign and deliver to Landlord
a statement in which Tenant acknowledges and agrees to the Commencement Date,
the Expiration Date, and such other information as is reasonably by Landlord.
BASE RENT AND SECURITY DEPOSIT
Section 3.
(a) During the twelve (12) months of the Term, Tenant shall pay to
Landlord, without any deductions or setoff, the sum of Thirty-one thousand seven
hundred forty-six ($31,746.00), plus all applicable sales and use taxes thereon,
in equal monthly installments of Two thousand six hundred forty-five and 50
cents ($2,645.50) plus 6% sales tax, in advance on the first day of each and
every month during the Term of the Lease; Rent shall be payable to The Century
Group, Inc. and shall be sent to 7177 W. Oakland Park Blvd., Ft. Lauderdale ,
Florida 33313 or such other entity as Landlord may designate from time to time.
Rent for a partial month shall be due and payable on a pro rata daily basis on
the first day that said rent accrues in said month. The rent due under this
Section 3 (a) is hereinafter referred to as "Base Rent".
(b) All installments of Base Rent or Additional Rent (as defined
hereinafter) not received by Landlord when due shall bear interest at the rate
of eighteen percent (18%) per annum from the due date (i.e., the first day of
the month) until paid; provided, however, that in no event shall such rate
exceed the maximum rate allowed by law.
ADDITIONAL RENT
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Section 4. (a) Tenant agrees to pay to Landlord, as additional rent
("Additional Rent") for the Premises, throughout the Term, Tenant's
proportionate share (defined in Section 4 (e) herein and referred to as
"Tenant's Proportionate Share") of the operating expenses (which items are
defined in this Section 4 (a), and referred to as "Operating Expenses"), plus
all applicable sales and use taxes thereon. This Additional Rent for the
current year amounts to $961.49 a month plus 6% sales tax. An estimate of
Tenant's Proportionate Share of the Operating Expenses for the first calendar
year of the Term, or the portion thereof remaining after the Commencement Date,
shall be delivered to Tenant within ten (10) days of the execution of this
lease. The Operating Expenses shall include the following:
(i) Any real estate taxes and assessments (collectively referred to
hereinafter as the "Tax Cost") (A) which shall or may become a lien upon, become
due and payable, or be assessed, imposed, or levied by lawful taxing authorities
against the Building, the Building Site and any other improvements on the
Building Site; (B) which arise in connection with the use, occupancy, or
possession of the Building Site or any part thereof; (C) which become due and
payable out or for the Building Site, or any part thereof; or (D) which are
imposed, assessed, or levied in lieu of, in substitution for, or in addition to
any or all of the foregoing. The Tax Cost shall not include any charge (such as
a water meter charge) which is measured by actual user consumption. A real
estate tax bill or copy thereof submitted by Landlord to Tenant shall be
conclusive evidence of the amount of any real estate taxes, assessments, or
installment thereof;
(ii) All premiums and costs (collectively referred to as the "Insurance
Cost") for public liability, fire and extended coverage or all risk, business
interruption, and/or any other insurance coverage which may reasonably be
carried by Landlord insuring the Premises, the Building, the Building Site or
any improvements thereon; and
(iii) All electricity, gas, and air conditioning service costs ("Utility
Cost") provided to the Premises by Landlord pursuant to Sections 11 (c) and (g).
(iv) All operating expenses, not specifically mentioned above, are also
considered as Additional Rent, including security, lawn care, elevator
maintenance, etc.
(b) Prior to the beginning of each calendar year, Landlord shall estimate
Tenant's Proportionate Share of the Operating Expenses for the following
calendar year and give Tenant written notice of such estimate. Tenant shall pay
such amount as Additional Rent in twelve (12) equal monthly installments on the
first day of each month, throughout such calendar year. After the end of that
calendar year, Landlord shall furnish Tenant a statement of the actual Operating
Expenses. Tenant shall pay deficiency upon receipt of Landlord's notice
thereof. Any surplus paid by Tenant during the preceding calendar year, shall
be applied against the next monthly installments of Additional Rent due from
Tenant.
(c) During any part of the Term which shall be less than a full calendar
year, Landlord's estimated Operating Expenses shall be prorated on a daily basis
so that Tenant shall pay Tenant's Proportionate Share (or such other amount as
set forth in Section 4 (f) below) of such expenses attributable to the portion
of the calendar year occurring within the Term. Any such deficiency or surplus
which occurs in the last year of the Term shall be determined by Landlord, and
notice of such determination given to Tenant within sixty (60) days after the
end of the calendar year in which such deficiency or surplus occurs. In the
event a surplus is determined to exist, Landlord shall deliver payment thereof
to Tenant with said notice. In the event a deficiency is determined to exist,
Tenant shall deliver payment thereof to Landlord within ten (10) days of receipt
of said notice.
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(d) Any and all sums of money or charges, except for Base Rent,
required to be paid by Tenant under this Lease, whether or not the same is so
designated, shall be considered Additional Rent and shall be due and payable
no later than the due date of the next installment of Base Rent. Nothing
herein shall limit any other remedy Landlord may have.
(e) Tenant's Proportionate Share of the Building is Five point seven
(5.7%) percent, which shall be a percentage equal to the ratio of the
rentable square footage of the Premises to ninety-five (95%) percent of the
total rentable square footage of all rentable area within the Building.
(f) Notwithstanding anything contained herein to the contrary, it is
agreed that in the event the Building is not fully occupied during any year of
the Lease Term, the Operating Expenses shall be allocated for Tenant's Premises
according to Tenant's Proportionate Share of the entire building.
USE OF COMMON AREAS
Section 5. (a) Landlord hereby grants to Tenant and Tenant's employees,
agents, customers and invitees, the right to use, during the Term, along with
other tenants in the Building, the common areas of the Building ("Building
Common Areas") consisting of corridors, elevators, foyers, restrooms, vending
areas, building stairs and other similar facilities provided for the common use
of tenants generally and/or the public.
(b) Landlord hereby grants to Tenant and Tenant's employees, agents,
customers and invitees, the right to use, during the Term, along with other
tenants in the Building or any other tenants on the Building Site, the common
areas on the Building Site ("Building Site Common Areas") consisting of the
parking areas, access roads and facilities which may be furnished by the
Landlord and which are located adjacent to the Building, the truck ways,
driveways, loading docks and areas, sidewalks, ramps, and any other areas and
improvements which may be provided from time to time by Landlord for the general
use in common of the Building tenants and their officers, agents, employees, and
customers, and all lighting facilities incident thereof, as such areas and
facilities may be changed from time to time by Landlord. Landlord reserves the
right to change or modify the design or layout of the parking areas.
(c) If Landlord deems it necessary to prevent the acquisition of public
rights in and to the Building, Landlord may from time to time temporarily close
portions of the Common Areas, and may erect private boundary markers or take
such steps as deemed appropriate for the purpose. Such action shall not
constitute or be considered an eviction or disturbance of Tenant's quiet
possession of the Premises.
USE OF PREMISES BY TENANT
Section 6. (a) The Premises may be occupied and used as an office, and
for no other purpose.
(b) Tenant shall use and occupy the Premises in accordance with all
governmental laws, ordinances, rules, and regulations, and shall maintain all
permits, licenses and authorizations as required by all applicable governmental
authorities. Tenant shall not use, or allow the Premises to be used, for any
purpose other than as specified herein and shall not us, or permit the Premises
to be used, for any unlawful, disreputable, or immoral purpose or in any way
that will injure the reputation of the Building Site. Tenant shall pay for any
and all costs incurred to insure that Tenant's activities comply with all
applicable laws, ordinances, rules and regulations.
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RULES AND REGULATIONS
Section 7. Tenant's occupancy shall be subject to, and Tenant shall abide
by, the rules and regulations ("Rules and Regulations") of general application
governing the conduct of tenants in the Building and parking garage, and the use
of the Building Common Areas as my be established by Landlord from time to time.
CONDITION OF PREMISES, ALTERATIONS AND INSTALLATIONS
Section 8. (a) Except as specifically set forth below, Tenant shall not
make alterations, changes, and improvements to the Premises or the Building,
including any roof or exterior wall penetration. Tenant may make nonstructural
alterations, changes, or improvements only with the prior written approval of
Landlord, which approval will not be unreasonably withheld. Landlord may impose
any conditions or requirements upon the making of such alterations, changes, and
improvements.
(b) Notwithstanding anything set forth in the Lease to the contrary,
Tenant does hereby accept the Premises in "as is" condition, without any
obligation or liability of whatsoever kind or nature by Landlord to do or
perform any improvements, repairs or maintenance to the Premises.
(c) No improvements or construction shall be commenced in or upon the
Premises until such time as Landlord shall have approved, in writing, all plans
and specifications therefore, and Tenant shall have received, and provided
evidence thereof to Landlord, all governmental approvals and permits therefore.
Further, Tenant shall provide to Landlord, prior to commencement of the work to
be performed by Tenant hereunder, evidence of financial responsibility of Tenant
in such form and content as shall be satisfactory to landlord, in its sole and
absolute discretion.
(d) In the event Tenant shall default in the performance of any of
Tenant's obligations as described above, or shall fail to provide the plans and
specifications, building permits and/or financial assurances as described above
on or before commencement, Tenant shall be deemed in default and Landlord shall
be entitled to rely upon any of Landlord's remedies as provided in this Lease.
SERVICES TO BE FURNISHED BY LANDLORD
Section 9. Landlord agrees to furnish to Tenant the following services:
(a) Water for sanitary and drinking purposes only at those points of
supply provided for general use of other tenants in the Building. If Tenant
requires, uses or consumes water for any purpose in addition to sanitary and
drinking purposes, Landlord may install a water meter and thereby measure
Tenant's water consumption for all purposes. In such event, Tenant shall pay
Landlord for the cost of the meter, the cost of the installation thereof and the
cost of the water consumption throughout the duration of Tenant's occupancy.
Landlord hall maintain the meter and related equipment in good working order and
repair at Tenant's own expense. If Tenant defaults in this obligation, Landlord
may replace or repair the meter and collect the cost thereof from Tenant.
Tenant agrees to pay for water consumed, as shown on said meter as and when the
bills are rendered. Any amounts due hereunder from Tenant shall be deemed
Additional Rent.
(b) Limited access to the Building during other than normal operating
hours of Tenant shall be provided in such form as Landlord deems appropriate.
Landlord, however, shall have no liability to Tenant, its employees,
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<PAGE>
agents, invitees or licensees for losses due to theft or burglary, or for
damages done by unauthorized persons on the Premises or in the Building, and
Landlord shall not be required to insure against any such losses. Tenant shall
cooperate fully in Landlord's efforts to maintain security in the Building and
shall follow all regulations promulgated by Landlord with respect thereto.
(c) Central heat and air conditioning during normal business hours at such
temperatures and in such amounts as are considered by Landlord to be Building
Standard (as may be defined in the Building Rules) or as required by
governmental authority. Heating and air conditioning service shall be provided
at other times (as established by the Building Rules) only upon the written
request of Tenant delivered to Landlord in accordance with the Building Rules.
Tenant shall bear the cost of such additional service, which shall be considered
Additional Rent, at rates determined and billed by Landlord from time to time,
and shall pay such charge as provided in Section 4(d).
(d) Standard routine maintenance and electric lighting service for all
Building Common Areas only, as determined by Landlord to be necessary.
(e) Electrical current for standard building lighting fixtures and for
normal incidental uses.
The failure by Landlord to any extent to furnish, or the interruption,
cessation or termination of services in whole or in part, or any curtailment in
the use of the Premises resulting from any of the matters and things herein
referred to, shall not render Landlord liable in any respect nor be construed as
an eviction (constructive or otherwise) of Tenant, nor work an abatement of
rent, nor relieve Tenant from the obligation to fulfill any covenant or
agreement of this Lease. If any of the equipment or machinery used to provide
the foregoing services does not function properly, Tenant shall have no claim
for offset or abatement of rent or damages on account of any resulting
interruption in service.
LIABILITY OF LANDLORD
Section 10. Landlord and Landlord's agents and employees shall be liable
for, and Tenant waives all claims for damage to person or property sustained by
Tenant or any person claiming through Tenant resulting from an accident or
occurrence in, about, or upon the Premises, the Building, or any other part of
the Building, the Common Areas unless due to the gross negligence of Landlord
and/or Landlord's agents and employees. Tenant, as a material part of the
consideration to Landlord, further assumes all risk of damage to property or
injury to person in, upon, or about the Premises from any cause whatsoever,
(except that which is caused by the gross negligence of Landlord).
INDEMNIFICATION AND INSURANCE
Section 11. (a) Tenant will indemnify Landlord and save Landlord harmless
from and against any and all claims, actions, damages, liability, and expense in
connection with loss, damage or injury to persons or property occurring in, on ,
or about, arising out of the Premises, or occasioned wholly or in part by any
act or omission of Tenant, Tenant's agents, contractors, customers, or
employees.
(b) Tenant shall, at all times during the Term and during any other period
that Tenant actually occupies any portion of the Premises, at its own expense,
keep in full force and effect public liability insurance with minimum limits of
One Million Dollars ($1,000,000.00) on account of bodily injuries to or death of
one (1) person, and One Million Dollars ($1,000,000.00) on account of bodily
injuries to or death of more than one (1) person as a result of any one (1)
accident or disaster, and One Million Dollars($1,000,000.00) on account of
damages to property,
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<PAGE>
naming Landlord and Landlord's mortgagees ('the Mortgagee"), if any, as
additional insured. Tenant shall deliver to Landlord prior to the Commencement
Date or Occupancy Date, whichever is sooner, a certificate of insurance
evidencing the coverage required herein. The policy shall provide that the
insurer cannot cancel the policy without at least thirty (30) days prior written
notice to Landlord.
(c) Tenant shall not carry on any activity in or about the Premises which
will in any way cause an increase in the insurance rates on the Premises and/or
the Building. Tenant shall pay as Additional Rent upon demand any increases in
such insurance rates resulting from the use of the Premises.
SIGNS
Section 12. Tenant acknowledges that Tenant will abide by the restrictions
on the type and location of signs as set forth in the Rules and Regulations.
Accordingly, Tenant will not erect or install any sign except in strict
conformity with the standards set forth by Landlord, as determined by Landlord
in Landlord's sole discretion. Landlord may determine type, location and
content of any sign for Tenant.
ASSIGNMENT AND SUBLETTING
Section 13. (a) This Lease shall not be mortgaged, pledged, encumbered,
assigned, or otherwise transferred by Tenant, voluntarily, involuntarily, by
operation of law, or otherwise, or the Premises or any part thereof sublet,
used, or occupied for the conduct of ant business by any other party or for any
purpose other than herein authorized, without the prior written consent of the
Landlord, which consent shall not be unreasonably withheld, and the Landlord's
Mortgagee, or if required, any future mortgagee of Landlord. Any consents to
any assignment or subletting shall not constitute a waiver of the necessity for
consent to any subsequent assignment or subletting. The sale, or sales, during
the term hereof, aggregating fifty percent (50%) or more of the outstanding
shares of stock or other ownership interests of Tenant shall be deemed to be an
assignment of this Lease within the meaning of this Section 15.
(b) In the event of any permitted assignment or other transfer of this
Lease by Tenant, (i) Tenant shall remain liable for performance of all
obligations of the assignee or transferee of Tenant hereunder, and Tenant hereby
agrees to absolutely and unconditionally guarantee the performance hereunder of
such assignee or transferee; and (ii) any rent which Tenant receives pursuant to
any sublease in excess of the Base Rent, Percentage Rent, and the Additional
Rent shall be paid by Tenant to Landlord.
CASUALTY
Section 14. (a) if the Premises shall be destroyed or so injured by any
cause as to be unfit, in whole or in part, for occupancy and such destruction or
injury could reasonably be repaired within six (6) months from the date the
repair work is commenced (as determined by Landlord and Landlord's Mortgage, in
their sole discretion), Landlord shall notify Tenant within thirty (30) days
after the happening of such destruction or injury whether or not Landlord will
repair or rebuild. If Landlord elects not to repair or rebuild, this Lease
shall be terminated. If Landlord elects to repair, then Tenant shall not be
entitled to surrender possession of the Premises nor shall Tenant's liability to
pay rent under this Lease cease without the mutual consent of the parties
hereto; and Landlord shall repair the damage or injury with all reasonable speed
and complete such repairs within six (6) months from the date Landlord receives
the insurance proceeds paid on account of such damage or destruction.
Notwithstanding the foregoing if Tenant has agreed that the damage or injury
reparable, and provided that Landlord is proceeding with the necessary
6
<PAGE>
repairs in good faith, Landlord's failure to complete such repairs within the
six (6) month period shall not entitle Tenant to surrender possession of the
Premises. If during such period Tenant shall be deprived of the use of all or
any portion of the Premises, a proportionate allowance shall be made to Tenant
from the Base Rent and the Additional Rent corresponding to the time during
which and to the portion of the Premises of which Tenant shall be so deprived.
(b) If such destruction or injury cannot reasonably be repaired within six
(6) months from the date the repair work commences (as determined by Landlord
and Landlord's First Mortgagee, in their sole discretion), Landlord shall notify
Tenant within thirty (30) days after the happening of such destruction or injury
whether or not Landlord will repair or rebuild. If Landlord elects not to
repair or rebuild, this Lease shall be terminated. If Landlord shall elect to
repair or rebuild, Landlord shall specify the time within which such repairs of
reconstruction will be completed and Tenant shall have the option within thirty
(30) days after the receipt of such notice to elect either to terminate this
Lease and any further liability hereunder, or to extend the term of the Lease by
a period of time equivalent to the time from the happening of such destruction
or injury until the Premises are restored to their former condition. In the
event Tenant elects to extend the term of the Lease, landlord shall restore the
Premises to the condition as originally delivered to Tenant within the time
specified in such notice, and Tenant shall not be able to pay rent for the
period from the time of such destruction or injury until the Premises are so
restored to their former condition. Notwithstanding the foregoing, if Tenant
has agreed that the damage or injury is reparable, and provided that Landlord is
proceeding with the necessary repairs in good faith, Landlord's failure to
complete such repairs within the time specified shall not entitle Tenant to
damages or a right to terminate the Lease and surrender possession of the
Premises.
(c) In addition to all rights to cancel or terminate this Lease given to
the parties in Section 15 (a) and (b) hereof, if the Premises and/or Building
are destroyed or damaged during the last year of the Term, to the extent of
fifty percent (50%) or more of the value of the Premises and/or the Building,
then Landlord shall have the right to cancel and terminate this Lease as of the
date of such damage or destruction by giving notice thereof within thirty (30)
days after the date of said damage or destruction.
(d) Notwithstanding anything to the contrary contained in Sections 15 (a),
(b) or (c) hereof, Landlord may cancel this Lease with no further liability to
Tenant in the event that following destruction or injury to the Premises,
Landlord's Mortgagee elects to require Landlord to apply any insurance proceeds
paid to Landlord as a result of the casualty to reduce any debt secured by the
Building Site.
7
<PAGE>
CONDEMNATION
Section 15. (a) In the event the entire Premises shall be taken by
condemnation or right of eminent domain, this Lease shall terminate as of the
day possession shall be taken by the taking authority, and Landlord and Tenant
shall be released from any further liability hereunder thereafter accruing. In
the event only a portion of the Premises shall be taken by condemnation or right
of eminent domain and the portion so taken renders the balance unsuitable for
the purpose of this Lease, either the Landlord or the Tenant shall be entitled
to terminate this Lease, such termination to become effective as of the day
possession shall be taken, provided thirty (30) days notice in writing of such
termination is given. If, in such case, this Lease is not terminated, Landlord
agrees to restore the Premises with reasonable speed to an architectural unit as
nearly like its condition prior to such taking as shall be practicable, and if
during and/or after the work of restoration, Tenant is deprived of the use of
all or a part of the Premises, an appropriate reduction of rent, depending upon
the time during which and the portion of said Premises of which Tenant is so
deprived shall be granted.
(b) All damages awarded in connection with the taking of the Premises,
whether allowed as compensation for diminution in value to the leasehold or to
the fee of the Premises, shall belong to the Landlord. Notwithstanding the
foregoing, Tenant shall be entitled to make a separate claim against the
condemning authority for damage to merchandise and fixtures, and removal,
reinstallation, and moving expenses, provided that such separate claim by Tenant
does not diminish Landlord's award.
(c) Notwithstanding anything to the contrary contained in Sections 17 (a),
(b) or (c) hereof, Landlord may cancel this Lease with no further liability to
Tenant in the event that following a taking by condemnation or right of eminent
domain, Landlord's Mortgagee elects to require Landlord to apply any proceeds
paid to Landlord as a result of the condemnation or eminent domain proceedings
to reduce the debt secured by the Building Site.
LANDLORD'S REMEDIES UPON DEFAULT
Section 16. (a) If Tenant shall at any time (i) be in default in the
payment of Base Rent, Additional Rent, or other sums of money required to be
paid by Tenant and Tenant shall fail to remedy such default within five (5) days
of the date such sum is due; (ii) violate any restriction or rule in the
Building Rules and fail to remedy such violation within thirty (30) days after
receipt of written notice thereof; (iii) be in default in the performance of any
other covenant, term, condition, provision, rule, or regulation of this Lease,
and Tenant shall fail to remedy such default within fifteen (15) days after
receipt of written notice thereof (but Tenant shall not be deemed to be in
default if Tenant commences to remedy said defaults within said fifteen (15) day
period and proceeds therewith with due diligence), and despite Tenant's efforts,
said defaults cannot be remedied within said fifteen (15) day period); (iv)
commits waste upon the Premises; (v) vacates the Premises or fails to
continuously occupy and conduct Tenant's business on the Premises; or (vi)
becomes insolvent or makes an assignment for the benefit of creditors, or if a
receiver or trustee of Tenant's property shall be appointed, or if proceedings
under any chapter of the United States Bankruptcy Code shall be instituted by or
against Tenant and shall not be dismissed within sixty (60) days after being
filed, or if any event shall happen which, aside from this provision, would
cause any assignment or devolution of Tenant's interest or occupancy hereunder
by operation of law; then, in any event, Landlord, in addition to all other
remedies given to Landlord in law or in equity, may by written notice to Tenant,
terminate this Lease, or without terminating this Lease, reenter the Premises by
summary proceedings or otherwise. In any event Landlord may dispossess the
Tenant, it being the understanding that under no circumstances is this Lease to
be an asset for Tenant's creditors by operation of law or otherwise.
8
<PAGE>
In the event of such reentry Landlord may relet the Premises without being
obligated so to do and may apply the rent from such reletting first to the
payment of Landlord's expenses, including attorneys' fees incurred by reason of
Tenant's default, and the expense of reletting, including, without limitation,
repairs, renovation, or alteration of the Premises and then to the amount of
Base Rent, Additional Rent, and all other sums due from Tenant hereunder and for
any deficiency. Any and all such deficiencies shall be payable by the Tenant
monthly on the date herein provided for the payment of Base Rent.
(b) In the event of a default by Tenant of any of the terms, provisions,
covenants, conditions, rules, and regulations of this Lease, Landlord shall have
the right to invoke any remedy permitted to Landlord in law or equity, including
the right to terminate this Lease. Such remedies shall include the right to sue
immediately for any and all damages, including immediate payment of all Base
Rent and Additional Rent owing for the remainder of the term hereof. No
termination of this Lease and no taking or recovery of possession of the
Premises shall deprive Landlord of any of its remedies or actions against Tenant
and Tenant shall remain liable for all past or future Base Rent, Additional
Rent, and all other charges payable by Tenant under this Lease, during and for
the balance of the term hereof. The bringing of any action for rent or other
default shall not be construed as a waiver of the right to obtain possession of
the Premises.
(c) If suit shall be brought for recovery of possession of the Premises,
for the recovery of rent, or any other amount due under the provisions of this
Lease, or because of the breach of any other covenant herein contained on the
part of Tenant to be kept or performed, and breach shall be established, Tenant
shall pay to Landlord all expenses incurred therefor, including reasonable
attorneys', legal assistant and paralegal fees incurred.
(d) All rights and remedies provided herein or otherwise existing at law
or in equity are cumulative, and the exercise of one or more rights or remedies
by either party shall not preclude or waive its right to the exercise of any or
all of the others.
DISCHARGE OF LIENS - INABILITY TO BIND LANDLORD'S INTEREST
Section 17. Tenant shall not do or suffer anything to be done whereby the
Premises, the Building, or the Building Site may be encumbered by any liens or
mechanics, laborers, or materialmen, chattel mortgages or any other liens.
Furthermore, Tenant shall have no authority to create any lien for labor or
material on or against the Premises, the building, or any Landlord's interest
therein. Tenant shall, whenever and as often as any such liens are filed
purporting to be for labor or material furnished or to be furnished to Tenant,
discharge the same of record within ten (10) days after the Date of filing by
payment, bonding or otherwise, as provided by law. Tenant, upon reasonable
notice and request in writing from Landlord, shall also defend for Landlord, at
Tenant's sole costs and expense, any action, suit, or proceeding which may be
brought on or for the enforcement of any such lien. Tenant will pay any damages
and satisfy and discharge any judgments entered in such action, suit or
proceeding and save harmless the Landlord from any liability, claim, or damages
resulting therefrom. In default of Tenant procuring the discharge, as
aforesaid, of any such lien, Landlord may, with ten (10) days' prior notice,
procure the discharge thereof by bonding or payment or otherwise, and all costs
and expenses incurred by Landlord in obtaining such discharge shall be paid by
Tenant as Additional Rent within ten (10) days after notice from Landlord of the
amount thereof.
LIMITATION ON LIABILITY OF LANDLORD
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<PAGE>
Section 18. If Landlord shall fail to perform any covenant, term, or
condition of this Lease upon Landlord's part to be performed and, as a
consequence of such default, Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied only out of the proceeds of sale
received upon execution of such judgment and levy thereon against the right,
title, and interest of Landlord in the Building as the same then may be
encumbered, and neither Landlord, nor any of its partners, shall be liable for
any deficiency. It is understood and agreed that in no event shall Tenant have
any right to levy execution against any property of Landlord other than its
interest in the Building. Such right of execution shall be subordinate and
subject to any mortgage or other encumbrance upon the Building. In the event of
the sale or other transfer of Landlord's right, title, and interest in the
Premises or the Building, Landlord shall be released from all liability and
obligations hereunder accruing after the date of such sale or other transfer.
RIGHTS OF LANDLORD
Section 19. (a) Landlord reserves the right at all reasonable times, by
itself or its duly authorized agents, to go upon and inspect the Premises and
every part thereof, and at its option to make repairs, alterations, and
additions to the Premises, or the Building.
(b) If Landlord shall make any payments on behalf of Tenant which are
Tenant's obligation in order to fulfill Tenant's covenants, then any amounts so
paid by Landlord are agreed and declared to be items of Additional Rent and
shall be due and payable to Landlord from Tenant with the next installment of
Base Rent due thereafter under this Lease. Any such amounts which shall be paid
by Landlord on behalf of Tenant shall bear interest at the rate of eighteen
(18%) percent per annum, provided in no event shall rate to be charged to Tenant
be in excess of that otherwise permitted by law.
(c) Landlord shall have the right to use Tenant's name in any advertising
conducted by Landlord or Landlord's agents for and with respect to the Building.
MORTGAGE SUBORDINATION AND ESTOPPEL LETTER
Section 20. (a) Tenant understands, acknowledges and agrees that this
Lease is and shall be subordinate to any mortgage, ground lease or other lien
now existing or hereafter placed on or affecting the Premises, the Building, or
any part thereof, and to any renewals, refinancing or extensions and to all
advances made or thereafter to be made upon the security thereof. This shall be
self-operative and no further instrument of subordination shall be required by
any mortgagee or lender hereof. However, Landlord is hereby irrevocably vested
with full power and authority to subordinate this Lease to any mortgage, or
other lien now existing or hereafter placed upon the Premises, the Building, or
the Building Site as a whole. Further, Tenant agrees upon demand or request of
any party in interest, to execute promptly such further instruments or
certificates to carry out the intent hereof.
(b) Notwithstanding the provisions of Section 21 (a) hereof, any mortgagee
may at any time subordinate the lien of its mortgage to the operation and effect
of this Lease without obtaining the Tenant's consent thereto, by giving the
Tenant written notice thereof, in which this Lease shall be deemed to be senior
to such mortgage without regard to their respective dates of execution,
delivery, and/or recordation among the Land Records of the county in which the
Building is located, and thereafter such mortgagee shall have the same rights as
to this Lease as it would have had were this Lease executed and delivered before
the execution of such mortgage.
(c) Tenant shall, within ten (10) days from request by Landlord, execute
and deliver, to such persons as
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<PAGE>
Landlord shall request a statement in recordable form certifying that his Lease
is unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as so modified), stating the dates to
which rent and other charges payable under this Lease have been paid, stating
that Landlord is not in default hereunder (of if Tenant alleges a default
stating the nature of such alleged default) and further stating such other
matters as Landlord or its mortgagee (s) shall reasonably require.
(d) The terms of this Lease are subject to approval by the Mortgagee, if
any, or any other lender (s), such approval is a condition precedent to
Landlord's obligations hereunder. If First Mortgagee requires reasonable
changes to the provisions of the Lease other than those provisions designating
the length of the term and the rent payable under this Lease, Landlord shall
have the right to cancel this Lease if Tenant refuses to approve any such
reasonable change in writing within thirty (30) days after Landlord's request
therefor.
NO WAIVER BY LANDLORD
Section 21. No waiver of any of the terms, covenants, provisions, conditions,
rules, and regulations imposed or required by this Lease, and no waiver of any
legal or equitable relief or remedy shall be implied by the failure of Landlord
to assert any rights to declare any forfeiture, or any other reason. No waiver
of any of said terms, provisions, covenants, rules, and regulations shall be
valid unless it shall be in writing signed by the Landlord. No waiver or
forgiveness of performance by Landlord in respect to one or more tenants of the
Building shall constitute a waiver or forgiveness of performance of any one or
more of the terms, provisions, conditions, rules, and regulations of this Lease
may be failure of performance of any other terms, provisions, conditions,
covenants, rules, and regulations of this Lease.
VACATION OF PREMISES
Section 22. Tenant shall deliver and surrender to Landlord possession of
the Premises, including all Tenant Improvements (and all replacements thereof)
and all fixtures permanently attached to the Premises during the Term, upon the
expiration of the Term or the termination of this Lease in any other way in as
good condition and repair, ordinary wear and tear and insured casualty excepted;
provided, however, that upon Landlord's request made at least thirty (30) days
prior to the end of the Term or the date Tenant is otherwise required to vacate
the Premises, Tenant shall remove all fixtures and equipment affixed to the
Premises by Tenant, and restore the Premises to good condition, ordinary wear
and tear and insured casualty excepted, at Tenant's sole expense. Such removal
shall be performed prior to the earlier of the end of the Term, or the date
Tenant is required to vacate the Premises.
LANDLORD'S LIEN
Section 23. (a) Tenant hereby grants to Landlord a lien and security
interest on all property of Tenant now or hereafter placed in or upon the
Premises, and such property shall be and remain subject to such lien and
security interest of Landlord for payment of all rent and other sums agreed to
be paid by Tenant herein. It is provided, however, the Landlord shall not have
a lien with respect to the Premises which would be superior to a lien from a
lending institution, supplier or leasing company, if such lending institution,
supplier or leasing company has a perfected security interest in the equipment,
furniture or other tangible personal property and which security interest has
its origin in a transaction whereby Tenant acquired such equipment, furniture or
other tangible personal property.
(b) The provisions of this Section 24 relating to such lien and security
interest shall constitute a
11
<PAGE>
security agreement under and subject to the Uniform Commercial Code of the
State of Florida, so that Landlord shall have and may enforce a security
interest on all property of Tenant now or hereafter place in or on the rights
provided by law or by the other terms and provisions of this Lease.
(c) Tenant agrees to execute as debtor such financing statement or
statements and such other documents as Landlord my now or hereafter request in
order to protect or further perfect Landlord's security interest.
Notwithstanding the above, Landlord shall neither sell nor withhold from Tenant
Tenant's business records.
SECURITY DEPOSIT
Section 24. The Security Deposit shall be held by Landlord without
liability for interest and as security for the performance by Tenant of Tenant's
covenants and obligations under this Lease, it being expressly understood that
the Security Deposit shall not be considered an advance payment of rental or a
measure of Tenant's damages in case of default by Tenant. The Security Deposit
shall be paid to Landlord upon execution of this Lease. Landlord may, in its
sole discretion, from time to time without prejudice to any other remedy, use
the Security Deposit to the extent necessary to make good any default under this
Lease or to satisfy any other covenant or obligation of Tenant hereunder;
provided, however, that no portion of the Security Deposit shall be applied
towards payment of the last month's rent hereunder without the prior written
consent of the Landlord's Mortgagee. Following any such application of the
Security Deposit, Tenant shall pay to Landlord on demand the amount so applied
in order to restore the Security Deposit to its original amount. If Tenant is
not in default at the termination of this Lease, the balance of the Security
Deposit remaining after any such application shall be returned by Landlord to
Tenant after deducting therefrom any unpaid obligation of the Tenant to the
landlord as may arise under this Lease, including, without limitation, the
obligation to restore the Premises pursuant to Section 23. If Landlord
transfers its interest in the Premises during the term of this Lease, Landlord
may assign the Security Deposit to the transferee and thereafter Landlord shall
have no further liability for the return of such Security Deposit.
NO INCOME PARTICIPATION
Section 25. Neither Tenant nor any other person having an interest in
the possession, use, occupancy or utilization of the Premises shall enter into
any lease, sublease, license, concession or other agreement for use, occupancy
or utilization of the Premises which provides for rental or other payment for
such use, occupancy or utilization based in whole or in part on the net income
or profits derived by any person from the Premises or portion thereof leased,
used, occupied or utilized (other than an amount based on a fixed percentage or
percentages of receipts of sales), and that any such purported lease, sublease,
license, concession or other agreement shall be absolutely void and ineffective
as a conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the leased Premises.
MEMORANDUM OF LEASE
Section 26. This Lease shall not be recorded, but either party may
record a Memorandum of Lease in which shall be described the property herein
demised, the Term, and which shall refer to this Lease. The party requesting
that the Memorandum of Lease be recorded shall prepare and pay all costs of
recording the Memorandum of Lease, and the other party agrees to execute at any
and all times such instruments as may be reasonably required for such recording.
RENT DEMAND
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Section 27. Every demand for rent wherever and whenever made shall have
the same effect as if made at the time if falls due and at the place of payment.
After the service of any notice or commencement of any suit, or final judgment
therein, Landlord may receive and collect any rent due, and such collection or
receipt shall not operate as a waiver of or otherwise affect such notice, suit,
or judgment.
NOTICES
Section 28. Any notices or consent required to be given by or on behalf
of either party upon the other shall be in writing and shall be given by
personal delivery, or by overnight delivery service, effective upon the date
actually delivered, or by mailing such notices or consent by registered or
certified United States mail, postage prepaid, return receipt requested,
addressed to the parties at the addresses noted above or at such other address
as may be specified from time to time, in writing, delivered to the other party,
and the time of the rendition of such notice by mail shall be three (3) days
following the date such notice is deposited in an official United States Post
Office, postage prepaid.
APPLICABLE LAW AND CONSTRUCTION
Section 29. The laws of the State of Florida shall govern the validity,
performance, enforcement, and interpretation of the Lease. The invalidity or
unenforceability of any provision of this Lease shall not affect or impair any
other provision. The submission of this document for examination does not
constitute an offer to lease, or a reservation or option for the Premises and
becomes effective only upon execution and delivery thereof by Landlord and
Tenant. All negotiations, considerations, representations, and understandings
between the parties are incorporated herein and may be modified or altered only
by agreement in writing between the parties. Tenant shall have no right to quit
the Premises or cancel or rescind this Lease except as expressly granted herein.
FORCE MAJEURE
Section 30. In the event that Landlord shall be delayed, hindered in, or
prevented from the performance of any act required hereunder by reason of
strikes, lockouts, inability to procure materials, failure of power, restrictive
governmental laws or regulations, riots, insurrection, war, or any other reason
of a like nature not the fault of the Landlord, then such performance shall be
excused for the period of the delay and the period of performance shall be
extended for a period equivalent to the period of such delay.
NO PARTNERSIP
Section 31. Landlord does not, in any way or for any purpose, become a
partner of Tenant in the conduct of Tenant's business or otherwise, or joint
venturer, or a member of a joint enterprise with Tenant.
QUIET ENJOYMENT
Section 32. Landlord hereby convenants and agrees that if Tenant shall
perform all of the covenants and agreements herein stipulated to be performed on
Tenant's part, Tenant shall at all times during the continuance hereof have
peaceable and quiet enjoyment and possession of the Premises without any manner
of hindrance from Landlord.
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HOLDING OVER
Section 33. If at the expiration of the Term of this Lease, or any renewal
thereof, Tenant continues to occupy the Premises, such holding over shall not
constitute a renewal of this Lease, but Tenant shall be a tenant from
month-to-month.
CAPTIONS
Section 34. Any paragraph, titles, or captions contained in this Lease are
for convenience only and shall not be deemed part of the context of this Lease.
VARIATION IN PRONOUNS
Section 35. All the terms and words used in this Lease, regardless of the
number and gender in which they are used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context or sense of this Lease or any paragraph or
clause herein may require, the same as if such words had been fully and properly
written in the number and gender so required.
RADON
Section 36. Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health risks
to persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your own
county public health unit.
IN WITNESS WHEREOF, the parties hereto have set their hands this
day of 1997, as to the Landlord and this day of ,1997 as
to the Tenant.
Signed, Sealed and Delivered
in the Presence of:
The Century Group, Inc.
By:
--------------------------------
"LANDLORD"
First Independent Computer, Inc.
BY:
--------------------------------
"TENANT"
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AGREEMENT OF LEASE
This Agreement of Lease is made on the 1st day of August, 1997, by and between
Security State Bank, Abilene, Texas, and First Independent Computers, Inc.,
Abilene, Texas.
DESCRIPTION OF PROPERTY LEASED
Location: 402 Cypress Street, Abilene, Texas
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SQUARE PRICE MONTHLY
SPACE DESCRIPTION FOOTAGE PER FOOT RENT
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Basement Vault 256 0.00
- -------------------------------------------------------------------------------
2nd Floor Parking Garage 0.00
- -------------------------------------------------------------------------------
2nd Floor - Machine Room & Programmers 6,246 0.60 3,747.60
Offices
- -------------------------------------------------------------------------------
3rd Floor - Corp. Offices - No 4,474 0.70 3,131.80
Modifications
- -------------------------------------------------------------------------------
4th Floor - Partial 7,500 0.60 4,500.00
- -------------------------------------------------------------------------------
5th Floor - Partial 4,968 0.60 2.980.80
- -------------------------------------------------------------------------------
6th Floor - Complete 8,470 0.60 5,082.00
- -------------------------------------------------------------------------------
Annex & Mailroom 9,090 0.60 5,454.00
- -------------------------------------------------------------------------------
3rd Floor of Parking Garage 1,000.00
(All but 10 currently assigned spaces)
- -------------------------------------------------------------------------------
Building - 4th and Cedar 3,200 0.60 1,920.00
- -------------------------------------------------------------------------------
Total 44,204 $27,816.20
- -------------------------------------------------------------------------------
</TABLE>
TERMS:
This lease shall begin on August 1, 1997, and shall be in effect, as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Space Description Length of Lease Expiration Date
- -------------------------------------------------------------------------------
<S> <C> <C>
2nd Floor Parking Garage 2 years 07/31/99
- -------------------------------------------------------------------------------
2nd Floor - Machine Room & Programmers 2 years 07/31/99
Offices
- -------------------------------------------------------------------------------
4th Floor 2 years 07/31/99
- -------------------------------------------------------------------------------
5th Floor 2 years 07/31/99
- -------------------------------------------------------------------------------
6th Floor 2 years 07/31/99
- -------------------------------------------------------------------------------
Annex & Mailroom 2 years 07/31/99
- -------------------------------------------------------------------------------
3rd Floor of Parking Garage 2 years 07/31/99
(All but 10 currently assigned spaces)
- -------------------------------------------------------------------------------
Building - 4th and Cedar 2 years 07/31/99
- -------------------------------------------------------------------------------
1
<PAGE>
- -------------------------------------------------------------------------------
3rd Floor Corporate Offices 1 year 07/31/98
- -------------------------------------------------------------------------------
</TABLE>
All leases will automatically renew for the same length of term, if notification
of termination is not made by/to lessee and lessor within one hundred and eighty
(180) days prior to expiration date. All lease prices may increase at renewal
date, but increase will be limited to percentage of change, if any, in the
Consumer Price Index for the prior calendar year. Total monthly rent, due in
advance on the 1st day of each month, beginning August 1, 1997, will be
$27,816.20. This amount includes all utilities and janitorial service.
LEASEHOLD IMPROVEMENTS:
Lessor will assume maximum total of $40,000 for the two year term. Additional
changes will be the responsibility of the lessee, after discussion and approval
by the lessor.
Signed this _________________ day of _______________________, 19_____.
LESSOR: LESSEE:
Security State Bank First Independent Computers, Inc.
Abilene, Texas Abilene, Texas
- ------------------------------- ------------------------------------
Kenneth L. Burgess
2
<PAGE>
LEASE ADDENDUM
This Addendum to an Agreement of Lease dated June 26, 1997, is made on the 1st
day of August, 1997, by and between Security State Bank, Abilene, Texas, and
First Independent Computers, Inc., Abilene, Texas.
DESCRIPTION OF PROPERTY LEASED
Location: 402 Cypress Street, Abilene, Texas
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SQUARE PRICE MONTHLY
SPACE DESCRIPTION FOOTAGE PER FOOT RENT
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
8th Floor 8,044 0.70 $5,630.80
- -------------------------------------------------------------------------------
</TABLE>
TERMS:
This lease shall begin on August 1, 1997, and shall be in effect, as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Space Description Length of Lease Expiration Date
- -------------------------------------------------------------------------------
<S> <C> <C>
8th Floor 2 years 07/31/99
- -------------------------------------------------------------------------------
</TABLE>
All leases will automatically renew for the same length of term, if notification
of termination is not made by/to lessee and lessor within one hundred and eighty
(180) days prior to expiration date. All lease prices may increase at renewal
date, but increase will be limited to percentage of change, if any, in the
Consumer Price Index for the prior calendar year. Total monthly rent, due in
advance on the 1st day of each month, beginning August 1, 1997, will be
$5,630.80. This amount includes all utilities and janitorial service.
Signed this _________________ day of _______________________, 19_____.
LESSOR: LESSEE:
Security State Bank First Independent Computers, Inc.
Abilene, Texas Abilene, Texas
3
<PAGE>
- ------------------------------- ------------------------------------
Kenneth L. Burgess
4
<PAGE>
CREDIT CARD, DEBIT CARD AND MERCHANT PROCESSING SERVICE AGREEMENT
THIS AGREEMENT is made and entered into between First Independent
Computers, Inc., a Texas corporation, (FICI), 1157 North 5th, Suite 800,
Abilene, Texas 79601, and Best Bank (the "Customer") 2950 Pearl Street,
Boulder, Colorado 80301.
Customer desires to engage FICI to perform data processing and other
services in order to provide to Customer computer programming, data processing
and other services for Customer in connection with Customer's MasterCard
International, Inc. ("MasterCard"), VISA U.S.A., Inc. ("VISA") and, if
applicable, private label charge card, merchant processing and the line of
credit operations (the "Services") as described in Schedule "A" to this
Agreement.
FICI and Customer therefore agree as follows:
1. SERVICES.
1.1 SERVICES.FICI agrees to perform for Customer the Services described in
Schedule "A". Customer agrees on an exclusive basis during the terms of this
Agreement to engage FICI to perform the Services described in Schedule "A".
1.2 TRAINING. FICI will initially train Customer personnel selected by
Customer in the use of the Services. Customer will make the necessary qualified
personnel available for training by FICI.
1.3 REPORTS. FICI will provide the Customer with daily reports and other
periodic reports reflecting the Services provided to Customer, including among
other things, all detailed charges and credits to Customer's accounts showing
proper source references and information necessary for the general books of both
Customer and Customer's customers.
1.4 EQUIPMENT. Customer will provide, install, and maintain in good
operating condition all necessary communication terminals, control units,
communication lines to the FICI data center, telephones, and any other equipment
and features required to implement the terms of this Agreement, such equipment
is listed on Schedule "A" attached hereto. The purchase of equipment and
features shall be only as agreed by both parties. Customer will furnish and
install any and all spare parts required for such equipment and features.
1.5 FINANCIAL STATEMENTS; AUDIT. Upon Customer's request, FICI will
provide to Customer copies of the most recent audited financial statements of
First Independent Computers, Inc., the most recent unaudited financial
statements of FICI and the most recent independent audit of FICI's data
processing functions.
1.6 NOTIFICATION OF SYSTEM CHANGES. All changes to the FICI processing
system materially affecting Customer's procedures or reporting must be approved
by both parties unless mandated by statute regulation or appropriate court
order and will be preceded by release bulletins to Customer at least 30 days
prior to installation.
1
<PAGE>
1.7 OPERATING INSTRUCTIONS. FICI may from time to time provide Customer
with instructions governing the operation of the FICI processing system (the
"Operating Instructions"). Customer will comply with all such Operating
Instructions as may be in effect from time to time.
1.8 BACKUP FACILITIES. FICI will provide backup facilities and procedures
for provision of the Services to prevent any major interruption of services to
Customer in the event primary facilities are not functional.
2. CHARGES FOR SERVICES.
2.1 PRICING. Customer will pay FICI for the data processing and other
services set forth in Schedule "A" which includes "A1" Credit Cards, "A2" Debit
Cards and "A3" Merchant Processing in accordance with the pricing schedule
attached hereto as Schedule "A". In the event Customer engages FICI to provide
additional Services by an amendment to Schedule "A", Customer will pay FICI for
the additional services in accordance with the pricing schedule attached hereto
as Schedule"A" for said additional service.
2.2 PAYMENT. Customer will provide FICI with access to an account of
customer funds, not requiring signature, which FICI may draw upon by ACH to pay
for services provided by FICI to customer under the terms of this Agreement.
The detailed records of the transaction types, prices, volumes, and charges
represented by the amount drafted on the account of Customer will be provided by
FICI to Customer on a daily or monthly basis according to the nature of the
transaction or charge. If Customer fails to establish an account as required by
this section, FICI shall notify Customer in writing of such failure and Customer
shall, within seven (7) days of such notification, establish the account. If
Customer fails to establish the account within such period, then FICI may
terminate this Agreement by written notice to Customer. If FICI shall be unable
to receive payment from Customer at any time because sufficient funds are not
available in the account to permit a draft to be honored, then FICI shall notify
Customer, in writing, of such failure to receive payment in the account to
permit a draft to be honored, then FICI shall notify Customer, in writing, of
such failure to receive payment and Customer shall, within (10) days of such
notification, provide sufficient funds in the account to assure full payment of
FICI. If Customer fails to provide sufficient funds in the account to pay FICI
within such time period, then FICI may terminate this Agreement by written
notice to Customer. Upon the termination of this Agreement, FICI shall have no
further obligation to provide services to Customer and all outstanding unpaid
amounts due and owing by Customer to FICI under the terms of this Agreement
shall become immediately due and payable. The termination of this Agreement
shall not affect the obligation of Customer to pay for services rendered to
Customer under this Agreement prior to the date of termination.
2.3 PRICE CHANGES. During the first two (2) years of the Original Term of
this Agreement, FICI may not increase the prices for the Services set forth in
Schedule "A", with the exception of prices for pass-through items which may be
increased at any time the applicable vendors increase such prices to FICI, but
only to the extent of the actual increases by vendors. Thereafter, for each
subsequent annual period, FICI may
2
<PAGE>
increase any or all of the prices set forth in Schedule "A" by an amount not to
exceed the greater of five percent (5%) or the increase, if any, in the previous
calendar year, of the National Consumer Price Index for all Urban consumers (All
items 1967 = 100) published by the Bureau of Labor Statistics of the U.S. Labor
Department.
3. CONVERSION.
3.1 CONVERSION FEE. Should customer elect to have FICI perform the
services necessary to convert Customer's equipment, software and systems to
implement the FICI Services, Customer will pay FICI the conversion fee set forth
in Schedule "A".
3.2 CONVERSION COSTS. During the time necessary for FICI to complete the
conversion of Customer's equipment, software, customer will pay all of FICI's
reasonable out-of-pocket conversion expenses for travel, lodging and the like.
FICI will submit statements to Customer for such expenses and Customer will pay
such statements within thirty (30) days after receipt thereof. If requested
by Customer, FICI will provide copies of vouchers or other documentation for
such statements. Any amounts that remain unpaid for more than thirty (30) days
after the date of the statement shall bear interest at the rate of one and
one-half percent (1.5%) per month from the date of the statement, but not to
exceed the highest applicable lawful rate.
4. TERM.
4.1 ORIGINAL TERM AND RENEWAL. This Agreement is effective from the date
hereof and shall extend for an Original Term of FIVE (5) years from October,
1997. This Agreement shall automatically renew for successive three (3) year
periods at the end of the Original Term and at the end of each renewal term,
unless either party gives the other party written notice at least one hundred
eighty (180) days before the end of the Original Term or any renewal term of its
intention not to renew this Agreement.
5. PROPRIETARY RIGHTS & CONFIDENTIALITY.
5.1 PROPRIETARY RIGHTS. Customer acknowledges that the FICI Services and
processing system consists of computer programs, procedures, forms, information
and other materials which constitute trade secrets and property of great value
owned by FICI or its affiliates, having been acquired through the expenditure of
a great amount of time, effort and money. Customer further acknowledges that
any disclosure to others of any of such trade secrets will result in substantial
monetary loss and irreparable damage to FICI. Customer will treat all such
programs, procedures, forms, information and materials confidentially and
safeguard them by using the same procedures used by Customer for data Customer
regards as confidential except as necessary in the event of FICI's breach of
this agreement. Customer will not disclose to any person, directly or
indirectly, except as required in the proper performance of this Agreement, any
information regarding the FICI Services or processing system or the terms of
this Agreement. All specifications, tapes, programs, enhancements and other
materials developed in connection with this Agreement shall be and remain at all
times during and after the term of this Agreement the exclusive property of
FICI. The provisions of this Article 5 shall survive any termination of this
Agreement.
3
<PAGE>
5.2 CONFIDENTIALITY OF DATA. All data relating to Customer's business
provided to FICI by Customer pursuant to this Agreement will be treated
confidentially and safeguarded by FICI using the same care and discretion that
it uses with data which FICI regards as confidential, except where and to the
extent that disclosure is authorized by Customer, compelled by governmental
regulation or customers of Customer, by court order and upon approval by
Customer. FICI further acknowledges that any disclosure to others of any
Customer trade secrets will result in substantial monetary loss and irreparable
damage to Customer. The provisions of this Article 5 shall survive any
termination of this Agreement.
6. CORRECTION OF DATA; LIMITATION OF LIABILITY.
6.1 CORRECTION OF DATA. In the event FICI employees cause errors in
Customer's data to occur and Customer requests correction of such data within
ninety-five (95) days from the date of the error, FICI will correct such data as
necessary at FICI's expense. The expense to FICI of correcting such data shall
be the only responsibility of FICI and shall constitute Customer's sole and
exclusive remedy with respect to such errors.
6.2. LIMITATION OF LIABILITY. In no event will FICI be liable for
special, indirect, incidental or consequential damages of Customer or any third
party. Except for losses covered by FICI's errors and omissions coverage
described in Section 6.3., FICI's total liability for direct damages alleged by
Customer or any other party in any action, regardless of its nature, arising out
of or in connection with this Agreement shall not exceed the amount of the first
month's charges paid by Customer to FICI under this Agreement. Customer will
release, indemnify and hold harmless FICI from and against any claim for
damages in excess of such amount.
6.3. ERRORS AND OMISSIONS COVERAGE. During the term of this Agreement,
FICI will maintain errors and omissions coverage with respect to its employees
of up to one million dollars ($1,000,000) per occurrence.
6.4. FORCE MAJEURE. FICI shall not be liable for damages arising from or
delays in processing or other non-performance caused by such events as
accidents, fires, telecommunications failures, equipment failures, failures or
fluctuations in electrical power, heat, light or air conditioning, labor
disputes, strikes, riots, war, governmental regulations, third party
non-performance, acts of God or other causes over which FICI has no control.
7. TERMINATION.
7.1. TERMINATION FOR CAUSE. Customer or FICI may terminate this Agreement
upon the material breach of this Agreement by the other party under this
Agreement and failure of such party to cure such breach within one hundred
eighty (180) days after receipt of written notice specifying in detail the
breach claimed. If such breach is not cured within such 180-day period,and the
terminating party intends to terminate, the terminating party must immediately
give thirty (30) days written notice of termination.
4
<PAGE>
7.2. TERMINATION FOR NON-PAYMENT. If Customer fails to pay in full any
invoice within thirty (30) days from the date of invoice, FICI may notify
Customer that such invoice is past due and provide a 30-day period for payment
of the past due amount plus any interest accrued thereon. If Customer fails to
pay the full amount of such invoice plus interest within such 30-day period,
FICI may terminate this Agreement and all services hereunder at any time upon
written notice to Customer.
7.3. FILES AND OTHER MATERIALS. Upon proper termination of this Agreement
in accordance with all applicable provisions (at the conclusion of the required
written notice period), all data files created by FICI and related to Customer
will be furnished to Customer by FICI in FICI's standard form at the cost set
forth in Schedule "A", provided however, that such cost shall be waived if such
termination is due to material breach of this Agreement by FICI. Should
Customer terminate this Agreement prior to the end of the Original Term or any
renewal term, customer will pay for all costs of communications equipment that
has been installed in Customer's locations as of the time of such termination,
such payment to include all of FICI's costs in accordance with the applicable
equipment service agreement. FICI agrees to use reasonable efforts to relocate
such communications equipment. Upon any termination of this Agreement, Customer
will return to FICI all operations materials and materials relating to or
constituting part of FICI's processing system.
7.4. PAYMENT DUE UPON TERMINATION. Upon any termination of this
Agreement, all amounts owing from Customer to FICI, together with any and all
interest accrued and unpaid thereon, shall be due and payable at the time of
termination.
7.5. LIQUIDATED DAMAGES. Upon any termination of this Agreement prior to
the end of the Original Term or any renewal term, other than upon termination
due to material breach by FICI hereunder, Customer shall pay to FICI as
liquidated damages an amount equal to the product of eighty percent (80%) of
Customer's average total monthly billings under this Agreement for the most
recent six (6) months (or lesser number of months if Services have been provided
for less than six (6) months) multiplied by the number of months remaining in
the term of the Agreement. The parties hereto acknowledge and agree that (a)
FICI has incurred and will incur substantial expenses in connection with the
commencement and continuation of providing services hereunder, (b) FICI has
substantial fixed expenses in providing these services, which cannot be reduced
by termination of such services, (c) in the event of any such termination, the
damages that would be incurred by FICI because of such termination would be
uncertain and difficult and impracticable to calculate and (d) the amount
determined pursuant to this Section 7.5. represents a reasonable method of
estimating the actual damages that would be incurred by FICI in the event of
such a termination.
8. General.
8.1. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Texas. This Agreement has been accepted in and shall
be performable in Abilene, Taylor county, Texas. All times referred to herein
shall be as Abilene, Texas time.
5
<PAGE>
8.2. ENTIRE AGREEMENT; RIGHT TO PERFORM. This Agreement represents the
entire understanding between Customer and FICI with respect to the matters
contained herein and, except as otherwise provided herein, may be amended only
by an instrument in writing signed by the parties hereto. Customer warrants
that it will be free, as of the date of commencement of the Services to be
provided hereunder, of any contractual obligation or legal impediment that would
prevent Customer from performing its obligations under this Agreement, and that
FICI's offer to provide to such services in no way caused or induced Customer to
breach any contractual obligations.
8.3. SEVERABILITY. In the event that any of the provision of this
Agreement are held to be unenforceable or invalid by any court of competent
jurisdiction, the validity and enforceability of the remaining provisions will
not be affected, and in lieu of such invalid or unenforceable provision there
shall be added as part of this Agreement, a provision as similar in terms as may
be valid and enforceable.
6
<PAGE>
8.4. RELATIONSHIP OF PARTIES. FICI, in providing services to Customer
hereunder, is acting only as an independent contractor. Except as otherwise
provided herein: (a) FICI does not undertake by this Agreement or otherwise to
perform any obligation of Customer, whether regulatory or contractual, or to
assume any responsibility for Customer's business or operations, and (b) FICI
has the sole right and obligations to supervise, manage, contract, direct,
procure, perform or cause to be performed, all work to be performed by FICI
under this Agreement.
8.5 NO-HIRE PROVISION. During the term of this Agreement and for a period
of twelve (12) months thereafter, neither party will, without the prior written
consent of the other, which consent will not be unreasonably withheld, offer
employment to or employ any person employed then or within the preceding twelve
(12) months by the other party, if the person was involved in providing or
receiving services.
8.6. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be given by personal service or certified mail, return receipt
requested, postage prepaid, to the addresses of the parties as they appear
above, or as changed through written notice to the other party.
8.7. BINDING EFFECT AND ASSIGNMENT. This Agreement is binding on the
parties hereto and their respective successors and assigns. Customer may not
assign this Agreement (whether such assignment is effected in connection with a
sale of Customer's assets, stock or through merger or otherwise) without the
prior written consent of the other party, which shall not be unreasonably
withheld.
Dated and effective this 1st day of October, 1997.
Best Bank First Independent Computers, Inc.
By: By:
Name: Name:
Title: Title:
7
<PAGE>
LINE OF CREDIT AGREEMENT BETWEEN CENTURY FINANCIAL GROUP, INC. AND FIRST
INDEPENDENT COMPUTERS, INC.
In consideration of Century Financial Group, Inc.'s, a Delaware corporation
('CFG'), agreement to grant to First Independent Computers, Inc., a Texas
corporation ('FICI") ' a line of credit ("Line of Credit"); in consideration of
the advances of principal CFG may make to FICI thereunder ("Advances"); and in
consideration of FICI's agreement to repay the Advances pursuant to the terms
set forth below, the parties agree as follows:
1 . LINE OF CREDIT. The maximum amount of the Line of Credit from CFG to
FICI will be _________), and at no time will CFG be required to make an Advance
to FICI if, as a result, the aggregate outstanding principal amount of the
Advances would exceed that amount. Subject to the foregoing, FICI may obtain an
Advance from time to time as provided
in paragraph 2 below.
2. ADVANCES. Advances will be made either through disbursements by CFG
to FICI], by check or wire transfer, or through disbursement by CFG directly to
FICI's vendor(s), upon FICI's instructions. If for any reason whatsoever, CFG
makes an Advance to FICI in excess of the maximum amount of the Line of Credit,
FICI will repay the excess based upon the repayment schedule set forth in
paragraph 8, below, together with interest at the daily Periodic Rate applicable
to the Line of Credit from time to time.
3. SECURITY STATEMENTS. The parties hereby agree that the Line of Credit
shall be secured by all assets of FICI.
FICI warrants to CFG that the property in which a security interest is granted
is subject to no other liens, charges or encumbrances and that there are no
fi6ancing statements on file regarding FICI that might create a lien on the
property secured herein.
Upon default, as is defined within this agreement, CFG shall have the right to
foreclose on this security.
FICI shall execute any and all financing statements or other documentation
which are requested by CFG and which CFG believes is necessary to perfect its
lien. FICI appoints CFG as its agent to file any and all financing
statements which may be necessary or required to perfect CFG's security
interest and FICI authorizes CFG to execute the same for FICI.
At Monthly Intervals ("Billing Cycle") as determined by CFG, CFG will send FICI
a statement ('Billing Statement") which will show Advances made to FICI, the
FINANCE CHARGE then accrued and unpaid, and other charges, payments and credits
to the Account. The Billing Statement %Will also show the credit available
under the Line of Credit as of its closing date. CFG need not send FICI A
Billing Statement for any Billing Cycle in which no FINANCE CHARGE is imposed or
if FICI's Account has a debit or credit balance of one dollar or less.
4. FINANCE CHARGE. FICI agrees to pay CFG for each Billing Cycle as of
the closing date shown on a Billing Statement a FINANCE CHARGE on the Daily
Periodic Rate (as described in Section 5). The total FINANCE CHARGE for each
Billing Cycle will be equal to the sum total of the FINANCE CHARGES for each day
during the Billing Cycle. CFG will compute the FINANCE CHARGE for each day
during the Billing Cycle by multiplying the Daily Periodic Rate times the Daily
Balance (including current transactions) of the Account at the end of each day
during the Billing Cycle. CFG will compute the 'Daily Balance ' by taking the
balance of the Account (not including any FINANCE CHARGE accrued during that
same Billing Cycle) at the beginning of each day during the Billing Cycle,
adding any new Advances or charges, and subtracting any payments or credits.
This will give the Daily Balance. FICI understands that under this method of
calculating the Daily Balance, the FINANCE CHARGE will begin to accrue on each
Advance or charge on the day it is made. There will be no Billing Cycle in
which an Advance may be paid without accruing a FINANCE CHARGE.
5. ANNUAL PERCENTAGE RATE AND DAILY PERIODIC RATE. The ANNUAL PERCENTAGE
RATE and the Daily Periodic Rate for the Line of Credit will be a fixed interest
rate. The Daily Periodic Rate for the Account is ._____%, which corresponds to
an ANNUAL PERCENTAGE RATE of _________ percent.
<PAGE>
6. EXCESS FINANCE CHARGE. If for any reason whatsoever the FINANCE CHARGE
applicable to the Line of Credit for any Billing Cycle exceeds any maximum
interest rate then allowed by law, CFG will not charge FICI, and FICI will not
pay the excess. However, CFG may add the excess to the FINANCE CHARGE due from
FICI in any subsequent Billing Cycle(s), and FICI will pay CFG the excess, to
the extent that as a result of doing so the FINANCE CHARGE for such Billing
Cycle(s) would not exceed any maximum interest rate then allowed by law. FICI
understands that the excess may be spread by CFG over any number of Billing
Cycles.
7. DRAW PERIOD FICI can obtain Advances for one year (the 'Draw Period").
The Draw Period may be extended from year to year, upon the request of FICI, but
at the sole discretion of CFG.
8. MINIMUM PERIODIC PAYMENTS FICI will pay CFG for each Billing Cycle a
minimum payment. The minimum payment will consist of an amount equal to any
accrued and unpaid FINANCE CHARGE as applicable, as of the closing date of each
Billing Cycle. In addition to the foregoing, FICI will, on anniversary date of
the Line of Credit, repay the entire amount outstanding, including principal,
unpaid interest and any other unpaid charges, unless the Line of Credit is
extended for an additional year by the parties per section 7, above. Upon the
termination of the final term, FICI will repay the entire amount outstanding,
including all outstanding principal, unpaid interest and any other unpaid
charges.
9. CREDITING OF PAYMENTS. CFG will apply each payment from FICI first,
to any costs, expenses and indemnities due to it; then to any FINANCE CHARGE;
and then, to the outstanding principal amount of the Advances.
10, MANNER OF MAKING PAYMENTS. FICI will make all payments to CFG under
this Agreement, at, 320 Walworth Lane, Eutawville, SC 29048, or at such other
place as CFG may notify FICI in writing. Excep for payments due on demand or on
termination as provided in this Agreement, FICI will make all payments by the
payment due date stated in each Billing Statement.
ii. LATE CHARGE. If FICI fails to pay the minimum payment as provided in
Section 7 above, within ten (10) days of the date when it is due, FICI will pay
CFG a late charge (one time only for each such amount) equal to the grea ter of
five dollars ($5.00) or five percent (5%) of the
<PAGE>
portion of the minimum payment due which FICI does not pay (WITH a maximum of
$100.00).
12. PREPAYMENT OR
ADVANCES. FICI may prepay the principal amount of the Advances at any time
without penalty, subject to prior payment to CFG of all FINANCE CHARGES due,
fees, costs, indemnities and other non-principal amounts then due to CFG.
13. EVENTS OF DEFAULT. Each of the following shall constitute an 'Event
of Default' for the purposes of this Agreement:
(a) If FICI fails to make any payment under this Agreement when due
(whether at stated maturity or upon acceleration or termination of this
Agreement).
(b) If FICI fails for any reason whatsoever, whether within or beyond its
control, to comply with any other obligation under this Agreement.
(c) If any warranty or representational statement made or furnished by
FICI to CFG in connection v,/ith this Agreement proves to have been false or
misleading when made or furnished in any material respect.
(d) If a judgment or tax lien should be filed against FICI or any of
its property, or an attachment or garnishment shall be issued against any of
its property rights.
(e) If FICI should be unable to pay its debts as they come due, become
insolvent, make an assignment for the benefit of any of its creditors or file a
petition in any bankruptcy or similar proceeding, or if any such petition shall
be filed or proceeding commenced against it, or if any trustee or receiver shall
be named for FICI or any of its property.
If an Event of Default shall have occurred and be continuing, CFG need not
make any further Advances to FICI. In addition, CFG may also, in its sole
discretion, by a writing sent to FICI at its address for notices under this
Agreement, demand immediate repayment from FICI of the outstanding principal
amount OF the Advances, together with any accrued and unpaid FINANCE CHARGES,
and other amounts owed to CFG under this Agreement. FICI waives all other
protest, demand, presentment or notice whatsoever. CFG may also take such
action as it may deem appropriate to exercise any other rights available to it
under this Agreement or at law, all of which are cumulative. If CFG should
engage an attorney to represent it in collecting any amounts due from FICI, FICI
will pay CFG, upon demand, the expenses and REASONABLE fees of the attorney,
together with any other costs CFG may incur in collecting any amounts due from
FICI. Any amount which is due to CFG under this paragraph (including without
limitation any principal or FINANCE CHARGE), and which FICI does not pay CFG on
demand will bear interest, from the date when of demand until FICI makes payment
in full at the highest rate then permitted by applicable law, but if no such rat
' e shall then exist, at the highest rate currently permitted by applicable law,
or if no such rate currently exists, at the per annum rate of eighteen (18.0%)
percent.
14. NOTICE; CHANGE OF ADDRESS. FICI will send any notices to CFG under
this Agreement, to its address set forth above, unless CFG notifies FICI
otherwise in writing. In the absence of written notice from FICI notifying CFG
that it has changed its address, CFG may send all the Billing Statements and
notices to FICI under this Agreement to 3020 N.W. 33rd Avenue, Fort Lauderdale,
Florida 33311.
15. ASSIGNABILITY. FICI understands that it cannot assign to anyone its
rights under this Agreement, nor delegate any of its obligations, without CFG's
prior written consent, which CFG may grant or withhold in its sole discretion.
If FICI tries to do so without CFG's prior written consent, the assignment or
delegation will not be enforceable against CFG, and FICI will have committed an
Event of Default. CFG may assign any of its rights and delegate any of its
obligations under this Agreement without consent and without prior notice to
FICI. In connection with any such assignment or delegation, CFG may provide to
the other party involved any information it may have regarding FICI or the Line
of Credit.
16. WAIVER. CFG may accept late payments or partial payments, even though
marked 'payment in full", without waiving any of its rights under this
Agreement. No failure or delay by CFG in the exercise of any right shall
operate as A waiver. No change or modification to the terms of this Agreement
shall bind the parties absent CFG's written consent.
17. APPLICABLE LAW. This Agreement is governed by Florida law, except
that federal law shall apply to the extent it permits the parties to charge a
higher interest rate. Each provision of this Agreement shall be interpreted so
as to be effective and valid under Florida law, but if any provision is, or
becomes, prohibited under Florida law, that provision shall be valid or
enforceable to the fullest extent permitted by law, and the invalidity shall not
affect the remaining
<PAGE>
provisions of this Agreement.
18. OTHER TAXES. If any taxes other than federal or Florida income or
franchise taxes based on CFG's net income should at any time apply to payments
from FICI to CFG in respect to the Line of Credit or this Agreement (including
taxes such as the Florida documentary excise tax), FICI will be responsible for
the same and will reimburse CFG immediately upon demand for any amounts
(including any penalty or interest) CFG pays in connection therewith, together
with interest on such amounts until paid to it in full at the interest rate
applicable to the Line of Credit from time to time. CFG may instead, in its
sole discretion, treat any such amount due by FICI under this paragraph as an
Advance to FICI under the Line of Credit.
19. MISCELLANEOUS. This Agreement shall bind FICI and its assigns,
successors, and heirs. Time is of the essence to the provisions of this
Agreement. FICI agrees that CFG may bring any litigation arising in connection
with this Agreement before any federal or state court in Broward County,
Florida, without prejudice to its right to bring such litigation before any
other competent court wherever located.
20. DELAY OF ENFORCEMENT. CFG can delay enforcing any of its rights
under this Agreement without losing them. For example: CFG can extend the
time for making some payments without extending others. CFG shall be required
to give FICI 2-days written notice before it enforces any right.
21. FINANCIAL DISCLOSURE. CFG may request that FICI complete and deliver
to CFG no later than each anniversary date of this Line of Credit an updated
annual financial information disclosure form provided by CFG. Upon our request
from time to time, FICI further agrees to update the information it has given
CFG in connection with FICI's application for the Line of Credit and provide
such additional information regarding its financial condition and business as
CFG may request.
22. RIGHT OF SET-OFF. FICI hereby authorizes CFG, to the fullest extent
permitted by law, to set off and apply any and all sums (general or special,
time or demand, provisional or final) at any time held, and other indebtedness
at any time owing, by CFG to or for FICI's credit or account against any and all
Advances, together with a FINANCE CHARGE due and other amounts owing to CFG
under this Agreement. This right of set-off is in addition to any other right
or remedies which CFG may have.
<PAGE>
23. COPY RECEIVED. By signing below, the parties agree to the terms of this
Agreement and acknowledge receipt of a fully completed copy of this Agreement.
THE UNDERSIGNED, each with the express written authority to act on behalf
of their respective corporations, hereby execute this Agreement this day of
1997.
CENTURY FINANCIAL GROUP, INC.
By:
--------------------------------
, President (Seal)
FIRST INDEPENDENT COMPUTERS, INC.
By:
--------------------------------
Kenneth A. Klotz
President (Seal)
<PAGE>
COLUMBIA CAPITAL CORP.
1998 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Columbia Capital Corp. 1998 Stock
Option Plan (the "Plan"), is to provide an incentive to officers, directors,
employees, independent contractors, and consultants of Columbia Capital
Corp., a Delaware corporation (sometimes referred to herein as the
"Company"), and any parent companies and subsidiaries (together with the
Company herein collectively referred to as "CLCK") to remain in the employ of
CLCK or provide services to CLCK and contribute to its success.
As used in the Plan, the term "Code" shall mean the Internal Revenue
Code of 1986, as amended, and any successor statute, and the terms "Parent"
and "Subsidiary" shall have the meanings set forth in Sections 424(e) and (f)
of the Code.
This Plan was adopted by the Board of Directors as of March 25, 1998,
and the stockholders of the Company as of _________ __, 1998.
2. ADMINISTRATION. The Plan shall be administered by a committee (the
"Plan Committee") which shall be established by the Board of Directors of the
Company (the "Board"). The Plan Committee shall be comprised of at least two
members who shall be outside directors of the Company, as defined in Section
162(m) of the Code or any successor provision. Members of the Plan Committee
shall be appointed, both initially and as vacancies occur, by the Board. The
Board may serve as the Plan Committee if by the terms of the Plan all members
of the Board are otherwise eligible to serve on the Plan Committee. The
Board, at any time it so desires, may increase or decrease, but not below
two, the number of members of the Plan Committee, may remove from membership
on the Plan Committee all or any portion of its members, and may appoint such
person or persons as it desires to fill any vacancy existing on the Plan
Committee, whether by removal, resignation or otherwise. The provisions of
the Plan and all option and stock appreciation right (SAR) agreements
executed pursuant thereto, and its decisions shall be conclusive and binding
upon all interested persons. Subject to the provisions of the Plan, the Plan
Committee shall have the sole authority to determine:
(a) The persons (hereinafter, "optionees") to whom options to
purchase shares of Common Stock of the Company ("Stock") and SARs shall be
granted;
(b) The number of options and SARs to be granted to each optionee;
(c) The price to be paid for each share of Stock upon the exercise of
each option;
1
<PAGE>
(d) The period within which each option and SAR shall be exercised
and, with the consent of the optionee, any extensions of such period
(provided, however, that the original period and all extensions shall not
exceed the maximum period permissible under the Plan); and
(e) The terms and conditions of each stock option and/or SAR
agreement entered into between the Company and persons to whom the Company
has granted an option or SAR and of any amendments thereto (provided that the
optionee consents to each such amendment).
The Plan Committee shall meet at such times and places as it determines,
including by means of a telephone conference call. A majority of the members
shall constitute a quorum, and a decision of a majority of those present at
any meeting at which a quorum is present shall constitute the decision of the
Plan Committee. A memorandum signed by all of the members of the Plan
Committee shall constitute the decision of the Plan Committee without the
necessity, in such event, for holding an actual meeting.
3. ELIGIBILITY. Officers, directors and employees of CLCK independent
contractors, consultants and other persons providing significant services to
CLCK shall be eligible to receive grants of options under the Plan.
4. STOCK SUBJECT TO PLAN. There shall be reserved for issue, upon the
exercise of options granted under the Plan, 1,250,000 shares of Stock or the
number of shares of Stock, which, in accordance with the provisions of
Section 9 hereof, shall be substituted therefor. Such shares may be treasury
shares. If an option granted under the Plan shall expire or terminate for
any reason without having been exercised in full, unpurchased shares subject
thereto shall again be available for the purposes of the Plan. The maximum
number of shares with respect to which options which may be granted to an
optionee who is an employee of CLCK shall not exceed 125,000 shares in any
fiscal year during the term of the Plan.
5. TERMS OF OPTIONS AND SARS.
(a) INCENTIVE STOCK OPTIONS. It is intended that options granted
pursuant to this Section 5(a) qualify as incentive stock options as defined
in Section 422 of the Code. Incentive stock options shall be granted only to
employees of CLCK. Each stock option agreement evidencing an incentive stock
option shall provide that the option is subject to the following terms and
conditions and to such other terms and conditions not inconsistent therewith
as the Plan Committee may deem appropriate in each case:
(1) OPTION PRICE. The price to be paid for each share of Stock
upon the exercise of each incentive stock option
2
<PAGE>
shall be determined by the Plan Committee at the time the option is granted,
but shall in no event be less than 100% of the Fair Market Value (as defined
below) of the shares on the date the option is granted, or not less than 110%
of the Fair Market Value of such shares on the date such option is granted in
the case of an individual then owning (within the meaning of Section 424(d)
of the Code) 10% or more of the total combined voting power of all classes of
stock of the Company or of its Parent or Subsidiaries. As used in this Plan,
the term "date the option is granted" means the date on which the Plan
Committee authorizes the grant of an option hereunder or any later date
specified by the Plan Committee. For the purposes of the Plan, Fair Market
Value of the shares shall be (i) the closing sales price of shares of Stock
sold on the New York Stock Exchange, American Stock Exchange or the NASDAQ
National Market System on the date the option is granted (or if there was no
sale on such date, the highest asked price for the Stock on such date), (ii)
if the Stock is not listed on either of those exchanges or traded on the
NASDAQ National Market System on the date the option is granted, the mean
between the "bid" and "asked" price of the Stock in the National
Over-The-Counter Market (or other similar market quotation system) on the
date the option is granted, or (iii) if the Stock is not traded in any
market, the price determined by the Plan Committee to be the fair market
value, based upon such evidence as it may deem necessary or desirable.
(2) PERIOD OF OPTION AND EXERCISE. The period or periods
within which an option may be exercised shall be determined by the Plan
Committee at the time the option is granted, but in no event shall any option
granted hereunder be exercised more than ten years from the date the option
was granted nor more than five years from the date the option was granted in
the case of an individual then owning (within the meaning of Section 424(d)
of the Code) more than 10% of the total combined voting power of all classes
of stock of the Company or of its Parent or Subsidiaries.
(3) PAYMENT FOR STOCK. The option exercise price for each
share of Stock purchased under an option shall be paid in full at the time of
purchase. The Plan Committee may provide that the option price be payable, at
the election of the holder of the option and with the consent of the Plan
Committee, in whole or in part either in cash or by delivery of Stock in
transferable form, such Stock to be valued for such purpose at its Fair
Market Value on the date on which the option is exercised. No share of Stock
shall be issued upon exercise until full payment therefor has been made, and
no optionee shall have any rights as an owner of Stock until the date of
issuance to him of the stock certificate evidencing such Stock.
3
<PAGE>
(4) LIMITATION ON AMOUNT BECOMING EXERCISABLE IN ANY ONE
CALENDAR YEAR. Subject to the overall limitations of Section 4 hereof
(relating to the aggregate shares subject to the Plan), the aggregate Fair
Market Value (determined as of the time the option is granted) of Stock with
respect to which incentive stock options are exercisable for the first time
by the optionee during any calendar year (under the Plan and all other
incentive stock option plans of the Company, the Parent, and Subsidiaries)
shall not exceed $100,000.
(b) NONQUALIFIED STOCK OPTIONS. Nonqualified stock options may be
granted not only to employees but also to directors who are not employees of
CLCK and to consultants, independent contractors and other persons who
provide substantial services to CLCK. Each nonqualified stock option granted
under the Plan shall be evidenced by a stock option agreement between the
person to whom such option is granted and the Company. Such stock option
agreement shall provide that the option is subject to the following terms and
conditions and to such other terms and conditions not inconsistent therewith
as the Plan Committee may deem appropriate in each case:
(1) OPTION PRICE. The price to be paid for each share of
stock upon the exercise of an option shall be determined by the Plan
Committee at the time the option is granted, but in no event shall be less
than 85% of the Fair Market Value of the shares on the date the option is
granted. As used in this Plan, the term "date the option is granted" means
the date on which the Plan Committee authorized the grant of an option
hereunder or any later date specified by the Plan Committee. To the extent
that the fair market value of Stock is relevant to the pricing of the option
by the Plan Committee, fair market value of the Stock shall be determined as
set forth in Section 5(a)(1) hereof.
(2) PERIOD OF OPTION AND EXERCISE. The periods, installments
or intervals during which an option may be exercised shall be determined by
the Plan Committee at the time the option is granted, but in no event shall
such period exceed 10 years from the date the option is granted.
(3) PAYMENT FOR STOCK. The option exercise price for each
share of Stock purchased under an option shall be paid in full at the time of
purchase. The Plan Committee may provide that the option exercise price be
payable at the election of the holder of the option, with the consent of the
Plan Committee, in whole or in part either in cash or by delivery of Stock in
transferable form, such Stock to be valued for such purpose at its Fair
Market Value on the date on which the option is exercised. No share of Stock
shall be issued until full payment therefor has been made, and no optionee
shall have any rights as an owner of shares of
4
<PAGE>
Stock until the date of issuance to him of the stock certificate evidencing such
Stock.
(c) STOCK APPRECIATION RIGHTS. SARs may be granted in writing
under the Plan by the Plan Committee subject to the following terms and
conditions and such other terms and conditions as the Plan Committee may
prescribe.
(1) RIGHT OF OPTIONEE. Each SAR shall entitle the holder
thereof, upon the exercise of the SAR, to receive from the Company in
exchange therefor an amount equal in value to the excess of the Fair Market
Value on the date of exercise of one share of Stock over its Fair Market
Value on the date of grant (or, in the case of an SAR granted in connection
with an option, the excess of the Fair Market Value of one share of Stock at
the time of exercise over the option exercise price per share under the
option to which the SAR relates), multiplied by the number of shares covered
by the SAR or the option, or portion thereof, that is surrendered. No SAR
shall be exercisable at a time that the amount determined under this
subparagraph is negative. Payment by the Company upon exercise of an SAR
shall be made in Stock valued at the Fair Market Value of the Stock on the
date of exercise.
(2) EXERCISE. An SAR shall be exercisable only at the time
or times established by the Plan Committee. If an SAR is granted in
connection with an option, the following rules shall apply: (i) the SAR shall
be exercisable only to the extent and on the same conditions that the related
option could be exercised; (ii) upon exercise of the SAR, the option or
portion thereof to which the SAR relates terminates; and (iii) upon exercise
of the option, the related SAR or portion thereof terminates.
(3) RULES. The Plan Committee may withdraw any SAR granted
under the Plan at any time and may impose any conditions upon the exercise of
an SAR or adopt rules and regulations from time to time affecting the rights
of holders of SARs granted prior to adoption or amendment of such rules and
regulations as well as SARs granted thereafter.
(4) FRACTIONAL SHARES. No fractional shares shall be issued
upon exercise of an SAR. In lieu thereof, cash may be paid in an amount
equal to the value of the fraction or, if the Plan Committee shall determine,
the number of shares may be rounded downward to the next whole share.
(5) SHARES SUBJECT TO PLAN. Upon the exercise of an SAR for
shares, the number of shares of Stock reserved for issuance under the Plan
shall be reduced by the number of shares issued.
6. NONTRANSFERABILITY. The options and SARs granted pursuant to the
Plan shall be nontransferable except by will or the
5
<PAGE>
laws of descent and distribution of the state or country of the optionee's
domicile at the time of death or for options other than incentive stock
options, pursuant to a qualified domestic relations order as defined in the
Code or Title I of the Employee Retirement Income Security Act and shall be
exercisable during the optionee's lifetime only by him (or, in the case of a
transfer pursuant to a qualified domestic relations order, by the transferee
under such qualified domestic relations order) and after his death, by his
personal representative or by the person entitled thereto under his will or
the laws of intestate succession.
7. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP. Unless otherwise
specified in the applicable option and/or SAR agreement or SAR, upon
termination of the optionee's employment or other relationship with CLCK, his
rights to exercise options and SARs then held by him shall be only as follows
(in no case do the time periods referred to below extend the term specified
in any option):
(a) DEATH OR DISABILITY. Upon the death or disability (within the
meaning of Section 22(e)(3) of the Code) of an optionee, any option or SAR
which he holds may be exercised (to the extent exercisable at his death or
disability), unless it otherwise expires, within such period after the date
of his death (not less than six months nor more than twelve months) as the
Plan Committee shall prescribe in his option agreement or SAR, by the
optionee or, in the event of death, by the optionee's representative or by
the person entitled thereto under his will or the laws of intestate
succession.
(b) RETIREMENT. Upon the retirement (either pursuant to an CLCK
retirement plan, if any, or pursuant to the approval of the Board) of an
officer, director or employee, an outstanding option or SAR may be exercised
(to the extent exercisable at the date of such retirement) by him within such
period after the date of his retirement (provided that such period is no less
than 30 days and no more than three months) as the Plan Committee shall
prescribe in his option agreement or SAR.
(c) OTHER TERMINATION. In the event an officer, director or
employee ceases to serve as an officer or director or leaves the employ of
CLCK for any reasons other than as set forth in (a) and (b), above, or a
nonemployee ceases to provide services to CLCK, any option or SAR which he
holds shall remain exercisable (to the extent exercisable as of the date of
such termination) until 30 days after the date of such termination.
(d) PLAN COMMITTEE DISCRETION. The Plan Committee may in its sole
discretion accelerate the exercisability of any or all options or SARs.
8. TRANSFER TO RELATED CORPORATION. In the event an employee leaves the
employ of the Company to become an employee of
6
<PAGE>
a Parent or a Subsidiary or any employee leaves the employ of a Parent or a
Subsidiary to become an employee of the Company or another Parent or
Subsidiary, such employee shall be deemed to continue as an employee for
purposes of this Plan.
9. ADJUSTMENT OF SHARES; TERMINATION OF OPTIONS AND SARS.
(a) ADJUSTMENT OF SHARES. In the event of changes in the
outstanding Stock by reason of stock dividends, split-ups, consolidations,
recapitalization, reorganizations or like events (as determined by the Plan
Committee), an appropriate adjustment shall be made by the Plan Committee in
the number of shares reserved under the Plan, in the number of shares set
forth in Section 4 hereof, in the number of shares and the option price per
share specified in any stock option agreement, and in the number of SARs with
respect to any unexercised shares. The determination of the Plan Committee
as to what adjustments shall be made shall be conclusive. Adjustments for
any options to purchase fractional shares shall also be determined by the
Plan Committee. The Plan Committee shall give prompt notice to all optionees
of any adjustment pursuant to this Section.
(b) TERMINATION OF OPTIONS AND SARS ON MERGER, REORGANIZATION OR
LIQUIDATION OF THE COMPANY. Notwithstanding anything to the contrary in this
Plan, in the event of any merger, consolidation or other reorganization of
the Company in which the Company is not the surviving or continuing
corporation (as determined by the Plan Committee) or in the event of the
liquidation or dissolution of the Company, all options and SARs granted
hereunder shall terminate on the effective date of the merger, consolidation,
reorganization, liquidation or dissolution unless there is an agreement with
respect thereto which expressly provides for the assumption of such options
and SARs by the continuing or surviving corporation.
10. SECURITIES LAW REQUIREMENTS. The Company's obligation to issue
shares of its Stock upon exercise of an option or SAR is expressly
conditioned upon the completion by the Company of any registration or other
qualification of such shares under any state and/or federal law or rulings
and regulations of any government regulatory body or the making of such
investment representations or other representations and undertakings by the
optionee (or his legal representative, heir or legatee, as the case may be)
in order to comply with the requirements of any exemption from any such
registration or other qualification of such shares which the Company in its
sole discretion shall deem necessary or advisable. The Company may refuse to
permit the sale or other disposition of any shares acquired pursuant to any
such representation until it is satisfied that such sale or other disposition
would not be in contravention of applicable state or federal securities law.
11. TAX WITHHOLDING. As a condition to the exercise of an
7
<PAGE>
option or SAR or otherwise, the Company may require an optionee to pay over
to the Company all applicable federal, state and local taxes which the
Company is required to withhold with respect to the exercise of an option or
SAR granted hereunder. At the discretion of the Plan Committee and upon the
request of an optionee, the minimum statutory withholding tax requirements
may be satisfied by the withholding of shares of Stock otherwise issuable to
the optionee upon the exercise of an option or SAR.
12. AMENDMENT. The Board may amend the Plan at any time, except that
without shareholder approval:
(a) The number of shares of Stock which may be reserved for
issuance under the Plan shall not be increased except as provided in Section
9(a) hereof;
(b) The option price per share of Stock subject to incentive stock
options may not be fixed at less than 100% of the Fair Market Value of a
share of Stock on the date the option is granted;
(c) The maximum period of ten (10) years during which the options
or SARs may be exercised may not be extended;
(d) The class of persons eligible to receive options or SARs under
the Plan as set forth in Section 3 shall not be changed; and
(e) This Section 12 may not be amended in a manner that limits or
reduces the amendments which require shareholder approval.
13. EFFECTIVE DATE. The Plan shall be effective upon the date of its
adoption by both the Board, and subject to the approval of the stockholders
of the Company within the 12 month period following such adoption date.
14. TERMINATION. The Plan shall terminate automatically as of the
close of business on the day preceding the 10th anniversary date of its
effectiveness or earlier by resolution of the Board, or upon consummation of
any merger, consolidation or other reorganization in which the options
granted hereunder terminate, all as described in Section 9(b) hereof. Unless
otherwise provided herein, the termination of the Plan shall not affect the
validity of any option agreement outstanding at the date of such termination.
8
<PAGE>
15. STOCK OPTION AND SAR AGREEMENT. Each option and SAR granted under
the Plan shall be evidenced by a written agreement executed by the Company
and accepted by the optionee, which (i) shall contain each of the provisions
and agreements herein specifically required to be contained therein, (ii)
shall indicate whether an option is to be an incentive stock option or a
nonqualified stock option, and if it is to be an incentive stock option, the
stock option agreement shall contain terms and conditions permitting such
option to qualify for treatment as an incentive stock option under Section
422 of the Code, (iii) may contain the agreement of the optionee to remain in
the employ of, and/or to render services to, the Company or any Parent or
Subsidiary for a period of time to be determined by the Plan Committee, and
(iv) may contain such other terms and conditions as the Plan Committee deems
desirable and which are not inconsistent with the Plan.
16. NO RIGHT TO EMPLOYMENT. Nothing in this Plan or in any option or
SAR granted hereunder shall confer upon any optionee any right to continue in
the employ of CLCK or to continue to perform services for CLCK, or shall
interfere with or restrict in any way the rights of CLCK to discharge or
terminate any officer, director, employee, independent contractor or
consultant at any time for any reason whatsoever, with or without good cause.
17. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
Executed and dated as of the date first written above at Fort
Lauderdale, Florida.
Columbia Capital Corp.
By:
------------------------------
Kenneth A. Klotz
Chief Executive Officer
9
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0
0
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</TABLE>
