SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
| | Preliminary Proxy Statement
| | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
|x| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to |_| ss.240.14a-11(c)
or |_| ss.240.14a-12
AMERICOM USA, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|x| No fee required
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
Class A Common Stock
2) Aggregate number of securities to which transaction applies: 3,500,014
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $116.67
representing one-third of the principal amount of $350.01, the par
value of the securities multiplied by the number of securities to be
issued as part of the merger.
4) Proposed maximum aggregate value of transaction: ______________
5) Total fee paid: ___________________
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ________________________________
2) Form, Schedule or Registration Statement No.: ______________
3) Filing Party: __________________________________________
4) Date Filed: ___________________________________________
<PAGE>ii
AMERICOM USA, INC.
1303 Grand Avenue
Arroyo Grande, California 93420
(805) 542-6700
To the Stockholders of AMERICOM USA, INC.
The accompanying Proxy Statement contains information concerning (i) the
approval of a recapitalization of the outstanding common stock into newly
authorized Class A Common Stock and authorization of Class B Common Stock; and
(ii) the approval of a merger with digiCities, Inc. The Board of Directors
strongly recommends your approval of these proposals.
It is important that your shares be represented. Accordingly, we urge you
to mark, sign, date and return the enclosed proxy promptly.
Sincerely,
/s/ TOM HOPFENSPERGER
-----------------
Tom Hopfensperger
President
<PAGE>1
PROXY STATEMENT
of
AMERICOM USA, INC.
1303 Grand Avenue
Arroyo Grande, California 93420
(805) 542-6700
Information Concerning the Solicitation
This Proxy Statement is furnished to the stockholders of AmeriCom USA, Inc., a
Delaware corporation ("AmeriCom") in connection with the solicitation by
AmeriCom's Board of Directors (the "Board"), for an action to be taken by
written consent of the stockholders, pursuant to Section 228 of the Delaware
General Corporation Law ("DGCL"). The solicitation is to effect a
recapitalization of AmeriCom's outstanding stock by exchanging all of its
outstanding common stock for a like number of newly authorized Class A Common
Stock. At the same time, AmeriCom intends to complete a merger with digiCities,
Inc., a California Corporation ("digiCities).
The written consent solicited hereby, if properly signed and returned to
AmeriCom, will be voted in accordance with the instructions contained therein.
After being voted, the written consent may not be revoked. AmeriCom will bear
the entire cost of preparing, assembling, printing and mailing proxy materials
furnished by the Board to the stockholders.
Record Date and Voting Rights
AmeriCom is authorized to issue up to 100,000,000 shares of common stock, par
value $0.0001, and 20,000,000 shares of preferred stock, par value $0.0001. As
of November 22, 1999, 38,099,235 shares of common stock and no shares of
preferred stock were issued and outstanding. Each share of common stock is
entitled to one vote on all matters submitted for stockholder approval. The
record date for determination of stockholders entitled to consent to the action
is November 22, 1999.
Principal Stockholders
The following table sets forth certain information concerning the beneficial
ownership of the voting common stock as of December 15, 1999 with respect to
each person known by AmeriCom to be the beneficial owner of more than 5% of the
outstanding common stock and each of the Company's executive officers and
directors. Except as otherwise indicated, AmeriCom believes that all beneficial
owners named below have sole voting and investment power with respect to all
shares of capital stock beneficially owned by them.
<PAGE>2
<TABLE>
<S> <C> <C>
Number of Shares Percentage
Name of Beneficial Owner Beneficially Owned Beneficially Owned
- --------------------------------------- --------------------- ---------------------
Robert Cezar 15,675,070 * 41.1%
David Loomis 2,260,684 5.9%
All directors and officers as a group 18,924,673 49.0%
- --------------------
</TABLE>
* Of this amount 4,548,370 shares are held in trusts of which Robert M. Cezar
is a trustee or co-trustee.
FAIRNESS HEARING BY CALIFORNIA
DEPARTMENT OF CORPORATIONS
On October 15, 1999, AmeriCom filed an Application for a Reorganization Permit
with the California Department of Corporations("DOC"). In addition, AmeriCom
requested a Fairness Hearing to be held at which time the DOC would make a
determination as to the overall fairness of the proposed recapitalization and
the merger with digiCities. On December 21, 1999, the Fairness Hearing was held
and the DOC found that the terms of the proposed recapitalization and merger
were fair and the requested Permit has been issued.
PROPOSAL ONE
APPROVAL OF RECAPITALIZATION
In September, 1999, the Board approved both a recapitalization of AmeriCom's
outstanding stock and a merger with digiCities. The recapitalization contained
in this proposal requires approval by AmeriCom's shareholders and the merger
contained in Proposal Two requires approval by the shareholders of both AmeriCom
and digiCities. The Board recommends approval. A definitive Merger and
Recapitalization Agreement and Plan of Reorganization was signed by AmeriCom and
digiCities on September 27, 1999. The closing of the Merger and Recapitalization
is subject to various conditions.
Description
The recapitalization and merger is a two-phase transaction. In the first phase,
AmeriCom will conduct a recapitalization of its outstanding stock by exchanging
all of its currently outstanding common stock for an equal number of newly
authorized Class A Common Stock. At the same time, a new class of shares, Class
B Common Stock, will be authorized subject to the rights, preferences and
privileges as determined, in the future, by the Board. The rights, preferences
and privileges of Class B Common Stock could be subordinate or superior to the
rights, preferences and privileges of Class A Common Stock. Consequently, the
future issuance of Class B Common Stock would have a diluted effect on existing
stockholders and possibly superior or different rights, preferences and
privileges as compared to the Class A Common Stock. AmeriCom will issue
38,099,235 shares of Class A Common Stock in exchange for the 38,099,235 shares
of common stock currently outstanding. The Class A Common Stock will have in
effect identical rights, preferences and privileges of the existing common
stock.
<PAGE>3
Simultaneously with the above recapitalization, AmeriCom wishes to consummate a
merger (the "Merger") in which it will issue 3,500,000 shares of its Class A
Common Stock to shareholders of digiCities in exchange for all of the
outstanding shares of digiCities. The conversion ratio will be such that each
share of outstanding digiCities' stock will be converted into approximately
37.11 shares of AmeriCom's Class A Common Stock. AmeriCom will also issue
1,500,000 options to purchase its Class A Common Stock to the Holders of
existing options in digiCities in substitution for their digiCities Options.
AmeriCom currently has outstanding options to purchase 12,960,447 shares of its
common stock. AmeriCom is a foreign corporation subject to Section 2115 of the
California General Corporation Law.
The digiCities' shareholders will receive an amount of AmeriCom's Class A Common
Stock aggregating approximately 8.4% of the outstanding shares of AmeriCom's
Class A Common Stock after the exchange pursuant to the Merger. The Holders of
digiCities options will receive options to purchase shares of AmeriCom's Class A
Common Stock aggregating approximately 3.5% of AmeriCom's Class A Common Stock
outstanding after the exchange (on a fully diluted basis). The Articles of
Incorporation of AmeriCom will also be amended to authorize 99,000,000 shares of
Class A Common Stock, 1,000,000 shares of Class B Common Stock and 10,000,000
shares of preferred stock as part of the recapitalization and merger.
The Merger will be affected under the Merger and Recapitalization Agreement
dated September 27, 1999, a copy of which is attached hereto as Exhibit A, and
will close no later than January 15, 1999. The Merger and Recapitalization are
subject to various conditions including the issuance of a Permit and the holding
of a "Fairness Hearing" by the California Department of Corporations and the
requisite consent by a majority of the shares held by AmeriCom's and digiCities'
shareholders.
AmeriCom will distribute its new Class A Common Stock in the recapitalization
transaction by exchanging all currently outstanding common stock with shares of
the new Class A Common Stock. Existing shareholders of AmeriCom will exchange
their AmeriCom common stock for an identical number of newly authorized AmeriCom
Class A Common Stock. As indicated above, AmeriCom 's Class A Common Stock will
have substantially identical rights, preferences and privileges as those
currently provided by its existing common stock.
Principal Reasons for Recapitalization
The purpose of the recapitalization transaction is to provide AmeriCom with
greater flexibility in future business/financial transactions by creating two
classes of its common stock. Class A Common Stock will have all of the rights,
preferences and privileges that are currently embodied in its common stock. The
Class B Common Stock will have rights, preferences and privileges as determined
by the Board from time to time but which would be different than the rights,
preferences and privileges of the outstanding Class A Common Stock.
The Board believes that the best interests of AmeriCom and its stockholders will
be served by completing the recapitalization.
Vote Required
Proposal One must be approved by the holders of a majority of the outstanding
common stock. As soon as consents have been received from stockholders owning a
majority of AmeriCom's outstanding common stock, this Proposal will have been
<PAGE>4
approved and a notice of such stockholder approval will be sent to each AmeriCom
stockholder.
PROPOSAL TWO
APPROVAL OF MERGER
As the second part of the recapitalization and merger, described under Proposal
One above, AmeriCom proposes to merge with digiCities.
Description
The Merger will result in the following: (i) each of digiCities' then
outstanding common shares will be converted into approximately 37.11 shares of
AmeriCom's Class A Common Stock; (ii) each of digiCities' then outstanding
options will be converted into options to purchase AmeriCom's Class A Common
Stock; (iii) the separate existence of digiCities shall cease and all of its
assets, liabilities, rights and obligations will be assumed by AmeriCom; and
(iv) AmeriCom will be the surviving corporation and will continue its reporting
status under the Securities and Exchange Act of 1934, as amended (the "1934
Act"). Consequently, the shareholders of AmeriCom as well as shareholders of
digiCities will have the disclosure benefits of AmeriCom's "Reporting Company"
status under the 1934 Act.
Proforma financial information showing AmeriCom if the merger had occurred as of
September 30, 1999 are attached here to as Exhibit B.
Appraisal rights are available to stockholders of AmeriCom and stockholders of
digiCities in connection with the Merger. Delaware law establishes the
procedures to be followed and failure to do so may result in the loss of all
appraisal rights. Please carefully review "Dissenting Stockholders' Right of
Appraisal" set forth below.
Principal Reasons for Merger
The purpose of the Merger is to combine the assets and businesses of AmeriCom
and digiCities into a single company which is intended to result in a stronger,
more diverse business entity.
Other than the dilutive effect of the Merger on AmeriCom's stockholders, as a
result of the issuance of an additional 3,500,000 shares of AmeriCom's Class A
Common Stock, management believes there are no material disadvantages to the
Merger.
Vote Required
Proposal Two must be approved by the holders of a majority of the outstanding
common stock. As soon as consents have been received from stockholders owning a
majority of AmeriCom's outstanding common stock, this Proposal will have been
approved and a notice of such stockholder approval will be sent to each AmeriCom
stockholder.
<PAGE>5
AmeriCom Business
AmeriCom was incorporated under the laws of the state of Delaware on May 4,
1994. AmeriCom's primary business is providing systems for the delivery of
advertisements and merchandising on Internet Web sites through its proprietary
technology systems, AdCast and TrueManagement(TM). The AdCast system is the
primary product offered by AmeriCom. The AdCast system is an advertising
delivery system which delivers non-scrollable advertisement frames
("billboards") which can contain animated ads lasting from 15 to 90 seconds in
length with audio, video and pop-up frame capability to Web sites which have
agreed to the placement of a billboard on such Web site ("AdCast Affiliates") as
well as hot links to other Web sites. The AdCast advertisement space appears on
an AdCast Affiliate Site each time a visitor to that Web site logs on. The ad
appears as an outlined frame in which an advertisement is run. Because the
AdCast frame does not scroll, complete viewing of the advertisement is likely
despite the typical paging and scrolling that occurs during a Web site visit.
The TrueManagement system provides management tools, analytical reports, and
operating control data pertaining to advertising on the Internet for users of
the AdCast system.
AmeriCom contracts with Web site owners to allow placement of the AdCast
billboards on the Web sites and AmeriCom sells the billboard space to
advertisers and sponsors. The AdCast Affiliates receive a fee based on the
number of visitors to their Web site and advertising credits which can be used
to promote their Web site on other AdCast Affiliate Sites.
Through the e-Billboard Exchange Program, AdCast Affiliates are given three free
ads on other Affiliate Websites for each ad shown on their own Website.
The pricing structure for the AdCast advertising rates is based on spot minute
increments, similar to spot pricing on television. As with television, billboard
ads can vary in length. Unlike television, however, AdCast billboard ads play
only when a viewer is watching i.e. a Web site visitor has logged on. The
billboard ad delivery is initiated by the act of visiting an AdCast Affiliate
Site.
AmeriCom began online operation on February 1, 1999 showing unpaid
advertisements while it tested the AdCast system. This phase is commonly
referred to as the "beta" phase of development. In July 1999, AmeriCom commenced
the sale of paid advertising. AmeriCom is currently displaying in excess of 4
million ads per day. Of these, 25% are ads displayed on the AdCast Affiliate
sites and promote products of AmeriCom's sponsorship advertiser and advertisers
with whom AmeriCom has entered into commission based contracts or
"paid-per-click" programs. The balance is unpaid ads which cross-promote AdCast
Affiliate sites pursuant to AdCasts's e-Billboard Exchange program.
AmeriCom anticipates that it will receive future revenue from (i) its
sponsorship ad program which provides display of a sponsor's logo on AdCast
Affiliate sites, (ii) sale of advertising space on the billboard ads displayed
on AdCast Affiliate sites and (iii) commissions from sales of merchandise from
ads displayed. AmeriCom has one member in its sponsorship program and has
received negligible revenues from sales of merchandise and limited revenue from
the sale of paid advertisements.
<PAGE>6
AmeriCom's main target industry to date has been to aggregate site owners of Web
sites concerning the sport of wrestling. AmeriCom believes that it has almost
saturated this market and intends to focus on more diverse site groups in the
future.
AmeriCom currently has three wholly owned subsidiaries: Kiosk Software, Inc.,
Adcast, Inc., and AdCast Canada, Ltd.; another subsidiary company, RMC
Diversified Associates International, Inc., was wound up in August 1999
subsequent to the fiscal year end.
AmeriCom's executive offices are located at 1303 Grand Avenue, Arroyo Grande,
California 93420 andthe phone number is (805) 542-6700.
digiCities Business
digiCities is located in Santa Monica, California and specializes in the
marketing and development of web sites for small to medium sized businesses.
digiCities commenced business in January 1999 building web sites for business
customers using a standardized layout and format, and maintain those sites on
its own web servers, located in Santa Monica, California. Following the
acquisition of digiCities by AmeriCom, owners of web sites maintained by
digiCities would be offered advertising opportunities by becoming an AdCast
Affiliate of AmeriCom and the opportunity to draw traffic to their web site by
participation in the e- Billboard Exchange Program.
digiCities commenced selling its web site product by outbound telemarketing in
January 1999, using both its own telemarketing facilities and telemarketing
rooms managed by outside contractors. Charges include a fee for initial site
set-up and a monthly maintenance fee. Fees are primarily collected via a Billing
Service Contract with an aggregator company. The aggregator represents several
hundred telephone local exchange carriers ("LECs"). By this mechanism, the
business customer buying a web site agrees to have their local telephone service
account charged with digiCities' fees. digiCities passes the new customer's
billing information to the aggregator, who in turn distributes it to the
relevant LEC. Customers pay the digiCities charges along with their other
monthly telephone charges, and the net proceeds are ultimately passed back via
the aggregator to digiCities.
In August 1999, digiCities launched an alternative business web site product
called Flash 4 Websites which is sold by direct marketing networks. Revenues
from this product are charged to customers' credit cards, resulting in
significantly faster cash flow to digiCities.
digiCities presently maintains approximately 15,000 web sites, has 10 full-time
employees, and generated revenues during 1999 of approximately $1.2 million.
Dissenting Stockholders' Right of Appraisal
Any AmeriCom stockholder is entitled to be paid the fair value of his/her shares
in accordance with Section 262 of the DGCL if the stockholder neither votes in
favor of nor consents in writing to the Recapitalization or the Merger. A brief
summary of the provisions of DGCL Section 262 is set forth below and the
complete text of said Section is set forth in Exhibit C.
<PAGE>7
Each holder of shares of AmeriCom common stock who asserts appraisal rights and
who follows the procedures set forth in Section 262 of the DGCL, will be
entitled to have his or her shares of AmeriCom common stock purchased by
AmeriCom for cash at their fair market value.
A holder who wishes to preserve his/her appraisal rights must either vote
against the Proposals or abstain from voting. Any stockholder who does not
follow the foregoing is not entitled to payment for his/her shares under the
DGCL. AmeriCom will notify each dissenting stockholder either before or within
10 days after the effective date of the proposed merger as to the procedure for
exercising such stockholder's dissenters rights.
AmeriCom will pay each stockholder requesting appraisal rights who complied with
the requirements of Section 262 the amount it estimates to be the fair value of
the stockholder's shares, plus accrued interest (computed from the effective
date of the action until the date of payment) upon his/her surrender of stock
certificates representing the shares to AmeriCom.
A stockholder requesting appraisal rights may notify AmeriCom in writing of his
estimate of the fair value of the shares and the amount of interest due and
demand payment of his estimate, less any payment made pursuant to Section 262 of
DGCL, or reject AmeriCom's offer of fair value of the stockholder's shares made
pursuant to DGCL Section 262.
Within 120 days after the Effective Date of the Merger, any stockholder who has
perfected his/her appraisal rights and complied with Section 262 of DGCL and who
is otherwise entitled to appraisal rights but disagrees with the fair value of
his/her stock as determined by AmeriCom, may file a petition in the Delaware
Court of Chancery demanding a determination of the value of the shares held by
all stockholders entitled to an appraisal. Upon the filing of any such petition
by a stockholder, a copy of the petition must be delivered to AmeriCom. AmeriCom
must, within 20 days after such delivery, file in the office of the Register in
Chancery in which the petition was filed a duly verified list of the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of the shares have not been reached.
If the petition for an appraisal is timely filed, the Delaware Court of Chancery
will hold a hearing to determine the stockholders of AmeriCom entitled to
appraisal rights and will appraise the shares owned by such stockholders. Such
stockholders have a right to receive the "fair value" of their shares, exclusive
of any element of value arising from the accomplishment or expectation of the
Merger or recapitalization and exclusive of any claims for unfair dealing or
violation of fiduciary duty, together with a fair rate of interest, if any, to
be paid thereon. Following the appraisal proceeding, the Court will direct
AmeriCom to make payment of the fair value of such shares as so determined,
together with a fair rate of interest, if any, on such shares to the
stockholders entitled thereto. Payment will be made upon surrender of the stock
certificates representing the shares delivered to AmeriCom.
Any stockholder who has demanded appraisal rights in compliance with Section 262
will not, after the Effective Date, be entitled to vote his/her shares for any
purpose nor be entitled to the payment of dividends or other distributions on
his/her shares (other than those payable as of a date prior to the Effective
Date).
<PAGE>8
The foregoing summary does not purport to provide a comprehensive statement of
the procedures to be followed by a stockholder who seeks appraisal rights and
payment of the fair value of his/her shares of AmeriCom common stock. DGCL
establishes the procedures to be followed and failure to do so may result in the
loss of all appraisal rights. Accordingly, each stockholder who might desire to
exercise appraisal rights should carefully consider and comply with the
provisions of this section, the full text of which is set out in Exhibit B to
this Proxy Statement and consult his/her legal advisor.
The discussion contained herein is qualified in its entirety by and should be
read in conjunction with the Merger and Recapitalization Agreement attached
hereto as Exhibit A.
Federal Income Tax Consequences of the Recapitalization and Merger
The Recapitalization and Merger is intended to be a tax free reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"). However, no foreign, state or local tax considerations are
addressed herein. IN VIEW OF THE VARYING NATURE OF THOSE TAX CONSEQUENCES, EACH
STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABILITY OF FEDERAL, STATE,
LOCAL OR FOREIGN TAX LAWS.
AmeriCom has not obtained and will not seek a ruling from the Internal Revenue
Service or an opinion of legal or tax counsel with respect to the tax
consequences of the Recapitalization and Merger. Stockholders should consult
their own tax advisors regarding the specific tax consequences to them of the
Recapitalization and Merger, including the applicability of the laws of any
state or other jurisdiction.
Tax Consequences of Dissenting Stockholders' Receiving Appraisal Rights
A stockholder requesting appraisal rights under Section 262 of the DGCL and who
exercises his or her rights and receives payment for such shares in cash
generally will recognize capital gain or loss measured by the difference between
the amount of cash received and such stockholder's basis in the shares. However,
different tax consequences could apply depending upon the stockholder's
particular circumstances. Accordingly, each stockholder should consult his or
her own tax advisors regarding the specific tax consequences of exercising
appraisal rights under his or her particular circumstances.
AmeriCom USA, Inc.
By Order of the Board of Directors
/s/ ADRIAN BRAY
----------------------------------
Adrian Bray, Acting Secretary
Arroyo Grande, California
December 21, 1999
<PAGE>
EXHIBIT A
MERGER AGREEMENT AND PLAN OF REORGANIZATION
<PAGE>
MERGER AND RECAPITALIZATION AGREEMENT
AND
PLAN OF REORGANIZATION
AmeriCom USA, Inc.
A Delaware Corporation
and
DigiCities, Inc.
A California Corporation
September 27, 1999
<PAGE>i
TABLE OF CONTENTS
<TABLE>
<S> <C>
PREAMBLE.....................................................................................1
DEFINITIONS..................................................................................1
PRELIMINARY STATEMENT........................................................................3
ARTICLE I. THE MERGER........................................................................4
Section 1.1. The Merger.............................................................4
Section 1.2. Closing................................................................4
Section 1.3. Certificate............................................................4
Section 1.4. Bylaws.................................................................5
Section 1.5. Directors..............................................................5
Section 1.6. Officers...............................................................5
ARTICLE II RECAPITALIZATION..................................................................5
Section 2.1. The Recapitalization...................................................5
Section 2.2. Closing................................................................6
ARTICLE III. CONVERSION......................................................................6
Section 3.1. Effect of the Merger and Recapitalization on Capital Stock.............6
Section 3.2. Delivery and Exchange..................................................6
Section 3.3. Stock Options..........................................................7
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF AMERICOM.......................................8
Section 4.1. Organization, Authority and Qualification..............................8
Section 4.2. Ownership of Shares; Subsidiaries......................................8
Section 4.3. Financial Statement, Financial Condition. .............................8
Section 4.4. Accounts Receivable....................................................9
Section 4.5. Interest in AmeriCom's Property........................................9
Section 4.6. Real Property..........................................................9
Section 4.7. Intellectual Property..................................................9
Section 4.8. Absence of Specific Changes...........................................10
Section 4.9. Permit, Licenses, and Franchises......................................11
Section 4.10. Judgments, Decrees, or Orders Restraining Business....................11
Section 4.11. Insurance.............................................................12
Section 4.12. Environmental Compliance; Hazardous Materials.........................12
Section 4.14. No Violation of Other Instruments.....................................12
Section 4.14. Contracts.............................................................12
Section 4.15. Litigation............................................................13
Section 4.16. Taxes.................................................................13
Section 4.17. Employee Benefit Matters.............................................13
<PAGE>ii
Section 4.18. AmeriCom Reporting Requirements.......................................14
Section 4.19. Disclosure............................................................14
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF DIGICITIES.....................................14
Section 5.1. Organization, Authority and Qualification.............................14
Section 5.2. Ownership of Shares; Subsidiaries.....................................14
Section 5.3. Financial Statement, Financial Condition. ............................15
Section 5.4. Title of Properties...................................................15
Section 5.5. Inventory.............................................................15
Section 5.6. Accounts Receivable...................................................15
Section 5.7. Interest in DigiCities's Property.....................................16
Section 5.8. Real Property.........................................................16
Section 5.9. Intellectual Property.................................................16
Section 5.10. Absence of Undisclosed Liabilities....................................17
Section 5.11. Absence of Specific Changes...........................................17
Section 5.12. Permit, Licenses, and Franchises......................................18
Section 5.13. Judgments, Decrees, or Orders Restraining Business....................18
Section 5.14. Environmental Compliance; Hazardous Materials.........................18
Section 5.15. No Violation of Other Instruments.....................................18
Section 5.16. Contracts.............................................................19
Section 5.17. Litigation............................................................19
Section 5.18. Taxes.................................................................19
Section 5.19. Employee Benefit Matters..............................................20
Section 5.20. Reporting Requirements................................................20
Section 5.21. Records...............................................................20
Section 5.22. Labor Disputes........................................................20
Section 5.23. Insurance.............................................................20
Section 5.24. Shareholder Relations.................................................21
Section 5.25. Disclosure............................................................21
ARTICLE VI. COVENANTS.......................................................................21
Section 6.1 Covenants of DigiCities...............................................21
Section 6.2. Covenants of AmeriCom.................................................23
Section 6.3. Post-Closing Covenants................................................24
ARTICLE VII. CONDITIONS TO THE MERGER.......................................................25
Section 7.1. Conditions Precedent to AmeriCom's Obligation to Close................25
Section 7.2. Conditions Precedent to DigiCities' Obligation to Close...............26
Section 7.3. Additional Conditions to the Obligations of DigiCities................27
ARTICLE VIII. SURVIVAL OF WARRANTIES........................................................27
ARTICLE IX. TERMINATION OF AGREEMENT........................................................27
Section 9.1. Termination by AmeriCom...............................................27
<PAGE>iii
Section 9.2. Termination...........................................................28
Section 9.3. Right to Proceed......................................................29
Section 9.4. Return of Documents...................................................29
ARTICLE X. ADDITIONAL AGREEMENTS............................................................29
Section 10.1. Expenses..............................................................29
Section 10.2. Publicity.............................................................29
Section 10.3. Approval of DigiCities Shareholders...................................30
Section 10.4. Approval of AmeriCom Shareholders.....................................30
ARTICLE XI. MISCELLANEOUS...................................................................30
Section 11.1. Governing Law; Counterparts...........................................30
Section 11.2. Notices...............................................................30
Section 11.3. Waiver................................................................31
Section 11.4. Binding Effect........................................................31
Section 11.5. No Third Party Beneficiaries..........................................31
Section 11.6. Amendments............................................................31
</TABLE>
<PAGE>1
MERGER AND RECAPITALIZATION AGREEMENT
AND
PLAN OF REORGANIZATION
PREAMBLE
This merger agreement and plan of reorganization (the "Agreement") are
made as of September 27, 1999, between AmeriCom USA, Inc., a Delaware
corporation ("AmeriCom"), and DigiCities, Inc., a California corporation
("DigiCities").
DEFINITIONS
In this Agreement, unless the context otherwise requires:
(a) "Action" shall mean any action, suit, litigation, complaint,
counterclaim, claim, petition, mediation contest, or administrative proceeding,
whether at law, in equity, in arbitration or otherwise, and whether conducted by
or before any Government or other Person.
(b) "AmeriCom Subsidiary" shall mean all such Persons required to be
disclosed in Schedule 3.2(b) pursuant to Section 3.2(b).
(c) "CACC" means the California Corporation Code.
(d) "Closing Date" means November 15, 1999, or such later date on or
before the Termination Date as the parties may agree to in writing.
(e) "Contract" shall mean all existing written and oral material
agreements and commitments, including, without limitation, all employment and
consulting contracts, union contracts, distributorship agreements, agreements
with suppliers and customers (except purchase or sale orders entered into in the
ordinary course of business involving the purchase or sale of goods or services
for not more than Ten Thousand Dollars ($10,000.00) and for a term of not more
than twelve (12) months), leases, licenses, employee benefit plans, deferred
compensation agreements, indentures, notes, bonds, mortgages, security
agreements, loan agreements, guarantees, franchise agreements, agreements in
respect of the issuance, sale, repurchase or transfer of capital stock, bonds or
other securities, power of attorney, and any contract which involves a payment
by DigiCities of more than Ten Thousand Dollars ($10,000.00) or has a term or
requires performance over a period of more than ninety (90) days.
(f) "Dissenting Shares" shall have the meaning set forth in Section 1300
of the California Corporation Code.
<PAGE>2
(g) "Effective Time" shall mean the date on which a certificate of
merger and the Amended and Restated Certificate of Incorporation of AmeriCom are
filed in the office of the Secretary of State of the State of Delaware and/or
the Secretary of State of the State of California.
(h) "Exchange Act" means the Securities Exchange Act of 1934.
(i) "Forum" shall mean any federal, national, state, local, municipal or
foreign court, governmental agency, administrative body or agency, tribunal,
private alternative dispute resolution systems, or arbitration panel.
(j) "GDCL" shall mean the General Delaware Corporation Law.
(k) "Government" shall mean any federal, national, state, provincial,
local, municipal, or foreign government or any department, commission, board,
bureau, agency, instrumentality, unit, or taxing authority thereof.
(l) "Laws" shall mean all federal, national, state, provincial, local,
municipal or foreign constitutions, statutes, rules, regulations, norms,
ordinance, acts, codes, legislation, treaties, conventions, common law
principles, judicial decisions and similar laws and legal requirements, whether
of the United States of America or any other jurisdiction as in effect form time
to time.
(m) "Liability" shall mean any liability or obligation whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due.
(n) "Order" shall mean all applicable orders, writs, judgments,
injunctions, decrees, rulings, consent agreements, and awards of or by any Forum
or entered by consent of the party to be bound.
(o) "Person" shall include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization and a Government.
(p) "Proprietary Rights" means (i) patents, applications for patents and
patent rights; (ii) in each case, whether registered, unregistered or under
pending registration, trademark rights, trade names, trade name rights,
corporate names, business names, trade styles or dress, service marks and logos
and other trade designations and copyrights; and (iii) all agreements relating
to the technology, know-how or processes,
(q) "SEC" means the Securities and Exchange Commission.
(r) "Surviving Corporation" shall mean Americom USA, Inc.
<PAGE>3
(s) "Taxes" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of whatever
nature, including, without limitation, income, gross receipts, excise, property,
sales, use, customs, value added, consumption, transfer, license, payroll,
employee income, withholding, social security, and franchise taxes, now or
hereafter imposed or levied by the United States of America or any Government or
by any department, agency or other political subdivision or taxing authority
thereof or therein, all deposits required in connection therewith, and all
interests, penalties, additions to tax, and other similar Liabilities with
respect thereto.
(t) "Termination Date" has the meaning Section 9.2(i) specifies.
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a Plan of Reorganization pursuant to which:
(a) DigiCities will merge into AmeriCom on the terms and subject to the
conditions set forth herein;
(b) Upon the Effective Time, (i) all issued and outstanding Common
Shares of DigiCities shall be converted and exchanged for 3,500,014 shares of
Class A Common Stock of AmeriCom pursuant to this Agreement and (ii) the
continuing employees of DigiCities immediately after the Effective Time shall be
allocated 1,500,000 shares of Class A Common Stock of AmeriCom under AmeriCom
Stock Option Plan.
(c) Upon the Effective Date, AmeriCom will be recapitalized by (i)
converting its existing common stock into a Class A and Class B common stock and
(ii) each share of outstanding common stock of AmeriCom shall be converted and
exchanged for one share of Class A Common Stock of AmeriCom pursuant to this
Agreement.
(d) The respective Boards of Directors of AmeriCom and DigiCities have
approved the Merger and exchange, and declared advisable and in the best
interests of their respective stockholders; and
(e) The Merger transaction described in this Agreement is intended to be
a tax-free reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
(f) The recapitalization transaction described in this agreement is
intended to be a tax-free reorganization within the meaning of Section 368 (a)
(1) (E) of the Code.
<PAGE>4
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
Section 1.1. The Merger.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as hereinafter defined), DigiCities shall
be merged with and into AmeriCom (the "Merger") in accordance with the GDCL and
CACC, whereupon the separate legal existence of DigiCities shall cease, and
AmeriCom shall continue as the surviving corporation (the "Surviving
Corporation").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger set forth herein,
AmeriCom and DigiCities will file a Certificate of Merger with the Secretary of
State of the State of Delaware and the Secretary of State of the State of
California. The Merger shall become effective at such time as set forth in the
Certificate of Merger ("Effective Time") or, if the Certificate of Merger does
not specify another time, 8:00 a..m., Pacific Time, on the Effective Date.
(c) The Merger shall have the effects set forth in GDCL and CACC.
(d) The Merger is intended to be a tax-free reorganization
pursuant to Section 368(a)(1)(A) of the Code and the regulations promulgated
under Section 368 of the Code.
Section 1.2. Closing. On or before the Closing Date, the parties hereto
will take all actions necessary to (i) effect the Merger as required by GDCL and
CACC; (ii) transmit for filing of the Certificate of Merger with the Secretary
of State of Delaware and the Secretary of State of California; (iii) satisfy the
conditions set forth in Article VI; and (iv) accomplish all transactions this
Agreement contemplates, as the case may be (all those actions collectively being
the "Closing"). The Closing will take place at the office of Bartel Eng Linn &
Schroder in Sacramento, California, at 10:00 a.m., Pacific Time, on the Closing
Date, or at such other time and place as the parties may agree to in writing.
Section 1.3. Certificate. The Certificate of Incorporation of AmeriCom,
after giving effect to amendment to AmeriCom's Certificate of Incorporation as
specified in Section 1.1(a) and in effect on the Effective Time of the Merger
will become the Certificate of Incorporation of the Surviving Corporation. From
and after the Effective Time of the Merger, said Certificate of Incorporation,
as it may be amended from time to time as provided by law, will be, and may be
separately certified as, the Certificate of Incorporation of the Surviving
Corporation.
<PAGE>5
Section 1.4. Bylaws. The Bylaws of AmeriCom in effect on the Effective
Time of the Merger will be the Bylaws of the Surviving Corporation until they
are thereafter duly altered, amended, or repealed.
Section 1.5. Directors. The directors of AmeriCom immediately prior to
the Effective Time of the Merger will be the directors of the Surviving
Corporation. They will hold office until their successors have been elected and
qualified.
Section 1.6. Officers. The initial officers of the Surviving Corporation
shall be as Schedule 1.6 sets forth, and each of these persons will serve in
each office Schedule 1.6 specifies for that person, subject to the provisions of
the articles of the Surviving Corporation, until that person's successor is duly
elected to, and, if necessary, qualified for that office.
ARTICLE II
RECAPITALIZATION
Section 2.1. The Recapitalization.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time, all of the currently outstanding shares
of AmeriCom Common Stock shall be converted and exchanged (the
"Recapitalization") in accordance with the GDCL and CACC, whereupon (i) the
Certificate of Incorporation of AmeriCom will be amended to change AmeriCom's
authorized capital stock to 120,000,000 of which 99,000,000 shares shall be
designated Class A Common Stock, $.0001 par value, 1,000,000 shares shall be
designated as Class B Common Stock, $.0001 par value, and 20,000,000 shares
shall be designated Preferred Stock, $.0001 par value and (ii) the Class A
Common Stock shall have all of the rights, preferences and privileges granted to
common stock under the GDCL while the Class B Common Stock and Preferred Stock
shall have such rights, preferences and privileges and be issued in such numbers
as AmeriCom's Board of Directors may determine from time to time;
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the recapitalizations set forth
herein, AmeriCom will file an Amended and Restated Certificate of Incorporation
with the Secretary of the State of Delaware. The Recapitalization shall become
effective at such time as set forth in the Amended and Restated Certificate of
Incorporation.
(c) The Recapitalization shall have the effects as provided in
the GDCL and Section 2115 of the CACC.
(d) The Recapitalization is intended to be a tax-free
reorganization pursuant to Section 368(a)(1)(E) of the Code and the regulations
promulgated under Section 368 of the Code.
<PAGE>6
Section 2.2. Closing. On or before the Closing Date, the parties hereto
shall take all actions to (i) affect the recapitalization as required by the
GDCL and CACC; (ii) transmit for filing the Amended and Restated Certificate of
Incorporation with the Secretary of State of Delaware; (iii) satisfying the
conditions set forth in Article VI; and (iv) accomplish all transactions this
Agreement contemplates, as the case may be (all those actions collectively being
the "Closing"). The Closing will take place at the office of Bartel Eng Linn &
Schroder in Sacramento, California, at 10:00 a.m. Pacific Time, on the Closing
Date, or at such other time and place as the parties may agree to in writing.
ARTICLE III.
CONVERSION
Section 3.1. Effect of the Merger and Recapitalization on Capital Stock.
As of the Effective Time, as a result of the Merger and Recapitalization and
without any action on the part of any holder thereof:
(a) All of the shares of DigiCities Common Stock issued and
outstanding immediately before the Effective Time, will by virtue of the Merger
and without action on the part of the shareholder, be converted into and become
the right to receive 3,500,014 shares of Class A Common Stock, $.0001 par value,
of the Surviving Corporation.
(b) All of the shares of AmeriCom Common Stock issued and
outstanding immediately before the Effective Time, will by virtue of the
Recapitalization and without action on the part of the shareholders, be
converted into and become the right to receive a like number of shares of
AmeriCom's Class A Common Stock, $.0001 par value.
Section 3.2. Delivery and Exchange.
(a) After the Effective Time, the shareholders of DigiCities,
upon surrender of their stock certificates to AmeriCom (or any agent that
AmeriCom may appoint for purpose of this Section 3.2) shall be entitled to
receive in exchange therefor a certificate or certificates representing the
number of shares of AmeriCom Class A Common Stock as set forth in the allocation
schedule attached hereto as Schedule 3.2(a). No certificates or scrip for
fractional shares of AmeriCom's Common Stock have been or will be issued. Until
surrendered and exchanged, each DigiCities share certificate shall, after the
Effective Time, be deemed for all corporate purposes to represent only the right
to receive the same number of shares of AmeriCom Class A Common Stock into which
the DigiCities's Common Stock shall have been converted pursuant to the Merger.
(b) After the Effective Time, each holder of AmeriCom's Common
Stock certificates, upon surrender thereof to AmeriCom (or any agent that
AmeriCom may appoint for purpose of this Section 3.2) shall be entitled to
receive in exchange therefor a certificate or certificates representing the same
number of shares of AmeriCom Class A Common Stock. No certificates or scrip for
fractional shares of AmeriCom's Common Stock have been or will be issued. Until
<PAGE>7
surrendered and exchanged, each AmeriCom share certificate shall, after the
Effective Time, be deemed for all corporate purposes to represent only the right
to receive the same number of shares of AmeriCom Class A Common Stock into which
the AmeriCom's Common Stock shall have been converted pursuant to the Merger.
(c) As of the Effective Time, no transfer of the shares of
AmeriCom Common Stock or DigiCities Common Stock outstanding prior to the
Effective Time shall be made on the stock transfer books of the Surviving
Corporation. If, after the Effective Time, AmeriCom or DigiCities stock
certificates are presented to AmeriCom or the Surviving Corporation, they shall
be exchanged pursuant to Section 3.2(a) or 3.2 (b) above.
Section 3.3. Stock Options.
(a) As soon as practicable following the date of this Agreement
but before the Closing Date, the Board of Directors of AmeriCom shall adopt such
resolutions or take such other actions as may be required to effect the
following:
(i) As soon as practicable after the Effective Time,
AmeriCom shall allocate and grant up to 1,500,000 shares AmeriCom Class A Common
Stock under the AmeriCom Stock Option Plan to the prior existing employees of
DigiCities immediate prior to the Effective Time provided that they remained
employees of AmeriCom after the Effective Time, under a 3 year vesting schedule
and in accordance with the direction to be provided by DigiCities prior to the
Effective Time; and
(ii) Make such other changes to the AmeriCom Option Plan
as it deems appropriate to give effect to the Merger.
(b) Prior to the Closing, AmeriCom shall seek consent from each
of its stock option holders agreeing to convert his/her AmeriCom Stock Options
into stock options exercisable into Class A Common Stock of AmeriCom.
(c) As soon as practicable after the Effective Time, the
Surviving Corporation shall deliver to the holders of AmeriCom Stock Options
appropriate notices setting forth such holders' rights pursuant to the AmeriCom
Option Plan and the agreements evidencing the grants of such AmeriCom Stock
Options shall continue in effect on the same terms and conditions.
(d) The Surviving Corporation shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Surviving
Corporation's Class A Common Stock for delivery on exercise of AmeriCom Stock
Options outstanding in accordance with this Section 3.2.
<PAGE>8
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF AMERICOM
AmeriCom represents and warrants to, and agrees with, DigiCities that
all the following representations and warranties in this Article IV are as of
the date of this Agreement, and will be, as amended or supplemented pursuant to
Section 6.3 on the Closing Date, true and correct:
Section 4.1. Organization, Authority and Qualification.
(a) AmeriCom is duly organized, validly existing, and in good
standing under the laws of Delaware, and has the corporate power to own all of
its properties and assets and to carry on its business as it is now being
conducted. AmeriCom is duly qualified to do business as a foreign corporation
and is in good standing in the jurisdictions listed in Schedule 4.1, and, except
as set forth in Schedule 4.1, neither the ownership of its property nor the
conduct of its business requires it to be qualified to do business in any other
jurisdiction.
(b) AmeriCom's Board of Directors has authorized the execution of
this Agreement, and AmeriCom has the corporate power and is duly authorized to
have DigiCities merge into AmeriCom pursuant to this Agreement.
Section 4.2. Ownership of Shares; Subsidiaries.
(a) Prior to the Effective Time, AmeriCom's authorized capital
stock consists of 100,000,000 shares of Common Stock, $0.0001 par value, of
which 36,759,609 shares are issued and outstanding and 20,000,000 shares of
Preferred Stock, $0.0001 par value, of which no shares are issued and
outstanding. Except as set forth in Schedule 4.2(a), all issued and outstanding
shares have been validly issued in full compliance with all federal and state
securities laws, are fully paid and nonassessable, and have voting rights.
Except as set forth in Schedule 4.2(a), there are no outstanding subscriptions,
options, rights, warrants, convertible securities, or other agreements or
commitments obligating AmeriCom to issue or to transfer from treasury any
additional shares of its capital stock of any class.
(b) AmeriCom does not own or have an interest, direct or
indirect, or any commitment to purchase or otherwise acquire, any capital stock
or other equity interest, direct or indirect, in any other Person, except as set
forth in Schedule 4.2(b). All such interests so set forth are owned of record
and beneficially by AmeriCom as set forth in Schedule 4.2(b) and are duly
authorized, validly issued, fully paid and nonassessable, and were authorized,
offered, issued and sold in accordance with all applicable securities and other
Laws.
Section 4.3. Financial Statement, Financial Condition. The balance
sheet of AmeriCom as of June 30, 1999 ("AmeriCom Current Balance Sheet ") and
the related statement of profits and losses through June 30, 1999 and for the
last two (2) fiscal years then ended, prepared by AmeriCom,
<PAGE>9
copies of which have been delivered by AmeriCom to DigiCities, fairly present
the financial position of AmeriCom as of that date and the results of operations
for June 30, 1999, and have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with that of preceding
years.
Section 4.4. Accounts Receivable. Except as set forth in Schedule 4.4,
all notes and accounts receivable shown on the AmeriCom Current Balance Sheet
and all such receivables now held by AmeriCom are valid and collectible
obligations and were not and are not subject to any offset or counterclaim,
except for amounts reserved against such receivables which are reflected on the
AmeriCom Current Balance Sheet or otherwise set forth in Schedule 4.4. With
respect to notes and accounts receivable arising after the AmeriCom Balance
Sheet Date and now outstanding, (except for a percentage thereof equal to the
percentage which has been historically reserved against receivable amounts on
the AmeriCom Current Balance Sheet or in Schedule 4.4 for bad debts) constitutes
valid and collectible obligations on such AmeriCom Current Balance Sheet.
Section 4.5. Interest in AmeriCom's Property. Except as set forth in
Schedule 4.5, no officer, director, or shareholder of AmeriCom or any AmeriCom
Subsidiary has any interest in any property, real or personal, tangible or
intangible, including copyrights, trademarks, or trade names, used in or
pertaining to the business of AmeriCom or any AmeriCom Subsidiary.
Section 4.6. Real Property. AmeriCom has good title to all of the real
property reflected in the AmeriCom Current Balance Sheet as owned by AmeriCom,
free and clear from all defects and liens, except as may be set forth in the
notes to the AmeriCom Current Balance Sheet or in Schedule 4.6. Schedule 4.6
lists all real property, whether owned or not owned by AmeriCom, listing with
respect to each parcel the street address and the owner or lessor.
Section 4.7. Intellectual Property.
(a) Schedule 4.7 attached hereto lists and contains a description
of:
(i) All patents, patent applications and registrations,
trade marks, trade mark applications and registrations, copyrights, copyright
applications and registrations, trade names and industrial designs, domestic or
foreign, owned or used by AmeriCom or relating to the operation of the Business;
(ii) All trade secrets, know-how, inventions and other
intellectual property owned or used by AmeriCom or relating to the Business; and
(iii) All proprietary computer systems, software and
application software, owned or used by AmeriCom or relating to the Business,
(all of the foregoing being collectively called the "Intellectual Property").
<PAGE>10
(b) AmeriCom has good and valid title to all of the Intellectual
Property, free and clear of any and all Encumbrances, except in the case of any
Intellectual Property licensed to AmeriCom as disclosed in Schedule 4.7.
Complete and correct copies of all agreements whereby any rights in any of the
Intellectual Property have been granted or licensed to AmeriCom have been
provided to the Purchaser. No royalty or other fee is required to be paid by
AmeriCom to any other person in respect of the use of any of the Intellectual
Property except as provided in such agreements delivered to the Purchaser.
Except as indicated in Schedule 4.7, AmeriCom has the exclusive right to use all
of the Intellectual Property and has not granted any license or other rights to
any other person in respect of the Intellectual Property. Complete and correct
copies of all agreements whereby any rights in any of the Intellectual Property
have been granted or licensed by AmeriCom to any other person have been provided
to the Purchaser.
(c) Except as disclosed in Schedule 4.7, there are no
restrictions on the ability of AmeriCom or any successor to or assignee from
AmeriCom to use and exploit all rights in the Intellectual Property. All
statements contained in all applications for registration of the Intellectual
Property were true and correct as of the date of such applications. Each of the
trade marks and trade names included in the Intellectual Property is in use.
None of the rights of AmeriCom in the Intellectual Property will be impaired or
affected in any way by the transactions contemplated by this agreement.
(d) The conduct of the Business and the use of the Intellectual
Property does not infringe, and AmeriCom has not received any notice, complaint,
threat or claim alleging infringement of, any patent, trade mark, trade name,
copyright, industrial design, trade secret or other Intellectual Property or
proprietary right of any other person.
Section 4.8. Absence of Specific Changes. Except as set forth in
Schedule 4.8, since the AmeriCom Balance Sheet Date there has not been:
(a) Any change in the business, personnel, results of operations,
assets, financial condition, or manner of conducting the business of AmeriCom or
any AmeriCom Subsidiary other than changes in the ordinary course of business,
none of which has had an adverse effect on the business, results of operations,
assets, financial condition, or prospects of AmeriCom or any AmeriCom
Subsidiary;
(b) Any damage, destruction, or loss (whether or not covered by
insurance) adversely affecting any aspect of the business or operations of
AmeriCom or any AmeriCom Subsidiary;
(c) Any direct or indirect redemption or other acquisition by
AmeriCom of any of AmeriCom's shares of capital stock of any class, or any
declaration, setting aside, or payment of any dividend or other distribution of
AmeriCom's capital stock of any class;
<PAGE>11
(d) Any increase in the compensation payable or to become payable
by AmeriCom or any AmeriCom Subsidiary to any of its officers, employees, or
agents, other than the normal increases granted in the ordinary course of
business;
(e) Any option to purchase or other right to acquire stock of any
class of AmeriCom or any AmeriCom Subsidiary granted by AmeriCom or any AmeriCom
Subsidiary to any Person (other than as specified in Schedule 4.2(a) above);
(f) Any employment, bonus, or deferred compensation agreement
entered into between AmeriCom or any AmeriCom Subsidiary and any of its
directors, officers, or other employees or consultants;
(g) Any issuance of capital stock of any class by AmeriCom or any
AmeriCom Subsidiary;
(h) Any indebtedness incurred by AmeriCom or any AmeriCom
Subsidiary for borrowed money or any commitment to borrow money entered into by
AmeriCom or any guaranty given by AmeriCom;
(i) Any amendment to AmeriCom's Certificate of Incorporation or
Bylaws;
(j) Any delayed or postponed payment of any accounts payable or
other Liabilities outside the ordinary course of business; or
(k) Any discontinued or determined to be discontinued selling of
any products or services offered by AmeriCom, the sales of which have been
material to AmeriCom.
Section 4.9. Permit, Licenses, and Franchises. AmeriCom and each
AmeriCom Subsidiary have obtained all necessary permits, licenses, franchises,
and other authorizations and have complied with all laws applicable to the
conduct of their business in the manner and in the areas in which business is
presently being conducted; and all such permits, licenses, franchises, and
authorizations are valid and in full force and effect. Neither AmeriCom nor any
AmeriCom Subsidiary has engaged in any activity that would cause revocation or
suspension of any such permits, licenses, franchises, or authorizations; no
action or proceeding contemplating the revocation or suspension of any of them
is pending or threatened; and no approvals or authorizations will be required
after the consummation of the Merger to permit AmeriCom to continue its business
as presently conducted.
Section 4.10. Judgments, Decrees, or Orders Restraining Business.
Neither AmeriCom nor any AmeriCom Subsidiary is a party to or subject to any
judgment, decree, or Order entered in any suit or proceeding brought by any
governmental agency or by any other Person, enjoining AmeriCom or any AmeriCom
Subsidiary with respect to any business practice, the acquisition of any
property, or the conduct of business in any area.
<PAGE>12
Section 4.11. Insurance. During each of the past two (2) fiscal years,
AmeriCom and each AmeriCom Subsidiary have been adequately insured by
financially sound and reputable insurers with respect to risks normally insured
against and in amounts normally carried by companies similarly situated; all
such policies are in full force and effect; all premiums due on such policies
have been fully paid; and no notice of cancellation or termination has been
received with respect to any policy.
Section 4.12. Environmental Compliance; Hazardous Materials. AmeriCom
and each AmeriCom Subsidiary have complied in all material respects with, and
have not been cited for any violation of, federal, state, and local
environmental protection laws and regulations; and no material capital
expenditures will be required for compliance with any federal, state, or local
laws or regulations now in force relating to the protection of the environment.
As used in this paragraph, "Hazardous Material" means any hazardous or toxic
substance, material, or waste that is regulated by any federal authority or by
any state or local authority where the substance, material, or waste is located.
There are no underground storage tanks located on the real property described in
Schedule 4.6 in which any Hazardous Material has been or is being stored, nor
has there been any spill, disposal, discharge, or release of any Hazardous
Material into, upon, or over that real property or into or upon ground or
surface water on that real property. There are no asbestos containing materials
incorporated into the buildings or interior improvements that are part of that
real property or into other assets of AmeriCom or any AmeriCom Subsidiary, nor
is there any electrical transformer, fluorescent light fixture with ballasts, or
other equipment containing PCBs on that real property.
Section 4.14. No Violation of Other Instruments. The execution and
delivery of this Agreement do not, and the consummation of the Merger will not,
(i) violate any provision of AmeriCom's Certificate of Incorporation or Bylaws;
(ii) violate any provision of, result in the acceleration of any obligation
under, or result in the imposition of any lien or encumbrance on any asset of
AmeriCom pursuant to the terms of any mortgage, note, lien, lease, franchise,
license, permit, agreement, instrument, order, arbitration award, judgment, or
decree; (iii) result in the termination of any license, franchise, lease, or
permit to which AmeriCom is a party or by which AmeriCom is bound; or (iv)
violate or conflict with any other restriction of any kind or character to which
AmeriCom is subject. AmeriCom's Board of Directors will take all actions
required by law or by AmeriCom's Certificate of Incorporation or Bylaws, or
otherwise required or necessary to authorize the execution and delivery of this
Agreement and to authorize the merger of AmeriCom with and into DigiCities
pursuant to this Agreement.
Section 4.14. Contracts.
(a) Except as set forth in Schedule 4.14, all AmeriCom Contracts
have been entered into in the ordinary course of AmeriCom's business on
commercially reasonable terms, are valid and enforceable in all material
respects in accordance with their terms, are in full force and effect, and will
continue to be valid and enforceable and in full force and effect on identical
terms following the Effective Time. Except as set forth in Schedule 4.14, no
AmeriCom Contract is likely to result in a loss to AmeriCom upon completion of
the performance, and all AmeriCom Contracts can be fulfilled or performed by the
AmeriCom in accordance with their respective terms without
<PAGE>13
undue or unusual expenditures of money or effort. All AmeriCom Contracts are
listed on Schedule 4.14, and true, correct and complete copies of all AmeriCom
Contracts have been delivered to DigiCities.
(b) There are no existing material defaults, events of default or
events which, with the giving of notice or lapse of time, or both, would
constitute a material default by AmeriCom under any AmeriCom Contract. No event
has occurred which may hereafter give rise to any right of termination,
acceleration, damages or any other remedy under any AmeriCom Contract.
(c) To AmeriCom's knowledge, neither this Agreement, the Closing
nor the relationship between AmeriCom and DigiCities has caused or is likely to
cause the termination, redetermination, or renegotiation of any AmeriCom
Contract.
Section 4.15. Litigation. Except as set forth in Schedule 4.15, no
Action is pending or, to the knowledge of AmeriCom, threatened against, by or
affecting AmeriCom or any AmeriCom Subsidiary.
Section 4.16. Taxes. Except as set forth in Schedule 4.16, AmeriCom has
duly and timely filed all federal, state, municipal, local and foreign, if any,
tax returns and reports (including returns for estimated tax), and all reports
and returns of all other Governments having jurisdiction (collectively,
"Returns") with respect to all Taxes (including, without limitation,
consolidated or combined Returns of some or all of AmeriCom and any AmeriCom
Subsidiary); all such Returns and reports show the correct and proper amount
due; and the Taxes shown on all Returns and reports and all tax assessments
received by AmeriCom or any AmeriCom Subsidiary have been paid to the extent
that such Taxes or estimates are due. AmeriCom has previously provided to
DigiCities true, correct and complete copies of all Returns filed with respect
to the two (2) tax years preceding the date hereof. Except as set forth in
Schedule 4.15, all Taxes imposed on AmeriCom and any AmeriCom Subsidiary by any
Government (including all deposits in connection therewith required by
applicable Law, and all interest and penalties thereon) which have become due
and payable by AmeriCom for all periods through the date hereof have been paid
in full, and adequate reserves for all other Taxes, whether or not due and
payable, and whether or not disputed, have been set up on the books of AmeriCom,
and such reserves will be adequate to pay all Taxes of AmeriCom for all periods
through the Closing. There is not now any proposed assessment against AmeriCom
or any AmeriCom Subsidiary of additional Taxes of any kind. AmeriCom is not a
party to any tax sharing or tax allocation agreement, understanding, arrangement
or commitment. There is no dispute or Action concerning any Tax Liability of the
AmeriCom raised by a Government in writing.
Section 4.17. Employee Benefit Matters. Except as set forth in Schedule
4.17, neither AmeriCom nor any AmeriCom Subsidiary (i) has established or
contributed to any pension, profit-sharing, option, other incentive plan, or any
other type of employee benefit plan, (ii) maintains or has maintained, is or was
a party to, and otherwise participates and has participated in, on its own
behalf or on behalf of any former employees, any pension, profit-sharing,
option, other incentive plan, or any other type of employee benefit plan, or
(iii) has any obligation to, or customary arrangement with,
<PAGE>14
former employees, if any, for bonuses, incentive compensation, vacations,
severance pay, sick pay, sick leave, insurance, service award, relocation,
disability, tuition refund, or other benefits, whether oral or written.
Section 4.18. AmeriCom Reporting Requirements. The AmeriCom Common Stock
is registered under Section 12 of the Exchange Act and AmeriCom is subject to
the periodic reporting requirements of Section 13 of the Exchange Act. AmeriCom,
is and has been for the last 12 months, current in all filings required to be
made with the SEC. AmeriCom has heretofore provided DigiCities copies of all
forms, reports and other documents filed by it under the Exchange Act since
January 1, 1999.
Section 4.19. Disclosure. No representation or warranty by AmeriCom in
this Agreement and no statement by AmeriCom or any AmeriCom Subsidiary, by any
executive officer or other person or contained in any document, certificate, or
other writing furnished by or on behalf of AmeriCom to DigiCities in connection
with this transaction, contains or will contain any untrue statement of material
fact, or omits or will omit to state any material fact necessary to make it not
misleading or to fully provide the information required to be provided in the
document, certificate, or other writing.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF DIGICITIES
DigiCities represents and warrants to, and agrees with, AmeriCom that
all the following representations and warranties in this Article IV are as of
the date of this Agreement, and will be, as amended or supplemented pursuant to
Section 7.1 on the Closing Date, true and correct:
Section 5.1. Organization, Authority and Qualification.
(a) DigiCities is duly organized, validly existing, and in good
standing under the laws of California, and has the corporate power to own all of
its properties and assets and to carry on its business as it is now being
conducted. DigiCities is duly qualified to do business as a foreign corporation
and is in good standing in the jurisdictions listed in Schedule 5.1, and, except
as set forth in Schedule 5.1, neither the ownership of its property nor the
conduct of its business requires it to be qualified to do business in any other
jurisdiction.
(b) DigiCities's Board of Directors has authorized the execution
of this Agreement, and DigiCities has the corporate power and is duly
authorized, subject to the approval of this Agreement by its shareholders, to
merge DigiCities into AmeriCom pursuant to this Agreement.
Section 5.2. Ownership of Shares; Subsidiaries.
(a) DigiCities's authorized capital stock consists of 100,000
shares of Common Stock, no par value, of which 94,305 shares are issued and
outstanding. Except as set forth in
<PAGE>15
Schedule 5.2, all issued and outstanding shares have been validly issued in full
compliance with all federal and state securities laws, are fully paid and
nonassessable, and have voting rights. Except as set forth in Schedule 5.2,
there are no outstanding subscriptions, options, rights, warrants, convertible
securities, or other agreements or commitments obligating DigiCities to issue
any additional shares of its Common Stock.
(b) DigiCities does not have any subsidiary.
Section 5.3. Financial Statement, Financial Condition. The compilation
balance sheet of DigiCities as of June 30, 1999 ("DigiCities Current Balance
Sheet ") and the related statement of profits and losses through June 30, 1999
and the audited financial statements of DigiCities for the last two (2) fiscal
years ended December 31, 1998 and 1997, copies of which have been delivered by
DigiCities to AmeriCom, fairly present the financial position of DigiCities as
of June 30, 1999 and the results of operations for those years, and have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with that of preceding years.
Section 5.4. Title of Properties. Except as set forth in Schedule 5.4,
and except for the lien for any current taxes or assessments not yet delinquent,
DigiCities owns free and clear of any liens, claims, charges, options, or
encumbrances all the property reflected on its books at the DigiCities Current
Balance Sheet dated June 30, 1999 ("DigiCities Balance Sheet Date") and all
property acquired since that date, except such property as has been disposed of
in the ordinary course of business consistent with prior practices of DigiCities
or with AmeriCom's written consent. For purposes of this Section 5.4, a
disposition of any single asset (other than inventories) carried on the books of
DigiCities at more than $10,000 will be considered to be a disposition not in
the ordinary course of business.
Section 5.5. Inventory. The inventories of DigiCities reflected on the
DigiCities Current Balance Sheet, as well as all inventory items acquired since
the DigiCities Balance Sheet Date that are now the property of DigiCities,
consist of raw materials, supplies, work in process, and finished goods, of such
quality and in such quantities as are being used and will be usable or are being
sold and will be salable in the ordinary course of the business of DigiCities.
These inventories exclude scrap, slow moving items, and obsolete items, and are
valued at the lower of cost or market value, determined in accordance with
generally accepted accounting principles consistently applied. Since the
DigiCities Balance Sheet Date, DigiCities has continued to replenish these
inventories in a normal and customary manner consistent with prudent practice
prevailing in the business.
Section 5.6. Accounts Receivable. Except as set forth in Schedule 5.6,
all notes and accounts receivable shown on the DigiCities Current Balance Sheet
and all such receivables now held by DigiCities are valid and collectible
obligations and were not and are not subject to any offset or counterclaim,
except for amounts reserved against such receivables which are reflected on the
DigiCities Current Balance Sheet or otherwise set forth in Schedule 5.6. With
respect to notes and accounts receivable arising after the DigiCities Balance
Sheet Date and now outstanding, (except for a percentage thereof equal to the
percentage which has been historically reserved against receivable amounts on
the DigiCities Current Balance Sheet or in Schedule 5.6 for bad debts)
constitutes valid
<PAGE>16
and collectible obligations on such DigiCities Current Balance Sheet. DigiCities
currently factors its accounts receivable in the ordinary course of business.
Section 5.7. Interest in DigiCities's Property. Except as set forth in
Schedule 5.7, no officer, director, or shareholder of DigiCities has any
interest in any property, real or personal, tangible or intangible, including
copyrights, trademarks, or trade names, used in or pertaining to the business of
DigiCities.
Section 5.8. Real Property. DigiCities has good title to all of the real
property reflected in the DigiCities Current Balance Sheet as owned by
DigiCities, free and clear from all defects and liens, except as may be set
forth in the notes to the DigiCities Current Balance Sheet or in Schedule 5.8.
Schedule 5.8 lists all real property, whether owned or not owned by DigiCities,
listing with respect to each parcel the street address and the owner or lessor.
Section 5.9. Intellectual Property.
(a) Schedule 5.9 attached hereto lists and contains a description
of:
(i) All patents, patent applications and registrations,
trade marks, trade mark applications and registrations, copyrights, copyright
applications and registrations, trade names and industrial designs, domestic or
foreign, owned or used by DigiCities or relating to the operation of the
Business;
(ii) All trade secrets, know-how, inventions and other
intellectual property owned or used by DigiCities or relating to the Business;
and
(iii) All proprietary computer systems, software and
application software, owned or used by DigiCities or relating to the Business,
(all of the foregoing being collectively called the "Intellectual Property").
(b) DigiCities has good and valid title to all of the
Intellectual Property, free and clear of any and all Encumbrances, except in the
case of any Intellectual Property licensed to DigiCities as disclosed in
Schedule 5.9. Complete and correct copies of all agreements whereby any rights
in any of the Intellectual Property have been granted or licensed to DigiCities
have been provided to the Purchaser. No royalty or other fee is required to be
paid by DigiCities to any other person in respect of the use of any of the
Intellectual Property except as provided in such agreements delivered to the
Purchaser. Except as indicated in Schedule 5.9, DigiCities has the exclusive
right to use all of the Intellectual Property and has not granted any license or
other rights to any other person in respect of the Intellectual Property.
Complete and correct copies of all agreements whereby any
<PAGE>17
rights in any of the Intellectual Property have been granted or licensed by
DigiCities to any other person have been provided to the Purchaser.
(c) Except as disclosed in Schedule 5.9, there are no
restrictions on the ability of DigiCities or any successor to or assignee from
DigiCities to use and exploit all rights in the Intellectual Property. All
statements contained in all applications for registration of the Intellectual
Property were true and correct as of the date of such applications. Each of the
trade marks and trade names included in the Intellectual Property is in use.
None of the rights of DigiCities in the Intellectual Property will be impaired
or affected in any way by the transactions contemplated by this agreement.
(d) The conduct of the Business and the use of the Intellectual
Property does not infringe, and DigiCities has not received any notice,
complaint, threat or claim alleging infringement of, any patent, trade mark,
trade name, copyright, industrial design, trade secret or other Intellectual
Property or proprietary right of any other person.
Section 5.10. Absence of Undisclosed Liabilities. Except as set forth
in Schedule 5.10, there are no Liabilities of DigiCities other than the
following:
(a) Liabilities disclosed or provided for in the DigiCities
Current Balance Sheet, including the notes to the DigiCities Current Balance
Sheet; or
(b) Liabilities incurred in the ordinary course of business since
June 30, 1999, none of which has been adverse to the business of DigiCities, and
none of which is attributable to any period before the DigiCities Current
Balance Sheet.
Section 5.11. Absence of Specific Changes. Since the DigiCities Current
Balance Sheet there has not been:
(a) Any change in the business, personnel, results of operations,
assets, financial condition, or manner of conducting the business of DigiCities
other than changes in the ordinary course of business, none of which has had an
adverse effect on the business, results of operations, assets, financial
condition, or prospects of DigiCities;
(b) Any damage, destruction, or loss (whether or not covered by
insurance) adversely affecting any aspect of the business or operations of
DigiCities;
(c) Any direct or indirect redemption or other acquisition by
DigiCities of any of DigiCities' shares of capital stock of any class, or any
declaration, setting aside, or payment of any dividend or other distribution of
DigiCities' capital stock of any class;
(d) Any option to purchase, or other right to acquire stock of
any class of DigiCities granted by DigiCities to any Person (other than as
specified in Schedule 5.2 above);
<PAGE>18
(e) Any issuance of capital stock of any class by DigiCities;
(f) Any indebtedness incurred by DigiCities for borrowed money or
any commitment to borrow money entered into by DigiCities or any guaranty given
by DigiCities;
(g) Any amendment to DigiCities' Articles of Incorporation or
Bylaws or
(h) Any delayed or postponed payment of any accounts payable or
other Liabilities outside the ordinary course of business.
Section 5.12. Permit, Licenses, and Franchises. DigiCities has obtained
all necessary permits, licenses, franchises, and other authorizations and has
complied with all laws applicable to the conduct of their business in the manner
and in the areas in which business is presently being conducted; and all such
permits, licenses, franchises, and authorizations are valid and in full force
and effect. DigiCities has not engaged in any activity that would cause
revocation or suspension of any such permits, licenses, franchises, or
authorizations; no action or proceeding contemplating the revocation or
suspension of any of them is pending or threatened; and no approvals or
authorizations will be required after the consummation of the Merger to permit
DigiCities to continue its business as presently conducted.
Section 5.13. Judgments, Decrees, or Orders Restraining Business.
DigiCities is not a party to or subject to any judgment, decree, or Order
entered in any suit or proceeding brought by any governmental agency or by any
other Person, enjoining DigiCities with respect to any business practice, the
acquisition of any property, or the conduct of business in any area.
Section 5.14. Environmental Compliance; Hazardous Materials. DigiCities
has complied in all material respects with, and have not been cited for any
violation of, federal, state, and local environmental protection laws and
regulations; and no material capital expenditures will be required for
compliance with any federal, state, or local laws or regulations now in force
relating to the protection of the environment. As used in this paragraph,
"Hazardous Material" means any hazardous or toxic substance, material, or waste
that is regulated by any federal authority or by any state or local authority
where the substance, material, or waste is located. There are no underground
storage tanks located on the real property described in Schedule 5.8 in which
any Hazardous Material has been or is being stored, nor has there been any
spill, disposal, discharge, or release of any Hazardous Material into, upon, or
over that real property or into or upon ground or surface water on that real
property. There are no asbestos containing materials incorporated into the
buildings or interior improvements that are part of that real property or into
other assets of DigiCities, nor is there any electrical transformer, fluorescent
light fixture with ballasts, or other equipment containing PCBs on that real
property.
Section 5.15. No Violation of Other Instruments. The execution and
delivery of this Agreement do not, and the consummation of the Merger will not,
(i) violate any provision of DigiCities' Articles of Incorporation or Bylaws;
(ii) violate any provision of, result in the acceleration
<PAGE>19
of any obligation under, or result in the imposition of any lien or encumbrance
on any asset of DigiCities pursuant to the terms of any mortgage, note, lien,
lease, franchise, license, permit, agreement, instrument, order, arbitration
award, judgment, or decree; (iii) result in the termination of any license,
franchise, lease, or permit to which DigiCities is a party or by which
DigiCities is bound; or (iv) violate or conflict with any other restriction of
any kind or character to which DigiCities is subject. DigiCities' Board of
Directors will take all actions required by law, or by DigiCities' Articles of
Incorporation or Bylaws, or otherwise required or necessary to authorize the
execution and delivery of this Agreement and to authorize the merger of
DigiCities with and into AmeriCom pursuant to this Agreement.
Section 5.16. Contracts.
(a) Schedule 5.16 sets forth all DigiCities Contracts which have
been entered into in the ordinary course of DigiCities' business on commercially
reasonable terms, are valid and enforceable in all material respects in
accordance with their terms, are in full force and effect, and will continue to
be valid and enforceable and in full force and effect on identical terms
following the Effective Time. Except as set forth in Schedule 5.16, no
DigiCities Contract is likely to result in a loss to DigiCities upon completion
of the performance, and all DigiCities Contracts can be fulfilled or performed
by the DigiCities in accordance with their respective terms without undue or
unusual expenditures of money or effort. All DigiCities Contracts are listed on
Schedule 5.16, and true, correct and complete copies of all DigiCities Contracts
have been delivered to AmeriCom.
(b) There are no existing material defaults, events of default or
events which, with the giving of notice or lapse of time, or both, would
constitute a material default by DigiCities under any DigiCities Contract. No
event has occurred which may hereafter give rise to any right of termination,
acceleration, damages or any other remedy under any DigiCities Contract.
(c) To DigiCities' knowledge, neither this Agreement, the Merger
nor the relationship between DigiCities and AmeriCom has caused or is likely to
cause the termination, redetermination, or renegotiation of any DigiCities
Contract except the Agreement between AmeriCom and DigiCities dated August 3,
1999 which will be terminated and superseded by this Agreement.
Section 5.17. Litigation. Except as set forth in Schedule 5.17, no
Action is pending or, to the knowledge of DigiCities, threatened against, by or
affecting DigiCities.
Section 5.18. Taxes. Except as set forth in Schedule 5.18, DigiCities
has duly and timely filed all federal, state, municipal, local and foreign, if
any, tax returns and reports (including returns for estimated tax), and all
reports and returns of all other Governments having jurisdiction (collectively,
"Returns") with respect to all Taxes; all such Returns and reports show the
correct and proper amount due; and the Taxes shown on all Returns and reports
and all tax assessments received by DigiCities has been paid to the extent that
such Taxes or estimates are due. DigiCities has previously provided to AmeriCom
true, correct and complete copies of all Returns filed with respect
<PAGE>20
to the two (2) tax years preceding the date hereof. Except as set forth in
Schedule 5.18, all Taxes imposed on DigiCities by any Government (including all
deposits in connection therewith required by applicable Law, and all interest
and penalties thereon) which have become due and payable by DigiCities for all
periods through the date hereof have been paid in full, and adequate reserves
for all other Taxes, whether or not due and payable, and whether or not
disputed, have been set up on the books of DigiCities, and such reserves will be
adequate to pay all Taxes of DigiCities for all periods through the Closing.
There is not now any proposed assessment against DigiCities of additional Taxes
of any kind. DigiCities is not a party to any tax sharing or tax allocation
agreement, understanding, arrangement or commitment. There is no dispute or
Action concerning any Tax Liability of the DigiCities raised by a Government in
writing.
Section 5.19. Employee Benefit Matters. DigiCities (i) has not
established or contributed to any pension, profit-sharing, option, other
incentive plan, or any other type of employee benefit plan, (ii) has not
maintain or maintained, is or was a party to, and otherwise participates and has
participated in, on its own behalf or on behalf of any former employees, any
pension, profit-sharing, option, other incentive plan, or any other type of
employee benefit plan, or (iii) has no obligation to, or customary arrangement
with, former employees, if any, for bonuses, incentive compensation, vacations,
severance pay, sick pay, sick leave, insurance, service award, relocation,
disability, tuition refund, or other benefits, whether oral or written.
Section 5.20. Reporting Requirements. The DigiCities Common Stock has
not been registered under Section 12 of the Exchange Act and DigiCities is not
subject to the periodic reporting requirements of Section 15(d) of the Exchange
Act.
Section 5.21. Records The stock ledgers and stock transfer books and the
minutes records of DigiCities relating to all issuances and transfers of stock
by DigiCities, and all proceedings of the stockholders, the Board of Directors,
and the committees hereof of DigiCities since its incorporation made available
to AmeriCom are accurate stock ledgers and stock transfer books (as provided by
the transfer agent) and minute book records of DigiCities or exact copies
thereof. The corporate minute books of DigiCities are complete and each of the
minutes contained therein accurately reflect the actions that were taken at the
duly called and held meeting or by consent without a meeting. All actions by
DigiCities which required director or stockholder approval are reflected in the
corporate minute books of DigiCities. DigiCities is not in violation or breach
of, or in default with respect to, any terms of its respective certificates of
incorporation (or other charter documents) or bylaws.
Section 5.22. Labor Disputes. No work stoppage or other labor dispute
with respect to DigiCities is pending or threatened, and no application for
certification of a collective bargaining agent is pending or threatened.
Section 5.23. Insurance. During each of the past two (2) fiscal years,
DigiCities has been adequately insured by financially sound and reputable
insurers with respect to risks normally insured against and in amounts normally
carried by companies similarly situated; all such policies are in full
<PAGE>21
force and effect; all premiums due on such policies have been fully paid; and no
notice of cancellation or termination has been received with respect to any
policy.
Section 5.24. Shareholder Relations. DigiCities is not aware of any
actions or threatened action by any shareholder(s) against DigiCities or any
officers or directors thereof. DigiCities believes its shareholder relations are
good.
Section 5.25. Disclosure. No representation or warranty by DigiCities in
this Agreement and no statement by DigiCities, by any executive officer or other
person or contained in any document, certificate, or other writing furnished by
or on behalf of DigiCities to AmeriCom to in connection with this transaction,
contains or will contain any untrue statement of material fact, or omits or will
omit to state any material fact necessary to make it not misleading or to fully
provide the information required to be provided in the document, certificate, or
other writing.
ARTICLE VI.
COVENANTS
Section 6.1 Covenants of DigiCities.
DigiCities hereby covenants to AmeriCom as follows:
(a) Until the Effective Time, DigiCities will immediately advise
AmeriCom in a detailed written notice of any fact or occurrence of any pending
or threatened occurrence of which DigiCities obtains knowledge and which (if
existing and known at the date of the execution of this Agreement) would have
been required to be set forth or disclosed in or pursuant to this Agreement or
which, if existing and known at any time prior to or at the Effective Time,
would make the performance by any party of a covenant contained in this
Agreement impossible or make such performance materially more difficult than in
the absence of such fact or occurrence.
(b) Before DigiCities releases any information concerning this
Agreement, the Merger, or any of the other transactions contemplated by this
Agreement which is intended for, or may result in, public dissemination thereof,
DigiCities shall notify AmeriCom, shall furnish drafts of all documents or
proposed oral statements to AmeriCom for comment, and shall not release any such
information without the consent of AmeriCom, which consent shall not be
unseasonably withheld. Nothing contained herein shall prevent DigiCities from
releasing any information if required to do so by law.
(c) Until the Effective Time, no amendment will be made in the
Articles of Incorporation or Bylaws of DigiCities.
(d) Until the Effective Time, no share of capital stock of
DigiCities, option or warrant for any such share, right to subscribe for or
purchase any such share, or security convertible
<PAGE>22
into or exchangeable for any such share shall be issued or sold by DigiCities
except with notice to and the consent of AmeriCom.
(e) Until the Effective Time, no dividend or liquidating or other
distribution or stock split shall be authorized, declared paid, or effected by
DigiCities in respect of the outstanding shares of DigiCities Common Stock.
Until the Effective Time, no direct or indirect redemption, purchase, or other
acquisition shall be made by DigiCities of shares of DigiCities Common Stock.
(f) Until the Effective Time, DigiCities shall not borrow money
or otherwise incur any indebtedness, except in the ordinary course of business
or with notice to and consent of AmeriCom.
(g) Until the Closing Date, DigiCities will afford the officers,
directors, employees, counsel, agents, investment bankers, accountants, and
other representatives of AmeriCom free and full access to the properties, books,
and records of DigiCities, will permit them to make extracts from and copies of
such books and records, and will from time to time furnish AmeriCom with such
additional financial and operating data and other information as to the
financial condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of DigiCities as AmeriCom from time to time may
request. Until the Closing Date, DigiCities will cause the independent certified
public accountants of DigiCities to make available to AmeriCom and its
independent certified public accountants the work papers relating to the
DigiCities financial statements prepared by them.
(h) Until the Effective Time, DigiCities will conduct its affairs
so that at the Effective Time, no representation or warranty of DigiCities will
be inaccurate, no covenant or agreement of DigiCities will be breached, and no
condition in this Agreement will remain unfulfilled by reason of the actions or
omissions of DigiCities. Until the Effective Time, DigiCities will conduct its
affairs in all respects only in the ordinary course of business and will use its
best efforts to preserve the business operations of DigiCities intact, to keep
available services of its present personnel, to preserve in full force and
effect the contracts, agreements instruments, leases, licenses, arrangements,
and understandings of DigiCities and to preserve the good will of its suppliers,
customers, and others having business relations with it.
(i) DigiCities shall not make any agreement or reach any
understanding not approved by AmeriCom as a condition for obtaining any consent,
authorization, approval, order, license, certificate, or permit required for the
consummation of the transactions contemplated by this Agreement.
(j) Prior to the Closing Date, DigiCities shall assist AmeriCom
in the timely preparation and filing of all documents necessary to be filed with
the California Secretary of State. DigiCities will comply with any applicable
transfer tax statutes that require any such filing before the Effective Time.
<PAGE>23
(k) DigiCities agrees to indemnify and hold harmless AmeriCom's
officers, directors, employees, agents, and counsel, in each case past, present,
or as they may exist at any time after the date of this Agreement, and each
person, if any, who controls, controlled, or will control AmeriCom within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, and, if the Merger is abandoned or terminated pursuant to Article VIII or
otherwise except solely as a result of a breach of this Agreement by AmeriCom
(the "AmeriCom Indemnitees"), against any and all losses, liabilities, claims,
damages, and expenses whatsoever (which shall include, for all purposes of this
Section 6.1(k), but not be limited to, counsel fees and any and all expenses
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation, in each case whether or
not involving a third party) as and when incurred arising out of, based upon, or
in connection with (i) any untrue statement or alleged untrue statement of a
material fact contained in any application or other document or communication
executed by, or on behalf of, DigiCities filed with any governmental authority
in connection with the Merger; or any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided in each case that such untrue statement,
alleged untrue statement, omission, or alleged omission relates to information
furnished by or on behalf of, or pertaining to, DigiCities, or any DigiCities
security holder, and (ii) any breach of any representation, warranty, covenant,
or agreement of DigiCities contained in this Agreement. The foregoing agreement
to indemnify shall be in addition to any liability DigiCities may otherwise
have, including liabilities arising under this Agreement.
Section 6.2. Covenants of AmeriCom.
(a) Until the Effective Time, AmeriCom will comply with all
disclosure requirements of Sections 13, 14 and 16 of the Exchange Act.
(b) Before AmeriCom or any AmeriCom Subsidiary releases any
information concerning this Agreement, the Merger, or any of the other
transactions contemplated by this Agreement which is intended for, or may result
in, public dissemination thereof, AmeriCom and the AmeriCom Subsidiaries shall
notify DigiCities, shall furnish drafts of all documents or proposed oral
statements to DigiCities for comment, and shall not release any such information
without the consent of DigiCities, which consent shall not be unreasonably
withheld. Nothing contained herein shall prevent AmeriCom from releasing any
information if required to do so by law, or pursuant to Section 6.2(a).
(c) Until the Effective Time, no amendment will be made in the
Certificate of Incorporation or Bylaws of AmeriCom.
(d) Until the Effective Time, no dividend or liquidating or other
distribution or stock split shall be authorized, declared, paid, or effected by
AmeriCom in respect of the outstanding shares of AmeriCom Common Stock. Until
the Effective Time, no direct or indirect redemption,
<PAGE>24
purchase, or other acquisition shall be made by AmeriCom or any Subsidiary of
shares of AmeriCom Common Stock.
(e) Until the Closing Date, AmeriCom will afford the officers,
directors, employees, counsel, agents, investment bankers, accountants, and
other representatives of DigiCities and lenders, investors, and prospective
lenders and investors free and full access to the plants, properties, books, and
records of AmeriCom and the Subsidiaries, and will permit them to make extracts
from and copies of such books and records.
(f) Until the Effective Time, AmeriCom and AmeriCom Subsidiaries
will conduct their affairs so that at the Effective Time no representation or
warranty of AmeriCom will be inaccurate, no covenant or agreement of AmeriCom
will be breached, and no condition in this Agreement will remain unfulfilled by
reason of the actions or omissions of AmeriCom or any AmeriCom Subsidiary.
(g) AmeriCom agrees to indemnify and hold harmless DigiCities'
officers, directors, employees, agents, and counsel, in each case past or
present, and each person, if any, who controls, controlled, or will control
DigiCities within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act and, if the Merger is abandoned or terminated pursuant
to Article IX or otherwise solely as a result of a breach of this Agreement by
AmeriCom (the "DigiCities Indemnitees"), against any and all losses,
liabilities, claims, damages and expenses whatsoever (which shall include, for
all purposes of this Section 6.2(g), but not be limited to, counsel fees and any
and all expenses whatsoever incurred in investigating, preparing, or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation, in each case
whether or not involving a third party) as and when incurred arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained in any application or other document or
communication decided by or on behalf of AmeriCom filed with any governmental
authority in connection with the Merger; or any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided in each case that such untrue
statement, alleged untrue statement, omission, or alleged omission relates to
information furnished by or on behalf of, or pertaining to, AmeriCom, any
AmeriCom Subsidiary, or any AmeriCom security holder, or (ii) any breach of any
representation, warranty, covenant, or agreement of AmeriCom contained in this
Agreement. The foregoing agreement to indemnify shall be in addition to any
liability AmeriCom may otherwise have, including liabilities arising under this
Agreement.
(h) Prior to the Effective Time, neither AmeriCom nor any
AmeriCom Subsidiary shall recapitalize or reclassify its respective outstanding
capital stock or effect any stock dividend, stock split, or reverse stock split.
(i) Prior to the Closing Date, AmeriCom shall prepare and file
with the California Department of Corporations ("DOC") applications for a
Fairness Hearing and reorganization permit.
<PAGE>25
AmeriCom shall use its best efforts to obtain a Fairness Order and limited
offering qualification for the Merger.
Section 6.3. Post-Closing Covenants.
(a) After the Effective Time, AmeriCom will use its best,
commercially reasonable efforts to remove Joseph Jacobson as a guarantor of
DigiCities debts and, if required, substitute AmeriCom as a substitute Guarantor
to replace Mr. Jacobson.
(b) After the Effective Time, AmeriCom will appoint Scott Carni
as President of the new DigiCities Division of AmeriCom, to serve in such
capacity for so long as he faithfully and competently carries out the duties of
such position.
(c) After the Effective Time, AmeriCom intends to seek listing of
its common stock on the NASD's OTC Bulletin Board.
ARTICLE VII.
CONDITIONS TO THE MERGER
Section 7.1. Conditions Precedent to AmeriCom's Obligation to Close.
AmeriCom's obligation to consummate the Merger is subject to the satisfaction,
on or before the Closing Date, of the following conditions:
(a) Each of the acts and undertakings of DigiCities to be
performed on or before the Closing Date pursuant to the terms of this Agreement
has been duly performed.
(b) DigiCities has furnished AmeriCom with a copy, certified by
DigiCities' secretary, of (i) a resolution or resolutions duly adopted by
DigiCities' Board of Directors authorizing and approving this Agreement and
directing that it be submitted to a vote of DigiCities' shareholders, and (ii) a
resolution or resolutions adopting this Agreement, duly approved by the holders
of at least a majority of the total number of outstanding shares of Common Stock
of DigiCities.
(c) All the representations and warranties of DigiCities
contained in this Agreement and in the schedules required pursuant to Article IV
are true in every respect on the Closing Date, with the same effect as though
such representations and warranties had been made on that date; and AmeriCom has
received at the Closing a certificate, dated the Closing Date and executed by
the President or a Vice President of DigiCities, containing a verification to
that effect.
(d) DigiCities has furnished AmeriCom with a favorable opinion of
DigiCities' counsel dated the Closing Date, substantially in the form attached
as Appendix A. In addition to matters specified in the form, the opinion must
include such other matters incident to the contemplated transactions as are
reasonably requested by AmeriCom or its counsel.
<PAGE>26
(e) AmeriCom has received, or has satisfied itself that it will
receive, in form satisfactory to it, all necessary approvals of the transactions
contemplated by this Agreement from authorities having any jurisdiction over the
business or transactions of DigiCities so that DigiCities may continue to carry
on their business as presently conducted after consummation of the Merger; and
no such approval and no license or permit granted to DigiCities has been
withdrawn or suspended.
(f) All consents of other parties to the mortgages, notes,
leases, franchises, agreements, licenses, and permits of DigiCities necessary to
permit consummation of the Merger have been obtained.
(g) DigiCities has delivered the schedules as required in Article
V, updated through the Closing Date.
(h) In its sole and absolute discretion, AmeriCom is satisfied
with any matter reflected, listed, or disclosed in the updated schedules that
was not reflected, listed, or disclosed in the original schedules.
(i) DigiCities has delivered to AmeriCom an executed non-compete
agreement from each of the individuals as set forth in Schedule 7.1(i), in
substantially the form of Exhibit A attached to the Agreement.
Section 7.2. Conditions Precedent to DigiCities' Obligation to Close.
DigiCities' obligation to consummate the Merger is subject to the satisfaction,
on or before the Closing Date, of the following conditions:
(a) Each of the acts and undertakings of AmeriCom to be performed
on or before the Closing Date pursuant to the terms of this Agreement has been
duly performed.
(b) AmeriCom has furnished DigiCities with a copy, certified by
AmeriCom's secretary, of a resolution or resolutions duly adopted by AmeriCom's
Board of Directors authorizing and approving this Agreement and directing that
it be submitted to a vote of AmeriCom's shareholders, and (ii) a resolution or
resolutions adopting this Agreement, duly approved by the holders of at least a
majority of the total number of outstanding shares of Common Stock of AmeriCom.
(c) All the representations and warranties of AmeriCom contained
in this Agreement and in the schedules required pursuant to Article IV are true
in every respect on the Closing Date, with the same effect as though such
representations and warranties had been made on that date; and DigiCities has
received at the Closing a certificate, dated the Closing Date and executed by
the President or a Vice President of AmeriCom, containing a verification to that
effect.
<PAGE>27
(d) DigiCities has received, or has satisfied itself that it will
receive, in form satisfactory to it, all necessary approvals of the transactions
contemplated by this Agreement from authorities having jurisdiction over the
business or transactions of AmeriCom or any AmeriCom Subsidiary so that AmeriCom
and AmeriCom Subsidiaries may continue to carry on their business as presently
conducted after consummation of the Merger; and no such approval and no license
or permit granted to AmeriCom or any AmeriCom subsidiary has been withdrawn or
suspended.
(e) All consents of other parties to the mortgages, notes,
leases, franchises, agreements, licenses, and permits of AmeriCom or any
AmeriCom Subsidiary necessary to permit consummation of the Merger have been
obtained.
(f) AmeriCom has delivered the schedules as required in Article
IV, updated through the Closing Date.
Section 7.3. Additional Conditions to the Obligations of DigiCities.
(a) The obligations of DigiCities to consummate the Merger is
subject to the satisfaction of the following additional conditions: (i) AmeriCom
shall receive a limited offering permit from the State of California, Department
of Corporations pursuant to Section 25120 of the California Corporations Code
and a Fairness Order pursuant to Section 25142 of the California Corporations
Code; and (ii) the availability of Section 3(a)(10) exemption under the
Securities Act of 1933, as amended.
(b) Upon the Closing Date, AmeriCom will pay those certain
outstanding payables identified in Schedule 7.3.
(c) AmeriCom will enter into an Indemnification Agreement with
Joseph Jacobson as of the Closing Date whereby AmeriCom will indemnify Mr.
Jacobson for any claims made against him as a Guarantor of DigiCities
liabilities up to an aggregate amount of $85,000.
ARTICLE VIII.
SURVIVAL OF WARRANTIES
The representations and warranties included or provided for in this
Agreement or in any schedule or certificate or other document delivered pursuant
to this Agreement will survive the Closing Date for a period of one (1) year. No
claim may be made under this Article VIII unless written notice of the claim is
given within that one (1) year period.
ARTICLE IX.
TERMINATION OF AGREEMENT
Section 9.1. Termination by AmeriCom. As soon as practicable, and in
any event within fifteen (15) days after the receipt of (i) the last schedule
required to be delivered to AmeriCom by
<PAGE>28
DigiCities pursuant to Article V and (ii) any supporting documentation requested
by AmeriCom, AmeriCom will give DigiCities notice if AmeriCom has decided that
it wishes to terminate this Agreement based on any information contained in any
of the schedules or obtained during the course of its investigation pursuant to
Section 6.1. The notice will specify the information contained in the schedules
or obtained during the investigation on which AmeriCom's decision to terminate
is based. DigiCities will have ten (10) days after the receipt of the notice to
review that information with AmeriCom. If AmeriCom does not withdraw its notice
within this five (5) day period, all further obligations of AmeriCom and
DigiCities under this Agreement will terminate without further liability of
AmeriCom to DigiCities or of DigiCities to AmeriCom, except their respective
obligations as provided in Section 9.3. If AmeriCom does not advise DigiCities
within the fifteen (15) day period specified in the first sentence above that it
wishes to terminate this Agreement, AmeriCom will be considered to be satisfied
with the information relating to DigiCities contained in the schedules or
obtained during the course of its investigation, subject to AmeriCom's rights
concerning the continued accuracy of DigiCities' representations and warranties
as required in Section 6.1.
Section 9.2. Termination. This Agreement and the transactions
contemplated under this Agreement may be terminated at any time before the
Closing Date, either before or after the approval of DigiCities' shareholders is
obtained:
(a) By mutual consent of AmeriCom and DigiCities;
(b) By AmeriCom if there has been a material misrepresentation or
a material breach of warranty in DigiCities' representations and warranties set
forth in this Agreement or in any schedule or certificate delivered pursuant to
this Agreement;
(c) By DigiCities if there has been a material misrepresentation
or a material breach of warranty in AmeriCom's representations and warranties
set forth in this Agreement or in any schedule or certificate delivered pursuant
to this Agreement;
(d) By AmeriCom or DigiCities if either party will have
determined in its sole discretion that the transactions contemplated by this
Agreement have become inadvisable or impracticable by reason of the institution
or threat of institution, by governmental authorities (local, state, or federal)
or by any other Person, of material litigation or proceedings against either or
both of the parties, it being understood and agreed that a written request by
governmental authorities for information with respect to the proposed
transactions, which could be used in connection with such litigation or
proceedings, may be considered by AmeriCom or DigiCities to be a threat of
material litigation or proceedings, whether such request is received before or
after the date of this Agreement;
(e) By AmeriCom if it has determined that the business, assets,
or financial condition of DigiCities taken as a whole, have been materially and
adversely affected, whether by reason of changes, developments, or operations in
the ordinary course of business or otherwise;
<PAGE>29
(f) By AmeriCom if it has determined that the business, assets,
or financial condition of DigiCities taken as a whole, have been materially and
adversely affected, whether by reason of changes, developments, or operations in
the ordinary course of business or otherwise;
(g) By DigiCities if it has determined that the business, assets,
or financial condition of AmeriCom taken as a whole, have been materially and
adversely affected, whether by reason of changes, developments, or operations in
the ordinary course of business or otherwise;
(h) By AmeriCom if any condition set forth in Section 7.1 is
not satisfied prior to the Closing Date;
(i) By DigiCities if any condition set forth in Sections 7.2 or
7.3 is not satisfied prior to the Closing Date; and
(j) By DigiCities or by AmeriCom if the Closing Date referred to
in Section 1.2 has not occurred by October 31, 1999.
Section 9.3. Right to Proceed. In the event that this Agreement is
terminated pursuant to Article IX, or because of the failure to satisfy any of
the conditions specified in Article VII, all further obligations of AmeriCom and
of DigiCities under this Agreement will terminate without further liability of
AmeriCom to DigiCities or DigiCities to AmeriCom, except for the obligations of
both parties under Sections 9.3, 9.4, 10.5, 10.2 and 11.5; provided, however,
despite anything in this Agreement to the contrary, that if DigiCities fails to
satisfy any of the conditions specified in Article VI, AmeriCom will nonetheless
have the right, in its discretion, to proceed with the transactions contemplated
by this Agreement.
Section 9.4. Return of Documents. In the event of the termination of
this Agreement for any reason, each party will return to the other party all
documents, work papers, and other materials (including copies) relating to the
transactions contemplated in this Agreement, whether obtained before or after
execution of this Agreement. Each party will not use any information so obtained
for any purpose, and will take all practicable steps to have such information
kept confidential.
ARTICLE X.
ADDITIONAL AGREEMENTS
Section 10.1. Expenses. Except as otherwise provided herein, all
expenses incurred by AmeriCom in connection with the negotiations among the
parties, and the authorization, preparation, execution and performance of this
Agreement and the transactions contemplated hereby shall be paid by AmeriCom.
Except as otherwise provided herein, all expenses incurred by DigiCities in
connection with the negotiations among the parties, and the authorization,
preparation, execution and performance of this Agreement and the transactions
contemplated hereby shall be paid by DigiCities. AmeriCom will pay up to $10,000
of all legal fees incurred by DigiCities in consummating this Merger
transaction.
<PAGE>30
Section 10.2. Publicity. All press releases and other public
announcements respecting the subject matter hereof shall be made in compliance
with Sections 6.1(b) and 6.2(b).
Section 10.3. Approval of DigiCities Shareholders. DigiCities will take
all necessary steps to obtain approval of the merger transaction by a majority
of the DigiCities shareholders within ten (10) days from the date the Department
of Corporation approves the mailing of the Fairness Hearing Notice, which number
of days includes adequate time for the preparation and mailing of information to
shareholders. In all material sent to or other communications with the
shareholders on this subject, DigiCities's Board of Directors will recommend to
the shareholders that they adopt the Plan of Merger and approve the terms of
this Agreement. DigiCities shareholders will also be advised of their appraisal
rights, should they object to the merger transaction.
Section 10.4. Approval of AmeriCom Shareholders. AmeriCom will take all
necessary steps to obtain approval of the merger transaction by a majority of
the AmeriCom shareholders within ten (10) days from the date the Department of
Corporation approves the mailing of the Fairness Hearing Notice, which number of
days includes adequate time for the preparation and mailing of information to
shareholders. In all material sent to or other communications with the
shareholders on this subject, AmeriCom's Board of Directors will recommend to
the shareholders that they adopt the Plan of Merger and approve the terms of
this Agreement. AmeriCom shareholders will also be advised of their appraisal
rights, should they object to the merger transaction.
ARTICLE XI.
MISCELLANEOUS
Section 11.1. Governing Law; Counterparts. This Agreement (a) will be
construed under and in accordance with the laws of the State of California; (b)
will be binding on and will inure to the benefit of the parties to the Agreement
and their respective successors and assigns; (c) may be executed in one or more
counterparts, all of which will be considered one and the same Agreement, and
will become effective when one (1) or more counterparts will have been signed by
each of the parties and delivered to AmeriCom and DigiCities; and (d) embodies
the entire Agreement and understanding, superseding all prior agreements and
understandings between DigiCities and AmeriCom relating to the subject matter of
this Agreement.
Section 11.2. Notices. All notices or other communications required
hereunder shall be in writing and shall be sufficient in all respects and shall
be deemed delivered after five (5) days if sent via registered or certified
mail, postage prepaid; the next day if sent by overnight courier service; or one
(1) business day after transmission, if sent by facsimile to the following:
If to AmeriCom: Robert Cezar, President
AmeriCom USA, Inc.
1303 Grand Avenue
Arroyo Grande, CA 93420
Facsimile: (805) 473-4022
<PAGE>31
With A Copy To: Scott E. Bartel, Esq.
Bartel Eng Linn & Schroder
300 Capitol Mall, Suite 1100
Sacramento, CA 95814
Facsimile: (916) 442-3442
If to DigiCities: Scott Carni, President
DigiCities, Inc.
5855 Green Valley Circle
Suite 206
Culver City, CA 90230
Facsimile: (310) 670-9175
With a Copy To: Alan Barkan, Esq.
Lopshire & Barkan
21550 Oxnard Street
Suite 630
Woodland Hills, CA 91367
Facsimile: (818) 703-6975
Each party shall promptly notify the other party in writing of any
change of address.
Section 11.3. Waiver. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver must be in writing and be
authorized by a resolution of the Board of Directors or by a duly authorized
officer of the waiving party.
Section 11.4. Binding Effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of DigiCities and AmeriCom and their
respective successors and assigns; provided, however, that no party hereto shall
have the right to assign its rights and obligations hereunder without the prior
written consent of the other parties hereto.
Section 11.5. No Third Party Beneficiaries. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as provided in Section 11.4.
Section 11.6. Amendments. This Agreement may be amended only by the
written agreement of all parties; provided, however, that if amended after the
meeting of the shareholders of DigiCities,
<PAGE>32
the terms regarding the conversion contained in Section 3.1(a) will not be
amended without the further approval of DigiCities' shareholders as required by
law.
[remainder of page intentionally left blank -- signature page follows]
<PAGE>33
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its duly authorized officers, all as of the day and
year first above written.
AmeriCom USA, Inc.,
A Delaware Corporation
By: /s/ ROBERT CEZAR
-------------------------
Robert Cezar, President
By: /s/ HELEN COOPER
------------------------
Helen Cooper, Secretary
DigiCities, Inc.
A California Corporation
By: /s/ SCOTT CARNI
------------------------
Scott Carni, President
By: /s/ CHAD LEMS
-------------------------
Chad Lems, Secretary
<PAGE>
AMENDMENT AGREEMENT
This Agreement dated November 15, 1999 is an Amendment Agreement to the Merger
and Recapitalization Agreement and Plan of Reorganization, dated September 27.
1999, in which digiCities will merge into the Corporation (the "Merger") and
modifies the existing Agreement of the Parties.
WHEREAS, the Board of Directors of each company resolved on September 27,
1999 to approve the Merger and Recapitalization Agreement and Plan of
Reorganization, dated September 27, 1999, in which digiCities will merge into
the Corporation; and
WHEREAS, the Merger is to be approved by the State of California Corporations
Division at a Fairness Hearing; and
WHEREAS, the date for the Fairness Hearing has yet to be assigned by the
State;
NOW THEREFORE, the parties hereby agree to an extension of the Merger
Agreement and Plan of Reorganization for an additional sixty (60) days to
January 15, 2000.
IN WITNESS WHEREOF the Parties have cause this Amendment Agreement to be duly
executed on the dates as noted below.
AMERICOM USA, INC. DIGICITIES, INC.
Per: /s/ ROBERT CEZAR Per: /S/ SCOTT CARNI
------------ ------------
Name: Robert Cezar Name: Scott Carni
Title: Title: President
Dated: November 16, 1999 Dated: November 16, 1999
------------------ ------------------
<PAGE>
EXHIBIT B
FINANCIAL STATEMENTS OF AMERICOM
AS OF SEPTEMBER 30, 1999 AND
PRO FORMA FINANCIAL STATEMENTS
ASSUMING THE MERGER WITH DIGICITIES
HAD OCCURRED ON SEPTEMBER 30, 1999
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1: Financial Statements:
Unaudited Consolidated Balance Sheets-
September 30, 1999 and June 30, 1999 3
Unaudited Consolidated Statements of Operations -
Three months ended September 30, 1999
and September 30, 1998 4
Unaudited Consolidated Statement of Changes
in Stockholders' Equity for the Three
Months ended September 30, 1999 5
Unaudited Consolidated Statements of Cash
Flows-Three months ended September 30, 1999
and September 30, 1998 6
Notes to Unaudited Consolidated Financial Statement 7-9
Pro Forma Condensed Consolidated Balance Sheet
as of September 30, 1999 10
Pro Forma Condensed Consolidated Statement of
Operations for the Three Months ended September
30, 1999 11
Notes to ProForma Consolidated Financial Statements 12
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-16
PART II. OTHER INFORMATION
Item 5: Other Information 17
Item 6: Exhibits and Reports on Form 8-K 17
Signature 18
<PAGE>3
AmeriComUSA, Inc. and Subsidiaries
Interim Consolidated Balance Sheet
September 30, 1999 and June 30, 1999
(Unaudited)
ASSETS
<TABLE>
<S> <C> <C>
Sept. 30, 1999 June 30, 1999
-------------- ---------------
Current Assets:
Cash $ 34,485 5,497
Accounts Receivable 167,451 33,819
Advances Receivable 56,054 53,930
Other Current Assets 101,179 10,338
-------------- ---------------
Total Current Assets 359,169 103,584
Property and Equipment, Net 521,623 537,223
Other Assets:
Software, net 1,301,669 1,441,134
Advances pursuant to merger- cash and common stock 520,000 520,000
MyLine software cost, net 1,324,389 1,452,556
Goodwill, net 362,609 383,528
Deposits 20,534
-------------- ---------------
Total Other Assets 3,508,667 3,817,752
-------------- ---------------
TOTAL ASSETS $ 4,389,459 4,458,559
============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Liabilities:
Accounts Payable $ 1,040,360 1,371,503
Payroll Taxes Payable 468,398 150,917
Accrued Payables 621,213 233,620
Notes & Loans Payable - Short Term 235,404 974,096
Convertible Promissory Notes 361,004 150,000
-------------- ---------------
Total Current Liabilities 2,726,379 2,880,136
Notes & Loans Payable - Long Term 610,143 200,000
-------------- ---------------
TOTAL LIABILITIES 3,336,522 3,080,136
Refundable Common Stock:
Common Stock - Refundable (1,978,000 shares issued
and outstanding) (June 1999 1,889,000 shared issued ) 197 189
Common Stock Subscribed (June 1999 161,000 shares refundable) 16
Additional Paid-in Capital 2,815,270 2,947,859
Less due from investors for issued common stock (124,200)
Less subscriptions receivable (289,800)
-------------- ---------------
Total Refundable Common Stock 2,815,467 2,534,064
Stockholders' Deficiency:
Preferred Stock, $.0001 par value, 10,000,000 shares
authorized, none issued and outstanding -
Common Stock, $.0001 par value, 100,000,000 shares
authorized, 33,738,217 shares issued and outstanding
(32,519,284 for June 1999) 3,373 3,252
Additional Paid-in Capital 10,145,415 8,416,156
Accumulated Deficit (11,911,318) (9,575,049)
-------------- ---------------
Total Stockholders Deficiency (1,762,530) (1,155,641)
-------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 4,389,459 4,458,559
============== ===============
</TABLE>
<PAGE>4
AmeriComUSA, Inc. and Subsidiaries
Interim Consolidated Statement of Operations
For The Three Months Ended Sept. 30, 1999 and Sept. 30, 1998
(Unaudited)
ASSETS
<TABLE>
<S> <C> <C>
Sept. 30, 1999 Sept. 30, 1998
---------------- ----------------
Revenues $ 264,755 0
------------
Total Revenues 264,755 0
------------
Cost of Sales 222,291 0
------------
Total Cost of Sales 222,291 0
------------
Gross Profit 42,464 0
------------
Expenses:
Salaries & Wages 916,226 90,117
Payroll Taxes 84,366 6,298
Advertising & Public Relations 52,486
Amortization 288,551
Audit & Accounting 40,413
Building Rent 61,998 4,800
Consulting Expense 104,499 29,724
Depreciation 29,816 482
Insurance 55,840 6,029
Legal 328,595 16,081
Other general and administrative expenses 65,964 8,369
Outside Services 219,799 1,445
Telephone Expense 55,675 9,135
Travel Expense 51,995 5,206
------------ ------------
Total Expenses 2,356,223 177,686
------------ ------------
Operating Loss (2,313,759) (177,686)
------------ ------------
Other Income (Expense):
Interest Expense (21,119) (6,070)
Vendor Finance Charges (1,370) (661)
Net Other Expense (22,489) (6,731)
------------ -------------
Net Loss $ (2,336,248) (184,417)
============ =============
Net Loss Per Common Share - basic and diluted (0.07) N/A
============ =============
Weighted Average Shares - basic and diluted 32,931,618 N/A
============ =============
</TABLE>
<PAGE>5
AmeriComUSA, Inc. and Subisidaries
Interim Consolidated Statement of Changes in Stockholders' Equity
For the Three Months Ended Sept. 30, 1999 and for Year Ended June 30, 1999
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
AmeriComUSA, Inc.
Common Stock Additional Total
Issued Paid-in Accumulated Stockholders
Shares Amount Capital Deficit Equity
------------ ------------ ---------- ------------- ------------
Balance, June 30, 1999 32,519,284 $ 3,252 $ 8,416,153 $ (9,575,049) $ (1,155,644)
Conversion of promissory notes into
common stock 131,371 13 262,729
Issuance of common stock for cash 523,996 55 786,773
Conversion of notes into
common stock 443,645 44 473,913 473,957
Issuance of common stock for services 119,921 10 205,845
Net Loss, three months ended 9/30/99 (2,336,248) (2,336,248)
=========== ========== =========== ============= =============
Balance, September 30, 1999 33,738,217 $ 3,374 $10,145,413 $(11,911,297) $ (1,762,510)
=========== ========== =========== ============= =============
</TABLE>
<PAGE>6
AmeriComUSA, Inc. and Subisidaries
Interim Consolidated Statement of Cash Flow
For the Three Months Ended Sept. 30, 1999 and Sept. 30, 1998
(Unaudited)
<TABLE>
<S> <C> <C>
Sept.30, 1999 Sept.30, 1998
------------- -------------
Cash flows from operating activities:
Net Loss $(2,336,248) $ (184,417)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization 288,551
Depreciation 29,816
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (34,485) 28,415
Advances receivable (164,751) (1,700)
Other current assets (54,814)
Increase (decrease) in:
Accounts payable and accrued expenses 558,404 95,294
Payroll taxes payable 408,108 10,746
Net cash (used in) provided by operating activities (1,305,419) (51,662)
------------- -------------
Cash flows from investing activities:
Purchase of property and equipment (513,481)
------------- -------------
Net cash used in investing activities (513,481) -
------------- -------------
Cash flows from financing activities:
Sale of common stock 1,596,674
Increase (decrease) in notes payable 248,015 52,950
------------- -------------
Net cash provided by financing activities 1,844,689 52,950
------------- -------------
Net increase (decrease) in cash 25,789 1,288
Cash and cash equivalents at beginning of period 8,696 248
------------- -------------
Cash and cash equivalents at end of period $ 34,485 $ 1,536
============= =============
</TABLE>
<PAGE>7
AmeriComUSA, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements
As of September 30, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission for interim
financial information. Accordingly, they do not include all the information and
footnotes necessary for a comprehensive presentation of financial position and
results of operations.
It is management's opinion, however, that all adjustments (consisting of normal
recurring adjustments) have been made which are necessary for a fair financial
statements presentation. The results for the interim period are not necessarily
indicative of the results to be expected for the year.
For further information, refer to the consolidated financial statements and
footnotes included in the company's Form 10-KSB for the year ended June 30,
1999.
NOTE 2 - CONVERTIBLE NOTES PAYABLE
At June 30, 1999 there were two convertible promissory notes outstanding
aggregating $150,000. In July ,1999 both of the convertible promissory notes
were converted to common stock of the Company at a price of $2.00 per share. The
shares issued approximated 75,990, including 990 shares issued for accrued
interest.
NOTE 3 - CANCELLED MERGER
On July 1, 1999 the Company entered into a Merger Agreement and Plan of
Reorganization ("Merger") with a trading public shell. The merger was
subsequently terminated by mutual consent of the parties.
NOTE 4 - SUBSCRIPTION AGREEMENT
On July 29, 1999 the Company entered into a subscription agreement with a
foreign investor providing for the sale of 1,250,000 shares of the Company's
common stock for total proceeds of $2,500,000. The Agreement provided for the
sales price to be held in escrow, and conditioned release of the funds and
completion of the sale upon the Company' stock being listed for trading on the
NASD OTC Bulletin Board.
<PAGE>8
NOTE 5 - ACQUISITION OR DISPOSITION OF ASSETS
On September 27, 1999 AmeriComUSA, Inc. (`the Company') finalized a Merger and
Recapitalization Agreement and Plan of Reorganization with digiCities,
Incorporated (`the Agreement'). The Agreement was initially entered into on
August 2, 1999 but subsequently re-negotiated and amended. The Agreement was
concluded pursuant to the Memorandum of Understanding reached with digiCities on
July 2, 1999 and previously reported on Form 8K.
The Agreement provides for the Company to acquire all of digiCities' issued and
outstanding common stock in exchange for 3,500,014 shares of AmeriComUSA's Class
A common stock. In addition, AmeriComUSA will allocate options to purchase
1,500,000 shares of its Class A common stock to digiCities employees, pursuant
to AmeriComUSA's employee stock option plan. Following completion of the
acquisition, digiCities, Inc. will cease to exist as an independent entity.
Completion of the merger is contingent upon satisfaction of certain conditions
detailed in the Agreement, including the obtaining of a Fairness Order and
permit qualification for the merger from the California Department of
Corporations.
The Agreement also provides for the Company's authorized capital stock to be
increased to 120,000,000 shares of which 99,000,000 shares will be designated as
Class A Common Stock, $0.0001 par value, 1,000,000 will be designated as Class B
Common Stock, $0.0001 par value and 20,000,000 will be designated as Preferred
Stock, $0.0001 par value. The Class A Common Stock shall have all the rights,
preferences ad privileges granted to common stock under the General Delaware
Corporations Law while the Class B Common Stock and Preferred Stock shall have
such rights, preferences and privileges and shall be issued in such numbers as
the Company's Board of Directors may determine from time to time.
Simultaneously with the merger with digiCities, all the outstanding shares of
the Company's Common Stock will be converted and exchanged to shares of Class A
Common Stock, $0.0001 par value on a one-for-one basis.
NOTE 6 - REFUNDABLE COMMON STOCK
Pursuant to the common stock subscription agreements under the Private
Placement, the investor may, at their option, request a full refund if the
Company does not become quoted on the OTC Bulletin Board by a stipulated date of
January 31, 1999 for original subscription agreements and September 30, 1999 for
amended subscription agreements. Pursuant to the Securities and Exchange
Commission Codification of Financial Reporting Policies Section 211, the
refundable common stock is presented as a separate item between liabilities and
equity.
NOTE 7 - STOCKHOLDERS' EQUITY
(A) Conversion of Promissory Notes into Common Stock
In July three convertible promissory notes issued by the company during 1999
aggregating $260,000 were converted to common stock at a price of $2.00 per
share. The shares issued aggregated 131,371 including 1,371 shares issued for
accrued interest.
(B) Issuance of Common Stock for cash
During the three months ended September 30,1999 stock was sold and issued for
cash. The shares were issued aggregating $786,773. The total aggregated shares
issued were 523,996.
<PAGE>9
(C) Conversion of Notes into Common Stock
During the three months ended September 30,1999 two note payments and two notes
were converted into shares. The shares were issued aggregating $473,913. The
total aggregated shares issued were 443,645.
(D) Issuance of Common Stock for Services
During the three months ended September 30, 1999 stock was issued for services.
The shares were issued aggregating $205,845. The total aggregated shares issued
were 119,921.
<PAGE>10
AmeriComUSA, Inc. and Subsidiaries
Pro Forma
Interim Consolidated Balance Sheet
September 30, 1999
(Unaudited)
ASSETS
<TABLE>
<S> <C>
Current Assets:
Cash $ 43,353
Accounts Receivable 1,012,281
Advances Receivable 56,054
Other Current Assets 30,329
-------------
Total Current Assets 1,142,017
Property and Equipment, Net 637,393
Other Assets:
Deposits 457
Long Term Receivables 284,633
Software, net 1,301,669
Advances pursuant to merger - cash and common stock 520,000
MyLine software cost, net 1,324,389
Goodwill, net 7,238,750
-------------
Total Other Assets 10,669,898
-------------
TOTAL ASSETS $ 12,449,308
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 1,098,239
Payroll Taxes Payable 471,752
Employee Garnishments 243
Accrued Payables 642,120
Franchise Tax Payable 800
Factor Payable 359,849
Notes & Loans Payable - Short Term 244,130
Convertible Promissory Notes 361,004
-------------
Total Current Liabilities 3,178,137
Notes & Loans Payable - Long Term 880,837
-------------
TOTAL LIABILITIES 4,058,974
Refundable Common Stock:
Common Stock - Refundable (1,978,000 shares issued
and outstanding) 197
Additional Paid-in Capital 2,815,270
Total Refundable Common Stock 2,815,467
Stockholders' Equity:
Preferred Stock, $.0001 par value, 10,000,000 shares
authorized, none issued and outstanding -
Common Stock, $.0001 par value, 100,000,000 shares
authorized, 37,238,231 shares issued and outstanding 3,723
Additional Paid-in Capital 17,407,843
Accumulated Deficit (11,836,699)
-------------
Total Stockholders' Equity 5,574,867
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,449,308
=============
</TABLE>
<PAGE>11
AmeriComUSA, Inc. and Subsidiaries
Pro Forma
Interim Consolidated Statement of Operations
For The Three Months Ended Sept. 30, 1999
(Unaudited)
<TABLE>
<S> <C>
Revenues $ 1,492,475
-------------
Total Revenues 1,492,475
-------------
Cost of Sales 302,363
-------------
Total Cost of Sales 302,363
-------------
Gross Profit 1,190,112
-------------
Expenses:
Salaries & Wages 1,091,801
Payroll Taxes 91,334
Advertising & Public Relations 62,285
Amortization 650,457
Audit & Accounting 56,512
Building Rent 72,641
Consulting Expense 109,421
Depreciation Expense 29,816
Insurance 57,040
Legal 332,283
Other general and administrative expenses 106,283
Outside Services 379,296
Telephone Expense 70,794
Travel Expense 57,943
-------------
Total Expenses 3,167,906
-------------
Operating Loss (1,977,794)
-------------
Other Income (Expense):
Interest Expense (21,119)
Vendor Finance Charges (1,370)
Net Other Expense (22,489)
-------------
Net Loss $ (2,000,283)
=============
Net Loss Per Common Share - basic and diluted (0.05)
=============
Weighted Average Shares - basic and diluted 36,431,632
=============
</TABLE>
<PAGE>12
AMERICOM USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) The pro forma adjustments to the consolidated balance sheet give effect
to the merger as if it occurred on September 30, 1999. The purchase
price has been computed using a $2.00 per share fair market value of the
3,500,014 AmeriCom USA, Inc. common stock shares to be issued to the
digiCities, Inc. stockholders. The $2.00 value is based upon recent
issuances of AmeriCom USA, Inc. common stock for cash pursuant to
private placements.
The purchase price differential which was set at 6/30/99 computed as
follows:
Purchase price $7,000,028
digiCities, Inc. stockholders' deficiency 238,019
----------
Purchase price differential $7,238,047
==========
Since the merger has not yet closed, the Company has allocated the
purchase price based on the assumption that the historical costs of the
recorded assets and liabilities to be acquired approximate the fair
market value of those assets and liabilities at the merger date.
Accordingly, the purchase price differential of $7,238,047 has been
allocated on a preliminary basis to goodwill pending the development of
additional fair market value data of the acquiree's customer base
intangible asset. The goodwill will be amortized over a period of five
years using the straight-line method.
(2) Amortization of acquired goodwill is based on the assumption that the
acquisition occurred on October 30, 1998, the inception date of
digiCities, Inc.
The pro forma effect of amortization of acquired goodwill over the next
five years is as follows:
2000 $1,447,609
2001 1,447,609
2002 1,447,609
2003 1,447,609
485,382
----------
$6,272,974
==========
<PAGE>12
EXHIBIT C
SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW
SECTION 262. Appraisal Rights
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss. 261, ss. 252, ss. 264, ss. 257, ss. 268, ss. 263 or ss.
264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation
surviving a merger if the merger did not require for its approval the
vote of the stockholders of the surviving corporation as provided in
subsections (f) or (g) of ss. 261 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders thereof
are required by the terms of an agreement of merger or consolidation
pursuant to ss.ss. 261,262, 264, 267, 268, 263 and 264 of this title to
accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in
respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or
depository receipts at the effective date of the merger
<PAGE>
or consolidation will be either listed on a national
securities exchange or designated as a national market
system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders:
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b.
of this paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs
a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss. 253 of this title is
not owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was such
on the record date for such meeting with respect to shares for which
"appraisal rights are available pursuant to subsection (b) or (c) hereof
that appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of
this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote
on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares. A proxy or vote
against the merger or consolidation shall not constitute such a demand.
A stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
ss.228 or 253 of this title, the surviving or resulting corporation,
either before the effective date of the merger or consolidation or
within 10 days thereafter, shall notify each of the stockholders
entitled to appraisal rights of the effective date of the merger or
consolidation and that appraisal rights are available for any or all of
the shares of the constituent corporation, and shall include in such
<PAGE>
notice a copy of this section. The notice shall be sent by certified
or registered mail, return receipt requested, addressed to the
stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within
20 days after the date of mailing of the notice, demand in writing
from the surviving or resulting corporation the appraisal of his
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d.) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (.a) and {&) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by I or more publications at
least I week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
<PAGE>
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application of the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
<PAGE>
AMERICOM USA, INC.
1303 Grand Avenue
Arroyo Grande, California 93420
(805) 542-6700
THIS WRITTEN CONSENT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby consents, as designated below, as to all the shares of
common stock of AMERICOM USA, INC. ("Company") owned by the undersigned.
1. Approval of the Recapitalization of the Company's 38,099,235 shares of
outstanding common stock into a newly authorized Class A Common Stock
and the authorization of Class B Common Stock and preferred stock.
FOR _____ AGAINST _____ ABSTAIN _____
2. Approval of the issuance of 3,500,000 shares of Class A Common Stock to
complete a merger with digiCities, Inc.
FOR _____ AGAINST _____ ABSTAIN _____
This written consent, when properly executed, shall be deemed voted in the
manner directed herein by the undersigned stockholder.
Please sign exactly as your name appears on your share certificates. When shares
are held by joint tenants, all joint tenants should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If the signatory is a corporation, please sign the full corporate name
by the president or another authorized officer. If the signatory is a
partnership, please sign in the partnership name by an authorized person.
________________________ _________________________________
Name (Print) Name (Print) (if held jointly)
Dated: ________________________ _________________________________
Signature Signature (if held jointly)
________________________ _________________________________
(Address) (Address)
________________________ _________________________________
(City, State, Zip) (City, State, Zip)
PLEASE MARK, SIGN, DATE AND RETURN THE WRITTEN CONSENT
PROMPTLY USING THE ENCLOSED ENVELOPE.
