SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-23769
AMERICOM USA, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-2068322
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1303 Grand Avenue
Arroyo Grande, California 93420
(Address of principal executive offices) (zip code)
Issuer's Telephone Number: 805/542-6700
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value per share
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the last 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X
Check if there is no disclosure of delinquent files in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $0
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was sold, or the average bid and asked price
of such common equity, as of a specified date within the past 60
days. $21,489,782 based on sale of common stock at $2.00 per share
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at March 24, 1999
Common Stock, par value $0.0001 31,943,528
Documents incorporated by reference: Form 8-K/A #1 filed February 18, 1999
Form 8-K filed February 23, 1999
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
The Company's primary business is providing systems for the
delivery of advertisements and merchandising on Internet Web sites
through its proprietary technology systems, AdCast(R) and
TrueManagement(R). The AdCast system is the primary product offered
by the Company. 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. (For
the Company's own descriptive purposes Web site owners which have
agreed to the placement of a billboard ad are referred to as "AdCast
Affiliates" and their respective Web sites as "AdCast Affiliate
Sites". They are not affiliates as that term is used by the
Securities and Exchange Commission and they do not directly or
indirectly control, nor are controlled by, or are under common
control with, the Company.)
The AdCast advertisement space appears on a 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.
The Company contracts with Web site owners to allow
placement of the AdCast billboards on the Web sites and the Company
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. To date, the Company has
only received negligible revenues.
The pricing structure for the AdCast advertising rates is
based on spot minute increments, similar to spot pricing on
television. Similar to 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. The Company has not received any revenues to
date from the sale of its billboard advertising.
BACKGROUND AND CURRENT TRANSACTIONS
The Company was incorporated in Delaware in 1994 to market
MyLine, a telecommunication system developed under contract by RMC
Diversified Associates International, Ltd. ("DAI"), a California
company under contract to Americom Ltd., a Turks and Caicos
corporation. DAI was owned by Robert Cezar, Chief Executive Officer
and a director of the Company. In April, 1996, Americom Ltd. sold
the technology to Enhanced Service Providers LLC ("ESP"), a
Massachusetts corporation. As part of the transaction the Company
was required to release its international marketing rights to the
MyLine technology to Americom Ltd. As consideration, the Company
received $540,000 in cash and 161,000 shares of ESP common stock.
The ESP common stock has been valued at $0 in the Company's
financial statements. Following the sale of the marketing rights to
the MyLine technology, the Company was inactive until July, 1998,
when it acquired, as a wholly-owned subsidiary, DAI, which had
developed the AdCast and TrueManagement technologies. Since the
acquisition of DAI, the Company has concentrated, through its
subsidiary DAI, on enhancement of these technologies.
During 1997 and 1998, the Company (and its subsidiary, DAI)
operated at a loss and financed its operations almost entirely from
the sale of convertible promissory notes and other debt instruments,
some of which notes have been converted into shares of the Company's
common stock. As of December 31, 1998, the Company had outstanding
short-term promissory notes aggregating $941,437. There is no
assurance that the Company will not continue to operate at a loss
and that it will be able to continue its operations.
On January 29, 1999, the Company completed an offering of
2,350,000 shares of its common stock for an aggregate sales price of
$3,687,500 to investors located outside the United States through
Asia Pacific Finance Group Ltd., a British Virgin Island
corporation. The Company's current sources of funds to date have
been the sale of its equity securities and convertible promissory
notes.
Effective March 11, 1999, the Company entered into an
Agreement of Purchase and Sale and Exclusive Licensing of Technology
with Americom Ltd., which provides for the Company to acquire
My-Line and InstAccount. My-Line is an enhanced, feature rich,
remotely programmable, personal telecommunication system.
InstAccount is a real time communication accounting and management
tool. The agreement provides for the Company to pay aggregate
consideration of (i) $538,000 in cash over a two year term, (ii)
500,000 shares of common stock of the Company and (iii) re-conveyance
of all shares held in ESP. My-Line provides the platform which will
form the basis for the development of System 7. SEE "Research and
Development".
OPERATIONS
The Company began online operations on February 1, 1999
showing unpaid advertisements while it tests the AdCast system.
This phase is commonly referred to as the "beta" phase of
development. The Company is currently displaying approximately
900,000 unpaid ads per day. These ads are displayed on the AdCast
Affiliate Sites and are ads promoting products of the Company's
sponsorship advertiser, advertisers with whom the Company has
entered into commission based contracts and cross-promotion of
AdCast Affiliate Sites.
The Company anticipates that it will receive revenue from
(i) its sponsorship ad program (see "Marketing") 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. As of the date hereof, the Company has one member in its
sponsorship program and has received negligible revenues from sales
of merchandise and no revenue from the sale of paid advertisements.
The Company's main target industry to date has been to
aggregate site owners of Web sites concerning the sport of
wrestling. The Company believes that it has almost saturated this
market and intends to focus on more diverse site groups.
The Company currently has four subsidiaries: RMC Diversified
Associates International, Ltd. ("DAI"), AdCast, Inc., AdCast Canada
Inc, and Kiosk Software, Inc.
DAI. DAI is a wholly-owned subsidiary of the Company and
serves as its engineering and ongoing research and development arm.
DAI entered into an agreement and plan of reorganization with Jim
and Jon Tech, a California company, on February 26th, 1999, to
acquire certain technology. The agreement, and amendment thereto,
provides for the Company to acquire all of the assets of Jim and Jon
Tech, including the J-Engine Tool (see "DAI Technology"), for
consideration to each of the two shareholders, Jon Iverson and Jim
Heintz, of (i) a total of 200,000 shares of common stock of the Company
to be divided pro rata between the two shareholders in accordance with
their original shareholders in Jim and Jon Tech, (ii) options
for each of the two shareholders to purchase 300,000 shares of
the common stock of the Company at an exercise price of $2.00 per share,
(iii) $100,000 for each of the two shareholders in cash, payable in
installments, and (iv) Jon Iverson will serve as president of DAI and
Jim Heintz will serve as chief technological officer of DAI. The agreement
is subject to certain contingencies which have not yet been met and there is
no assurance that the transaction will be closed. If the transaction
is closed, the Company will file a Form 8-K with the terms of the
transaction. Robert M. Cezar is the president, secretary and sold
director of DAI.
AdCast, Inc. AdCast, Inc. is a wholly-owned subsidiary of
the Company and is responsible for marketing and sales of the AdCast
and TrueManagement technologies. Robert M. Cezar is the president,
secretary and sold director of AdCast, Inc.
AdCast Canada Inc. AdCast Canada Inc. is a wholly-owned
subsidiary of the Company and was incorporated March 11, 1999 to
cultivate the Canadian and European marketplaces for the Company's
technologies. AdCast Canada Inc. is engaged in the marketing of the
AdCast technologies in Canada and Europe with its headquarters in
Toronto, Ontario, Canada. Malcolm Cullen serves as president of
AdCast Canada, Inc., , Jayson Schwarz as its secretary and Robert
Cezar serves as its Chairman. Messrs. Cullen, Schwarz and Cezar are
the directors of AdCast Canada, Inc.
Kiosk Software, Inc. Kiosk Software, Inc. (formerly Kiosk
Acquisition, Inc.) is a newly-formed, wholly-owned subsidiary which
effected a merger with an existing privately owned company, Kiosk
Software, Inc. on February 8, 1999, and subsequently adopted that
company's name. Kiosk Software, Inc. is engaged in the development
and delivery of products and services for the deployment of
interactive kiosk software applications. Kiosk Software, Inc.
provides complete kiosk development services from design through
delivery. It specializes in multi-media software development in
addition to full kiosk integration and support including graphics
for effective user interface, custom cabinet design, multimedia
software development and development of custom applications for
education, retail and tourist environments. Its primary products
are the Kiosk Operating Suite (K/OS), a proprietary kiosk
application development tool and TerraVista, a product for Internet
access control. Kiosk Software, Inc. uses its proprietary software
to manage and update remote systems from a central location. Kiosk
Software, Inc. had revenues for 1998 (unaudited) of approximately
$327,000 with a net loss (unaudited) of approximately $300,000. The
Company has advanced Kiosk Software, Inc. an aggregate amount of
$629,950 to pay its outstanding liabilities. Lori Fisher, the
principal shareholder of Kiosk Software, Inc., was appointed the
sole director, president and chief operating officer of Kiosk
Software, Inc. at an annual compensation of $100,000 plus other key
employee benefits including the lease of a company car.
ADCAST TECHNOLOGY
AdCast. The AdCast system delivers to AdCast Affiliate
Sites non-scrollable billboards in which animated ads of 15 to 90
seconds in length are placed. The AdCast system also provides
various audience measurements tools for the AdCast Affiliate and to
the billboard advertiser. Measurements provided include such items
as number of click-throughs, number of times an advertisement is
viewed and duration of stay on a Web site. This data is provided
to both advertisers and the AdCast Affiliates enabling them to make
adjustments to their advertisements or Web sites, respectively, to
increase effectiveness.
TrueManagement. TrueManagement provides a series of
management tools that enable AdCast Affiliates to maintain
interaction between the AdCast system and their AdCast Affiliate
Sites. In addition, the AdCast Affiliate can use the TrueManagement
system to manage their own promotional advertising campaigns via the
AdCast delivery system, analyze specific billboard advertisement
performance, and obtain real-time reports displaying visits to their
site, by hour, day, or month.
For the advertiser, TrueManagement permits advertisers to
monitor the results of their advertisements and to easily make
adjustments to ad campaigns as needed.
Benefits of the AdCast and TrueManagement Systems. The
Company believes that what differentiates the AdCast system from
other Internet advertising delivery systems is its ability to allow
advertisers to eliminate waste in advertising dollars by setting the
precise number of advertisements and click-throughs per visitor, on
a per day, per month, and/or per campaign basis. AdCast offers all
of the traditional features of existing Internet ad delivery systems
with accountability, by providing both the AdCast Affiliates and
advertisers with detailed information concerning the performance of
advertising campaigns.
The benefits of the AdCast system include:
* Non-scrolling billboard ads which can be set for
durations from 15 to 90 seconds featuring audio,
video, pop-up animation frames and hot links.
* Non-scrolling billboard ads appearing at the bottom
of the Web site page during a Web site visitor's
entire stay with a clickable link to that company's
Web site or other post-processing facilities.
* Specified number of times that ads are shown to
each specific visitor, per day, per month or for
the entire ad campaign.
* Ability to provide hot-links to on-line ordering,
coupon printing, special offers and more capabilities.
The TrueManagement system contains tools that enable AdCast
Affiliates and advertisers to control, review, and manage certain
standard features. Some of the benefits of the TrueManagement
system include:
* Reliable audience measurement as well as collection
of historical data for analysis and review.
* Free and easy access to the information generated
by TrueManagement and to AdCast on-line by
advertisers and Web site hosts.
* Ability of advertisers to easily change or perfect
their ad.
* Real-time information including total number of new
visitors, daily visitors, cumulative repeat
visitors and cumulated total visitors.
KIOSK SOFTWARE TECHNOLOGY
Kiosk Operating Suite ("K/OSTM"). K/OS is a fully
developed kiosk developer tool kit which includes remote management,
usage and event logging, read/write access for standard Open
Database Connectivity (ODBC/JDBC) databases and program interfaces
to common peripherals. K/OS enables software programmers to easily
create interactive business solutions, maintain hardware and remotely
manage public access kiosks. The system is designed to be
steadfastly reliable and easy to customize. K/OS can deliver any
interactive, multimedia content that can be viewed or played using
Microsoft Internet Explorer. The product provides system
flexibility through its Java and ActiveX interfaces.
TerraVistaTM. TerraVista, an extension of Microsoft's
Internet Explorer, controls public access on the Internet by serving
as a programmable gateway to selected Internet sites. TerraVista
gives the system administrator the tools to focus a user's attention
to those portions of the Internet that have been pre-selected and
approved. TerraVista constrains the hardware to prevent the user
from circumventing the system. TerraVista is a fail-safe solution,
ideal for use in academic environments, libraries, correctional
facilities, corporate visitor centers and other public areas.
DAI TECHNOLOGY
Pursuant to the reorganization agreement with Jim
and Jon Tech, DAI will acquire the J-Engine Tool. The J-Engine Tool is a
portable, scalable,modular approach to building and managing Web sites.
The J-Engine Tool provides Internet Service Providers ("ISPs") with the
ability to sell turnkey systems such as content management and e-commerce to
an unlimited number of users with unlimited customization. The
J-Engine Tool can be used to target both business-to-consumer and
business-to-business clients. This is achieved with the
implementation of a powerful layout function that allows
customization, via on-line interface, all the way from final
Web-page design down to the look of the program interface layouts
themselves. The J-Engine Tool also allows the Web site manager to
control access to the management system developed for their Web site
through specified password protection.
Fields can be added or deleted at will because the J-Engine
Tool technology is based on an object database. Java Servlets allow
the program to be implemented in virtually any environment and as a
result, the J-Engine Tool's modular architecture makes it easy to
add new functionality as needed. This could allow for example, a Web
polling or statistics module to be added to help a user create a
more compelling Web site. This means that not only will the program
meet today's e-commerce needs, it can be fashioned into any number
of new uses, virtually without limit.
The layout section allows for virtually unlimited control
over commerce page layouts, text and graphics, checkout screens,
product layouts and even the layout of the program and editor
itself. This includes complete access to database variables and
programming constructs such as "if", "while", and others. Complete
control of all HTML elements is also possible.
MARKETING
The Company is marketing the AdCast system through its
wholly-owned subsidiary AdCast, Inc. to domestic and foreign
businesses involved in publishing and commerce over the Internet.
Domestic and non-Canadian/European international marketing
operations are handled through the Company's California
headquarters. European and Canadian marketing is handled by AdCast
Canada, Inc., the Company's wholly-owned Canadian subsidiary.
The Company entered into a joint-development agreement
with Systeam, SpA, an Italian information technology company, to
participate in the development, enhancement and expansion of the
Company's products. Systeam has had its personnel at the
headquarters of the Company for much of February and March, 1999, to
assist in the technical changes necessary to accommodate the
Company's growth.
The Company intends to target manufacturers and
suppliers of products, goods and services that utilize the Internet
for dissemination and sales of their products.
The Company offers a sponsorship program in which a
participant will receive several AdCast Affiliate Sites on which its
logo will be placed. These Web sites will be selected based on
compatibility of interests from the Company's pool of Web sites.
The sponsor will compensate the Company either through commissions
based on the amount of sales generated from viewers clicking on the
sponsor's logo on an AdCast Affiliate Site or through advertising
referral guarantees. The Company believes that its sponsorship
program is unique and anticipates that it will appeal to larger
organizations that already have name and logo recognition.
OPERATING AGREEMENTS
AGREEMENT WITH INTERNET STORE. On September 3, 1998, the Company
entered into a non-binding memorandum of understanding (the "memorandum")
with a large chain storefront and Internet retailer of sporting goods
(the "Store"). The memorandum stipulates that the Company shall receive
30% of the Store's net margin on sales as defined in the agreement,
generated by consumers who have "clicked" through to the Store's Web
site from the Company Internet billboards. In addition, the Company
leases billboard space, paid on a per visitor basis, on the Store's Web
site. The company has also agreed to allow the Store to be the
preferred sponsor on all of its customer's sports and school related
Web sites and all of its customer's Web sites where the Store's
vendors advertise.
BUSINESS SERVICES AGREEMENT. On September 8, 1998, the Company
entered into a twelve month agreement, subject to renewal, with a
British Virgin Islands corporation (the "Corporation") for services
generally related to financial and management advisory services for the
arrangement of a U.S. stock market listing through a reverse acquisition
with a U.S. publicly held company and for assisting the Company in
connection with a private placement offering. Under terms of the agreement,
the Company shall pay to the Corporation: (i) 5% management success fees
for the services of the private placement upon the execution of each
subscription agreement, (ii) 4% of the Company's common stock payable
for the services of the U.S. stock market listing transactions, payable
upon execution of the reverse merger with a U.S. publicly held company.
Per management of the Company, the 5% fee as noted in (i) above,
was verbally amended o 10%. The Company has been paying the 10% fees to
the Corporation as new subscription agreements are received. Upon
closing of the reverse merger the Corporation was issued 1,200,000
shares of the Company's common stock equivalent to 4% of the total
outstanding common stock of the Company.
SOFTWARE DEVELOPMENT AGREEMENT. In August, 1998, the Company
entered into an agreement with Systeam Spa (the "Developer"), an Italian
company engaged in information technology, consulting, software development,
software support and related matters. Under the terms of the agreement,
Systeam has contracted to provided continued, ongoing development and
support of the Company's AdCast, e-CommPlus, TrueManagement, and My-
Channel technology ("Technology"). In consideration the Company has
agreed to pay an annual royalty equal to 8% of the worldwide net
revenues of the Company for a period of 10 years, renewable for
successive 10 year terms provided the Developer continues to develop,
implement, support and upgrade the Technology and Licensed Software
during such periods. The Company has agreed to guarantee a
minimum royalty payment in the amount of $250,000 in the first
calendar year, subsequent to the completion of the development of
Phase I of the Licensed Software which is contemplated to
occur in April, 1999.
CONSULTING AGREEMENT. On January 8, 1999, the Company entered
into a consulting agreement with a Canadian corporation (the "Consultant")
whereby the Consultant will head American Web site customer acquisition
efforts. Under the agreement, the initial term is from January 1, 1999
through April 30, 1999, and the amount budgeted for the Consultant's
fees and expenses during this initial term is approximately $100,000,
subject to ongoing audit and review by the Company of the Consultant's
performance in obtaining the stipulated Web sites. The Company agreed
to pay an advance fee of $30,000 to the Consultant on a bi-weekly basis
from January 1, 1999 through April 30, 1999. The agreement shall be
extended contingent on the Consultant meeting certain stipulated goals
and the agreement may be canceled at any time by the Company.
RESEARCH AND DEVELOPMENT
The Company has begun development of additional products.
There is no assurance that such products will ever become viable
products or that the Company will be able to market such products.
E-CommPlus is designed for the small and medium sized business as a
low-cost electronic commerce software program that enables such
business to take on-line orders for their products from retailers
and/or individual consumers. The Company anticipates work on the
development of System 7 will allow for the ability to place long
distance telephone calls within the Internet environment. This
development will follow the proposed acquisition of the assets of
Jim and John Tech and will be further developed by Systeam.
PATENTS AND TRADEMARKS
The AdCast and TrueManagement technology is owned by
the Company's wholly-owned subsidiary, DAI. DAI does not currently
have patent or trademark protection for any of its proprietary
technology but the Company intends to file such patent, copyright
and trademark applications. The Company has initiated preparation
of the applications for a patent of the AdCast service to be filed
in the United States Patent Office and a copyright application for
the AdCast service to be filed with the United States Register of
Copyrights.
ITEM 2. DESCRIPTION OF PROPERTY
The Company maintains its offices in four locations.
The executive offices are located at 1303 Grand Avenue, Arroyo
Grande, California 93420 pursuant to a one-year lease at $1,627 per
month for approximately 2,500 square feet. The offices of the
AdCast, Inc. and DAI are located at 124 South Halcyon Road, Arroyo
Grande, California under a monthly lease of $2,600 per month for
approximately 3,500 square feet. The Kiosk Software, Inc. offices
are located at 3534-A Empleo Street, San Luis Obispo, California
pursuant to a monthly lease of $1,600 for approximately 2,400 square
feet. AdCast Canada, Inc. leases approximately 650 square feet at
2040 Yonge Street, Suite 220, Toronto, Canada on a month-to-month
basis at a gross fee of $500 per month.
ITEM 3. LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders,
through the solicitation of proxies or otherwise, during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On December 23, 1998, the Company applied to NASD
Regulation, Inc. for quotation of the Company's common stock on the
NASD OTC Bulletin Board. On January 30,1999, the Company received
from NASD Regulation, Inc. the trading symbol AMUS. Trading has not
yet been cleared by NASD Regulation, Inc. and is pending subject to
further review and approval.
The following is a list of the equity securities sold by the
Company during the period covered by this report that were not
registered under the Securities Act other than unregistered sales
made in reliance on Regulation S. The following shares were issued
pursuant to the conversion of convertible notes held by each named
shareholder.
Date Shareholder Number Consideration
Of Shares Paid
9/18/98 Grant D. Oswalt 12,500 $ 12,500
9/21/98 Kuo ChungWu 30,000 30,000
9/25/98 Jose O. Rivera 12,500 12,500
10/9/98 Stephanie D. Forrest 6,000 6,000
10/13/98 Pamel D. Kingsley 6,250 6,250
10/15/98 Stephen D. Loomis 13,278 13,278
10/15/98 Merrill Lynch for
G . Pritchard 12,500 12,500
10/25/98 Craig D. Machado 13,306 13,306
10/29/98 CDS Distributing 13,271 13,271
10/29/98 Kuo Chung Wu 30,000 30,000
10/29/98 Kuo Chung Wu 20,000 20,000
11/1/98 Cal S. Krupa 13,071 13,071
11/1/98 Stephen E. Loomis 6,250 6,250
11/1/98 Greg Reid 12,500 12,500
11/2/98 Carl D. Clark 12,500 12,500
11/4/98 Chris H. Daniel 12,876 12,876
11/6/98 Kuo Chung Wu 60,000 60,000
11/13/98 Sondra S. Cleary 12,653 12,653
11/23/98 Jing Yeng Wu 60,000 60,000
12/7/98 Adwall Investments, Ltd. 225,000 225,000
12/7/98 Coja Corporation 25,000 25,000
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS:
In the 1998 fiscal year, the Company had no revenue
from business operations. In the 1997 fiscal year, the Company had
only incidental revenue derived from consulting activities unrelated
to the continuing business of the Company. During both years the
Company incurred administrative costs and costs arising from the
development of various technical and business concepts which did not
reach fruition during either period. As such, no accurate and
comprehensive comparison between the Company's 1998 and 1997
operating results is available.
Future prospects for the registrant's financial condition
and results of operations will be overwhelmingly dependent on
factors which were not present during the 1997 and 1998 fiscal
years. In particular, the speed and success of development of the
AdCast advertising billboard service, which only commenced in
calendar 1999, will determine the bulk of the Registrant's revenues
in fiscal year 1999 and beyond. Similarly, future expenses will
relate largely to the development of Adcast and will be
substantially higher than expenses in fiscal 1997 and 1998. The
registrant's profitability will also be impacted by the revenues and
expenses of Kiosk Software, Inc., a subsidiary company acquired in
February 1999, which is engaged in the development of software for
public access computer terminals. To date Kiosk Software has
incurred operating losses.
The Company began online operations on February 1, 1999.
Since that time, the Company has grown to distribution of
approximately 900,000 ads per day, which is within 5% of the
Company's original forecast.
The Company's operations in future periods will be dependent
upon the availability of adequate liquid funds for capital
expenditures and to meet income deficits associated with the
operational roll-out of the Adcast advertising service. In order to
meet its need for sufficient liquid funds, the Company has made the
following arrangements.
First, on January 29, 1999, the Company completed its
offering of 2,350,000 shares of its common stock to non-United
States residents for an aggregate subscription price of $3,687,500,
pursuant to Regulation S. As a result of the delays in getting NASD
Regulation approval to begin trading the Company's securities on the
OTC Bulletin Board, certain Regulation S investors withdrew their
stock subscriptions pursuant to the agreement with them resulting in
an aggregate of 2,160,000 shares sold for an aggregate subscription
price of $3,427,500. Of the total subscribed, $639,000 of the
subscription price has not yet been received in cash and is
receivable within 10 days of the Company's clearance for trading of
its common stock on the NASD OTC Bulletin Board.
Second, the Company has authorized the issuance of up
to $1.5 million of convertible subordinated promissory notes to
individuals who qualify as accredited investors as defined by the
Securities and Exchange Commission. These notes, which are payable
in full on March 31, 2000, and which bear interest at 10% per annum,
bear the right to convert to shares of the Company's common stock at
a conversion price of $2.00 for one share of common stock ($.0001
par value). To date, $422,500 has been received by way of sales of
these promissory notes.
The Company considers that existing commitments of
equity and debenture financing will be adequate to meet the
Company's operational funding requirements
for the next 12 months. However, there can be no guarantee that
these sources of funding will be realized, nor that internally
generated funds will be developed sufficiently quickly to meet the
registrant's needs when externally generated funds are exhausted.
The Company's income will be heavily dependent upon sales of
advertising inventory on Adcast billboards and the successful
delivery of that advertising. The Company has not sold or delivered
paid advertising through its Adcast billboard service but
anticipates sales in the second quarter of calendar 1999. However,
there is no assurance that such sales will be realized. Prospective
sales of Adcast advertising are dependent upon both the ability of
the Company to sell and deliver Adcast services and the continued
development of the overall market for Internet advertising services
and Internet related commerce.
SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO
SIX MONTHS ENDED DECEMBER 31, 1997
In both the six months ended December 31, 1997 and 1998 the
Company had no revenues. However, between the last six months of
calendar 1997 and the comparable period of 1998 expenses increased
concurrent with the development in 1998 of the Company's AdCast
technology. As the Company had anticipated, it incurred
substantially higher payroll, outside consulting, legal and travel
costs compared to the prior year in preparation for the technical
and marketing launch of AdCast. The Company simultaneously incurred
extraordinary expenses while negotiating with and preparing for the
merger into Chatsworth Acquisition Corporation, a merger which was
accomplished on December 4, 1998. During the comparable six month
period of 1997 the Company was not engaged in similar activities and
therefore no meaningful comparison can be made for the operating
results of the Company between the two subject periods.
The following table provides a summary of selected
financial data for the AmeriCom USA, Inc. and RMC Diversified
Associates International, Ltd. (the "Company") combined statement of
operations:
FISCAL YEAR ENDED JUNE 30,
(in US$ thousands except per share data)
1998 1997
Operating Revenue 0 14
Net (Loss) (273) (394)
Earnings per share: $ (.03) $ (.04)
Total assets 51 14
Long term debt, less current portion 0 0
The following table sets forth the percentage relationship
of certain revenue and expense items for the fiscal years indicated:
Percentages of Operating Revenue
Year Ended June 30,
1998 1997
Operating revenue 100% 100%
Operating expenses and costs:
Salaries, wages and payroll costs N/A 1,467%
Bad debt expense N/A 480%
Legal expense N/A 211%
Facilities Rental N/A 195%
Insurance and claims N/A 134%
Depreciation and amortization N/A 12%
Other N/A 257%
Total operating expenses N/A 2,756%
Operating income (loss) N/A 2,656%
Other income (expense):
Gain on debt forgiveness N/A 0%
Gain on sale of investment N/A 316%
Interest expense N/A (41%)
Payroll tax penalties and interest N/A (377%)
Income (loss) before income taxes N/A (2,758%)
Income taxes N/A 0%
Net income (loss) N/A (2,758%)
SUBSEQUENT EVENTS
Convertible Subordinated Promissory Notes. On February 12,
1999, the Board of Directors of the Company authorized issuance of
up to $1,500,000 of Convertible Subordinated Promissory Notes for
the purpose of raising liquid funds for working capital. These
notes, payable in full on March 31, 2000, with annual interest of
10%, bear the right to convert to shares of the Company's common
stock at a conversion price of $2.00 for one share of common stock
($.0001 par value). To date, $422,500 has been invested by way of
purchases of these promissory notes by individuals who qualify as
accredited investors as defined by the Securities And Exchange
Commission.
Americom USA, Inc. Stock Option Plan. At a meeting of the
Board of Directors of the Company held March 26, 1999, the Board
adopted a Stock Option Plan to be utilized for employees and such
others as the Board deems necessary and appropriate. The Plan
provides for the issue and distribution of 9,500,000 shares. The
Plan is extremely flexible and allows for custom tailoring for each
individual through the issue of individual Incentive Stock Option
Agreements. To date the Company has issued options totaling
9,212,721 shares. Each Incentive Stock Option Agreement provides
for different vesting periods.
ITEM 7. FINANCIAL STATEMENTS
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL, LTD.
COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
AMERICOM USA, INC. AND
RMC DIVERSIFIED ASSOCIATES INTERNATIONAL, LTD
CONTENTS
PAGE 1 - REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
PAGE 2 - COMBINED BALANCE SHEETS AS OF JUNE 30, 1998
1997
PAGE 3 - COMBINED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED JUNE 30, 1998 AND 1997
PAGE 4 - COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS'
DEFICIENCY FOR THE YEARS ENDED JUNE 30, 1998
AND 1997
PAGE 5 - 6 - COMBINED STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED JUNE 30, 1998 AND 1997
PAGE 7 - 17 - NOTES TO COMBINED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of:
AmeriCom USA, Inc. and RMC Diversified
Associates International, Ltd.
We have audited the accompanying combined balance sheets of AmeriCom
USA, Inc. and RMC Diversified Associates International, Ltd. as of
June 30, 1998 and 1997 and the related combined statements of
operations, changes in stockholders' deficiency, and cash flows for
the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these combined financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of
AmeriCom USA, Inc. and RMC Diversified Associates International,
Ltd. as of June 30, 1998 and 1997 and the results of their
operations and their cash flows for the two years then ended in
conformity with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
January 29, 1999 (except for Note 13(e) and Note 4 as to which the
dates are February 8, 1999 and February 10, 1999, respectively.)
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL, LTD.
COMBINED BALANCE SHEETS
AS OF JUNE 30, 1998 AND 1997
ASSETS
1998 1997
CURRENT ASSETS
Cash and cash equivalents $ 28,767 $ 199
Accounts receivable - 638
Due from officer 6,767 8,546
Other assets 1,200 -
Total Current Assets 36,734 9,383
PROPERTY AND EQUIPMENT, NET 14,379 3,486
OTHER ASSETS 455 1,410
TOTAL ASSETS $ 51,568 $ 14,279
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued
expenses $ 217,318 $ 164,251
Payroll taxes payable 53,614 41,498
Accrued salaries and wages 565,742 425,421
Notes and loans payable 105,408 80,408
Notes and loans payable -
related parties 798,529 756,675
Convertible promissory notes 37,500 -
Total Current Liabilities 1,778,111 1,468,253
TOTAL LIABILITIES 1,778,111 1,468,253
Commitments and contingencies
STOCKHOLDERS' DEFICIENCY
Common stock 14,500 14,500
Additional paid-in capital 133,007 133,007
Accumulated deficit (1,874,050) (1,601,481)
Total Stockholders' Deficiency (1,726,543) (1,453,974)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 51,568 $ 14,279
See accompanying notes to combined financial statements.
2
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL, LTD.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
1998 1997
REVENUES $ - $ 14,275
Total Revenues - 14,275
EXPENSES
Salaries and wages 163,289 206,199
Payroll tax 2,570 3,300
Advertising - 1,078
Amortization expense 455 455
Bad debt expense - 68,533
Building rent 2,318 27,863
Consulting expense 2,000 2,220
Depreciation expense 4,738 1,698
Insurance 11,995 19,190
Legal 28,100 30,111
Other general and
administrative expenses 6,283 25,580
Research and development 3,774 -
Telephone expense 12,176 7,328
TOTAL EXPENSES 237,698 393,555
OPERATING LOSS (237,698) (379,280)
OTHER INCOME (EXPENSE)
Gain on debt forgiveness 8,938 -
Gain on sale of investment - 45,095
Interest expense (37,154) (5,821)
Vendor finance charges (2,553) -
Payroll tax penalties and
interest (4,102) (53,859)
NET OTHER EXPENSE (34,871) (14,585)
NET LOSS $(272,569) $(393,865)
Weighted average number
of shares outstanding
during period 9,500,000 9,499,926
Net loss per common
share and equivalents ($0.0287) ($0.0415)
See accompanying notes to combined financial statements.
3
AMERICOM USA, INC. AND RMC DIVERSIFIED ASSOCIATES INTERNATIONAL, LTD.
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AMERICOM USA, INC RMC DIVERSIFIED
ASSOCIATES INTER-
NATIONAL, LTD AMERICOM
COMMON STOCK USA, INC.
------------------- --------------- ADDITIONAL
NUMBER NUMBER ACCUMU-
OF OF PAID-IN LATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
BALANCE,
JUNE 30,
1996 3,883,250 $3,883 10,000 $10,000 $ 71,117 $(1,207,616)
$(1,122,616)
Issuance of
common stock
in exchange
for debt 30,861 31 - - 61,890 - 61,921
Issuance of
common stock
as compen-
sation 585,889 586 - - - - 586
Net loss 1997 - - - - - (393,865)(393,865)
--------- ---- ------ ------ ------- -------- ------
BALANCE,
JUNE 30,
1997 4,500,000 $4,500 10,000 $10,000 $133,007 $(1,601,481)
$(1,453,974)
Net loss
1998 - - - - - (272,569)(272,569)
--------- ------ ----- ------- ------- -------- -------
BALANCE,
JUNE 30,
1998 4,500,000 $4,500 10,000 $10,000 $133,007 $(1,874,050)
$(1,726,543)
See accompanying notes to combined financial statements.
4
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL, LTD.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
1998 1997
Cash flows from operating
activities:
Net loss $(272,569) $(393,865)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation 4,738 1,698
Amortization 455 455
Loss on disposal of assets - 6,691
Provision for losses on receivables - 68,533
Compensation expense recorded under
employee stock issuances - 586
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable 638 414,079
Employee receivable 1,779 750
Due from officer - 9,332
Other assets (1,200) 19,415
Investment in stock - 4,905
Increase (decrease)in:
Accounts payable and accrued
expenses 53,067 (20,204)
Payroll taxes payable 12,116 (222,768)
Accrued salaries and wages 140,321 148,086
Net cash (used in) provided by
operating activities (60,655) 37,693
Cash flows from investing
activities:
Purchase of property and equipment (8,014) -
Proceeds from return of deposits 498 -
Increase in other assets - (499)
Net cash used in investing
activities (7,516) (499)
Cash flows from financing
activities:
Notes and loans payable 59,239 (38,482)
Promissory note 37,500 -
Net cash provided by (used in)
financing activities 96,739 (38,482)
5
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL, LTD.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
Net increase (decrease) in cash 28,568 (1,288)
Cash and cash equivalents at
beginning of year 199 1,487
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 28,767 $ 199
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
During 1997 the Company issued 30,660 and 201 shares of common stock in
exchange for notes and loans payable of $61,320 and $603, respectively.
During 1997 the Company issued 585,889 shares of common stock to
certain officers and employees as compensation.
During 1998 the Company purchased certain property and equipment for
$7,615 from a related party in exchange for a note payable.
See accompanying notes to combined financial statements.
6
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
AmeriCom USA, Inc. ("AmeriCom") is a Delaware corporation
chartered on May 4, 1994. RMC Diversified Associates
International, Ltd. ("Diversified") is a California corporation
chartered on December 26, 1989. Diversified has developed
proprietary technologies known as Adcast, e-CommPlus,
TrueManagement, and My-Channel. In July 1998, AmeriCom acquired
all the issued and outstanding common stock of Diversified
making Diversified a wholly owned subsidiary of AmeriCom (See
Note 13). AmeriCom and Diversified (hereinafter jointly
referred to as "the Company") develop and market software
technology products that provide advertisers, web site owners,
sponsors and affiliates with advanced Internet technology,
revenue sharing, commercial efficiency, commercial
effectiveness and operating savings. AmeriCom positions itself
in the marketplace as an Internet Advertising Service Provider.
The Company is not operating as a development stage company
since they received revenues from research and development
contracts and license sales relating to previously owned
technology rights in years prior to 1997.
AmeriCom and Diversified have been combined herein due to
common management control since inception of both companies.
Principles of Combination
The combined financial statements include the accounts of
AmeriCom and Diversified. All significant intercompany balances
and transactions have been eliminated in combination.
Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements and
revenues and expenses during the reported period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
For purpose of the cash flow statements, the Company considers
all highly liquid investments with original maturities of three
months or less at time of purchase to be cash equivalents.
7
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures from maintenance and repairs are
charged to expense as incurred. Depreciation is provided using
the straight-line method over the estimated useful life's of
the assets from three to five years.
Income taxes
The Company accounts for income taxes under the Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 109. "Accounting for Income Taxes" ("Statement
No.109"). Under Statement No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those measured using enacted tax
rates expected to be recovered or settled. Under Statement 109,
the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that
includes the enactment date. At June 30, 1998 AmeriCom and
Diversified had approximately $160,000 and $800,000,
respectively, of net operating loss carryforwards, which expire
beginning in years 2010 and 2005, respectively. A one hundred
percent valuation allowance has been established against any
resulting deferred tax asset at June 30, 1998 and 1997.
Per Share Data
Net loss per common share for the year ended June 30, 1998 and
1997 is computed by dividing net loss by the weighted average
common shares outstanding during the year as defined by
Financial Accounting Standards, No. 128, "Earnings per Share".
The assumed exercise of common share equivalents was not
utilized since the effect was anti-dilutive. For purposes of
the net loss per common share computation only, the acquisition
of Diversified (see Note 13) and related exchange of shares was
applied retroactively as if it occurred on July 1, 1996.
8
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
Long-Lived Assets
During 1995, Statement of Financial Accounting Standards
No.121, "Accounting for the Impairment of Long-lived Assets and
for Long-lived Assets to be Disposed Of" ("SFAS 121"), was
issued. SFAS 121 requires the Company to review long-lived
assets and certain identifiable assets related to those assets
for impairment whenever circumstances and situations change
such that there is an indication that the carrying amounts may
not be recoverable. If the undiscounted future cash flows of
the enterprise are less than their carrying amounts, their
carrying amounts are reduced to fair value and an impairment
loss is recognized. The adoption of this pronouncement did not
have a significant impact on the Company's financial statements
as of June 30, 1998 and 1997.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at June 30 consisted of the following:
1998 1997
Computers and equipment 19,206 4,680
Software 2,805 1,699
22,011 6,379
Less accumulated depreciation 7,632 2,893
$ 14,379 $ 3,486
Depreciation expense was $4,738 and $1,698 in 1998 and 1997,
respectively.
NOTE 3 - SALARIES AND WAGES PAYABLE
Salaries and wages payable represent current and prior years
salaries from September 1994 through June 1998. The following
schedule reflects salaries payable at June 30:
Officers Employees Total
1997 237,369 188,052 425,421
1998 371,369 194,373 565,742
In January 1999 $490,742 of accrued salaries existing at that
date were paid in cash with funds received from a private
placement (See Note 13).
9
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 4 - PAYROLL TAXES PAYABLE
At June 30, 1998 and 1997 the Company owed $45,545 and $41,442,
respectively, in payroll taxes, interest and penalties for
prior tax periods ended September 30, 1995. Such amounts were
accrued in payroll taxes payable at June 30, 1998 and 1997. On
February 10, 1999, the Company paid the full amount of $45,545
to the Internal Revenue Service.
NOTE 5 - NOTES AND LOANS PAYABLE
The following schedule reflects notes and loans payable to
non-related parties at June 30:
1998 1997
Note payable, interest at 10%
per annum, due on demand,
unsecured, 1997 $ 18,506 $ 18,506
Note payable, interest at 10%
per annum, due on demand,
unsecured 10,000 10,000
Note payable, interest at 10%
per annum, due on demand,
unsecured 6,821 6,821
Note payable to unrelated party
issued in exchange for forgive-
ness of debt of $19,457 from a
related party reduced by a $5,000
payment interest at 10% per annum,
due on demand, unsecured 14,457 14,457
Note payable dated June 3, 1998
interest at 10% per annum, due
June 3, 1999, unsecured 25,000 -
Note payable, non-interest bearing
due on demand, unsecured 25,624 25,624
Note payable, non-interest bearing
due on demand, unsecured 5,000 5,000
$105,408 $ 80,408
The following schedule reflects notes and loans payable to related
parties at June 30:
1998 1997
Note payable dated May 15, 1998
to related party interest
at 18% per annum, due July
1, 1998, unsecured $9,610 $ -
10
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 5 - NOTES AND LOANS PAYABLE (CONT'D)
1998 1997
Note payable to related party
interest at 14% per annum,
due on demand, unsecured 4,801 4,801
Note payable to related party
interest at 10% per annum,
due on demand, unsecured 2,546 -
Note payable to officer,
interest at 10% per annum,
due on demand, unsecured 7,034 -
Note payable to officer,
interest at 10% per annum,
due on demand, unsecured 12,556 1,274
Note payable to officer,
interest at 10% per annum,
due on demand, unsecured 3,844 600
Note payable to officer, non-
interest bearing through March
26, 1998, interest at 10% per
annum from March 27, 1998, due
on March 27, 1999, unsecured 750,000 750,000
Loan payable to related party
non-interest bearing, due
on demand, unsecured 8,138 -
$ 798,529 $ 756,675
Accrued interest on the notes and loans payable has been
included in accrued expenses.
NOTE 6 - CONVERTIBLE PROMISSORY NOTES
In June 1998 the Company issued convertible promissory notes to
three investors, one of whom is related to the Chief Financial
Officer of the Company. Each note was for $12,500 and bears
interest at 20% per annum. The holders could convert the
amounts due (including interest calculated to the conversion
date) to common stock of AmeriCom at 50% of the then market
price of AmeriCom common stock. The holders could convert the
stock at any time during the term of the note subject to the
ability to determine the fair market value of such stock. The
notes were converted in October 1998. (See Note 13).
11
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 7 - RELATED PARTIES
Certain notes and salaries are owed to related parties at June
30, 1998 and 1997 (See Notes 3 and 5). Certain related parties
took part in the acquisition of Diversified (see Note 13).
At June 30, 1998 and 1997 the director and CEO of the Company
beneficially held approximately 63.5% and 64%, respectively, of
the common stock of AmeriCom USA, Inc. and 75% and 80%,
respectively, of the common stock of RMC Diversified Associates
International, Ltd. Just after completion of the merger and
recapitalization (See Note 13), the same director and CEO of
the company held approximately 58.1% of the surviving entity.
As discussed in the supplemental disclosure to the combined
cash flow statements, and Note 10, certain non-cash issuances
of common stock to related parties occurred during 1997.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company is aware of the issues associated with the
programming code in existing computer systems as the millennium
(year 2000) approaches. The "year 2000" problem is pervasive
and complex as virtually every computer operation will be
affected in some way by the rollover of the two-digit year to
00. The issue is whether computer systems will properly
recognize date-sensitive information when the year changes to
2000. Systems that do not properly recognize such information
could generate erroneous data or cause a system to fail.
Although management believes that none of the Company's systems
are affected by this problem, the Company could be impacted by
the failure of other companies to timely correct their computer
systems. The Company's operations are dependent on the world
wide telecommunications networks including computer systems,
telephone systems, and delivery systems. If any of these
systems become inoperational, the Company will be directly and
significantly effected. Management has not assessed the
potential effect on the Company's earnings.
NOTE 9 - STOCKHOLDERS' EQUITY
In September 1998 AmeriCom filed with the state of Delaware, an
amendment to its articles of incorporation to increase the
authorized shares of its Class A common stock to 15,000,000
from 30,000, and to change the par value of all classes of
common and preferred stock to $0.001 from $0.01. The effect of
these changes is shown retroactively in the financial
statements for the years ended June 30, 1998 and 1997.
12
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 9 - STOCKHOLDERS' EQUITY (CONT'D)
AmeriCom has authorized 15,000,000 shares of Class A common
stock, par value $0.001, 10,000 shares of Class B non-voting
common stock, par value $0.001, and 10,000 shares of preferred
stock, par value $0.001. At June 30, 1998 and 1997, AmeriCom
had 5,000,000 shares of Class A common stock issued and
outstanding of which 500,000 was owned by Diversified and is
eliminated in the combined financial statements. No Class B
common stock or preferred stock has ever been issued. The
preferred stock may be issued from time to time in one or more
series, each such series to have such distinctive designation
or title as may be fixed by the Board of Directors. Preferred
stockholders have preference over common stockholders as to
cash dividends and liquidations.
Diversified has authorized 100,000 shares of common stock, no
par. At June 30, 1998 and 1997 Diversified had 10,000 shares of
its common stock issued and outstanding.
NOTE 10 - STOCK ISSUED AS COMPENSATION
Although the Company has not yet established any formal stock
compensation plans, during 1997 AmeriCom issued under what
would be considered a nonvariable compensatory stock issuance,
585,889 shares of common stock to certain key officers and
employees. The fair market value of the stock was considered to
be equal to the par value and accordingly $586 was recorded as
compensation expense in 1997.
NOTE 11 - GAIN ON SALE OF INVESTMENT
During 1997 the Company sold an investment in common stock for
gross proceeds of $50,000. The investment was recorded at its
original cost of $4,905 resulting in a gain on sale of
investment of $45,095.
NOTES 12 - OPERATING AGREEMENTS
(A) Agreement with Internet Store
On September 3, 1998 the Company entered into a non-binding
memorandum of understanding (the "memorandum") with a large
chain storefront and internet retailer of sporting goods (the
"Store"). The memorandum stipulates that the Company shall
receive 30% of the Store's net margin on sales as defined in
the agreement, generated by consumers who have "clicked"
through to the Store's Web site from the Company internet
billboards. In addition, the Company leases billboard space,
paid on a per visitor basis, on the Store's Web site. The
Company has also agreed to allow the Store to be the preferred
sponsor on all of its customer's sports and school related Web
sites and all of its customer's Web sites where the Store's
vendors advertise.
13
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTES 12 - OPERATING AGREEMENTS (CONT'D)
(B) Business Services Agreement
On September 8, 1998 the Company entered into a twelve month
agreement, subject to renewal, with a British Virgin Islands
Corporation (the "Corporation") for services generally related
to financial and management advisory services for the
arrangement of a U.S. stock market listing through a reverse
acquisition with a U.S. publicly held company and for assisting
the Company in connection with a private placement offering
(See Note 13). Under terms of the agreement, the Company shall
pay to the corporation: (i) five percent management success
fees for the services of the private placement upon the
execution of each subscription agreement (see below), (ii) four
percent of the Company's common stock payable for the
services of the U.S. stock market listing transactions, payable
upon execution of the reverse merger with a U.S. publicly held
company.
Per management of the Company, the five percent fee as noted in
(i) above was verbally amended to ten percent. The Company has
been paying the ten percent fees to the corporation as new
subscription agreements are received. Upon closing of the
reverse merger (See Note 13) the corporation was issued
1,200,000 shares of the Company's common stock equivalent to
four percent of the total outstanding common stock of the Company.
(C) Software Development Agreement
In August of 1998 the Company entered into an agreement with
Systeam Spa (the "Developer"), an Italian company engaged in
information technology, consulting, software development,
software support and related matters. Under the terms of the
agreement Systeam has contracted to provide continued, ongoing
development and support of the Company's AdCast, e-CommPlus,
TrueManagement, and My-Channel technology ("Technology"). In
consideration the Company has agreed to pay an annual royalty
equal to eight per cent (8%) of the world-wide net revenues of
the Company for a period of ten (10) years, renewable for
successive ten (10) year terms provided the Developer continues
to develop, implement, support and upgrade the Technology and
Licensed Software during such periods. The Company has agreed
to guarantee a minimum royalty payment in the amount of
$250,000 in the first calendar year, subsequent to the
completion of the development of Phase I of the Licensed
Software which is contemplated to occur in April, 1999.
14
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTES 12 - OPERATING AGREEMENTS (CONT'D)
(D) Consulting Agreement
On January 8, 1999 the Company entered into a consulting
agreement with a Canadian corporation (the "Consultant")
whereby the Consultant will head American Web-site customer
acquisition efforts. Under the Agreement, the initial term is
from January 1, 1999 through April 30, 1999 and the amount
budgeted for the Consultant's fees and expenses during this
initial term is approximately $100,000, subject to ongoing
audit and review by the Company of the Consultant's performance
in obtaining the stipulated Web sites. The Company agreed to
pay an advance fee of $30,000 to the Consultant on a bi-weekly
basis from January 1, 1999 through April 30, 1999. The
agreement shall be extended contingent on the Consultant
meeting certain stipulated goals and the agreement may be
canceled at any time by the Company.
NOTE 13 - SUBSEQUENT EVENTS
(A) Acquisition of Diversified
On July 15, 1998 the Board of Directors of Diversified and
AmeriCom elected to execute a stock swap, whereby six
stockholders, three of whom were related parties at that date,
representing 100% of the outstanding stock of Diversified,
exchanged their common stock for common stock of AmeriCom at a
ratio of 500 for 1. Diversified then issued 10,000 shares of
its common stock to AmeriCom resulting in Diversified becoming
a wholly owned subsidiary of AmeriCom. Since both entities were
under common control the exchange was accounted for at
historical cost in a manner similar to that in a pooling of
interests.
(B) Conversion of Promissory Notes
At June 30, 1998 there were three convertible promissory notes
outstanding for $12,500 each (See Note 6). In August and
September 1998 three new convertible promissory notes were
issued in the amounts of $12,500 each under the same terms as
the previous notes. In October 1998 all six of the convertible
promissory notes were converted to common stock of the
Company at a price of $1.00 per share. The shares issued
aggregated 78,455 including 3,455 shares issued for accrued
interest.
15
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTES 13 - SUBSEQUENT EVENTS (CONT'D)
(C) Merger and Recapitalization
On November 23, 1998 AmeriCom USA, Inc. entered into an
Agreement and Plan of Merger (the "Agreement") with Chatsworth
Acquisition Corporation, a public shell ("Chatsworth") whereby
all of the stockholders of AmeriCom USA, Inc. exchanged all of
their common stock in AmeriCom USA, Inc. for 27,550,000 shares
or 91.83% of the common stock of Chatsworth. The merger was
effective on December 4, 1998 and Chatsworth changed its name
to AmeriCom USA, Inc. Under Generally Accepted Accounting
Principles, a company whose stockholders receive over fifty
percent of the stock of the surviving entity in a business
combination is considered the acquirer for accounting purposes.
Accordingly, the transaction is accounted for as an
acquisition of Chatsworth by AmeriCom USA, Inc. and a
recapitalization of AmeriCom USA, Inc. The financial
statements subsequent to the acquisition will include the
following: (1) the balance sheet will consist of the net assets
of Chatsworth at historical costs and the net assets of the
Company at historical costs; (2) the statement of operations
will consist of the operations of the Company for the entire
fiscal year and the operations of Chatsworth from the
acquisition date. As a result of the merger, 2,100,000 shares
of common stock of the surviving entity were issued to certain
parties who were not previously stockholders of Chatsworth or
the Company (See Note 12), and 350,000 shares were issued to
the prior shareholders of Chatsworth, resulting in of a total
30,000,000 common shares issued and outstanding, just
subsequent to consummation of the merger.
(D) Private Placements
In December 1998 the Company issued a Private Placement
Memorandum, pursuant to Regulation S of the Securities Act of
1933, as amended, to offer 152 units each consisting of 10,000
shares of the Company's Class A Common Stock at a purchase
price of $20,000 per unit or $2.00 per share. A discount of
$0.50 per share was offered to subscribers who paid 100% with
their subscription agreement. In January 1999 the Company
amended such Private Placement Memorandum to increase the units
offered to 452. As of January 29, 1999 the Company has
received subscriptions for approximately 2,350,000 shares
aggregating approximately $3,687,500, at which point the
offering was closed. The Company's net proceeds after placement
discount and commissions but before offering expenses are
estimated to be 90% of the amount raised.
16
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTES 13 - SUBSEQUENT EVENTS (CONT'D)
(E) Acquisition of Software Company
On January 24, 1999, the effective date, the Company entered
into an Agreement and Plan of Reorganization (the "Agreement")
by and among the Company, Kiosk Acquisition, Inc. ("KAI"),
Kiosk Software, Inc.("Kiosk") and the principal shareholder of
Kiosk (the "Kiosk shareholder"). KAI Acquisition, Inc. is a
wholly owned subsidiary of the Company formed specifically for
the purpose of acquiring Kiosk. Under the terms of the
Agreement, which shall close on or before February 15, 1999,
the Company shall acquire one hundred percent of the issued and
outstanding common stock of Kiosk by issuing shares of the
Company's common stock based on an exchange ratio formula as
follows: (1) the exchange ratio shall be computed by dividing
1,000,000 by the quantity of outstanding Kiosk common shares
just prior to the merger; (2) the number of shares issued to
Kiosk shareholders shall be equal to the product of the number
of shares of Kiosk owned times the ratio computed in (1) above.
The 1,000,000 numerator of the exchange ratio shall be
adjusted, as defined in the agreement, based on any stock sales
taking place between the effective date of the Agreement and
180 days after the closing date of the Agreement, at a price
below the $2.00 offering price of the Regulation S Private
Placement (see Note 13). Any unexercised options of Kiosk at
the effective date of the merger shall also be converted to
options of the Company at a similar ratio as the common stock
exchange discussed above. At completion of the merger, all
shares of Kiosk shall be retired and the corporate existence of
Kiosk shall be terminated. On February 8, 1999 the acquisition
was closed.
The principal shareholder of Kiosk shall be employed by KAI
subsequent to the merger, as its President and Chief Operating
Officer at an annual salary of $100,000 and as a director of
such corporation.
Kiosk specializes in complete kiosk development services
including custom cabinet design and multimedia software
development for a wide variety of applications using its
proprietary Kiosk Operating System.
In contemplation of the merger, the Company has advanced funds
totaling $50,000 to Kiosk. Such advances are evidenced by two
promissory notes in the amounts of $15,000 and $35,000 dated
January 4, 1999 and January 19, 1999, respectively. The notes
bear interest at 8% per annum with principal and accrued
interest due on or before December 31, 1999. On the closing
date of February 8, 1999, funds were advanced to Kiosk to pay
off its liabilities.
17
AMERICOM USA, INC. AND SUBSIDIARY
INTERIM CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 111,606
Accounts Receivable 33,164
Other Current Assets 8,081
---------
Total Current Assets 152,851
PROPERTY AND EQUIPMENT, NET 49,298
OTHER ASSETS 455
---------
TOTAL ASSETS $ 202,604
---------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts Payable & Accrued Expenses $ 197,100
Payroll Taxes Payable 84,662
Accrued Salaries and Wages 549,317
Franchise Tax Payable 800
Notes & Loans Payable - Related Parties 826,434
Notes & Loans Payable 105,011
---------
Total Current Liabilities 1,763,324
STOCKHOLDERS' DEFICIENCY:
Preferred Stock, $.0001 par value,
20,000,000 shares authorized,
none issued and outstanding
Common Stock, $.0001 par value,
100,000,000 shares authorized,
30,115,000 shares issued and
outstanding 3,011
Common Stock Subscribed,
2,130,000 shares 213
Paid-in Capital 4,240,231
Accumulated Deficit (2,525,175)
-----------
Sub-Total 1,718,280
Less Subscriptions Receivable (3,279,000)
-----------
Total Stockholders' Deficiency (1,560,720)
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 202,604
---------
See accompanying notes to interim consolidated financial statements.
AMERICOM USA, INC. AND SUBSIDIARY
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(651,125)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 3,197
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (26,397)
Other current assets (6,881)
Increase (decrease) in:
Accounts payable and accrued expenses (19,418)
Payroll taxes payable 31,048
Accrued salaries and wages (16,425)
--------
NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVITIES (686,001)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (38,116)
---------
NET CASH USED IN INVESTING ACTIVITIES (38,116)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 779,448
Increase (decrease) in notes payable 27,508
-------
NET CASH PROVIDED BY FINANCING ACTIVITIES 806,956
-------
NET INCREASE (DECREASE) IN CASH 82,839
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,767
------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 111,606
----------
See accompanying notes to interim consolidated financial statements.
AMERICOM USA, INC. AND SUBSIDIARY
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
REVENUES $ -
----------
TOTAL REVENUES -
----------
EXPENSES:
Salaries & Wages $228,190
Payroll Taxes 21,301
Advertising 800
Audit & Accounting 10,520
Building Rent 12,600
Consulting expense 79,114
Depreciation expense 3,197
Insurance 16,135
Legal 77,364
Other general and administrative expenses 38,886
Outside Services 55,840
Telephone expense 21,802
Travel expense 38,398
-------
TOTAL EXPENSES 604,147
---------
OPERATING LOSS (604,147)
----------
OTHER INCOME (EXPENSE):
California Franchise Tax (1,600)
Interest expense (42,421)
Vendor finance charges (1,236)
Payroll & Franchise Tax penalties and interest (1,731)
NET OTHER EXPENSE (46,978)
--------
NET LOSS $(651,125)
See accompanying notes to interim consolidated financial statements.
AMERICOM USA, INC. AND SUBSIDIARY
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
June 30,
1998 4,500,000 $4,500 - $ - 10,000 $10,000 $133,007 $(1,874,050) $ - $(1,560,720)
Acquisition
of DAI
by AmeriCom
USA 5,000,000 5,000 - - (10,000) (10,000) 5,000 - - 0
Conversion
of promis-
sory notes
into common
stock 78,4555 78 - - - - 78,377 - - 78,455
Stock sold
prior to
merger 631,000 631 - - - - 538,530 - - 539,161
Reverse merger
with Chats-
worth Acqui-
sition Cor-
poration 19,790,545 (7,209) - - - - 8,042 - - 833
Stock sold
after
merger 115,000 11 - - - - 182,488 - - 182,499
Stock
subscribed - - 2,130,000 213 - - 3,294,787 - (3,279,000) 16,000
Net Loss,
7/1/98-
12/31/98 - - - - - - - (651,125)
Balance,
December 31,
1998 30,115,000 $3,011 2,130,000 $213 - $- $4,240,231 $(2,525,175) $(3,279,000) $(1,560,720)
</TABLE>
See accompanying notes to interim consolidated financial statements.
AMERICOMUSA, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited 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 managements's opinion, however, that all
material 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 combined
financial statements and footnotes included in the
company's December 4, 1998 Form 8-K, as amended, for
the years ended June 30, 1998 and 1997.
NOTE 2 ACQUISITION OF RMC DIVERSIFIED ASSOCIATES
INTERNATIONAL, LTD.
On July 15, 1998, the Board of Directors of RMC
Diversified Associates International, Ltd.
("Diversifed") and AmeriComUSA, Inc. ("AmeriCom")
elected to execute a stock swap, whereby six
stockholders, three of whom were related parties at
that date, representing 100% of the outstanding stock
of Diversified, exchanged their common stock for
common stock of AmeriCom at a ratio of 500 to 1.
Diversified then issued 10,000 shares of its common
stock to AmeriCom, resulting in Diversified becoming a
wholly owned subsidiary of AmeriCom. Since both
parties were under common control, the exchange was
accounted for at historical cost in a manner similar
to that in a pooling of interests.
NOTE 3 CONVERSION OF PROMISSORY NOTES
At June 30, 1998, there were three convertible
promissory notes outstanding for $12,500 each. In
August and September, 1998, three new convertible
promissory notes were issued in the amounts of $12,500
each under the same terms as the previous notes. In
October, 1998, all six of the convertible promissory
notes were converted to common stock of the Company at
a price of $1.00 per share. The shares issued
aggregated 78,455 including 3,455 shares issued for
accrued interest.
NOTE 4 MERGER AND RECAPITALIZATION
On November 23, 1998, AmeriComUSA, Inc.
("AmeriCom") entered into an Agreement and Plan of
Merger (the "Agreement") with Chatsworth Acquisition
Corporation, a public shell ("Chatsworth") whereby
all of the stockholders of AmeriCom exchanged all of
their common stock in AmeriCom for 27,550,000 shares,
or 91.83%, of the common stock of Chatsworth. The
merger was effective on December 4, 1998, and
Chatsworth changed its name to AmeriComUSA, Inc.
Under Generally Accepted Accounting Principles, a
company whose stockholders receive over fifty percent
of the stock of the surviving entity in a business
combination is considered the acquirer for accounting
purposes. Accordingly, the transaction is accounted
for as an acquisition of Chatsworth by AmeriCom and a
recapitalization of AmeriCom. The financial
statements subsequent to the acquisition include the
following: (1) the balance sheet consists of the net
assets of Chatsworth at historical costs and the net
assets of the Company at historical costs; (2) the
statement of operations consists of the operations of
the Company for the six months starting July 1, 1998,
and the operations of Chatsworth from the acquisition
date, December 4, 1998. As a result of the merger,
2,100,000 shares of common stock of the surviving
entity were issued to certain parties who were not
previously stockholders of Chatsworth or the Company,
and 350,000 shares were issued to the prior
shareholders of Chatsworth, resulting in a total of
30,000,000 common shares issued and outstanding, just
subsequent to consummation of the merger.
NOTE 5 PRIVATE PLACEMENTS
In December, 1998, the Company issued a Private
Placement Memorandum, pursuant to Regulation S of the
Securities Act of 1933, as amended, to offer 152 units
each consisting of 10,000 shares of the Company's
Class A Common Stock at a purchase price of $20,000
per unit or $2.00 per share. A discount of $0.50 per
share was offered to subscribers who
paid 100% with their subscription agreement. In
January, 1999, the Company amended such Private
Placement Memorandum to increase the units offered to
452. As of January 29, 1999, the Company had received
subscriptions for approximately 2,350,000 shares
aggregating $3,687,500, at which point the offering
was closed. The Company's net proceeds after
placement discount and commissions but before offering
expenses are estimated to be 90% of the amount raised.
NOTE 6 SUBSEQUENT EVENT
Acquisition of Software Company
On January 24, 1999, the effective date, the
Company entered into an Agreement and Plan of
Reorganization (the "Agreement") by and among the
Company, Kiosk Acquisition, Inc. ("KAI") , Kiosk
Software, Inc. ("Kiosk") and the principal
shareholder of Kiosk (the "Kiosk shareholder"). KAI
is a wholly owned subsidiary of the company formed
specifically for the purpose of acquiring Kiosk.
Under the terms of the Agreement, which closed on
February 8, 1999, the Company acquired one hundred
percent of the issued and outstanding common stock of
Kiosk by issuing shares of the Company's common stock
based on an exchange ratio formula as follows: (1)
the exchange ratio shall be computed by dividing
1,000,000 by the quantity of outstanding Kiosk common
shares just prior to the merger; (2) the number of
shares issued to Kiosk shareholders shall be equal to
the product of the number of shares of Kiosk owned
times the ratio computed in (1) above. The
1,000,000 numerator of the exchange ratio shall be
adjusted, as defined in the agreement, based on any
stock sales taking place between the effective date of
the Agreement and 180 days after the closing date of
the Agreement, at a price below the $2.00 offering
price of the Regulation S Private Placement (see Note
5). Any unexercised options of Kiosk at the effective
date of the merger shall also be converted to options
of the Company at a similar ratio as the common stock
exchange discussed above. At completion of the
merger, all shares of Kiosk shall be retired and the
corporate existence of Kiosk shall be terminated.
The principal shareholder of Kiosk has been
employed by KAI subsequent to the merger, as its
President and Chief Operating Officer at an annual
salary of $100,000 and as a director of such corporation.
Kiosk specializes in complete kiosk development
services including custom cabinet design and
multimedia software development for a wide variety of
applications using its proprietary Kiosk Operating
System.
In contemplation of the merger, the Company had
advanced funds totaling $50,000 to Kiosk. On the
closing date, February 8, 1999, the Company advanced
funds totaling $579,950 to Kiosk so that Kiosk could
pay off all its outstanding liabilities.
CHATSWORTH ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1998
CHATSWORTH ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 - INDEPENDENT AUDITORS' REPORT
PAGE 2 - BALANCE SHEET AS OF OCTOBER 31, 1998
PAGE 3 - STATEMENTS OF OPERATIONS FOR TEN MONTHS
ENDED OCTOBER 31, 1998 AND FOR THE PERIOD
FROM DECEMBER 3, 1997 (INCEPTION) TO
OCTOBER 31, 1998
PAGE 4 - STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY FOR THE PERIOD FROM DECEMBER 3,
1997 (INCEPTION) TO OCTOBER 31,1998
PAGE 5 - STATEMENTS OF CASH FLOW FOR THE TEN MONTHS
ENDED OCTOBER 31, 1998 AND FOR THE PERIOD
FROM DECEMBER 3, 1997 (INCEPTION) TO
OCTOBER 31, 1998
PAGE 6 - 9 - NOTES TO FINANCIAL STATEMENTS AS OF
OCTOBER 31, 1998
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Chatsworth Acquisition Corporation
(A Development Stage Company)
We have audited the accompanying balance sheet of Chatsworth
Acquisition Corporation (a development stage company) as of October
31, 1998 and the related statements of operations, changes in
stockholders' equity and cash flows for the ten months then ended
and for the period from December 3, 1997 (inception) to October 31,
1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly in all material respects, the financial position of
Chatsworth Acquisition Corporation (a development stage company) as
of October 31, 1998, and the results of its operations and its cash
flows for the ten months then ended and from December 3, 1997
(inception) to October 31, 1998, in conformity with generally
accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
November 23, 1998
CHATSWORTH ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF OCTOBER 31, 1998
ASSETS
Cash $ 918
TOTAL ASSETS $ 918
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Due to related party $ 50
STOCKHOLDERS' EQUITY
Preferred Stock, $.0001
par value, 20 million
shares authorized, none
issued and outstanding -
Common Stock, $.0001 par
value, 100 million shares
authorized, 5,000,000 issued
and outstanding 500
Capital in excess of par 500
Accumulated deficit (132)
Total Stockholders' Equity 868
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 918
See accompanying notes to financial statements.
2
CHATSWORTH ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1998
AND FOR THE PERIOD FROM DECEMBER 3, 1997
(INCEPTION) TO OCTOBER 31, 1998
CUMULATIVE FROM
DECEMBER 3, 1997 TEN MONTHS
(INCEPTION) TO ENDED
OCTOBER 31, 1998 OCTOBER 31,1998
Income $ - $ -
Expenses
Bank charges $ 132 $ 132
NET LOSS $ (132) $ (132)
See accompanying notes to financial statements.
3
CHATSWORTH ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 3, 1997
(INCEPTION) TO OCTOBER 31, 1998
Deficit
Additional Accumulated
Common Paid-In During Devel-
Stock Capital opment Stage Total
Common stock issuance $ 500 $ 500 $ - $ 1,000
Net loss for the ten
months ended October
31, 1998 - - (132) (132)
BALANCE AT OCTOBER
31, 1998 $ 500 $ 500 $ (132) $ 868
See accompanying notes to financial statements.
4
CHATSWORTH ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1998
AND FOR THE PERIOD FROM DECEMBER 3, 1997
(INCEPTION) TO OCTOBER 31, 1998
CUMULATIVE FROM
DECEMBER 3, 1997 TEN MONTHS
(INCEPTION) TO ENDED
OCTOBER 31, 1998 OCTOBER 31, 1998
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (132) $ (132)
Adjustments to
reconcile net loss
to net cash used
by operating activities: - -
Net cash used in
operating activities (132) (132)
CASH FLOWS FROM INVESTING
ACTIVITIES - -
CASH FLOWS FROM FINANCING
ACTIVITIES:
Due to related party 50 50
Proceeds from issuance
of common stock 1,000 -
Net cash provided by
financing activities 1,050 50
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 918 (82)
CASH AND CASH
EQUIVALENTS - BEGINNING
OF PERIOD - 1,000
CASH AND CASH EQUIVALENTS
- END OF PERIOD $ 918 $ 918
See accompanying notes to financial statements.
5
CHATSWORTH ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization and Business Operations
Chatsworth Acquisition Corporation (a development
stage company) ("the Company") was incorporated in
Delaware on December 3, 1997 to serve as a vehicle
to effect a merger, exchange of capital stock, asset
acquisition or other business combination with a
domestic or foreign private business. At October
31, 1998, the Company had not yet commenced any
formal business operations, and all activity to date
relates to the Company's formation and proposed fund
raising. The Company's fiscal year end is December 31.
The Company's ability to commence operations is
contingent upon its ability to identify a
prospective target business and raise the capital it
will require through the issuance of equity
securities, debt securities, bank borrowings or a
combination thereof.
B. Use of Estimates
The preparation of the financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting period. Actual
results could differ from those estimates.
C. Cash and Cash Equivalents
For purposes of the statements of cash flows, the
Company considers all highly liquid investments
purchased with an original maturity of three months
or less to be cash equivalents.
6
CHATSWORTH ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Income Taxes
The Company accounts for income taxes under the
Financial Accounting Standards Board of Financial
Accounting Standards No. 109, "Accounting for Income
Taxes" ("Statement 109"). Under Statement 109,
deferred tax assets and liabilities are recognized
for the future tax consequences attributable to
differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in
which those temporary differences are expected to be
recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the
period that includes the enactment date. There were
no current or deferred income tax expense or
benefits due to the Company's limited operations for
the period ended October 31, 1998.
E. New Accounting Pronouncements
The Financial Accounting Standards Board has
recently issued several new accounting
pronouncements. Statement No. 129, "Disclosure of
Information about Capital Structure" establishes
standards for disclosing information about an
entity's capital structure, is effective for
financial statements for periods ending after
December 15, 1997 and has been adopted by the
Company as of December 31, 1997. Statement No. 130,
"Reporting Comprehensive Income" establishes
standards for reporting and display of comprehensive
income and its components, and is effective for
fiscal years beginning after December 15, 1997.
Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" establishes
standards for the way that public business
enterprises report information about operating
segments in annual financial statements and requires
that those enterprises report selected information
about operating segments in interim financial
reports issued to shareholders. It also establishes
standards for related disclosures about products and
services, geographic areas, and major customers,
and is effective for
7
CHATSWORTH ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
financial statements for periods beginning after
December 15, 1997. The Company believes that its
adoption of Statements 130 and 131 did not have a
material effect on the Company's financial position
or results of operations.
NOTE 2 - STOCKHOLDERS' EQUITY
A. Preferred Stock
The Company is authorized to issue 20,000,000 shares
of preferred stock at $.0001 par value, with such
designations, voting and other rights and
preferences as may be determined from time to time
by the Board of Directors.
B. Common Stock
The Company is authorized to issue 100,000,000
shares of common stock at $.0001 par value. The
Company issued 4,750,000 and 250,000 shares to
Pierce Mill Associates, Inc. and Cassidy &
Associates, respectively.
NOTE 3 - RELATED PARTIES
Legal counsel to the Company is a firm owned by a
director of the Company who also owns 100% of the
outstanding stock of Pierce Mill Associates,
Inc., the 95% shareholder. The same party is also
the controlling owner of Cassidy & Associates, the
5% shareholder that the Company is indebted to in
the amount of $50.
8
CHATSWORTH ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF OCTOBER 31, 1998
NOTE 4 - SUBSEQUENT EVENTS
Merger and Recapitalization
On November 23, 1998 Americom USA, Inc. ("Americom")
entered into an Agreement and Plan of Merger (the
"Agreement") with the Company whereby all of the
stockholders of Americom exchanged all of their
common stock in Americom for 27,550,000 shares or
91.83% of the common stock of the Company. The
merger was effective on December 4, 1998 and the
Company changed its name to Americom USA, Inc. Under
Generally Accepted Accounting Principles, a company
whose stockholders receive over fifty percent of the
stock of the surviving entity in a business
combination is considered the acquirer for
accounting purposes. Accordingly, the transaction is
accounted for as an acquisition of the Company by
Americom and a recapitalization of Americom. The
financial statements subsequent to the acquisition
will include the following: (1) the balance sheet
will consist of the net assets of the Company at
historical costs and the net assets of Americom at
historical costs; (2) the statement of operations
will consist of the operations of Americom for the
entire fiscal year and the operations of the Company
from the acquisition date. As a result of the
merger, 4,650,000 of the original 5,000,000
outstanding common shares of Chatsworth were
retired, and 2,100,000 shares of common stock of the
surviving entity were issued to certain parties who
were not previously stockholders of the Company or
Americom, resulting in a total 30,000,000 common
shares issued and outstanding, just subsequent to
consummation of the merger.
9
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
As a result of the merger of AmeriCom USA, Inc. with
and into Chatsworth Acquisition Corporation and as of the date
thereof, December 4, 1998, the accountant to Chatsworth was
replaced with the accountant for AmeriCom USA, Inc. The
financial statements for the Company since inception and prior
to the change in such accountants have not contained any adverse
opinion or disclaimer or were modified as to any uncertainty,
audit scope or accounting principles and there were not any
disagreements or "reportable events" with such former accountant.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A)
OF THE EXCHANGE ACT
The Directors and Officers of the Company are as follows:
Name Age Title
Robert M. Cezar 57 Director, Chief Executive Officer
David H. Loomis 60 Director, President, Chief Operating
Officer, Acting Chief Financial
Officer, Treasurer, Vice President
of Finance
Greg M. Hogue 58 Executive Vice President
Helen E. Cooper 58 Secretary, Vice President for
Administration
Craig D. Machado 52 Director
Winston Lee 44 Vice President, International
Corporate Development
There are no agreements or understandings for any
officer or director to resign at the request of another person
and none of the above-named officers or directors is acting on
behalf of or will act at the direction of any other person.
Set forth below are the names of the directors and
officers of the Company, all positions and offices with the
Company held, the period of service, and business experience
during at least the last five years:
ROBERT M. CEZAR, 57, serves as Chief Executive
Officer and a director of the Company. Since 1994, Mr. Cezar
has served as a director, chief executive officer and president
of Diversified Associates International, now a wholly-owned
subsidiary of the Company. From 1994 to 1996, Mr. Cezar was
chief executive officer, director and chief engineering officer
of AmeriCom USA, Inc. From 1996 to 1998, Mr. Cezar was vice
president of engineering for Enhanced Service Providers, a
telecommunications company.
DAVID H. LOOMIS, 60, serves as President, Chief
Operating Officer, Acting Chief Financial Officer, Treasurer,
Vice President of Finance and a director of the Company. From
1963 to 1991, Mr. Loomis served in various positions at Loomix,
a $23 million agri-business company culminating as chief
financial officer and a director. From 1994 to 1996, Mr. Loomis
served as chief financial officer and a director of AmeriCom
USA. From 1996 to 1998, Mr. Loomis served as chief financial
officer and a director of DAI. In April, 1998, Mr. Loomis
joined the Company as its Chief Financial Officer, Treasurer,
and Vice President for Finance and in January, 1999, assumed the
positions of President and Chief Operating Officer. Mr. Loomis
received his Bachelor of Science degree in Social Science from
California State Polytechnic University in 1961.
GARY M. HOGUE, 58, serves as Executive Vice
President of the Company. From 1994 to 1998, Mr. Hogue was the
Administrative Manager for Torch Operating Company, Santa Maria
District, an oil production operating company for facilities
both offshore and onshore California. From 1969 to 1992, Mr.
Hogue served in a number of positions with Atlantic Richfield
Co. (ARCO), the last of which was Personnel Director for ARCO
Oil and Gas, Western District. Mr. Hogue received his Bachelor
of Science degree in Economics from Sonoma State College in 1972
and mis Masters of Business Administration in 1982 from
Pepperdine University, Malibu, California.
HELEN E. COOPER, 58, serves as Secretary and Vice
President for Administration of the Company. From 1993 to 1994,
Ms. Cooper served as a director, corporate secretary and vice
president for administration of DAI. From 1994 to 1996, Ms.
Cooper was director, corporate secretary and vice president for
administration of AmeriCom USA, Inc. From 1996 to 1998, Ms.
Cooper served as an administrative assistant at Enhanced Service
Providers. Since April 1998, Ms. Cooper has been employed by
the Company. Ms. Cooper received her teaching degree in 1962
from Oxford University and Froebel Institute, United Kingdom.
CRAIG D. MACHADO, 52, serves as a director of the
Company. From 1991 to 1995, Mr. Machado served as vice
president, marketing and merchandising at Calgene Fresh, Inc., a
genetically engineered fresh tomato company. Since 1995, Mr.
Machado has been the director of marketing for APIO, Inc., an
agro distribution and processing company located in Guadalupe,
California. Mr. Machado has served as president of the Northern
California Produce Council in 1976 and 1977 and was recognized
by the Sacramento Bee as the Creative Advertiser of the Year for
1987. Mr. Machado received his Bachelor of Science degree in
Architectural Engineering from California State University,
Sacramento, California in 1966.
WINSTON LEE, 44, serves as Vice President of
International Corporate Development. In 1987 Mr. Lee founded
Gateway Communications Limited, Taipei, Taiwan, an international
direct dial rate arbitrage company which developed an automatic
aggregation system. From 1994 to 1998, Mr. Lee was managing
director of Strait Venture Inc., Taiwan, which company
represents several large telecommunications company in the Far
East, including China. Mr. Lee received his Bachelor of
Architecture degree in 1977 from Rice University and his Master
of Business Administration from New York University in 1982. In
October, 1998, Mr. Lee joined the Company as its Vice President
for International Corporate Development.
LEGAL PROCEEDINGS INVOLVING PRIOR PUBLIC COMPANY
In June of 1982, Robert Cezar became president of
International Video Corporation, a publicly held company and
thereafter acted as its chief executive officer and a director.
In May, 1983, International Video Corporation changed its name
to Cezar Industries, Ltd. ("CIL"). On June 15, 1992, Mr. Cezar
resigned his position as an officer and director of CIL. In
May, 1994, CIL was unable to meet its debt obligations and filed
a voluntary petition in bankruptcy under Chapter 11.
ITEM 10. EXECUTIVE COMPENSATION
REMUNERATION
The following table sets forth the total compensation
paid or accrued by the Company on behalf of the Chief Executive
Officer and President of the Company during 1998 and the four
highest paid officers who received a salary in excess of
$100,000. In 1998, the Company did not issue any stock options
or other incentive awards. Pursuant to the Stock Option Plan
adopted in 1999, the Company has issued options to purchase
900,000 shares of Common Stock to Robert Cezar, options to
purchase 675,000 shares of Common Stock to David Loomis, options
to purchase 600,000 shares of Common Stock to Craig Machado and
643,762 options to Lori Fisher. One-third of each such holders
options become fully vested on March 9, 2000, one-third on March
9, 2001, and one-third on March 9, 2002, except those of Ms.
Fisher of which 343,762 are currently fully vested, 100,000
vesting each in 2000, 2001 and 2002. All such options are
exercisable at $2.00 per share.
SUMMARY COMPENSATION TABLE
PRINCIPAL POSITION Year Salary
Robert Cezar, Chief
Executive Officer 1998 $86,150
David Loomis, President 1998 $75,167*
Lori Fisher 1998 $100,000**
* Of which $46,000 was accrued.
** Of which $100,000 was accrued.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of December 31, 1998,
each director and officer of the Company and each person known
by the Company to be the beneficial owner of five percent or
more of the Company's Common Stock and except if noted, the
holder thereof has sole voting and investment power with respect
to the shares shown.
Amount of Common Percent of
Stock Beneficially Common Stock
Name Owned (1)
Robert Cezar (2)(4) 17,336,054 54.3%
Chief Executive Officer, Director
124 South Halcyon Road
Arroyo Grande, California 93420
David Loomis (4), Director 2,260,684 7.1%
President, Chief Operating Officer,
Acting Chief Financial Officer
124 South Halcyon Road
Arroyo Grande, California 93420
Helen Cooper (3) 993,919 3.1%
Vice President of Administration,
Secretary
124 South Halcyon Road
Arroyo Grande, California 93420
Gary Hogue 0 0%
Executive Vice President
1303 Grand Avenue, Suite 221
Arroyo Grande, California 93420
Craig Machado, Director (4) 587,980 1.8%
21 La Gaviota
Pismo Beach, California 93449
All directors and 21,198,637
executive officers as
a group (5 persons)
(1) Based upon 31,943,528 outstanding shares of common stock.
(2) Of which 7,335,946 is held in the Robert M. Cezar trust.
(3) Of which 665,690 is held in the Helen E. Cooper trust.
(4) Does not include options issued pursuant to stock option
plan which do not become fully vested within the next 60 days.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has been not a party to any transaction or
proposed transaction within the past two years in which any
director or executive officer, security holder or director
nominee, or members of the immediate family of any of the
foregoing, had a direct or indirect material interest.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
2.1* Certificate of Merger filed December 18, 1998, with
Securities and Exchange Commission as exhibit to Form
8-K and incorporated herein by reference.
3.1* Certificate of Incorporation filed as an exhibit to the
Company's registration statement on Form 10-SB (filed on
February 11, 1998 and incorporated herein by reference.
3.2* By-Laws filed as an exhibit to the Company's
registration statement on Form 10-SB filed on February
11, 1998 incorporated herein by reference.
3.3+ Amendment to By-Laws.
10.1* Software development agreement between AmeriCom USA,
Inc., a company incorporated under the laws of Delaware
and Systeam, Spa filed as an exhibit to the Company's
Form 8-K/A on February 18, 1999.
10.2+ Agreement of Purchase and Sale and Exclusive Licensing
of Technology with Americom, Ltd. effective March, 11,
1999 for the acquisition of the My-Line Technology
10.3+ Stock Option Plan
16.1* Accountant's Letter filed December 18, 1998, with
Securities and Exchange Commission as exhibit to Form 8-K.
23.1+ Consent of accountants
_________
* Previously filed
+ Filed herewith
(b) Form 8-K filed December 18, 1998 reporting
item 1, 2, 4, 6 and 9 and amended February 18, 1999 reporting
item 7, financial statements dated January 29, 1999.
Form 8-K filed February 23, 1999 reporting item 2.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
AMERICOM USA, INC.
By: /s/ Robert Cezar
Chief Executive Officer
/s/ David Loomis
Chief Financial Officer
March 31, 1999
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Name Office Date
/s/ Robert Cezar Director March 31, 1999
/s/ David Loomis Director March 31, 1999
/s/ Craig Machado Director March 31, 1999
AMENDMENTS TO BY-LAWS OF AMERICOM USA, INC.
The following sections of the
by-laws of AmeriCom USA, Inc. shall be
amended to read as follows:
Section 2.3. Election and Term.
The directors shall be divided into three
classes, designated as Class I, Class II and
Class III. Each class shall consist, as
nearly as may be possible, of one-third of
the total number of directors constituting
the entire Board of Directors. The term of
the initial Class I directors shall
terminate on the date of the _____ annual
meeting of stockholders; the term of the
initial Class II directors shall terminate
on the date of the ____ annual meeting of
stockholders and the term of the initial
Class III directors shall terminate on the
date of the ____ annual meeting of
stockholders.
At each annual meeting of
stockholders beginning in ____, successors
to the class of directors whose term expires
at that annual meeting shall be elected for
a three-year term. Unless otherwise
provided by the Certificate of
Incorporation, each director elected shall
hold office until the annual meeting for the
year in which his term expires and until his
successor is duly elected and qualified, or
until his earlier death, resignation,
retirement, disqualification or removal
Section 2.4. Vacancies. If the
number of directors is changed, the increase
or decrease shall be apportioned among the
classes so as to maintain the number of
directors in each class as nearly equal as
possible. A director shall hold office
until the annual meeting for the year in
which his term expires and until his
successor shall be elected and shall
qualify, subject, however, to prior death,
resignation, retirement, disqualification or
removal from office. Any vacancy on the
Board of Directors, howsoever resulting, may
be filled by a majority of the directors
then in office, even if less than a quorum,
or by a sole remaining director. Any
director elected to fill a vacancy shall
hold office for a term that shall coincide
with the term of the class to which such
director shall have been elected and in no
event shall a decrease in the number of
directors shorten the term of any incumbent
director.
Notwithstanding the foregoing,
whenever the holders of any one or more
classes or series of Preferred Stock issued
by the Corporation shall have the right,
voting separately by class or series, to
elect directors at an annual meeting or
special meeting of stockholders, the
election, term of office, filling of
vacancies and other features of such
directorships shall be governed by the terms
of the Certificate of Incorporation or the
resolution or resolutions adopted by the
Board of Directors pursuant to Article FOUR
of the Certificate of Incorporation
applicable thereto, and such directors so
elected shall not be divided into classes
pursuant to Article SIXTEEN of the
Certificate of Incorporation unless
expressly provided by such terms.
ARTICLE XI
INDEMNIFICATION
Section 11.1 Right to
Indemnification. The corporation shall
indemnify and hold harmless, to the fullest
extent permitted by the Delaware General
Corporation Law as it presently exists or
may hereafter be amended, any person who was
or is made or is threatened to be made a
party or is otherwise involved in any
action, suit or proceeding, whether civil,
criminal, administrative or investigative (a
"Proceeding") by reason of the fact that he,
or a person for whom he is the legal
representative, is or was a Director or
officer of the corporation or is or was
serving at the request of the corporation as
a Director, officer, employee or agent of
another corporation or of a partnership,
joint venture, trust, enterprise or
nonprofit entity, including service as an
officer and Director of a subsidiary of the
Corporation and service with respect to
employee benefit plans, against all
liability and loss suffered and expenses
(including attorneys' fees) reasonably
incurred by such person. The corporation
shall be required to indemnify a person in
connection with a Proceeding (or part
thereof) initiated by such person only if
the proceeding (or part thereof) was
authorized by the Board of Directors of the
corporation.
Section 11.2 Advancement of
Expenses. The corporation shall pay the
reasonable expenses (including attorneys'
fees) incurred in defending any Proceeding
in advance of its final disposition,
provided, however, that the payment of
expenses incurred by a Director or officer
advance of the final disposition of the
Proceeding shall be made only upon receipt
of an undertaking by the Director or officer
to repay all amounts advanced if it should
be ultimately determined that the Director
or officer is not entitled to be indemnified
under this Article or otherwise.
Section 11.3 Claims. If a
claim for indemnification or advancement of
expenses under this Article is not paid in
full within sixty days after a written claim
therefor has been received by the
corporation, the claimant may file suit to
recover the unpaid amount of such claim and,
if successful in whole or in part, shall be
entitled to be paid all of the expense of
prosecuting such action. In any such action
the corporation shall have the burden of
proving that the claimant was not entitled
to the requested indemnification or payment
of expenses under applicable law.
Section 11.4 Nonexclusivity of
Rights. The rights conferred on any person
by Article 11 shall not be exclusive of any
other rights which such person may have or
hereafter acquire under any statute,
provision of the Certificate of
Incorporation, these Bylaws, agreement, vote
of stockholders or disinterested directors
or otherwise.
Section 11.5 Other
Indemnification. The Corporation's
obligation, if any, to indemnify any person
who was or is serving at its request as a
director, officer, employee or agent of
another corporation, partnership, joint
venture, trust, enterprise or nonprofit
entity shall be reduced by any amount such
person may collect as indemnification from
such other corporation, partnership, joint
venture, trust, enterprise or nonprofit
enterprise.
Section 11.6 Amendment or
Repeal. Any repeal or modification of the
foregoing provisions of this Article 11
shall not adversely affect any right or
protection hereunder of any person in
respect of any act or omission occurring
prior to the time of such repeal or
modification.
AGREEMENT OF PURCHASE AND SALE
AND EXCLUSIVE LICENSING OF TECHNOLOGY
This AGREEMENT OF PURCHASE AND SALE AND EXCLUSIVE LICENSING OF
TECHNOLOGY (this "Agreement"), is made effective as of the 11th day
of March, 1999.
B E T W E E N:
AMERICOM LTD., a corporation incorporated under the laws of
Turks and Caicos, BWI
(hereinafter called the "Seller"),
PARTY OF THE FIRST PART;
- - and -
AMERICOM U.S.A., INC., a corporation incorporated under the laws of
the State of Delaware, in the United States of America,
(hereinafter called the "Purchaser"),
PARTY OF THE SECOND PART;
RECITALS:
WHEREAS, Seller is engaged in the business (the "Americom Products
Business") of developing, marketing, licensing, and distributing
certain technology for the provision of enhanced communications
services, including certain services marketed by Seller under the
names "My Line" and "InstAccount" (hereinafter referred to as the
"Americom Products").
WHEREAS, it is proposed that the Seller sell and license to the
Purchaser certain assets owned by Seller and used in the
development, marketing, licensing and distribution of the Americom
Products, all upon and subject to the terms and conditions of this
Agreement as hereinafter set forth.
NOW, THEREFORE. in order to consummate the foregoing purchase, sale
and license and in consideration of the premises and the
representations and undertakings therein set forth, the parties
agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS
0.1 Purchase and Sale. Subject to the terms
and conditions contained herein, on the Closing
Date (as hereinafter defined), Seller will both
(i) sell, convey, transfer, assign
and deliver to Purchaser; and
(ii) execute an exclusive (with the
exception of the Contracts set forth
in Exhibit 1.4(b)), irrevocable,
perpetual, royalty-free license in
favor of Purchaser, and Purchaser
shall purchase and license from
Seller, all right, title and interest
in and to those assets and properties
the Technology) more particularly
described in the following
subparagraphs (a) through (1) below:
(a) All source
codes and object
codes comprising
any part of or in
any way used in any
software
applications or
modules
(collectively, the
"Americom
Software") forming
thc basis of or
otherwise used in
connection with the
Americom Products
together with all
tapes, disks,
printouts and other
media on which the
Americom Software
is stored (the
"Principal
Technology"). The
Principal
Technology
includes, without
limitation, the
software printout
delivered with this
Agreement by
Americium which has
been jointly
identified by
parties, a copy of
which is being
retained' at the
offices of
Purchaser's counsel.
(b) All of
Seller's rights
under any
licensing,
marketing, sales or
other arrangements
(collectively,
"Contracts")
pertaining to the
Americom Products
Business, together
with all of
Seller's rights to
revenues to which
the Seller
otherwise would
become entitled
from and after the
date of this
Agreement; provided
that Purchaser
shall have sixty
(60) days to review
and consider the
Contracts, and to
elect, at its
option, to reject
the assignment of
any one or more of
the Contracts;
(c) Those
trademarks, service
marks and trade
names, together
with all U.S. and
foreign
applications for
registration rights
therefor, which are
used by Seller in
the marketing,
distribution,
licensing and sale
of the Americom
Products (the
"Trademarks");
(d) To the
extent reduced to
written or other
tangible form
(including but not
limited to
electronic media),
all drawings,
designs, plans,
manuals, research,
specifications,
formulae,
processes,
know-how,
technology, trade
secrets and other
confidential or
proprietary
information and
other data and
information (to the
extent not
otherwise
encompassed in
paragraphs 1.1 (a)
through (c) above
pertaining in any
way to the Americom
Products or the
Americom Software
or contemplated
improvements,
supplements,
additions to the
Americom Products
or the Americom
Software
(collectively, the
"Other Intellectual
Property Interests");
(e) All
customer lists and
customer files
directly related to
the Americom
Products (the
"Customer Files"); and
(f) All
marketing surveys,
sales records,
sales projections,
marketing plans and
other materials
related to the
marketing of the
Americom Products
(the "Marketing
Materials").
1.2 No Other Assets. No other assets owned or used
by Seller shall be included in the purchase and license,
except to the extent they are listed in Section 1.1 above.
1.3 No Rights to Trademarks or Tradenames. Except to
the limited extent provided in Section 1.1 (c), no
rights are to be transferred hereunder to Purchaser in
any trademarks and tradenames owned or used by Seller,
or any of its affiliated companies, subsidiaries or
divisions.
1.4 Transfer Documents. All of the assets to be
transferred to Purchaser under this Agreement shall be
conveyed by bills of sale, assignments, or other
instruments (the "Transfer Documents") which shall
contain appropriate representations that Seller has good
and marketable title, free and clear of all liens and
encumbrances to the same. The Transfer Documents shall
include the following:
(a) A bill of sale (the "Bill of
Sale") in the form attached hereto as
Exhibit 1.4(a) with respect to the
Principal Technology, Other
Intellectual Property Interests,
Customer Files, and Marketing Materials;
(b) An assignment of contracts
(the "Assignment of Contracts") in the
form attached hereto as Exhibit 1.4(b)
with respect to the Contracts,
provided that said assignment
documentation shall provide that
Purchaser shall have sixty (60) days
to review and consider the Contracts,
and to elect, at its option, to reject
the assignment of any one or more of
the Contracts;
(c) An assignment of trademarks
(the "Assignment of Trademarks") in
the form attached hereto as Exhibit
1.4(c) with respect to each of the
Trademarks; and
(d) A License Agreement in the
form attached hereto as Exhibit 1.4(d)
with respect to any and all of the
Technology.
SECTION 2. CONSIDERATION, PAYMENT
In consideration of the sale and license of the
Technology set forth in Section 1, Purchaser shall make
the following payments and provide the following
consideration to Seller:
1.1 As a deposit the sum of THIRTY-EIGHT
THOUSAND DOLLARS ($38,000) on the execution of
this Agreement;
1.2 At the Closing, Purchaser shall deliver
to the Seller by wire transfer in accordance
with "Exhibit 2.2" the sum of ONE HUNDRED
THOUSAND DOLLARS ($100,000.00);
1.3 Short Term Note. At the Closing,
Purchaser shall deliver to Seller a promissory
note bearing interest at the rate of Eight (8%)
percent per annum (the "Promissory Note") in
the principal amount of Four Hundred Thousand
Dollars ($400,000.00) repayable as follows:
(i) A lump sum payment of TWO
HUNDRED THOUSAND DOLLARS ($200,000.00)
is due and payable on the first
anniversary date of the Promissory
Note; and
(ii) A second lump sum payment of
TWO HUNDRED THOUSAND DOLLARS
($200,000.00) plus any and all accrued
and unpaid interest owing under the
note is due and payable on the second
anniversary date of the (Promissory
Note).
The Promissory Note is to be in such form as is attached
hereto as Exhibit 2.3
2.1 Shares of Purchaser. At the Closing,
Purchaser shall allot and issue to the Seller
FIVE HUNDRED THOUSAND (500,000) Common Shares
(the "Shares") out of the capital of the
Purchaser. It is agreed and understood between
the parties that the present value of the
Shares is TWO DOLLARS ($2) per share and has a
current value of ONE MILLION DOLLARS
($1,000,000.00). The parties agree that there
shall be no adjustment of the Purchase Price
hereafter should there be any change in value
of the Shares.
2.2 Transfer of Shares of Enhanced Service
Providers, LLC. At the Closing, Purchaser shall
deliver all documentation required to assign
and transfer all of the shares held by
Purchaser in the capital of Enhanced Service
Providers, LLC (the "ESP Shares") to the Seller.
SECTION 3. LIABILITIES
3.1 Liabilities To Be Assumed. Purchaser agrees to
deliver to Seller at the Closing an assumption document
(the "Assumption Document") in the form set forth in
Exhibit 3.1 attached hereto pursuant to which Purchaser
assumes Seller's obligations to perform those
obligations of Seller under the Contracts which by their
terms are to be performed after the Closing Date;
provided that Purchaser shall retain the right to elect,
during the sixty (60) day period following the Closing,
to reject the assignment of any Contract;
3.2 Liabilities Not Assumed. Except as Purchaser
shall specifically otherwise agree in writing, Seller
shall retain full and sole responsibility for all
obligations and liabilities with respect to the
development, marketing, distribution, licensing and sale
of the Americom Products except for those liabilities
specifically assumed in the Assumption Document,
including without limitation:
(a) any
liability in
respect of or
arising out of any
of the Americom
Products which were
licensed or sold
prior to Closing;
(b) any
liability for
failure of the
Americom Products
to perform
according to
specification or as
intended prior to
the Closing Date;
(c) any
liability or
obligations
involving the
payment of any
taxes arising out
of or relating to
the operation of
the Americom
Products Business
by the Seller prior
to the Closing;
(d) any
liability or
responsibility with
respect to claims
for credit by third
parties with
respect to Products
licensed or sold
prior to the
Closing; and
(e) any
liability or
obligation to any
third parties not
expressly assumed
in the Assumption
Document.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1 Corporate Status. Seller is a
corporation duly organized, validly existing
and in good standing under the laws of Turks
and Caicos, and is duly qualified to transact
business as a foreign corporation in such other
jurisdictions in which its ownership of the its
assets or its operation of the Americom
Products Business requires it to be so
qualified. Seller has all requisite corporate
power and authority to own or lease and operate
the assets owned or used by it and carry on the
Americom Products Business as presently being
conducted by it and to execute, deliver and
perform this Agreement and all other
agreements, certificates and other documents
being delivered by it at or prior to the
Closing in connection with transactions
contemplated hereby, and to consummate the
transactions contemplated hereby.
3.2 Authority. The execution and delivery
of this Agreement, the consummation of the
transactions provided for herein, and the
execution and delivery of all other agreements,
instruments and documents to be delivered
hereunder have been duly authorized by all
necessary action on the part of Seller, and
this Agreement, and all other agreements,
instruments and documents to be delivered by
Seller hereunder constitute and will constitute
valid and legally binding obligations of Seller
enforceable against Seller in accordance with
their terms subject to general principles of
equity and except to the extent enforceability
may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
3.3 No Conflict With Other Agreements. The
execution, delivery and performance of this
Agreement and any other agreements, instruments
and documents to be delivered hereunder by
Seller and the consummation of the transactions
contemplated by this Agreement will not (a)
result in the breach of any term or provision
of the charter or by-laws of Seller, or (b)
constitute a default under or result in
violation of any existing indenture, contract,
agreement, or other instrument to which such
Seller is a party or by which it or any of its
property is bound or any applicable law,
statute, decree, order, rule, or regulation of
any court, regulatory body or administrative
agency that is binding on Seller.
3.4 Title to Technology. Seller has good
title to all the Technology free and clear of
all liens, claims, security interests and
encumbrances (except liens for taxes not yet
due and payable).
3.5 Condition of Technology. The Technology
is free from defects in design and operation
(except such minor: defects as do not interfere
with the continued use thereof in the conduct
of normal operations). Without limiting the
generality of the foregoing, the Americom
Software fully supports each of the Americom
Products and each capability of the Americom
Products free of major defects that interfere
with the continued operation of the Americom
Products.
3.6 Contracts. The Contracts constitute all
agreements, contracts and commitments to which
Seller is a party or by which it is bound and
which relate to any licensing, sales, marketing
or distribution arrangement concerning the
Americom Products Business. Seller has provided
Purchaser with complete and accurate copies of
all such agreements, contracts and commitments.
3.7 Employment Contracts. Seller has not
entered into and is not in any way bound to any
contract of employment (or other arrangement
other than employment-at-will) with any
employee of the Seller, which contract or
arrangement specifically provides for the
employment of such employee in the Sellers
Americom Products Business.
3.8 Compliance with Law; Litigation. Seller
has complied with, and is not in violation of,
applicable Turks and Caicos, international,
U.S. federal, state and local statutes, laws,
rules and regulations, which the failure to
comply with would materially affect the use of
any of the Technology and the operation of the
Americom Products Business or Seller's ability
to perform its obligations hereunder or which
the failure to comply with would have a
material adverse effect on the reputation and
goodwill associated with the Americom Products.
There are no suits, actions, arbitrations, or
legal, administrative or other proceedings, or
governmental investigations, pending or
threatened against Seller in which there is a
reasonable possibility of an adverse decision
that could adversely affect Seller's ability to
perform its obligations hereunder or that may
affect the Technology or the operation of the
Americom Products Business or that would have
an adverse effect on the reputation and
goodwill associated with the Americom Products.
Seller is not subject to any injunction, order
or decree of any court or administrative agency
that may have an adverse effect on the ability
of Seller to perform its obligations hereunder
or that may affect the Technology or the
operation of the Americom Products Business.
3.9 Brokerage or Finder's Fees. Seller has
not engaged the service of any broker or finder
in connection with the sale of the Americom
Products Business. There is no broker, finder
or other person who has any valid claim against
Purchaser for a commission, finder's fee or
brokerage fee in connection with this Agreement
or the consummation of the transactions
contemplated hereby by virtue of any actions
taken by Seller.
3.10 Consents and Approvals. Neither the
execution and delivery of this Agreement by
Seller nor compliance by Seller with any of the
provisions hereof shall require any consent,
approval, authorization of, or filing with or
notification to, any governmental or regulatory
authority.
3.11 Trademarks. The Trademarks constitute
all of the trademarks, service marks and trade
names utilized by Seller in connection with the
Americom Products. Seller is the owner of all
of the Trademarks. None of the Trademarks,
whether or not registered, infringes on the
trademarks of any other person, nor is there
any pending claim of such infringement.
3.12 Software. No portion of the Americom
Software, whether expressed in source or object
code and when or not copyrighted or
copyrightable, requires (i) the payment of any
royalty to any person or entity or (ii) the
consent of any third party to the assignment
thereof and the same is freely transferable by
the Seller. Seller is not a party to nor the
subject of any outstanding orders, decrees,
judgments or stipulations which would adversely
impact the rights of Seller or upon
communication of this transaction, Purchaser to
sell, use, license, market, sell and distribute
the Americom Software, nor is Seller a party to
or the subject of any suits, actions,
arbitrations, claims or legal administrative or
other proceedings, or governmental
investigations alleging or otherwise claiming
that the Americom Software infringes upon the
intellectual or industrial property interests
of any third party. The Seller is not aware of
any infringement by any third party with
respect to Seller's intellectual and industrial
property rights with respect to the Americom
Software. Except as specifically included in
the Contracts, the Seller has not granted to
any third party a license, whether exclusive or
non-exclusive, with respect to the Americom
Software. The development, marketing,
licensing, distribution and sale of the
Americom Products does not infringe upon or
otherwise violate any patents, copyrights or
other intellectual property or industrial
property interests of any third party, nor are
there any suits, actions, arbitrations, claims
or legal, administrative or other proceedings,
or governmental investigations pending or
threatened against Seller alleging that the
development, marketing, licensing, distribution
and sale of the Americom Products infringes
upon the intellectual or industrial property
interests of any third party.
3.13 Intellectual Property Interests Not in
Tangible Form. To the best of Seller's
knowledge, there are no designs, plans,
research, specifications, formulae, processes,
know-how, technology, trade secrets or other
confidential or proprietary information or
other data and information which (i) are
material to the development, marketing,
licensing, distribution or sale of the Americom
Products or contemplated improvements,
supplements or additions to the Americom
Products and (ii) are not currently reduced to
written or other tangible form (including,
without limitation, electronic media).
3.14 Necessary Technology. The Technology
constitute all of the tangible or intangible
assets (including designs, specifications,
know-how, technology, trade secrets and
marketing materials and plans) which are
necessary or convenient to enable Purchaser,
following the Closing, to conduct the Americom
Products Business in the same manner and to the
same extent as heretofore conducted by the Seller.
3.15 Disclosure. No representation or
warranty in this Section, and no statement
contained elsewhere in this Agreement or in any
Schedule, Exhibit, Certificate or other
document furnished or to be furnished to
Purchaser pursuant hereto or in connection with
the transactions contemplated under this
Agreement, contains or will contain any untrue
statement of a material fact or omits or will
omit to state a material fact or any fact
necessary to make the statements contained
therein not materially misleading when taken as
a whole. To the best of Seller's knowledge,
there is no fact which adversely affects or may
in the future have a material adverse effect on
the business, properties, assets, operations,
affairs, or condition (financial or otherwise)
of the Americom Products Business which has not
been specifically described herein or in one of
the Schedules to this Agreement.
3.16 Shares of Purchaser. Seller (i) has
been provided with an opportunity to ask
questions of and receive answers from
Purchaser, or its representatives, concerning
the operations, business and financial
condition of Purchaser, and all such questions
have been answered to Seller's full
satisfaction and any information necessary to
verify such responses has been made available
to it; (ii) has received such documents,
materials and information as Seller deems
necessary or appropriate for evaluation of the
Shares, and further confirms that Seller has
fully read and understands these materials and
has made such further investigation as Seller
deems appropriate to obtain additional
information to verify the accuracy of such
materials; (iii) confirms that the Shares were
not offered to it by means of general
solicitation or general advertising; (iv) has
such knowledge and experience in financial and
business matters that it is capable of
evaluating the merits and risks of an
investment in the Shares; (v) is acquiring the
Shares for its own account, for investment
purposes only, and not with a view toward sale
or the distribution thereof, in whole or in
part; (vi) understands that the Shares have not
been registered under the securities laws of
any state or under the Securities Act of 1933,
as amended, and are offered in reliance on
exemptions therefrom, and that the Shares have
not been approved or disapproved by the
Securities and Exchange Commission or any other
federal or state agency; and (vii) understands
that there are restrictions on the
transferability of the Shares and that it may
not be possible for Seller to sell or otherwise
transfer the Shares and accordingly, that the
Seller may have to hold the Shares and bear the
economic risks of the investment for an
extended period of time. Acquisition for
Investment. The Shares being issued to the
Vendor pursuant to this Agreement are being
acquired by the Vendor in good faith solely for
the Vendor's own account, for investment and
not with a view toward resale or other
distribution within the meaning of the
Securities Act. The Vendor further represents
that the Shareholder has no present contract,
undertaking, agreement or arrangement with any
person to sell, transfer or grant participation
to such person or to grant to any third person
with respect to any share of Parent Corporation
Common Stock. The shares of Parent Corporation
Common Stock being issued to the Shareholder
pursuant to this Agreement will not be offered
for sale, sold or otherwise transferred by the
Shareholder without either registration or
exemption from registration under the
Securities Act.
3.17 Evaluation of Merits and Risks of
Investment. The Seller has such knowledge and
experience in financial and business matters
that the Seller is capable of evaluating the
merits and risks of the Seller's investment in
the Shares being acquired hereunder. The
Shareholder further represents that the Seller:
(i) has obtained all information available
pursuant to any 8K's filed and all other
documentation available from the NASD; (ii) has
received all the information that the Seller
has that the Seller considers necessary or
appropriate for deciding whether to accept the
Shares being issued to the Seller pursuant to
this Agreement; (iii) has the ability to bear
the economic risks of the Seller's prospective
investment; and (iv) is able, without
materially impairing the Seller's financial
condition, to hold the Shares for an indefinite
period of time and to suffer complete loss on
the Seller's investment. The Seller confirms
that Purchaser has made available to the Seller
and its representatives and agents the
opportunity to ask questions of the officers
and management employees of Purchaser about the
business and financial condition of Purchaser
as the Seller has requested.
3.18 Forward Looking Information/ Risk
Factors. The Seller acknowledges and agrees
that any oral or written forward-looking
statements made by or on behalf of Purchaser in
connection with the sale herein contemplated
were made in the context of and shall have been
deemed to have been accompanied by the risk
factors set forth in Purchaser's Annual Report
on Form 10-K for the fiscal year ended October
31, 1997, on file with the Securities and
Exchange Commission (the "Commission"), and
Purchaser's Quarterly Report on Form 10-Q for
the three months ended January 31, 1998. The
Seller acknowledges that actual results could
differ materially from those projected in or
implied by any forward-looking statement.
3.19 Transfer Limitations. The Seller
further agrees that unless transferred in
compliance with Rule 144 promulgated under the
Securities Act ("Rule 144") promulgated under
the Securities Act, prior to any proposed
transfer of any of the shares of Purchaser,
unless there is in effect a registration
statement under the Securities Act covering the
proposed transfer, the Seller shall give
written notice to Purchaser of the Seller's
intention to effect such transfer. Each such
notice shall describe the manner and
circumstances of the proposed transfer in
sufficient detail, and shall, if Purchaser so
requests, shall be accompanied by either (a) a
written opinion of legal counsel who shall be
satisfactory to Purchaser, addressed Purchaser
and satisfactory in form and substance to
Purchaser's counsel, to the effect that the
proposed transfer of Purchaser Common Stock may
be effected without registration under the
Securities Act, or (b) a "No Action" letter
from the Commission to the effect that the
transfer of such securities without
registration will not result in a
recommendation by the staff of the Commission
that action be taken with respect thereto,
whereupon the holder of such Purchaser Common
Stock shall be entitled to transfer such shares
of Purchaser Common Stock in accordance with
the terms of the notice delivered by the holder
to Purchaser. Each certificate evidencing the
Shares transferred as above provided shall bear
the appropriate restrictive legend set forth in
Section 5.3 below, except that such certificate
shall not bear such restrictive legend if in
the opinion of counsel for Purchaser such
legend is not required in order to establish
compliance with any provisions of the
Securities Act.
3.20 Rule 144 Limitations. The Seller is
familiar with the provisions of Rule 144, which
in substance permits the limited public resale
of "restricted securities" acquired, directly
or indirectly from the issuer thereof (or from
an affiliate of such issuer) in a non-public
offering subject to the satisfaction of certain
conditions. The Seller further understands
that in the event all of the applicable
requirements of Rule 144 are not satisfied,
registration under the 1933 Act or compliance
with a registration exemption would be required
to sell the Shares received from Purchaser
hereunder. With a view to making available the
benefits of certain rules and regulations of
the Commission, which may permit the sale to
the public without registration of the shares
of Purchaser being issued to the Seller
pursuant to this Agreement, Purchaser agrees,
for a period of two years following the Closing
Date, to use reasonably diligent efforts to:
(a)
make and keep
public information available, as those
terms are understood and defined in
Rule 144, at all times after the
effective date that Acquiring
Corporation becomes subject to the
reporting requirements of the
Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(b)
file with the
Commission in a timely manner all
reports and other documents required
of Acquiring Corporation under the
Securities Act and the Exchange Act; and
(c) so long as any of the Shareholders owns
any shares of Parent Corporation Common Stock
being issued pursuant to this Agreement, to
furnish to the Shareholder forthwith upon
request a written statement by Acquiring
Corporation as to its compliance with the
reporting requirements of Rule 144, a copy of
the most recent annual or quarterly report of
Acquiring Corporation and such other reports
and documents of Acquiring Corporation and
other information in the possession of or
reasonably obtainable by Acquiring Corporation
as the Shareholder may reasonably request in
availing itself of any rule or regulation of
the Commission allowing the Shareholder to sell
any such shares of Parent Corporation Common
Stock without registration.
SECTION 5.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
4.1 Status. Purchaser is a corporation
incorporated under the laws of the State of
Delaware, of the United States of America duly
organized and validly existing and in good
standing under the said laws of the State of
Delaware, and is duly qualified to transact
business as a corporation in such other
jurisdictions in which its ownership of its
assets or its operation of a business including
the Americom Products Business shall require it
to be so qualified. Purchaser has all requisite
power and authority to own or lease and operate
or carry on the Americom Products Business as
presently being conducted and to execute,
deliver and perform this Agreement and all
other agreements, certificates and other
documents being delivered at or prior to the
Closing in connection with the transactions
contemplated hereby and to consummate the
transactions contemplated hereby.
4.2 Authority. The execution and delivery
of this Agreement, the consummation of the
transactions provided for herein, and the
execution and delivery of all other agreements,
instruments and documents to be delivered
hereunder by Purchaser have been duly
authorized by all necessary action on the part
of Purchaser, and this Agreement, and all other
agreements, instruments and documents to be
delivered hereunder constitute and will
constitute valid and legally binding
obligations of Purchaser enforceable against
Purchaser in accordance with their terms
subject to general principles of equity and
except to the extent enforceability may be
limited by bankruptcy, insolvency, moratorium
or other similar laws affecting the enforcement
of creditors' rights generally.
4.3 No Registration Under the Securities
Act. The Vendor understands that the Shares to
be issued to the Vendor under this Agreement
have not been and will not be registered under
the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions
contained in the Securities Act or
interpretations thereof, and cannot be offered
for sale, sold or otherwise transferred unless
the Shares are so registered or qualify for
exemption from registration under the
Securities Act. The Vendor acknowledges and
agrees that each certificate representing the
Shares issued pursuant to this Agreement, and
any shares issued or issuable in respect of any
of the Shares upon any stock split, stock
dividend, recapitalization, or similar event,
shall be imprinted with a legend in
substantially the following form (in addition
to any legend required under applicable state
securities laws):
THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE TRANSFERRED OR
SOLD OTHER THAN (I) PURSUANT TO AN
EFFECTIVE REGISTRATION UNDER THE
SECURITIES ACT AND OTHER APPLICABLE
STATE SECURITIES LAWS OR AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION, AND
(II) UPON RECEIPT BY THE ISSUER OF
EVIDENCE SATISFACTORY TO IT OF
COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE STATE SECURITIES
LAWS. THE ISSUER SHALL BE ENTITLED TO
REQUIRE AN OPINION OF COUNSEL
SATISFACTORY TO IT WITH RESPECT TO
COMPLIANCE WITH THESE REQUIREMENTS.
THE CERTIFICATES EVIDENCING
THE SHARES TO BE ISSUED TO THE
SHAREHOLDER UNDER THIS AGREEMENT SHALL
ALSO BEAR ANY LEGEND REQUIRED BY THE
COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA OR SUCH AS ARE
REQUIRED PURSUANT TO ANY STATE, LOCAL
OR FOREIGN LAW GOVERNING SUCH SECURITIES.
SECTION 6. OTHER AGREEMENTS AND COVENANTS
6.1 Non-Competition Agreement. On the Closing Date,
Seller and Purchaser shall enter into a non-competition
agreement (the "Non-Competition Agreement") in the form
attached hereto as Exhibit 6.1.
6.2 Assigned Contracts. To the extent that any of
the Contracts to be assigned hereunder are not
assignable without the consent of another party, this
Agreement shall not constitute an assignment or an
attempted assignment thereof or an assumption or an
attempted assumption thereof, if such assignment or
attempted assignment or assumption or attempted
assumption would constitute a breach thereof. Seller
agrees to use reasonable efforts to obtain any necessary
consent to assumption or assignment of the Contracts,
and, if necessary, to fulfill all obligations
thereunder, subject to the undertaking that Purchaser
likewise shall fulfill its obligations.
6.3 Further Assurances; Consents. From time to time
following the Closing, without further consideration,
each party, at its own expense, shall execute and
deliver such documents to the other party as such other
party may reasonably request in order more effectively
to consummate the transactions contemplated hereby,
including without limitation the transfer of all
tangible or intangible assets necessary to make the
representations contained in Section 4.14 of this
Agreement true and correct. In the case of contracts,
agreements, and rights that may not be transferred and
assigned to Purchaser without the consent of a party
whose consent has not been obtained by the Closing Date,
Seller and Purchaser shall use their reasonable efforts
to obtain such consents as soon as practicable
thereafter. Without limiting the generality of the
foregoing, Seller also covenants, at Seller's own cost
and expense, to execute and deliver such documents and
take such further action as Purchaser may request in
order to enable Purchaser to file and prosecute any
application for patent, copyright, trademark or other
intellectual or industrial property protection with
respect to the Technology.
6.4 Litigation Cooperation. In the event that Seller
or Purchaser shall become a party to litigation,
arbitration or administrative proceedings not involving
the other party hereto related to claims of patent,
trademark or copyright infringement with respect to the
Technology, the party not involved in such litigation,
arbitration or administrative proceeding shall, at the
request of the party so involved, cooperate with such
requesting party by providing to the requesting party
such information, records and testimony as such
requesting party may reasonably request in the
prosecution, defense or conduct of such litigation,
arbitration or administrative proceeding. The requesting
party shall reimburse the other party for all reasonable
expenses incurred by such other party in providing such
information, records and testimony.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
The performance of the obligations of Purchaser under
this Agreement is subject, at the election of Purchaser,
to the fulfillment of each of the following conditions
by Seller on or before the Closing:
7.1 Continuation and Truth of Representations and
Warranties. The representations and warranties of Seller
contained in this Agreement or in any certificate or
document delivered to Purchaser pursuant hereto shall be
true and correct in all material respects on the date
hereof and shall be deemed to have been made again at
the Closing and speak as of the Closing Date and shall
then also be true and correct in all material respects.
7.2 Compliance by Seller. Seller shall have
performed and complied in all material respects with all
terms, covenants and conditions required by this
Agreement to be performed or complied with by Seller on
or before the Closing Date.
7.3 Adverse Occurrences. There shall not have
occurred any event or act, whether or not under the
control of Seller, which in Purchaser's reasonable
discretion has a material adverse effect on the value of
the Technology, including but not limited to the
discovery of any design or operational defect in the
cancellation of key Contracts, receipt of a claim that
the use of the Technology infringes the intellectual
property rights of any third party or any event
adversely affecting the goodwill associated with the
Trademarks.
7.4 Legal Proceedings. There shall be no law, and no
order shall have been entered and not vacated by a court
or administrative agency of competent jurisdiction,
which (a) enjoins, restrains, makes illegal or prohibits
consummation of the transactions contemplated hereby or
(b) restricts or interferes with, in any material way,
the utilization of the Technology after the Closing, and
there shall be no litigation pending before a court or
administrative agency of competent jurisdiction, or
threatened, seeking to do, or which, if successful,
would have the effect of, any of the foregoing.
7.5 Opinion of Counsel to Seller. Purchaser shall
have been furnished with opinion of Twa, Cochrane,
Scatfeld & Associates, general counsel for Seller, dated
as the Closing Date, to the effect that:
(a) Seller is a corporation duly organized,
validly existing and in good standing under the
laws of Turks and Caicos and is duly qualified
to transact business as a foreign corporation
in such other jurisdictions in which its
ownership of the Technology or operation of its
business, including the Americom Products
Business, requires it to be so qualified.
Seller has all corporate power and authority
necessary to own or lease and operate its
assets and to conduct the Americom Products
Business as now being conducted by it, and has,
all requisite corporate power and authority to
execute, deliver and perform this Agreement and
all other agreements, certificates and other
documents being delivered by it at or prior to
the Closing in connection with the transactions
contemplated hereby, and to consummate the
transactions contemplated hereby.
(b) The execution, delivery and performance
of this Agreement by Seller have been duly
authorized and approved and fully transfers
complete and exclusive ownership of the
Technology to Purchaser. Performance by
Americom under this Agreement or any ancillary
agreement or instrument, will not require any
consent or approval, violate any order of any
court or other agency of government or any
contract, indenture, agreement, or other
instrument to which Americom is a party, or by
which Americom is bound, or be in conflict
with, result in a breach of, or constitute
(with due notice or lapse of time or both) a
default under, or result in the creation or
imposition of any material lien, charge, or
encumbrance of any nature whatsoever upon any
of the property or assets of Americom. Neither
the execution and delivery, nor the performance
of this Agreement, by Seller violates any
provisions of the charter or the by-laws of
Seller, any provision of any law, regulation or
order of any judicial, administrative or
arbitral body, or any provision of any
contract, obligation, indenture, agreement or
other instrument to which Seller is a party.
(c) There is no action, suit or proceeding
at law or in equity or by or before any
governmental instrumentality or other agency
now pending or threatened against or affecting
Americom which, if adversely determined, could
reasonably be expected to have a material
adverse effect on the ability of Americom to
execute, deliver or perform under this
Agreement. To our knowledge, no claims have
been asserted against Seller by any person
challenging the ownership or use of any of the
Technologies by Seller or challenging or
questioning the validity or effectiveness of
such Technologies.
(d) Each of this Agreement and any other
agreement or instrument delivered pursuant
hereto by Seller has been duly executed and
delivered by Seller and constitutes a legal,
valid and binding obligation of Seller in
accordance with its terms subject to general
principles of equity, and except as the
enforceability thereby may be limited by
bankruptcy, insolvency or other laws affecting
the rights of creditors, generally.
(e) Seller is the owner of all right, title
and interest in and to the Technology, free and
clear of all liens, claims, security interests
and encumbrances and has full power and
authority to transfer and license all such
right, title and interest to Purchaser. The
use, development, marketing, licensing,
distribution and sale of the Technology by the
Purchaser anywhere throughout the world, upon
consummation of the transactions contemplated
herein, will not violate or otherwise infringe
upon the contractual, intellectual or
industrial property interests of any third party.
7.6 Certificate. Purchaser shall have been furnished
with a certificate by the President or of any duly
authorized corporate officer of Seller, certifying, in
such form as the Purchaser may reasonably request, as to
the fulfillment of the conditions set forth in Sections
7.1, 7.2, and 7.3.
SECTION 8. CLOSING
The closing of the transactions contemplated by this
Agreement (the "Closing") shall be held on the 30th day
of April, 1999 or such other date as the parties shall
mutually agree in writing (the "Closing Date"). The
Closing shall occur at the offices of Twa, Cochrane,
Skatfeld, Providenciales, Turks and Caicos, BWI or at
such other place or date as may be fixed by mutual
agreement of Purchaser and Seller.
SECTION 9. RESPONSIBILITIES OF SELLER AT THE CLOSING
At the Closing, Seller shall:
(a) Deliver to Purchaser the Bill of Sale;
(b) Deliver to Purchaser the Assignment of
Contracts;
(c) Deliver to Purchaser the Assignment of
Trademarks;
(d) Deliver to Purchaser the opinion of
its counsel; and
(e) Deliver to Purchaser such other
documents as are necessary or appropriate
pursuant to this Agreement.
SECTION 10. RESPONSIBILITIES OF PURCHASER AT THE CLOSING
At the Closing, Purchaser shall:
(a) Wire transfer in accordance Exhibit 2.2
to be received by the Seller on or before
Closing the $100,000.00 payable on closing;
(b) Deliver the Promissory Note;
(c) Issue the Shares;
(d) Deliver the transfer documentation
regarding the ESP Shares;
(e) Execute and deliver to Seller the
Assumption Document;
(f) Deliver to Seller the opinion of its
counsel;
(g) Deliver to Seller such other
documents as are necessary or appropriate
pursuant to this Agreement.
SECTION 11. INDEMNIFICATION
11.1 Indemnification by Seller. From and after the
Closing, Seller shall defend (with counsel reasonably
acceptable to Purchaser), indemnify and hold Purchaser
and its officers, managers, members, employees,
consultants, agents and representatives wholly harmless
from and against any and all liability, loss, cost and
expense whatsoever (including reasonable fees of legal
counsel) that may be incurred by Purchaser ("Purchaser
Claim") as a result of any one or more of the following:
(a) Seller's
failure to perform
any of its
agreements
contained herein or
in any instrument
delivered in
connection herewith
or to pay any of
its liabilities or
to perform any of
its obligations not
expressly assumed
by Purchaser
hereunder;
(b) The breach
or inaccuracy of
any of the
representations or
warranties made by
Seller in this
Agreement or in any
certificate or
document delivered
pursuant hereto; and
(c) A claim by
a third party which
arises from an
obligation or
liability not
expressly assumed
by Purchaser
hereunder,
including without
limitation those
liabilities of
Seller not
expressly assumed
by Purchaser as
identified in
Section 3.2 hereof
and any taxes
payable by Seller
in any jurisdiction.
11.2 Indemnification by Purchaser. From and after the
Closing, Purchaser shall defend (with counsel reasonably
acceptable to Seller), indemnify and hold Seller and its
officers, directors, shareholders, employees,
consultants, agents and representatives wholly harmless
from and against any and all liability, loss, cost and
expense whatsoever (including reasonable fees of legal
counsel) that may be incurred by Seller ("Seller Claim")
as a result of any one or more of the following:
(a) Purchaser's
failure to perform
any of its
agreements
contained herein or
in any instrument
delivered in
connection herewith
or to pay any
liabilities or to
perform any
obligations
expressly assumed
or undertaken by
Purchaser pursuant
to the terms hereof;
(b) The breach
or inaccuracy of
any of the
representations or
warranties made by
Purchaser in this
Agreement or in any
certificate or
document delivered
pursuant hereto; and
(c) A claim by a third party which
arises from an obligation or liability
expressly assumed by Purchaser hereunder.
11.3 Manner of Payment of Finally Determined Claims.
The amount of any liability, loss, cost, or expense for
which Purchaser or Seller shall be finally determined to
have an obligation to indemnify the other pursuant to
this Section shall be paid by the indemnifying party to
the indemnified party no later than thirty (30) days
after such final determination.
11.4 Procedure for Obtaining Indemnification
(a) In the event that either Seller or
Purchaser shall claim that it is entitled
to be indemnified pursuant to the terms of
this Section, it (the "Claiming Party")
shall so notify the other party (the
"Indemnifying Party") in writing of such
claim. Such notice shall specify the basis
of such claim and the liability, loss, cost
or expense incurred by, or imposed upon,
the Claiming Party on account thereof. If
such liability, loss, cost or expense is
liquidated in amount, the amount stated in
such notice shall be deemed the amount of
the claim of the Claiming Party as of the
date of such notice, provided that the
statement of such amount shall not prevent
or limit the Claiming Party from making
claims for additional liability, loss, cost
or expense which relate to the basis of the
claim and which are incurred after, or are
unknown at, the time of the notice. If the
amount is not liquidated, the notice shall
so state and, in such event, a claim shall
be deemed asserted against the Indemnifying
Party on behalf of the Claiming Party, but
no payment shall be made on account thereof
until the amount of such claim is
liquidated and the claim is finally
determined.
(b) If the Indemnifying Party shall
not, within twenty (20) days after the
receipt of such notice, advise the Claiming
Party, in writing, that it denies the right
of the Claiming Party to indemnity in
respect to a claim, then the amount of such
claim, at once if said claim is liquidated,
or subsequently at such time as any
unliquidated claim has become liquidated,
shall be deemed to be finally determined
between the parties hereto subject to
additional claims.
(c) If the Indemnifying Party shall
notify the Claiming Party that it disputes
any claim made by the Claiming Party, then
the parties hereto shall endeavor to settle
and compromise said claim, or may agree to
submit the same to arbitration. If they are
unable to agree on any settlement or
compromise or submission to arbitration,
such claim for indemnification shall be
settled by appropriate litigation, and any
liability established by reason of such
settlement, compromise, arbitration or
litigation, shall be deemed to be finally
determined and shall be paid and satisfied
in accordance with this Section.
(d) Each party shall promptly give written notice to
the other of any claim of a third party which may
reasonably be expected to result in a claim by the
Claiming Party against the other Indemnifying Party. The
Indemnifying Party shall undertake the defense of such
claim with counsel reasonably acceptable to the Claiming
Party; provided, however, that the Claiming Party shall
be entitled to participate in such defense with counsel
selected by it and at its expense (in which case counsel
for the Indemnifying Party and for the Claiming Party
shall consult and cooperate at all times in defending
against such a claim). If the Indemnifying Party (i)
fails to give adequate written assurance to the Claiming
Party of its willingness to undertake the defense of
such claim or (ii) fails to undertake in a timely and
proper manner the defense of such claim, the Claiming
Party, upon such additional notice to the Indemnifying
Party, shall have the exclusive right to defend,
compromise or settle such claim in such manner as the
Claiming Party deems appropriate. In such event, the
Claiming Party shall remain entitled to indemnification
by the Indemnifying Party to the fullest extent provided
for under this Section. In no event may the Indemnifying
Party settle, compromise or otherwise resolve any claim
unless the terms of such settlement, compromise or
resolution include a complete release of the Claiming
Party of any liability with respect thereto.
11.5 Right of Setoff with Regard to the Notes. Until
such time as the Long Term Note has become due and
payable in accordance with the terms thereof, Purchaser
shall have the right to recover any Purchaser Claims by
setting off, in the manner set forth in this Section,
with respect to the principal and interest accrued and
outstanding under such Note, the Setoff Amount as
defined in subparagraph (c) below.
(a) Purchaser shall give written notice
(the "Claim Notice") to Seller of any claim by
the Purchaser for Purchaser Claims, which
written notice shall set forth in reasonable
detail (i) the amount of Purchaser Claims which
the Purchaser claims to have sustained by
reason thereof and (ii) the basis of the claim
therefor.
(b) For a period of thirty (30) days from
its receipt of a Claim Notice from Purchaser
(the "Notice of Contest Period"), Seller may
send written notice (the "Notice of Contest")
to Purchaser that Seller disputes the claims
made by Purchaser in the Claim Notice. For a
period of thirty (30) clays (the "Resolution
Period") from receipt by Purchaser of a Notice
of Contest by Seller, Purchaser and Seller
shall attempt to negotiate in good faith a
written resolution of the dispute. If, at the
conclusion of the Resolution Period, the
parties have been unable to negotiate such a
resolution, each party shall set forth a
detailed written statement of such party's
position (the "Arbitration Submission") with
respect to such dispute including a statement
of those amounts in dispute which such party
believes to constitute Purchaser Claims and the
statements thus prepared shall be submitted to
arbitration by the American Arbitration
Association sited in San Luis Obispo,
California. In such case, the arbitrator, in
its decision, shall determine which party is
the prevailing party, and the non-prevailing
party, upon such decision, shall immediately
reimburse the prevailing party for all costs,
expenses and fees (including attorneys' fees)
incurred by the prevailing party in connection
with such arbitration.
(c) For purposes hereof, the Setoff Amount
shall be determined as follows:
(i) In the event that
Seller does not send a Notice
of Contest within the Notice
of Consent Period, then the
Setoff Amount shall be that
amount claimed by Purchaser
as Purchaser Claims in the
Claim Notice;
(ii) In the event that
Seller does send a Notice of
Contest and the dispute is
subsequently resolved by
negotiation, then the Setoff
Amount shall be that amount
upon which the parties agree
in writing;
(iii) In the event that
Seller does send a Notice of
Contest and the dispute is
subsequently resolved by
resort to arbitration as
provided herein, then the
Setoff Amount shall be that
amount set forth in the
arbitrator's decision as
constituting Purchaser Claims.
11.6 Escrow on Maturity of Long Term Note. In the
event that, at such time as all principal and interest
becomes due and payable under the terms of the Long Term
Note, Purchaser has submitted one or more Purchaser
Claims with respect to which the Setoff Amount has not
yet been determined or has been determined but is not
yet paid, then Purchaser shall withhold from its payment
to Seller of all such principal and interest an amount
(the "Withheld Amount") equal to the aggregate Purchaser
Claims claimed by Purchaser. Purchaser shall immediately
deposit the Withheld Amount with Fleet National Bank to
earn interest and from which distributions of the
Withheld Amount shall be made in accordance with the
terms of the resolution of the Purchaser Claims. All
amounts due under the Long Term Note in excess of the
Withheld Amount shall be paid immediately to Seller.
SECTION 12. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND INDEMNIFICATION
The representations, warranties and covenants set forth
in this Agreement or in any Exhibit, Schedule,
certificate or other document or instrument delivered
pursuant to this Agreement, and the indemnification
provisions contained in this Agreement, shall survive
the Closing. The conduct by the Purchaser of due
diligence or other investigations of the Americom
Products Business, whether before or after the Closing,
and the information learned as a result of such
investigations, shall not in any way constitute a waiver
by Purchaser of the representations, warranties,
covenants and indemnification obligations of Seller set
forth in this Agreement or otherwise limit Purchaser's
ability to enforce any of the same.
SECTION 13. MISCELLANEOUS
13.1 Access to Books and Records; Cooperation in
Litigation. After the Closing, each party shall furnish
to the other party such reports as are required for the
requesting party to discharge its obligations. Each
party shall also permit the other party to have
reasonable access to the books, records and files
relating to the Americom Products Business for any
reasonable purpose of the other party, such as for use
in litigation or in tax compliance matters. Each party
shall also reasonably cooperate with the other party in
the requesting party's prosecution or defense of any
litigation or other proceeding arising from the
requesting party's utilization of the Technology.
13.2 Binding Effect; Assignment. This Agreement shall
be binding upon, inure to the benefit of, and be
enforceable by the successors and permitted assigns of
the parties hereto. In this regard, Purchaser shall be
free to assign its rights under this Agreement to any
other party.
13.3 Notices. All notices or other communications
required or permitted to be given hereunder shall become
effective when delivered by hand or received by telegram
or registered first-class mail, postage prepaid and
addressed to the intended recipient at the address
indicated below. Any party may at any time and from time
to time change its address by a notice given to the
other party in the manner set forth in this Section.
(a) If to Seller:
Americom Ltd.
c/o Twa, Cochrane, Scatfeld & Associates Chancery Court,
P.O. Box 209
Providenciales, Turks & Caicos Islands, BWI
Attention: Bruce R. Twa,
Telephone: 649-946-4261 Fax: 649-946-4410
e-mail- [email protected]
(b) If to Purchaser:
Americom U.S.A., Inc.
Schwarz Gillen, 2040 Yonge Street
Suite 220, Toronto, Ontario M4S 1Z9
Telephone: 416-486-2040 Fax: 416-486-3325
e-mail schwarzgillen sprint.ca
13.4 Waivers. No action taken pursuant to this
Agreement, including any investigation by or on behalf
of any party hereto, shall be deemed to constitute a
waiver by the party taking such action, of compliance
with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of any
condition or of a breach of any provision of this
Agreement shall not operate or be construed as a waiver
of any other condition or other breach. The waiver by
any party of any of the conditions precedent to its
obligations under this Agreement shall not preclude it
from seeking redress for breach of this Agreement other
than with respect to the condition so waived.
13.5 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which
together shall constitute and be the same instrument.
This Agreement shall become effective when at least one
counterpart has been executed by each party hereto
notwithstanding the fact that not all of the parties
hereto have executed the same copy of the Agreement.
This Agreement may be delivered by any party hereto by
facsimile transmission of the signature page of this
Agreement executed on behalf of such party. The
foregoing provisions shall apply to each of the
instruments and agreements to be executed and delivered
by the parties at the Closing.
13.6 Exhibits and Schedules. The following Exhibits and
Schedules are attached hereto and are hereby
incorporated herein and made a part hereof:
EXHIBIT DESCRIPTION
1.4(A) BILL OF SALE
1.4(B) ASSIGNMENT OF CONTRACTS
1.4(C) ASSIGNMENT OF TRADEMARKS
1.4(D) LICENSE
2.2 WIRE TRANSFER INSTRUCTIONS
2.3 PROMISSORY NOTE
3.1 ASSUMPTION DOCUMENT
6.1 NON-COMPETITION AGREEMENT
13.7 Bulk Transfers. The parties hereto waive
compliance with the requirements of the bulk sales law
of any jurisdiction in connection with the sale of the
Technology to Purchaser hereunder. Seller shall
indemnify and hold harmless Purchaser against all losses
which may be incurred by Purchaser as a result of
noncompliance with any such Bulk Sales Laws.
13.8 Governing Law. The validity, performance and
enforcement of this Agreement, shall be governed by the
laws of California without giving effect to the
principles of conflicts of law thereof.
13.9 Separability. Any term or provision of this
Agreement which is invalid or unenforceable shall be
ineffective to the extent of such invalidity or
unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement.
13.10 Headings. The headings and subheadings hereof
are inserted for convenience of reference only and shall
not affect the interpretation of this Agreement.
13.11 Attorneys' Fees. The Seller shall
pay the cost of any and all legal fees
incurred by both Seller and Purchaser in
connection with this transaction. In the
event any dispute or controversy arises
with respect to this Agreement, the
prevailing party shall be entitled to
recover its actual costs and attorneys fees
from the other party, whether such dispute
or controversy is resolved by arbitral,
judicial or administrative order,
settlement or appeal.
13.12 Amendment. This Agreement may be amended only in
writing, signed by both parties hereto.
13.13 Entire Agreement. This Agreement, including the
Exhibits and Schedules attached hereto, merges all prior
negotiations between the parties and embodies the entire
agreement of the parties with respect to the subject
matter hereof and no party hereto shall be bound by any
condition, definition, warranty or representation other
than expressly provided for in this Agreement (including
the Exhibits and Schedules attached hereto) as the same
shall apply to such party.
13.14 No Rights of Third Parties. The parties hereto
specifically intend and agree that nothing contained
herein shall be construed as in any way granting or
otherwise according any rights to any person or entity
not a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement, under seal, by their duly
authorized officers as of the date first set forth above.
AMERICOM LTD.
By:
Name:
Title:
AMERICOM USA, INC.
By:
Name:
Title:
AMERICOM USA, INC.
STOCK OPTION PLAN
SECTION 1.01. PURPOSE. (a) The purpose of this
Stock Option Plan (the "PLAN") is to promote the growth
and general prosperity of AmeriCom USA, Inc. (the
"COMPANY") by permitting the Company to grant options to
purchase shares of its common stock, par value $.0001
per share (the "COMMON STOCK"), to persons whose
contributions are important to the success of the
Company. The Plan is designed to help attract and
retain superior personnel for positions of substantial
responsibility with the Company and its parent and
subsidiary corporations (if any) and to provide key
employees, directors and consultants of or to the
Company and its parent and subsidiary corporations with
an additional incentive to contribute to the success of
the Company.
(b) The Company intends that options
granted to employees pursuant to the provisions of the
Plan will qualify as "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "CODE") and Treasury
Regulations promulgated thereunder ("ISOS"), unless an
option, by its terms, would not qualify thereunder. The
Plan also provides for the granting of options that do
not qualify as ISOs ("NQOS") to individuals who are not
employees. As used in the Plan, the terms "parent
corporation" and "subsidiary corporation" shall have the
meanings set forth in subsections (e) and (f),
respectively, of Section 424 of the Code, and shall be
referred to herein, collectively, as "AFFILIATES."
SECTION 2.01. ADMINISTRATION. (a) The Plan
shall be administered by the board of directors of the
Company or by a committee of the board of directors
consisting of two or more directors to whom
administration of the Plan has been delegated by
resolution of the board of directors. The members of
the board of directors or that committee, as the case
may be, are hereafter referred to as the "Plan
Administrators." Actions of the Plan Administrators
shall be taken by a majority vote or by unanimous
written consent.
(b) In the event that the Company is
subject to Section 16 of the Securities Exchange Act of
1934, as amended ("ACT"), the grant of an option to any
individual subject to the limitations of Section 16(b)
of the Act, and the terms of such option, shall be
approved by the full board of directors of the Company
or a committee comprised solely of two or more
individuals who are "Non-Employee Directors" within the
meaning of Rule 16(b)-3 promulgated by the Securities
and Exchange Commission thereunder.
(c) In the event that the Company is the
issuer of any common equity securities required to be
registered under Section 12 of the Act, the grant of an
option to any employee of the Company or an Affiliate,
and the terms of such option, shall be approved by a
committee comprised solely of two or more individuals
who are "outside directors" within the meaning of the
Treasury Regulations promulgated under Section 162(m) of
the Code.
SECTION 2.02. AUTHORITY OF PLAN ADMINISTRATORS.
Subject to the provisions of the Plan, and with a view
to effecting its purpose, the Plan Administrators shall
have sole authority, in their absolute discretion, (a)
to construe and interpret the Plan, (b) to define the
terms used herein, (c) to prescribe, amend, and rescind
rules and regulations relating to the Plan, (d) to
determine the individuals to whom options to purchase
Common Stock shall be granted under the Plan, (e) to
determine the time or times at which options shall be
granted under the Plan, (f) to determine the number of
shares of Common Stock subject to each option, the
option price and the duration of each option granted
under the Plan, (g) to determine all of the other terms
and conditions of options granted under the Plan, and
(h) to make all other determinations necessary or
advisable for the administration of the Plan and do
everything necessary or appropriate to administer the
Plan. All decisions, determinations and interpretations
made by the Plan Administrators shall be binding and
conclusive on all participants in the Plan and on their
legal representatives, heirs and beneficiaries.
SECTION 2.03. TERMS, CONDITIONS AND METHOD OF
GRANT. The terms and conditions of options granted
under the Plan may differ from one another as the Plan
Administrators, in their absolute discretion, shall
determine as long as all options granted under the Plan
satisfy the requirements of the Plan. No optionee shall
have any rights with respect to an option granted under
the Plan unless the optionee shall have executed and
delivered to the Plan Administrators an option agreement
(with a copy of the Plan attached). The option
agreement shall be in the form and shall contain such
provisions consistent with the Plan as the Plan
Administrators, acting with the benefit of legal
counsel, shall deem advisable. The date of the option
agreement shall be the date of granting the option to
the optionee for all purposes of the Plan. No option
under the Plan shall be granted the exercise of which
shall be conditioned upon the exercise of any other
option under the Plan or any other plan.
SECTION 3.01. MAXIMUM NUMBER OF SHARES OF COMMON
STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 12.01, the sum of the aggregate number of shares
with respect to which options may be granted under the
Plan and the number of shares subject to the
substituted options described in Section 12.02, is Nine
Million, Five Hundred Thousand (9,500,000). The maximum
number of shares subject to the Plan may be adjusted
pursuant to the provisions of Section 12.01 of the Plan.
If any of the options granted under the Plan expire or
terminate for any reason before they have been exercised
in full, the shares of Common Stock subject to those
expired or terminated options shall again be available
for the purpose of the Plan.
SECTION 4.01. ELIGIBILITY AND PARTICIPATION.
Employees, directors and consultants of or to the
Company or any Affiliate shall be eligible for selection
by the Plan Administrators to receive grants of options
hereunder; provided, however, that only employees of the
Company or an Affiliate shall be eligible for selection
by the Plan Administrators to receive grants of ISOs
under the Plan.
SECTION 5.01. EFFECTIVE DATE AND TERM OF PLAN.
The Plan shall become effective upon its adoption by the
board of directors of the Company, subject to approval
of the Plan by the shareholders of the Company, as
provided in Section 14.01. The Plan shall continue in
effect for a term of 10 years from the earlier of the
date of adoption by the board or approval by
shareholders unless sooner terminated under Section 13.01.
SECTION 5.02. DURATION OF OPTIONS. Each option
and all rights thereunder granted pursuant to the terms
of the Plan shall expire on the date determined by the
Plan Administrators, but in no event shall any option
granted under the Plan expire later than ten (10) years
from the date on which the option is granted. In
addition, each option shall be subject to early
termination as provided in this Plan.
SECTION 5.03. PURCHASE PRICE. The purchase
price for shares of Common Stock acquired pursuant to
the exercise (in whole or in part) of any option shall
not be less than the fair market value of the stock at
the time of the grant of the option. Fair market value
shall be determined by the Plan Administrators on the
basis of those factors they deem appropriate; provided
that the Plan Administrators shall make a good faith
effort to determine such fair market value in selecting
such factors, and provided further, that if at the time
the determination is made the Common Stock is admitted
to trading on a national securities exchange, the fair
market value of the shares shall be not less than the
greater of (i) the mean between the high bid and asked
prices reported for the Common Stock on that exchange on
the day the option is granted or the most recent trading
day preceding the date on which the option is granted or
(ii) the last reported sale price reported for the
Common Stock on that exchange on the day or most recent
trading day preceding the date on which the option is
granted. The phrase "national securities exchange"
shall include the National Association of Securities
Dealers Automated Quotation System and the
over-the-counter market.
SECTION 5.04. TERM AND PURCHASE PRICE OF OPTION
GRANTED TO MORE THAN TEN PERCENT STOCKHOLDER.
Notwithstanding anything to the contrary in Sections
5.02 and 5.03, if an option which is intended to be an
ISO is to be granted to an employee who at the time the
option is granted owns (or under Section 424(d) of the
Code is deemed to own) more than 10 percent of the
voting power or value of all classes of stock of the
Company, (i) that option by its terms shall not be
exercisable after the expiration of five years after the
date that option is granted, and (ii) the purchase price
for shares acquired pursuant to the exercise (in whole
or in part) of that option shall be at least 110 percent
of the fair market value (as determined under Section
5.03) of the shares subject to the option at the time
the option is granted.
SECTION 5.05. MAXIMUM AMOUNT OF OPTIONS IN ANY
CALENDAR YEAR. (a) To the extent that the aggregate
fair market value of stock with respect to which options
under this Plan and all other such option plans of the
Company and Affiliates, which would otherwise be ISOs,
are exercisable for the first time by an optionee in any
calendar year exceeds $100,000, such options shall not
be treated as ISOs. Nothing contained herein shall
prohibit the grant of an NQO to an individual who is an
employee of the Company or an Affiliate regardless of
whether ISOs are granted to such individual in such
year.
(b) Subject to the provisions of Section
12.01, the maximum aggregate number of shares which may
be granted under the Plan to any employee of the Company
or an Affiliate during any calendar year shall be One
Million (1,000,000).
SECTION 6.01. EXERCISE OF OPTIONS BY OPTIONEE.
Each option shall be exercisable in one or more
installments during its term, and the right to exercise
may be cumulative as determined by the Plan
Administrators. No option may be exercised for a
fraction of a share of Common Stock. In addition, no
option may be exercised other than on a business day of
the Company. The full purchase price of any shares
purchased shall be paid at the time of exercise of the
option by a combination of cash, certified or cashier's
check payable to the order of the Company or, if
permitted by the terms of the option, shares of Common
Stock. If any portion of the purchase price is paid in
shares of Common Stock, those shares shall be tendered
at their then fair market value, as determined by the
Plan Administrators in accordance with Section 5.03 of
the Plan. In addition, if permitted by the terms of the
option, the optionee may purchase all or any portion of
the shares subject to an option by directing the Company
to withhold from delivery to the optionee the number of
shares having a fair market value equal to the aggregate
exercise price of the total number of shares purchased,
or to deliver that number of shares and his irrevocable
instructions to a broker to deliver to the Company
proceeds of the sale of shares or a loan that are
sufficient to pay the aggregate exercise price of the
total number of shares purchased. No option may be
exercised on a date later than 10 years from the date it
is granted.
SECTION 6.02. EXERCISE OF OPTIONS BY ESTATE OR
BENEFICIARIES. Subject to the provisions of Section
11.01, if an option shall have been transferred to an
estate of an optionee, or to any beneficiary thereof who
shall have acquired such option by bequest or
inheritance by reason of the death of such optionee, the
option shall be exercisable in the same manner as if
exercised by such optionee pursuant to Section 6.01.
SECTION 6.03. WRITTEN NOTICE REQUIRED. Any
option granted pursuant to the terms of the Plan shall
be considered exercised when written notice of that
exercise, together with the investment representations
described in Section 7.01, if any, have been given to
the Company at its principal office by the person
entitled to exercise the option and full payment for the
shares with respect to which the option is exercised has
been received by the Company. Upon receipt thereof, and
in connection with the transfer of Common Stock pursuant
to the exercise of an ISO, the Company shall provide
optionee with a written statement containing the
information required by Section 6039(a) of the Code.
SECTION 6.04. WITHHOLDING TAXES. Shares of
Common Stock shall not be transferred to an optionee
upon exercise of an option granted hereunder unless and
until the optionee has paid to the Company, or such
other person responsible under applicable law for
withholding taxes in connection with such exercise, an
amount of cash sufficient to satisfy the liability for
federal, state and local withholding taxes in connection
with such exercise. In their complete discretion,
however, the Plan Administrators may permit the optionee
to elect to have the Company assume this obligation by
directing the Company to withhold a number of shares
having a fair market value equal to the withholding
taxes, or to deliver that number of shares and his
irrevocable instructions to a broker to deliver to the
Company the proceeds of a sale of a number of shares or
a loan that are sufficient to satisfy the withholding
taxes.
SECTION 7.01. COMPLIANCE WITH STATE AND FEDERAL
LAWS. Shares of Common Stock shall not be issued with
respect to any option granted under the Plan unless the
exercise of that option and the issuance and delivery of
the Common Stock pursuant to that exercise shall comply
with all relevant provisions of state and federal laws,
rules and regulations, and the requirements of any stock
exchange upon which the Common Stock may then be listed,
and shall be further subject to the approval of counsel
for the Company with respect to that compliance. If any
law or any regulation of any federal or state body
having jurisdiction shall require the Company or the
optionee to take any action in connection with the
shares specified in the optionee's notice, then the date
for the delivery of the shares shall be postponed until
the completion of the necessary action. The Plan
Administrators also shall require (to the extent
required by applicable laws, rules and regulations) an
optionee to furnish evidence satisfactory to the Company
(including a written and signed representation letter
and a consent to be bound by any transfer restrictions
imposed by law, legend, condition, or otherwise) that
the Common Stock is being purchased only for investment
and without any present intention to sell or distribute
the Common Stock in violation of any law, rule or
regulation. Further, each optionee shall consent to the
imposition of a legend on the shares of Common Stock
subject to his or her option restricting their
transferability as may be required by applicable laws,
rules and regulations.
SECTION 8.01. OPTION RIGHTS UPON TERMINATION OF
SERVICE. If an optionee ceases to be in the service of
the Company or any Affiliate in any capacity, without
regard to the anticipated duration of that cessation of
service and for any reason other than death or permanent
disability, his or her option shall immediately
terminate, unless an option agreement allows the option
to be exercised (to the extent exercisable on the date
of termination of service) for a specified period of
time thereafter.
SECTION 9.01. OPTION RIGHTS UPON DEATH OR
DISABILITY. Except as otherwise limited by the Plan
Administrators at the time of the grant of an option, if
an optionee dies or becomes permanently and totally
disabled within the meaning of Section 22(e)(3) of the
Code while in the service of the Company or any
Affiliate, his or her option shall expire one year after
the date of death or the date of permanent and total
disability, unless in either case the option agreement
or the Plan otherwise provides for earlier termination.
During that period, the unexercised portion of the
option may be exercised by the optionee, if living, or
by the person or persons to whom the optionee's rights
under the option shall pass by will or by the laws of
descent and distribution, but only to the extent that
the optionee is entitled to exercise the option at the
date of death or the date of permanent and total
disability, as the case may be.
SECTION 10.01. PRIVILEGES OF STOCK OWNERSHIP.
Notwithstanding the exercise of any option granted
pursuant to the Plan, no optionee shall have any of the
rights or privileges of a stockholder of the Company in
respect of any shares of Common Stock issuable upon the
exercise of his or her option until the optionee becomes
a stockholder of record.
SECTION 11.01. OPTIONS NOT TRANSFERABLE.
Options granted pursuant to the terms of the Plan may
not be sold, pledged, assigned or transferred in any
manner other than by will or the laws of descent or
distribution any may be exercised during the lifetime of
an optionee only by that optionee.
SECTION 12.01. ADJUSTMENTS FOR CHANGES IN
CAPITALIZATION OR ORGANIZATION; ACCELERATION OF RIGHT TO
EXERCISE OPTION. All options granted pursuant to this
Plan shall be adjusted in the manner prescribed by this
section.
(a) If the outstanding shares of the Common
Stock of the Company are increased, decreased, changed
into, or exchanged for a different number or kind of
shares or securities through recapitalization,
reclassification, stock dividend, stock split or reverse
stock split, an appropriate and proportionate adjustment
shall be made in the maximum number and kind of shares
of Common Stock as to which options may be granted under
the Plan. A corresponding adjustment changing the
number or kind of shares of Common Stock allocated to
unexercised options or portions thereof, which shall
have been granted prior to any such change, shall
likewise be made. Any such adjustment in outstanding
options shall be made without change in the aggregate
purchase price applicable to the unexercised portion of
the option, but with a corresponding adjustment in the
price for each share of Common Stock or other unit of
any security covered by the option.
(b) Upon the effective date of the
dissolution or liquidation of the Company, or of a
reorganization, merger, combination or consolidation of
the Company with one or more other corporations in which
the Company is not the surviving corporation, or of the
transfer of substantially all of the assets or stock of
the Company to another corporation, the Plan and any
option theretofore granted hereunder shall terminate
unless provision is made in writing in connection with
that transaction for the continuance of the Plan and for
the assumption of options theretofore granted hereunder,
or the substitution for those options of new options
covering the stock of the successor corporation, or a
parent or subsidiary thereof, with appropriate
adjustments, as determined or approved by the Plan
Administrators, as to the number and kind of shares of
stock subject to the substituted options and prices
therefor, in which event the Plan and the options
theretofore granted, or the new options substituted
therefor, shall continue in the manner and under the
terms so provided. For the purposes of the preceding
sentence, the excess of the aggregate fair market value
of the shares subject to the option immediately after
the substitution or assumption over the aggregate option
price of those shares shall not be more than the excess
of the aggregate fair market value of the shares subject
to the option immediately before the substitution or
assumption over the aggregate option price of those
shares, and the new option or assumption of the old
option shall not give the optionee additional benefits
which the optionee did not have under the old option.
In the event of (i) such dissolution,
liquidation, reorganization, merger, combination,
consolidation or sale or transfer of assets or stock in
which provision is not made in the transaction for the
continuance of the Plan and for the assumption of
options theretofore granted or the substitution for
those options of new options covering the securities of
a successor corporation or a parent or subsidiary
thereof or (ii) a difference between the excess of the
aggregate fair market value of the shares subject to the
option immediately after the substitution or assumption
over the aggregate option price of those shares and the
excess of the aggregate fair market value of the shares
subject to the option immediately before the
substitution or assumption over the aggregate option
price of those shares, each optionee (or that person's
estate or a person who acquired the right to exercise
the option from the optionee by bequest or inheritance)
shall be entitled, prior to the effective date of the
consummation of any such transaction, to purchase, in
whole or in part, the full number of shares of Common
Stock under the option or options granted to him or her
which he or she would otherwise have been entitled to
purchase during the remaining term of the option and
without regard to any otherwise applicable exercise
restrictions set forth in the option agreement. To the
extent that any such exercise relates to stock that is
not otherwise available for purchase through the
exercise of the option by the optionee at that time, the
exercise shall be contingent upon the consummation of
that dissolution, liquidation, reorganization, merger,
combination, consolidation, or sale or transfer of
assets or stock.
SECTION 12.02. ASSUMPTION OF OPTIONS GRANTED BY
KIOSK SOFTWARE, INC. (a) Pursuant to an Agreement and
Plan of Reorganization dated January 24, 1999, by and
between the Company, Kiosk Acquisition, Inc., Kiosk
Software, Inc., and Lori Fisher, Kiosk Software, Inc.
shall be merged into Kiosk Acquisition, Inc., which
shall be an Affiliate of the Company as of the effective
time of the merger ("Merger").
(b) Holders of options ("Kiosk Options")
to purchase common stock of Kiosk Software, Inc. ("Kiosk
Stock"), to the extent outstanding and unexercised
immediately prior to the Merger, pursuant to the Kiosk
Software, Inc. 1998 Stock Incentive Plan ("Kiosk Plan"),
shall receive options to purchase shares of Common Stock
in substitution of their options to purchase Kiosk
Stock. Such options to purchase Kiosk Stock shall be
cancelled and options to purchase Common Stock shall be
substituted therefor simultaneously as of the Merger.
(c) The number of shares of Common Stock
subject to the option serving as a substitute for a
Kiosk Option shall be that number, rounded down to the
next lowest whole number, such that the aggregate fair
market value of such Common Stock, determined as of the
Merger, shall be equal to the fair market value of the
Kiosk Stock, determined immediately prior to the Merger,
subject to such Kiosk Option, to the extent outstanding
and unexercised as of the Merger.
(d) The exercise price of an option to
purchase shares of Common Stock serving as a substitute
for a Kiosk Option shall be the amount such that the
excess of (i) the aggregate fair market value of such
shares of Common Stock, determined as of the Merger,
over (ii) the aggregate exercise price of the substitute
option, is equal to the excess of (iii) the aggregate
fair market value of the Kiosk Stock subject to the
Kiosk Option, determined immediately prior to the
Merger, over the aggregate exercise price of such Kiosk
Option, to the extent outstanding and unexercised as of
the Merger.
(e) The terms of the substitute option
to purchase Common Stock shall be identical to the terms
of the Kiosk Option, including those terms of the Kiosk
Plan incorporated by reference, except as provided in
paragraphs (c) and (d), above, and except to the extent
such terms are inconsistent with the terms of this Plan,
in which case the terms of the substitute option shall
be modified to avoid such inconsistency.
Notwithstanding the preceding sentence, however, to the
extent that a Kiosk Option qualified as an ISO in the
hands of the optionee immediately prior to the Merger,
the terms of the substitute option to purchase Common
Stock shall not be modified in such a fashion to result
in the optionee receiving "additional benefits," within
the meaning of Section 424(a)(2) of the Code, which he
did not have under the Kiosk Option.
SECTION 13.01. TERMINATION AND AMENDMENT OF
PLAN. (a) The Plan shall terminate 10 years after the
earlier of its adoption by the board of directors of the
Company or its approval by the shareholders of the
Company, and no options shall be granted under the Plan
after that date; provided, however, that termination of
the Plan shall not terminate any option granted prior
thereto, and options granted prior to termination of the
Plan and existing at the time of termination of the Plan
shall continue to be subject to all the terms and
conditions of the Plan as if the Plan had not
terminated.
(b) Subject to the limitation contained
in Section 13.02, the board of directors of the Company
may at any time amend or revise the terms of the Plan,
provided that no amendment or revision shall (i)
increase the maximum aggregate number of shares of
Common Stock provided for in Section 3.01 that may be
sold pursuant to options granted under the Plan, except
with the approval of the shareholders of the Company or
except as provided under the provisions of Section
12.01(a), (ii) permit the granting of an option to
anyone other than as provided in Section 4.01, (iii)
increase the maximum term provided for in Sections 5.02
and 5.04 of any option, or (iv) change the minimum
purchase price for shares of Common Stock under Sections
5.03 and 5.04.
SECTION 13.02. PRIOR RIGHTS AND OBLIGATIONS. No
amendment, suspension or termination of the Plan shall,
without the consent of the optionee, alter or impair any
of that optionee's rights or obligations under any
option granted under the Plan prior to that amendment,
suspension or termination.
SECTION 14.01. APPROVAL OF SHAREHOLDERS. Within
12 months before or after its adoption by the board of
directors of the Company, as provided by Section 5.01,
the Plan must be approved by shareholders of the Company
holding at least a majority of the voting stock of the
Company voting in person or by proxy at a duly held
shareholders' meeting. Options may be granted under the
Plan prior to obtaining approval, subject to the
limitations of Section 13.01 concerning the period
during which options may be granted, but those options
shall be contingent upon approval being obtained and may
not be exercised prior to the receipt of that approval.
SECTION 15.01. RESERVATION OF SHARES OF COMMON
STOCK. The Company, during the term of the Plan, will
at all times reserve and keep available a sufficient
number of shares of Common Stock to satisfy the
requirements of the Plan.
SECTION 16.01. HEADINGS. The headings of the
sections of the Plan are for convenience only and shall
not be considered or referred to in resolving questions
of interpretation.
SECTION 17.01. BROKERS' COMMISSIONS. No
commission may be paid to brokers on the sale by the
Company to the optionee of Common Stock that is optioned
and sold under the Plan.
SECTION 18.01. ADOPTION. The Plan has been
adopted by a resolution duly adopted by the board of
directors of the Company.
SECTION 19.01. APPLICABLE LAW. The Plan and
Options granted hereunder shall be governed by the laws
of the State of Delaware.
WEINBERG & COMPANY, PA
Town Executive Center
6100 Glades Road, Suite 314
Boca Raton, Florida 33434
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in the Form 10-KSB Annual Report for
the fiscal year ended December 31, 1998, of AmeriCom USA, Inc. our
report as of June 30, 1998, and 1997, dated January 29, 1999 (except
for Note 13 (e) and Note 4 as to which the dates are February 8,
1999 and February 10, 1999, respectively) relating to the combined
financial statements of AmeriCom USA, Inc. and RMC Diversified
Associates International, Ltd. which appear in such Form 10-KSB.
WEINBERG & COMPANY PA
Certified Public Accountants
Boca Raton, Florida
March 26, 1999
WEINBERG & COMPANY, PA
Town Executive Center
6100 Glades Road, Suite 314
Boca Raton, Florida 33434
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in the Form 10-KSB Annual Report for
the fiscal year ended December 31, 1998, of AmeriCom USA, Inc. our
report as of October 31, 1998, dated November 23, 1998 relating to
the financial statements of Chatsworth Acquisition Corporation which
appear in such Form 10-KSB.
WEINBERG & COMPANY PA
Certified Public Accountants
Boca Raton, Florida
March 26, 1999
