SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _______________.
COMMISSION FILE NUMBER O-23845
GO ONLINE NETWORKS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 33-0873993
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5681 BEACH BOULEVARD, SUITE 101/100
BUENA PARK, CALIFORNIA 90621
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (714) 736-0988
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 No X.
----
Check if there is no disclosure of delinquent filers pursuant 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. $89,749
State the aggregate market value of 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 prices of such common equity, as
of a specified date within the past 60 days. (See definition of affiliate in
rule 12b-2 of the Exchange Act.) $ 51,780,106, based on the closing price for
the common stock on March 17, 2000.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of December 31, 1999,
there were 75,181,843 shares of common stock, par value $0.001, issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the form 10-KSB (e.g., Part I, Part II, etc. )
into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The listed documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24,
1990). None.
Transitional Small Business Disclosure
Format (check one):
Yes _____ No __X__
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GO ONLINE NETWORKS CORPORATION
TABLE OF CONTENTS
-------------------
PART I
Item 1 Description of Business.
Item 2 Description of Property
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders.
PART II
Item 5 Market for Common Equity and Related Stockholder Matters.
Item 6 Management's Discussion and Analysis or Plan or Operations.
Item 7 Financial Statements.
Item 8 Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial Owners and Management.
Item 12 Certain Relationships and Related Transactions.
Item 13 Exhibits and Reports on Form 8-K.
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PART I
This Annual Report includes forward-looking statements within the meaning of the
Securities Exchange Act of 1934 (the "Exchange Act"). These statements are based
on management's beliefs and assumptions, and on information currently available
to management. Forward-looking statements include the information concerning
possible or assumed future results of operations of the Company set forth under
the heading "Financial Information-Management's Discussion and Analysis of
Financial Condition or Plan of Operation." Forward-looking statements also
include statements in which words such as "expect," "anticipate," "intend,"
"plan," "believe," "estimate," "consider" or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions. The Company's future results and
shareholder values may differ materially from those expressed in these
forward-looking statements. Readers are cautioned not to put undue reliance on
any forward-looking statements.
ITEM 1 - DESCRIPTION OF BUSINESS
Go Online Networks Corporation operates in the high technology and
e-commerce business utilizing a three-tiered revenue model. In initiating our
strategy, we acquired and currently operate three distinct divisions, each
described below:
Internet Kiosk Division
-------------------------
We are pursuing a strategy in the installation of internet kiosks in the
mid-priced hotel market. Our internet kiosks, designed in three primary models,
are installed in the hotel lobby or an alternative centralized public access
room. Our kiosk division has developed two suppliers capable of manufacturing
small, integrated kiosks that can provide pay-as-you-use stand-alone internet
access. At no cost to the hotel owner and sharing revenues with us and the
owner, our internet kiosks have been and will continue to be marketed to these
mostly mid-priced hotels by sales agent organizations employed by our kiosk
division. Presently, 369 hotels have signed contracts and 167 have been
installed as of January 10, 2000. We believe that we will have many more by
year end and hope to reach our goals of installation of enough kiosks to make us
profitable by the first quarter of 2001.
ShopGoOnline.com
----------------
Utilizing online video and audio technology to assist with customer review,
our ShopGoOnline.com internet website offers a variety of products and services
via the world wide web. ShopGoOnline.com sells products such as jewelry, coins,
collectibles, electronics, computers, skin care and beauty products, and
personal fitness products. At ShopGoOnline.com, the customer can search for
products we have to sell by category or by product name and obtain a full
description of the product offer including a complete audio presentation of the
product as well as a video demonstration when appropriate.
Auctionomics.com
----------------
The internet auction method of e-commerce has become increasingly accepted
in today's internet environment. By adding Auctionomics.com to our e-commerce
business strategy, we are attempting to take advantage of those opportunities.
As a complimentary component of our network of e-commerce web sites,
Auctionomics will link traffic to the ShopGoOnline.com virtual shopping mall,
and vice versa.
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THE HOTEL INTERNET KIOSK
We believe the demand for internet access by travelers will continue to
grow as more of the United States and world population continues to go on line.
Travelers, whether business or personal, are a substantial potential market.
Business strategies to service the traveler's needs range from internet services
located in airports and hotels, to remote, hand held or car based devices. User
demand, capital requirements, and operating costs of alternative technologies,
along with the business models to service these travelers are all evolving, and
have mostly resulted to date in substantial operating losses.
Within the hotel industry, the primary attention paid to travelers to date
has been in the upscale, high priced and luxury hotels segments. These affluent
travelers are viewed as the most likely to pay for the cost of technological
solutions to internet access and entertainment demand. The twin demand drivers,
entertainment and internet, are expected to pay for these sophisticated
technological solutions.
On the other hand, little attention has been directed to mid-priced hotels
which is our primary focus, aside from possible provision of a modem jack on
phones. Cable or a satellite service is considered for entertainment. Owners
of franchises are resisting orders from chain corporations to spend significant
sums, such as electronic upgrades of room locks and other amenities.
In the upscale and luxury hotel category, the two leading companies, On
Command and LodgeNet have reported substantial losses in building their in-room
entertainment and internet access business in luxury hotels. LodgeNet now
services 4,700 lodging properties with 725,000 rooms, providing on demand
movies, video games, high-speed internet access and other programming.
LodgeNet's losses narrowed in the first six months of 1999 to ($16 million) from
($36 million) in the first half of 1998. Its competitor, On Command, claims an
installed base of 942,000 rooms, of which 11,000 rooms represent installation of
its new OCX platform including high-speed internet access. Losses at On Command
for the first six months of 1999 remained flat at ($15 million) with the
comparable 1998 period.
Aside from the current losses encountered in acquiring and installing new
accounts, and building new service technologies that include high speed internet
access, the room based services in upscale hotels require the companies to front
a high cost per room investment. Capital outlays of $400 per room are common.
High-speed internet access generally revolves around installation of a T1
network service (essentially a high speed digital type of telephone line) that,
while available, has significant installation, maintenance, and operating costs.
Daily per room fees for this unlimited internet access approach $10. Both
companies offer differing versions of in-room connectivity for laptops.
Airport based internet access holds significant potential. There are
significant complexities, costs, and time encountered for marketing,
contracting, and installing with multiple airport public authorities. The
prototype units being installed are generally sophisticated, expensive units
that integrate internet services with multiple advertising side panels with
electronic traveler information systems. GTE is a major factor in this large
market.
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THE MID-PRICED HOTEL MARKET
Market segmentation of the hotel industry began in 1981, with the
mid-priced and economy segments rapidly developing. This design and operational
model was coupled with franchising, and eventually consolidations, to build
large numbers of hotel properties and rooms. Brand identification programs for
these chains, e.g., Days Inn and Motel 6, were launched to promote occupancy and
brand loyalty. Leveraged buyout firms such as KKR acquired major brand names,
such as Motel 6. Economically priced hotels with minimal amenities and
standardized design have now became commonplace.
Today, to name just a few, corporations such as Choice Hotels International
have franchised over 3,600 mid-priced and budget hotels in the United States
operating under name chain brands such as Sleep, Comfort, Quality, Roadway, and
EconoLodge. Choice Hotels has developed mid-priced longer stay hotels under the
brand name Main Stay Suite. Cendant Corp developed the Days Inn franchise,
which includes 1,755 hotels in the United States. Other chains, including
Holiday Inn, Ramada, and Howard Johnson are expanding rapidly. Our business
model is intended to address the build up of mid-priced hotels by providing
efficient and cost-effective internet access for the guests in these mid strata
hotels.
This segment of hotels generates substantial numbers of travelers and
potential internet users. For example, a 150-bed hotel at 70% occupancy
generates 38,325 occupied rooms per year. If one-third of the occupied rooms
are double occupied on average, 51,000 potential internet users per year stay in
the hotel. In a 500-room hotel with 70% occupancy, and with half of the rooms
averaging two people, the number of annual potential users rises to 192,000. In
good locations, occupancy rates as well as double occupancy, run significantly
higher. Location too will also affect the mix of business travelers, a more
intense internet user. Younger family members entertain themselves by Web
surfing. Our internet kiosk business model addresses this pool of travelers at
middle and lower priced hotels for both the hotel and Go Online.
GROWTH OF THE ONLINE AUCTION
The internet offers for the first time the opportunity to create a
marketplace for person-to-person trading--the exchange of goods between
individuals. This trading has traditionally been conducted through trading
forums, such as classified advertisements, collectibles shows, garage sales and
flea markets, or through intermediaries, such as auction houses and local dealer
shops. These markets are inefficient because, among other things:
* their fragmented, regional nature makes it difficult and expensive for
buyers and sellers to meet, exchange information and complete transactions;
* they offer a limited variety and breadth of goods;
* they often have high transaction costs from intermediaries; and
* they are information inefficient, as buyers and sellers lack a reliable and
convenient means of setting prices for sales or purchases.
An internet-based centralized trading place can overcome the inefficiencies
associated with traditional person-to-person trading by facilitating buyers and
sellers meeting, listing items for sale, exchanging information, interacting
with each other and, ultimately, consummating transactions. Through such a
trading place, buyers can access a significantly broader selection of goods to
purchase and sellers have the opportunity to sell their goods efficiently to a
broader base of buyers. Because of the internet's efficiency, the number of
online auction purchasers is expected to increase.
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OUR PRODUCTS AND SERVICES
SHOPGOONLINE.COM
Mr. Scott Claverie, the current President, formed the ShopGoOnline.com
division as a small venture to develop internet e-commerce solutions. Through
our AMS Acquisition Corp. subsidiary, we provided seed financing in exchange for
a 75% interest in the ShopGoOnline.com website. This initial financing
contained an option for Mr. Claverie to reacquire majority ownership. This
option was recently extinguished for 1,250,000 shares of our common stock and
certain cash consideration. We own 75% of the equity, and are committed to
provide overall division financing and direction. ShopGoOnline.com is a dba of
AMS Acquisition Corp.
ShopGoOnline.com offers a variety of products and services via the world
wide web. ShopGoOnline.com sells products such as household items, jewelry,
coins, collectibles, electronics, computers, skin care and beauty products, and
personal fitness products. Almost anything that is normally offered to the
public through traditional retail or exclusive TV offers or infomercials can be
available through e-commerce on the internet.
At ShopGoOnline.com, the customer can search for products by category or by
product name and obtain a full description of the product offer including a full
color picture and full-motion video. In addition, the customer will be able to
view the TV offer in part or in its entirety all from the ShopGoOnline.com web
site.
When fully implemented, our ShopGoOnline.com web site will be a place where
a customer can find favorite products as well as some of those seen advertised
on TV. Our customers can shop from hundreds of products and add them to their
electronic shopping cart. At the checkout counter, the customer purchases all
the products selected from one easy location. Our ShopGoOnline.com division
then processes the orders and has the products delivered right to the customers'
door.
Our ShopGoOnline.com division derives revenue from three different sources:
1. Direct Sales B from selling product and services that are offered on the
web site.
2. Indirect sales B by referring our customers to "link share" numbers to
purchase products advertised on our web site.
3. Web hosting B by hosting other web pages that reside on our server
Our ShopGoOnline.com web site opened for business on July 6, 1999. Our
site is now open 24 hours a day, 365 days a year. We are in the initial growth
phase of our sales and advertising. For the period from inception of our web
site until December 31, 1999, we have had total gross sales of $21,456 on total
expenses associated with ShopGoOnline of $212,856 B a loss of $182,612.
Additional income of $22,219 was generated by ShopGoOnline for a business to
business web site development project for an outside third party. Our products
are shipped by our vendors via a method of the vendor's choice, although to date
most of our vendors have selected UPS as their primary shipper.
Currently, our ShopGoOnline.com web, file, print and fax servers operate on
industry standard hardware (including Intel processors, Seagate and IBM hard
drives and Linux software), that can be easily replaced if problems arise. Our
online video and audio technology is provided through our relationship with Real
Networks, Inc., and their RealAudioJ and RealVideoJ products which have become
widely utilized and accepted on the internet. Our use of their products is
producing videos that the compatible with the users home/work internet
connection and software.
Our internal and external web server software is balanced and maintained
using a server-load based rotation scheme. If a server becomes busy, the next
available server will receive and process the request. As the requests grow
beyond the capacity of the equipment, new machines will be added to the rotation
scheme in short order. This scheme allows for growth and failure redundancy.
To our knowledge, there are no known material limitation or upgrades necessary.
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We supply the products sold on ShopGoOnline.com directly from agreements
with vendors who sell on our site. These vendors include 5th Avenue, Ingram
Micro, Ingram Entertainment, Panda America, Guthey Renker and Carefree Traders.
We generally do not warehouse any inventory ourselves for resale. We make
arrangements with each individual vendor to package, ship and notify us of sale
and delivery. We obtain payment from our customers and pay the vendors directly
for these products.
On September 15, 1999 we entered into an agreement with Panoscan, Inc.,
through which Panoscan will work with ShopGoOnline to develop new ways to
present and promote products using digital imaging. Specifically, Panoscan
agreed to use its camera system to capture images for use on the Vera's in the
Glen area of the ShopGoOnline site. We agreed to credit Panoscan in our
promotions and press releases. Panoscan has completed their work on the
specific site section and it has been implemented on our web site.
INTERNET KIOSK DIVISION
Our internet kiosk, designed in three primary models, is designed to be
installed in a hotel lobby or an alternative centralized public access area.
Our primary strategy is to place these internet access kiosks in mid-price
hotels in the lobby or another high access area.
We have contractual arrangements with iCom Network, Inc. as well as
Infotouch Technologies, Inc., two suppliers who manufacture small, integrated
kiosks that can provide pay as you use stand alone internet access. Our
agreement with iCom provides that we agree to purchase five hundred internet
kiosks over twelve months with a minimum of 25 per month at a cost to us of
$3,250.00 per kiosk (payable net 15 days after shipment). On June 22, 1999 we
agreed to purchase 50 surfnet internet terminals from Infotouch during the
subsequent 45 days at between $3,195.00 and $3,395.00 each (depending on the
specific model chosen).
At no cost to the owner and in a revenue sharing model, our internet kiosks
have been and will continue to be marketed to mostly mid-priced hotels by sales
agent organizations employed by our Kiosk Division.
Available kiosks range from 23 inches wide to 30 inches wide, and 20 inches
high for the table top versions to 68.5 inches high for some of the stand alone
versions. The hotel chooses from our agreement the type of kiosk they desire,
the manufacturer and the kiosk finish color. Each kiosk includes a mechanism
for accepting currency and a traditional internet browser familiar to customers
for browsing the internet and obtaining email.
The hotel is required to provide free space, approximately 9-12 square
feet, under a four-year, renewable internet exclusive contract. The hotel
receives in exchange a 10% share of kiosk revenues with a $45 monthly minimum.
The contract is renewable by the hotel for an additional four years or eight
years in total. We agree to maintain the kiosk from our share of the revenues.
Presently, the total direct installed cost of each internet kiosk is
approximately $3,300, which has been brought down from our initial cost of
$5,100.
After entering into a contract with the hotel owner, we order the kiosks
from the manufacturer (providing a direct shipping address for the location),
order a telephone line approximately two weeks prior to installation, order the
internet service provider for the location and confirm that appropriate
telephone line and RJ11 jacks are installed and telephone service is active.
When the kiosk is shipped from the manufacturer and arrives at the site, we
dispatch an installation crew to install the kiosk and train the location owner
and employees on the use of the system. We later contact the location owner to
confirm the unit has been installed and respond to all questions or concerns
that he or she may have.
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The kiosk division business plan has several multi-level, integrated
strategies to maximize our revenues and business value from the kiosks. These
revenue and valuation sources are as follows:
* Revenues and earnings streams generated by the existing and potential
kiosks.
* Advertising revenues to be sold as spots and banners on the hotels' kiosks.
This revenue is based on "eyeballs" generated.
* A value derived from the exclusive 4-year internet service contract for a
hotel (with potential for 8 year exclusive contracts). The aggregate
value of these contracts should grow geometrically as hotels are added,
representing future revenue streams and the exclusive right to provide
that hotel's guests with internet services. Operating experience will
refine the value.
* Tie-ins to our other services by usage promotional affinity programs,
including ShopGoOnline.com.
* Develop branded "rewards" programs for hotels to give their guests that
operate through the kiosk.
Although we cannot be sure that we will be successful in marketing our
internet kiosks, we intend to have the 2,000 internet kiosks installed and
operating in hotels at the end of a two-year period. Presently, 369 hotels have
signed contracts and 167 have been installed as of January 10, 2000 in 25
different states. Our existing customers include franchises of Ramada Inns,
Holiday Inns, Howard Johnsons, Econolodge, Radisson Inn and Country Suites. No
one customer or chain accounts for a substantial portion of our business to
date. A majority of our kiosk sites are in metropolitan areas such as: Atlanta,
GA; Washington, DC; Birmingham, AL; Houston, TX; Dallas, TX; San Antonio, TX;
Orlando, FL; Chicago, IL; Phoenix, AZ; Nashville, TN; Charlotte, NC; Grand
Rapids, MI; Oklahoma City, OK etc. 329 of the 369 sites are located within 10
miles of an international or regional airport.
AUCTIONOMICS, INC.
Auctionomics, Inc. incorporated in the state of Nevada in June 1999. This
division was created solely for the pursuit of our desire to capture a share of
the online auction market. Auctionomics.com is structured to perform as a
focused auction marketing resource for some items, but more particularly as a
referral website B specifically to direct traffic to auction web sites which are
our partners. Auctionomics.com commenced operation in August 1999 and launched
in September 1999. To date, we have concentrated the Auctionomics.com site on
marketing for brand development to build traffic and the development of a
working operational web site. To date we do not have any direct auction sales
through our site.
Our Auctionomics.com website primarily operates as a referral website
initially to ClassifiedAuctions.com, on online auction website which commenced
operations in June 1999. ClassifiedAuctions.com is owned and operated by
Express Auction Specialists, Inc., an auction company. ClassifiedAuctions.com
primarily conducts person to person auctions that offer assets to be provided
for online sale, including primarily artwork, jewelry, collectibles and real
estate. ClassifiedAuctions.com has needed marketing assistance to build traffic
and sales which is beneficial to us since we can drive activity to their site.
We entered into a marketing agreement with ClassifiedAuctions.com to
provide referrals to their site in exchange for fees. Under that agreement,
Auctionomics.com will receive 20% of the gross revenue derived from each sale
made by ClassifiedAuctions.com which is referred to by us. Our plan is to
advertise and market Auctionomics through web browsers and search engines and
build traffic that we would then convert to online transactions referred to
ClassifiedAuctions.com, for a fee. At present, the majority seller on
Classified Auctions is Express Auction Specialists, Inc. (an entity unaffiliated
with us), which is headed by Larry Makowski.
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Within minutes of registering with ClassifiedAuctions.com, online users can
list items for sale or auction. Users may browse familiar classified categories
for sale items or bid on items posted for auction in a fully automated, secure
online service.
The founders of Auctionomics, Inc., Messrs. Harvey A. Turell and Nathan A.
Wolfstein IV, have experience in the marketing of real estate auctions. We
acquired a 75% interest in Auctionomics, Inc. from the two founders/shareholders
in June 1999. The consideration was 500,000 shares of our common stock and a
two-year warrant to acquire an additional 500,000 shares of our common stock at
$0.50. The shareholders, Messrs. Turell and Wolfstein, are entitled to receive
a bonus of 25% of Auctionomics.com pre-tax income, so long as they retain their
25% ownership. If their shareholdings are reduced, the bonus is reduced
proportionally. We provided Auctionomics, Inc. with $25,000 for working capital
shortly after the acquisition in June 1999.
Auctionomics.com can become an auction e-trading community providing
sellers and buyers access to specially selected sales events and the
ShopGoOnline.com virtual mall.
Auctionomics.com provides users methods to effectively market and sell
their goods. These include:
* Digital literature and emailings to targeted buyer lists and the
presentation of products for sale in online events through digital
presentations Internet search engine marketing
* ShopGoOnline.com virtual shopping mall
* Streaming video and streaming digital audio online of certain key items in
an auction as a way to provide visual and audio views of the items in the
online auction marketing program.
* Television/cable Broadcasting. For selected online events, Auctionomics
intends to contract for satellite broadcast of a live auction event,
with live interactive bidding in real time
* Credit card payments online
COMPETITION
The electronic commerce market, particularly over the internet, is
relatively new, rapidly evolving and competitive, and we expect competition to
intensify in the future. We will compete with many other companies which either
offer the same types of merchandise or provide the same or a similar type of
sales format to customers.
* ShopGoOnline.
Current competitors for our ShopGoOnline division include companies with online
commerce sites such as Onsale, Inc., Intermallamerica.com, iVillage.com,
Egghead, Amazon.com, Inc., AOL.com, Beyond.com Corporation, Buy.com Inc.,
Cyberian Outpost, Inc., Dell Computer Corporation and numerous other companies
marketing goods over the internet. Most of these companies have substantially
greater resources than we do and consequently have the ability to market their
products more effectively. This is not an exhaustive list of current
competitors.
We intend to compete with these companies by utilizing the key differentiation
of our streaming audio and video, as well as link to other sites and undertake
traditional advertising. In addition, it is not difficult to enter the online
commerce market, and current and new competitors can launch new online commerce
web sites at relatively low cost.
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* Internet Kiosks.
Our internet kiosk division competes on a national scale with other internet
kiosk competitors and other competitors for services to hotel guests. There are
numerous other potential competitors that could use their existing
infrastructure to provide internet services to the lodging industry, including
franchised cable operators, wireless cable operators, telecommunications
companies, major technology companies and DBS providers.
Our internet kiosk division also indirectly competes with "in-room" internet
suppliers such as Lodgenet and On Command, as well as other in-room internet
access providers. We are not seeking to compete in this market, but rather have
focused our marketing efforts on mid-priced hotels which are not likely to
commit the resources required to make in-room access available in the near
future. We also believe that the hotel lobby resource is easier for quick
access to email and other quick look ups similar to pay telephone resources.
* Auctionomics.
Our Auctionomics internet auction site competes with numerous, well-established
internet auction sites. The biggest competitor in that market is ebay.com, but
there are numerous other sites such as onsale.com, bid.com, ubid.com,
egghead.com, 2themart.com and many others which have competitive auction sites.
New competitors can enter this market very easily. If we do not properly market
our site, our competitors will have more market share.
We believe that we can effectively compete for a portion of this market through
the ability to provide referrals to on-line and live auctions with auction
enhancements, primarily in the streaming audio and video which can showcase the
products to be marketed in an improved format which could create demand and spur
the potential buyer to either make an on-line bid or go to the live event.
GOVERNMENT REGULATION
Our internet and e-commerce businesses may become subject to increasing
government regulation as various government regulators continue their focus on
improving internet commerce. Several states, including California and
Washington, have laws regulating the disclosure of pricing information by
wholesalers and comparable businesses. In the future, governments of California,
Washington and other states could require additional disclosure in order to
comply with other regulations. In addition, several states have laws that
regulate auctions and auction companies within their jurisdiction. Some states
may interpret their statutes to apply to our transactions with consumers in such
states, even if those transactions originate over the internet. The burdens of
complying with auctioneering laws could materially increase our cost of doing
business. Similarly, states may construe their existing laws governing issues
such as property ownership, sales tax, libel and personal privacy to apply to
internet companies servicing consumers within their boundaries. Resolution of
whether or how these laws will be applied is uncertain and may take years to
resolve.
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SALES AND MARKETING
Web Promotion B Advertising
As with any internet company, we actively market our web sites and drive
traffic to them. We plan to market and brand our Go Online web sites through
conventional banner ads and reciprocal links placed throughout highly visible
online locations and print publications.
It is a standard in the industry to team with web promoters in order to
market our sites electronically. Web promoters (also known as media sales
companies) are actively involved in banner placement and swapping, search engine
registration, and other activities associated with Web promotion. Because of
their existing relationships and the ability to "package" deals, these firms
constitute the quickest, most cost-effective way to promote a site. Typically,
these firms take a percentage of their clients' total ad revenue (usually
35-50%) as compensation for their services.
Specifically, these firms provide :
* Exclusive sales representation
* Support by a sales force of experienced media professionals
* Increased focus on long-term sponsorship programs
* Total inventory and ad management
* Additional revenue streams from local and international ad sales efforts
To date, we have entered into agreements with Website Results, LinkShare
Corporation and Doubleclick. Our Website Results contract is designed to assist
us in building traffic to our website by developing key indices on search
engines. ShopGoOnline.com is a Platinum Program subscriber to Website Results
which specializes in developing multiple "doorway" pages for internet customers
for their subscribers. The "doorway" program is a system to rank multiple
keyword phrases for Website Result's clients to establish high ranking for those
phrases with the major search engines to build traffic by optimizing rankings in
order to produce quality targeted traffic for our website. We also have an
agreement with LinkShare through which we receive revenues and pay fees for
receiving traffic from other better known sites and referring web traffic
through our sites. We have agreed with DoubleClick to obtain 1,000,000
impressions on Doubleclick with "click through" to our ShopGoOnline website. We
paid $15,000 for this first agreement.
In the coming months, our management intends to pursue expanded traditional
and nontraditional marketing with our Website Results, Doubleclick, Linkshare
and other agreements to build consumer awareness of ShopGoOnline.com. The media
campaign, which we generally launched with the grand opening of
ShopGoOnline.com, was expanded with nationwide newspaper display ads which
reached a substantial number of readers in the eight major internet markets. We
placed display ads in the Boston Globe, San Francisco Examiner, Chicago Times,
New York Times, Miami Herald, San Diego Union Tribune, Los Angeles Times and
Dallas Morning News.
Key to the success of Auctionomics.com is to stay connected to the auction
community, both on- and offline. Therefore, our plan is to advertise in
publications that target the auction enthusiast. Currently, Auctionomics.com is
running a full-page advertisement in Auction Weekly, one of the most respected
publications in the auction arena.
Since 1994, Auction Weekly has been published by Auction Advisory. Auction
Advisory has now taken its auction expertise online at auctionadvisory.com.
Auction Weekly lists only live auctions, those auctions conducted by
professional auctioneers and government agencies. The publishers and principals
of Auction Advisory are deeply involved in the auction industry, and have been
for the past 18 years.
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The paper version of Auction Weekly has always listed 300+ auctions each
week while the online database is updated daily. Auction Advisory gives users
early warning and up to the minute changes, similar to traditional, short-notice
"public notices".
Auction Weekly is mailed first class every Tuesday. This 32-page newsletter
comprehensively lists all auctions in the Southwest (AZ, CA, CO, NM, NV, TX,
UT). The newsletter lists virtually every type of auction from large to small.
Auction Weekly lists government auctions, estates, IRS, U.S. customs, city,
county, state, bankruptcy, lien auctions, antiques, business liquidations, U.S.
Dept. of Defense, and U.S. Marshal.
Internet Kiosk Marketing
While we cannot be sure we will succeed with our goal, we intend to seek to
have the 2,000 internet kiosks installed and operating in hotels at the end of a
two-year period. To accelerate penetration of the hotel market and the use of
the installed kiosks, in September 1999 we initiated a major 45-day marketing
campaign for our kiosk division. The sales and marketing campaign includes:
* Advertising in trade magazines and attending trade shows to enhance our
kiosk program's visibility with hotel operators. An example is the
Asian-American Hotel Association, which represents approximately 60% of the
franchised mid and economy priced hotel owners.
* Providing the hotel upon kiosk installation with a full marketing program
to increase guest usage. This includes signage, which will be intended to draw
guests to the kiosk, and obtaining email while traveling. Guest access to their
email requires only knowing the short address of the mail servers of their
internet service providers (ISP) and password they currently use to access their
mail. This information is the same that is inputted into their home or office
email program and is readily available to the traveler before he/she departs.
* Distribute plastic affinity cards to reward users with credits to be spent
at our ShopGoOnline.com web site. Affinity members or guests of certain hotels
will be offered free minutes to check for their e-mail at check-in. Some hotels
look to also use the kiosks as a center around which to develop a stay rewards
program for their guests.
* Develop catalogs for periodic mailing to users of the kiosks for purchase
opportunities at our online sites.
* Retain sales agencies to represent our kiosk division to acquire agreements
to place internet kiosks in hotels within the United States and internationally.
Our most recent sales agreement was with Midwest Internet Solutions, Inc.
covering Indiana, Michigan, and Ohio.
Through Decembeer 31, 1999, we have installed a total of 167 kiosks and
have agreements signed with 369 sites.
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OUR BACKGROUND
Go Online Networks Corporation became a publicly traded corporation on the
over-the-counter bulletin board in April 1990 by the "reverse acquisition" of
Valencia Capital, a Colorado corporation. From this acquisition, our
shareholders became the majority shareholders and the corporation in November
1990 was renamed Jones Naughton Entertainment, IncA one for four reverse stock
split was accomplished at the same time, resulting in nine million common shares
then outstanding.
Under our then president, Mr. Spike Jones, Jr., we initially produced
infomercials but ceased infomercial production in 1993. Mr. Jones left us and
in 1995, we acquired Real Estate Television Network, Inc., a satellite real
estate TV network. Real Estate Television Network's target market was the
independent real estate office of the large franchised office networks, e.g.
Century 21. In 1996, many of the large independent real estate firms were
acquired by HSF, Inc., which resulted in a consolidated industry. The
consolidation led to the decision to internally produce and provide training and
other services, which were originally provided by outside vendors like Real
Estate Television Network. In 1996, we sold Real Estate Television Network to
AmeriNet Financial Services, Inc.
In late 1997 and 1998, we made the strategic decision to pursue
opportunities involving the internet. In the first quarter of 1998, we acquired
the assets of a small advertising agency, Affiliated Marketing Services, Inc
which we intended to move into internet advertising. We determined that
Affiliated Marketing Services, Inc.'s internet progress was insufficient, and
during the fourth quarter of 1998, we sold Affiliated Marketing Services, Inc.
back to its management.
Subsequent to the sale, we made our initial investment in AMS Acquisition
Corp., a previously unaffiliated corporate entity which was and continues to be
the developer of ShopGoOnline.com, investing $25,000 for a 75% equity interest.
AMS Acquisition Corp. was formed in Nevada on June 29, 1998. Management of that
corporation received a repurchase option to acquire back 26% of the outstanding
shares from us. We subsequently purchased this repurchase option. We issued to
management (primarily its President Scott Claverie) 1,250,000 shares of our
common stock, along with cash consideration.
During March 1998 we entered into an agreement to acquire the assets of
Sign Products of America, Inc., an unaffiliated business formed in November 1995
in California, which was engaged in the manufacturing, marketing, management and
display of advertising and informational kiosks. The purchase price was $50,000
with a down payment of $25,000 plus four equal quarterly installments at the 90
day, 180 day, 270 day and 350 day anniversaries of the closing date.
We acquired a 75% interest in Auctionomics, Inc. from Nathan A. Wolfstein
IV and Harvey A. Turell, the two previously unaffiliated founders/shareholders
in June 1999. Auctionomics, Inc. was formed in Nevada in June 1999. The
consideration was 500,000 shares of our common stock and a two-year warrant to
acquire an additional 500,000 shares of our common stock at $0.50. The
shareholders, Messrs. Turell and Wolfstein, are entitled to receive a bonus of
25% of Auctionomics.com pre-tax income, so long as they retain their 25%
ownership. If their shareholdings are reduced, the bonus is reduced
proportionally. We provided Auctionomics, Inc. with $25,000 for working capital
shortly after the acquisition in June 1999.
At a meeting of shareholders held on September 8, 1999, we reincorporated
in Delaware and changed our name to Go Online Networks Corporation. This change
was designed to provide us with the advantages of Delaware law for a public
corporation and to change the name to reflect our new internet businesses.
On January 10, 2000, we entered into an agreement with Westlake Capital
Corp., pursuant to which we issued 3,000,000 of our newly-issued shares of
common stock to acquire Westlake. Westlake was a reporting company with the
Securities and Exchange Commission. As part of the acquisition, we elected to
have successor issuer status under rule 12g-3 of the Securities Exchange Act of
1934, which makes us a reporting company.
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RESEARCH AND DEVELOPMENT
We have not spent any measurable amount of time on research and development
activities.
EMPLOYEES
As of December 31, 1999, we had 13 full-time employees and 8 part time
employees, including employees in each of our divisions. Of these employees,
four work in our administrative offices, five are employed by our internet kiosk
division, nine are employed by our ShopGoOnline.com division and three are
employed by our Auctionomics division. None of our employees is covered by any
collective bargaining agreement. We believe that our relations with our
employees are good.
ITEM 2 - DESCRIPTION OF PROPERTY
Our principal executive offices are located at 5681 Beach Boulevard, Suite
101/100, Buena Park, California 90621. Effective July 21, 1999 we entered into
a lease for this office space. The term of the lease is for 3 years with
monthly base rent payments of $1,600. The rent for the first year was prepaid.
Future base rent commitments during the years ended December 31 under this lease
are summarized as follows: 2000 - $ 8,000; 2001 - $ 19,200; and 2002 - $
11,200.
Effective May 15, 1999, we entered into a lease for office space in
northern California used by our ShopGoOnline.com division. The term of the
lease is for 5 years with monthly base rent payments of $1,615. The base rent
amounts are subject to increases of 3% per annum. We have the right to
terminate the lease between May 15, 2000 and June 15, 2000 and also between May
15, 2002 and June 15, 2002. The first years rent was prepaid. Future base rent
commitments during the years ended December 31 under this lease are summarized
as follows: 2000 - $ 19,380; 2001 - $19,380; 2002 - $ 19,380; 2003 - $ 19,380;
and 2004 - $ 8,075.
Effective August 12, 1999, we entered into a lease for office space for our
marketing department located at 13101 Washington Blvd., Suite 231, Culver City,
California. The term of the lease is until September 30, 2000, with a month to
month tenancy thereafter, with monthly base rental of $1,254.00 per month.
At the end of the lease terms for all of our rental space, we believe that
we can lease the same or comparable offices at approximately the same monthly
rate.
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ITEM 3 - LEGAL PROCEEDINGS
During 1996 we sold our wholly-owned subsidiary Real Estate Television
Network, Inc. in exchange for shares of stock of AmeriNet Financial Services,
Inc., the entity that acquired Real Estate Television Network. Since we were
unable to receive free trading shares of AmeriNet as agreed, on July 9, 1998 we
filed a lawsuit against AmeriNet and certain of its officers and directors
alleging breaches of written contracts, fraud and violations of various
Corporate Code sections. On September 2, 1998, AmeriNet filed a cross-complaint
against us alleging fraud and misrepresentation, breaches of contracts and
conspiracy. In the cross-complaint AmeriNet sought damages in the approximate
amount of $12,000,000, together with exemplary and punitive damages, attorney's
fees and cost of the suit. The actual losses identified by the cross-complaint
were less than $500,000. Effective on December 15, 1999, we entered into a
settlement with AmeriNet which provided for AmeriNet (which had subsequently
been renamed Homespace, Inc.) to issue to us 200,000 shares of Homespace common
stock and pay us $100,000, with mutual releases of claims on both sides.
On December 3, 1998, related to a different litigation matter, a default
judgment was entered against us in the approximate amount of $55,000 for alleged
amounts owed by Real Estate Television Network for which the plaintiff alleges
was also owed by us. On July 14, 1999 the default judgement was set aside
based on the fact that we were never properly served with a summons and
complaint. We contend that we are not liable for the amounts due since Real
Estate Television Network was a separate corporation and we never guaranteed
this obligation.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders for a vote during the
period covered by this report.
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PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the high and low closing prices for shares
of our common stock for the periods noted, as reported by the National Daily
Quotation Service and the Over-The-Counter Bulletin Board. Quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions. Prior to September 22, 1999, our common stock
was listed under the symbol "JNNE." Effective on September 22, 1999, the
trading symbol for our common stock changed to GONT.
CLOSING PRICES
YEAR PERIOD HIGH LOW
----- ------ ---- ----
1999 First quarter .09 .02
Second quarter .74 .09
Third quarter .70 .36
Fourth quarter .49 .12
1998 First quarter .07 .04
Second quarter .16 .03
Third quarter .10 .03
Fourth quarter .05 .02
The number of beneficial holders of record of our common stock as of the
close of business on December 31, 1999 was approximately 223. Many of the
shares of Go Online's common stock are held in "street name" and consequently
reflect numerous additional beneficial owners, which we are advised is
approximately 9,925 as of August 24, 1999.
At December 31, 1999, we had outstanding options to purchase 2,450,000
shares of common stock at exercise prices ranging from $.20 to $5.50, with a
weighted average option price of $.27.
At December 31, 1999, we had 2,614,523 shares of common stock which could
be sold pursuant to Rule 144. In general, under Rule 144, subject to the
satisfaction of certain other conditions, a person, including one of our
affiliates, who has beneficially owned restricted shares of common stock for at
least one year is entitled to sell, in certain brokerage transactions, within
any three-month period, a number of shares that does not exceed the greater of
1% of the total number of outstanding shares of the same class, or the average
weekly trading volume during the four calendar weeks immediately preceding the
sale. A person who presently is not and who has not been an affiliate for at
least three months immediately preceding the sale and who has beneficially owned
the shares of common stock for at least two years is entitled to sell such
shares under Rule 144 without regard to any of the volume limitations described
above.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock and do not
anticipate paying any cash dividends on our common stock in the future.
Instead, we intend to retain future earnings, if any, to fund the development
and growth of our business.
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RECENT SALES OF UNREGISTERED SECURITIES
On April 4, 1997, the Company issued 140,000 shares of common stock at a
price of $.039 per share to Nickolas Reissis, an accredited investor, under Rule
504 of Regulation D promulgated under the Securities Act, resulting in proceeds
to the Company of $5,400.
On April 4, 1997, the Company issued 2,500,000 shares of common stock at a
price of $.0255 per share to LaSalle Investments, an accredited investor, under
Rule 504 of Regulation D promulgated under the Securities Act, resulting in
proceeds to the Company of $63,750.
On July 10, 1997, the Company issued 800,000 shares of common stock at a
price of $.025 per share to Lightning Imports, Inc., an accredited investor,
under Rule 504 of Regulation D promulgated under the Securities Act, resulting
in proceeds to the Company of $20,000.
On July 25, 1997, the Company issued 400,000 shares of common stock at a
price of $.025 per share to Lightning Imports, Inc., an accredited investor,
under Rule 504 of Regulation D promulgated under the Securities Act, resulting
in proceeds to the Company of $10,000.
On November 15, 1997, the Company issued 1,000,000 shares of common stock
at a price of $.02 per share to Royal West Sales, an accredited investor, under
Rule 504 of Regulation D promulgated under the Securities Act, resulting in
proceeds to the Company of $20,000.
On November 15, 1997, the Company issued 1,250,000 shares of common stock
at a price of $.028 per share to Lightning Imports, Inc., an accredited
investor, under Rule 504 of Regulation D promulgated under the Securities Act,
resulting in proceeds to the Company of $35,000.
On January 29, 1998, the Company issued 150,000 shares of common stock at a
price of $.067 per share to Gary Howard, an accredited investor, under Rule 504
of Regulation D promulgated under the Securities Act, resulting in proceeds to
the Company of $10,000.
On January 29, 1998, the Company issued options to purchase 1,000,000
shares of restricted stock at an exercise price of $.05, 1,000,000 shares of
restricted stock at an exercise price of $.07 and 1,000,000 shares of restricted
stock at $.09 to Patrick Rost, an accredited investor and a consultant to the
Company, in connection with a consulting agreement. These issuances were under
Section 4(2) of the Securities Act. The options at $.05 and at $.07 were
exercised. The options at $.09 expired unexercised.
On January 29, 1998, the Company issued 400,000 shares of common stock at a
price of $.035 per share to Pat Rost, an accredited investor, under Rule 504 of
Regulation D promulgated under the Securities Act, resulting in proceeds to the
Company of $14,000.
On March 4, 1998, the Company issued 1,000,000 shares of common stock at a
price of $.0325 per share to Oriental New Investments, an accredited investor,
under Rule 504 of Regulation D promulgated under the Securities Act, resulting
in proceeds to the Company of $32,500.
On March 11, 1998, the Company issued 25,000 shares of common stock at a
price of $.04 per share to Financial Power Network, an accredited investor,
under Rule 504 of Regulation D promulgated under the Securities Act, resulting
in proceeds to the Company of $1,000.
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On April 2, 1998, the Company issued 777,778 shares of common stock at a
price of $.045 per share to Charles Dunn, an accredited investor, under Rule 504
of Regulation D promulgated under the Securities Act, resulting in proceeds to
the Company of $35,000.
On April 2, 1998, the Company issued 100,000 shares of common stock at a
price of $.025 per share to Financial Power Network, an accredited investor,
under Rule 504 of Regulation D promulgated under the Securities Act, resulting
in proceeds to the Company of $2,500.
On May 1, 1998, the Company issued 1,250,000 shares of common stock at a
price of $.03 per share to Lightning Imports, an accredited investor, under Rule
504 of Regulation D promulgated under the Securities Act, resulting in proceeds
to the Company of $37,500.
On June 30, 1998, the Company issued 1,066,666 shares of common stock at a
price of $.048 per share to Oriental New Investments, an accredited investor,
under Rule 504 of Regulation D promulgated under the Securities Act, resulting
in proceeds to the Company of $51,500.
On August 5, 1998, the Company sold an aggregate of $100,000 face value
convertible debenture to an accredited investor under Rule 504 of Regulation D.
The debenture was convertible at a discount into shares of common stock of the
Company at the discretion of the holder thereof. The entire debenture was
converted into an aggregate of 3,214,922 shares of common stock.
On August 8, 1998, the Company issued 200,000 shares of common stock at a
price of $.05 per share to Patrick Rost, an accredited investor, under Rule 504
of Regulation D promulgated under the Securities Act, in consideration for
consulting services valued at $10,000.
On August 21, 1998, the Company issued 800,000 shares of common stock at a
price of $.05 per share to James Cannon, an accredited investor and an officer
of the Company, under Rule 504 of Regulation D promulgated under the Securities
Act, resulting in proceeds to the Company of $40,000.
On September 2, 1998, the Company issued 700,000 shares of common stock at
a price of $.025 per share to JPMJ, Inc., an accredited investor, under Rule 504
of Regulation D promulgated under the Securities Act, resulting in proceeds to
the Company of $17,500.
On September 14, 1998, the Company issued 450,000 shares of common stock at
a price of $.055 per share to Oriental New Investments, an accredited investor,
under Rule 504 of Regulation D promulgated under the Securities Act, resulting
in proceeds to the Company of $25,000.
On October 1, 1998, the Company issued 1,000,000 shares of common stock at
a price of $.05 per share to Patrick Rost, an accredited investor, under Rule
504 of Regulation D promulgated under the Securities Act, resulting in proceeds
to the Company of $50,000.
On October 2, 1998, the Company issued 1,675,000 shares of common stock at
a price of $.025 per share to Lightning Imports, an accredited investor, under
Rule 504 of Regulation D promulgated under the Securities Act, resulting in
proceeds to the Company of $41,875.
On October 2, 1998, the Company issued 1,675,000 shares of common stock at
a price of $.025 per share to Patrick Rost, an accredited investor, under Rule
504 of Regulation D promulgated under the Securities Act, resulting in proceeds
to the Company of $41,875.
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On November 11, 1998, the Company sold an aggregate of $125,000 face value
convertible debenture to two accredited investors under Rule 504 of Regulation
D. The debentures were convertible at a discount into shares of common stock of
the Company at the discretion of the holders thereof. The two debentures were
converted into an aggregate of 5,000,000 shares of common stock.
On January 5, 1999 the Company sold an aggregate of $121,500 face value
convertible debenture to two accredited investors under Rule 504 of Regulation
D. The debentures were convertible at a discount into shares of common stock of
the Company at the discretion of the holders thereof. The two debentures were
converted into an aggregate of 2,963,658 shares of common stock.
On January 26, 1999, the Company issued 3,000,000 shares of common stock at
a price of $.033 per share to Oriental New Investments, an accredited investor,
under Rule 504 of Regulation D promulgated under the Securities Act, resulting
in proceeds to the Company of $100,000.
On January 26, 1999, the Company issued 285,714 shares of common stock at a
price of $.035 per share to Joseph Lynde, an accredited investor, under Rule 504
of Regulation D promulgated under the Securities Act, resulting in proceeds to
the Company of $10,000.
On January 26, 1999, the Company issued 1,714,286 shares of common stock at
a price of $.035 per share to Lightning Imports, an accredited investor, under
Rule 504 of Regulation D promulgated under the Securities Act, resulting in
proceeds to the Company of $60,000.
On February 18, 1999, the Company sold an aggregate of $100,000 face value
convertible debenture to an accredited investor under Rule 504 of Regulation D.
The debenture was convertible at a discount into shares of common stock of the
Company at the discretion of the holder thereof. The entire debenture was
converted into an aggregate of 1,949,991 shares of common stock.
On March 15, 1999, the Company issued 2,000,000 shares of common stock at a
price of $.05 per share to LaSalle Investments, an accredited investor, under
Rule 504 of Regulation D promulgated under the Securities Act, resulting in
proceeds to the Company of $100,000.
On April 16, 1999, the Company issued 4,000,000 shares of common stock at a
price of $.03125 per share to LaSalle Investments, an accredited investor, under
Rule 504 of Regulation D promulgated under the Securities Act, resulting in
proceeds to the Company of $125,000.
On April 19, 1999, the Company issued 1,250,000 shares of common stock to
Scott Claverie, an accredited investor and President of AMS Acquisition
Corporation which develops and maintains our ShopGoOnline division, which shares
were valued at $.275 per share. This issuance was completed in accordance
with Section 4(2) of the Securities Act.
In June 1999, the Company issued 500,000 shares to the two shareholders of
Auctionomics, Inc. in connection with the acquisition of Auctionomics, Inc. by
the Company. This issuance was exempt under Section 4(2) of the Securities Act.
On August 11, 1999, the Company issued 800,000 shares of common stock at a
price of $.1125 per share to LaSalle Investments, an accredited investor, under
Rule 504 of Regulation D promulgated under the Securities Act, resulting in
proceeds to the Company of $90,000.
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In September 1999, the Company issued 200,000 shares of restricted common
stock valued at $.42 and options to purchase 1,000,000 shares of common stock at
$.50 per share to Patrick Rost in connection with a consulting agreement. This
issuance was pursuant to Section 4(2) of the Securities Act.
On September 8, 1999 the Company completed a reorganization which resulted
in all shareholders of Jones Naughton Entertainment, Inc., a Colorado
corporation, effectively receiving a share of Go Online Networks Corporation, a
Delaware corporation in accordance with a tax free reorganization and
reincorporation. This issuance was exempt in accordance with Section 3(a)(8) of
the Securities Act.
On September 20, 1999 the Company sold a Convertible Note to Triton Private
Equities Fund, L.P., an accredited investor, for $350,000. In connection with
the sale of the Convertible Note, the Company issued warrants to purchase
175,000 shares at $.50 per share to Triton and warrants to purchase 17,500
shares at $.50 per share to Ganesh Ltd., an accredited investor and a finder in
the transaction.
On October 4, 1999, the Company issued 1,320,833 shares of common stock at
a price of $.158 per share to Oriental New Investments, an accredited investor
and a Colorado resident entity, under Rule 504 of Regulation D promulgated under
the Securities Act, resulting in proceeds to the Company of $208,750.
On October 6, 1999, the Company issued 208,333 shares of "restricted"
common stock (as that term is defined under Rule 144 of the Securities Act) to
Cutler Law Group and certain of its employees, the Company's legal counsel and
an accredited investor, in exchange for legal services rendered valued at
$70,000. The Company relied upon Section 4(2) of the Securities Act for the
issuance.
On October 6, 1999, the Company issued 100,000 shares of "restricted"
common stock (as that term is defined under Rule 144 of the Securities Act) to
Fred Turner, the Company's litigation legal counsel and an accredited investor,
in exchange for legal services rendered valued at $30,000. The Company relied
upon Section 4(2) of the Securities Act for the issuance.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion contains certain forward-looking statements that
are subject to business and economic risks and uncertainties, and our actual
results could differ materially from those forward-looking statements. The
following discussion regarding our financial statements should be read in
conjunction with the financial statements and notes thereto.
RESULTS OF OPERATIONS
In late 1998 and early 1999 we commenced a change in our business
operations to an internet commerce and technology business. This included the
acquisition of the ShopGoOnline.com internet e-commerce division and the
acquisition of Auctionomics.com. Accordingly, our historical operating results
do not reflect our present business strategy and consequently are not indicative
of the probability of our future success or failures. We sold our prior primary
business operating subsidiary, Real Estate Television Network, Inc., in late
1996 and had only nominal operations during 1997. During 1998, we acquired and
subsequently resold to its prior management AMS Acquisition Corp., a publishing
and advertising company.
FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED TO FISCAL YEAR ENDED
DECEMBER 31, 1998
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Our net loss during the fiscal year ended December 31, 1999 was
($2,443,308) compared to ($803,844) for 1998. This loss is attributable to an
increase in stock issued for services and for legal fees paid by us in
connection with our lawsuit against AmeriNet Financial Systems, Inc. and for
legal services related to becoming a reporting company. In addition, a portion
of this loss is attributed to the repurchase of an option held by Scott Claverie
to purchase 26,000 shares of AMS Acquisition Corp., the corporate entity which
owns and operates ShopGoOnline.com, for 1,250,000 shares of our common stock
valued at $.275 per share.
For the fiscal year ended December 31, 1999, we had revenue of $89,749,
approximately one-half of which was generated by our ShopGoOnline.com divisions,
and the other half of which was generated by our Internet kiosk business. While
we show no revenues on our financial statements during the fiscal year ended
December 31, 1998, this reflects the net earnings of our discontinued AMS
Acquisition Corp. subsidiary which were consolidated as a net loss for the
period. The operating subsidiary had earnings, but these were less than
expenses and consequently our financial statements reflect a nonrecurring net
loss for the period without reflecting earnings and expenses. At the end of
1996, we sold our Real Estate Television Network, Inc. operating subsidiary and
had planned to use the proceeds of that sale to acquire operating businesses.
When AmeriNet Financial Systems, Inc., the purchaser of Real Estate Television
Network, failed to honor its agreements with us, we were unable to complete
several proposed acquisitions and consequently filed legal action against
AmeriNet. That litigation has now been settled.
LIQUIDITY AND CAPITAL RESOURCES
We currently have limited capital resources pending completion of our
business plan in accordance with our investment agreement with Triton Private
Equities Fund, L.P. Nevertheless, all three businesses we are operating
presently have the ability to enact cost control measures to operate each of our
key businesses which would permit us to remain operational absent such immediate
funding.
* Our ShopGoOnline internet Kiosk division could stop building and placing
kiosks with no cost to us. At present, all sales agents for this business are
independent contractors whose demand for income from us is dependent on
performance and all are paid percentages of earned income by us for successful
sales. The necessary marketing and management of all of our businesses could
be effected on a very nominal budget until alternative financial resources are
developed.
* Auctionomics is currently dependent on the performance of two key
individuals whose salaries are paid against earned income and we are not
obligated to pay any "base" compensation. The Auctionomics site is offering only
referral businesses at this time so we are not obligated to inventory to build
this business at this time. All technical requirements are furnished by our
ShopGoOnline.com division and are included in that entities overhead and
equipment support system.
* ShopGoOnline.com's management staff is presently composed of the two
founders and 25% partners of Go Online Networks in establishing and building
that business. Both are motivated by their equity position to properly maintain
both Auctionomics and Shopgoonline.com websites and our technical server
capacity.
* Office leases for all three operations have been paid in advance, all
crucial equipment to operate these enterprises is bought and paid for and no
critical leases exist to allow a greatly reduced work force to professionally
operate these businesses.
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As of December 31, 1999, we had assets of $829,351 consisting primarily of
cash of $25,921, other current assets of $18,503, designs and trademarks of
$20,833, security deposits of $5,282, and equipment valued at $758,812.
Current Liabilities consist of accounts payable of $505,399, notes payable
and accrued expense of $136,467, unearned revenue of $120,000 (representing
prepaid advertising on our kiosks) and amounts due to Joseph Naughton, our
President, for advances from Mr. Naughton and accrued expenses totalling
$492,687. In addition to current liabilities, we had a liability of $538,462
attributed to an outstanding convertible debenture as of December 31, 1999.
At December 31, 1999, we had an accumulated deficit of $8,811,236 and a
stockholders deficit of $963,664. The accumulated deficit and the stockholders
deficit relate to our prior businesses which were recently changed.
Since inception, we have funded our capital requirements through private
equity financings. As of December 31, 1999, our sources of liquidity included
cash and cash equivalents of $44,424.
We made no Capital expenditures during the fiscal year ended December 31,
1998. We acquired $181,131 in equipment during the first six months of 1999.
Our principal commitments as of December 31, 1999 consisted primarily of leases
on our office facilities and there were no material commitments for additional
capital expenditures.
We funded our initial capital requirements through the sale of securities
to private investors in private offerings generating a total of $178,483 during
the fiscal year ended December 31, 1997, $694,883 during the fiscal year ended
December 31, 1998 and approximately $1,265,250 during the year ended December
31, 1999.
On September 20, 1999, we sold to Triton Private Equities Fund, LP, an
aggregate of $538,462 principal amount of a series 1999-A eight percent
convertible note for proceeds to us of $350,000.
We believe that proceeds from our previous financings, together with our
other resources and expected revenues, will be sufficient to cover working
capital requirements for at least six months. Should revenue levels expected by
us not be achieved, we would nevertheless require additional financing during
such period to support its operations, continued expansion of our business and
acquisition of products or technologies. Such sources of financing could
include capital infusions from some of our strategic alliance partners,
additional equity financings or debt offerings. Other than the proposed sale of
securities in this registration statement, we have made no arrangements or
commitments for such financing.
22
<PAGE>
YEAR 2000 DISCLOSURE
We have completed a review of our internal computer systems to identify all
software applications and hardware that could be affected by the inability of
many existing computer systems to process time-sensitive data accurately beyond
the year 1999, referred to as the year 2000 or Y2K issue. Because our internet
operations are relatively recent, we have purchased virtually all of our
presently existing systems during 1999 and consequently we are confident that
those systems and the operating software on those systems are Y2K compliant. We
have inquired of the manufacturers of our internet kiosk systems and have been
assured that all our kiosks are year 2000 compliant. We have also made
inquiries of our other primary third party providers and have received
assurances that they have taken steps to be year 2000 compliant. Despite these
efforts, it is possible that we have not identified all year 2000 problems in
our computer systems or in our third party supplier's systems. If we fail to
identify and remedy year 2000 problems, we could lose revenues or experience
delays in our business which would make us less profitable. While we may be
dependent for some functions on third-party computer systems and applications,
our relationship with our vendors is such that electronic data exchange is not
generally date dependent. Although we believe that our computer systems are Y2K
compliant, we intend to continue to monitor our computer systems in a continual
effort to insure that our systems are Y2K compliant. Costs associated with our
review were not material to our results of operations.
CERTAIN MATERIAL AGREEMENTS AND TRANSACTIONS
In addition to options disclosed elsewhere in the notes to the financial
statements, we have issued the following options to acquire our restricted
common stock:
* options to purchase 31,640 shares issued to Vera Brown exercisable at $.20
per share at any time within one year after our common stock first trades at or
above $1.20 per share for thirty consecutive trading days.
* options to purchase 31,640 shares issued to Vera Brown exercisable at $.40
per share exercisable at any time within one year after our common stock has
traded at $2.00 per share on each trading date for thirty consecutive days.
* options to purchase 31,640 shares issued to Vera Brown exercisable at $1.00
per share at any time within one year after our common stock has traded at $2.80
per share for thirty consecutive trading days. Such shares cannot be traded for
a period of ninety days after the exercise of this option.
* options to purchase 31,640 shares issued to Vera Brown exercisable at $2.00
per share, exercisable at any time within one year after our common stock has
traded at $3.60 per share for thirty consecutive trading days. Such shares
cannot be traded for a period of sixty days after the exercise of this option.
On July 8, 1998 AMS Acquisition Corp., a wholly-owned subsidiary we formed,
acquired the assets and liabilities of a business operating several different
publishing and advertising divisions located in San Diego, California. The
total investment in the acquisition of the business assets approximated $240,000
including related acquisition expenses. After operating the business for
approximately six months, the assets and liabilities were sold back to the
original seller in exchange for assuming the then existing liabilities of the
business. This sale back was effective December 31, 1998. At the time of the
return of the business, the total assets of the business including goodwill of
approximately $500,000, totaled approximately $858,000, and liabilities totaled
approximately $904,000. While the liabilities were assumed in the sale back
transaction, AMS remains contingently liable for any amounts not paid by the
purchaser. The assets and the liabilities have been subsequently sold to
another purchaser after the buy back from AMS.
23
<PAGE>
Effective February 3, 1998 we entered into a consulting agreement with
Patrick M. Rost to provide financial support and market makers for our publicly
traded common stock. In accordance with the terms of the agreement, Mr. Rost
was issued 400,000 shares valued at $.035 per share and 1,250,000 shares at $.03
per share (issued to Lightning Imports) as compensation for consulting services.
In addition, Mr. Rost was granted an option to acquire 1,000,000 shares at $.05,
1,000,000 at $.07 and 1,000,000 at $.09 per share. At the time of the grant of
the options, the market price of the stock was in excess of the option prices.
The options for the 1,000,000 shares at $.05 and the 1,000,000 shares at $.07
were exercised. The option for the 1,000,000 shares at $.09 expired
unexercised.
On March 5, 1995 we borrowed $49,500 and $52,500 from an individual and
from a corporation, respectively. The notes bear interest at 7% per annum and
are uncollateralized. The notes were due and not paid on May 29, 1996. The
lenders have the right to demand payment in full on the notes and failure to pay
on demand would increase the interest rate to 18% per annum. The lenders have
the right to convert the notes to our common stock at a rate of $.125 per share.
The balance payable on December 31, 1998 on the notes total $62,744 and $66,547,
respectively, including accrued interest.
Effective September 15, 1999 we entered into a consulting and financial
services agreement with Patrick M. Rost. The consulting and financial services
agreement provides for developing, managing and marketing financial services for
us from March 1, 1999 through December 31, 2000. In connection with the
agreement, Mr. Rost received 200,000 shares of "restricted" common stock and
options to purchase 1,000,000 shares of common stock at $.50 per share until
December 31, 2000. The shares underlying the options are being registered in
this registration statement.
ITEM 7 - FINANCIAL STATEMENTS
The financial statements called for under this item appear under the
caption Index to Financial Statements (Page F-1 hereof).
2ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The financial statements for the fiscal year ended December 31, 1998 were
audited by Schumacher & Associates, Certified Public Accountants. On January
15, 2000, the Company retained the services of Miller and McCollom, Certified
Public Accountants, to audit the Company's financial statements for the period
ended December 31, 1999. There have been no disagreements between management
and its former or current accountants of the type that are required to be
reported under this Item 8.
24
<PAGE>
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth the names and ages of the current directors
and executive officers of GONT who will remain so with the combined entity,
their principal offices and positions and the date each such person became a
director or executive officer. Our executive officers are elected annually by
the Board of Directors. Our directors serve one year terms until their
successors are elected. The executive officers serve terms of one year or until
their death, resignation or removal by the Board of Directors. There are no
family relationships between any of the directors and executive officers. In
addition, there was no arrangement or understanding between any executive
officer and any other person pursuant to which any person was selected as an
executive officer.
Our directors and executive officers are as follows:
Name Age Positions
- - ---- --- ---------
Joseph M. Naughton 56 Chairman, Chief Executive Officer, Director
Scott Claverie 39 Director; President of AMS Acquisition Corp.
Dba GoOn-line.com
Jim Cannon 65 Director; Director of Operations, Go Online
Kiosk Division; Secretary
Michael Abelson 51 Director
JOSEPH M. NAUGHTON, Chairman B Mr. Naughton has been our President since
May 1991. From September 1986 through October 1987, Mr. Naughton was Operations
Manager for Shop Television Network in which he oversaw the marketing and
merchandising from that company. In October 1987 Mr. Naughton was elected to
Shop Television Network's Board and Directors and appointed simultaneously
Executive Vice President and Chief Operating Officer. Shop Television Network's
wholly-owned subsidiary ShopTV, Inc. was acquired by the JC Penney Company in
1988 and Mr. Naughton was a Vice President of Operations for the renamed JC
Penny Television Shopping Channel, the TV home shopping program arm of the JC
Penney Company until June 1991. Mr. Naughton was responsible for overseeing the
video production and cable distribution for the JC Penney and Shop Television
Network. Prior to Shop Television Network, Mr. Naughton served as VP/General
Merchandising Manager for the GEMCO division of Lucky Stores from January 1985.
From May 1970 until October 1986, Mr. Naughton worked for Lucky Stores, Inc. and
its wholly owned subsidiary Gemco Stores.
25
<PAGE>
SCOTT CLAVERIE, Director and President of AMS Acquisition Corp. B Mr.
Claverie will be directing the operations and marketing efforts of
ShopGoOnline.com. From June 1997 until June 1999, Mr. Claverie was Business
Operations Manager for Cal State University at Chico where he was responsible
for management and support of the support staff for the university's voice
network. From February 1994 until June 1996, he was a branch manager for
Computer Telephone Corp. Computer Telephone Corp. markets a large variety of
telecommunication services and was responsible for managing a significant
portion of Pacific Bell's customer base. From September 1991 to February 1994,
Mr. Claverie was an account executive for MCI Telecommunications, where he
marketed communication products and services to the business community. From
June 1987 through August 1990, he was Advertising Director of the Chico News &
Review, where he supervised and coordinated activities of sales personnel in the
display and classified departments. From May 1981 through September 1986, Mr.
Claverie was a retail manager for Gemco Stores, managing the operations for the
fine jewelry and camera department.
JIM CANNON, Director of Operations -- Mr. Cannon has over 30 years of
experience in the hospitality, lodging, and food and beverage industry. A
graduate of Cornell University with a Bachelor's of Science degree in Business
and Food Technology. He is an eleven-year veteran of the Days Inn organization,
serving as Vice President of Franchise Operations. From September 1998 until
April 1999, Mr. Cannon was with ShoLodge Franchise Systems. From March 1997
until September 1998, Mr. Cannon was Director of Franchise Sales for Country &
Hearth Inns in Atlanta, Georgia. From August 1990 through August 1996, Mr.
Cannon was National Director of Franchise Development for Hospitality
International, Inc. in Atlanta, Georgia. During 1990 and 1991, Mr. Cannon
worked in sales of Friendship Inn and Econolodge franchises for Econolodges of
America, Inc. in North Bergen, New Jersey. In addition, Mr. Cannon's past
experience includes senior level executive positions with Columbia Sussex
Corporation, Inc. (a Holiday Inn Franchise Group), Days Inn or America, Inc and
other hotels and restaurants.
DR. MICHAEL ABELSON, Director. Dr. Abelson is President of Abelson &
Company, a firm he founded in 1986, which specializes in improving real estate
management and sales associate profitability. Dr. Abelson is also on the
faculty of Texas A&M University in the Department of Management, which he joined
in 1981.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely on the review of copies of such reports furnished to the Company
and written representations that no other reports were required, the Company has
been informed that all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than ten percent shareholders were
complied with.
ITEM 10 - EXECUTIVE COMPENSATION
Summary Compensation Table
The following GONT summary compensation table shows certain compensation
information for services rendered in all capacities for the three fiscal years
ended December 31, 1996, 1997, 1998 and 1999. Other than as set forth herein,
no executive officer's salary and bonus exceeded $100,000 in any of the
applicable years. The following information includes the dollar value of base
salaries, bonus awards, the number of stock options granted and certain other
compensation, if any, whether paid or deferred.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
-------------------------- -------------------------------
Awards Payouts
--------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION STOCK Awards OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL YEAR ($) ($) ($) ($) SARS (#) ($) ($)
POSITION
Joseph Naughton 1999 $96,000 -0- -0- -0- -0- -0- -0-
(President, CEO) (12/31)
1998 96,000 -0- -0- - 0 - - 0 - -0- -0-
(12/31)
1997 96,000 -0- -0- -0- -0- -0- -0-
(12/31)
1996 96,000 -0- -0- -0- -0- -0- -0-
(12/31)
Jim Cannon (1) 1999 40,000 -0- -0- -0- -0- -0- -0-
(12/31)
1998 -0- -0- -0- - 0 - - 0 - -0- -0-
(12/31)
Michael English (2) 1996 $48,000 -0- -0- -0- -0- -0- -0-
(12/31)
</TABLE>
(1) Mr. Cannon commenced his employment with the Company in 1999.
(2) Mr. English was President of the Company until his resignation during 1996.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<S> <C> <C> <C> <C>
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SAR'S GRANTED
OPTIONS/SAR'S GRANTED TO EMPLOYEES IN FISCAL EXERCISE OF BASE PRICE
(#) YEAR ($/SH) EXPIRATION DATE
NAME
Joseph M. Naughton -0- -- -- --
- - ------------------ ---------------------- ---------------------- ----------------------- ---------------
James Cannon -0- -- -- --
</TABLE>
<TABLE>
<CAPTION>
26
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<S> <C> <C> <C> <C>
NUMBER OF UNEXCERCISED
SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
OPTIONS/SARS AT FY-END (#) MONEY OPTION/SARS
SHARES ACQUIRED ON EXERCISABLE/UNEXERCISABLE AT FY-END ($)
NAME EXERCISE (#) VALUE REALIZED ($) EXERCISABLE/UNEXERCISABLE
------------------- ------------------ -------------------------- -----------------------------
Joseph M. Naughton -0- -0- - 0 - --
James Cannon -0- -0- - 0 - --
</TABLE>
Compensation of Directors
Our Directors have not received any compensation for serving in such
capacity. We currently contemplate that we will pay each outside director up to
$500 to attend meetings will provide certain option grants and/or restricted
stock awards as compensation for its outside Directors in the future for serving
in such capacity.
Employment Agreements
Effective May 1, 1999 we entered into a consulting agreement with Michael
Abelson, one of our directors, whereby Mr. Abelson was engaged to assist in the
creation of our real estate website for our ShopGoOnline.com operating division.
The term of the agreement is for one year but can be terminated by us with or
without cause with 30 days notice. Compensation to Mr. Abelson is summarized as
follows:
* Monthly cash consulting fee of $5,000;
* Quarterly bonus equal to 15% of the gross revenues earned by us through our
real estate web site developed by Mr. Abelson; and
* options to acquire 25,000 shares of stock for each $500,000 in gross
revenues attributable to the real estate web site developed by us.
Effective April 12, 1999 we entered into an employment agreement with James
Cannon. The agreement is for a term of one year but is subject to termination
by us for cause. Both we and Mr. Cannon have the right to terminate the
agreement after giving the other party thirty days notice. In the event that
the agreement is terminated by us without cause, Mr. Cannon will be entitled to
compensation earned computed pro-rata up to the date of termination. Mr.
Cannon's compensation during the term of the agreement will be as follows:
* Base salary of $60,000 per year;
* Quarterly bonus of 20% of the net advertising revenues of the Community
Marquee Division generated as a result of Mr. Cannon's direct efforts
during the previous quarter;
* Alternative quarterly bonus equal to 25% of the net advertising revenues of
the Community Marquee Division generated by parties other than Mr. Cannon;
and
* Options to purchase 25,000 shares of our common stock for each twenty-
five kiosks shipped up to a maximum of 150 kiosks. The exercise price of
the options shall be equal to 60% of the closing bid price of our common
stock on the last business day of the month in which Mr.Cannon becomes
eligible.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the common stock and series A preferred stock of GONT as of
December 31, 1999 by:
* each person or entity known to own beneficially more than 5% of the common
stock or 5% of the preferred stock;
* each of GONT's directors;
* each of GONT's named executive officers; and
* all executive officers and directors of GONT as a group.
27
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Title of Class Beneficial Owner (1) Beneficial Ownership Class
- - --------------- --------------------- --------------------- -----------
<S> <C> <C> <C>
Joseph M. Naughton 5,307,125 (2) 7.6%
Common Stock
Preferred Stock 0 0.0%
Common Stock James M. Cannon 1,008,000 (3) 1.4%
Preferred Stock 0 0.0%
Common Stock Scott Claverie 1,250,000 1.8%
Preferred Stock 0 0.0%
Common Stock Michael Abelson 485,000 (4) 0.7%
Preferred Stock 0 0.0%
Preferred Stock Nicanor Concepcion & Fahma
Concepcion, Joint Tenants
624 Park Ave. 130,000 26.0%
Norton, VA 24273
Preferred Stock Avelino Rosales
23 White Drive 63,333 12.7%
Cedarhurst, NY 11516
Preferred Stock Bill Tillson
14623 Deervale Place 40,000 8.0%
Sherman Oaks, CA 91403
Preferred Stock Bradley B. Hinshew 35,000 7.0%
3918 River Road
Sneeds Ferry, NC 28460
Common Stock All Officers and Directors
as a Group (4 persons) 6,800,125 (2,3,4) 9.5%
===================== ========
</TABLE>
1. Except as otherwise set forth, the address for each of these shareholders
is c/o Go Online Networks Corporation, 5681 Beach Boulevard, Suite 101/100,
Buena Park, CA 90621.
2. Mr. Naughton's shares are held through several different entities and
trusts, as to which Mr. Naughton is the primary beneficial owner.
3. Reflects 8,000 shares which Mr. Cannon owns director and up to 1,000,000
shares which Mr. Cannon could obtain upon the exercise of a warrant to purchase
shares of common stock at $.20 per share.
4. In addition, Mr. Abelson will receive options to purchase 25,000 shares
of common stock for each $500,000 in gross revenues attributable to the real
estate website developed by us.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
28
<PAGE>
Joseph M. Naughton, our Chief Executive Officer has made several loans to
Go Online. As of December 31, 1998 and as of December 31, 1999 the amounts
payable to Mr. Naughton for advances totaled $130,242 and $124,222
respectively. In addition there is unpaid compensation due to him of $48,000
for 1996, $61,250 for 1997, $70,485 for 1998 and $72,750 for 1999. The balances
payable for compensation to Mr. Naughton totaled $179,735 at December 31, 1998
and $252,485 at December 31, 1999. The balances payable to Mr. Naughton are
uncollateralized, bear no interest and are payable on demand. This loan is on
terms which are substantially better than could be obtained from third parties.
Effective February 26, 1999 we entered into a joint venture agreement with
Scott Claverie whereby 25,000 shares of AMS Acquisition Corp. were transferred
(25% ownership of AMS) to Mr. Claverie. We also granted Mr. Claverie warrants
to acquire an additional 26,000 shares of AMS at $1.00 per share following the
end of the first profitable quarter of operations, but in no event later than
twelve months after the February 26, 1999 agreement date. Effective April 19,
1999 we exchanged 1,250,000 restricted shares of our common stock for the
warrants. These 1,250,000 shares were recorded at $.275 per share, one half of
the market value of free trading shares of our common stock on April 19, 1999,
and recorded as an expense totaling $343,750. As a part of the joint venture
agreement, we agreed to provide AMS with $25,000 for working capital. Mr.
Claverie transferred to AMS all equipment, intellectual property, technology
associated with the individuals internet-based business. These transactions
were all on terms as fair as those obtainable from third parties.
During 1996 we sold our wholly-owned subsidiary Real Estate Television
Network, Inc. in exchange for shares of stock of AmeriNet Financial Services,
Inc., the entity that acquired Real Estate Television Network. Since we were
unable to receive free trading shares of AmeriNet as agreed, on July 9, 1998 we
filed a lawsuit against AmeriNet and certain of its officers and directors
alleging breaches of written contracts, fraud and violations of various
Corporate Code sections. On September 2, 1998, AmeriNet filed a cross-complaint
against us alleging fraud and misrepresentation, breaches of contracts and
conspiracy. In the cross-complaint AmeriNet sought damages in the approximate
amount of $12,000,000, together with exemplary and punitive damages, attorney's
fees and cost of the suit. The actual losses identified by the cross-complaint
were less than $500,000. Effective on December 15, 1999, we entered into a
settlement with AmeriNet which provided for AmeriNet (which had subsequently
been renamed Homespace, Inc.) to issue to us 200,000 shares of Homespace common
stock and pay us $100,000, with mutual releases of claims on both sides.
On December 3, 1998, related to a different litigation matter, a default
judgment was entered against us in the approximate amount of $55,000 for alleged
amounts owed by Real Estate Television Network for which the plaintiff alleges
was also owed by us. On July 14, 1999 the default judgement was set aside
based on the fact that we were never properly served with a summons and
complaint. We contend that we are not liable for the amounts due since Real
Estate Television Network was a separate corporation and we never guaranteed
this obligation.
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit No. Description
- - ----------- -----------
2.1 Agreement and Plan of Merger of Go Online Networks
Corporation, a Delaware corporation, and Jones Naughton
Entertainment, Inc. a Colorado corporation, dated
September 8, 1999.
2.2 Certificate of Merger of Jones Naughton Entertainment, Inc.
into Go Online Networks Corporation, dated
August 12, 1999.
29
<PAGE>
2.3 Articles of Merger of Jones Naughton Entertainment, Inc. with
Go Online Networks Corporation, dated September 8, 1999.
3.1 Articles of Incorporation of Valencia Capital, Inc., filed
October 20, 1987.
3.2 Articles of Amendment to the Articles of Incorporation of
Valencia Capital, Inc., filed February 7, 1991.
3.3 Articles of Amendment to the Articles of Incorporation of
Jones Naughton Entertainment, Inc., filed July 27, 1994.
3.4 Articles of Amendment to the Articles of Incorporation of
Jones Naughton Entertainment, Inc., filed July 28, 1994.
3.5 Certificate of Designation for Jones Naughton Entertainment,
Inc., dated June 8, 1994.
3.6 Bylaws of Jones Naughton Entertainment, Inc., as amended.
3.7 Certificate of Incorporation of Go Online Networks
Corporation, dated August 11, 1999.
3.8 Certificate of Designation for Go Online Networks Corporation,
dated August 13, 1999.
3.9 Bylaws of Go Online Networks Corporation.
3.10 Articles of Incorporation of AMS Acquisition Corp., filed
June 29, 1998.
3.11 Bylaws of AMS Acquisition Corp.
10.1 Agreement and Plan of Reorganization by and among Amerinet
Financial Systems, Inc., Jones Naughton Entertainment,
Inc., Real Estate Television Network, Inc. and Amerinet,
Inc., dated August 1996.
10.2 Stock Purchase Agreement between Amerinet Financial Services,
Inc. and Jones Naughton Entertainment, Inc., dated
October 1996.
10.3 Escrow Agreement between Jones Naughton Entertainment, Inc.,
Amerinet Financial Systems, Inc. and MRC Legal Services
Corporation, dated February 12, 1997
10.4 Form of Stock Purchase Agreement between Jones Naughton
Entertainment, Inc. and investors for 504 Stock Sales from
January 1997 through April 1999.
10.5 Escrow Agreement between Jones Naughton Entertainment, Inc.,
Michael Rost and MRC Legal Services Corp., dated
November 17, 1997.
10.6 Stock Purchase Agreement between Jones Naughton
Entertainment, Inc. and Joe Lynde, dated November 17, 1997.
10.7 Escrow Agreement between Jones Naughton Entertainment, Inc.,
Joseph Lynde and MRC Legal Services Corp., dated
November 17, 1997.
10.8 Stock Purchase Agreement between Jones Naughton
Entertainment, Inc. and David Evans, dated November
17, 1997.
10.9 Escrow Agreement between Jones Naughton Entertainment, Inc.,
David Evans and MRC Legal Services Corp., dated November
17, 1997.
10.10 Stock Purchase Agreement between Jones Naughton
Entertainment, Inc. and Patricia L. Schonebaum IRA Account,
dated November 17, 1997.
10.11 Escrow Agreement between Jones Naughton Entertainment, Inc.,
Patricia L. Schonebaum IRA Account and MRC Legal
Services Corp., dated November 17, 1997.
10.12 Stock Purchase Agreement between Jones Naughton
Entertainment, Inc. and Patricia L. Schonebaum, dated
November 17, 1997.
10.13 Escrow Agreement between Jones Naughton Entertainment, Inc.,
Patricia L. Schonebaum and MRC Legal Services Corp., dated
November 17, 1997.
30
<PAGE>
10.14 Stock Purchase Agreement between Jones Naughton
Entertainment, Inc. and Joy F. Evans, dated November
17, 1997.
10.15 Escrow Agreement between Jones Naughton Entertainment, Inc.,
Joy F. Evans and MRC Legal Services Corp., dated
November 17, 1997.
10.16 Agreement for Purchase and Sale of Assets between Sign
Products of America, Inc. and Jones Naughton Entertainment,
Inc., dated March 1998.
10.17 Agreement for Purchase and Sale of Assets between Affiliated
Marketing Services, Inc. and AMS Acquisition Corp., dated
July 8, 1998.
10.18 Employment Agreement between AMS Acquisition Corp. and Paul
Hentschl effective July 8, 1998.
10.19 First Company Security Agreement in favor of Affiliated
Marketing Services, Inc., dated July 8, 1998.
10.20 Company Security Agreement in favor of Paul Hentschl, dated
July 8, 1998.
10.21 Secured Promissory Note payable to Paul Hentschl, dated July
8, 1998.
10.22 Agreement for Purchase and Sale of Assets between AMS
Acquisition Corp. and Affiliated Marketing Services, Inc.,
dated January 11, 1999.
10.23 Addendum to Agreement for Purchase and Sale of Assets
between AMS Acquisition Corp. and Affiliated Marketing
Services, Inc., dated January 13, 1999.
10.24 Joint Venture Agreement by and between Jones Naughton
Entertainment, Inc. and Scott Claverie, dated February
26, 1999.
10.25 Employment Agreement between Jones Naughton Entertainment,
Inc. and James Cannon, effective April 12, 1999.
10.26 Stock Exchange Agreement by and between Jones Naughton
Entertainment, Inc. and Scott Claverie, dated April
19, 1999.
10.27 Independent Consultant Agreement between Jones Naughton
Entertainment, Inc. and Michael Abelson, effective
May 1, 1999.
10.28 Marketing Agreement between Jones Naughton Entertainment,
Inc. and PDQ Internet , dated May 3, 1999.
10.29 Marketing Agreement between Jones Naughton Entertainment,
Inc. and ieXe, dated June 4, 1999.
10.30 Reorganization and Stock Purchase Agreement between Jones
Naughton Entertai ment, Inc. and Auctionomics, Inc.,
dated June 10, 1999.
10.31 Consulting Agreement between Auctionomics, Inc. and WLTC,
LLT, effective June 10, 1999.
10.32 Vendor Agreement between GoOn-line.com and 5th Avenue
Channel, dated June 1999.
10.33 Addendum to Reorganization and Stock Purchase Agreement
between Jones Naughton Entertainment, Inc. and Auctionomics,
Inc., dated June 25, 1999.
10.34 Form of Securities Subscription Agreement between Jones
Naughton Entertainment, Inc. and certain Investors for 3%
Series A Convertible Debentures due July 30, 2000
10.35 Form of 3% Series A Convertible Debenture due July 30, 2000
10.36 Form of Escrow Agreement between Jones Naughton
Entertainment, Inc., certain Investors, and Edward H.
Burnbaum, Esq., as escrow agent, for the Company's 3% Series
A Convertible Debentures due July 30, 2000.
10.37 Office Lease between Jones Naughton Entertainment, Inc. and
eOfficeSuites, Inc. dated August 12, 1999.
31
<PAGE>
10.38 Consulting and Financial Services Agreement between Jones
Naughton Entertainment, Inc. and Patrick M. Rost dated
September 15, 1999.
10.39 Employment Agreement between AMS Acquisition Corp. and Matt
Herman, effective October 1, 1999.
10.40 Lease Proposal for 5681 Beach Blvd., Buena Park, CA 90621
for Jones Naughton Entertainment, Inc. dated July 21, 1999.
10.41 Lease Agreement between GoOn-Line.com and Design Arts
Building Associates dated April 29, 1999
10.42 Securities Purchase Agreement between Go Online Networks
Corporation and Triton Private Equities Fund, L.P., dated
September 20, 1999
10.43 Series 1999-A Eight Percent Convertible Promissory Note due
October 1, 2001 dated September 21, 1999 issued to Triton
Private Equities Fund, L.P.
10.44 Warrant to Purchase Common Stock dated September 21, 1999
issued to Triton Private Equities Fund, L.P.
10.45 Registration Rights Agreement between Go Online Networks
Corporation and Triton Private Equities Fund, L.P. dated
September 20, 1999
10.46 Escrow Agreement among Go Online Networks Corporation,
Triton Private Equities Fund, L.P. and H. Glenn Bagwell,
Jr., as escrow agent, dated as of September 20, 1999.
10.47 Form of Site Agreement
10.48 Agreement between Auctionomics, Inc. and Classified
Auctions.com, LLC
10.49 Agreement between Ingram Book Company and Go Online Networks
Corporation dated November 22, 1999
10.50 Agreement between LinkShare Corporation and Go Online
Networks Corporation
10.51 Agreement between Infotouch Technologies Corporation and Go
Online Networks Corporation dated June 22, 1999
10.52 Memorandum of Understanding between Icom Network and Go
Online Networks Corporation dated March 8, 1999
10.53 Invoice dated June 14, 1999 reflecting Agreement between
Websites Results and Go Online Networks Corporation
10.54 Investment Agreement dated November 29, 1999 between
Triton Private Equities Fund LP and Go Online Networks
Corporation
10.55 Registration Rights Agreement dated November 29, 1999
between Triton Private Equities Fund LP and Go Online
Networks Corporation
10.56 Form of Warrant to Purchase Common Stock issuable to Triton
Private Equities Fund LP by Go Online Networks
Corporation
10.57 Addendum to Employment Agreement for James Cannon.
23.1 Consent of Schumacher & Associates, independent public
accountants
23.2 Consent of Miller and McCollom, certified public accountants
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the period of this report.
32
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 28, 2000 Go Online Networks Corporation
/s/ Joseph M. Naughton
Joseph M. Naughton, Chief Executive
Officer and Director
33
<PAGE>
GO ONLINE NETWORKS CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
WITH
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
December 31, 1998 and 1999
Consolidated Financial Statements:
Report of Independent Certified Public Accountants F-2 & F-3
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Consolidated Statement of Changes in
Stockholders' (Deficit) F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
-------------------------------------------------------
The Board of Directors
Go Online Networks Corporation
Buena Park, California
We have audited the accompanying balance sheet of Go Online Networks Corporation
and Consolidated Subsidiaries as of December 31, 1999, and the related
statements of operations, stockholders' (deficit) and cash flows for the year
then ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements, referred to above, present fairly, in
all material respects, the financial position of Go Online Networks, Corporation
and Consolidated Subsidiaries as of December 31, 1999, and the results of its
operations, changes in stockholders' (deficit) and its cash flows for the year
then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1, the Company
has suffered recurring losses from operations and has a net capital deficiency
that raise substantial doubts about its ability to continue as a going concern.
Management's plan to continue in operations is contained in Note 1 to the
financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Miller and McCollom
Miller and McCollom
Certified Public Accountants
2170 South Parker Road, Suite 270
Denver, CO 80231
February 25, 2000
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
-------------------------------------------------------
The Board of Directors
Go Online Networks Corporation
Buena Park, California
We have audited the accompanying statements of operations, stockholders'
(deficit) and cash flows of Go Online Networks Corporation for the year ended
December 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 statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements, referred to above, present fairly, in
all material respects, the results of operations, changes in stockholders'
(deficit) and cash flows of Go Online Networks Corporation for the year ended
December 31, 1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1, the Company
has suffered recurring losses from operations and has a net capital deficiency
that raise substantial doubts about its ability to continue as a going concern.
Management's plan to continue in operations is contained in Note 1 to the
financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Schumacher & Associates
Schumacher & Associates
Certified Public Accountants
12835 E. Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
August 27, 1999
F-3
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999
ASSETS
------
<TABLE>
<CAPTION>
<S> <C>
Current Assets:
Cash $ 25,921
Other current assets 18,503
Total Current Assets 44,424
--------
Designs and trademarks, net of
accumulated amortization of $29,164 20,833
Security deposits 5,282
Equipment, net of accumulated depreciation
of $96,569 758,812
--------
TOTAL ASSETS $829,351
========
</TABLE>
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
<TABLE>
<CAPTION>
<S> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 505,399
Notes payable and accrued interest
(Note 8) 136,467
Unearned revenue (Note 1) 120,000
Advances from and accrued expenses
to officer (Note 2) 492,687
------------
Total Current Liabilities 1,254,553
Convertible debentures (Note 4 and Note 11) 538,462
------------
TOTAL LIABILITIES 1,793,015
------------
Commitments and contingencies
(Notes 1,2,3,4,5,6,7,8,9,10 and 11) -
Stockholders' (Deficit):
Convertible preferred stock, no par
value, 10,000,000 shares authorized,
638,333 issued and outstanding 168,883
Common stock, no par value,
100,000,000 shares authorized,
75,181,843 shares issued and
outstanding 7,678,689
------------
Accumulated (Deficit) (8,811,236)
------------
TOTAL STOCKHOLDERS' (DEFICIT) (963,664)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 829,351
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended Year Ended
December 31, December 31,
1998 1999
------------- ------------
Revenue
Sales $ - $ 89,749
-------------- ------------
Expenses:
Advertising - 58,365
Amortization and depreciation 12,500 80,660
Rent 7,451 44,237
Legal fees 120,048 433,564
Contract services, salaries and
payroll taxes 124,375 274,215
Compensation, officer 96,000 96,000
Common stock issued for
Website development (Note 10) - 180,000
Other 82,100 612,045
-------------- ------------
Total Operating Expenses 442,474 1,779,086
-------------- ------------
Net (Loss) Before Other
Income (Expense) (442,474) (1,689,337)
Other Income (Expense):
Option buy back (Note 10) - (625,000)
Operating loss of segment disposed of (145,203) -
Litigation settlement (Note 7) - 100,000
Discount on convertible
debentures (Note 4) - (188,462)
Loss from disposition of
segment disposed of (Note 5) (94,845) -
Interest expense (121,322) (40,509)
-------------- ------------
Net (Loss) $ (803,844) $(2,443,308)
============== ============
Per Common Share $ (.02) $ (.03)
============== ============
Weighted Average
Shares Outstanding 44,558,017 70,502,913
============== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From December 31, 1997 through December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Preferred Stock Common Stock Accumulated
No./Shares Amount No./Shares Amount (Deficit) Total
----------- ---------- ---------- ---------- ------------- ------------
Balance at December 31, 1997 938,000 $ 322,417 34,665,995 $4,766,211 $ (5,564,084) $ (475,456)
Common stock issued - - 19,484,366 914,208 - 914,208
Preferred stock converted (299,667) (104,884) 299,667 104,884 - -
Loss for the year ended December 31, 1998
- - - - (803,844) (803,844)
----------- ---------- ---------- ---------- ------------- ------------
Balance at December 31, 1998 638,333 217,533 54,450,028 5,785,303 (6,367,928) (365,092)
Common stock issued - - 20,592,815 1,844,736 - 1,844,736
Preferred stock converted (139,000) (48,650) 139,000 48,650 - -
Loss for the year ended December 31, 1999
- - - - (2,443,308) (2,443,308)
----------- ---------- ---------- ---------- ------------- ------------
Balance at December 31, 1999 499,333 $ 168,883 75,181,843 $7,678,689 $ (8,811,236) $ (963,664)
=========== ========== ========== ========== ============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended Year Ended
December 31, December 31,
1998 1999
------------ ------------
Operating Activities:
Net (Loss) $ (803,844) $(2,443,308)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Amortization and depreciation 12,500 80,660
Increase in accounts payable
and accrued expenses 46,651 439,358
Increase in unearned revenue - 120,000
Discount on debenture - 188,462
Option buy back - 625,000
Other 126,382 346,413
---------- ------------
Net Cash (Used in) Operating Activities (618,311) (643,415)
---------- ------------
Investing Activities:
Investment in equipment - (855,381)
Investment in designs and trade name (50,000) (50,000)
---------- ------------
Net Cash (Used in) Investing Activities (50,000) (905,381)
---------- ------------
Financing Activities:
Repayment of notes and advances payable (31,427) -
Common stock issued 694,883 1,039,736
Proceeds from notes and advances payable - 532,710
---------- ------------
Net Cash Provided by Financing Activities 663,456 1,572,446
---------- ------------
Increase (decrease) in Cash (4,855) 23,650
Cash at Beginning of Period 7,126 2,271
----------- ------------
Cash at End of Period $ 2,271 $ 25,921
=========== ============
Interest Paid $ 121,322 $ 40,509
============ ============
Income Taxes Paid $ - $ -
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(1) Summary of Significant Accounting Policies
----------------------------------------------
A. Organization and Principles of Consolidation
------------------------------------------------
The consolidated financial statements of Go Online Networks Corporation,
formerly Jones Naughton Entertainment, Inc. and Consolidated Subsidiaries
include the accounts of Go Online Networks Corporation, incorporated in Colorado
on October 20, 1987, and reincorporated in Delaware effective September 14,
1999, and its subsidiaries AMS Acquisition Corp. (AMS), incorporated in Nevada
on June 2, 1998 and Auctionomics, Inc., incorporated in Nevada on June 8, 1999.
Jones Naughton Entertainment, Inc. changed its name to Go Online Networks
Corporation on September 8, 1999. References to the Company refer to Go Online
Networks Corporation and its subsidiaries. As of December 31, 1998, AMS was a
wholly-owned subsidiary of Go Online Networks Corporation. As of December 31,
1999, AMS and Auctionomics are 75% owned subsidiaries of Go Online Networks
Corporation. The Company is in the information technology business. All
intercompany accounts have been eliminated in the consolidation. The Company
has selected December 31 as its year end.
B. Use of Estimates in the Preparation of Financial Statements
-------------------------------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
C. Basis of Presentation - Going Concern
------------------------------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained operating losses
since its inception and has a net capital deficiency. Management's plan to
continue in operations is to continue to attempt to raise additional debt or
equity capital until such time the Company is able to generate sufficient
operating revenue.
In view of these matters, realization of certain of the assets in the
accompanying financial statements is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financial requirements, raise additional capital, and the success of its future
operations. Management believes that its ability to raise additional capital
provides the opportunity for the Company to continue as a going concern.
F-8
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(1) Summary of Significant Accounting Policies, Continued
----------------------------------------------------------
D. Per Share Information
-----------------------
The per share information is computed based upon the weighted average number of
shares outstanding.
E. Equipment
---------
The Company carries its investment in equipment, principally consisting of
office equipment and computer access kiosks installed at customer locations, at
cost net of accumulated depreciation. Depreciation is provided over a five year
period on a straight-line basis.
F. Geographic Area of Operations
--------------------------------
The Company's customers are principally in the U.S.A. The potential for severe
financial impact can result from negative effects of economic conditions within
the market or geographic area. Since the Company's business is principally in
one area and in one industry, this concentration of operations results in an
associated risk of uncertainty.
G. Intangible Assets
------------------
The Company reviews the carrying value of its intangible assets on a periodic
basis, at least quarterly, to determine if there is any impairment in carrying
value. As of December 31, 1999 and the Company believes that there is no
impairment in value of the carrying value of its intangible assets.
H. Stock Issued for Services and Stock Options Granted for Services
--------------------------------------------------------------------
The Company has issued stock and granted stock options for services. The market
value of the shares issued for services was recorded as an expense in the
accompanying financial statements. All options granted were at market value or
higher at the time of the grant. No compensation was recorded for the options
granted since any compensatory amounts would be immaterial since the options
were granted at prices at least equal to market.
I. Income Taxes
-------------
The Company as of December 31, 1998 had approximately $7,700,000 of net
operating loss carryovers which expire in years through 2019. A change in
ownership of more than 50% of the Company may result in the inability of the
Company to utilize the carryovers. As of December 31, 1999 the Company had
deferred tax assets of approximately $2,310,000 related to net operating loss
carryovers. A valuation allowance has been provided for the total amount since
the amounts, if any, of future revenues necessary to be able to utilize the
carryovers are uncertain.
F-9
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(1) Summary of Significant Accounting Policies, Continued
----------------------------------------------------------
J. Preferred Stock
----------------
The Company has outstanding 499,333 shares of Series A Preferred Stock. Each
share of Series A Preferred stock is convertible into one share of common stock
at the option of the holder. The Series A Preferred Stock votes on an equal per
share basis with the common stock, and is eligible to receive equivalent
dividends to the shares of common stock. In the event of liquidation of the
Company, the Series A Preferred Stock has a liquidation preference of the number
of shares plus 8% from the time of issuance.
K. Advertising
-----------
The Company expenses advertising costs as incurred.
L. Unearned Revenue
-----------------
The Company received $145,000 related to future advertising on the Internet
kiosks which has been accounted for as unearned revenue. The advertising
revenue will be recognized as income and will be amortized over the periods
covered on a straight-line basis. $25,000 had been earned as of December 31,
1999.
N. Concentration of Credit Risks
--------------------------------
The Company carries its cash accounts in banks. As of December 31, 1999 the
Company had no accounts in excess of the amount insured by the F.D.I.C.
(2) Advances and Accrued Expenses, Related Party
-------------------------------------------------
The Company's Chief Executive Officer has loaned various amounts to the Company.
As of December 31, 1999 the amounts payable to the officer for advances totaled
$240,202. In addition there is unpaid compensation due to him of $252,485 at
December 31, 1999. The balances payable to the related party are
uncollateralized, bear no interest and are payable on demand.
F-10
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(3) Stock Options
--------------
The following summarizes earned options granted, exercised and outstanding:
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Option Expiration
Date of Grant # of Shares Price Date
- - ------------------- ------------ ----------- ----------------------------
February 27, 1996 1,000,000 $ .35 November 1, 1997
------------ -----------
Balance outstanding
December 31, 1996 1,000,000 $ .35 Average option price of $.35
April 10, 1997 100,000 $ .25 November 1, 1997
April 10, 1997 100,000 $ .10 May 1, 1998
April 10, 1997 100,000 $ .15 November 1, 1998
April 1, 1997 100,000 $ .25 November 1, 1999
February 27, 1996 (1,000,000) $ .35 Expired November 1, 1997
April 10, 1997 (100,000) $ .05 Expired November 1, 1997
------------ -----------
Balance outstanding
December 31, 1997 300,000 $ .10-$.25 Average option price of $.17
April 10, 1997 (100,000) $ .10 Expired May 1, 1998
April 10, 1997 (100,000) $ .15 Expired November 1, 1998
May 3, 1998 500,000 $ .07 February 2, 1999
May 3, 1998 500,000 $ .125 February 2, 1999
May 3, 1998 500,000 $ .25 February 2, 1999
July 27, 1998 500,000 $ .25 February 2, 1999
------------ -----------
Balance outstanding
December 31, 1998 2,100,000 $ .07-$.25 Average option price of $.18
May 3, 1998 (500,000) $ .07 Exercised February 2, 1999
April 12, 1999 150,000 $ .25 April 11, 2001
April 12, 1999 1,000,000 $ .20 April 11, 2001
August 9, 1999 200,000 $ .32 August 8, 2000
September 15, 1999 1,000,000 $ .50 December 31, 2000
May 3, 1998 (500,000) $ .125 Expired February 2, 1999
May 3, 1998 (500,000) $ .25 Expired February 2, 1999
July 27, 1998 (500,000) $ .25 Expired February 2, 1999
April 1, 1997 (100,000) $ .25 Expired November 1, 1999
------------ -----------
Balance outstanding
December 31, 1999 2,350,000 $ .20-$.50 Average option price of $.27
============ ===========
</TABLE>
The Company has other various option agreements with employees, independent
contractors and consultants that have contingencies associated with the rights
to exercise. These other contingent option agreements are disclosed at various
locations throughout the notes to the financial statements. The above summary
represents all options that are not subject to any contingencies. All options
were granted at exercise prices equal to or in excess of market prices of the
stock at the date of grant, therefore no compensation expense was recorded for
the options.
F-11
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(3) Stock Options, Continued
--------------------------
In addition to options disclosed elsewhere in the notes to the financial
statements, the Company has issued the following options to acquire restricted
common stock of the Company:
A. 31,640 shares exercisable at $.20 per share at any time within one year
after the Company's common stock first trades at or above $1.20 per share for
thirty consecutive trading days.
B. 31,640 shares exercisable at $.40 per share exercisable at any time
within one year after the publicly traded common stock of the Company has traded
at $2.00 per share on each trading date for thirty consecutive days.
C. 31,640 shares exercisable at $1.00 per share at any time within one year
after the publicly traded common stock of the Company has traded at $2.80 per
share for thirty consecutive trading days. Such shares cannot be traded for a
period of ninety days after the exercise of this option.
D. 31,640 shares exercisable at $2.00 per share, exercisable at any time
within one year after the publicly traded common stock of the Company has traded
at $3.60 per share for thirty consecutive trading days. Such shares cannot be
traded for a period of sixty days after the exercise of this option.
(4) Convertible Debentures
-----------------------
During the years ended December 31, 1998 and 1999, the Company issued
approximately $343,000 and $100,000, respectively of convertible debentures
which have been converted to common stock. The debentures were converted to
common stock at 75% of the market value of the common stock. The difference
between the exercise price and the market price upon exercise has been recorded
as interest expense in the accompanying 1998 and 1999 financial statements in
the amount of $114,333 and $33,333, respectively. In addition during September,
1999, the Company issued $538,462 of convertible debentures for $350,000. The
discount of $188,462 has been recorded as an other expense similar to interest
in the financial statements. As additional consideration for the purchase of
the debenture, the purchaser was granted a warrant to purchase 175,000 shares of
common stock of the Company at a price of $.50 per share which will expire on
December 31, 2000. Since the exercise price was in excess of the market value
of the stock at the time of issuance, no consideration was recorded in the
financial statements. If not converted to common stock, the debenture accrues
interest at 8% per annum, due and payable quarterly in arrears with the first
payment due on December 31, 1999. The $538,462 convertible debenture is
convertible at the option of the holder into common stock at a conversion price
for each share of common stock equal to the lesser of (1) 125% of the closing
bid price for the common stock on the date of issuance of the debenture or (2) a
percentage of the average of the three lowest closing bid prices for the common
stock for the 20 trading days immediately preceding the conversion date. The
applicable percentage shall be equal to the following: (I) for conversions made
on or before 120 days after the date of the debenture, 105%; (ii) between 121
and 150 days, 103%; (iii) between 151 and 180 days, 100%; (iv) between 181 and
210 days, 97% or (v) after 210 days, 95%. See Note 11 for subsequent events
related to this matter.
F-12
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(5) Investment in and Disposition of Investment in Publishing and
---------------------------------------------------------------------
Advertising Business
-------------
On July 8, 1998 AMS Acquisition Corp., a newly formed wholly-owned subsidiary of
the Company acquired the assets and liabilities of a business operating several
different publishing and advertising divisions located in San Diego, California.
The total investment in the acquisition of the business assets approximated
$240,000 including related acquisition expenses. After operating the business
for approximately six months, the assets and liabilities were sold back to the
original seller in exchange for assuming the then existing liabilities of the
business. This sale back was effective December 31, 1998. At the time of the
return of the business, the total assets of the business including goodwill of
approximately $500,000, totaled approximately $858,000, and liabilities totaled
approximately $904,000. While the liabilities were assumed in the sale back
transaction, AMS remains contingently liable for any amounts not paid by the
purchaser. The assets and the liabilities have been subsequently sold again
after the buy back from AMS. The financial statements have no provision for
future losses, if any, related to this contingency. The ultimate resolution of
this matter cannot presently be determined.
The consolidated financial statements include a loss from the operations of this
discontinued business in the amount of $145,203 and a loss from disposition of
this business totaling $94,845.
(6) Consulting Agreements
----------------------
Effective February 3, 1998 the Company entered into a consulting agreement with
an individual to provide financial support and market makers for the Company's
publicly traded common stock. In accordance with the terms of the agreement
the consultant was issued 400,000 shares valued at $.035 per share and 1,250,000
shares at $.03 per share as compensation for consulting services. In addition,
the consultant was granted an option to acquire 1,000,000 shares at $.05,
1,000,000 at $.07 and 1,000,000 at $.09 per share. At the time of the grant of
the options, the option price was in excess of the market price of the stock.
The options for the 1,000,000 shares at $.05 and the 1,000,000 shares at $.07
were exercised. The option for the 1,000,000 shares at $.09 expired
unexercised.
Effective July 27, 1998 the Company entered into a consulting agreement with an
individual for a 90 day period. The individual was paid $6,000 per month
for providing services to assist in developing financial support for the
Company's publicly traded common stock. In addition, the consultant was granted
an option to purchase 500,000 shares of the Company's common stock at $.125 per
share within one year of the effective date of the agreement. The option
expired unexercised.
Effective March 9, 1998 the Company entered into an internet public relations
agreement with an entity for a three month period. For services performed, the
Company issued 125,000 shares of its common stock valued at $.025 per share.
The entity was also granted a ninety day option to acquire 50,000 additional
shares at $.075 per share. The option expired unexercised.
Effective October 17, 1997 the Company entered into a consulting agreement with
an individual whereby the individual prepared news releases and other services
requested by the Company in connection with its securities market, broker dealer
relationships and investor relations. The Company issued the individual 150,000
shares valued at $.066 per share for compensation related to the services
performed.
F-13
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(7) Commitments and Contingencies
-------------------------------
During 1996 the Company sold its wholly-owned subsidiary RETN in exchange for
shares of stock of the entity acquiring RETN. Since the Company was unable to
receive free trading shares of the entity, the Company on July 9, 1998 filed a
lawsuit against the purchaser and certain of its officers and directors alleging
breaches of written contracts, fraud and violations of various Corporate Code
sections. On September 2, 1998, the purchasing entity filed a cross-complaint
against the Company alleging fraud and misrepresentation, breaches of contracts
and conspiracy. During December 31, 1999, the Company settled this matter and
received $100,000 cash plus 160,000 restricted shares of Home Space Inc. A
contingent asset exists with respect to the 160,000 shares, the value of which
cannot presently be determined. The financial statements include no value for
the 160,000 shares. An additional 40,000 shares were issued to the Company's
legal counsel as part of the settlement. The 160,000 shares of Home Space, Inc.
were pledged as collateral for the convertible debentures. See Note 11.
On December 3, 1998, related to a different litigation matter, a default
judgement was entered against the Company in the approximate amount of $55,000
for alleged amounts owed by RETN for which the plaintiff alleges is also owed by
the Company. On July 14, 1999 the default judgement was set aside based on the
fact that the Company was never properly served with a summons and complaint.
The Company contends that it is not liable for the amounts due since RETN was a
separate corporation and the Company never guaranteed this obligation. The
financial statements do not include any loss provision with respect this matter.
A contingency exists with respect to this matter, the ultimate resolution of
which cannot presently be determined.
Management does not believe that the above contingencies will result in material
adverse effects on the financial statements.
(8) Notes Payable
--------------
On March 5, 1995 the Company borrowed $49,500 and $52,500 from an individual and
from a corporation, respectively. The notes bear interest at 7% per annum and
are uncollateralized. The notes were due and not paid on May 29, 1996. The
lenders have the right to demand payment in full on the notes and failure to pay
on demand would increase the interest rate to 18% per annum. The lenders have
the right to convert the notes to common stock of the Company at a rate of $.125
per share. The balance payable on December 31, 1999 on the notes total $66,244
and $70,223, respectively, including accrued interest.
F-14
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(9) Acquisition of Assets
-----------------------
During March 1998 the Company entered into an agreement to acquire the assets of
a business engaged in the manufacturing, marketing, management and display of
advertising and informational kiosks. The purchase price was $50,000 with a
down payment of $25,000 plus four equal quarterly installments at the 90 day,
180 day, 270 day and 350 day anniversaries of the closing date. As of December
31, 1998 the balance payable under the terms of the agreement was $12,500, which
was paid off in 1999. Since the value of tangible assets acquired was minimal,
the total $50,000 was recorded in the accompanying financial statements as an
intangible asset related to the designs, trademarks, trade names, contract
rights and other intangible assets. This intangible asset is being amortized on
a straight line basis over a three year period.
(10) Other Events and Transactions
--------------------------------
Effective February 26, 1999 the Company entered into a joint venture agreement
with an individual, the current President of AMS, whereby 25,000 shares of (AMS)
Acquisition Corp. were transferred (25% ownership of AMS) to the individual.
The Company also granted the individual warrants to acquire an additional 26,000
shares of AMS at $1.00 per share following the end of the first profitable
quarter of operations, but in no event later than twelve months after the
February 26, 1999 agreement date. Effective April 19, 1999 the Company
exchanged 1,250,000 restricted shares of Go Online Networks Corporation common
stock for the warrants. These 1,250,000 shares were recorded at $.50 per share,
ninety percent of the market value of free trading shares of the Company's
Common Stock on April 19, 1999, and recorded as an expense totaling $625,000.
As a part of the joint venture agreement, the Company agreed to provide AMS with
$25,000 for working capital.
Effective May 15, 1999 the Company entered into a lease for office space in
northern California. The term of the lease is for five years with monthly base
rent payments of $1,615. The base rent amounts are subject to increases of 3%
per annum. The Company has the right to terminate the lease between May 15,
2000 and June 15, 2000 and also between May 15, 2002 and June 15, 2002. Future
base rent commitments during the years ended December 31 under this lease are
summarized as follows:
2000 $ 19,380
2001 $ 19,380
2002 $ 19,380
2003 $ 19,380
2004 $ 8,075
Effective July 21, 1999 the Company entered into a lease for office space in
Buena Park California. The term of the lease is for three years with monthly
base rent payments of $1,600. Future base rent commitments during the years
ended December 31 under this lease are summarized as follows:
2000 $ 19,200
2001 $ 19,200
2002 $ 11,200
F-15
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(10) Other Events and Transactions, Continued
--------------------------------------------
During May, 1999, the Company entered into a settlement agreement whereby the
Company paid $25,000 in cash to an entity for the full and final release of a
liability of the Company with respect to the Company's guarantee of certain
commitments of RETN to the entity.
Effective June 10, 1999 the Company entered into a stock purchase agreement
whereby the Company acquired 75% ownership of Auctionomics, Inc., a Nevada
corporation. Auctionomics, Inc. had no business assets or liabilities at the
time of the acquisition. The Company had issued 500,000 restricted shares of
its common stock and a warrant for an additional 500,000 shares exercisable for
two years at an exercise price of $.50 per share. The shares were recorded at
$.36 per share, ninety percent of the market value, due to the size of the block
and the restricted nature of the stock. The $180,000 value of the shares issued
was recorded as an expense in the accompanying financial statements since the
substance of the transaction was to engage the services of the principals of
Auctionomics to assist the Company in developing an Internet web site. The
Company agreed to and has provided $25,000 of working capital. The agreement
also provides that the 25% shareholders of Auctionomics will be entitled to a
bonus equal to 25% of the net income before taxes of Auctionomics each year for
as long as they remain shareholders of Auctionomics. The Company also entered
into consulting agreements with the 25% shareholders of Auctionomics whereby
they will receive 20% of the gross revenues generated to Auctionomics through
efforts of the consultants as long as they are shareholders of Auctionomics.
Effective April 12, 1999 the Company entered into an employment agreement with
an individual. The agreement is for a term of one year but is subject to
termination by the Company for cause. The Company or the employee have the
right to terminate the agreement after giving the other party thirty days
notice. In the event that the agreement is terminated by the Company without
cause, the employee shall be entitled to compensation earned computed pro-rata
up to the date of termination. The employee's compensation during the term of
the agreement shall be as follows:
A. Base salary of $60,000 per year.
B. Quarterly bonus of 20% of the net advertising revenues of the Community
Marquee Division generated as a result of the employee's direct efforts during
the previous quarter.
C. Alternative quarterly bonus in lieu of B. above equal to 25% of the net
adverting revenues of the Community Marquee Division generated by partes other
than the employee.
D. The employee shall be granted options to purchase 25,000 shares of the
Company's common stock for each twenty-five kiosks shipped up to a maximum of
150 kiosks. The exercise price of the options shall be equal to 60% of the
closing bid price on the last business day of the month in which the employee
becomes eligible. The difference between the exercise price and the option
price at the time when the options are earned will be expensed in the financial
statements as compensation.
F-16
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(10) Other Events and Transactions, Continued
--------------------------------------------
Effective May 1, 1999 the Company entered into a consulting agreement with an
individual whereby the consultant was engaged to assist in the creation of the
Company's real estate website for its GoOn-line.com operating division. The
term of the agreement is for one year but can be terminated by the Company with
or without cause with 30 days notice.
Compensation to the consultant is summarized as follows:
A. Monthly cash consulting fee of $5,000.
B. Quarterly bonus equal to 15% of the gross revenues earned by the Company
through its real estate web site developed by the consultant.
C. The consultant shall be granted options to acquire 25,000 shares of stock
for each $500,000 in gross revenues attributable to the real estate web site
developed by the Company.
Effective May 20, 1999 the Company entered into a marketing agreement with an
entity, whereby the entity agreed to introduce various hotels, motels and other
lodging businesses to the Company for the purpose of placing computer access
kiosks in their facilities. The Company will compensate the entity 20% for all
adjusted gross usage and 10% of advertising revenue generated as a result of the
site agreements negotiated during the term of the agreement. The site owner will
also be paid not More than 10% of adjusted gross revenue. The entity will be
paid 25% of all the adjusted gross usage and 15% of the advertising revenue for
any site agreement that is signed for a duration exceeding 4 years. The Company
granted the entity a 60 month exclusive representation for the marketing of the
Company's kiosk system for South Florida, define as south of Interstate 40. In
order to maintain exclusivity, the entity must sign 20 new sites per month for
the 60 month contract period and must agree to procure a minimum of 8
advertising contracts per kiosk installed. Upon execution of the first 100 site
agreements the Company will grant the entity an option to purchase 100,000
shares of stock at $.45 per share exercisable for a two year period. Upon
execution of the first 500 site agreements the Company will grant the entity the
right to purchase 250,000 shares at $.75 per share for two years. Upon
execution of the first 1,000 site agreements the Company will grant the entity
the right to purchase 250,000 shares at $1.25 per share for two years. The
difference, if any, between the exercise price and ninety percent of the market
value of the stock will be recorded as additional compensation to the extent
ninety percent of the market price exceeds the exercise price of the option
granted. If the entity installs additional ad panels on the Company's kiosks
using a secondary ad panel furnished by the Company the entity will be
compensated 10% for all ad revenue up to $15,000 per year per ad panel and 90%
of all ad revenues generated per panel in excess of $15,000 per year.
F-17
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(10) Other Events and Transactions, Continued
--------------------------------------------
Effective May 15, 1999 the Company entered into a marketing agreement with an
entity, whereby the entity agreed to introduce various hotels, motels and other
lodging businesses to the Company for the purpose of placing computer access
kiosks in their facilities. The Company will compensate the entity 20% for all
adjusted gross usage and 10% of advertising revenue generated as a result of the
site agreements negotiated during the term of the agreement. The site owner will
also be paid not more than 10% of adjusted gross revenue. The entity will be
paid 25% of all the adjusted gross usage and 15% of the advertising revenue for
any site agreement that is signed for a duration exceeding 4 years. The Company
granted the entity a 60 month exclusive representation for the marketing of the
Company's kiosk system for Southern California, defined as Los Angeles County
and south of Los Angeles County, and also Arizona and Nevada. In order to
maintain exclusivity, the entity must sign 20 new sites per month for the 60
month contract period and must agree to procure a minimum of 8 advertising
contracts per kiosk installed. Upon execution of the first 100 site agreements
the Company will grant the entity an option to purchase 100,000 shares of stock
at $.75 per share exercisable within one year. Upon execution of the first
1,000 site agreements the Company will grant the entity the right to purchase
250,000 shares at $1.25 within one year. The difference, if any, between the
exercise price and ninety percent of the market value of the stock will be
recorded as additional compensation to the extent ninety percent of the market
price exceeds the exercise price of the option granted. If the entity installs
additional ad panels on the Company's kiosks using a secondary ad panel
furnished by the Company the entity will be compensated 10% for all ad revenue
up to $15,000 per year per ad panel and 90% of all ad revenues generated per
panel in excess of $15,000 per year. In addition, the Company agreed to pay the
entity $350 for each 4 year site agreement and $200 for all other site
agreements exceeding one year. The Company also agreed to pay the entity $2,000
per month in advance for marketing expenses drawn against future site agreement
fees and commissions as long as the entity signs not less that 10 new site
agreements for the following month.
During August, 1999, the Company entered into a marketing agreement with an
entity whereby the entity agreed to provide certain marketing services for the
Company. The entity agreed to introduce various hotels, motels and other
lodging businesses to the Company and to assist in negotiating kiosk site
agreements for the Company. The entity will be compensated as follows:
A. The entity will receive 20% for all adjusted gross usage revenue and 10%
of advertising revenue generated as a result of the site agreements negotiated
for the duration of the agreement. The site agreement will provide for a
commission to be paid to the site owner of not more than 10% of the adjusted
gross revenue. For purposes of the contract, adjusted gross revenue is defined
as revenue less cost for purchasing and installing the kiosk.
B. The entity will be paid 25% of all adjusted gross usage and 15% of the
advertising revenue for any site agreement that is signed for a duration
exceeding four years.
C. The entity will be paid $150 for each site agreement of four years or
greater and $100 for each site agreement less than four years.
F-18
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(10) Other Events and Transactions, Continued
--------------------------------------------
D. The entity was granted a 60 month exclusive representation for the
marketing of the kiosk system for Indiana, Michigan and Ohio.
E. In order to maintain the exclusive marketing agreement, the entity agreed
to deliver 20 signed site agreements per month for the 60 month contract period
and agreed to produce a minimum of eight advertising contracts per kiosk.
F. Upon the execution of the first 100 site agreements the company agreed to
grant to the entity an option to purchase 100,000 shares of the company's common
stock for the price of $1.00 per share for one year.
G. Upon the execution of the first 500 site agreements the company agreed to
grant to the entity an option to purchase 250,000 shares of the Company's common
stock for the price of $1.25 per share for one year.
H. If the entity installs additional advertising panels on the kiosks using
secondary advertising panel display units, the entity will be compensated 10%
for all advertising revenue up to $15,000 per year. Advertising revenues
generating more than $15,000 per year will earn the entity 90% and 10% will be
paid to the Company.
During October, 1999, 308,333 restricted shares of common stock were issued as
consideration for amounts owed for legal fees totaling $73,750. The financial
statements include an expense provision for the $37,000 difference between the
$.24 agreed upon price of the stock and ninety percent of the market value of
the publicly traded stock.
Effective October 1, 1999, the Company entered into an employment agreement with
an individual for a three year period. The individual will serve as Executive
Vice President and Director of Technical Support.
A. The employee will receive an annual salary of $80,000 for the first year,
$90,000 for the second year and $100,000 for the third year.
B. The employee shall also receive a cash bonus payable following the end of
each fiscal year equal to one eighth of one percent of the gross sales of the
Company, if and only if the Company is profitable for the corresponding year.
C. In addition to the salary and bonus set forth above, the employee shall
be granted options to acquire common stock of the Company as follows:
At the end of the first year the employee shall be eligible to purchase up to
200,000 shares of common stock at $.25 per share. At the end of years two and
three the employee shall become eligible to purchase 200,000 shares of stock at
the average closing bid price on the five business days immediately preceding
the anniversary of the employment agreement. All options granted shall be
exercisable for a period of two years from their date of grant.
F-19
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(10) Other Events and Transactions, Continued
--------------------------------------------
D. The agreement may be terminated for cause at any time. The agreement may
be terminated by the Company or the employee with 30 days notice. If terminated
by the Company, the employee shall be entitled to compensation earned up to the
date of termination plus 90 days severance pay. If terminated by the employee,
the employee shall be entitled to compensation earned prior to the date of
termination.
Effective October 6, 1999, the Company entered into an employment agreement with
an individual. The agreement is for a term of one year but is subject to
termination by the Company for cause. The Company or the employee have the
right to terminate the agreement after giving the other party thirty days
notice. In the event that the agreement is terminated by the Company without
cause, the Employee shall beentitled to compensation earned computed pro-rata up
to the date of termination.
The employee's compensation during the term of the agreement shall be as
follows:
A. Base salary of $60,000 per year.
B. Quarterly bonus of 10% of the net advertising revenues of the Go Online
kiosk's generated as a result of the employee's direct efforts during the
previous quarter.
C. The employee shall be granted options to acquire common stock of the
Company as follows: For his 1st year of employment, employee is granted an
option to purchase 100,000 shares at .32 per share. In addition, for every
seventy-five (75) kiosks shipped and installed by the division, up to a maximum
of three hundred seventy-five (375) kiosks, employee shall receive options to
acquire 25,000 shares of Company common stock at an exercise price equal to
seventy-five percent (75%) of the closing bid price on the last business day of
the month in which employee became eligible hereunder. Parties to this contract
agree that this option starts at a level of 225 units already in existence when
employee signed this agreement. The initial option expires December 31, 2000.
Subsequent options expire on the 31st of December of the next calendar year that
those options become effective in.
(11) Subsequent Events
------------------
During January, 2000, the Company issued 3,800,000 common shares for an inactive
fully reporting company, for the purpose of the Company to become an SEC fully
reporting company.
On January 24, 2000, for 250,000 shares of its common stock, the Company entered
into a consulting agreement with an individual with regard to the preparation
and printing of certain materials for the Company.
During January, 2000, the Company issued 2,500,000 shares of its common stock
for $.10 per share.
Effective January 10, 2000, the Company entered into a Securities Purchase
Agreement whereby the buyer agreed to buy from the Company $1,000,000 of its
Series 2000-A Eight Percent (8%) Convertible Notes, maturing January 1, 2002,
and payable in quarterly installments in arrears on March 31, June 30, September
30, and December 31, of each year during the term of the Note, with the first
such payment to be made March 31, 2000. Accrual of interest may be payable
either in cash or Common Stock
F-20
<PAGE>
GO ONLINE NETWORKS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999
(11) Subsequent Events, Continued
------------------------------
at the holder's option. If interest is paid in Common Stock, the number of
shares to be delivered in payment will be determined by taking the dollar amount
of interest being paid divided by the average of the closing bid prices for the
Common Stock for the ten trading days prior to the due date of such interest.
The Notes are convertible into Common Stock, upon certain Registration, and for
prices determined at various dates as defined in the agreement. The purchase
price was $500,000 in cash and cancellation of the $538,462 of the convertible
debentures outstanding as of December 31, 1999.
F-21
<PAGE>
AGREEMENT AND PLAN OF MERGER
OF
GO ONLINE NETWORKS CORPORATION, A DELAWARE CORPORATION,
AND
JONES NAUGHTON ENTERTAINMENT, INC., A COLORADO CORPORATION
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 8,
1999 ("Merger Agreement") is entered into by and between Jones
Naughton Entertainment, Inc., a Colorado corporation ("JNNE"), and
Go Online Networks Corporation, a Delaware corporation ("Go
Online"), which corporations are sometimes referred to herein as the
"Constituent Corporations."
R E C I T A L S
A. JNNE is a corporation duly organized and existing under
the laws of the State of Colorado and has authorized capital of
100,000,000 shares of Common Stock, no par value (the "JNNE Common
Stock"), and 20,000,000 shares of Preferred Stock, no par value. As
of August 12, 1999, 71,302,677 shares of JNNE Common Stock were
issued and outstanding and 499,333 shares of Series A Preferred
Stock (the "JNNE Preferred Stock") were issued and outstanding.
B. Go Online is a corporation duly organized and existing
under the laws of the State of Delaware and has authorized capital
of 100,000,000 shares of Common Stock, par value $0.001 per share
(the "Go Online Common Stock"), and 20,000,000 shares of Preferred
Stock, par value $0.001 per share. As of August 13, 1999, 100
shares of Go Online Common Stock were issued and outstanding, all of
which were held by JNNE. On August 13, 1999, the Board of Directors
authorized a series of preferred stock designated Series A Preferred
Stock (the "Go Online Preferred Stock"), having rights, preferences,
and privileges identical to that of the JNNE Preferred Stock. No
shares of Go Online Preferred Stock were issued and outstanding.
C. The Board of Directors of JNNE has determined that it is
advisable and in the best interests of JNNE and its shareholders
that JNNE merge with and into Go Online upon the terms and subject
to the conditions of this Merger Agreement for the purpose of
effecting the reincorporation of JNNE in the State of Delaware.
D. The respective Boards of Directors of JNNE and Go Online
have adopted and approved the terms and conditions of this Merger
Agreement.
E. The parties intend by this Merger Agreement to effect a
reorganization under Section 368 of the Internal Revenue Code of
1986, as amended.
<PAGE>
NOW, THEREFORE, in consideration of the promises and the
mutual covenants and agreements contained herein, the parties hereto
agree, subject to the terms and conditions set forth herein, as
follows:
I.
MERGER
1.1 Merger. In accordance with the provisions of this
Merger Agreement, the Colorado Business Corporation Act and the
Delaware General Corporation Law, JNNE shall be merged with and into
Go Online (the "Merger"), the separate existence of JNNE shall cease
and Go Online shall be, and is herein sometimes referred to as, the
"Surviving Corporation," and the name of the Surviving Corporation
shall be "Go Online Networks Corporation".
1.2 Filing and Effectiveness. The Merger shall become
effective when the following actions have been completed:
(a) All of the conditions precedent to the
consummation of the Merger specified in this Merger Agreement and
required under the Colorado Business Corporation Act and the
Delaware General Corporation Law have been satisfied or duly waived
by the party entitled to satisfaction thereof;
(b) An executed Articles of Merger or an executed
counterpart of this Merger Agreement meeting the requirements of the
Colorado Business Corporation Act has been filed with the Secretary
of State of the State of Colorado; and
(c) An executed Certificate of Merger or an executed
counterpart of this Merger Agreement meeting the requirements of the
Delaware General Corporation Law has been filed with the Secretary
of State of the State of Delaware.
The date and time when the Merger shall become effective is
herein called the "Effective Time of the Merger."
1.3 Effect of the Merger. At the Effective Time of the
Merger, the separate existence and corporate organization of JNNE
shall cease and Go Online, as the Surviving Corporation, (i) shall
continue to possess all of its assets, rights, powers and property
as constituted immediately before the Effective Time of the Merger,
(ii) shall be subject to all actions previously taken by its and
JNNE's Board of Directors, (iii) shall succeed, without other
transfer, to all of the assets, rights, powers and property of JNNE
in the manner more fully set forth in Section 259(a) of the Delaware
General Corporation Law, (iv) shall continue to be subject to all of
its debts, liabilities and obligations as constituted immediately
before the Effective Time of the Merger and (v) shall succeed,
without other transfer, to all of the debts, liabilities and
obligations of JNNE in the same manner as if Go Online had itself
incurred them, all as more fully provided under the applicable
provisions of the Delaware General Corporation Law and the Colorado
Business Corporation Act.
<PAGE>
II.
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of
Incorporation of Go Online as in effect immediately before the
Effective Time of the Merger shall continue in full force and effect
as the Certificate of Incorporation of the Surviving Corporation
until duly amended or repealed in accordance with the provisions
thereof and applicable law.
2.2 Bylaws. The Bylaws of Go Online as in effect
immediately before the Effective Time of the Merger shall continue
in full force and effect as the Bylaws of the Surviving Corporation
until duly amended or repealed in accordance with the provisions
thereof and applicable law.
2.3 Officers and Directors. The persons who are officers
and directors of Go Online immediately prior to the Effective Time
of the Merger shall, after the Effective Time of the Merger, be the
officers and directors of the Surviving Corporation, without change
until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of
Incorporation, Bylaws and applicable law.
III.
MANNER OF CONVERSION OF STOCK
3.1 JNNE Shares.
(a) Upon the Effective Time of the Merger, each share of
JNNE Common Stock, no par value, issued and outstanding immediately
before the Effective Time of the Merger shall by virtue of the
Merger and without any action by the Constituent Corporations, by
the holder of such shares or by any other person, be converted into
and become one fully paid and nonassessable share of Common Stock,
$.001 par value per share, of the Surviving Corporation.
(b) Upon the Effective Time of the Merger, each share of
JNNE Series A Preferred Stock, no par value, issued and outstanding
immediately before the Effective Time of the Merger shall by virtue
of the Merger and without any action by the Constituent
Corporations, by the holder of such shares or by any other person,
be converted into and become one fully paid and nonassessable share
of Series A Preferred Stock, $0.001 par value per share, of the
Surviving Corporation.
3.2 JNNE Options, Warrants and Convertible Securities. At
the Effective Time of the Merger, the Surviving Corporation shall
assume and continue the stock option plans of JNNE, if any, and all
options, warrants and rights to purchase or acquire shares of JNNE
Common Stock. At the Effective Time of the Merger, each outstanding
and unexercised option, warrant and right to purchase or acquire
shares of JNNE Common Stock shall, by virtue of the Merger and
without any
<PAGE>
action on the part of the holder thereof, be converted
into and become an option, warrant or right to purchase or acquire
shares of the Surviving Corporation's Common Stock on the basis of
one share of the Surviving Corporation's Common Stock for each share
of JNNE Common Stock issuable pursuant to any such option, warrant
or right, and under the same terms and conditions and at an exercise
price per share equal to the exercise price per share applicable to
any such JNNE option, warrant or right. No options, warrants or
rights to purchase or acquire Preferred Stock of JNNE currently exist.
A number of shares of the Surviving Corporation's Common
Stock shall be reserved for issuance upon the exercise of options,
warrants and other securities equal to the number of shares of JNNE
Common Stock so reserved immediately before the Effective Time of
the Merger.
3.3 Go Online Common Stock. Upon the Effective Time of
the Merger, each share of Go Online Common Stock, $.001 par value
per share, issued and outstanding immediately before the Effective
Time of the Merger shall, by virtue of the Merger and without any
action by Go Online, by the holder of such shares or by any other
person, be canceled and returned to the status of authorized but
unissued shares.
3.4 Exchange of Certificates. After the Effective Time
of the Merger, each holder of an outstanding certificate
representing shares of JNNE Common Stock or JNNE Preferred Stock
may, at such shareholder's option, surrender the same for
cancellation to American Securities Transfer & Trust, Inc., as
transfer agent (the "Transfer Agent"), and each such holder shall be
entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of the Surviving
Corporation's Common Stock or Preferred Stock, as the case may be,
into which the surrendered shares were converted as herein provided.
Until so surrendered, each outstanding certificate theretofore
representing shares of JNNE Common Stock or JNNE Preferred Stock
shall be deemed for all purposes to represent the number of whole
shares of the Surviving Corporation's Common Stock or Preferred
Stock into which the shares of JNNE Common Stock or Preferred Stock
were converted in the Merger.
The registered owner on the books and records of the
Surviving Corporation or the Transfer Agent of any such outstanding
certificate shall, until such certificate has been surrendered for
transfer or conversion or otherwise accounted for to the Surviving
Corporation or the Transfer Agent, have and be entitled to exercise
any voting or other rights with respect to and to receive dividends
and other distributions upon the shares of Common Stock or Preferred
Stock, as the case may be, of the Surviving Corporation represented
by such outstanding certificate as provided above.
Each certificate representing Common Stock or Preferred Stock
of the Surviving Corporation so issued in the Merger shall bear the
same legends, if any, with respect to restrictions on
transferability as the certificates of JNNE so converted and given
in exchange therefor, unless otherwise determined by the Board of
Directors of the Surviving Corporation in compliance with applicable
laws.
IV.
GENERAL
<PAGE>
4.1 Covenants of Go Online. Go Online covenants and
agrees that it will, on or before the Effective Time of the Merger,
take such actions as may be required by the Colorado Business
Corporation Act in order to effectuate the Merger.
4.2 Further Assurances. From time to time, as and when
required by Go Online or by its successors or assigns, there shall
be executed and delivered on behalf of JNNE such deeds and other
instruments, and there shall be taken or caused to be taken by it
such further and other actions as shall be appropriate or necessary
in order to vest or perfect in or conform of record or otherwise by
Go Online the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers,
franchises and authority of JNNE and otherwise to carry out the
purposes of this Merger Agreement, and the officers and directors of
Go Online are fully authorized in the name and on behalf of JNNE or
otherwise to take all such actions and to execute and deliver all
such deeds and other instruments.
4.3 Deferral. Consummation of the Merger may be deferred
by the Board of Directors of JNNE for a reasonable period of time if
the Board of Directors determines that deferral would be in the best
interests of JNNE and its shareholders.
4.4 Amendment. The parties hereto, by mutual consent of
their respective Boards of Directors, may amend, modify or
supplement this Merger Agreement in such manner as may be agreed
upon by them in writing at any time before or after approval of this
Merger Agreement by the shareholders of JNNE and Go Online, but not
later than the Effective Time of the Merger; provided, however, that
no such amendment, modification or supplement not approved by the
shareholders of JNNE and Go Online shall adversely affect the rights
of such shareholders or change any of the principal terms of this
Merger Agreement.
4.5 Dissenters. In the event that the shareholders of
JNNE exercise their dissenters rights in accordance with the
Colorado Business Corporations Act such that the aggregate amount of
monies to be paid by JNNE to such dissenting shareholders exceeds
$2,500.00, then JNNE's Board of Directors may terminate this
Agreement and the Merger without further cause.
4.6 Abandonment. At any time before the Effective Time
of the Merger, this Merger Agreement may be terminated and the
Merger may be abandoned for any reason whatsoever by the Board of
Directors of either JNNE or of Go Online, or of both,
notwithstanding the approval of this Merger Agreement by the
shareholders of JNNE or Go Online, or by both, if circumstances
arise which make the Merger inadvisable. In the event of
abandonment of this Merger Agreement, as above provided, this Merger
Agreement shall become wholly void and of no effect, and no
liability on the part of the Board of Directors or shareholders of
JNNE or Go Online shall arise by virtue of such termination.
4.7 Expenses. If the Merger becomes effective, the
Surviving Corporation shall assume and pay all expenses in
connection therewith not theretofore paid by the respective parties.
If for any reason the Merger shall not become effective, JNNE shall
pay all expenses incurred in connection with all the proceedings
taken in respect of this Merger Agreement or relating thereto.
<PAGE>
4.8 Registered Office. The registered office of the
Surviving Corporation in the State of Delaware is located at 15 E.
North Street, City of Dover, County of Kent, Delaware 19901, and
Paracorp, Inc. is the registered agent of the Surviving Corporation
at such address.
4.9 Agreement. An executed copy of this Merger Agreement
will be on file at the principal place of business of the Surviving
Corporation and, upon request and without cost, a copy thereof will
be furnished to any shareholder.
4.10 Governing Law. This Merger Agreement shall in all
respects be construed, interpreted and enforced in accordance with
and governed by the laws of the State of Delaware and, so far as
applicable, the Merger provisions of the Colorado Business
Corporation Act.
4.11 Counterparts. This Merger Agreement may be executed
in any number of counterparts, each of which shall be deemed to be
an original and all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, JNNE and Go Online have caused this
Merger Agreement to be signed by their respective duly authorized
officers.
JONES NAUGHTON ENTERTIANMENT, INC.
a Colorado corporation
By: /s/Joseph M. Naughton
Its: Chief Executive Officer
ATTESTED:
By: /s/Joseph M. Naughton
Its: Secretary
GO ONLINE NETWORKS CORPORATION
a Delaware corporation
By: /s/Joseph M. Naughton
Its: Chief Executive Officer
ATTESTED:
By: /s/James Cannon
Its: Secretary
CERTIFICATE OF MERGER
OF
JONES NAUGHTON ENTERTAINMENT, INC.
(a Colorado corporation)
INTO
GO ONLINE NETWORKS CORPORATION
(a Delaware corporation)
Pursuant to Section 252c of the General Corporation Law of the State
of Delaware,
It is hereby certified, on behalf of each of the constituent
corporations named below, as follows:
1. The names of the constituent corporations are Jones Naughton
Entertainment, Inc., a Colorado corporation ("JNNE") and Go Online
Networks Corporation, a Delaware corporation ("GONC"). The Articles
of Incorporation of JNNE was filed with the Secretary of State of
the State of Colorado on October 20, 1987. The Certificate of
Incorporation of GONC was filed with the Secretary of State of the
State of Delaware on August 12, 1999.
2. An Agreement and Plan of Reorganization between JNNE and GONC
has been approved, adopted, certified, executed and acknowledged by
JNNE and GONC in accordance with Section 252c of the General
Corporation Law of the State of Delaware.
3. GONC is the surviving corporation.
4. The executed Agreement and Plan of Reorganization is on file at
the principal place of business of GONC, the surviving corporation,
at 5681 Beach Boulevard, Suite 101, Buena Park, California 90621. A
copy of the Agreement and Plan of Reorgan9ization will be furnished
by GONC, the surviving corporation, without cost, to any stockholder
of JNNE or GONC who sends a written request therefor to GONC at its
principal place of business indicated above. The certificate of
Incorporation of the survivor corporation shall be its Certificate
of Incorporation.
5. The authorized capital stock of JNNE preceding the merger is
100,000,000 shares of common stock, no par value, and 20,000,000
shares of preferred stock, no par value. The authorized capital
stock GONC is 100,000,000 shares of common stock par value $.001 per
share and 10,000,000 shares of preferred stock, par value $.001 per
share.
JONES NAUGHTON ENTERTAINMENT, INC.
By: /s/ Joseph M. Naughton
Joseph M. Naughton
Chief Executive Officer
ATTEST:
/s/ Joseph M. Naughton
Joseph M. Naughton
Secretary
GO ONLINE NETWORKS CORPORATION
By: /s/Joseph M. Naughton
Joseph M. Naughton
Chief Executive Officer
ATTEST:[
/s/ James Cannon
James Cannon
Secretary
[STATE OF DELAWARE ]
[SECRETARY OF STATE ]
[DIVISION OF CORPORATIONS]
[FILED 09:00 AM, 09/09/1999]
[991377404-3082585 ]
[09-14-1999 12:56:18]
[19991171714 C $75.00]
[FILED CUSTOMER COPY ]
[DONETTA DAVIDSON ]
[COLORADO SECRETARY OF STATE]
ARTICLES OF MERGER
THIS IS TO CERTIFY:
1. PARTIES. Pursuant to the terms of that certain definitive
Agreement and Plan of Reorganization dated September 8, 1999 (the
"Agreement"), Jones Naughton Entertainment, Inc. ("JNNE"), a
corporation formed pursuant to the laws of the State of Colorado,
has merged with Go Online Networks Corporation, a corporation formed
pursuant to the laws of the State of Delaware, effective September
8, 1999 (the "Effective Date").
2. APPROVAL. The terms of the Agreement were approved by the
affirmative vote of the Board of Directors of both JNNE and GONC on
August 12, 1999 by unanimous written consent, by the Shareholder of
GONC by unanimous written consent on August 12, 1999 and by a
majority of the Shareholders of JNNE on September 8, 1999 at a
special meeting of shareholders held pursuant to proper notice. The
number of votes cast in favor of the merger by each voting group
entitled to vote separately on the merger was sufficient for
approval by that voting group.
3. SHARE EXCHANGE. The Agreement provides that all of the
shareholders of JNNE, representing 71,302,677 issued and outstanding
common shares, shall exchange their respective shares for an
aggregate of 71,302,677 of GONC common stock. The Agreement also
provides that all of the holders of preferred stock of JNNE,
representing 499,333 issued and outstanding preferred shares, shall
exchange their respective shares for an aggregate of 499,333 shares
of GONC preferred stock. Immediately prior to the Effective Date,
there were 100 common shares of GONC issued and outstanding.
4. SERVICE. For purposes herein, all notices and service of
process may be effectuated by tendering the same to M. Richard
Cutler, Esq., 610 Newport Center Drive, Suite 800, Newport Beach,
CA 92660, legal counsel to GONC.
5. SURVIVING ENTITY. Pursuant to the terms of the Agreement,
GONC shall be the surviving entity and, upon the Effective Date and
upon filing of these Articles of Merger with the Colorado Secretary
of State and issuance of an applicable Certificate of Merger by the
Secretary of State of Colorado, JNNE shall cease to exist as a bona
fide Colorado corporation. The address of the principal office of
GONC is 5681 Beach Boulevard, Suite 101, Buena Park, CA 90621.
6. COUNTERPARTS. This Articles of Merger may be executed in
counterparts, each of which shall be deemed to be an original
document, but together shall be deemed to constitute only one
agreement.
Executed as of this 8th day of September, 1999
JONES NAUGHTON ENTERTAINMENT, GO ONLINE NETWORKS
INC. CORPORATION
/s/Joseph M. Naughton /s/Joseph M. Naughton
By: Joseph M. Naughton, By: Joseph M. Naughton,
Chief Executive Officer Chief Executive Officer
[Filed on October 20, 1987]
[Secretary of State]
[State of Colorado]
ARTICLES OF INCORPORATION
of
VALENCIA CAPITAL, INC.
The undersigned natural person, who is more than eighteen years of age,
hereby establishes a corporation (the "Corporation") under the provisions of
the Colorado Corporation Code (the "Code"), adopts these Articles of
Incorporation:
ARTICLE 1
Name
The corporate name of the Corporation shall be: VALENCIA CAPITAL, INC.
ARTICLE 2
Registered Office and Agent
The address of the initial registered office of the Corporation is 420 S.
Howes, Street, Suite 200, Fort Collins, Colorado 80521, and the name of its
initial registered agent at such address is Kenneth C. Wolfe.
ARTICLE 3
Incorporator
The name and address of the INCORPORATOR of the Corporation is: Kenneth C.
Wolfe at 420 S. Howes Street, Suite 200, Fort Collins, Colorado 80521.
ARTICLE 4
Purposes and Powers
Section 3.01. Purposes. The Corporation shall have and may exercise all of
the rights, powers and privileges' now or- hereafter conferred upon
corporations organized under the laws of Colorado. In addition, the
Corporation may do everything necessary, suitable or proper for the
accomplishment of any of its purposes. The Corporation may conduct part or
all of
<PAGE>
its business in Colorado, other states of the United States or ,the world
and may hold, purchase, mortgage, lease and convey real and personal
property in any of such places.
Section 3.02. Powers. The Corporation, subject to any specific written
limitations or restrictions imposed by the Code or by these Articles of
Incorporation, shall have and exercise the following powers:
Clause (a) Statutory Powers. To have and exercise all the powers specified
in the Code;
Clause (b) Enter into Profit Sharing Arrangements and Partnerships. To enter
into any lawful arrangement for sharing profits, union of interest,
reciprocal association, or cooperative association with any domestic
corporation or foreign corporations, asscciatiods, partnerships,
individuals,', or other entities, and to enter into general or limited
partnerships;
Clause (c) Guaranties. To make any guaranty respecting stocks, dividends,
securities, indebtedness, interest, contracts, or other obligations created
by any domestic or foreign corporations, associations, partnerships,
individuals, or other entities;
Clause (d) Construction of Powers. Each of the foregoing clauses of this
section shall be construed as independent powers, and the matters expressed
in each clause shall not, unless otherwise expressly provided, be limited by
reference to, or inference from, the terms of any other clause. The
enumeration of specific powers shall not be construed as limiting or
restricting in any manner either the meaning of general terms used in any
of these clauses, or -the scope of the general powers of the Corporation
created by them; nor shall the expression of one thing in any of these
clauses be deemed to exclude another not expressed, although it be of like
nature.
Section 3.03. Carrying Out of Purposes and Exercise of Powers in Anv
Jurisdiction. The Corporation may carry out its purposes and exercise its
powers in any state, territory, district, or possession of the United
States, or in any foreign countrv, to the extent that these purposes and
powers are not forbidden by the law of the state, territory, district or
possession of the United States, or by the foreign country; and it may limit
the purpose or purposes that it proposes to carry out or the powers it
proposes to exercise in any application to do
<PAGE>
business in any state, territory, district, or possession of the United
States, or foreign country.
Section 3.04. Direction of Purposes and Exercise of Powers by Directors. The
Board of Directors, subject to any specific written limitations or
restrictions imposed by the Code or by these Articles of incorporation,
shall direct the carrying out of the purposes and exercise the powers of the
Corporation without previous authorization or subsequent approval by the
shareholders of the Corporation.
Section 3.05. Limiting Provision. Nothing contained in this Article shall be
construed to authorize the Corporation to engage in the business of banking
or insurance.
ARTICLE 4
Capital
Section 4.01. Number. The aggregate number of shares that the Corporation
shall have authority to issue is 100,000,000 shares of capital stock without
par value.
Section 4.02. Right to Fix Consideration for Shares. The directors of the
Corporation shall fix and determine the consideration to be received for
shares of the Corporation.
The Board of Directors is authorized to impose anv restriction on the sale,
pledge, transfer or other disposition of shares of the Corporation by the
shareholders which, in "the Board of Directors" sole discretion, is
necessary or desirable for the Corporation, including, but not limited to,
those: restrictions necessary to enable the Corporation to comply with state
or federal securities laws.
Section 4.03. Voting for Directors. Cumulative voting shall not be allowed
in the election of directors of the Corporation.
Section 4.04. Shares Not to be Divided Into Classes. The shares of the
Corporation are not to be divided, into classes.
Section 4.05. No shares Issued in Series. The Corporation is not authorized
to issue shares in series.
<PAGE>
ARTICLE 5
Pre-emptive Right
No holder of any stock of the Corporation shall be entitled, as a matter of
right, to purchase, subscribe for or otherwise acquire any new or additional
shares of stock of the Corporation of any class, or any options or warrants
to purchase, subscribe for or otherwise acquire any such new or additional
shares, or any shares, bonds, notes, debentures or other securities
convertible into or carrying options or warrants to 'purchase, subscribe for
or otherwise acquire any such new or additional shares.
ARTICLE 6
Provisions For Regulation of
The Internal Affairs of the Corporation
Section 6.01. Bylaws. The initial Bylaws shall be adopted by the Board of
Directors. The power to alter, amend, or repeal the Bylaws cr to adopt new
Bylaws shall be vested in the Board of Directors. The Bylaws may contain any
provisions for the regulation and management of the affairs of the
Corporation not inconsistent with the Code or these Articles of Incorporation.
Section 6.02. Transactions in Which Directors Have an Interest. Any contract
or other transaction between the Corporation and one or more of its
directors, or between the Corporation and any firm of which one or, more of
its directors are members or employees, or in which they are interested, or
between the Corporation and any corporation or association of which one or
more of its directors are shareholders, members, directors, officers, or
employees, or in which they are interested, shall be valid for all purposes,
notwithstanding the presence of the director or directors at the meeting of
the Board of Directors of the Corporation that acts upon, or in reference
to, the contract or transaction, and notwithstanding his or their
participation in the action if the fact of such interest shall be disclosed
or known to the Board of Directors and the Board of Directors shall,
nevertheless, authorize or ratify the contract or transaction,
<PAGE>
the interested director or directors to be counted in determining whether a
quorum is present and to be entitled to vote on such authorization or
ratification. This section shall not be construed to invalidate any contract
or other transaction that would otherwise be valid under the common and
statutory law applicable to it.
Section 6.03. Elimination of Certain Liability of Directors. A director of
the Corporation shall not be personally liable to the Corporation or its
shareholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's, duty of
loyalty to the Corporation or its shareholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under the Colorado Corporation Code, or (iv) for any
transaction from which the director derived an improper personal benefit.
Section 6.04. Indemnification and Insurance.
Clause (a). Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of
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 or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding
is alleged action in any official capacity as a director, officer, employee
or agent; or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation
to the fullest extent authorized by the Code, as it exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than the law permitted the Corporation, to provide prior to such
amendment) against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure
to the benefit of his heirs, representatives and administrators;
<PAGE>
provided, however, that, except as provided in Clause (b) the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this Section shall be
a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its
final disposition; provided, however, that, if the Code requires, the
payment oil such expenses incurred by a director or officer in his capacity
as a director or officer (and not in any other capacity in which service was
or is rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in advance of the
final disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it is ultimately determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same
scope and effect as the foregoing indemnification of directors and officers.
Clause (b). Right of Claimant to Bring Suit. If a claim under Clause (a) of
this Section is not paid in full by the Corporation within 30 days after a
written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance
of its final disposition where the required undertaking, if any is required,
has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the Code for the
Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors, independent legal
counsel, or its shareholders), that the claimant has not met such applicable
standard or conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
Clause (c) . Nonexclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of any
other right with any person may have or hereafter acquire
<PAGE>
under any statute, provision of the certificate of incorporation, bylaw,
agreement, vote of shareholders or disinterested directors or otherwise.
Clause (d). Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expenses liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Code.
Section 6.05. Removal of Directors. At a special meeting of the shareholders
called expressly for that purpose, directors may be removed. in the manner
provided in this section. The entire Board of Directors may be removed, with
or without cause, by a vote of the holders of a majority of the shares then
entitled to vote at an election of directors. No director may be removed if
the votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire Board of Directors. No
director shall be entitled to receive notice of or a hearing with respect to
his removal.
Section 6.06. Compensation of Directors. The Board of Directors is
authorized to make provision for reasonable compensation to its members for
their services as directors and to fix the basis and conditions upon which
this compensation shall be paid. Any director may also serve the Corporation
in any other capacity and receive compensation therefor in any form.
ARTICLE 7
Data Respecting Directors
Section 7.01. Board of Directors. The Board of Directors shall not be
required to be residents of the state of Colorado or shareholders of the
Corporation.
Section 7.02. Name and Address. The names and addresses of the persons who
are to serve as directors until the first annual
<PAGE>
meeting of the shareholders and until their successors have been elected
and qualified, follows:
John C. Power
9012 S. 47th Place
Phoenix, Arizona 85044
Stephen G. Calandrella
7150 Campus Dr., Suite 215
Colorado Springs, CO 80918
Eric Ratinoff
Webb Canyon Road
Claremont, California 91711
Section 7.03. Increase or Decrease of Directors. The
number of directors shall be fixed in accordance with the bylaws.
The number of directors shall not be more than nine or less than
the number required by the Colorado Corporation Code, as amended.
No shares may be issued and held of record by more shareholders
than there are directors until there are at least three directors. Any
shares issued in violation of this paragraph shall be
null and void. This provision shall also constitute a restriction on the
transfer of shares.
DATED the 19th day of October, 1987.
/s/ Kenneth C. Wolfe
Incorporator
CHANGE OF NAME
DP871756429
[02-07-91 08:30]
[911007235 $35.00]
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
VALENCIA CAPITAL, INC.
WE, THE UNDERSIGNED, pursuant to the Colorado Business Corporation
Act, hereby adopt the following Articles of Amendment as a revision
of the articles of Incorporation of Valencia Capital, Inc.
FIRST: The name of the corporation is Valencia Capital, Inc.
SECOND: The duration of the corporation is perpetual.
THIRD: The following amendments to the Articles of Incorporation
were approved by the shareholders:
Article I of the Articles of Incorporation is hereby amended in its
entirety to read as follows:
ARTICLE I
Corporate Name
The name of the corporation is: Jones Naughton Entertainment, Inc.
FOURTH: The amendments set forth in Article Third above were adopted
the 7th day of December, 1990.
FIFTH: The number of shares outstanding and entitled to vote of such
amendments as of the 7th day of December, 1990, was 3,970,755.
{STAMP}[COMPUTER UPDATE COMPLETE]
{STAMP}[COMP. CH'D RPM
<PAGE>
SIXTH: 3,110,626 shares voted for such amendments, and 0 shares
voted against such amendments.
DATED this 20 day of December, 1990.
/s/Spike Jones, Jr.
Spike Jones, Jr., President
/s/Joseph Naughton
Joseph Naughton, Secretary
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
I, THE UNDERSIGNED, a Notary Public, hereby certify that on the 20
day of December, 1990, personally appeared before me Spike Jones,
Jr. and Joseph Naughton, who being by me first duly sworn severally
declared that they are the persons who signed the foregoing Articles
of Amendment as corporate officers of Valencia Capital, Inc., and
that the statements contained herein are true.
/s/David K. Armstrong
NOTARY PUBLIC
Residing at: (not legible)
(SEAL)
[941084359 $30.00]
[SOS 07-27-94 13:11 ]
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
JONES NAUGHTON ENTERTAINMENT INC.
Pursuant to Section 7-2-109 of the Colorado Corporation Code -(the
"Code"), Jones Naughton Entertainment, Inc. hereby submits the following
Articles of Amendment to the Articles of Incorporation.
FIRST:
The name of the Corporation is Jones Naughton Entertainment, Inc.
SECOND:
Article 4 of the Articles of Incorporation is hereby amended in its
entirety to read as follows:
ARTICLE 4
The corporation shall have authority to issue shares as follows:
4.01 One hundred million (100,000,000) shares of common stock, with
no par value. Each share of common stock shall entitle the holder
thereof to one (1) vote on each matter submitted to a vote at a
meeting of shareholders.
4.02 Ten million (10,000,000) shares of Preferred Stock, with no par
value, to be issued in the form and manner, with the relative
rights, preferences, qualifications, limitations or restrictions
thereon as the Board of Directors shall determine.
4.03 Cumulative voting shall not be allowed in the election of
Directors.
<PAGE>
THIRD:
The above Articles of Amendment to the Articles of Incorporation was
adopted by the Company's shareholders on June 8, 1994.
FOURTH:
The designation and number of shares outstanding and entitled to
vote at the time of adoption of the Articles of Amendment to the
Articles of Incorporation were 7,157,757 shares of Common Stock;
and the number of such shares represented at such vote were
3,738,000 The total number of votes cast in favor of the Articles
of amendment to the Articles of Incorporation were 3,738,000 Such
3,738,000 shares cast in favor of such Amendments were sufficient
for approval.
FIFTH:
The Articles of Amendment do not provide for the exchange,
reclassification or cancellation of issued shares.
In witness whereof, Jones Naughton Entertainment, Inc. has
executed these Articles of Amendment to the Articles of Incorporation
as of the 8th day of June, 1994.
Jones Naughton Entertainment, Inc.
By: /s/Michael D. English
Its: President
By: /s/Joseph M. Naughton
Its: Secretary
Attest:Verified
By:/s/Joseph M. Naughton
Secretary
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On the 10th day of June, 1994, personally appeared before me
Michael D. English and Joseph M. Naughton who being duly sworn did
say, that they are respectively the President and the Secretary of
Jones Naughton Entertainment, Inc., and that the within and foregoing
instrument was signed on'W of saidpany by authority of the approval of
the shareholders of said Company.
/s/Grace M. Westlund
NOTARY PUBLIC
(OFFICIAL SEAL)
(NORARY PUBLICE-CALIFORNIA]
/s/Grace M. Westlund
NOTARY PUBLIC
(OFFICIAL SEAL)
(NORARY PUBLIC-CALIFORNIA]
[941085002 $30.00]
[SOS 07-28-94 15:22]
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
JONES NAUGHTON ENTERTAINMENT, INC.
Pursuant to the authority vested in the Board of Directors of Jones
Naughton Entertainment, Inc. in the Articles of Incorporation the
Board of Directors hereby adopts the following amendments to the
Articles of Incorporation of Jones Naughton Entertainment, Inc.:
FIRST:
The name of the Corporation is Jones Naughton Entertainment, Inc.
the ("Company").
SECOND:
The following amendment to the Articles of Incorporation of the
Company was adopted by the Board of Directors without shareholder
action (shareholder action was not required).
Article 4, paragraph 4.02 of the Articles of Incorporation is hereby
amended by adding the following:
1. DEFINITIONS. As used herein, the following words and
expressions have the respective meanings set out below:
(a) "Articles of Incorporation" means the Articles of Incorporation
of the Company as amended and in effect from time to time.
(b) "CONVERSION RATE" shall have the meaning set forth in paragraph
5 hereof.
(c) "Common Stock" means the capital stock of the Company
designated as common stock and authorized from time to time and
being stock which is junior to all series of Preferred Stock in
respect of payments upon Liquidation.
(d) "Company" means Jones Naughton Entertainment, Inc. and its
subsidiaries and includes any successor corporation by merger,
consolidation or otherwise if the stockholders of the former
corporations continue as stockholders of the new combined corporation.
<PAGE>
(e) "Liquidation Event" means the voluntary or involuntary
liquidation, distribution or sale of substantially all of the
Company's assets, or the dissolution or winding up of the Company
and includes (i) the merger or consolidation of the Company with
another corporation pursuant to any statute except for a merger or
consolidation of the Company in which the Company is the surviving
entity and immediately after which persons who held shares
representing a majority of the votes for directors of the Company
under the Articles of Incorporation hold a majority of votes for
directors of the surviving entity; and (ii) a distribution or sale
of substantially all of the Company's assets or stock.
(f) "Liquidation price" shall have the meaning set forth in
paragraph 6(a) hereof.
(g) "Preferred Stock" means the authorized class of capital stock of
the Company as set forth in Article 4, paragraph 4.02 of the
Company's Articles of Incorporation, as amended.
(h) "Series a Preferred Stock" means the authorized class of capital
stock of the Company designated as Series A Convertible Preferred
Stock pursuant to paragraph 2 hereof.
2. DESIGNATION AND NUMBER OF SHARES. 1,500,000 Shares of the
Preferred Stock of the Company shall constitute a series of
preferred stock designated as Series A Convertible Preferred Stock,
no par value (the "Series A Preferred Stock").
3. VOTING RIGHTS OF SERIES A PREFERRED STOCK.
(a) General. Except as otherwise provided by law, the holder of
Series A Preferred Stock shall have the right to one vote for each
share of Common Stock into which such holder's Series A Preferred
Stock is convertible; and with respect to such vote, such holder
shall have, subject to Colorado law, all voting rights and powers
equal to the voting rights and powers of holders of Common Stock,
and shall be entitled to notice of any stockholders meetings in
accordance with the Bylaws of the Company, and shall be entitled to
vote with the holders of the Common Stock together as a single class
upon any question affecting the management and affairs of the Company.
4. DIVIDENDS. The holders of Series A Preferred Stock will receive
dividends on the same per share basis, at the same times and to the
same extent as the holders of Common Stock.
5. CONVERSION OF SERIES A PREFERRED STOCK TO COMMON STOCK. Each
Series A Preferred Share shall be convertible, at the option of the
owner thereof, at any time, upon surrender to the Company of the
certificates for the shares to be
<PAGE>
converted, into fully paid and nonassessable shares of Common Stock
of the Company, at the initial rate of one (1) Common Share for each
Series A Preferred Share ("Conversion Rate"). Conversion of Series A
Preferred Stock into Common Stock shall be made pursuant to the
following terms:
(a) Any holder of the Series A Preferred Stock desiring to convert
shares as herein provided shall deliver, duly endorsed in blank, the
certificate or certificates representing the shares to be converted
to the Company, and at the same time notify the Secretary of the
Company in writing, that such holder desires to convert the Series A
Preferred Stock into Common Stock pursuant to these provisions at
the Conversion Rate.
(b) Upon receipt by the Secretary of a certificate or certificates
representing Series A Preferred Stock and a Notice that the holder
thereof desires to convert the same, the Company shall forthwith
cause to be issued to the holder of the Series A Preferred Stock
surrendering the same, one (1) share of Common Stock for each Series
A Preferred Share surrendered, with fractional shares being rounded
up to the next whole share, and shall deliver to such holder a
certificate for such Common Stock.
(C) The number and kind of securities issuable upon conversion of
the Series A Preferred Stock shall be subject to adjustment from
time to time upon the happening of certain events, as follows:
(i) In case the Company shall (a) declare a dividend on its Common
Stock in shares of Common Stock or make a distribution in shares of
Common Stock, (b) subdivide its outstanding shares of Common Stock,
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (d) issue by reclassification of
its shares of Common Stock other securities of the Company
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
corporation), then the number of shares of Common Stock issuable
upon conversion of the Series A Preferred Stock immediately prior
thereto shall be adjusted so that the holder of the Series A
Preferred Stock shall be entitled to receive the kind and number of
shares of Common Stock of the Company which he would have owned or
have been entitled to receive after the happening of any of the
events described above, had the Series A Preferred Stock been
converted immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant to
this paragraph 5(c)(i) shall become effective immediately after the
effective date of such event retroactive to immediately after the
record date, if any, for such event.
(ii) No adjustment in the number of shares of Common Stock issuable
hereunder shall be required unless such adjustment would require an
increase or
<PAGE>
decrease of at least one percent (1%) in the number of
shares of Common Stock issuable upon the conversion of the Series A
Preferred Stock.
(iii) Whenever the number of shares of Common Stock issuable upon
the conversion of the Series A Preferred Stock or the conversion
price of such Common Stock is adjusted, the Company shall promptly
mail by first class mail, postage prepaid, to each holder, notice of
such adjustment or adjustments.
(iv) Notwithstanding any adjustment in the number or kind of shares
issuable upon the conversion of the Series A Preferred Stock,
certificates representing shares of Series A Preferred Stock issued
prior or subsequent to such adjustment may continue to refer to the
same number and kind of shares as were issuable prior to such
adjustment.
(v) Notwithstanding anything to the contrary herein, each share of
Series A Preferred Stock shall automatically be converted into
shares of Common Stock at the then effective Conversion Rate
immediately prior to the closing of an underwritten public offering
covering any of the Company's Common Stock.
(d) Reservation of Stock Issuable Upon Conversion. The Company shall
at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting
the conversion of the shares of the Series A Preferred Stock, such
number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the
Series A Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares
of Series A Preferred Stock, the Company shall take such corporate
action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
6. LIQUIDATION RIGHTS OF SERIES A PREFERRED STOCK.
(a) In the event of the occurrence of any Liquidation Event, the
holders of Series A Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of any assets of the
Company to the holders of Common Stock, an amount equal to the
consideration received by the Company for all shares of Series A
Preferred Stock issued and outstanding divided by the number of
shares then issued and outstanding plus eight percent (8%) per annum
from the date of issuance of the Series A Preferred Stock.
<PAGE>
(b) All assets remaining in the Company after the distributions
provided for in paragraph 6(a) have been fully made, shall be
distributed pro rata among the holders of Common Stock to the
exclusion of the holders of and Series A Preferred Stock.
(c) In any valuation of assets of the Company, if the consideration
received by the Company is other than cash, its value will be deemed
to be its fair market value. In the case of publicly traded
securities received in a merger, consolidation or sale of the
Company, fair market value shall mean the closing market price for
such securities on the date such consolidation, merger or sale is
consummated. If the consideration is in a form other than publicly
traded securities, its value shall be determined by the Board of
Directors of the Company.
THIRD:
The above Articles of Amendment to the Articles of Incorporation was
adopted by the Board of Directors without shareholder approval pursuant
to the provisions of the Articles of Incorporation on June 8, 1994.
FOURTH:
The Articles of Amendment do not provide for the exchange,
reclassification or cancellation of issued shares.
In witness whereof, Jones Naughton Entertainment, Inc. has executed
these Articles of Amendment of Articles of Incorporation as of the
26 day of July, 1994.
Jones Naughton Entertainment, Inc.
By: /s/Michael D. English
Its: President
By: /s/Joseph M. Naughton
Its: Secretary
Attest: Verified
By: /s/Joseph M. Naughton
Secretary
<PAGE>
STATE OF CALIFORNIA )
:ss.
COUNTY OF LOS ANGELES )
On the 27th day of July, 1994, personally appeared before me
Michael D. English and Joseph M. Naughton , who being by me duly
sworn did say that they are respectively the President and Secretary
of JONES NAUGHTON ENTERTAINMENT INC., the corporation that executed
the above and foregoing instrument and that said instrument was
signed in behalf of said corporation by authority of its Articles
of Incorporation as Amended and said Michael D. English and
Joseph M. Naughton acknowledged to me that said corporation
executed the same.
/s/Grace M. Westlund
NOTARY PUBLIC
[OFFICIAL SEAL]
[NOTARY PUBLIC CALIFORNIA]
JONES NAUGHTON ENTERTAINMENT, INC.
Statement of Designation of Series a
Convertible Preferred Stock
Pursuant to Section 7-4-102(4)
of the Colorado Corporate Code
We, MICHAEL D. ENGLISH and JOSEPH M. NAUGHTON, being, respectively,
the President and the Secretary of Jones Naughton Entertainment,
Inc., a corporation organized and existing under the laws of the State
of Colorado (the "Company"), do hereby certify:
That, pursuant to authority expressly vested in the Board of
Directors of the Company by the provisions of its Articles of
Incorporation, the Board of Directors has duly adopted the following
resolution on the 8th day of June, 1994:
RESOLVED, that this Board of Directors, pursuant to authority
expressly vested in it by the provisions of the Articles of
Incorporation of the Company, authorizes the issue of a series of
Preferred Stock of the Company and fixes the designation, relative
powers, preferences and rights, and the qualifications, limitations
and restrictions for a series of Preferred Stock, as follows:
1. DEFINITIONS. As used herein, the following words and expressions
have the respective meanings set out below:
(a) "Articles of Incorporation" means the Articles of Incorporation
of the Company as amended and in effect from time to time.
(b) "Conversion Rate" shall have the meaning set forth in paragraph
5 hereof.
(c) "Common Stock" means the capital stock of the Company designated
as common stock and authorized from time to time and being stock
which is junior to all series of Preferred Stock in respect of
payments upon Liquidation.
(d) "Company" means Jones Naughton Entertainment, Inc. and its
subsidiaries and includes any successor corporation by merger,
consolidation or otherwise if the stockholders of the former
corporations continue as stockholders of the new combined corporation.
(e) "Liquidation Event" means the voluntary or involuntary
liquidation, distribution or sale of substantially all of the
Company's assets, or the dissolution or winding up of the Company
and includes (i) the merger or consolidation of the
<PAGE>
Company with another corporation pursuant to any statute except for
a merger or consolidation of the Company in which the Company is the
surviving entity and immediately after which persons who held shares
representing a majority of the votes for directors of the Company
under the Articles of Incorporation hold a majority of votes for
directors of the surviving entity; and (ii) a distribution or sale
of substantially all of the Company's assets or stock.
(f) "Liquidation Price" shall have the meaning set forth in
paragraph 6(a) hereof.
(g) "Preferred Stock" means the authorized class of capital stock
of the Company as set forth in Article 4, paragraph 4.02 of the
Company's Articles of Incorporation, as amended.
(h) "Series A Preferred Stock" means the authorized class of
capital stock of the Company designated as Series A Convertible
Preferred Stock pursuant to paragraph 2 hereof.
2. DESIGNATION AND NUMBER OF SHARES. 1,500,000 Shares of the
Preferred Stock of the Company shall constitute a series of
preferred stock designated as Series A Convertible Preferred Stock,
no par value (the "Series A Preferred Stock").
3. VOTING RIGHTS OF SERIES A PREFERRED STOCK.
(a) General. Except as otherwise provided by law, the holder of
Series A Preferred Stock shall have the right to one vote for each
share of Common Stock into which such holder's Series A Preferred
Stock is convertible; and with respect to such vote, such holder
shall have, subject to Colorado law, all voting rights and powers
equal to the voting rights and powers of holders of Common Stock,
and shall be entitled to notice of any stockholders meetings in
accordance with the Bylaws of the Company, and shall be entitled to
vote with the holders of ' the Common Stock together as a single
class upon any question affecting the management and affairs of the
Company.
4. DIVIDENDS. The holders of Series A Preferred Stock win receive
dividends on the same per share basis, at the same times and to the
same extent as the holders of Common Stock.
5. CONVERSION OF SERIES A PREFERRED STOCK TO COMMON STOCK. Each
Series A Preferred Share shall be convertible, at the option of the
owner thereof, at any time, upon surrender to the Company of the
certificates for the shares to be converted, into fully paid and
nonassessable shares of Common Stock of the Company, at the initial
rate of one (1) Common Share for each Series A Preferred Share
("Conversion
<PAGE>
Rate"). Conversion of Series A Preferred Stock into Common Stock
shall be made pursuant to the following terms:
(a) Any holder of the Series A Preferred Stock desiring to convert
shares as herein provided shall deliver, duly endorsed in blank, the
certificate or certificates representing the shares to be converted
to the Company, and at the same time notify the Secretary of the
Company in writing, that such holder desires to convert the Series A
Preferred Stock into Common Stock pursuant to these provisions at
the Conversion Rate.
(b) Upon receipt by the Secretary of a certificate or certificates
representing Series A Preferred Stock and a notice that the holder
thereof desires to convert the same, the Company shall forthwith
cause to be issued to the holder of the Series A Preferred Stock
surrendering the same, one (1) share of Common Stock for
each Series A Preferred Share surrendered, with fractional shares
being rounded up to the next whole share, and shall deliver to such
holder a certificate for such Common Stock.
(c) The number and kind of securities issuable upon conversion of
the Series A Preferred Stock shall be subject to adjustment from
time to time upon the happening of certain events, as follows:
(i) In case the Company shall (a) declare a dividend on its Common
Stock in shares of Common Stock or make a distribution in shares of
Common Stock, (b) subdivide its outstanding shares of Common Stock,
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (d) issue by reclassification of
its shares of Common Stock other securities of the Company
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
corporation), then the number of shares of Common Stock issuable
upon conversion of the Series A Preferred Stock immediately prior
thereto shall be adjusted so that the holder of the Series A
Preferred Stock shall be entitled to receive the kind and number of
shares of Common Stock of the Company which he would have owned or
have been entitled to receive after the happening of any of the
events described above, had the Series A Preferred Stock been
converted immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant to
this paragraph 5(c)(i) shall become effective immediately after the
effective date of such event retroactive to immediately after the
record date, if any, for such event.
(ii) No adjustment in the number of shares of Common Stock issuable
hereunder shall be required unless such adjustment would require an
<PAGE>
increase or decrease of at least one percent (1%) in the number of
shares of Common Stock issuable upon the conversion of the Series A
Preferred Stock.
(iii) Whenever the number of shares of Common Stock issuable upon
the conversion of the Series A Preferred Stock or the conversion
price of such Common Stock is adjusted, the Company shall promptly
mail by first class mail, postage prepaid, to each holder, notice of
such adjustment or adjustments.
(iv) Notwithstanding any adjustment in the number or kind of shares
issuable upon the conversion of the Series A Preferred Stock,
certificates representing shares of Series A Preferred Stock issued
prior or subsequent to such adjustment may continue to refer to the
same number and kind of shares as were issuable prior to such
adjustment.
(v) Notwithstanding anything to the contrary herein, each share of
Series A Preferred Stock shall automatically be converted into
shares of Common Stock at the then effective Conversion Rate
immediately prior to the closing of an underwritten public offering
covering any of the Company's Common Stock.
(d) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred
Stock, such number of its shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all outstanding
shares of the Series A Preferred Stock, and if at any time the
number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding
shares of Series A Preferred Stock, the Company shall take such
corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
6. LIQUIDATION RIGHTS OF SERIES A PREFERRED STOCK.
(a) In the event of the occurrence of any Liquidation Event, the
holders of Series A Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of any assets of the
Company to the holders of Common Stock, an amount equal to the
consideration received by the Company for all shares of Series A
Preferred Stock issued and outstanding divided by the number of
shares then issued and outstanding plus eight percent (8%) per annum
from the date of issuance of the Series A Preferred Stock.
<PAGE>
(b) All assets remaining in the Company after the distributions
provided for in paragraph 6(a) have been fully made, shall be
distributed pro rata among the holders of Common Stock to the
exclusion of the holders of and Series A Preferred Stock.
(c) In any valuation of assets of the Company, if the consideration
received by the Company is other than cash, its value will be deemed
to be its fair market value. In the case of publicly traded
securities received in a merger, consolidation or sale of the
Company, fair market value shall mean the closing market price for
such securities on the date such consolidation, merger or sale is
consummated. If the consideration is in a form other than publicly
traded securities, its value shall be determined by the Board of
Directors of the Company.
IN WITNESS WHEREOF, the resolution set forth above was adopted the 8th
day of June, 1994.
By: /s/Michael D. English
Its: President
By: /s/Joseph M. Naughton
Its: Secretary
Attest: Verified
By: /s/Joseph M Naughton
Secretary
<PAGE>
STATE OF CALIFORNIA )
:ss.
COUNTY OF LOS ANGELES )
On the 10th day of June1994, personally appeared before me
Michael D. English and Joseph M. Naughton, who being by me duly
sworn did say that they are respectively the President and Secretary
of JONES NAUGHTON ENTERTAINMENT, INC., the corporationt executed
the above and foregoing instrument and that said instrument was signed
in behalf of said corporation by authority of its Articles of
Incorporation as Amended and said Michael D. English and
Joseph M. Naughton acknowledged to me that said corporation
executed the same.
/s/ Grace M. Westlund
NOTARY PUBLIC
(OFFICIAL SEAL)
(NOTARY PUBLIC-CALIFORNIA)
AMENDED AND RESTATED
B Y L A W S
of
JONES NAUGHTON
ENTERTAINMENT , INC.
a Colorado Corporation
<PAGE>
TABLE OF CONTENTS
ARTICLE I - CORPORATE OFFICES . . . . . . . . . . . . . . . . 1
1.01 Principal Office . . . . . . . . . . . . . . . . . . . . 1
1.02 Other Offices . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II -- SHAREHOLDERS . . . . . . . . . . . . . . . . . 1
2.01 Annual Meeting . . . . . . . . . . . . . . . . . . . . . 1
2.02 Special Meetings . . . . . . . . . . . . . . . . . . . . 1
2.03 Place of Meetings . . . . . . . . . . . . . . . . . . . 2
2.04 Notice of Meetings . . . . . . . . . . . . . . . . . . . 2
2.05 Closing of Stock Transfer Books . . . . . . . . . . . . 2
2.06 Record Date for Determination of Shareholders . . . . . 2
2.07 Voting List . . . . . . . . . . . . . . . . . . . . . . 3
2.08 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.09 Proxies . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Voting Shares . . . . . . . . . . . . . . . . . . . . . 4
2.11 Voting of Shares by Certain Holders . . . . . . . . . . 4
2.12 Advance Notice for Shareholder Nominations
of Directors and Proposals . . . . . . . . . . . . . . . 4
2.13 Examination by Shareholders of Books and Records . . . . 5
ARTICLE III -- B0ARD OF DIRECTORS . . . . . . . . . . . . . 6
3.01 General Powers . . . . . . . . . . . . . . . . . . . . . 6
3.02 Number of Directors and Qualification . . . . . . . . . 6
3.03 Election and Term of Office . . . . . . . . . . . . . . .6
3.04 Regular Meetings . . . . . . . . . . . . . . . . . . . . 6
3.05 Special Meetings . . . . . . . . . . . . . . . . . . . . 6
3.06 Notice . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.07 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.08 Manner of Acting . . . . . . . . . . . . . . . . . . . . 7
3.09 Vacancies and Newly Created Directorships . . . . . . . 7
3.10 Committees . . . . . . . . . . . . . . . . . . . . . . . 7
3.11 Fees and Compensation . . . . . . . . . . . . . . . . . 8
3.12 Presumption of Assent . . . . . . . . . . . . . . . . . 8
3-13 Resignations . . . . . . . . . . . . . . . . . . . . . . 8
3.14 Action by Written Consent . . . . . . . . . . . . . . . 8
3.15 Meetings by Telephone Conference Call . . . . . . . . . 9
3.16 Removal of Directors . . . . . . . . . . . . . . . . . . 9
3.17 Loans to Directors, Officers, and Others . . . . . . . .9
<PAGE>
TABLE OF CONTENTS - CONT'D
ARTICLE TV -- COMMITTEES OF DIRECTORS . . . . . . . . .9
4.01 How Constituted . . . . . . . . . . . . . . . . .9
4.02 Powers . . . . . . . . . . . . . . . . . . . . . .9
4.03 Proceedings . . . . . . . . . . . . . . . . . . .9
4.04 Quorum and Manner of Acting . . . . . . . . . . 10
4.05 Meetings by Telephone Conference Call, Consent . 10
4-06 Resignations . . . . . . . . . . . . . . . . . . 10
4.07 Removal . . . . . . . . . . . . . . . . . . . . 10
4.08 Vacancies . . . . . . . . . . . . . . . . . . . 10
4.09 Compensation . . . . . . . . . . . . . . . . . . 11
ARTICLE V -- OFFICERS . . . . . . . . . . . . . . . . 11
5.01 Officers . . . . . . . . . . . . . . . . . . . . 11
5.02 Election, Term of Office and Qualification . . . 11
5.03 Resignations . . . . . . . . . . . . . . . . . . 11
5.04 Removal . . . . . . . . . . . . . . . . . . . . 11
5.05 Vacancies and Newly Created Offices . . . . . . 12
5.06 Chairman of the Board . . . . . . . . . . . . . 12
5.07 President . . . . . . . . . . . . . . . . . . . 12
5-08 Vice-Presidents . . . . . . . . . . . . . . . . 12
5.09 Secretary . . . . . . . . . . . . . . . . . . . 12
5.10 Treasurer . . . . . . . . . . . . . . . . . . . 13
5.11 Assistant Secretaries and Treasurers . . . . . . 13
5.12 Salaries . . . . . . . . . . . . . . . . . . . . 14
5.13 Surety Bonds . . . . . . . . . . . . . . . . . . 14
ARTICLE VI - EXECUTION OF INSTRUMENTS, 13ORROWING OF
MONEY AND DEPOSIT OF CORPORATE FUNDS . . . . . . . . 14
6.01 Instruments . . . . . . . . . . . . . . . . . . 14
6.02 Loans . . . . . . . . . . . . . . . . . . . . . 14
6.03 Deposits . . . . . . . . . . . . . . . . . . . 14
6.04 Checks, Drafts, etc . . . . . . . . . . . . . . 15
6.05 Bonds and Debentures . . . . . . . . . . . . . 15
6.06 Sale, Transfer, etc., of Securities . . . . . . 15
6.07 Proxies . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII - CAPITAL STOCK . . . . . . . . . . . . . 16
7.01 Stock Certificates . . . . . . . . . . . . . . . 16
7.02 Transfer of Stock b . . . . . . . . . . . . . . .17
7.03 Regulations . . . . . . . . . . . . . . . . . . 17
7.04 Transfer Agents and Registrars . . . . . . . . . 17
7.05 Lost or Destroy ed Certificates . . . . . . . . 17
<PAGE>
TABLE OF CONTENTS - Cont'd
ARTICLE VIII -- MAINTENANCE AND INSPECTION OF BOOKS AND
RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8-01 Books . . . . . . . . . . . . . . . . . . . . . . . . 17
8.02 Examination . . . . . . . . . . . . . . . . . . . . . 18
8.03 Financial Statements . . . . . . . . . . . . . . . . . 18
8.04 inspection . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX -- INDEMNIFICATION . . . . . . . . . . . . . . . 18
9.01 Indemnification of Third Party Actions . . . . . . . . 18
9.02 Indemnification of Corporation Actions . . . . . . . . 19
9.03 Determination . . . . . . . . . . . . . . . . . . . . 19
9.04 General Indemnification . . . . . . . . . . . . . . . 19
9.05 Advances . . . . . . . . . . . . . . . . . . . . . . .19
9.06 Scope of Indemnification . . . . . . . . . . . . . . .20
9.07 Insurance . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE X -- FISCAL YEAR . . . . . . . . . . . . . . . . . .20
ARTICLE XI - DIVIDENDS . . . . . . . . . . . . . . . . . . 20
ARTICLE XII -- AMENDMENTS . . . . . . . . . . . . . . . . . 21
CERTIFICATE OF ADOPTION OF BYLAWS . . . . . . . . . . . . . 22
<PAGE>
BYLAWS
OF
Jones Naughton Entertainment, Inc.
Approved by Resolution of the
Board of Directors dated 1994
ARTICLE I
CORPORATE OFFICES
1.01 Principal Office
The Board of Directors shall from time to time fix the location of the
principal executive office of the corporation at any place within or without
the State of Colorado. If the principal executive office is located outside
of the State of Colorado, then the corporation shall maintain a registered
office within such State.
1.02 OTher Offices
The Board of Directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
SHAREHOLDERS
2.01 Annual Meeting
The annual meeting of shareholders shall be held each year on a date and at
a time designated by the Board of Directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the second
Friday of May of each year at 10:00 a.m. However, if such date falls on a
legal holiday, then the meeting shall be held on the next succeeding
business day. At the meeting, directors shall be elected and any other
proper business may be transacted. If the election of directors shall not be
held on the day designated herein for the annual meeting of the
shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders as
soon thereafter as may be convenient.
2.02 Special Meetings
Special meetings of the shareholders may be called at any time by the
Chairman of the Board, the President, or a majority of the Board of
Directors. Shareholders owning ten percent (10%) or more of all of the
shares entitled to vote on any issue to be considered at a special meeting
may also call a special meeting by providing written
<PAGE>
demand to the corporate secretary. The written demand must state the purpose
of the meeting and be dated and signed by the shareholders calling the meeting.
2.03 Place of Meetings
Meetings of shareholders may be held at any place within or outside the
State of Colorado designated by the Board of Directors. In the absence of
any such designation, meetings shall be held at the registered office of the
corporation.
2.04 Notice of Meetings
Written or printed notice stating the place, day and hour of the meeting,
and in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than
fifty (50) days before the date of the meeting, either personally or by
mail, by or at the direction of the President, the Secretary or the officer
or persons calling the meeting, to each shareholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the shareholder at his
address as it appears on the stock transfer books of the corporation, with
postage prepaid.
2.05 Closing of Stock Transfer Books
For the purpose of determining shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or shareholders
entitled to receive payment of any dividend or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors of the corporation may provide that the stock transfer books shall
be closed for a period not to exceed fifty (50) days. If the stock transfer
books are closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be
closed for at least ten (10) days immediately preceding such meeting.
2.06 Record Date for Determination of Shareholders
In lieu of closing the stock transfer books, and for the purpose of
determining the shareholders entitled to notice of or to vote at any meeting
or adjournment thereof, or to make a determination of shareholders for any
other proper purpose, the Board of Directors may fix in advance a date as
the record date for such determination of shareholders, which date shall not
be more than fifty (50) days and, in case of a meeting of shareholders, not
less than ten (10) days prior to the date on which the particular action
requiring such determination of shareholders is to be taken, and in such
event only shareholders of record on the date so fixed shall be entitled to
notice or to vote or to otherwise participate in the matter with respect to
which the record date is fixed, notwithstanding any transfer of any shares
on the books of the corporation after the record date, except as otherwise
provided in the Colorado Corporation Code.
If the Board of Directors does not so fix a record date and the stock
transfer books are not closed:
<PAGE>
(a) the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on
the business day next preceding the day on which notice of such meeting is
given or, if notice is waived, at the close of business on the business day
next preceding the day on which the meeting is held;
(b) the record date for determining shareholders entitled to give consent
to corporate action in writing without a meeting, when no prior action by
the Board is required, shall be the day on which the first written consent
is given;
(c) The record date for determining shareholders for any other purpose
shall be the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
2.07 Voting List
The officer or agent having charge of the stock transfer books for
shares of the corporation shall make a complete list of the shareholders
entitled to vote at each meeting of the shareholders of the corporation or
any adjournment thereof, arranged in alphabetical order, with the address of
and the number of shares held by each, which list shall be produced and kept
open at the time and place of the meeting and shall be subject to the
inspection of any shareholder, for any purpose germane to the meeting,
d6ring the whole time of the meeting. The original stock transfer books
shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
2.08 Quorum
A majority of each class the outstanding shares of the corporation entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on
the subject matter shall constitute the act of the shareholders, unless the
vote of a greater number of shares or voting by classes is required by the
Colorado Corporation Code, the Articles of Incorporation of the corporation
or these Bylaws.
2.09 Proxies
At all meetings of shareholders, a shareholder may vote either in person or
by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven (11) months from the
date of its execution, unless otherwise provided in the proxy.
<PAGE>
2.10 Voting Shares
Each outstanding share, regardless of class, shall be entitled to one vote
on each matter submitted to vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are
limited or denied by the Articles of Incorporation of the corporation as
permitted by the Colorado Corporation Code. No cumulative voting shall be
allowed in the election of directors.
2.11 Voting of Shares by Certain Holders
Neither treasury shares nor shares held by another corporation, if a
majority of the shares entitled to vote for the election of directors of
such other corporation is held by the corporation, shall be voted at any
meeting or counted in determining the total number of outstanding shares at
any given time.
Shares standing in the name of another corporation, domestic or foreign, may
be voted by such officer, agent or proxy as the bylaws of such corporation
may prescribe, or, in the absence of such provision, as the Board of
Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
On and after the date on which written notice of redemption of redeemable
shares has been mailed to the holders thereof and a sum sufficient to redeem
such shares has been deposited with a bank or trust company with irrevocable
instruction and authority to pay the redemption price to the holders thereof
upon surrender of certificates therefor, such shares shall not be entitled
to vote on any matter and shall not be deemed to be outstanding shares.
2.12 Advance Notice for Shareholder Nominations of Directors and
Proposals
Set forth below is the advance notice procedure for nominations (other than
by or at the direction of the Board) of candidates for election as directors
at, and for proposals
<PAGE>
to be brought before, an annual meeting of shareholders of the Company.
Subject to any other applicable requirements, only such nominations may be
considered and such business may be conducted at an annual meeting as has
been brought before the meeting by or at the direction of the Board or by a
shareholder who has given to the Secretary of the Company timely written
notice, in proper form, of the same.
To be timely, notice of nominations or other business to be brought before
an annual meeting must be received by the Secretary of the Company not less
than 60 days nor more than 90 days prior to the anniversary of the preceding
year's annual meeting or, if the date of the annual meeting is advanced by
more than 30 days or delayed by more than 60 days from such anniversary
date, such notice must be received not earlier than 90 days prior to such
annual meeting and not later than the close of business on the later of(i)
the 60th day prior to the annual meeting or (ii) the 10th day following the
day on which public announcement of the date of the meeting is first made.
Each notice must set forth (i) the name and address, as it appears on the
books of the Company, of the shareholder who intends to make the nomination
or proposal and of any beneficial owner on whose behalf the nomination or
proposal is made and (ii) the class and number of shares of the Company that
are owned beneficially and of record by such shareholder and beneficial
owner. In addition, in the case of a shareholder proposal, the notice shall
set forth a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and any
material interest of such shareholder or beneficial owner in that proposed
business.
In the case of a nomination of any person for election as a director, the
notice must set forth (i) all information regarding the nominee proposed by
the shareholder that would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission
and (ii) the consent of the nominee to be named in a proxy statement as a
candidate for election and to serve as a director of the Company if elected.
2.13 Examination by Shareholders of Books and Records
Any person who is a shareholder of record, upon written demand stating the
purpose thereof, shall have the right to examine, in person, or by agent or
attorney, at any reasonable time or times, for any proper purpose, the
corporation's books and records of account, minutes, and record of
shareholders and to make extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a shareholder. Upon
the written request of any shareholder, the corporation shall mail to such
shareholder its most recent annual or quarterly financial statements showing
in reasonable detail its assets and liabilities and the results of its
operations.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
3.01 General Powers
The property, business and affairs of the corporation shall be managed by
the Board of Directors. The Board of Directors may exercise all the powers
of the corporation whether derived from law or the Articles of
Incorporation, except such powers as are by statute, by the Articles of
Incorporation or by these Bylaws, vested solely in the shareholders of the
corporation.
3.02 Number of Directors and Qualification
The authorized number of directors shall be specified from time to time by
resolution of the Board of Directors, but shall not be less than three (3)
nor more than seven (7). Directors need not be residents of the State of
Colorado or shareholders of the corporation.
3.03 Election and Term of Office
Directors shall be elected at each annual meeting of shareholders to hold
office until the next succeeding annual meeting. Each director, including a
director elected to fill a vacancy, shall hold office until the expiration
of the term for which elected and until a successor has been elected and
qualified. No decrease in the authorized numb~r of directors shall have the
effect of shortening the term of any incumbent director.
3.04 Regular Meetings
The Board of Directors may provide by resolution the time and place, either
within or without the State of Colorado, for the holding of regular meetings
without notice other than such resolution.
3.05 Special Meetings
Special meetings of the Board of Directors for any purpose or purposes may
be called at any time by or at the request of the Chairman of the Board, the
President, or any two directors. The person or persons authorized to call
special meetings of the Board of Directors may fix any place, either, within
or without the State of Colorado, as the place for holding any special
meeting of the Board of Directors.
3.06 Notice
Notice of the time and place of any special meeting shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records. of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4)
days before the time of the holding of the meeting. If the notice is delivered
<PAGE>
personally or by telephone or telegram, it shall be delivered personally or
by telephone or to the telegraph company at least forty-eight (48) hours
before the meeting begins. Any oral notice given personally or by telephone
may be communicated either to the director or to a person at the office of
the director who the person giving notice has reason to believe will
promptly communicate it to the director. Any director may waive notice of
any meeting and attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where the director attends a
meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors needs to be specified in the notice or
waiver of notice of such meeting.
3.07 Quorum
A majority of the authorized number of directors as fixed in accordance with
these Bylaws shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, but if less than a majority is
present at a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice.
3.08 Manner of Acting
The act of a majority of the directors present at a meeting at which a
quorum is present shall, unless the act of a greater number of directors is
required by the Articles of Incorporation of the corporation or these
Bylaws, be the act of the Board of Directors.
3.09 Vacancies and Newly Created Directorships
Any vacancy occurring in the Board of Directors or any directorship to be
filled by reason of an increase in the number of directors shall be filled
by the vote of a majority of the remaining directors, even if less than a
quorum. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office such appointment to be until the
next annual meeting or a special meeting of the shareholders called for the
purpose of electing a director to the office so created. Any directorship to
be filled by reason of the removal of one or more directors by the
shareholders may be filled by election by the shareholders at the meeting at
which the director or directors are removed.
3.10 Committees
The Board of Directors, by resolution adopted by the majority of the number
of directors, may designate one or more committees consisting of not less
than two directors, which committee or committees, to the extent provided in
such resolution or in the Articles of Incorporation or these Bylaws, shall
have and may exercise all the authority so provided; except that the
designation of such committees and the delegation thereto of authority shall
not operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon it or him or her by law.
<PAGE>
3.11 Fees and Compensation
Directors may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Directors. This section shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation for those services.
3.12 Presumption of Assent
A director of the corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed
to have assented to the action taken unless such director's dissent shall be
entered in the minutes of the meeting or unless such director shall file a
written dissent to such action with the person acting as the Secretary of
the meeting before the adjournment thereof, or shall forward such dissent by
registered or certified mail to the Secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply
to a director who voted in favor of such action.
3.13 Resignations
A director may resign at any time by delivering a written resignation to
either the Chairman of the Board of Directors, the President, a
Vice-President or the Secretary or Assistant Secretary, if any. Unless
otherwise provided in the resignation, the resignation shall become
effective on its delivery to an officer or director of the corporation. If
the resignation is effective at a future time, the Board of Directors may
elect a successor to take
office when the resignation becomes Effective.
3.14 Action by Written consent
Any action required to be taken at a meeting of the directors of the
corporation or any other action which may be taken at a meeting of the Board
of Directors or of a committee, may be taken without a meeting if a
unanimous consent in writing, setting forth the action so taken, shall be
signed by all of the directors, or all of the members of the committee, as
the case may be. Such consent shall have the same legal effect as a
unanimous vote of all the directors or members of the committee.
3.15 Meetings by Telephone Conference Call
Members of the Board of Directors, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or
committee by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each
other. Participation in such a meeting shall constitute presence in person
at such meeting.
<PAGE>
3.16 Removal of Directors
At a shareholders' meeting called expressly for that purpose, directors may
be removed in the manner provided in this section, unless otherwise provided
by the Articles of Incorporation. One or more directors or the entire Board
of Directors may be removed, with or without cause, by a vote of the holders
of the majority of the shares then entitled to vote at an election of
directors.
3.17 Loans to Directors, Officers, and Others
The corporation shall not lend money to or use its credit to assist its
officers, directors or other control persons without authorization in the
particular case by the shareholders, but may lend money to and use its
credit to assist any employee, excluding such officers, directors or other
control persons of the corporation or of any subsidiary, if such loan or
assistance benefits the corporation.
ARTICLE IV
COMMITTEES OF DIRECTORS
4.01 How Constituted
The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, each
consisting of two or more directors, to serve at the pleasure of the Board.
The Board may designate one or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors.
4.02 Powers
Each committee shall have and may exercise all powers relating to the
business and affairs of the corporation as may be granted to it by the Board
of Directors, except for such power as by law may not be delegated by the
Board of Directors to a committee.
4.03 Proceedings
Each committee as may be designated hereunder by the Board of Directors may
fix its own presiding and recording officer or officers, and may meet at
such place or places, at such time or times and upon such notice (or without
notice) as it shall determine from time to time. It shall keep a record of
its proceedings and shall report such proceedings to the Board of Directors
at the meeting of the Board of Directors next following.
<PAGE>
4.04 Quorum and Manner of Acting
At all meetings of each committee as may be designated hereunder by the
Board of Directors, the presence of members constituting two-thirds of the
total authorized membership of the committee shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the
act of two-thirds of the members present at any meeting at which a quorum is
present shall be the act of such committee. The members of each committee as
may be designated hereunder by the Board of Directors, shall act only as a
committee and the individual members thereof shall have no powers as such.
4.05 Meetings by Telephone Conference Call, Consent
Members of each committee as may be designated hereunder by the Board of
Directors may participate in a meeting of the committee by means of
conference telephone or similar communication equipment by means of which
all persons participating in the meeting can hear each other. Participation
in such a meeting shall constitute presence in person at such a meeting.
Action may be taken by any committee without a meeting if all members
thereof consent in writing, and the writing or writings are filed with the
minutes of the proceedings of such committee.
4.06 Resignations
Any member of any committee as may be designated hereunder by the Board of
Directors may resign at any time by delivering a written resignation to
either the Chairman of the Board, if any, the President, the Secretary, or
Assistant Secretary, if any, or to the presiding officer of the committee of
which he or she is a member, if any shall have been appointed and shall be
in office. Unless otherwise specified therein, such resignation shall take
effect upon delivery.
4.07 Removal
The Board of Directors may at any time remove any member of any committee
designated by it hereunder either with or without cause.
4.08 Vacancies
If any vacancy shall occur in any committee designated by the Board of
Directors hereunder, by reason of disqualification, death, resignation,
removal or otherwise, the remaining members shall, until the filling of such
vacancy, constitute the then total authorized membership of the committee
and, provided that two or more members are remaining, shall continue to act.
Such vacancy may be filled at any meeting of the Board of Directors.
<PAGE>
4.09 Compensation
The Board of Directors may allow a fixed sum and expenses of attendance to
any member of any committee designated by it hereunder who is not an active
salaried employee of the corporation for attendance at each meeting of such
committee.
ARTICLE V
OFFICERS
5.01 Officers
The officers of the corporation shall be a President, one or more
Vice-Presidents, as may be determined by resolution of the Board of
Directors, and a Secretary. Any two or more offices may be held by the same
person, except the offices of president and secretary shall not be held by
the same person. The corporation may also have, at the discretion of the
Board of Directors, a Chairman of the Board, a Chief Financial Officer, one
or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers
and such other officers as may be appointed by the Board of Directors in
accordance with the provisions of these Bylaws.
5.02 Election, Term of Office and Qualification
The officers of the corporation shall be elected by, and serve at the
pleasure of, the Board of Directors, subject to any rights of an officer
under any contract of employment. Elections of officers shall take place
annually or at such other intervals as the Board of Directors may determine,
and may be held at regular or special meetings of the Board or by the
written consent of the directors. Each officer shall hold office until his
or her successor shall have been duly elected and qualified or until such
officer's death, resignation or removal in the manner provided in these
Bylaws. Any tw6or more offices may be held by the same person, except the
offices of President and Secretary shall not be held by the same person. The
Chairman of the Board, if any, shall be and remain a director of the
corporation during the term of his or her office. No other officer need be a
director of the corporation.
5.03 Resignations
Any officer may resign at any time by delivering a written resignation to
the Board of Directors, the President, or the Secretary. Unless otherwise
specified therein, such resignation shall take effect upon such delivery of
the resignation; and, unless otherwise specified in the resignation, the
acceptance of the resignation shall not be necessary to make it effective.
Any resignation is without prejudice to the rights, if any, of the
corporation under any contract to which the officer is a party.
5.04 Removal
Any officer may be removed by the Board of Directors or by a committee, if
any, if so authorized by the Board of Directors, whenever in its judgment
the best interests of
<PAGE>
the corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
5.05 Vacancies and Newly Created Offices
A vacancy in any office by reason of death, resignation, removal,
disqualification, the creation of a new office or otherwise, may be filled
by the Board of Directors at any regular or special meeting or by the
unanimous written consent of the directors.
5.06 Chairman of the Board
The Chairman of the Board, if such an officer be elected, shall, if present,
preside at meetings of the Board of Directors and exercise and perform such
other powers and duties as may from time to time be assigned to him by the
Board of Directors or as may be prescribed by these Bylaws. If there is no
President, then the Chairman of the Board shall also have the powers and
duties prescribed in these Bylaws for the President.
5.07 President
Subject to such supervisory powers, if any, as may be given by the Board of
Directors to the Chairman of the Board, if there be such an officer, and
unless the Board of Directors shall otherwise determine, the President shall
be the chief executive officer of the corporation, and shall, subject to the
control of the Board of Directors, have general supervision, direction and
control of the business, officers, employees and agents of the corporation.
The President shall, when present, preside at meetings of the shareholders
and, in the absence or non-existence of a Chairman of the Board, at all
meetings of the Board of Directors. The President shall have the general
powers and duties of management usually vested in the office of President of
a corporation, and shall have such other powers and duties as may be
prescribed by the Board of Directors or these Bylaws.
5.08 Vice-Presidents
In the absence or disability of the President, the Vice Presidents, in order
to their rank as fixed by the Board of Directors or, if not ranked, a Vice
President designated by the Board of Directors, shall perform all the duties
of the President and, when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the President. The Vice Presidents
shall have such other powers and perform such other duties as may from time
to time be prescribed for them by the Board of Directors, these Bylaws, the
President or the Chairman of the Board and, unless otherwise so prescribed,
the powers and duties customarily vested in the office of Vice President of
a corporation.
5.09 Secretary
The Secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the Board of Directors may
direct, a book of minutes of the proceedings of all meetings of, and a
record of all actions taken by, the Board of Directors, committees of
directors and shareholders of the corporation.
<PAGE>
The Secretary shall cause all notices of meetings to be duly given in
accordance with the provisions of these Bylaws and as required by statute.
The Secretary shall be the custodian of the corporate records and of the
seal of the corporation, and shall cause such seal (or a facsimile thereof)
to be affixed to all certificates representing stock of the corporation
prior to the issuance thereof and to all instruments the execution of which
on behalf of the corporation under its seal shall have been duly authorized
in accordance with these Bylaws, and when so affixed the Secretary may
attest the same.
The Secretary shall see that the books, reports, statements, certificates
and other documents and records required by statute are properly kept and
filed.
The Secretary shall have charge of the stock books of the corporation and
cause the stock and transfer books to be kept in such manner as to show at
any time the amount of the stock of the corporation of each class issued and
outstanding, the manner in which and the time when such stock was paid for,
the alphabetically arranged names and the addresses of the holders of record
thereof, the number of shares held by each holder, and the time when each
became such holder of record. The original or duplicate stock register shall
at all reasonable times be open to inspection by any director. The Secretary
shall cause the stock book to be kept and exhibited at the principal office
of the corporation in the manner and for the purposes provided by law and
these Bylaws.
The Secretary shall perform all duties incident to the office of Secretary
and such other duties as are given to him or her by law or these Bylaws or
as from time to time may be assigned by the Board of Directors.
5.10 Treasurer
The Treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained
earnings and shares. The books of account shall at all reasonable times be
open to inspection by any director.
The Treasurer shall deposit all money and other valuables in the name and to
the credit of the corporation with such depositories as may be designated by
the Board of Directors. The Treasurer shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
President and directors, whenever they request it, an account of all of
transactions taken as Treasurer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties
as may be prescribed by the Board of Directors or these Bylaws.
5.11 Assistant Secretaries and Treasurers
Any Assistant Secretaries or Assistant Treasurers elected by the Board of
Directors shall perform such of the duties of the Secretary or the
Treasurer, respectively,
<PAGE>
as may be assigned to them by the officers they are elected to assist, or as
may otherwise be specifically prescribed for them by the Board of Directors.
5.12 Salaries
The salaries or other compensation of the officers of the corporation shall
be fixed from time to time by the Board of Directors, except that the Board
of Directors may delegate to any person or group of persons the power to fix
the salaries or other compensation of any officers. No officer shall be
prevented from receiving any such salary or compensation by reason of the
fact that he is also a director of the corporation.
5.13 Surety Bonds
In case the Board of Directors shall so require, any officer or agent of the
corporation shall provide the corporation with a bond, in such sums and with
such surety or sureties as the Board of Directors may direct, conditioned
upon the faithful performance of his duties to the corporation, including
responsibility for negligence and for the accounting of all property, monies
or securities of the corporation which may come under his responsibility.
ARTICLE VI
EXECUTION OF INSTRUMENTS, BORROWING OF MONEY
AND DEPOSIT OF CORPORATE FUNDS
6.01 Instruments
The Board of Directors may authorize any officer, agent or agents, to enter
into any contract or execute and deliver any instrument in the name of, and
on behalf of, the corporation, and such authority may be general or confined
to specific instances.
6.02 Loans
No loan or advance shall be contracted on behalf of the corporation, no
negotiable paper or other evidence of its obligation under any loan or
advance shall be issued in its name, and no property of the corporation
shall he mortgaged, pledged, hypothecated, transferred or conveyed as
security for the payment of any loan, advance, indebtedness or liability of
the corporation, unless and except as authorized by the Board of Directors.
Any such authorization may be general or confined to specific instances.
6.03 Deposits
All monies of the corporation not otherwise employed shall be deposited from
time to time to its credit in such banks or trust companies or with such
bankers or other depositories as the Board of Directors may select, or as
from time to time may be selected by any officer or agent authorized so to
do by the Board of Directors.
<PAGE>
6.04 Checks, Drafts, etc.
All checks, drafts, acceptances, notes, endorsements and, subject to the
provisions of these Bylaws, evidences of indebtedness of the corporation
shall he signed by such officer or officers or such agent or agents of the
corporation and in such manner as the Board of Directors from time to time
may determine. Endorsements for deposit to the credit of the corporation in
any of its duly authorized depositories shall be in such manner as the Board
of Directors from time to time may determine.
6.05 Bonds and Debentures
Every bond or debenture issued by the corporation shall be evidenced by an
appropriate instrument which shall be signed by the President or a
Vice-President and by the Secretary. Where such bond or debenture is
authenticated with the manual signature of an authorized officer of the
corporation or other trustee designated by the indenture of trust or other
agreement under which such security is issued, the signature of any of the
corporation's officers named thereon may be a facsimile. In case any officer
who signed, or whose facsimile signature has been used on any such bond or
debenture, shall cease to be an officer of the corporation for any reason
before the same has been delivered by the corporation, such bond or
debenture may nevertheless be adopted by the corporation and issued and
delivered as though the person who signed it or whose facsimile signature
has been used thereon had not ceased to be such officer.
6.06 Sale, Transfer, etc., of Securities
Sales, transfers, endorsements, and assignments of shares of stocks, bonds
and other securities owned by or standing in the name of the corporation,
and the execution and delivery on behalf of the corporation of any and all
instruments in writing incident to any such sale, transfer, endorsement or
assignment, shall be effected by the President, or by any Vice-President,
together with the Secretary, or by any officer or agent thereunto authorized
by the Board of Directors.
6.07 Proxies
Proxies to vote with respect to shares of stock of other corporations owned
by or standing in the name of the corporation shall be executed and
delivered on behalf of the corporation by the President or any
Vice-President and the Secretary of the corporation or by any officer or
agent thereunto authorized by the Board of Directors.
<PAGE>
ARTICLE VII
CAPITAL STOCK
7.01 Stock Certificates
The shares of the corporation shall be represented by certificates signed by
the President or a Vice-President and the Secretary or an Assistant
Secretary of the corporation. The signatures of the President or
Vice-President and the Secretary or Assistant Secretary upon a certificate
may be facsimiles if the certificate is countersigned by a transfer agent,
or registered by a registrar, other than the corporation itself or an
employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased
to be such officer before such certificate is issued, it may be issued by
the corporation with the same effect as if he or she were such officer at
the date of its issue.
Every certificate representing shares issued by the corporation at a time
when it is authorized to issue shares of more than one class shall set forth
upon the face or back of the certificate, or shall state that the
corporation will furnish to any shareholder upon request and without charge,
a full statement of the designations, preferences, limitations and relative
rights of the shares of each class authorized to be issued and, if the
corporation is authorized to issue any preferred or special class in series,
the variations in the relative rights and preferences between the shares of
each such series so far as the same have been fixed and determined and the
authority of the Board of Directors to fix and determine the relative rights
and preferences of subsequent series.
Each certificate representing shares shall state upon the face thereof:
(a) That the corporation is organized under the laws of the State of
Colorado.
(b) The name of the person to whom the certificate is issued.
(c) The number and class of shares, and the designation of the series, if
any, which such certificate represents.
(d) The par value of each share represented by such certificate, or a
statement that the shares are without par value.
No certificate shall be issued for any share until such share is fully paid.
There shall be entered upon the stock transfer books of the corporation at
the time of issuance of each share, the number of the certificate issued,
the name and address of the person owning the shares represented thereby,
the number and kind, class or series of such shares and the date of issuance
thereof. Every certificate exchanged or returned to the corporation shall be
marked "Cancelled" with the date of cancellation.
<PAGE>
7.02 Transfer of Stock
Transfers of stock shall be made only upon the stock transfer books of the
corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where
a certificate is issued in replacement of a lost or destroyed certificate as
provided in these Bylaws, an outstanding certificate for the number of
shares involved shall be surrendered for cancellation before a new
certificate is issued therefor. Except as otherwise provided by law, the
corporation and transfer agents and registrars, if any, shall be entitled to
treat the holder of record of any share or shares of stock as the absolute
owner thereof for all purposes, and accordingly shall not be bound to
recognize any legal, equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it or they shall
have express or other notice thereof.
7.03 Regulations
Subject to the provisions of these Bylaws and of the Articles of
Incorporation, the Board of Directors may make such rules and regulations as
they may deem expedient concerning the issuance, transfer, redemption and
registration of certificates for shares of the stock of the corporation.
7.04 Transfer Agents and Registrars
The Board of Directors may appoint one or more transfer agents and one or
more registrars with respect to the certificates representing shares of
stock of the corporation, and may require all such certificates to bear the
signature of either or both. The Board of Directors may from time to time
define the respective duties of such transfer agents and registrars.
7.05 Lost or Destroyed Certificates
In the event of the loss or destruction of any certificate of stock, another
may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction
and concerning the giving of a satisfactory bond or bonds of indemnity.
ARTICLE VIII
MAINTENANCE AND INSPECTION OF BOOKS AND RECORDS
8.01 Books
The corporation shall keep correct and complete books and records of account
and shall keep minutes of the proceedings of its shareholders and Board of
Directors; and shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of
its shareholders, giving the names and addresses of all shareholders and the
number and class of the shares held by each.
<PAGE>
8.02 Examination
Any person who is a shareholder of record, upon written demand stating the
purpose thereof, shall have the right to examine, in person, or by agent or
attorney, at any reasonable time or times, for any proper purpose, the
corporation's books and records of account, minutes and record of
shareholders and to make extracts therefrom. A proper purpose means a
purpose reasonably related to the person's interest as a shareholder.
8.03 Financial Statements
Upon the written request of any shareholder of the corporation, the
corporation shall mail to such shareholder its most recent annual or
quarterly financial statements showing in reasonable detail its assets and
liabilities and the results of its operations.
8.04 Inspection
Every director shall have the absolute right at any reasonable time to
inspect all books, records and documents of every kind as well as the
physical properties of the corporation and each of its subsidiary
corporations. Such inspection by a director may be made in person or by an
agent or attorney. The right of inspection includes the right to copy and
make extracts of documents.
ARTICLE IX
INDEMNIFICATION
9.01 Indemnification of Third Party Actions
The corporation shall, to the maximum extent and in the manner permitted by
the Colorado Corporation Code, indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (except not an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere or its equivalent, shall not of itself
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
<PAGE>
9.02 Indemnification of Corporation Actions
The corporation shall, to the maximum extent and in the manner permitted by
the Colorado Corporation Code, indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of the action or suit, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which the person shall have been adjudged to be liable to the corporation
unless, and only to the extent that, the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court
considers proper.
9.03 Determination
To the extent that a director, officer, employee or agent of the corporation
has been successful, on the merits or otherwise, in defense of any action,
suit or proceeding referred to in SECTIONS 9.01 AND 9.02 hereof, or in
defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) which he actually and
reasonably incurred in connection therewith. Any other indemnification under
Section 9.01 OR 9.02 hereof shall be made by the corporation as authorized
in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Section 9.01 or
9.02 hereof. Such determination shall be made either (1) by the Board of
Directors by a majority vote of a quorum of directors, or (2) by the
shareholders by a majority vote of a quorum of shareholders at any meeting
duly called for such purpose.
9.04 General Indemnification
The indemnification and advancement of expenses provided by this Article IX
may not be construed to be exclusive of any other rights to which a person
seeking indemnification or advancement of expenses may be entitled under any
Article of Incorporation, Bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
9.05 Advances
Expenses incurred in defending a civil or criminal action, suit or
proceeding as contemplated in this Article IX may be paid by the corporation
in advance of the final
<PAGE>
disposition of the action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent that he shall
repay the amount advanced if it is ultimately determined that he is not
entitled to be indemnified by the corporation as authorized by this Article IX.
9.06 Scope of Indemnification
The indemnification and advancement of expenses authorized by this Article
IX is intended to permit the corporation to indemnify, to the fullest extent
permitted by the laws of the State of Colorado, any and all persons whom it
shall have power to indemnify under such laws from and against any and all
of the expenses, disabilities or other matters referred to in or covered by
such laws. Any indemnification or advancement of expenses hereunder shall,
unless otherwise provided when the indemnification or advancement of
expenses is authorized or ratified, continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit
of such person's heirs, executors and administrators.
9.07 Insurance
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity or arising out of his or her
status in any such capacity, whether or not the corporation would have the
power to indemnify him or her against the liability under the provisions of
this Article IX or the laws of the State of Colorado, as the same may
hereafter be amended or modified.
ARTICLE X
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the Board
of Directors.
ARTICLE XI
DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the
terms and conditions provided by law.
<PAGE>
ARTICLE XII
AMENDMENTS
These Bylaws may be amended by the Board of Directors at any meeting or by
the shareholders at any meeting.
<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
Jones Naughton Entertainment, Inc.
Certificate by Secretary of Adoption
by
Board of Directors
THE UNDERSIGNED hereby certifies that he is the duly elected, qualified, and
acting Secretary of Jones Naughton Entertainment, Inc. and that the
foregoing Bylaws, comprising twenty (20) pages, were submitted to and
approved and adopted by the Board of Directors of the corporation by
resolution dated March 1, 1994.
IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand and
affixed the corporate seal this 8th day of June, 1994.
/s/Joseph M Naughton
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
JONES NAUGHTON ENTERTAINMENT, INC.
Pursuant to Section 7-5-108(3) of the Colorado Corproation Code,
the following action is taken by the written consent of the Board of
Directors of Jones Naughton Entertainment, Inc. without a meeting.
RESOLVED that the Board of Directors hereby approve the attached
Amended and Restated Bylaws of Jones Naughton Entertainment, Inc.;
and
FURTHER RESOLVED, that the Board of Directors hereby approve the
attached proposed Articles of Amendment to the Articles of
Incorporation of Jones Naughton Entertainment, Inc., and direct that
such Articles of Amendment be submitted to the shareholders for
approval and adoption.
This action by unanimous written consent may be executed in one or
more counterparts, each of which shall be deemed an original and all
of which, when taken together, shall constitute one instrument.
IN WITNESS WHEREOF, this action was executed as of the 8th day of
June, 1994.
/s/Joseph M. Naughton
Director
/s/Michael D. English
Director
/s/unknown
Director
CERTIFICATE OF INCORPORATION
OF
GO ONLINE NETWORKS CORPORATION
1. The name of the corporation is Go Online Networks
Corporation.
2. The address, including street, number, city and county of
the registered office of the corporation in the State of Delaware is
15 E. North Street, City of Dover, County of Kent, Delaware, 19901.
3. The name of the registered agent of the corporation in the
State of Delaware at such address is PARACORP, INC.
4. The purpose of the corporation is to engage in any lawful
act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.
5. This Corporation is authorized to issue two classes of
shares of stock to be designated as "Common Stock" and "Preferred
Stock". The total number of shares of Common Stock which this
Corporation is authorized to issue is One Hundred Million
(100,000,000) shares, par value $0.001. The total number of shares
of Preferred Stock which this Corporation is authorized to issue is
Ten Million Shares (10,000,000) shares, par value $0.001.
The shares of Preferred Stock may be issued from time to
time in one or more series. The Board of Directors of the
Corporation (the "Board of Directors") is expressly authorized to
provide for the issue of all or any of the shares of the Preferred
Stock in one or more series, and to fix the number of shares and to
determine or alter for each such series, such voting powers, full or
limited, or no voting powers, and such designations, preferences,
and relative, participating, optional, or other rights and such
qualifications, limitations, or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the
Board of Directors providing for the issue of such shares (a
"Preferred Stock Designation") and as may be permitted by the
General Corporation Law of the State of Delaware. The Board of
Directors is also expressly authorized to increase or decrease (but
not below the number of shares of such series then outstanding) the
number of shares of any series subsequent to the issue of shares of
that series. In case the number of shares of any such series shall
be so decreased, the shares constituting such decrease shall resume
the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
6. The name and mailing address of the incorporator is as follows:
M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
<PAGE>
7. The incorporator shall have the powers afforded the
same under Title 8, Section 107, of the General Corporation Law of
the State of Delaware.
8. The corporation shall have a perpetual existence.
9. The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent permitted by
paragraph (7) of subsection (b) of Section 102 of the General
Corporation Law of the State of Delaware, as the same may be amended
and supplemented.
10. The corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented, indemnify
any and all persons whom it shall have power to indemnify under said
section from and against any and all expenses, liabilities, or other
matters referred to in or covered by said section.
11. From time to time, any of the provisions of this
Certificate of Incorporation may be amended, altered, or repealed
and other provisions, authorized by the laws of the State of
Delaware at the time enforced, may be added or inserted in a manner
and at the time prescribed by said laws.
12. The Board of Directors of the corporation is
expressly authorized to make, alter or repeal bylaws of the
corporation.
13. Elections of directors need not be by written ballot
unless the Bylaws of the corporation shall so provide. Meetings of
the Board of Directors may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation
may be kept, subject to any provisions contained in any laws of the
State of Delaware, outside the State of Delaware, at such place or
places as may be designated from time to time by the Board of
Directors or in the bylaws of the corporation.
THE UNDERSIGNED, being the incorporator herein before named,
for the purpose of forming a corporation pursuant to Chapter 1 of
Title 8 of the Delaware Code, make this certificate, hereby
declaring and certifying that this is my act and deed and the facts
herein stated are true.
Dated: August 11, 1999
/s/ M. Richard Cutler
M. Richard Cutler, Incorporator
GO ONLINE NETWORKS CORPORATION
CERTIFICATE OF DESIGNATION
SERIES A PREFERRED STOCK
Joseph M. Naughton and James Cannon hereby certify that they
are the Chief Executive Officer and Secretary, respectively, of Go
Online Networks Corporation, a Delaware corporation (hereinafter
referred to as the "Corporation" or the "Company"); that, pursuant
to the Corporation's Certificate of Incorporation and the General
Corporation Law of the State of Delaware, the Board of Directors of
the Corporation adopted the following resolutions on August 13,
1999; and that none of the Series A Preferred Stock has been issued.
1. Creation and Designation of Series A Preferred Stock.
There is hereby created a series of preferred stock consisting of
500,000 shares and designated as the Series A Preferred Stock (the
"Shares" or "Preferred Shares"), having the voting powers,
preferences, relative, participating, optional and other special
rights and the qualifications, limitations and restrictions thereof
that are set forth below.
2. Definitions. As used herein, the following words and
expressions have the respective meanings set out below:
(a) "Articles of Incorporation" means the Articles of
Incorporation of the Company as amended and in effect from time to
time.
(b) "Conversion Rate" shall have the meaning set forth in
paragraph 5 hereof.
(c) "Common Stock" means the capital stock of the Company
designated as common stock and authorized from time to time and
being stock which is junior to all series of Preferred Stock in
respect of payments upon Liquidation.
(d) "Company" means Jones Naughton Entertainment, Inc.
and its subsidiaries and includes any successor corporation by
merger, consolidation or otherwise if the stockholders of the former
corporations continue as stockholders of the new combined corporation.
(e) "Liquidation Event" means the voluntary or
involuntary liquidation, distribution or sale of substantially all
of the Company's assets, or the dissolution or winding up of the
Company and includes (i) the merger or consolidation of the Company
with another corporation pursuant to any statute except for a merger
or consolidation of the Company in which the Company is the
surviving entity and immediately after which persons who held shares
representing a majority of the votes for directors of the Company
under the Articles of Incorporation hold a majority of votes for
directors of the surviving entity; and (ii) a distribution or sale
of substantially all of the Company's assets or stock.
<PAGE>
(f) "Liquidation Price" shall have the meaning set forth
in Paragraph 6(a) hereof.
(g) "Preferred Stock" means the authorized class of
capital stock of the Company as set forth in Article 5 of the
Company's Certificate of Incorporation.
(h) "Series A Preferred Stock" means the authorized class
of capital stock of the Company designated as Series A Preferred
Stock pursuant to paragraph 1 hereof.
3. Voting Rights of Series A Preferred Stock. Except as
otherwise provided by law, the holder of Series A Preferred Stock
shall have the right to one vote for each share of Common Stock into
which such holder's Series A Preferred Stock is convertible; and
with respect to such vote, such holder shall have, subject to
Colorado law, all voting rights and powers equal to the voting
rights and powers of holders of Common Stock, and shall be entitled
to notice of any stockholders meetings in accordance with the Bylaws
of the Company, and shall be entitled to vote with the holders of
the Common Stock together as a single class upon any question
affecting the management and affairs of the Company.
4. Dividends. The holders of Series A Preferred Stock will
receive dividends on the same per share basis, at the same times and
to the same extent as the holders of Common Stock.
5. Conversion of Series A Preferred Stock to Common Stock.
Each Series A Preferred Share shall be convertible, at the option of
the owner thereof, at any time, upon surrender to the Company of the
certificates for the shares to be converted, into fully paid and
nonassessable shares of Common Stock of the Company, at the initial
rate of one (1) Common Share for each Series A Preferred Share
("Conversion Rate"). Conversion of Series A Preferred Stock into
Common Stock shall be made pursuant to the following terms:
(a) Any holder of the Series A Preferred Stock desiring
to convert shares as herein provided shall deliver, duly
endorsed in blank, the certificate or certificates representing
the shares to be converted to the Company, and at the same time
notify the Secretary of the Company in writing, that such
holder desires to convert the Series A Preferred Stock into
Common Stock pursuant to these provisions at the Conversion Rate.
(b) Upon receipt by the Secretary of a certificate or
certificates representing Series A Preferred Stock and a notice
that the holder thereof desires to convert the same, the
Company shall forthwith cause to be issued to the holder of the
Series A Preferred Stock surrendering the same, one (1) share
of Common Stock for each Series A Preferred Share surrendered,
with fractional shares being rounded up to the next whole
share, and shall deliver to such holder a certificate for such
Common Stock.
(c) The number and kind of securities issuable upon
conversion of the Series A Preferred Stock shall be subject to
adjustment from time to time upon the happening of certain
events, as follows:
<PAGE>
(i) In case the Company shall (a) declare a dividend
on its Common Stock in shares of Common Stock or make a
distribution in shares of Common Stock, (b) subdivide its
outstanding shares of Common Stock, (c) combine its Stock
or (d) issue by reclassification of its shares of Common
Stock other securities of the Company (including any such
reclassification in connection with a consolidation or
merger in which the Company is the continuing
corporation), then the number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock
immediately prior thereto shall be adjusted so that the
number of shares of Common Stock of the Company which he
would have owned or have been entitled to receive after
the happening of any of the events described above, had
the Series A Preferred Stock been converted immediately
prior to the happening of such event or any record date
with respect thereto. An adjustment made pursuant to this
paragraph 5(c)(i) shall become effective immediately after
the effective date of such event retroactive to
immediately after the record date, if any, for such event.
(ii) No adjustments in the number of shares of
Common Stock issuable hereunder shall be required unless
such adjustment would require an increase or decrease of
at least one percent (1%) in the number of shares of
Common Stock issuable upon the conversion of the Series A
Preferred Stock.
(iii) Whenever the number of shares of Common
Stock issuable upon the conversion of the Series A
Preferred Stock or the conversion price of such Common
Stock is adjusted, the Company shall promptly mail by
first class mail, postage prepaid, to each holder, notice
of such adjustment or adjustments.
(iv) Notwithstanding any adjustment in the number or
kind of shares issuable upon the conversion of the Series
A Preferred Stock, certificates representing shares of
Series A Preferred Stock issued prior or subsequent to
such adjustment may continue to refer to the same number
and kind of shares as were issuable prior to such adjustment.
(v) Notwithstanding anything to the contrary herein,
each share of Series A Preferred Stock shall automatically
be converted into shares of Common Stock at the then
effective Conversion Rate immediately prior to the closing
of an underwritten public offering covering any of the
Company's Common Stock.
(d) Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the shares of the
Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred
Stock, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the
conversion of all the then outstanding shares of Series A
Preferred Stock, the Company shall take such corporate action
as may, in the opinion of its counsel,
<PAGE>
be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient
for such purpose.
6. Liquidation Rights of Series A Preferred Stock.
(a) In the event of the occurrence of any Liquidation
Event, the holders of Series A Preferred Stock shall be
entitled to receive, prior and in preference to any
distribution of any assets of the Company to the holders of
Common Stock, an amount equal to the consideration received by
the Company for all shares of Series A Preferred Stock issued
and outstanding divided by the number of shares then issued and
outstanding, plus eight percent (8%) per annum from the date of
issuance of the Series A Preferred Stock.
(b) All assets remaining in the Company after the
distributions provided for in paragraph 6(a) have been fully
made, shall be distributed pro rata among the holders of Common
Stock to the exclusion of the holders of and Series A Preferred
Stock.
(c) In any valuation of assets of the Company, if the
consideration received by the Company is other than cash, its
value will be deemed to be its fair market value. In the case
of publicly traded securities received in a merger,
consolidation or sale of the Company, fair market value shall
mean the closing market price for such securities on the date
such consolidation, merger or sale is consummated. If the
consideration is in a form other than publicly traded
securities, its value shall be determined by the Board of
Directors of the Company.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation of Series A Preferred Stock to be duly executed by its
Chief Executive Officer and attested to by its Secretary and has
caused its corporate seal to be affixed hereto this 13th day of
August, 1999.
By: /s/Joseph M. Naughton
Joseph M. Naughton
Chief Executive Officer
ATTESTED:
By: /s/James Cannon
James Cannon
Secretary
BYLAWS
OF
GO ONLINE NETWORKS CORPORATION
<PAGE>
BYLAWS
OF
GO ONLINE NETWORKS CORPORATION
ARTICLE I
DIRECTORS; MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Powers, Standard of Care . . . . . . . . . . . . . . . . 1
A. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Standard of Care; Liability. . . . . . . . . . . . . . . . . 1
Section 2. Number and Qualification of the Board. . . . . . . . . 1
Section 3. Election and Term of Office of Directors. . . . .. . . 2
Section 4. Vacancies. . . . . . . . . . . . . . . . . . . . . . . 2
Section 5. Removal of Directors . . . . . . . . . . . . . . . . . 2
Section 6. Place of Meetings. . . . . . . . . . . . . . . . . . . 3
Section 7. Annual Meetings. . . . . . . . . . . . . . . . . . . . 3
Section 8. Other Regular Meetings . . . . . . . . . . . . . . . . 3
Section 9. Special Meetings/Notices . . . . . . . . . . . . . . . 3
Section 10. Waiver of Notice . . . . . . . . . . . . . . . . . . . 4
Section 11. Adjournment. . . . . . . . . . . . . . . . . . . . . . 4
Section 12. Notice of Adjournment. . . . . . . . . . . . . .. . . 4
Section 13. Sole Director Provided by Articles of Incorporation. . 4
Section 14. Directors Acting by Unanimous Written Consent. . . . . 4
Section 15. Fees and Compensation of Directors . . . . . . . . . . 5
Section 16. Committees . . . . . . . . . . . . . . . . . . . . . . 5
Section 17. Meetings and Action of Committees. . . . . . . . . . . 5
Section 18. Advisory Directors . . . . . . . . . . . . . . . . . . 5
ARTICLE II
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1. Officers . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2. Election of Officers . . . . . . . . . . . . . . . . . 6
Section 3. Subordinate Officers, Etc. . . . . . . . . . . . . . . 6
Section 4. Removal and Resignation of Officers. . . . . . . . . . 6
Section 5. Vacancies in Office. . . . . . . . . . . . . . . . . . 6
Section 6. Chairman of the Board. . . . . . . . . . . . . . . . . 6
Section 7. President. . . . . . . . . . . . . . . . . . . . . . . 6
Section 8. Vice Presidents. . . . . . . . . . . . . . . . . . . . 7
Section 9. Secretary. . . . . . . . . . . . . . . . . . . . . . . 7
Section 10. Chief Financial Officer. . . . . . . . . . . . . . . . 7
<PAGE>
ARTICLE III
MEETING OF SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Place of Meetings. . . . . . . . . . . . . . . . . . . 8
Section 2. Annual Meeting . . . . . . . . . . . . . . . . . . . . 8
Section 3. Special Meetings . . . . . . . . . . . . . . . . . . . 8
Section 4. Notice of Meetings; Reports. . . . . . . . . . . . . . 8
Section 5. Quorum . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6. Adjourned Meeting and Notice Thereof . . . . . . . . . 9
Section 7. Waiver of Notice or Consent by Absent Shareholders . .10
Section 8. Shareholders Acting Without a Meeting; Filling
Vacancies. . . . . . . . . . . . . . . . . . . . . . .10
Section 9. Other Actions Without a Meeting. . . . . . . . . . . .10
Section 10. Voting Rights; Cumulative Voting . . . . . . . . . . .11
Section 11. Proxies. . . . . . . . . . . . . . . . . . . . . . . .11
Section 12. Chairman and Secretary of Meeting. . . . . . . . . . .12
Section 13. Inspectors of Election . . . . . . . . . . . . . . . .12
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES . . . . . . . . . . . . . . . .12
Section 1. Certificates for Shares. . . . . . . . . . . . . . . .12
Section 2. Transfer on the Books. . . . . . . . . . . . . . . . .13
Section 3. Lost or Destroyed Certificates . . . . . . . . . . . .13
Section 4. Transfer Agents and Registrars . . . . . . . . . . . .13
Section 5. Record Date; Closing Stock Transfer Books. . . . . . .13
Section 6. Legend Condition . . . . . . . . . . . . . . . . . . .14
Section 7. Close Corporation Certificates . . . . . . . . . . . .14
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS . . . .14
ARTICLE VI
CORPORATE RECORDS AND REPORTS; INSPECTION. . . . . . . . . . . . . .14
Section 1. Records. . . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Maintenance and Inspection of Share Register . . . .15
Section 3. Maintenance and Inspection of Bylaws . . . . . . . . 15
Section 4. Annual Report to Shareholders. . . . . . . . . . . . 16
Section 5. Financial Statements . . . . . . . . . . . . . . . . 16
Section 6. Annual Statement of General Information. . . . . . . 16
<PAGE>
ARTICLE VII
GENERAL CORPORATE MATTERS. . . . . . . . . . . . . . . . . . . . . .17
Section 1. Checks, Drafts, and Evidences of Indebtedness. . . . .17
Section 2. Corporate Contracts and Instruments, How Executed . . 17
Section 3. Representation of Shares of Other Corporation. . . . .17
Section 4. Construction and Definitions . . . . . . . . . . . . .17
ARTICLE VIII
AMENDMENTS TO BYLAWS . . . . . . . . . . . . . . . . . . . . . . . .17
Section 1. Amendment by Shareholders. . . . . . . . . . . . . . 17
Section 2. Amendment by Directors . . . . . . . . . . . . . . . 18
ARTICLE IX
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 1. References to Code Sections. . . . . . . . . . . . . 18
Section 2. Effect of Shareholders Agreement . . . . . . . . . . 18
Section 3. Subsidiary Corporation . . . . . . . . . . . . . . . 18
Section 4. Offices. . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
BYLAWS
OF
Go Online Networks Corporation
A Delaware Corporation
ARTICLE I
DIRECTORS; MANAGEMENT
Section 1. Powers, Standard of Care.
A. Powers:
Subject to the provisions of the General Corporation Law of
Delaware (hereinafter the "Act"), and subject to any limitation in
the Articles of Incorporation and the Bylaws relating to action
required to be approved by the shareholders or by the outstanding
shares, the business and affairs of this corporation shall be
managed by and all corporate powers shall be exercised by or under
the direction of the Board of Directors.
B. Standard of Care; Liability.
i. Each Director shall exercise such powers and
otherwise perform such duties in good faith, in the manner such
Director believes to be in the best interests of the corporation and
its shareholders, and with such care including reasonable inquiry,
using ordinary prudence, as a person in a like position would use
under similar circumstances.
ii. In performing the duties of a Director, a
Director shall be entitled to rely on information, opinions,
reports, or statements, including financial statements and other
financial data, in which case prepared or presented by:
(a) One or more officers or employees of the corporation whom the
Director believes to be reliable and competent in the matters presented,
(b) Counsel, independent accountants or other persons as to matters which
the Director believes to be within such person's professional or expert
competence, or
(c) A Committee of the Board upon which the Director does not serve, as
to matters within its designated authority, which committee the Director
believes to merit confidence, so long as in any such case, the Director
acts in good faith, after reasonable inquiry when the need therefor is
indicated by the circumstances and without knowledge that would cause such
reliance to be unwarranted.
<PAGE>
Section 2. Number and Qualification of the Board.
The authorized number of Directors of the corporation shall
be no less than one (1) nor more than eleven (11). This number may
be changed by amendment to the Articles of Incorporation or by
amendment to this Section 2, of Article I of these Bylaws, adopted
by the vote or written consent of the shareholders entitled to
exercise majority voting power, as provided in the Act.
Section 3. Election and Term of Office of Directors.
Directors shall be elected at each annual meeting of the
Shareholders to hold office until the next annual meeting. Each
Director, including a Director elected to fill a vacancy, shall hold
office until the expiration of the term for which elected and until
a successor has been elected and qualified.
Section 4. Vacancies.
Vacancies in the Board of Directors may be filled by a
majority of the remaining Directors, though less than a quorum, or
by a sole remaining Director, except that a vacancy created by the
removal of a Director by the vote or written consent of the
Shareholders, or by court order, may be filled only by the vote of
the majority of the shares entitled to vote represented at a duly
held meeting at which a quorum is present, or by the written consent
of holders of the majority of the outstanding shares entitled to
vote. Each Director so elected shall hold office until the next
annual meeting of the Shareholders and until a successor has been
elected and qualified.
A vacancy in the Board of Directors shall be deemed to exist
in the event of the death, resignation, or removal of any Director,
or if the Shareholders fail, at any meeting of the Shareholders at
which any Directors are elected, to elect the full number of
authorized Directors.
The Shareholders may elect a Director or Directors to fill
any vacancy or vacancies not filled by the Directors, but any such
election by written consent shall require a consent of a majority of
the outstanding shares entitled to vote.
Any Director may resign effective upon giving written notice
to the Chairman of the Board, the President, the Secretary, or the
Board of Directors, unless the notice specifies a later time for
that resignation to become effective. If the resignation of a
Director is effective at a future time, the Board of Directors may
elect a successor to take office when the resignation becomes
effective.
No reduction of the authorized number of Directors shall have
the effect of removing any Director before that Director's term of
office expires.
Section 5. Removal of Directors.
The entire Board of Directors or any individual Director
named may be removed from office as provided by Section 141 of the
Delaware Corporations Code. In such a case, the remaining Board
Members may elect a successor Director to fill such vacancy for the
remaining unexpired term of the Director so removed. No Director
may be removed (unless the entire Board is removed) when
<PAGE>
the votes cast against removal or not consenting in writing to such
removal would be sufficient to elect such Director if voted cumulatively
at an election at which the same total number of votes were cast (or,
if such action is taken by written consent, all shares entitled to
vote were voted) and the entire number of Directors authorized at
the time of the Directors most recent election were then being
elected; and when by the provisions of Articles the holders of the
shares of any class or series voting as a class or series are
entitled to elect one or more Directors, any Director so elected may
be removed only by the applicable vote of the holders of the shares
of that class or series.
Section 6. Place of Meetings.
Regular meetings of the Board of Directors shall be held at
any place within or without the state that has been designated from
time to time by resolution of the Board. In the absence of such
resolution, regular meetings shall be held at the principal
executive office of the corporation. Special meetings of the board
shall be held at any place within or without the state that has been
designated in the notice of the meeting, or, if not stated in the
notice or there is no notice, at the principal executive office of
the corporation. Any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as
all Directors participating in such meeting can hear one another,
and all such Directors shall be deemed to have been present in
person at such meeting.
Section 7. Annual Meetings.
Immediately following each annual meeting of Shareholders,
the Board of Directors shall hold a regular meeting for the purpose
of organization, the election of officers and the transaction of
other business. Notice of this meeting shall not be required.
Minutes of any meeting of the Board, or any committee thereof, shall
be maintained as required by Section 142 of the Delaware
Corporations Code by the Secretary or other officer designated for
that purpose.
Section 8. Other Regular Meetings.
Other regular meetings of the Board of Directors shall be
held without call at such time as shall from time to time be fixed
by the Board of Directors. Such regular meetings may be held
without notice, provided the time and place of such meetings has
been fixed by the Board of Directors, and further provided the
notice of any change in the time of such meeting shall be given to
all the Directors. Notice of a change in the determination of the
time shall be given to each Director in the same manner as notice
for special meetings of the Board of Directors.
If said day falls upon a holiday, such meetings shall be held
on the next succeeding day thereafter.
<PAGE>
Section 9. Special Meetings/Notices.
Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the Chairman of the Board or
the President or any Vice President or the Secretary or any two
Directors.
Notice of the time and place for special meetings shall be
delivered personally or by telephone to each Director or sent by
first class mail or telegram, charges prepaid, addressed to each
Director at his or her address as it is shown in the records of the
Corporation. In case such notice is mailed, it shall be deposited
in the United States mail at least four (4) days prior to the time
of holding the meeting. In case such notice is delivered
personally, or by telephone or telegram, it shall be delivered
personally or by telephone or to the telegram company at least
forty-eight (48) hours prior to the time of the holding of the
meeting. Any oral notice given personally or by telephone may be
communicated to either the Director or to a person at the office of
the Director who the person giving the notice has reason to believe
will promptly be communicated to the Director. The notice need not
specify the purpose of the meeting, nor the place, if the meeting is
to be held at the principal executive office of the Corporation.
Section 10. Waiver of Notice.
The transactions of any meeting of the Board of Directors,
however called, noticed, or wherever held, shall be as valid as
though had at a meeting duly held after the regular call and notice
if a quorum be present and if, either before or after the meeting,
each of the Directors not present signs a written waiver of notice,
a consent to holding the meeting or an approval of the minutes
thereof. Waiver of notices or consents need not specify the purpose
of the meeting. All such waivers, consents and approvals shall be
filed with the corporate records or made part of the minutes of the
meeting. Notice of a meeting shall also be deemed given to any
Director who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to such Director. A
majority of the then elected number of Directors shall constitute a
quorum for the transaction of business, except to adjourn as
provided in Section 12 of this Article I. In no event, however,
shall a quorum be reached with less than one-third (1/3) of the
authorized number of Directors, nor less than two, whichever is
greater, unless the authorized number of Directors is one (1), in
which case one Director constitutes a quorum. Every act or decision
done or made by a majority of the Directors present at a meeting
duly held at which a quorum was present shall be regarded as the act
of the Board of Directors, subject to the provisions of Delaware
Corporations Code Sections 141, 144, and other relevant sections of
the Act. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of
Directors, if any action taken is approved by at least a majority of
the required quorum for that meeting.
Section 11. Adjournment.
A majority of the Directors present, whether or not
constituting a quorum, may adjourn any meeting to another time and
place.
<PAGE>
Section 12. Notice of Adjournment.
Notice of the time and place of the holding of an adjourned
meeting need not be given, unless the meeting is adjourned for more
than twenty-four (24) hours, in which case notice of such time and
place shall be given prior to the time of the adjourned meeting to
the Directors who were not present at the time of the adjournment.
Section 13. Sole Director Provided by Articles of Incorporation.
In the event only one Director is required by the Bylaws or
Articles of Incorporation, then any references herein to notices,
waivers, consents, meetings, or other actions by the majority or
quorum of Directors shall be deemed or referred as such notice,
waiver, etc., by such sole Director, who shall have all the rights
and duties and shall be entitled to exercise all the powers and
shall assume all the responsibilities otherwise herein described
given to a Board of Directors.
Section 14. Directors Acting by Unanimous Written Consent.
Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting with the same force and
effect as if taken by unanimous vote of Directors, if authorized by
a writing signed individually or collectively by all members of the
Board. Such consent shall be filed with the regular minutes of the
Board.
Section 15. Fees and Compensation of Directors.
Directors and members of a Director's Committee may receive
such compensation, if any, for their services, and such
reimbursement of expenses, as may be fixed or determined by
resolution of the Board of Directors. Nothing herein contained
shall be construed to preclude any Director from serving the
corporation in any other capacity as an officer, employee, or
otherwise, and receiving compensation for such services.
Section 16. Committees.
Committees of the Board may be appointed by resolution passed
by a majority of the whole Board. Committees shall be composed of
two (2) or more members of the Board and shall have such powers of
the Board as may be expressly delegated to them by resolution of the
Board of Directors. The Board may designate one (1) or more
Directors as alternate members of any committee, who may replace any
absent member at any meeting of the committee. Committees shall
have such powers of the Board of Directors as may be expressly
delegated to it by resolution of the Board of Directors except those
powers expressly made nondelegable by Delaware Corporations Code
Section 141.
Section 17. Meetings and Action of Committees.
Meetings and action of committees shall be governed by, and
held and taken in accordance with, the provisions of Article I,
Section 6, 8, 9, 10, 11, 12 and 14, with such changes in the context
<PAGE>
of those Sections as are necessary to substitute the committee and
its members for the Board of Directors and its members, except that
the time of the regular meetings of the committees may be determined
by resolution of the Board of Directors as well as the committee,
and special meetings of committees may also be called by resolutions
of the Board of Directors and notice of special meetings of
committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board
of Directors may adopt rules for the government of any committee not
inconsistent with the provisions of these Bylaws.
Section 18. Advisory Directors.
The Board of Directors from time to time may elect one (1) or
more persons to be advisory Directors, who shall not by such
appointment be members of the Board of Directors. Advisory
Directors shall be available from time to time to perform special
assignments specified by the President, to attend meetings of the
Board of Directors upon invitation and to furnish consultation to
the Board. The period during which the title shall be held may be
prescribed by the Board of Directors. If no period is prescribed,
title shall be held at the pleasure of the Board.
ARTICLE II
OFFICERS
Section 1. Officers.
The principal officers of the corporation shall be a Chairman
of the Board or a President or both, a Secretary and a Chief
Financial Officer who may also be called Treasurer. The corporation
may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries, and such
other officers as may be appointed in accordance with the provision
of the Section 3 of this Article. One person may hold two or more
offices.
Section 2. Election of Officers.
The principal officers of the corporation, except such
officers as may be appointed in accordance with the provisions of
Section 3 of this Article, shall be chosen by the Board of
Directors, and each shall serve at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any
contract of employment.
Section 3. Subordinate Officers, Etc.
The Board of Directors may empower the President to appoint
and remove such officers (other than the principal officers) as the
business of the corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties
as are provided in the Bylaws or as the Board of Directors may from
time to time determine.
<PAGE>
Section 4. Removal and Resignation of Officers.
Subject to the rights, if any, of an officer under any
contract of employment, any officer may be removed, either with or
without cause, by a majority of the Directors at that time in
office, at any regular or special meeting of the Board, or,
excepting the case of an officer chosen by the Board of Directors,
by any officer upon whom such power of removal may be conferred by
the Board of Directors.
Section 5. Vacancies in Office.
A vacancy in any office because of death, resignation,
removal, disqualification, or any other cause shall be filled in the
manner prescribed in these Bylaws for the regular appointments to
such office.
Section 6. Chairman of the Board.
The Chairman of the Board, if such an officer be elected,
shall, if present, preside at all meetings of the Board of Directors
and exercise and perform such other powers and duties as may from
time to time be assigned to him by the Board of Directors or
prescribed by the Bylaws. If there is no President, the Chairman of
the Board shall in addition be the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in
Section 7 of this Article.
Section 7. President.
Subject to such supervisory powers, if any, as may be given
by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the Chief Executive Officer
of the corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the
business and the officers of the corporation. He or she shall
preside at all the meetings of the Shareholders and, in the absence
of the Chairman of the Board, or if there be none, at all meetings
of the Board of Directors. He or she shall have the general powers
and duties of management usually vested in the office of the
President of a corporation, shall be ex officio a member of all
standing committees, including the executive committee, if any, and
shall have such other powers and duties as may be described by the
Board of Directors or the Bylaws.
Section 8. Vice Presidents.
In the absence or disability of the President, the Vice
Presidents, if any, in order of their rank as fixed by the Board of
Directors, shall perform all the duties of the President, and so
acting shall have all the powers of, and be subject to the
restrictions upon, the President. The Vice Presidents shall have
such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors or
the Bylaws, the President, or the Chairman of the Board.
<PAGE>
Section 9. Secretary.
The Secretary shall keep or cause to be kept at the principal
executive office or such other place as the Board of Directors may
order, a book of minutes of all meetings of Directors, Committees of
Directors, and Shareholders, with the time and place of holding,
whether regular or special, how authorized, the notice thereof
given, the names of those present of Directors and Committee
meetings, the number of shares present or represented at
Shareholders meetings, and the proceedings thereof.
The Secretary shall keep or cause to be kept at the principal
office or at the office of the corporation's transfer agent, a share
register, or duplicate share register, showing the names of the
shareholders and their addresses; the number of classes of shares
held by each; the number and date of certificates issued for the
same; and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give or cause to be given notice of all
meetings of the Shareholders and of the Board of Directors required
by the Bylaws or by law to be given, shall keep the seal of the
corporation in safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the Board of
Directors or by the Bylaws.
Section 10. Chief Financial Officer.
The Chief Financial Officer shall keep and maintain, or cause
to be kept and maintained, adequate and correct books and records of
accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall at all reasonable times be
open to inspection by any Director.
The Chief Financial Officer shall deposit all moneys and
other valuables in the name and to the credit of the corporation
with such depositories as may be designated by the Board of
Directors. He or she shall disburse the funds of the corporation as
may be ordered by the Board of Directors, shall render to the
President and Directors, whenever they request it, an account of all
of his transactions as Chief Financial Officer and of the financial
condition of the corporation, and shall have other powers and
perform such other duties as may be prescribed by the Board of
Directors or the Bylaws.
ARTICLE III
MEETING OF SHAREHOLDERS
Section 1. Place of Meetings.
Meetings of Shareholders shall be held at any place within or
without the State of Delaware designated by the Board of Directors.
In the absence of any such designation, Shareholders' meetings shall
be held at the principal executive office of the corporation.
<PAGE>
Section 2. Annual Meeting.
The annual meeting or the Shareholders shall be held on the
following date and at the following time:
Date of Meeting: Second Tuesday in September
Time of Meeting: 10:00 a.m.
If this day be a legal holiday, then the meeting shall be held on
the next succeeding business day, at the same time. At the annual
meeting, the Shareholders shall elect a Board of Directors, report
the affairs of the corporation, and transact such other business as
may properly be brought before the meeting. If the above date is
inconvenient, the annual meeting of Shareholders shall be held each
year on a date and at a time designated by the Board of Directors
within sixty (60) days of the above date upon proper notice to all
shareholders.
Section 3. Special Meetings.
A special meeting of the Shareholders, for any purpose or
purposes whatsoever, may be called at any time by the Board of
Directors, or by the Chairman of the Board of Directors, or by the
President, or by one or more Shareholders holding shares in the
aggregate entitled to cast not less than 10% of the votes at any
such meeting.
If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing,
specifying the time of such meeting and the general nature of the
business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman or the Board, the President,
any Vice President or the Secretary of the corporation. The officer
receiving such request shall forthwith cause notice to be given to
the Shareholders entitled to vote, in accordance with the provisions
of Sections 4 and 5 of this Article, that a meeting will be held at
the time requested by the person or persons calling the meeting, not
less than thirty-five (35) nor more than sixty (60) days after the
receipt of the request. If the notice is not given within (20) days
after receipt of the request, the person or persons requesting the
meeting may give the notice in the manner provided in these Bylaws
or as provided in the Act. Nothing contained in this paragraph of
this Section shall be construed as limiting, fixing or affecting the
time when the meeting of Shareholders called by action of the Board
of Directors may be held.
Section 4. Notice of Meetings; Reports.
Notice of meetings, annual or special, shall be given in
writing not less than the (10) nor more than sixty (60) days before
the date of the meeting, to Shareholders entitled to vote thereat by
the Secretary or the Assistant Secretary, or if there be no such
officer, or in the case of his or her neglect or refusal, by any
Director or Shareholder.
Such notices or any reports shall be given personally or by
mail, or other means of communication as provided in Delaware
Corporations Code Section 222, and shall be sent to the
<PAGE>
Shareholder's address appearing on the books of the corporation, or
supplied by him or her to the corporation for the purposes of
notice, and in absence thereof by posting notice at a place where
the principal executive office of the corporation is located or by
publication at least once in a newspaper of general circulation in
the county in which the principal executive office is located.
Notice of any meeting of Shareholders shall specify the place, date
and hour of the meeting and (i) in the case of a special meeting,
the general nature of the business to be transacted, and no other
business may be transacted, or (ii) in the case of an annual
meeting, those matters which the Board of Directors, at the date of
the mailing of notice, intends to present for action by the
Shareholders. At any meetings where Directors are elected, notice
shall include the names of the nominees, if any, intended at the
date of notice to be presented by the management for election.
If action is proposed to be taken at any meeting for approval
of (i) contracts or transaction in which a Director has a direct or
indirect financial interest, pursuant to Delaware Corporation Code
Section 144, (ii) an amendment to the Articles of Incorporation,
pursuant to Sections 241 or 242 of such Code, (iii) a reorganization
of the corporation, pursuant to the Act, ( iv) dissolution of the
corporation, pursuant to the Act, or (v) a distribution to preferred
Shareholders, pursuant to the Act, the notice shall also state the
general nature of such proposal.
Section 5. Quorum.
The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting of
Shareholders shall constitute a quorum for the transaction of
business. The Shareholders present at a duly called or held meeting
at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough Shareholders
to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least majority of the shares required
to constitute a quorum.
Section 6. Adjourned Meeting and Notice Thereof.
Any Shareholders' meeting, annual or special, whether or not
a quorum is present, may be adjourned from time to time by the vote
of the majority of the shares represented at such meeting, either in
person or by proxy, but in the absence of a quorum, no other
business may be transacted at such meeting.
When any meeting of Shareholders, either annual or special,
is adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place thereof are announced at
a meeting at which the adjournment is taken, unless a new record
date for the adjournment meeting is fixed, or unless the adjournment
is for more than forty-five (45) days from the date set for the
original meeting, in which case the Board of Directors shall set a
new record date. Notice of any such adjourned meeting shall be
given to each Shareholder of record entitled to vote at the
adjourned meeting in accordance with the provisions of Section 4 of
this Article. At any adjourned meeting the corporation may transact
any business which might have been transacted at the original meeting.
<PAGE>
Section 7. Waiver of Notice or Consent by Absent Shareholders.
The transactions at any meeting of Shareholders, either
annual or special, however called and noticed, and wherever held,
shall be as valid as though had at a meeting duly held after regular
call and notice, if a quorum be present either in person or by
proxy, and if, either before or after the meeting, each person
entitled to vote, not present in person or by proxy, signs a written
waiver of notice or a consent to a holding of the meeting, or any
approval of the minutes thereof. The waiver of notice or consent
need not specify either the business to be transacted or the purpose
of any regular or special meeting of Shareholders, except that if
action is taken or proposed to be taken for approval of any of those
matters specified in the last paragraph of Section 4 of this
Article, the waiver of notice or consent shall state the general
nature of such proposal. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance of a person at a meeting shall also constitute a
waiver of notice of such meeting, except when the person objects, at
the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened, and except
that attendance at a meeting is not a waiver of any right to object
to the consideration of matters not included in the notice of such
objection is expressly made at the meeting.
Section 8. Shareholders Acting Without a Meeting; Filling
Vacancies on Board.
Any action which may be taken at a meeting of the
Shareholders may be taken without a meeting or notice of meeting if
authorized by a writing signed by all of the Shareholders entitled
to vote at a meeting for such purpose and filed with the Secretary
of the corporation; provided further, that while ordinarily
Directors can only be elected by unanimous written consent under
Delaware Corporations Code Section 228, as to vacancy created by
death, resignation or other causes, if the Directors fail to fill a
vacancy, then a Director to fill that vacancy may be elected by the
written consent of persons holding a majority of shares entitled to
vote for the election of Directors.
Section 9. Other Actions Without a Meeting.
Unless otherwise provided in the General Corporation Law, any
action which may also be taken at any annual or special meeting of
Shareholders may be taken without a meeting and without prior notice
if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote
thereon were present and voted.
Unless the consents of all Shareholders entitled to vote have
been solicited in writing,
(a) Notice of any Shareholder approval without a meeting by
less than unanimous written consent shall be given at least ten (10)
days before the consummation of the action authorized by such
approval; and
<PAGE>
(b) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting by less
than unanimous written consent, to each of those Shareholders
entitled to vote who have not consented in writing.
Any Shareholder giving a written consent, or the
Shareholders's proxyholders, or a transferee of the shares of a
personal representative of the Shareholder or their respective
proxyholders, may revoke the consent by a writing received by the
corporation prior to the time that
written consents of the number of shares required to authorize the
proposed action have been filed with the Secretary of the
corporation, but may not do so thereafter. Such revocation is
effective upon its receipt by the Secretary.
Section 10. Voting Rights; Cumulative Voting.
Only persons in whose names shares entitled to vote stand on
the stock records of the corporation on the day fixed by the Board
of Directors for the determination of the Shareholders of record,
shall be entitled to vote at any Shareholders' meeting.
Provided the candidate's name has been placed in nomination
prior to the voting and one or more Shareholders have given notice
at the meeting prior to voting of the Shareholders intent to
accumulate the Shareholders votes, every Shareholder entitled to
vote at any election for Director of any corporation for profit may
cumulate his or her votes and give one candidate a number of votes
equal to the number of Directors to be elected multiplied by the
number of votes to which his or her shares are entitled, or
distribute his or her votes on the same principle among as many
candidates as he or she thinks fit.
The candidate receiving the highest number of votes up to the
number of Directors to be elected are elected.
The Board of Directors may fix a time as a record date for
the determination of the Shareholders entitled to notice of and to
vote at any such meeting, or entitled to receive any such dividend
or distribution, or any allotment, rights, or to exercise the rights
in respect to any such change, conversion, or exchange of shares.
In such case only Shareholders of record on the date so fixed shall
be entitled to notice of and to vote at such meeting, or to receive
such dividends, distribution, or allotment of rights or to exercise
such rights, as the case may be, notwithstanding a transfer of any
share on the books of the company after any record date fixed as
aforesaid.
Section 11. Proxies.
Every Shareholder entitled to vote for Directors or on any
other matter shall have the right to do so either in person or by
one or more agents authorized by proxy validly executed by the
Shareholder. A proxy may be executed by written authorization
signed, or by electronic transmission authorized, by the Shareholder
or the Shareholder's attorney in fact, giving the proxyholder(s) the
power to vote the Shareholder's shares. A proxy shall be deemed
signed if the Shareholder's name or other authorization is placed on
the proxy ( whether by manual signature, typewriting, telegraphic or
electronic transmission or otherwise) by the Shareholder or the
<PAGE>
Shareholder's attorney in fact. A proxy may also be transmitted
orally by telephone if submitted with information from which it may
be determined that the proxy was authorized by the Shareholder or
the Shareholder's attorney in fact.
A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless revoked
by the person executing it, prior to the vote pursuant thereto, by a
writing delivered to the corporation stating that the proxy is
revoked or by a subsequent proxy executed by, or attendance at the
meeting and voting in person by the person executing the proxy;
provided, however, that no such proxy shall be valid after the
expiration of eleven (11) months from the date of such proxy, unless
otherwise provided in the proxy. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the
provisions of Delaware Corporations Code Section 212.
Section 12. Chairman and Secretary of Meeting.
The President, or in the absence of the President, any Vice
President, shall call the meeting of the Shareholders to order, and
shall act as Chairman of the meeting. In the absence of the
President and all the Vice Presidents, Shareholders shall appoint a
Chairman at such meeting. The Secretary of the Corporation shall
act as Secretary of all meetings of the Shareholders, but in the
absence of the Secretary at any meeting of the Shareholders, the
presiding officer shall appoint any person to act as such Secretary
of the meeting.
Section 13. Inspectors of Election.
Before any meeting of Shareholders, the Board of Directors
may appoint any person other than nominees for office to act as
inspectors of election at the meeting or its adjournment. If no
inspectors of election are appointed, the Chairman of the meeting
may, and on the request of any Shareholder or his or her proxy
shall, appoint inspectors of election at the meeting. The number of
inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting on the request of one or more Shareholders or
proxies, the holders of a majority of shares or their proxies
present at the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as
inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment by the Board of Directors before the
meeting, or by the Chairman at the meeting.
The duties of these inspectors shall be as follows:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence
of a quorum, and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any
way arising in connection with the right to vote;
<PAGE>
(d) Count and tabulate all votes or consents;
(e) Determine the election result; and
(f) Do any other acts that may be proper to conduct the
election or vote with fairness to all Shareholders.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. Certificates for Shares.
Certificates for shares shall be of such form and device as
the Board of Directors may designate and shall state the name of the
record holder of the shares represented thereby; its number and date
of issuance; the number of shares for which it is issued; a
statement of the rights, privileges, preferences and restrictions,
if any; a statement as to the redemption or conversion, if any; a
statement of liens or restrictions upon transfer or voting, if any;
and if the shares be assessable, or if assessments are collectible
by personal action, a plain statement of such facts.
Every certificate for shares must be signed by the President
or a Vice President and a Secretary or an Assistant Secretary, and
must be authenticated by the signature of the President and
Secretary or an Assistant Secretary. No certificate or certificates
for shares are to be issued until such shares are fully paid, unless
the Board authorizes the issuance of certificates or shares as
partly paid, provided that such certificates shall state the amount
of consideration to be paid therefore and amount paid thereon.
Section 2. Transfer on the Books.
Upon surrender to the Secretary or transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied
by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old
certificate, and record the transaction on its books.
Section 3. Lost or Destroyed Certificates.
Any person claiming a certificate of stock to be lost or
destroyed shall make an affidavit or affirmation of that fact and
shall, if the Directors so require, give the corporation a bond of
indemnity, in the form and with one or more sureties satisfactory to
the Board, in at least double the value of the stock represented by
said certificate, whereupon a new certificate may be issued in the
same manner and for the same number of shares as the one alleged to
be lost or destroyed.
<PAGE>
Section 4. Transfer Agents and Registrars.
The Board of Directors may appoint one or more transfer
agents or transfer clerks and one or more registrars, which shall be
an incorporated bank or trust company, either domestic or foreign,
who shall be appointed at such times and places as the requirements
of the corporation may necessitate and Directors may designate.
Section 5. Record Date; Closing Stock Transfer Books.
In order that the corporation may determine the Shareholders
entitled to notice of any meeting or to vote or entitled to receive
payment or any dividend or other distribution or allotment of any
rights or entitled to exercise any rights in respect of any lawful
action, the Board may fix in advance, a record date, which shall not
be more than sixty (60) nor less than ten (10) days prior to the
date of such meeting nor more than sixty (60) days prior to any
other action. If no record date is fixed;
(a) The record date for determining Shareholders entitled to
notice of or to vote at a meeting of Shareholders shall be at the
close of the business on the business day next preceding the day on
which notice is given or, if notice is waived, at close of business
on the business day next preceding the day on which the meeting is
held.
(b) The record date for determining Shareholders entitled to
give consent to corporate action in writing without a meeting, when
no prior action by the Board is necessary, shall be the day on which
the first written consent is given.
(c) The record date for determining Shareholders for any
other purpose shall be the close of business on the day on which the
Board adopts the resolution relating thereto, or the sixtieth (60th)
day prior to the date of such other action, whichever is later.
The Board of Directors may close the books of the company
against transfers of shares during the whole or any part of such
period.
Section 6. Legend Condition.
In the event any shares of this corporation are issued
pursuant to a permit or exemption therefrom requiring the imposition
of a legend condition, the person or persons issuing or transferring
said shares shall make sure said legend appears on the certificate
and on the stub relating thereto in the stock record book and shall
not be required to transfer any shares free of such legend unless an
amendment to such permit or a new permit be first issued so
authorizing said deletion.
Section 7. Close Corporation Certificates.
All certificates representing shares of this corporation, in
the event it shall elect to become a close corporation, shall
contain a legend in accordance with Delaware Corporations Code
Section 202.
<PAGE>
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
The corporation may at its option, to the maximum extent
permitted by the Delaware General Corporation Law and by the
articles, indemnify each of its agents against expenses, judgments,
fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding arising by reason of the
fact that such person is or was an agent of the corporation. For
the purposes of this Section, an "agent" of the corporation includes
a person who is or was a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, or was a Director, officer, employee or agent of a
corporation which was a predecessor corporation of the corporation
or of any other enterprise at the request of such predecessor
corporation.
ARTICLE VI
CORPORATE RECORDS AND REPORTS; INSPECTION
Section 1. Records.
The corporation shall maintain, in accordance with generally
accepted accounting principles, adequate and correct accounts, books
and records of its business and properties. If the corporation has
fewer than one hundred (100) Shareholders, the financial statements
need not be prepared according to generally accepted accounting
principles so long as the financial statement reasonably sets forth
the assets and liabilities, income and expenses of the corporation,
and discloses the accounting bases used. All of such books, records
and accounts shall be kept at the corporations's principal executive
office in the State of Delaware, as fixed by the Board of Directors,
from time to time, or shall be kept at such place or such places as
designated by the Board of Directors. The minutes shall be kept in
written form and accounting books and records shall be kept in
either written form or in any other form capable of being converted
into written form. Such minutes and accounting books and records
shall be open to inspection upon the written demand of any
shareholder or holder of a voting trust certificate, at any
reasonable time during usual business hours, for a purpose
reasonably related to such holder's interest as a Shareholder or as
the holder of a voting trust certificate. Such inspection may be
made in person or by an agent or attorney, and shall include the
right to copy and make extracts. The foregoing rights of inspection
shall extend to the records of each subsidiary corporation.
Section 2. Maintenance and Inspection of Share Register.
The corporation shall keep at its principal executive office,
or at the office of its transfer agent or registrar, if either be
appointed and as determined by resolution of the Board of Directors,
a record of its Shareholders and the number and class of shares held
by each Shareholder. A Shareholder or Shareholders of the
corporation holding at least five percent ( 5%) in the aggregate of
outstanding voting shares of the corporation may (i) inspect, and
copy the records of Shareholders names and addresses and share
holdings during usual business hour upon five (5) days prior written
demand upon the corporation, and/or (ii) obtain from the transfer
agent of such transfer agent's usual charges for such a list, a list
of the Shareholders names and addresses who are entitled to vote for
<PAGE>
the election of Directors, and their share holdings, as of the most
recent record date for which such list has been compiled or as of a
date specified by the Shareholders subsequent to the day of demand.
Such list shall be made available by the transfer agent on or before
the later of five (5 ) days after the demand is received or the date
specified therein as the date as of which the list is to be
compiled. The record of Shareholders shall also be open to
inspection upon the written demand of any Shareholder or holder of a
voting trust certificate, at any time during usual business hours,
for a purpose reasonably related to such holder's interest as a
Share holder or as a holder of a voting trust certificate. Any
inspection and copying under this Section may be made in person or
by an agent or attorney of such Shareholder or holder of a voting
trust certificate making such demand.
Section 3. Maintenance and Inspection of Bylaws.
The corporation shall keep at its principal executive
office, or if its principal executive office is not in this state,
at its principal business office in this state, the original or a
copy of the Bylaws amended to date, which shall be open to
inspection by the Shareholders at all reasonable times during office
hours. If the principal executive office of the corporation is
outside the state and the corporation has no principal business
office in this state, the Secretary shall, upon written request of
any Shareholder, furnish to such Shareholder a copy of the Bylaws as
amended to date.
Section 4. Annual Report to Shareholders.
Provided this corporation has one hundred (100) Shareholders
or less, the Annual Report to Shareholders referred to in the
General Corporation Law is expressly dispensed with, but nothing
herein shall be interpreted as prohibiting the Board of Directors
from issuing annual or other periodic reports to Shareholders of the
corporation as they deem appropriate. Should this corporation have
one hundred (100) or more Shareholders, an Annual Report must be
furnished not later than one hundred twenty (120) days after the end
of each fiscal period.
Section 5. Financial Statements.
A copy of any annual financial statement and any income
statement of the corporation for each quarterly period of each
fiscal year, and any accompanying balance sheet of the corporation
as of the end of each such period, that has been prepared by the
corporation shall be kept on file at the principal executive office
of the corporation for twelve (12) months from the date of its
execution, and each such statement shall be exhibited at all
reasonable times to any Shareholder demanding an examination of such
statement or a copy shall be made to any such Shareholder.
If a Shareholder or Shareholders holding at least five
percent (5%) of the outstanding shares of any class of stock of the
corporation make a written request to the corporation for an income
statement of the corporation for the three (3) month, six (6) month,
or nine (9) month period of the then current fiscal year ended more
than thirty (30) days prior to the date of the request, and a
balance sheet of the corporation at the end of such period, the
Chief Financial Officer shall cause such statement to be prepared,
if not already prepared, and shall deliver personally or mail such
statement or statements to the person making the request within
thirty (30) days after the receipt of such request. If the
corporation has not sent to the Shareholders its Annual Report for
the last fiscal
<PAGE>
year, this report shall likewise be delivered or
mailed to such Shareholder or Shareholders within in (30) days after
such request.
The corporation also shall, upon the written request of any
Shareholder, mail to the Shareholder a copy of the last annual,
semi-annual or quarterly income statement which it has prepared and
a balance sheet as of the end of such period. This quarterly income
statement and balance sheets referred to in this Section shall be
accompanied by the report thereon, if any, of any independent
accountants engaged in the corporation or the certificate of
authorized officer of the corporation that such financial statements
were prepared without audit from the books and records of the
corporation.
Section 6. Annual Statement of General Information.
The corporation shall, in a timely manner, in each year, file
with the Secretary of State of Delaware, on the prescribed form, a
statement setting forth the authorized number of Directors, the
names and complete business or residence addresses of all incumbent
Directors, the names and complete business or residence addresses or
the Chief Executive Officer, Secretary, and Chief Financial Officer,
the street address of its principal executive office or principal
business office in this state and the general type of business
constituting the principal business activity of the corporation,
together with a designation of the agent of the corporation for the
purpose of the service of process.
ARTICLE VII
GENERAL CORPORATE MATTERS
Section 1. Checks, Drafts, and Evidences of Indebtedness.
All checks, drafts or other orders for payment of money,
notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors.
Section 2. Corporate Contracts and Instruments, How Executed.
The Board of Directors, except as in the Bylaws otherwise
provide, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of
and on behalf of the corporation and such authority may be general
or confined to specific instances; and, unless so authorized or
ratified by the Board of Directors or within the agency power of any
officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or to
any amount.
<PAGE>
Section 3. Representation of Shares of Other Corporation.
The Chairman of the Board, the President, or any Vice
President, or any other person authorized by resolution of the Board
of Directors by any of the foregoing designated officers, is
authorized to vote on behalf of the corporation any and all shares
of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority herein
granted to said officers to vote or represent on behalf of the
corporation any and all shares held by the corporation in any other
corporation or corporations may be exercised by any such officer in
person or by any person authorized to do so by proxy duly elected by
said officer.
Section 4. Construction and Definitions.
Unless the context requires otherwise, the general
provisions, rules of construction, and the definitions of the
Delaware General Corporation Laws shall govern the construction of
these Bylaws. Without limiting the generality of the foregoing, the
singular number includes the plural, the plural number includes the
singular, and the term "person" includes both a corporation and a
natural person.
ARTICLE VIII
AMENDMENTS TO BYLAWS
Section 1. Amendment by Shareholders.
New Bylaws may be adopted or these Bylaws may be amended or
repealed by the vote or written consent of holders of a majority of
the outstanding shares entitled to vote: provided, however, that if
the Articles of Incorporation of the corporation set forth the
number of authorized Directors of the corporation, the authorized
number of Directors may be changed only by an amendment of the
Articles of Incorporation.
Section 2. Amendment by Directors.
Subject to the rights of the Shareholders as provided in
Section 1 of this Article, to adopt, amend, or repeal Bylaws, and
the limitation of Delaware Corporations Code Section 109, Bylaws may
be adopted, amended, or repealed by the Board of Directors.
ARTICLE IX
MISCELLANEOUS
Section 1. References to Code Sections.
Section designations of three (3) digits or more referenced
herein refer to the General Corporation Law of the State of Delaware.
<PAGE>
Section 2. Effect of Shareholders Agreement.
Any Shareholders agreement authorized by the Act, shall only
be effective to modify the terms of these Bylaws if this corporation
elects to become a close corporation with appropriate filing of or
amendment to its Articles as required by the Act and shall terminate
when this corporation ceases to be a close corporation.
Section 3. Subsidiary Corporation.
Shares of this corporation owned by a subsidiary shall not
be entitled to vote on any matter.
Section 4. Offices.
The Board of Directors shall fix the location of the
principal executive office of the corporation at any place within or
outside the State of Delaware. If the principal executive office is
located outside this state, and the corporation has one or more
business offices in this state, the board of directors shall
likewise fix and designate a principal business office in the State
of Delaware.
The Board of Directors may at any time establish branch or
subordinate offices at any place or places where the corporation is
qualified to do business.
<PAGE>
CERTIFICATE OF SECRETARY
I, James Cannon, hereby certify that:
I am the Secretary of Go Online Networks Corporation, a
Delaware corporation; and
The foregoing Bylaws, consisting of 21 pages, are a true and
correct copy of the Bylaws of the corporation as duly adopted by
approval of the Board of Directors of the corporation on August 13,
1999.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
the seal of the Corporation this 13th day of August, 1999.
/s/James Cannon
James Cannon, Secretary
[FILED IN THE OFFICE OF THE]
[SECRETARY OF STATE OF THE]
[STATE OF NEVADA]
[JUNE 29, 1998]
[No. C15324-98]
[Dean Heller, Secretary of State]
ARTICLES OF INCORPORATION
OF
AMS ACQUISITION CORP.
FIRST: The name of the corporation is AMS Acquisition Corp.
SECOND: It's resident agent and registered office in the
State of Nevada is as follows: State Agent and Transfer Syndicate,
Inc. located at 318 N. Carson Street, Suite 214, Carson City, Nevada
89701.
THIRD: This Corporation is authorized to issue two classes
of shares of stock to be designated as "Common Stock" and "Preferred
Stock". The total number of shares of Common Stock which this
Corporation is authorized to issue is Ten Million (10,000,000)
shares, par value $0.001. The total number of shares of Preferred
Stock which this Corporation is authorized to issue is One Million
(1,000,000) shares, par value $0.001.
The shares of Preferred Stock may be issued from time to
time in one or more series. The Board of Directors of the
Corporation (the "Board of Directors") is expressly authorized to
provide for the issue of all or any of the shares of the Preferred
Stock in one or more series, and to fix the number of shares and to
determine or alter for each such series, such voting powers, full or
limited, or no voting powers, and such designations, preferences,
and relative, participating, optional, or other rights and such
qualifications, limitations, or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the
Board of Directors providing for the issue of such shares (a
"Preferred Stock Designation") and as may be permitted by the
General Corporation Law of the State of Nevada. The Board of
Directors is also expressly authorized to increase or decrease (but
not below the number of shares of such series then outstanding) the
number of shares of any series subsequent to the issue of shares of
that series. In case the number of shares of any such series shall
be so decreased, the shares constituting such decrease shall resume
the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
FOURTH: The governing body of this corporation shall be known
as directors, and the number of directors may from time to time be
increased or decreased in such manner as shall be provided by the
bylaws of the corporation.
The names and addresses of the first board of directors which
shall consist of one (1) member are as follows:
Joseph Naughton
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
<PAGE>
FIFTH: The name and address of the incorporator signing the
Articles of Incorporation is as follows:
M. Richard Cutler
610 Newport Center Drive
Suite 800
Newport Beach, California 92660
SIXTH: The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent permitted by
paragraph 1 of Section 78.037 of the General Corporation Law of the
State of Nevada, as the same may be amended and supplemented.
SEVENTH: The corporation shall, to the fullest extent
permitted by Section 78.751 of the General Corporation Law of the
State of Nevada, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify
under said section from and against any and all expenses,
liabilities, or other matters referred to in or covered by said
section.
I, THE UNDERSIGNED, being the incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Nevada, does make and file
these Articles of Incorporation, hereby declaring and certifying
that the facts herein stated are true, and accordingly have hereunto
set my hands this 29th day of June, 1998.
/s/M. Richard Cutler, Incorporator
STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On this 29 day of June, 1998, before me, the undersigned
Notary Public, personally appeared M. Richard Cutler (or prove to me
on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within Instrument
and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/Kerry E. Fennell
Notary Public
[KERRY E. FENNELL]
[Commission #1150186]
[Notary Public - California]
[Orange County]
[My Comm. Expires Sep 1, 2001]
<PAGE>
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT
BY RESIDENT AGENT
The undersigned, State Agent and Transfer Syndicate, Inc.,
hereby accepts the appointment as Resident Agent of the above named
corporation.
Resident Agent
Dated: 6-29-98 By: /s/John E. Block
State Agent & Transfer Syndicate, Inc.
[FILED IN THE OFFICE OF THE]
[SECRETARY OF STATE OF THE]
[STATE OF NEVADA]
[JUNE 29, 1998]
[No. C15324-98]
[Dean Heller, Secretary of State]
BYLAWS
OF
AMS ACQUISITION CORP.
a Nevada corporation
<PAGE>
BYLAWS
OF
AMS ACQUISITION CORP.
a Nevada corporation
ARTICLE I
OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Principal Office . . . . . . . . . . . 1
Section 2. Other Offices. . . . . . . . . . . . . 1
ARTICLE II
DIRECTORS - MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Powers, Standard of Care . . . . . . . 1
A. Powers. . . . . . . . . . . . . . . . . . . . . . . . 1
B. Standard of Care; Liability . . . . . . . . . . . . . 1
C. Exception for Close Corporation . . . . . . . . . . . 2
Section 2. Number and Qualification of Directors. 2
Section 3. Election and Term of Office of
Directors. . . . . . . . . . . . . . . . . . . 2
Section 4. Vacancies. . . . . . . . . . . . . . . 2
Section 5. Removal of Directors . . . . . . . . . 3
Section 6. Place of Meetings. . . . . . . . . . . 3
Section 7. Annual Meetings. . . . . . . . . . . . 4
Section 8. Other Regular Meetings . . . . . . . . 4
Section 9. Special Meetings/Notices . . . . . . . 4
Section 10. Waiver of Notice . . . . . . . . . . . 5
Section 11. Quorums. . . . . . . . . . . . . . . . 5
Section 12. Adjournment. . . . . . . . . . . . . . 5
Section 13. Notice of Adjournment. . . . . . . . . 5
Section 14. Board of Directors Provided by
Articles or Bylaws . . . . . . . . . . . . . . 5
Section 15. Directors Action by Unanimous Written
Consent. . . . . . . . . . . . . . . . . . . . 5
Section 16. Compensation of Directors. . . . . . . 6
Section 17. Committees . . . . . . . . . . . . . . 6
Section 18. Meetings and Action of Committees. . . 6
Section 19. Advisory Directors . . . . . . . . . . 6
ARTICLE III
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Officers . . . . . . . . . . . . . . . 6
Section 2. Election of Officers . . . . . . . . . 7
Section 3. Subordinate Officers, Etc. . . . . . . 7
Section 4. Removal and Resignation of Officers. . 7
Section 5. Vacancies. . . . . . . . . . . . . . . 7
Section 6. Chairman of the Board. . . . . . . . . 7
Section 7. President and Chief Executive Officer. 7
Section 8. Vice President . . . . . . . . . . . . 8
<PAGE>
Section 9. Secretary. . . . . . . . . . . . . . . 8
Section 10. Chief Financial Officer. . . . . . . . 8
ARTICLE IV
SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1. Place of Meetings. . . . . . . . . . . 9
Section 2. Annual Meeting . . . . . . . . . . . . 9
Section 3. Special Meetings . . . . . . . . . . . 9
Section 4. Notice of Meetings - Reports . . . . .10
Section 5. Quorum . . . . . . . . . . . . . . . .11
Section 6. Adjourned Meeting and Notice Thereof .11
Section 7. Waiver or Consent by Absent
Shareholders . . . . . . . . . . . . . . . . .11
Section 8. Maintenance and Inspection of Bylaws .12
Section 9. Annual Report to Shareholders. . . . .12
Section 10. Financial Statements . . . . . . . . .13
Section 11. Annual Statement of General
Information13
ARTICLE IX
AMENDMENTS TO BYLAWS . . . . . . . . . . . . . . . . . . . . . . . .14
Section 1. Amendment by Shareholders. . . . . . .14
Section 2. Amendment by Directors . . . . . . . .14
Section 3. Record of Amendments . . . . . . . . .14
ARTICLE X
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 1. Shareholders' Agreements . . . . . . .14
Section 2. Effect of Shareholders' Agreements . .14
Section 3. Subsidiary Corporations. . . . . . . .15
Section 4. Accounting Year. . . . . . . . . . . .15
Section 5. Form . . . . . . . . . . . . . . . . .15
<PAGE>
BYLAWS
OF
AMS ACQUISITION CORP.
A NEVADA CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office for
the transaction of business of the Corporation is hereby fixed and
located at 5681 Beach Boulevard, Suite 101, Buena Park, CA 90261.
The location may be changed by the Board of Directors in their
discretion, and additional offices may be established and maintained
at such other place or places, either within or outside of Nevada,
as the Board of Directors may from time to time designate.
Section 2. Other Offices. Branch or subordinate offices
may at any time be established by the Board of Directors at any
place or places where the Corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. Powers, Standard of Care.
A. Powers: Subject to the provisions of the Nevada
Corporations Code (hereinafter the "Act"), and subject to any
limitations in the Articles of Incorporation of the Corporation
relating to action required to be approved by the Shareholders, or
by the outstanding shares, the business and affairs of the
Corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board of Directors. The
Board of Directors may delegate the management of the day-to-day
operation of the business of the Corporation to a management company
or other persons, provided that the business and affairs of the
Corporation shall be managed, and all corporate powers shall be
exercised, under the ultimate direction of the Board.
B. Standard of Care; Liability:
(i) Each Director shall exercise such powers and
otherwise perform such duties, in good faith, in the matters such
Director believes to be in the best interests of the Corporation,
and with such care, including reasonable inquiry, using ordinary
prudence, as a person in a like position would use under similar
circumstances.
<PAGE>
(ii) In performing the duties of a Director, a
Director shall be entitled to rely on information, opinions,
reports, or statements, including financial statements and other
financial data, in which case prepared or presented by:
(a) One or more officers or employees of
the Corporation whom the Director believes to be reliable and
competent in the matters presented,
(b) Counsel, independent accountants or
other persons as to which the Director believes to be within such
person's professional or expert competence, or
(c) A Committee of the Board upon which
the Director does not serve, as to matters within its designated
authority, which committee the Director believes to merit
confidence, so long as in any such case the Director acts in good
faith, after reasonable inquiry when the need therefor is indicated
by the circumstances and without knowledge that would cause such
reliance to be unwarranted.
C. Exception for Close Corporation. Notwithstanding the
provisions of Section 1 of this Article, in the event that the
Corporation shall elect to become a close corporation, its
Shareholders may enter into a Shareholders' Agreement. Said
Agreement may provide for the exercise of corporate powers and the
management of the business and affairs of the Corporation by the
Shareholders; provided, however, such agreement shall, to the extent
and so long as the discretion or powers of the Board of Directors in
its management of corporate affairs is controlled by such agreement,
impose upon each Shareholder who is a party hereof, liability for
managerial acts performed or omitted by such person pursuant thereto
otherwise imposed upon Directors; and the Directors shall be
relieved to that extent from such liability.
Section 2. Number and Qualification of Directors. The
authorized number of Directors of the Corporation shall be at least
one (1) but not more than seven (7) until changed by a duly adopted
amendment to the Articles of Incorporation or by an amendment to
this Section 2 of Article II of these Bylaws, adopted by the vote or
written consent of Shareholders entitled to exercise majority voting
power as provided in the Act.
Section 3. Election and Term of Office of Directors.
Directors shall be elected at each annual meeting of the
Shareholders to hold office until the next annual meeting. Each
Director, including a Director elected to fill a vacancy, shall hold
office until the expiration of the term for which elected and until
a successor has been elected and qualified.
Section 4. Vacancies.
A. Vacancies on the Board of Directors may be filled by
a majority of the remaining Directors, though less than a quorum, or
by a sole remaining Director, except that a vacancy created by the
removal of a Director by the vote or written consent of the
Shareholders, or by a court order, may be filled only by the vote of
a majority of the shares entitled to vote, represented at a duly
held meeting at which a quorum is present, or by the written consent
of holders of the majority of the outstanding shares entitled to
vote. Each Director so elected shall hold office until the next
<PAGE>
annual meeting of the Shareholders and until a successor has been
elected and qualified.
B. A vacancy or vacancies on the Board of Directors
shall be deemed to exist in the event of the death, resignation or
removal of any Director, or if the Board of Directors by resolution
declares vacant the office of a Director who has been declared of
unsound mind by an order of court or convicted of a felony.
C. The Shareholders may elect a Director or Directors at
any time to fill any vacancy or vacancies not filled by the
Directors, but any such election by written consent shall require
the consent of a majority of the outstanding shares entitled to vote.
D. Any Director may resign, effective on giving written
notice to the Chairman of the Board, the President, the Secretary,
or the Board of Directors, unless the notice specifies a later time
for that resignation to become effective. If the resignation of a
Director is effective at a future time, the Board of Directors may,
prior to the effective date of a Director's resignation, elect a
successor to take office when the resignation becomes effective.
E. No reduction of the authorized number of Directors
shall have the effect of removing any Director before that
Director's term of office expires.
Section 5. Removal of Directors.
A. The entire Board of Directors, or any individual
Director, may be removed from office as provided by the Act. In
such case, the remaining members, if any, of the Board of Directors
may elect a successor Director to fill such vacancy for the
remaining unexpired term of the Director so removed.
B. No Director may be removed (unless the entire Board
is removed) when the votes cast against removal or not consenting in
writing to such removal would be sufficient to elect such Director
if voted cumulatively at an election at which the same total number
of votes were cast (or, if such action is taken by written consent,
all shares entitled to vote, were voted) and the entire number of
Directors authorized at the time of the Directors most recent
election were then being elected; and when by the provisions of the
Articles of Incorporation the holders of the shares of any class or
series voting as a class or series are entitled to elect one or more
Directors, any Director so elected may be removed only by the
applicable vote of the holders of the shares of that class or series.
Section 6. Place of Meetings. Regular meetings of the
Board of Directors shall be held at any place within or outside the
state that has been designated from time to time by resolution of
the Board. In the absence of such resolution, regular meetings
shall be held at the principal executive office of the Corporation.
Special meetings of the Board shall be held at any place within or
outside the state that has been designated in the notice of the
meeting, or, if not stated in the notice or there is no notice, at
the principal executive office of the Corporation. Any meeting,
regular or special, may be held by conference telephone or similar
communication equipment, so long as all Directors participating in
such meeting can hear one another, and all such Directors shall be
deemed
<PAGE>
to have been present in person at such meeting.
Section 7. Annual Meetings. Immediately following each
annual meeting of Shareholders, the Board of Directors shall hold a
regular meeting for the purpose of organization, the election of
officers and the transaction of other business. Notice of this
meeting shall not be required. Minutes of any meeting of the Board,
or any committee thereof, shall be maintained as required by the Act
by the Secretary or other officer designated for that purpose.
Section 8. Other Regular Meetings.
A. Other regular meetings of the Board of Directors
shall be held without call at such time as shall from time to time
be fixed by the Board of Directors. Such regular meetings may be
held without notice, provided the time and place of such meetings
has been fixed by the Board of Directors, and further provided the
notice of any change in the time of such meeting shall be given to
all the Directors. Notice of a change in the determination of the
time shall be given to each Director in the same manner as notice
for such special meetings of the Board of Directors.
B. If said day falls upon a holiday, such meetings shall
be held on the next succeeding day thereafter.
Section 9. Special Meetings/Notices.
A. Special meetings of the Board of Directors for any
purpose or purposes may be called at any time by the Chairman of the
Board or the President or any Vice President or the Secretary or any
two Directors.
B. Notice of the time and place for special meetings
shall be delivered personally or by telephone to each Director or
sent by first class mail or telegram, charges prepaid, addressed to
each Director at his or her address as it is shown in the records of
the Corporation. In case such notice is mailed, it shall be
deposited in the United States mail at least four days prior to the
time of holding the meeting. In case such notice is delivered
personally, or by telephone or telegram, it shall be delivered
personally or be telephone or to the telegram company at least 48
hours prior to the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated to
either the Director or to a person at the office of the Director who
the person giving the notice has reason to believe will promptly
communicate same to the Director. The notice need not specify the
purpose of the meeting, nor the place, if the meeting is to be held
at the principal executive office of the Corporation.
<PAGE>
Section 10. Waiver of Notice.
A. The transactions of any meeting of the Board of
Directors, however called, noticed, or wherever held, shall be as
valid as though had at a meeting duly held after the regular call
and notice if a quorum be present and if, either before or after the
meeting, each of the Directors not present signs a written waiver of
notice, a consent to holding the meeting or an approval of the
minutes thereof. Waivers of notice or consent need not specify the
purposes of the meeting. All such waivers, consents and approvals
shall be filed with the corporate records or made part of the
minutes of the meeting.
B. Notice of a meeting shall also be deemed given to any
Director who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to such Director.
Section 11. Quorums. A majority of the authorized number
of Directors shall constitute a quorum for the transaction of
business, except to adjourn as provided in Section 12 of this
Article II. Every act or decision done or made by a majority of the
Directors present at a meeting duly held at which a quorum was
present shall be regarded as the act of the Board of Directors,
subject to the provisions of the Act. A meeting at which a quorum
is initially present may continue to transact business
notwithstanding the withdrawal of Directors, if any action taken is
approved by at least a majority of the required quorum for that
meeting.
Section 12. Adjournment. A majority of the directors
present, whether or not constituting a quorum, may adjourn any
meeting to another time and place.
Section 13. Notice of Adjournment. Notice of the time and
place of the holding of an adjourned meeting need not be given,
unless the meeting is adjourned for more than 24 hours, in which
case notice of such time and place shall be given prior to the time
of the adjourned meeting to the Directors who were not present at
the time of the adjournment.
Section 14. Board of Directors Provided by Articles or
Bylaws. In the event only one Director is required by the Bylaws or
the Articles of Incorporation, then any reference herein to notices,
waivers, consents, meetings or other actions by a majority or quorum
of the Board of Directors shall be deemed or referred as such
notice, waiver, etc., by the sole Director, who shall have all
rights and duties and shall be entitled to exercise all of the
powers and shall assume all the responsibilities otherwise herein
described, as given to the Board of Directors.
Section 15. Directors Action by Unanimous Written Consent.
Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting and with the same force and
effect as if taken by a unanimous vote of Directors, if authorized
by a writing signed individually or collectively by all members of
the Board of Directors. Such consent shall be filed with the
regular minutes of the Board of Directors.
Section 16. Compensation of Directors. Directors, and
members as such, shall not receive any stated salary for their
services, but by resolution of the Board of Directors, a fixed sum
and
<PAGE>
expense of attendance, if any, may be allowed for attendance at
each regular and special meeting of the Board of Directors;
provided, however, that nothing contained herein shall be construed
to preclude any Director from serving the Corporation in any other
capacity as an officer, employee or otherwise receiving compensation
for such services.
Section 17. Committees. Committees of the Board of
Directors may be appointed by resolution passed by a majority of the
whole Board. Committees shall be composed of two or more members of
the Board of Directors. The Board may designate one or more
Directors as alternate members of any committee, who may replace any
absent member at any meeting of the committee. Committees shall
have such powers as those held by the Board of Directors as may be
expressly delegated to it by resolution of the Board of Directors,
except those powers expressly made non-delegable by the Act.
Section 18. Meetings and Action of Committees. Meetings
and action of committees shall be governed by, and held and taken in
accordance with, the provisions of Article II, Sections 6, 8, 9, 10,
11, 12, 13 and 15, with such changes in the context of those
Sections as are necessary to substitute the committee and its
members for the Board of Directors and its members, except that the
time of the regular meetings of the committees may be determined by
resolution of the Board of Directors as well as the committee, and
special meetings of committees may also be given to all alternate
members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the
government of any committee not inconsistent with the provisions of
these Bylaws.
Section 19. Advisory Directors. The Board of Directors
from time to time may elect one or more persons to be Advisory
Directors, who shall not by such appointment be members of the Board
of Directors. Advisory Directors shall be available from time to
time to perform special assignments specified by the President, to
attend meetings of the Board of Directors upon invitation and to
furnish consultation to the Board of Directors. The period during
which the title shall be held may be prescribed by the Board of
Directors. If no period is prescribed, the title shall be held at
the pleasure of the Board of Directors.
ARTICLE III
OFFICERS
Section 1. Officers. The principal officers of the
Corporation shall be a President, a Vice President, a Secretary, and
a Chief Financial Officer who may also be called Treasurer. The
Corporation may also have, at the discretion of the Board of
Directors, a Chairman of the Board, one or more Vice Presidents, one
or more Assistant Secretaries, one or more Assistant Treasurers, and
such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article III. Any number of offices
may be held by the same person.
Section 2. Election of Officers. The principal officers
of the Corporation, except such officers as may be appointed in
accordance with the provisions of Section 3 or Section 5 of this
Article, shall be chosen by the Board of Directors, and each shall
serve at the pleasure of the Board of Directors, subject to the
rights, if any, of an officer under any contract of employment.
<PAGE>
Section 3. Subordinate Officers, Etc. The Board of
Directors may appoint such other officers as the business of the
Corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided
in the Bylaws or as the Board of Directors may from time to time
determine.
Section 4. Removal and Resignation of Officers.
A. Subject to the rights, if any, of an officer under
any contract of employment, any officer may be removed, either with
or without cause, by a majority of the Directors at that time in
office, at any regular or special meeting of the Board of Directors,
or, except in the case of an officer chosen by the Board of
Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
B. Any officer may resign at any time by giving written
notice to the Board of Directors. Any resignation shall take effect
on the date of the receipt of that notice or at any later time
specified in that notice; and, unless otherwise specified in that
notice, the acceptance of the resignation shall not be necessary to
make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the
officer is a party.
Section 5. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause
shall be filled in the manner prescribed in the Bylaws for regular
appointments to that office.
Section 6. Chairman of the Board.
A. The Chairman of the Board, if such an officer be
elected, shall, if present, preside at the meetings of the Board of
Directors and exercise and perform such other powers and duties as
may, from time to time, be assigned by the Board of Directors or
prescribed by the Bylaws. If there is no President, the Chairman of
the Board shall, in addition, be the Chief Executive Officer of the
Corporation and shall have the powers and duties prescribed in
Section 7 of this Article III.
Section 7. President and Chief Executive Officer.
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board, if there is such an
officer, the President along with the Chief Executive Officer of the
Corporation shall, subject to the control of the Board of Directors,
have general supervision, discretion and control of the business and
officers of the Corporation. The President or the Chief Executive
Officer shall preside at all meetings of the Shareholders and, in
the absence of the Chairman of the Board, or if there be none, at
all meetings of the Board of Directors. The President and Chief
Executive Officer, jointly, shall have the general powers and duties
of management usually vested in the office of President and Chief
Executive Officer of a corporation, each shall be ex officio a
member of all the standing committees, including the Executive
Committee, if any, and shall have such other powers and duties as
may be prescribed by the Board of Directors or the Bylaws.
Section 8. Vice President. In the absence or disability
of the President or Chief Executive Officer, the Vice Presidents, if
any, in order of their rank as fixed by the Board of
<PAGE>
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President or Chief
Executive Officer, as the case may be, and when so acting, shall
have all the powers of, and be subject to all the restrictions upon,
the President or the Chief Executive Officer. The Vice Presidents
shall have such other powers and perform such other duties as from
time to time may be prescribed for them, respectively, by the Board
of Directors or the Bylaws, the President, the Chief Executive
Officer, or the Chairman of the Board.
Section 9. Secretary.
A. The Secretary shall keep, or cause to be kept, a book
of minutes of all meetings of the Board of Directors and
Shareholders at the principal office of the Corporation or such
other place as the Board of Directors may order. The minutes shall
include the time and place of holding the meeting, whether regular
or special, and if a special meeting, how authorized, the notice
thereof given, and the names of those present at Directors' and
committee meetings, the number of shares present or represented at
Shareholders' meetings and the proceedings thereof.
B. The Secretary shall keep, or cause to be kept, at the
principal office of the Corporation or at the office of the
Corporation's transfer agent, a share register, or duplicate share
register, showing the names of the Shareholders and their addresses;
the number and classes or shares held by each; the number and date
of certificates issued for the same; and the number and date of
cancellation of every certificate surrendered for cancellation.
C. The Secretary shall give, or cause to be given,
notice of all the meetings of the Shareholders and of the Board of
Directors required by the Bylaws or by law to be given. The
Secretary shall keep the seal of the Corporation in safe custody,
and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the Bylaws.
Section 10. Chief Financial Officer or Treasurer.
A. The Chief Financial Officer shall keep and maintain,
or cause to be kept and maintained, in accordance with generally
accepted accounting principles, adequate and correct accounts of the
properties and business transactions of the Corporation, including
accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, earnings (or surplus) and shares issued. The books
of account shall, at all reasonable times, be open to inspection by
any Director.
<PAGE>
B. The Chief Financial Officer shall deposit all monies
and other valuables in the name and to the credit of the Corporation
with such depositaries as may be designated by the Board of
Directors. The Chief Financial Officer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, shall
render to the President and Directors, whenever they request it, an
account of all of the transactions of the Chief Financial Officer
and of the financial condition of the Corporation, and shall have
such other powers and perform such other duties as may be prescribed
by the Board of Directors or the Bylaws.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. Place of Meetings. Meetings of the
Shareholders shall be held at any place within or outside the state
of Nevada designated by the Board of Directors. In the absence of
any such designation, Shareholders' meetings shall be held at the
principal executive office of the Corporation.
Section 2. Annual Meeting.
A. The annual meeting of the Shareholders shall be held,
each year, as follows:
Time of Meeting: 10:00 A.M.
Date of Meeting: Second Tuesday in June
B. If this day shall be a legal holiday, then the
meeting shall be held on the next succeeding business day, at the
same time. At the annual meeting, the Shareholders shall elect a
Board of Directors, consider reports of the affairs of the
Corporation and transact such other business as may be properly
brought before the meeting.
C. If the above date is inconvenient, the annual meeting
of Shareholders shall be held each year on a date and at a time
designated by the Board of Directors within ninety days of the above
date upon proper notice to all Shareholders.
Section 3. Special Meetings.
A. Special meetings of the Shareholders for any purpose
or purposes whatsoever, may be called at any time by the Board of
Directors, the Chairman of the Board, the President, or by one or
more Shareholders holding shares in the aggregate entitled to cast
not less than 10% of the votes at any such meeting. Except as
provided in paragraph B below of this Section 3, notice shall be
given as for the annual meeting.
<PAGE>
B. If a special meeting is called by any person or
persons other than the Board of Directors, the request shall be in
writing, specifying the time of such meeting and the general nature
of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board, the President,
any Vice President or the Secretary of the Corporation. The officer
receiving such request shall forthwith cause notice to be given to
the Shareholders entitled to vote, in accordance with the provisions
of Sections 4 and 5 of this Article, indicating that a meeting will
be held at the time requested by the person or persons calling the
meeting, not less than 35 nor more than 60 days after the receipt of
the request. If the notice is not given within 20 days after
receipt of the request, the person or persons requesting the meeting
may give the notice in the manner provided in these Bylaws. Nothing
contained in this paragraph of this Section shall be construed as
limiting, fixing or affecting the time when a meeting of
Shareholders called by action of the Board of Directors may be held.
Section 4. Notice of Meetings - Reports.
A. Notice of any Shareholders meetings, annual or
special, shall be given in writing not less than 10 days nor more
than 60 days before the date of the meeting to Shareholders entitled
to vote thereat by the Secretary or the Assistant Secretary, or if
there be no such officer, or in the case of said Secretary or
Assistant Secretary's neglect or refusal, by any Director or
Shareholder.
B. Such notices or any reports shall be given personally
or by mail or other means of written communication as provided in
the Act and shall be sent to the Shareholder's address appearing on
the books of the Corporation, or supplied by the Shareholder to the
Corporation for the purpose of notice, and in the absence thereof,
as provided in the Act by posting notice at a place where the
principal executive office of the Corporation is located or by
publication at least once in a newspaper of general circulation in
the county in which the principal executive office is located.
C. Notice of any meeting of Shareholders shall specify
the place, the day and the hour of meeting, and (i) in case of a
special meeting, the general nature of the business to be transacted
and that no other business may be transacted, or (ii) in the case of
an annual meeting, those matters which the Board of Directors, at
the date of mailing of notice, intends to present for action by the
Shareholders. At any meetings where Directors are elected, notice
shall include the names of the nominees, if any, intended at the
date of notice to be presented for election.
D. Notice shall be deemed given at the time it is
delivered personally or deposited in the mail or sent by other means
of written communication. The officer giving such notice or report
shall prepare and file in the minute book of the Corporation an
affidavit or declaration thereof.
<PAGE>
E. If action is proposed to be taken at any meeting for
approval of (i) contracts or transactions in which a Director has a
direct or indirect financial interest, (ii) an amendment to the
Articles of Incorporation, (iii) a reorganization of the
Corporation, (iv) dissolution of the Corporation, or (v) a
distribution to preferred Shareholders, the notice shall also state
the general nature of such proposal.
Section 5. Quorum.
A. The holders of a majority of the shares entitled to
vote at a Shareholders' meeting, present in person, or represented
by proxy, shall constitute a quorum at all meetings of the
Shareholders for the transaction of business except as otherwise
provided by the Act or by these Bylaws.
B. The Shareholders present at a duly called or held
meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken (other
than adjournment) is approved by a majority of the shares required
to constitute a quorum.
Section 6. Adjourned Meeting and Notice Thereof.
A. Any Shareholders' meeting, annual or special, whether
or not a quorum is present, may be adjourned from time to time by
the vote of the majority of the shares represented at such meeting,
either in person or by proxy, but in the absence of a quorum, no
other business may be transacted at such meeting.
B. When any meeting of Shareholders, either annual or
special, is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are
announced at a meeting at which the adjournment is taken, unless a
new record date for the adjourned meeting is fixed, or unless the
adjournment is for more than 45 days from the date set for the
original meeting, in which case the Board of Directors shall set a
new record date. Notice of any adjourned meeting shall be given to
each Shareholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of Section 4 of this Article. At
any adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting.
Section 7. Waiver or Consent by Absent Shareholders.
A. The transactions of any meeting of Shareholders,
either annual or special, however called and noticed, shall be valid
as though had at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the Shareholders entitled to
vote, not present in person or by proxy, sign a written waiver of
notice, or a consent to the holding of such meeting or an approval
of the minutes thereof.
B. The waiver of notice or consent need not specify
either the business to be transacted or the purpose of any regular
or special meeting of Shareholders, except that if action is
<PAGE>
taken or proposed to be taken for approval of any of those matters
specified in Section E of Section 4 of this Article, the waiver of
notice or consent shall state the general nature of such proposal.
All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
C. Attendance of a person at a meeting shall also
constitute a waiver of notice of such meeting, except when the
person objects, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or
convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in
the notice. A Shareholder or Shareholders of the Corporation
holding at least 5% in the aggregate of the outstanding voting
shares of the Corporation may (i) inspect, and copy the records of
Shareholders' names and addresses and shareholdings during usual
business hours upon five days prior written demand upon the
Corporation, and/or (ii) obtain from the transfer agent by paying
such transfer agent's usual charges for such a list, a list of the
Shareholders' names and addresses who are entitled to vote for the
election of Directors, and their shareholdings, as of the most
recent record date for which such list has been compiled or as of a
date specified by the Shareholders subsequent to the day of demand.
Such list shall be made available by the transfer agent on or before
the later of five days after the demand is received or the date
specified therein as the date as of which the list is to be
compiled. The record of Shareholders shall also be open to
inspection upon the written demand of any Shareholder or holder of a
voting trust certificate, at any time during usual business hours,
for a purpose reasonably related to such holder's interest as a
Shareholder or as a holder of a voting trust certificate. Any
inspection and copying under this Section may be made in person or
by an agent or attorney of such Shareholder or holder of a voting
trust certificate making such demand.
Section 8. Maintenance and Inspection of Bylaws. The
Corporation shall keep at its principal executive office, or if not
in this state, at its principal business office in this state, the
original or a copy of the Bylaws amended to date, which shall be
open to inspection by the Shareholders at all reasonable times
during office hours. If the principal executive office of the
Corporation is outside the state and the Corporation has no
principal business office in this state, the Secretary shall, upon
written request of any Shareholder, furnish to such Shareholder a
copy of the Bylaws as amended to date.
Section 9. Annual Report to Shareholders.
A. Provided the Corporation has 100 Shareholders or
less, the Annual Report to Shareholders referred to in the Act is
expressly dispensed with, but nothing herein shall be interpreted as
prohibiting the Board of Directors from issuing annual or other
period reports to Shareholders of the Corporation as they deem
appropriate.
<PAGE>
B. Should the Corporation have 100 or more Shareholders,
an Annual Report to Shareholders must be furnished not later than
120 days after the end of each fiscal period. The Annual Report to
Shareholders shall be sent at least 15 days before the annual
meeting of the Shareholders to be held during the next fiscal year
and in the manner specified in Section 4 of Article V of these
Bylaws for giving notice to Shareholders of the Corporation. The
Annual Report to Shareholders shall contain a Balance Sheet as of
the end of the fiscal year and an Income Statement and Statement of
Changes in Financial Position for the fiscal year, accompanied by
any report of independent accountants or, if there is no such
report, the certificate of an authorized officer of the Corporation
that the statements were prepared without audit from the books and
records of the Corporation.
Section 10. Financial Statements.
A. A copy of any annual financial statement and any
Income Statement of the Corporation for each quarterly period of
each fiscal year, and any accompanying Balance Sheet of the
Corporation as of the end of each such period, that has been
prepared by the Corporation shall be kept on file at the principal
executive office of the Corporation for 12 months from the date of
its execution, and each such statement shall be exhibited at all
reasonable times to any Shareholder demanding an examination of such
statement or a copy shall be made for any such Shareholder.
B. If a Shareholder or Shareholders holding at least 5%
of the outstanding shares of any class of stock of the Corporation
make a written request to the Corporation for an Income Statement of
the Corporation for the three month, six month or nine month period
of the then current fiscal year ended more than 30 days prior to the
date of the request, and a Balance Sheet of the Corporation at the
end of such period, the Chief Financial Officer shall cause such
statement to be prepared, if not already prepared, and shall deliver
personally or mail such statement or statements to the person making
the request within 30 days after the receipt of such request. If
the Corporation has not sent to the Shareholders its Annual Report
for the last fiscal year, this report shall likewise be delivered or
mailed to such Shareholder or Shareholders within 30 days after such
request.
C. The Corporation also shall, upon the written request
of any Shareholder, mail to the Shareholder a copy of the last
annual, semi-annual or quarterly Income Statement which it has
prepared and a Balance Sheet as of the end of such period. This
quarterly Income Statement and Balance Sheet referred to in this
Section shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the Corporation or the
certificate of authorized officer of the Corporation such that
financial statements were prepared without audit from the books and
records of the Corporation.
Section 11. Annual Statement of General Information. The
Corporation shall, in a timely manner, in each year, file with the
Secretary of State of Nevada, on the prescribed form, the statement
setting forth the authorized number of Directors, the names and
complete business or residence addresses of all incumbent Directors,
the names and complete business or residence addresses of the Chief
Executive Officer, Secretary and Chief Financial Officer, the street
address of its principal executive office or principal business
office in this state and the general type of business constituting
the principal business activity of the Corporation, together with a
designation
<PAGE>
of the agent of the Corporation for the purpose of the
service of process, all in compliance with the Act.
ARTICLE IX
AMENDMENTS TO BYLAWS
Section 1. Amendment by Shareholders. New Bylaws may be
adopted or these Bylaws may be amended or repealed by the vote or
written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the Articles of
Incorporation of the Corporation set forth the number of authorized
Directors of the Corporation, the authorized number of Directors may
be changed only by amendment to the Articles of Incorporation.
Section 2. Amendment by Directors. Subject to the rights
of the Shareholders to adopt, amend or repeal the Bylaws, as
provided in Section 1 of this Article IX, and the limitations of the
Act, the Board of Directors may adopt, amend or repeal any of these
Bylaws other than an amendment to the Bylaws changing the authorized
number of Directors.
Section 3. Record of Amendments. Whenever an amendment
or new Bylaw is adopted, it shall be copies in the corporate book of
Bylaws with the original Bylaws, in the appropriate place. If any
Bylaw is repealed, the fact of repeal with the date of the meeting
at which the repeal was enacted or written assent was filed shall be
stated in the corporate book of Bylaws.
ARTICLE X
MISCELLANEOUS
Section 1. Shareholders' Agreements. Notwithstanding
anything contained in this Article X to the contrary, in the event
the Corporation elects to become a close corporation, an agreement
between two or more Shareholders thereof, if in writing and signed
by the parties thereto, may provide that in exercising any voting
rights, the shares held by them shall be voted as provided therein
or in the Act, and may otherwise modify the provisions contained in
Article IV, herein as to Shareholders' meetings and actions.
Section 2. Effect of Shareholders' Agreements. Any
Shareholders' Agreement authorized by the Act, shall only be
effective to modify the terms of these Bylaws if the Corporation
elects to become a close corporation with the appropriate filing of
an amendment to its Articles of Incorporation as required by the Act
and shall terminate when the Corporation ceases to be a close
corporation. Any other provisions of the Act or these Bylaws may be
altered or waived thereby, but to the extent they are not so altered
or waived, these Bylaws shall be applicable.
Section 3. Subsidiary Corporations. Shares of the
Corporation owned by a subsidiary shall not be entitled to vote on
any matter.
Section 4. Accounting Year. The accounting year of the
Corporation shall be fixed by
<PAGE>
resolution of the Board of Directors.
Section 5. Form. The corporate seal shall be circular in
form, and shall have inscribed thereon the name of the Corporation,
the date of its incorporation, and the word "Nevada" to indicate the
Corporation was incorporated pursuant to the laws of the State of
Nevada.
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, certify that:
1. I am the duly elected and acting secretary of AMS
Acquisition Corp., a Nevada corporation; and
2. The foregoing Bylaws, consisting of 16 pages, are the
Bylaws of this Corporation as adopted by the Board of Directors in
accordance with the Nevada Business Corporation Act and that such
Bylaws have not been amended and are in full force and effect.
IN WITNESS WHEREOF, I have subscribed my name and affixed
the seal of this Corporation on July 7, 1998.
/s/Joseph Naughton, Secretary
AGREEMENT AND
PLAN OF REORGANIZATION
DATED AUGUST , 1996
BY AND AMONG
AMERINET FINANCIAL SYSTEMS, INC.,
JONES NAUGHTON ENTERTAINMENT, INC.,
REAL ESTATE TELEVISION NETWORK, INC.
AND
AMERINET, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
1. Certain Definitions. . . . . . . . . . . . . . . . . . . . 1
1.1 "Affiliate". . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "ANFS Financial Statements" . . . . . . . . . . . . . . 1
1.3 "ANFS Products/Services" . . . . . . . . . . . . . . . . 1
1.4 "ANFS Series A Stock". . . . . . . . . . . . . . . . . . 2
1.5 "Closing". . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Closing Date" . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Commission" . . . . . . . . . . . . . . . . . . . . . . 2
1.9 "Dissenting Shares". . . . . . . . . . . . . . . . . . . 2
1.10 "Effective Time" . . . . . . . . . . . . . . . . . . . . 2
1.11 "GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 "JNE Escrow Shares". . . . . . . . . . . . . . . . . . . 2
1.13 "Material Adverse Effect". . . . . . . . . . . . . . . . 2
1.14 "Notice of Claim". . . . . . . . . . . . . . . . . . . . 2
1.15 "Notice of Objection". . . . . . . . . . . . . . . . . . 2
1.16 "RETN Common Stock". . . . . . . . . . . . . . . . . . . 2
1.17 "RETN Disclosure Schedule" . . . . . . . . . . . . . . . 2
1.18 "RETN Financial Statements". . . . . . . . . . . . . . . 3
1.19 "RETN Products/Services" . . . . . . . . . . . . . . . . 3
1.20 "Securities Act" . . . . . . . . . . . . . . . . . . . . 3
1.21 "Transaction Documents". . . . . . . . . . . . . . . . . 3
1.22 "AMERINET Disclosure Schedule" . . . . . . . . . . . . . 3
2. Plan of Reorganization . . . . . . . . . . . . . . . . . . 3
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 ANFS Series A Stock. . . . . . . . . . . . . . . . . . . 4
2.3 Conversion of Shares . . . . . . . . . . . . . . . . . . 4
2.4 Fractional Shares. . . . . . . . . . . . . . . . . . . . 4
2.5 Escrow Agreement . . . . . . . . . . . . . . . . . . . . 4
2.6 Contingent Shares. . . . . . . . . . . . . . . . . . . . 5
2.7 The Closing. . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Effective Time . . . . . . . . . . . . . . . . . . . . . 5
2.9 Tax Free Reorganization. . . . . . . . . . . . . . . . . 5
3. Representations and Warranties of JNE and RETN . . . . . . 5
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . 6
3.3 Power, Authority and Validity. . . . . . . . . . . . . . 6
3.4 Financial Statements . . . . . . . . . . . . . . . . . . 7
3.5 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
3.6 Tax-Free Reorganization. . . . . . . . . . . . . . . . . 8
3.7 Absence of Certain Changes or Events . . . . . . . . . . 8
3.8 Title and Related Matters. . . . . . . . . . . . . . . .10
3.9 Proprietary Rights . . . . . . . . . . . . . . . . . . .10
3.10 Employee Benefit Plans . . . . . . . . . . . . . . . . .12
3.11 Bank Accounts. . . . . . . . . . . . . . . . . . . . . .12
3.12 Contracts. . . . . . . . . . . . . . . . . . . . . . . .12
3.13 Insider Transactions . . . . . . . . . . . . . . . . . .14
3.14 Insurance. . . . . . . . . . . . . . . . . . . . . . . .14
3.15 Disputes and Litigation. . . . . . . . . . . . . . . . .14
3.16 Compliance with Laws . . . . . . . . . . . . . . . . . .14
3.17 Subsidiaries . . . . . . . . . . . . . . . . . . . . . .15
3.18 Environmental Matters. . . . . . . . . . . . . . . . . .15
3.19 Corporate Documents. . . . . . . . . . . . . . . . . . .16
3.20 No Brokers . . . . . . . . . . . . . . . . . . . . . . .16
3.21 Disclosure . . . . . . . . . . . . . . . . . . . . . . .16
4. Representations and Warranties of ANFS and AMERINET. . . .16
4.1 Corporate Existence and Authority of ANFS. . . . . . . .17
4.2 Capitalization of ANFS . . . . . . . . . . . . . . . . .17
4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . .17
4.4 Execution of Agreement . . . . . . . . . . . . . . . . .17
4.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . .18
4.6 Disputes and Litigation. . . . . . . . . . . . . . . . .18
4.7 Compliance with Laws . . . . . . . . . . . . . . . . . .19
4.8 Guaranties . . . . . . . . . . . . . . . . . . . . . . .19
5. Preclosing Covenants of RETN and JNE . . . . . . . . . . .19
5.1 Notices and Approvals. . . . . . . . . . . . . . . . . .19
5.2 Employment Agreements, Other Commitments Terminated. . .19
5.3 Advice of Changes. . . . . . . . . . . . . . . . . . . .19
5.4 Information for ANFS s Statements and Applications.. . .20
5.5 Conduct of Business by RETN. . . . . . . . . . . . . . .20
6. Mutual Covenants . . . . . . . . . . . . . . . . . . . . .21
6.1 No Public Announcement . . . . . . . . . . . . . . . . .21
6.2 Other Negotiations . . . . . . . . . . . . . . . . . . .21
6.3 Due Diligence, Investigation, and Audits . . . . . . . .22
6.4 Regulatory Filings; Consents; Reasonable Efforts . . . .22
6.5 Further Assurances . . . . . . . . . . . . . . . . . . .22
7. Closing Matters. . . . . . . . . . . . . . . . . . . . . .22
7.1 Filing of Certificate of Merger. . . . . . . . . . . . .22
7.2 Exchange of Certificates . . . . . . . . . . . . . . . .23
<PAGE>
7.3 Delivery of Contingent Shares. . . . . . . . . . . . . .23
7.4 Delivery of Documents. . . . . . . . . . . . . . . . . .23
8. Conditions to RETN's Obligations . . . . . . . . . . . . .23
8.1 Accuracy of Representations and Warranties . . . . . . .23
8.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . .23
8.3 No Litigation. . . . . . . . . . . . . . . . . . . . . .23
8.4 No Adverse Development . . . . . . . . . . . . . . . . .24
8.5 Authorizations . . . . . . . . . . . . . . . . . . . . .24
8.6 Government Consents. . . . . . . . . . . . . . . . . . .24
8.7 Opinion of AMERINET's Counsel. . . . . . . . . . . . . .24
8.8 Filing of Certificate of Merger. . . . . . . . . . . . .24
8.9 Registration Rights Agreement. . . . . . . . . . . . . .24
9. Conditions to ANFS' and AMERINET's Obligations . . . . . .24
9.1 Accuracy of Representations and Warranties . . . . . . .24
9.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . .25
9.3 No Litigation. . . . . . . . . . . . . . . . . . . . . .25
9.4 Authorizations . . . . . . . . . . . . . . . . . . . . .25
9.5 No Adverse Development.. . . . . . . . . . . . . . . . .25
9.6 Government Consents. . . . . . . . . . . . . . . . . . .25
9.7 Opinion of RETN's Counsel. . . . . . . . . . . . . . . .25
9.8 Filing of Certificate of Merger. . . . . . . . . . . . .25
10. Termination of Agreement . . . .. . . . . . . . . . . . .25
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . .25
10.2 Liability for Termination. . . . . . . . . . . . . . . .26
10.3 Certain Effects of Termination . . . . . . . . . . . . .26
10.4 Remedies . . . . . . . . . . . . . . . . . . . . . . . .26
11. Indemnification. . . .. . . . . . . . . . . . . . . . . .27
11.1 Survival of Representations, Warranties, Covenants and
Agreements . . . . . . . . . . . . . . . . . . . . . . .27
11.2 Indemnification by JNE . . . . . . . . . . . . . . . . .27
11.3 Indemnification by ANFS and AMERINET . . . . . . . . . .27
11.4 Claims for Indemnification.. . . . . . . . . . . . . . .28
11.5 Arbitration. . . . . . . . . . . . . . . . . . . . . . .28
11.6 Limitation on Indemnification. . . . . . . . . . . . . .29
11.7 Escrow . . . . . . . . . . . . . . . . . . . . . . . . .29
12. Miscellaneous. . . . . . . . . . . . . . . . . . . . . .30
12.1 Governing Laws . . . . . . . . . . . . . . . . . . . . .30
12.2 Binding upon Successors and Assigns. . . . . . . . . . .30
12.3 Severability . . . . . . . . . . . . . . . . . . . . . .30
12.4 Entire Agreement . . . . . . . . . . . . . . . . . . . .31
<PAGE>
12.5 Counterparts . . . . . . . . . . . . . . . . . . . . . .31
12.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . .31
12.7 Amendment and Waivers. . . . . . . . . . . . . . . . . .31
12.8 Survival of Agreements . . . . . . . . . . . . . . . . .31
12.9 No Waiver. . . . . . . . . . . . . . . . . . . . . . . .31
12.10 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . .31
12.11 Notices. . . . . . . . . . . . . . . . . . . . . . . . .32
12.12 Time . . . . . . . . . . . . . . . . . . . . . . . . . .32
12.13 Construction of Agreement. . . . . . . . . . . . . . . .33
12.14 No Joint Venture . . . . . . . . . . . . . . . . . . . .33
12.15 Pronouns . . . . . . . . . . . . . . . . . . . . . . . .33
12.16 Further Assurances . . . . . . . . . . . . . . . . . . .33
12.17 Absence of Third-Party Beneficiary Rights. . . . . . . .33
Exhibits and Schedules
Exhibit A Certificate of Merger
Exhibit B Certificate of Incorporation
Exhibit C Form of Legal Opinion to be Delivered by
Counsel to RETN
Exhibit D Form of Legal Opinion to be Delivered by
Counsel to AMERINET
AMERINET Schedule
RETN Schedule
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
entered into this day of August, 1996, by and among AMERINET
FINANCIAL SYSTEMS, INC., a Florida [Delaware?] corporation ("ANFS"),
JONES NAUGHTON ENTERTAINMENT, INC., a Colorado corporation ("JNE"),
REAL ESTATE TELEVISION NETWORK, INC., a Nevada corporation ("RETN"),
and AMERINET, INC., a Delaware corporation ("AMERINET" and
"Surviving Corporation").
RECITALS
A. RETN is a wholly-owned subsidiary of JNE and AMERINET is a
wholly-owned subsidiary of ANFS.
B. Subject to and in accordance with the terms and conditions
of this Agreement and pursuant to the Certificate of Merger attached
hereto as Exhibit A ("Certificate of Merger"), the parties intend
that RETN will merge with and into AMERINET (the "Merger"), whereby
at the Effective Time, all of the RETN Common Stock will be
converted into one million (1,000,000) ANFS Series A Preferred Stock
Shares.
C. For federal income tax purposes, it is intended that the
Merger shall qualify as a tax free reorganization within the meaning
of Section368(a)(2)(D) of the Code.
D. The parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other
as an inducement to the consummation of the Merger.
AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in and
for the consideration and mutual covenants set forth herein, the
parties agree as follows:
1. Certain Definitions.
1.1 "Affiliate" shall have the meaning set forth in the rules
and regulations promulgated by the Commission pursuant to the
Securities Act.
1.2 "ANFS Financial Statements" shall mean ANFS' unaudited
balance sheet as of June 30, 1996, and statements of operations,
stockholders' equity and cash flow for the six (6) month period
then-ended, and the audited balance sheet as of December 31, 1995,
and statements of operations, stockholder's equity and cash flow for
the twelve (12) month period then ended.
<PAGE>
1.3 "ANFS Products/Services" shall mean all products or services
which have been, or are being, marketed by AMERINET or are currently
under development, and all trade secrets, copyrights, trademarks,
trade names and other proprietary rights related to such products or
services.
1.4 "ANFS Series A Stock" shall mean the Series A Preferred
Stock of ANFS issued to JNE in the Merger, the rights of which are
described in Section 2.2.
1.5 "Closing" shall mean the closing of the transactions
contemplated by this Agreement.
1.6 "Closing Date" shall mean the date of the Closing.
1.7 "Code" shall mean the United States Internal Revenue Code of
1986, as amended.
1.8 "Commission" shall mean the United States Securities and
Exchange Commission.
1.9 "Dissenting Shares" shall mean those shares held by holders
who perfect their appraisal rights under the applicable state laws.
1.10 "Effective Time" shall mean the date and time of the
effectiveness of the Merger under Delaware law.
1.11 "GAAP" shall mean generally accepted accounting principles.
1.12 "JNE Escrow Shares" shall mean the shares of ANFS Series A
Stock issued to JNE in the Merger and deposited in escrow pursuant
to Section 2.5.
1.13 "Material Adverse Effect" shall mean an effect on the
operations, assets or financial condition of an entity considered as
a whole which would lead a reasonable business person to conclude
that entering into the Merger would not be advisable in light of the
effect.
1.14 "Notice of Claim" shall mean a notice of a claim of
indemnification arising under Section 11.
1.15 "Notice of Dbjection" shall mean a notice of an objection to
a claim of indemnification arising under Section 11.
1.16 "RETN Common Stock" shall mean all of the outstanding shares
of Common Stock of RETN.
<PAGE>
1.17 "RETN Disclosure Schedule" shall mean the disclosure
schedule provided to ANFS and AMERINET by JNE and RETN disclosing
such items and matters as are required to be disclosed under this
Agreement.
1.18 "RETN Financial Statements" shall mean RETN's unaudited
balance sheet as of June 30, 1996, and statements of operations,
stockholders' equity and cash flow for the six (6) month period
then-ended, and the audited balance sheet as of December 31, 1995,
and statements of operations, stockholder's equity and cash flow for
the twelve (12) month period then ended.
1.19 "RETN Products/Services" shall mean all products or services
which have been, or are being, marketed by RETN, or are currently
under development, and all patents, patent applications, trade
secrets, copyrights, trademarks, trade names and other proprietary
rights related to such products or services.
1.20 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and
regulations thereunder, all as the same shall be in effect at the time.
1.21 "Transaction Documents" shall mean all documents or
agreements attached as an exhibit or schedule hereto, and set forth
on the Table of Contents.
1.22 "AMERINET Disclosure Schedule" shall mean the disclosure
schedule provided to JNE and RETN by ANFS and AMERINET disclosing
such items and matters as are required to be disclosed under this
Agreement.
2. Plan of Reorganization.
2.1 The Merger. Subject to the terms and conditions of this
Agreement and the Certificate of Merger, RETN shall be merged with
and into AMERINET in accordance with the applicable provisions of
the laws of the State of Delaware, and with the terms and conditions
of this Agreement and the Certificate of Merger, so that:
(a) At the Effective Time (as defined in Section 2.7
(below)), RETN shall be merged with and into AMERINET. As a result
of the Merger, the separate corporate existence of RETN shall cease,
and AMERINET shall continue as the surviving corporation, and shall
succeed to and assume all of the rights and obligations of RETN in
accordance with the laws of Delaware.
(b) The Certificate of Incorporation and Bylaws of
AMERINET in effect immediately prior to the Effective Time shall be
the Certificate of Incorporation and Bylaws, respectively, of the
Surviving Corporation after the Effective Time unless and until
further amended as provided by law.
<PAGE>
(c) Subject to the terms of this Agreement, the directors
and officers of AMERINET immediately prior to the Effective Time
shall be the directors and officers of the Surviving Corporation
after the Effective Time. Such directors and officers shall hold
their position until the election and qualification of their
respective successors or until their tenure is otherwise terminated
in accordance with the Bylaws of the Surviving Corporation.
2.2 ANFS SERIES A STOCK. The ANFS Series A Stock shall have the
following preferred rights:
(a) The ANFS Series A Stock shall have no voting rights
except as required by law and as provided in AMERINET'S Certificate
of Incorporation attached hereto as Exhibit B.
(b) Each of the Preferred Shares will have a liquidation
preference of Dollars ($ ) per share.
Following the payment of the foregoing liquidation preference, the
Preferred Shares will participate with the ANFS Common Stock equally
on a share-for-share basis in any remaining liquidating distributions.
(c) Each of the Preferred Shares will have an annual,
noncumulative dividend preference equal to Dollars
($ ) per share. Following the payment of this dividend
preference in any year, the Preferred Shares will participate with
the ANFS Common Stock equally on a share-for-share basis in any
remaining dividend distributions.
(d) The Preferred Shares will automatically convert into
ANFS Common Stock, on a one-for-one basis, upon the closing of an
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the
offering and sale of shares of Common Stock for the account of ANFS
(other than a registration statement effected solely to implement an
employee benefit plan, a transaction in which Rule 145 of the
Securities and Exchange Commission is applicable or any other form
or type of registration in which the shares of Common Stock issuable
upon conversion of the shares of ANFS Series A Stock cannot be
included pursuant to the Securities and Exchange Commission rules or
practices) which results in aggregate net cash proceeds to ANFS of
at least $20,000,000 and at a per share price of at least $ per
share (appropriately adjusted for subdivisions, combinations and
stock dividends on the Common Stock).
2.3 Conversion of Shares. Each share of RETN Common Stock,
issued and outstanding immediately prior to the Effective Time,
will, by virtue of the Merger, and at the Effective Time, and
without further action on the part of any holder thereof, be
converted into one thousand (1,000) shares of fully paid and
nonassessable shares of ANFS Series A Stock.
2.4 Fractional Shares. No fractional shares of ANFS Series A
Stock will be issued in connection with the Merger.
<PAGE>
2.5 Escrow Agreement. At the Effective Time, certificates
representing thirty-seven and one-half percent (37.5%) of the shares
of the ANFS Series A Stock issued to JNE in the Merger shall be
deposited in escrow. The JNE Escrow Shares shall be held as
collateral for the indemnification obligations of RETN and JNE under
Section 11 and pursuant to the provisions of an escrow agreement to
be entered into between the parties, with the terms of such
agreement to be mutually agreed upon, which terms shall not be
inconsistent with the terms set forth in this Agreement.
2.6 Contingent Shares. JNE shall be issued an additional Five
Hundred Thousand (500,000) ANFS Series A Stock shares (the
"Contingent Shares") on the six month anniversary date following the
Closing Date (the "Contingent Share Date") if, on, or before such
anniversary, RETN shall have sold, delivered and received payment
subsequent to the Closing Date for not less than real estate
satellite systems to new clients and ANFS shall have raised not less
than $ in equity financing following the Closing.
2.7 The Closing. Subject to termination of this Agreement as
provided in Section 10 (below), the Closing shall take place at the
offices of Pezzola & Reinke, Lake Merritt Plaza, 1999 Harrison
Street, Oakland, California, as soon as possible upon the
satisfaction or waiver of all conditions set forth in Sections 8 and
9 hereof, or such other time and place as is mutually agreeable to
the parties.
2.8 Effective Time. Simultaneously with the Closing, the
Certificate of Merger shall be filed in the office of the Secretary
of State of the State of Delaware. The Merger shall become
effective immediately upon the filing of the Certificate of Merger
with such office.
2.9 Tax Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the
Merger in accordance with the provisions of Section368(a)(2)(D) of
the Code. Each party agrees that it will not take or assert any
position on any tax return, report or otherwise which is
inconsistent with the qualification of the Merger as a
reorganization within the meaning of Section368(a) of the Code.
Except for cash paid in lieu of fractional shares, no consideration
that could constitute "other property" within the meaning of
Section356 of the Code is being paid by AMERINET for the RETN Common
Stock. In addition, AMERINET represents now, and as of the Closing
Date, that it presently intends to continue RETN's historic business
or use a significant portion of RETN's business assets in a business.
3. Representations and Warranties of JNE and RETN. Except as
otherwise set forth in the RETN Disclosure Schedule attached hereto,
JNE and RETN jointly and severally represent and warrant to ANFS and
AMERINET as set forth below. No fact or circumstance disclosed
shall constitute an exception to these representations and
warranties unless such fact or circumstance is set forth in the RETN
Disclosure Schedule or such supplements thereto as may mutually be
agreed upon in writing by JNE, RETN, ANFS and AMERINET.
3.1 Organization. RETN and JNE are corporations duly organized,
validly existing and in good standing under the laws of the state of
incorporation of such entity and have
<PAGE>
the corporate power and authority to carry on their respective
businesses as it is now being conducted. RETN and JNE are duly
qualified or licensed to do business and are in good standing in
each jurisdiction in which the nature of their respective businesses
or properties makes such qualification or licensing necessary except
where the failure to be so qualified would not have a Material Adverse
Effect on RETN and JNE. The RETN Disclosure Schedule contains a true
and complete listing of the locations of all sales offices, manufacturing
facilities, and any other offices or facilities of RETN, and a true
and complete list of all states in which RETN maintains any
employees. The RETN Disclosure Schedule contains a true and
complete list of all states in which RETN is duly qualified to
transact business as a foreign corporation. True and complete
copies of RETN's Articles of Incorporation and Bylaws, as in effect
on the date hereof and as to be in effect as of the Closing, have
been provided to ANFS, AMERINET or its representatives.
3.2 Capitalization.
(a) The authorized capital of RETN will consist, prior to
the Closing, of shares of Common Stock, of which
one thousand (1,000) shares will be issued and outstanding. JNE is
the record and beneficial owner of all such shares of RETN Common
Stock, free and clear of any and all claims, liens, encumbrances or
security interests.
(b) Except as set forth in the RETN Disclosure Schedule,
RETN does not have outstanding any preemptive rights, subscription
rights, options, warrants, rights to convert or exchange, capital
stock equivalents, or other rights to purchase or otherwise acquire
any RETN capital stock or other securities.
(c) All of the issued and outstanding shares of RETN
capital stock have been duly authorized, validly issued, are fully
paid and nonassessable, and such capital stock has been issued in
full compliance with all applicable federal and state securities
laws. None of RETN's issued and outstanding shares of capital stock
are subject to repurchase or redemption rights.
(d) Except for any restrictions imposed by applicable
state and federal securities laws, there is no right of first
refusal, option, or other restriction on transfer applicable to any
shares of RETN's capital stock.
(e) RETN is not under any obligation to register under the
Securities Act any shares of its capital stock or any other of its
securities that might be issued in the future if the Merger were not
consummated.
(f) RETN is not a party or subject to any agreement or
understanding (and, to JNE's and RETN's actual knowledge, there is
no agreement or understanding between or among any persons) that
affects or relates to the voting or giving of written consent with
respect to any security.
<PAGE>
3.3 Power, Authority and Validity. JNE and RETN have the
corporate power to enter into this Agreement and the other
Transaction Documents to which they are parties and to carry out
their obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by the Boards of Directors of JNE and RETN
and no other corporate proceedings on the part of RETN are necessary
to authorize this Agreement, the other Transaction Documents and the
transactions contemplated herein and therein. JNE and RETN are not
subject to, or obligated under, any charter, bylaw or contract
provision or any license, franchise or permit, or subject to any
order or decree, which would be breached or violated by or in
conflict with its executing and carrying out this Agreement and the
transactions contemplated hereunder and under the Transaction
Documents. Except for (i) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which
RETN is qualified to do business, and (ii) filings under applicable
securities laws, no consent of any person who is a party to a
contract which is material to RETN's business, nor consent of any
governmental authority, is required to be obtained on the part of
RETN to permit the transactions contemplated herein and to permit
RETN to continue the business activities of RETN as previously
conducted by RETN without a Material Adverse Effect. This Agreement
is, and the other Transaction Documents when executed and delivered
by JNE and RETN shall be, the valid and binding obligations of JNE
and RETN, enforceable in accordance with their respective terms.
3.4 FINANCIAL STATEMENTS.
(a) RETN has delivered to ANFS copies of the RETN
Financial Statements.
(b) The RETN Financial Statements are complete and in
accordance with the books and records of RETN and present fairly the
financial position of RETN as of its historical dates. The RETN
Financial Statements have been prepared in accordance with GAAP
(except for the absence of footnotes) applied on a basis consistent
with prior periods. Except and to the extent reflected or reserved
against in such balance sheets (including the notes thereto), RETN
does not have, as of the dates of such balance sheets, any
liabilities or obligations (absolute or contingent) of a nature
required or customarily reflected in a balance sheet (or the notes
thereto) prepared in accordance with GAAP. The reserves, if any,
reflected on the RETN Financial Statements are adequate in light of
the contingencies with respect to which they are made.
(c) RETN has no debt, liability, or obligation of any
nature, whether accrued, absolute, contingent, or otherwise, and
whether due or to become due, that is not reflected or reserved
against in the RETN Financial Statements, except for those (i) that
may have been incurred after the date of the RETN Financial
Statements; or (ii) that are not required by GAAP to be included in
a balance sheet or the notes thereto, except that RETN has not
established any reserves with respect to the costs and fees
associated with this Agreement, the other Transaction Documents, and
the transactions contemplated hereby and thereby. All
<PAGE>
material debts, liabilities, and obligations incurred after the
date of the RETN Financial Statements were incurred in the ordinary
course of business, and are usual and normal in amount both individually
and in the aggregate.
3.5 Tax matters.
(a) RETN has fully and timely, properly and accurately
filed all tax returns and reports required to be filed by it,
including all federal, foreign, state and local tax returns and
estimates for all years and periods (and portions thereof) for which
any such returns, reports or estimates were due. All such returns,
reports and estimates were prepared in the manner required by
applicable law. All income, sales, use, occupation, property or
other taxes or assessments due from RETN have been paid. There are
no pending assessments, asserted deficiencies or claims for
additional taxes that have not been paid. The reserves for taxes,
if any, reflected on the RETN Financial Statements are adequate and
there are no tax liens on any property or assets of RETN. There
have been no audits or examinations of any tax returns or reports by
any applicable governmental agency. No state of facts exists or has
existed which would constitute grounds for the assessment of any
penalty or of any further tax liability beyond that shown on the
respective tax reports, returns or estimates. There are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any federal, state or local income tax
return or report for any period.
(b) All taxes which RETN has been required to collect or
withhold have been duly withheld or collected and, to the extent
required, have been paid to the proper taxing authority.
(c) RETN is not a party to any tax-sharing agreement or
similar arrangement with any other party.
(d) At no time has RETN been included in the federal
consolidated income tax return of any affiliated group of corporations.
(e) No payment which RETN is obliged to pay to any
director, officer, employee or independent contractor pursuant to
the terms of an employment agreement, severance agreement or
otherwise will constitute an excess parachute payment as defined in
Section280G of the Code.
(f) RETN is not currently under any contractual obligation
to pay any tax obligations of, or with respect to any transaction
relating to, any other person or to indemnify any other person with
respect to any tax.
3.6 Tax-Free Reorganization.
<PAGE>
(a) Neither RETN nor JNE has taken or agreed to take any
action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section368(a) of
the Code.
(b) There is no present plan or intention by JNE to sell,
exchange or otherwise dispose of the ANFS Series A Stock to be
received in the Merger.
(c) Neither JNE nor RETN is an investment company as
defined in SectionSection368(a)(2)(F)(iii) and (iv) of the Code.
3.7 Absence of Certain Changes or Events. Since June 30, 1996,
RETN has not:
(a) suffered any material adverse change in its financial
condition or in the operations of its business, nor any material
adverse changes in its balance sheet, (with the RETN Financial
Statements and any subsequent balance sheet analyzed as if each had
been prepared according to GAAP), including but not limited to cash
distributions or material decreases in the net assets of RETN;
(b) suffered any damage, destruction or loss, whether
covered by insurance or not, materially and adversely affecting its
properties or business;
(c) granted or agreed to make any increase in the
compensation payable or to become payable by it to its officers or
employees, except those occurring in the ordinary course of
business;
(d) declared, set aside or paid any dividend or made any
other distribution on or in respect of the shares of its capital
stock or declared any direct or indirect redemption, retirement,
purchase or other acquisition by it of such shares;
(e) issued any shares of its capital stock or any
warrants, rights, options or entered into any commitment relating to
its shares except for the issuance of its pursuant to the exercise
of outstanding options;
(f) made any change in the accounting methods or practices
it follows, whether for general financial or tax purposes, or any
change in depreciation or amortization policies or rates adopted
therein;
(g) sold, leased, abandoned or otherwise disposed of any
real property or any machinery, equipment or other operating
property other than in the ordinary course of business;
(h) sold, assigned, transferred, licensed or otherwise
disposed of any patent, trademark, trade name, brand name, copyright
(or pending application for any patent,
<PAGE>
trademark or copyright) invention, work of authorship, process,
know-how, formula or trade secret or interest thereunder or other
intangible asset except in the ordinary course of its business;
(i) suffered any labor dispute;
(j) engaged in any activity or entered into any material
commitment or transaction (including without limitation any
borrowing or capital expenditure) other than in the ordinary course
of business;
(k) incurred any liabilities except in the ordinary course
of business and consistent with past practice which would be
required to be disclosed in financial statements prepared in
accordance with GAAP;
(l) permitted or allowed any of its property or assets to
be subjected to any mortgage, deed of trust, pledge, lien, security
interest or other encumbrance of any kind, except those permitted
under Section 3.8 hereof, other than any purchase money security
interests incurred in the ordinary course of business;
(m) made any capital expenditure or commitment for
additions to property, plant or equipment individually in excess of
Ten Thousand Dollars ($10,000), or in the aggregate, in excess of
Fifty Thousand Dollars ($50,000);
(n) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets to, or entered into
any agreement or arrangement with any of its Affiliates, officers,
directors or stockholder or any Affiliate or associate of any of the
foregoing;
(o) made any amendment to or terminated any agreement
which, if not so amended or terminated, would be required to be
disclosed on the RETN Disclosure Schedule; or
(p) agreed to take any action described in Sections 2.9,
3.6 or 3.7 or outside of its ordinary course of business or which
would constitute a breach of any of the representations contained in
this Agreement.
3.8 Title and Related Matters. RETN has good and marketable
title to all the properties, interests in properties and assets,
real and personal, reflected in the RETN Financial Statements or
acquired after the date of the RETN Financial Statements (except
properties, interests in properties and assets sold or otherwise
disposed of since the date of the RETN Financial Statements in the
ordinary course of business), free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character,
except the lien of current taxes not yet due and payable and except
for liens which in the aggregate do not secure more than Ten
Thousand Dollars ($10,000) in liabilities. The equipment of RETN
used in the operation of its business is in good operating condition
and repair. All real or personal property leases to which RETN is a
party are valid, binding, enforceable obligations of RETN effective
in accordance with
<PAGE>
their respective terms. There is not under any of such leases any
existing material default or event of default or event which, with
notice or lapse of time or both, would constitute a material default.
The RETN Disclosure Schedule contains a description of all real and
personal property leased or owned by RETN, identifying such property and,
in the case of real property, stating the monthly rental due, term of lease
and square feet leased. True and correct copies of each of RETN's leases
have been provided to ANFS, AMERINET or its representatives.
3.9 Proprietary Rights.
(a) RETN owns all right, title and interest in and to, or
valid licenses for use of, all patents, copyrights, technology,
software, software tools, know-how, processes, trade secrets,
trademarks, service marks, trade names and other proprietary rights
used in or necessary for the conduct of RETN's business as conducted
to the date hereof or contemplated, including, without limitation,
the technology and all proprietary rights developed or discovered or
used in connection with or contained in the RETN Products/Services,
free and clear of all liens, claims and encumbrances (including
without limitation distribution rights) (all of which are referred
to as "RETN Proprietary Rights") and RETN has the right to transfer
all such rights to AMERINET as contemplated hereby. The foregoing
representation as it relates to RETN Third-Party Technology (as
hereinafter defined) is limited to RETN's interest pursuant to the
RETN Third-Party Licenses (as hereinafter defined), all of which are
valid and enforceable and in full force and effect and which grant
RETN such rights to the RETN Third-Party Technology as are employed
in or necessary to the business of RETN as conducted or proposed to
be conducted. The RETN Disclosure Schedule contains an accurate and
complete description of (i) all patents, trademarks (with separate
listings of registered and unregistered trademarks), trade names,
and registered copyrights in or related to the RETN Products/
Services, all applications and registration statements therefor, and
a list of all licenses and other agreements relating thereto; and
(ii) a list of all licenses and other agreements with third parties
(the "RETN Third-Party Licenses") relating to any inventions,
technology, know-how, or processes that RETN is licensed or
otherwise authorized by such third parties to use, market,
distribute or incorporate into products distributed by RETN (such
software, inventions, technology, know-how and processes are
collectively referred to as the "RETN Third-Party Technology").
RETN's trademark or trade name registrations related to the RETN
Products/Services and all of RETN's copyrights in any of the RETN
Products/Services are valid and in full force and effect, and
consummation of the transactions contemplated hereby will not alter
or impair any such rights. No claims have been asserted against
RETN (and RETN is not aware of any claims which are likely to be
asserted against it or which have been asserted against others) by
any person challenging RETN's use, possession, manufacture, sale,
provision or distribution of the RETN Products/Services under any
patents, trademarks, trade names, copyrights, trade secrets,
technology, know-how or processes utilized by RETN (including,
without limitation, the RETN Third-Party Technology) or challenging
or questioning the validity or effectiveness of any license or
agreement relating thereto (including, without limitation, the RETN
Third-Party Licenses). There is no valid basis for any claim of the
type specified in the immediately preceding sentence which could in
any material way relate to or interfere with the currently planned
continued enhancement and exploitation by RETN of any of the RETN
Products/Services. None of the RETN
<PAGE>
Products/Services nor the use or exploitation of any patents,
trademarks, trade names, copyrights, technology, know-how or processes
by RETN in its current business infringes on the rights of, constitutes
misappropriation of, or in any way involves unfair competition with respect
to, any proprietary information or intangible property right of any third
person or entity, including without limitation any patent, trade secret,
copyright, trademark or trade name.
(b) No employee of RETN is in violation of any term of any
employment contract, patent disclosure agreement or any other
contract or agreement relating to the relationship of any such
employee with RETN or, to JNE's or RETN's actual knowledge, any
other party because of the nature of the business conducted by RETN
or proposed to be conducted by RETN.
(c) Each person presently or previously employed by RETN
(including independent contractors, if any) with access to
confidential information has executed a confidentiality and
non-disclosure agreement pursuant to the form of agreement
previously provided to AMERINET or its representatives. Such
confidentiality and non-disclosure agreements constitute valid and
binding obligations of RETN and such person, enforceable in
accordance with their respective terms. Neither the execution or
delivery of such agreements, nor the carrying on of their business
as employees by such persons, nor the conduct of their business as
currently anticipated, will conflict with or result in a breach of
the terms, conditions or provisions of or constitute a default under
any contract, covenant or instrument under which any of such persons
is obligated.
(d) No product or service liability or warranty claims
which individually or in the aggregate could exceed One Thousand
Dollars ($1,000) individually or Ten Thousand ($10,000) in the
aggregate have been communicated to, or threatened against, RETN
nor, to RETN's actual knowledge, is there any specific situation,
set of facts or occurrence that provides a basis for such claim.
3.10 Employee Benefit Plans. There is no unfunded prior service
cost with respect to any bonus, deferred compensation, pension,
profit-sharing, retirement, stock purchase, stock option, or other
employee benefit or fringe benefit plans, whether formal or
informal, maintained by RETN. Each bonus, deferred compensation,
pension, profit-sharing, retirement, stock purchase, stock option,
and other employee benefit or fringe benefit plans, whether formal
or informal, maintained by RETN conforms to all applicable
requirements of the Employees Retirement Income Security Act of
1974. The RETN Disclosure Schedule lists and describes all
profit-sharing, bonus, incentive, deferred compensation, vacation,
severance pay, retirement, stock option, group insurance or other
plans (whether written or not) providing employee benefits.
3.11 Bank Accounts. The RETN Disclosure Schedule sets forth the
names and locations of all banks, trusts, companies, savings and
loan associations, and other financial institutions at which RETN
maintains accounts of any nature and the names of all persons
authorized to draw thereon or make withdrawals therefrom.
<PAGE>
3.12 Contracts.
(a) RETN has no agreements, contracts or commitments that
provide for the sale, licensing or distribution by RETN of any of
its products, services, inventions, technology, know-how, trademarks
or trade names except in the ordinary course of its business.
(b) RETN has no agreements, contracts or commitments that
call for fixed and/or contingent payments or expenditures by or to
RETN of more than Ten Thousand Dollars ($10,000).
(c) Without limiting the provisions of Section 3.9 and
except for any agreements with ANFS or AMERINET, RETN has not
granted to any third party any exclusive rights of any kind with
respect to any of the RETN Products/Services.
(d) There is no outstanding sales contract, commitment or
proposal of RETN that is currently expected to result in any loss to
RETN (before allocation of overhead and administrative costs) upon
completion or performance thereof.
(e) RETN has no outstanding agreements, contracts or
commitments with officers, employees, agents, consultants, advisors,
salesmen, sales representatives, distributors or dealers that are
not cancelable by it on notice of not longer than thirty (30) days
and without liability, penalty or premium.
(f) RETN has no employment, independent contractor or
similar agreement, contract or commitment that is not terminable on
no more than thirty (30) days' notice without penalty or liability
of any type, including without limitation severance or termination pay.
(g) RETN has no currently effective collective bargaining
or union agreements, contracts or commitments.
(h) RETN is not restricted by agreement from competing
with any person or from carrying on its business anywhere in the world.
(i) RETN has not guaranteed any obligations of other
persons or made any agreements to acquire or guarantee any
obligations of other persons.
(j) RETN has no outstanding loan or advance to any person;
nor is it party to any line of credit, standby financing, revolving
credit or other similar financing arrangement of any sort which
would permit the borrowing by RETN of any sum not reflected in the
RETN Financial Statements.
<PAGE>
(k) All material contracts, agreements and instruments to
which RETN is a party are valid, binding, in full force and effect,
and enforceable by RETN in accordance with their respective terms.
No such material contract, agreement or instrument contains any
material liquidated-damages, penalty or similar provision. RETN has
not received any notice from any party to any such material
contract, agreement or instrument that such party intends to cancel,
withdraw, modify or amend such contract, agreement or arrangement.
(l) The RETN Disclosure Schedule lists all material
agreements pursuant to which RETN has agreed to supply to any third
party RETN Products/Services.
(m) RETN is not in default under or in breach or violation
of, nor, to its actual knowledge, is there any valid basis for any
claim of default by RETN under, or breach or violation by RETN of,
any contract, commitment or restriction to which RETN is a party or
to which it or any of its properties is bound, where such defaults,
breaches, or violations would, in the aggregate, have a Material
Adverse Effect on RETN. To RETN's actual knowledge, no other party
is in default under or in breach or violation of, nor is there any
valid basis for any claim of default by any other party under or any
breach or violation by any other party of, any material contract,
commitment, or restriction to which RETN is bound or by which any of
its properties is bound, where such defaults, breaches, or
violations would, in the aggregate, have a Material Adverse Effect
on RETN.
(n) All agreements, contracts and commitments (the
"Material Contracts") listed or described in the RETN Disclosure
Schedule pursuant to this Section 3.12 are assumable, or will
otherwise be the property of, the Surviving Corporation following
the Merger without further action by the Surviving Corporation or
AMERINET. If any of the Material Contracts are not assumable by or
will not be the property of, the Surviving Corporation following the
Merger, then RETN has described in the RETN Disclosure Schedule such
actions as is necessary for assumption of the Material Contract by
the Surviving Corporation.
(o) True and correct copies of each document or instrument
described in the RETN Disclosure Schedule pursuant to this Section
3.12 have been made available to ANFS, AMERINET, or their
representatives.
3.13 Insider Transactions. No Affiliate of RETN or JNE has any
interest in (i) any material equipment or other property, real or
personal, tangible or intangible, including, without limitation, any
item of intellectual property, used in connection with or pertaining
to the business of RETN; or (ii) any creditor, supplier, customer,
agent or representative of RETN; provided, however, that no such
Affiliate or other person shall be deemed to have such an interest
solely by virtue of the ownership of less than one percent (1%) of
the outstanding stock or debt securities of any publicly-held
company, the stock or debt securities of which are traded on a
recognized stock exchange or quoted on the National Association of
Securities Dealers Automated Quotation System.
<PAGE>
3.14 Insurance. The RETN Disclosure Schedule contains a list of
the principal policies of fire, liability and other forms of
insurance held by RETN.
3.15 Disputes and Litigation. There is no suit, action,
litigation, proceeding, investigation, claim, complaint, or
accusation pending, or to its knowledge threatened against or
affecting RETN or any of its properties, assets or business or to
which RETN is a party, in any court or before any arbitrator of any
kind or before or by any governmental agency (including, without
limitation, any federal, state, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality),
and to its knowledge, there is no basis for such suit, action,
litigation, proceeding, investigation, claim, complaint, or
accusation; (b) there is no pending or threatened change in any
environmental, zoning or building laws, regulations or ordinances
which affect or could affect RETN or any of its properties, assets
or businesses; and (c) there is no outstanding order, writ,
injunction, decree, judgment or award by any court, arbitrator or
governmental body against or affecting RETN or any of its
properties, assets or business. There is no litigation, proceeding,
investigation, claim, complaint or accusation, formal or informal,
or arbitration pending, or any of the aforesaid threatened, or any
contingent liability which would give rise to any right of
indemnification or similar right on the part of any director or
officer of RETN or any such person's heirs, executors or
administrators as against RETN.
3.16 Compliance with Laws. RETN has at all times been, and
presently is, in full compliance with, and has not received notice
of any claimed violation of, any applicable federal, state, local,
foreign and other laws, rules and regulations. RETN has filed all
returns, reports and other documents and furnished all information
required or requested by any federal, state, local or foreign
governmental agency and all such returns, reports, documents and
information are true and complete in all respects. All permits,
licenses, orders, franchises and approvals of all federal, state,
local or foreign governmental or regulatory bodies required of RETN
for the conduct of its business have been obtained, no violations
are or have been recorded in respect of any such permits, licenses,
orders, franchises and approvals, and there is no litigation,
proceeding, investigation, arbitration, claim, complaint or
accusation, formal or informal, pending or threatened, which may
revoke, limit, or question the validity, sufficiency or continuance
of any such permit, license, order, franchise or approval. Such
permits, licenses, orders, franchises and approvals are valid and
sufficient for all activities presently carried on by RETN.
3.17 Subsidiaries. RETN has no subsidiaries. RETN does not own
or control (directly or indirectly) any capital stock, bonds or
other securities of, and does not have any proprietary interest in,
any other corporation, general or limited partnership, firm,
association or business organization, entity or enterprise, and RETN
does not control (directly or indirectly) the management or policies
of any other corporation, partnership, firm, association or business
organization, entity or enterprise.
<PAGE>
"Subsidiary" or "Subsidiaries" means all corporations,
trusts, partnerships, associations, joint ventures o other Persons,
as defined below, of which a corporation or any other Subsidiary of
such corporation owns not less than twenty percent (20%) of the
voting securities or other equity or of which such corporation or
any other Subsidiary of such corporation possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies, whether through ownership of voting shares,
management contracts or otherwise. "Person" means any individual,
corporation, trust, association, partnership, proprietorship, joint
venture or other entity. There are no Subsidiaries of RETN.
3.18 Environmental Matters.
(a) As of the date hereof, no underground storage tanks
are present under any property that RETN has at any time owned,
operated, occupied or leased. As of the date hereof except as set
forth in the RETN Disclosure Schedule, no material amount of any
substance that has been designated by any governmental entity or by
applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment,
including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and
Recovery Act of 1976, as amended, and the regulations promulgated
pursuant to said laws (a "Hazardous Material"), excluding office,
janitorial and other immaterial supplies, are present, as a result
of the actions of RETN or, to RETN's actual knowledge, as a result
of any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and
surface water, that RETN have at any time owned, operated, occupied
or leased.
(b) At no time has RETN transported, stored, used,
manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has RETN disposed of, transported,
sold, or manufactured any product containing a Hazardous Material in
violation of any rule, regulation, treaty or statute promulgated by
any governmental entity to prohibit, regulate or control Hazardous
Materials or any Hazardous Material Activities.
(c) RETN currently holds all environmental approvals,
permits, licenses, clearances and consents necessary for the conduct
of its business as such business is currently being conducted, the
absence of which would be reasonably likely to have a Material
Adverse Effect on RETN.
(d) No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending or, to the
actual knowledge of RETN, threatened concerning any Environmental
Permit. RETN is not aware of any fact or circumstance which
<PAGE>
could involve it in any environmental litigation or impose upon it any
environmental liability which would be reasonably likely to have a
Material Adverse Effect on RETN.
3.19 Corporate Documents. RETN has furnished to ANFS for its
examination: (i) copies of its Certificate or Articles of
Incorporation and Bylaws; (ii) its Minute Book containing all
records required to be set forth of all proceedings, consents,
actions, and meetings of the stockholders, the board of directors
and any committees thereof; (iii) all permits, orders, and consents
issued by any regulatory agency with respect to RETN, or any
securities of RETN, and all applications for such permits, orders,
and consents; and (iv) its stock transfer books setting forth all
transfers of any capital stock. The corporate minute books, stock
certificate books, stock registers and other corporate records of
RETN are complete and accurate in all material respects, and the
signatures appearing on all documents contained therein are the true
signatures of the persons purporting to have signed the same. All
actions reflected in such books and records were duly and validly
taken in compliance with the laws of the applicable jurisdiction.
3.20 No Brokers. Neither JNE nor RETN is obligated for the
payment of fees or expenses of any broker or finder in connection
with the origin, negotiation or execution of this Agreement or the
Certificate of Merger or in connection with any transaction
contemplated hereby or thereby.
3.21 Disclosure. No statements by JNE or RETN contained in this
Agreement and the Exhibits and RETN Disclosure Schedule attached
hereto, any other Transaction Document or any written statement or
certificate furnished or to be furnished pursuant hereto or in
connection with the transactions contemplated hereby and thereby
(when read together) contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light
of the circumstances under which they were made.
4. Representations and Warranties of ANFS and AMERINET. Except
as otherwise set forth in the AMERINET Disclosure Schedule attached
hereto, ANFS and AMERINET represents and warrants to RETN as set
forth below. No fact or circumstance disclosed to JNE shall
constitute an exception to these representations and warranties
unless such fact or circumstance is set forth in the AMERINET
Disclosure Schedule or such supplements thereto as may mutually be
agreed upon in writing by ANFS and JNE.
4.1 Corporate Existence and Authority of ANFS. ANFS is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Florida (Delaware?). It has all
requisite corporate power, franchises, licenses, permits and
authority to own its properties and assets and to carry on its
business as it has been and is being conducted. It is in good
standing in each state, nation or other
<PAGE>
jurisdiction in each state, nation or other jurisdiction wherein
the character of the business transacted by it makes such
qualification necessary.
4.2 Capitalization of ANFS. The authorized equity securities of
ANFS consists of shares of common stock, of which
shares are issued and outstanding, and
shares of Preferred Stock, of which no shares are issued and
outstanding. No other shares of capital stock of ANFS are issued
and outstanding. All of the issued and outstanding shares have been
duly and validly issued in accordance and compliance with all
applicable laws, rules and regulations and are fully paid and
nonassessable. There are no options, warrants, rights, calls,
commitments, plans, contracts or other agreements of any character
granted or issued by ANFS which provide for the purchase, issuance
or transfer of any shares of the capital stock of ANFS nor are there
any outstanding securities granted or issued by ANFS that are
convertible into any shares of the equity securities of ANFS, and
none is authorized. ANFS is not obligated or committed to
purchase, redeem or otherwise acquire any of its equity. All
presently exercisable voting rights in ANFS are vested exclusively
in its outstanding shares of common stock, each share of which is
entitled to one vote on every matter to come before it's
shareholders, and other than as may be contemplated by this
Agreement, there are no voting trusts or other voting arrangements
with respect to any of ANFS s equity securities.
4.3 Subsidiaries. There are no Subsidiaries of ANFS, except as
identified in the AMERINET Disclosure Schedule.
4.4 Execution of Agreement. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which ANFS is a party or
to its knowledge by which it or any of its properties are bound; (b)
result in the creation of any security interest, lien, encumbrance,
adverse claim, proscription or restriction on any property or asset
(whether real, personal, mixed, tangible or intangible), right,
contract, agreement or business of ANFS; (c) to its knowledge
violate any law, rule or regulation of any federal or state
regulatory agency; or (d) to its knowledge permit any federal or
state regulatory agency to impose any restrictions or limitations of
any nature on ANFS or any of its actions.
4.5 Taxes.
(a) All taxes, assessments, fees, penalties, interest and
other governmental charges with respect to ANFS which have become
due and payable on the date hereof have been paid in full or
adequately reserved against by ANFS, (including without
<PAGE>
limitation, income, property, sales, use, franchise, capital stock,
excise, added value, employees' income withholding, social security and
unemployment taxes), and all interest and penalties thereon with
respect to the periods then ended and for all periods thereto;
(b) There are no agreements, waivers or other
arrangements providing for an extension of time with respect to the
assessment of any tax or deficiency against ANFS, nor are there any
actions, suits, proceedings, investigations or claims now pending
against ANFS, nor are there any actions, suits, proceedings,
investigations or claims now pending against ANFS in respect of any
tax or assessment, or any matters under discussion with any federal,
state, local or foreign authority relating to any taxes or
assessments, or any claims for additional taxes or assessments
asserted by any such authority, and there is no basis for the
assertion of any additional taxes or assessments against ANFS, and
(c) The consummation of the transactions contemplated by
this Agreement will not result in the imposition of any additional
taxes on or assessments against ANFS.
4.6 Disputes and Litigation. There is no suit, action,
litigation, proceeding, investigation, claim, complaint, or
accusation pending, or to its knowledge threatened against or
affecting ANFS or any of its properties, assets or business or to
which ANFS is a party, in any court or before any arbitrator of any
kind or before or by any governmental agency (including, without
limitation, any federal, state, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality),
and to its knowledge there is no basis for such suit, action,
litigation, proceeding, investigation, claim, complaint, or
accusation; (b) to its knowledge there is no pending or threatened
change in any environmental, zoning or building laws, regulations or
ordinances which affect or could affect ANFS or any of its
properties, assets or businesses; and (c) there is no outstanding
order, writ, injunction, decree, judgment or award by any court,
arbitrator or governmental body against or affecting ANFS or any of
its properties, assets or business. To its knowledge, there is no
litigation, proceeding, investigation, claim, complaint or
accusation, formal or informal, or arbitration pending, or any of
the aforesaid threatened, or any contingent liability which would
give rise to any right of indemnification or similar right on the
part of any director or officer of ANFS or any such person's heirs,
executors or administrators as against ANFS.
<PAGE>
4.7 Compliance with Laws. To its knowledge, ANFS has at all
times been, and presently is, in full compliance with, and has not
received notice of any claimed violation of, any applicable federal,
state, local, foreign and other laws, rules and regulations. ANFS
has filed all returns, reports and other documents and furnished all
information required or requested by any federal, state, local or
foreign governmental agency and all such returns, reports, documents
and information are true and complete in all respects. To its
knowledge, all permits, licenses, orders, franchises and approvals
of all federal, state, local or foreign governmental or regulatory
bodies required of ANFS for the conduct of its business have been
obtained, no violations are or have been recorded in respect of any
such permits, licenses, orders, franchises and approvals, and there
is no litigation, proceeding, investigation, arbitration, claim,
complaint or accusation, formal or informal, pending or threatened,
which may revoke, limit, or question the validity, sufficiency or
continuance of any such permit, license, order, franchise or
approval. Such permits, licenses, orders, franchises and approvals
are valid and sufficient for all activities presently carried on by
ANFS.
4.8 Guaranties. ANFS has not guaranteed any dividend,
obligation or indebtedness of any Person; nor has any Person
guaranteed any dividend, obligation or indebtedness of ANFS.
5. Preclosing Covenants of RETN and JNE.
5.1 Notices and Approvals. JNE agrees: (a) to give and to cause
RETN to give all notices to third parties which may be necessary or
deemed desirable by ANFS in connection with this Agreement and the
consummation of the transactions contemplated hereby; (b) to use its
best efforts to obtain and to cause RETN to obtain, all federal and
state governmental regulatory agency approvals, consents, permit,
authorizations, and orders necessary or deemed desirable by ANFS in
connection with this Agreement and the consummation of the
transaction contemplated hereby; and (c) to use its best efforts to
obtain, and to cause RETN to obtain, all consents and authorizations
of any other third parties necessary or deemed desirable by ANFS in
connection with this Agreement and the consummation of the
transactions contemplated hereby.
5.2 Employment Agreements, other Commitments Terminated. Prior
to the Closing, all employment agreements to which RETN is a party
shall be reviewed by RETN and ANFS and, as agreed between them,
either terminated prior to the Closing or assumed by AMERINET as of
the Closing with such modifications as may be acceptable to RETN,
ANFS and the employee party to such agreement.
5.3 Advice of Changes. RETN and JNE will promptly advise ANFS
in writing (i) of any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of RETN
or JNE contained in this Agreement, if made on or as
<PAGE>
of the date of such event or the Closing Date, untrue or inaccurate
in any material respect and (ii) of any material adverse change in
RETN's business, taken as a whole.
5.4 Information for ANFS's Statements and Applications. JNE and
RETN and their employees, accountants and attorneys shall cooperate
fully with ANFS in the preparation of any statements or applications
made by ANFS to any federal or state governmental regulatory agency
in connection with this Agreement and the transactions contemplated
hereby and to furnish ANFS with all information concerning JNE and
RETN necessary or deemed desirable by ANFS for inclusion in such
statements and applications, including, without limitation, all
requisite financial statements and schedules.
5.5 Conduct of Business by RETN. Until the Closing, RETN will
continue to conduct its business and maintain its business
relationships in the ordinary and usual course and will not, without
the prior written consent of ANFS:
(a) borrow any money which borrowings exceed in the
aggregate Ten Thousand Dollars ($10,000) or incur or commit to incur
any capital expenditures in excess of Ten Thousand Dollars ($10,000)
in the aggregate;
(b) lease, license, sell, transfer or encumber or permit
to be encumbered any asset, intellectual property right or other
property associated with the business of RETN (including sales or
transfers to Affiliates of RETN), except for sales of inventory in
the usual and ordinary course of business;
(c) dispose of any of its assets, except in the regular
and ordinary course of business;
(d) enter into any lease or contract for the purchase or
sale of any property, real or personal except in the ordinary course
of business;
(e) pay any bonus, increased salary, or special
remuneration to any officer or employee, including any amounts for
accrued but unpaid salary or bonuses (other than amounts not in
excess of normal payments made on a regular basis in prior periods);
(f) change accounting methods;
(g) declare, set aside or pay any cash or stock dividend
or other distribution in respect of capital, or redeem or otherwise
acquire any of its capital stock;
<PAGE>
(h) amend or terminate any contract, agreement or license
to which it is a party except in the ordinary course of business;
(i) loan any amount to any person or entity, or guaranty
or act as a surety for any obligation;
(j) issue or sell any shares of its capital stock of any
class or any other of its securities, or issue or create any
warrants, obligations, subscriptions, options, convertible
securities, or other commitments to issue shares of capital stock,
other than stock options granted as part of existing stock option
program or pursuant to any recapitalization plan disclosed to and
approved by ANFS in its discretion;
(k) split or combine the outstanding shares of its capital
stock of any class or enter into any recapitalization affecting the
number of outstanding shares of its capital stock of any class or
affecting any other of its securities;
(l) amend its Certificate of Incorporation or Bylaws
except as necessary to carry out a recapitalization plan;
(m) make or change any election, change any annual
accounting period, adopt or change any accounting method, file any
amended tax return, enter into any closing agreement, settle any tax
claim or assessment, surrender any right to claim refund of taxes,
consent to any extension or waiver of the limitation period
applicable to any tax claim or assessment, or take any other action
or omit to take any action, if any such election, adoption, change,
amendment, agreement, settlement, surrender, consent or other action
or omission would have the effect of increasing the tax liability of
RETN;
(n) do anything that would cause there to be material
adverse changes in its Financial Statements (with such Financial
Statements analyzed as if it had been prepared according to GAAP,
and including but not limited to cash distributions or material
decreases in the net assets of RETN), except as would occur in the
ordinary course of RETN's business, between the date of the RETN
Financial Statements and the Closing Date; or
(o) agree to do any of the things described in the
preceding clauses Section 6.1(a) through (n).
6. Mutual Covenants.
6.1 No Public Announcement. The parties shall make no public
announcement concerning this Agreement, their discussions or any
other memos, letters or agreements between the parties relating to
the Merger until such time as they agree to the contents
<PAGE>
of a mutually satisfactory press release which they intend to
publicly-release on the date of this Agreement. Either of the
parties, but only after reasonable consultation with the other, may
make disclosure if required under applicable law.
6.2 Other Negotiations. Between the date hereof and the
Closing, or such earlier date as ANFS and JNE mutually agree to
discontinue discussions of the Merger, neither ANFS nor JNE will
take any action to solicit, initiate, seek, encourage or support any
inquiry, proposal or offer from, furnish any information to, or
participate in any negotiations with, any corporation, partnership,
person or other entity or group (other than discussions pursuant to
this Agreement) regarding any acquisition, any merger or
consolidation with or involving RETN, or any acquisition of any
material portion of the stock or assets. JNE and ANFS agree that
any such negotiations in progress as of the date hereof will be
terminated or suspended during such period.
6.3 Due Diligence, Investigation, and Audits. At such time
prior to the Closing as may be reasonably requested, each party
shall make available to the other party and the other party's
employees, agents and representatives all information concerning the
operation, business and prospects of such party as may be reasonably
requested by the other party, including, without limitation, making
the working papers of such party's independent certified public
accountants available for inspection by the other party's
independent certified public accountants. Each party will cooperate
with the other party for the purpose of permitting the other party
to discuss such party's business and prospects with such party's
customers, creditors, suppliers and other persons having business
dealings with such party, subject to reasonable confidentiality
obligations between the parties.
6.4 Regulatory Filings; Consents; Reasonable Efforts. Subject
to the terms and conditions of this Agreement, JNE, RETN, ANFS and
AMERINET shall use their respective best efforts to (i) make all
necessary filings with respect to the Merger and this Agreement
under the Securities Act, and applicable blue sky or similar
securities laws and shall use all reasonable efforts to obtain
required approvals and clearances with respect thereto and shall
supply all additional information requested in connection therewith;
(ii) make merger notification or other appropriate filings with
federal, state or local governmental bodies or applicable foreign
governmental agencies and shall use all reasonable efforts to obtain
required approvals and clearances with respect thereto and shall
supply all additional information requested in connection therewith;
(iii) obtain all consents, waivers, approvals, authorizations and
orders required in connection with the authorization, execution and
delivery of this Agreement and the consummation of the Merger; and
(iv) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement.
6.5 Further Assurances. Prior to and following the Closing,
each party agrees to cooperate fully with the other parties and to
execute such further instruments, documents and agreements and to
give such further written assurances, as may be reasonably requested
by any
<PAGE>
other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect
the intents and purposes of this Agreement.
7. Closing Matters.
7.1 Filing of Certificate of Merger. On the date of the
Closing, but not prior to the Closing, the Certificate of Merger
shall be filed with the offices of the Secretary of State of the
State of Delaware and Nevada and the merger of RETN with and into
AMERINET shall be consummated.
7.2 Exchange of Certificates. At the Closing, JNE shall
exchange its RETN Common Stock certificate(s) for a certificate
representing the ANFS Series A Stock.
7.3 Delivery of Contingent Shares. Subject to fulfillment of
the conditions subsequent for the issuance of the Contingent Shares,
ANFS shall deliver a share certificate for the Contingent Shares to
JNE of the Contingent Shares Date.
7.4 Delivery of Documents. On or before the Closing, the
parties shall deliver the documents, and shall perform the acts,
which are set forth in Sections 8 and 9, as specified in such
Sections, including delivery of the counterpart signature pages of
the Transaction Documents executed by JNE, RETN, ANFS and/or
AMERINET, as the case may be. All documents which JNE or RETN shall
deliver or cause to be delivered shall be in form and substance
reasonably satisfactory to ANFS. All documents which ANFS or
AMERINET shall deliver or cause to be delivered shall be in form and
substance reasonably satisfactory to JNE.
8. Conditions to RETN's Obligations. Unless otherwise provided
below, JNE's and RETN's obligations to close the transactions
contemplated under this Agreement are subject to the fulfillment or
satisfaction by Closing of each of the following conditions (any one
or more of which may be waived by JNE, but only in a writing signed
by JNE):
8.1 Accuracy of Representations and Warranties. The
representations and warranties of ANFS and AMERINET set forth in
Section 4 shall be true in all material respects on and as of the
Closing with the same force and effect as if they had been made at
the Closing, and JNE shall receive a certificate to such effect
executed by the Presidents of ANFS and AMERINET.
8.2 Covenants. ANFS and AMERINET shall have performed and
complied with all of its covenants contained in Sections and
on or before the Closing, and JNE shall receive a certificate from
ANFS and AMERINET to such effect executed by the Presidents of ANFS
and AMERINET.
<PAGE>
8.3 No Litigation. On and as of the Closing, no litigation or
proceeding shall be threatened or pending against ANFS or AMERINET
with the purpose or with the probable effect of enjoining or
preventing the consummation of any of the transactions contemplated
by this Agreement, and JNE shall receive a certificate to such
effect executed by the Presidents of ANFS and AMERINET.
8.4 No Adverse Development. There shall not have been any
material adverse changes in the financial condition, results of
operations, assets, liabilities, business or prospects of ANFS since
the date of this Agreement, and JNE shall receive a certificate to
such effect executed by the President of ANFS.
8.5 Authorizations. JNE shall have received from ANFS written
evidence that the execution, delivery and performance of ANFS' and
AMERINET's obligations under this Agreement and the Certificate of
Merger have been duly and validly approved and authorized by the
Board of Directors of ANFS.
8.6 Government Consents. There shall have been obtained at or
prior to the Closing such permits or authorizations, and there shall
have been taken such other action, as may be required by any
regulatory authority having jurisdiction over the parties and the
subject matter and the actions herein proposed to be taken.
8.7 Opinion of AMERINET's Counsel. At the Closing, JNE shall
have received from counsel to ANFS an opinion dated as of the
Closing Date in substantially the form attached hereto as Exhibit D.
8.8 Filing of Certificate of Merger. As of the Closing, the
Certificate of Merger shall have been filed with the Secretary of
State of the State of Delaware.
8.9 Registration Rights Agreement. As of the Closing, ANFS will
have entered into registration rights agreements with JNE that they
be included in any ANFS-initiated registrations of ANFS Series A
Stock, or Common Stock, subject to the right of ANFS in an
underwritten public offering to exclude all or a portion of such
stock should the underwriters determine that inclusion of such
shares would jeopardize the success of the offering; and provided,
however, that none of the shares of such holders shall be excluded
from the public offering unless a pro rata portion (based on the
number of shares of ANFS Series A Stock held by such parties
participating in the offering) of the shares of ANFS Class A
Preferred Stock (or the Common Stock exchanged therefore) not
acquired in this Merger are also excluded from the offering. The
registration rights agreements will also provide that JNE will not
sell, transfer or otherwise dispose of ANFS Series A Stock during
the one hundred eighty (180) day period following the effective date
of the initial public offering of ANFS.
<PAGE>
9. Conditions to ANFS' and AMERINET'S Obligations. Unless
otherwise provided below, the obligations of ANFS and AMERINET are
subject to the fulfillment or satisfaction by Closing, of each of
the following conditions (any one or more of which may be waived by
ANFS, but only in a writing signed by ANFS):
9.1 Accuracy of Representations and Warranties. The
representations and warranties of JNE and RETN contained in Section
2 shall be true in all material respects on and as of the Closing
with the same force and effect as if they had been made at the
Closing, and ANFS shall receive a certificate from JNE and RETN to
such effect with respect to the representations and warranties of
RETN executed by the Presidents of JNE and RETN.
9.2 Covenants. JNE and RETN shall have performed and complied
with all of its covenants contained in Sections 5 and 6 on or before
the Closing, and AFNS shall receive a certificate from JNE and RETN
to such effect signed by the Presidents of JNE and RETN.
9.3 No Litigation. On and as of the Closing, no litigation or
proceeding shall be threatened or pending against JNE or RETN for
the purpose or with the probable effect of enjoining or preventing
the consummation of any of the transactions contemplated by this
Agreement, and ANFS shall receive a certificate from JNE and RETN to
such effect signed by the Presidents of JNE and RETN.
9.4 Authorizations. ANFS shall have received from RETN written
evidence that the execution, delivery and performance of this
Agreement and the Certificate of Merger have been duly and validly
approved and authorized by RETN's Board of Directors and by JNE's
Board of Directors. ANFS shall have received a certificate from
RETN to such effect signed by the President of RETN.
9.5 No Adverse Development. There shall not have been any
material adverse changes in the financial condition, results of
operations, assets, liabilities, business or prospects of RETN since
the date of this Agreement. ANFS shall have received a certificate
from RETN to such effect signed by the President of RETN.
9.6 Government Consents. There shall have been obtained at or
prior to the Closing such permits or authorizations, and there shall
have been taken such other action, as may be required by any
regulatory authority having jurisdiction over the parties and the
subject matter and the actions herein proposed to be taken
9.7 Opinion of RETN's Counsel. At the Closing, AFNS shall have
received from counsel to RETN, an opinion dated the Closing Date in
substantially the form attached hereto as Exhibit C.
<PAGE>
9.8 Filing of Certificate of Merger. As of the Closing, the
Certificate of Merger shall have been filed with the Secretary of
State of the State of Delaware.
10. Termination of Agreement.
10.1 Termination. This Agreement may be terminated at any time
prior to the Closing by the mutual written consent of each of the
parties hereto. This Agreement may also be terminated and abandoned:
(a) By ANFS or AMERINET if any of the conditions precedent
to ANFS' and AMERINET's obligations pursuant to Section 9 shall not
have been fulfilled at and as of the Closing.
(b) By JNE or RETN if any of the conditions precedent to
JNE's and RETN's obligations pursuant to Section 8 above shall not
have been fulfilled at and as of the Closing.
(c) By either JNE or ANFS, if the Merger is not effected
by , 1996.
Any termination of this Agreement under this Section 10.1 shall be
effected by the delivery of written notice of the terminating party
to the other parties hereto.
10.2 Liability for Termination. Any termination of this
Agreement pursuant to this Section 10 shall be without further
obligation or liability upon any party in favor of any other party
hereto; provided, that if such termination shall result from the
willful failure of a party to carry out its obligations under this
Agreement, then such party shall be liable for losses incurred by
the other parties as set forth in Section 10.5. The provisions of
this Section 10.2 shall survive termination.
10.3 Certain Effects of Termination. In the event of the
termination of this Agreement as provided in Section 10.1 hereof,
each party, if so requested by the other party, will (i) return
promptly every document (other than documents publicly available)
furnished to it by the other party (or any subsidiary, division,
associate or affiliate of such other party) in connection with the
transactions contemplated hereby, whether so obtained before or
after the execution of this Agreement, and any copies thereof which
may have been made, and will cause its representatives and any
representatives of financial institutions and investors and others
to whom such documents were furnished promptly to return such
documents and any copies thereof any of them may have made; or (ii)
destroy such documents and cause its representatives and such other
representatives to destroy such documents, and such party shall
deliver a certificate executed by its president or vice president
stating to such effect; and
<PAGE>
10.4 Remedies. No party shall be limited to the termination
right granted in Section 10.1 hereto by reason of the nonfulfillment
of any condition to such party's closing obligations but may, in the
alternative, elect to do one of the following:
(a) proceed to close despite the nonfulfillment of any
closing condition, it being understood that consummation of the
transactions contemplated hereby shall be deemed a waiver of any
misrepresentation or breach of warranty or covenant and of any
party's rights and remedies with respect thereto to the extent that
the other party shall have actual knowledge of such
misrepresentation or breach and the Closing shall nonetheless take
place; or
(b) decline to close, terminate this Agreement as provided
in Section 10.1 hereof, and thereafter seek damages to the extent
permitted in Section 10.5 hereof.
11. Indemnification.
11.1 Survival of Representations, Warranties, Covenants and
Agreements.
(a) The Escrow as provided in Section 2.5 shall terminate
on the later of (i) one (1) year after the Closing Date or (ii) the
date the first audit of ANFS's financial statements, which includes
the results of operations of AMERINET, has been completed and ANFS
has received a signed opinion from its independent auditors
certifying such financial statements (the "Escrow Termination
Date"). Except as set forth in below all warranties and
representations of the parties hereto shall terminate on the Escrow
Termination Date.
(b) The representations, warranties, covenants and
agreements of the parties contained in Sections 3 and 4 of this
Agreement or in any writing delivered pursuant to such sections, to
the extent that a breach or default in any such representations,
warranties, covenants or agreements is not as a result of fraud,
shall not terminate at, but rather shall survive, the Closing Date
and shall terminate on the Escrow Termination Date; provided,
however, that such representations, warranties, covenants and
agreements shall survive as to any claim or demand made prior to the
Escrow Termination Date until such claim or demand is fully paid or
otherwise resolved by the parties hereto in writing or by a court of
competent jurisdiction. Notwithstanding the foregoing, in the event
of fraud, or any breach of JNE's or RETN's representations set forth
in Section 3.2 (capitalization), the representations and warranties
of the parties hereto and their respective indemnity obligations
under this Section 11 shall not terminate.
11.2 Indemnification by JNE. JNE shall indemnify and hold
harmless ANFS, AMERINET, their directors and officers, and each
other person, if any, who controls ANFS or AMERINET within the
meaning of the Securities Act ("Controlling Persons") in respect of
any and all claims, losses, damages, liabilities, demands,
assessments, judgments, costs and expenses (including, without
limitation, settlement costs and any legal or other expenses for
investigating,
<PAGE>
bringing or defending any actions or threatened
actions) reasonably incurred by ANFS or AMERINET, any of its
directors, officers or Controlling Persons in connection with any
misrepresentation or breach of any warranty made by JNE or RETN in
this Agreement or in any schedule, exhibit, certificate or other
instrument contemplated by this Agreement.
11.3 Indemnification by ANFS and AMERINET. ANFS and AMERINET
shall, jointly and severally, indemnify and hold harmless JNE in
respect of any and all claims, losses, damages, liabilities,
demands, assessments, judgments, costs and expenses (including,
without limitation, settlement costs and any legal or other expenses
for investigating, bringing or defending any actions or threatened
actions) reasonably incurred by JNE in connection with any
misrepresentation or breach of any warranty made by ANFS or AMERINET
in this Agreement or in any schedule, exhibit, certificate or other
instrument contemplated by this Agreement.
11.4 Claims for Indemnification.
(a) Whenever any claim shall arise for indemnification
under this Section 11, the indemnified party shall describe such
claim in a Notice of Claim to the other party and, when known,
specify the facts constituting the basis for such claim and the
amount or an estimate of the amount of such claim. Each Notice of
Claim shall (A) be signed by the indemnified party, (B) contain a
description of the claim, (C) specify the amount of such claim, and
(D) state that, in the opinion of the signer thereof, such Notice of
Claim is valid under the terms of Section 11 hereof, and is being
given in good faith.
(b) The indemnified party shall give the other party
prompt notice of any claim for indemnification hereunder resulting
from, or in connection with, any claim or Third-Party Claim and,
with respect to any Third-Party Claim, the indemnified party shall
undertake the defense thereof by representatives reasonably
satisfactory to the indemnified party and the other partie(s)
hereto. The indemnified party shall not have the right to settle or
compromise or enter into any binding agreement to settle or
compromise, or consent to entry of any judgment arising from, any
such claim or proceeding in its sole discretion without the prior
written consent of the other party. Each party shall have the right
to participate in any such defense of a Third-Party Claim with
advisory counsel of its own choosing at its own expense. In the
event the indemnified party, within a reasonable time after notice
of any Third-Party Claim, fails to defend, the other party shall
have the right to undertake the defense, compromise or settlement of
such Third-Party Claim on behalf of, and for the account of, JNE,
ANFS or AMERINET, at the expense and risk of all parties to the
extent of their liability set forth in Section 11. No party shall,
without the indemnified party's written consent, settle or
compromise any such Third-Party Claim or consent to entry of any
judgment that does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the indemnified
party, or affiliate or affiliates, as the case may be, an
unconditional release from all liability in respect of such
Third-Party Claim.
<PAGE>
11.5 Arbitration. If a party makes a good faith determination
that a breach (or potential breach) of any of the confidentiality,
non-competition, or intellectual property rights provisions of this
Agreement by the other party may result in damages or consequences
that will be immediate, severe, and incapable of adequate redress
after the fact, so that a temporary restraining order or other
immediate injunctive relief is necessary for a realistic and
adequate remedy, that party may seek immediate injunctive relief
without first seeking relief through arbitration. After the court
has ruled on the request for injunctive relief, the parties will
thereafter proceed with arbitration of the dispute and stay the
litigation pending arbitration. Subject to the foregoing, any
dispute arising out of this Agreement, or its performance or breach,
shall be resolved by binding arbitration conducted by JAMS/Endispute
under the JAMS/Endispute Rules for Complex Arbitration (the "JAMS
Rules"). This arbitration provision is expressly made pursuant to
and shall be governed by the Federal Arbitration Act, 9 U.S.C.
Sections 1-14. The parties hereto agree that pursuant to Section 9
of the Federal Arbitration Act, a judgment of the United States
District Courts for the Northern District of California shall be
entered upon the award made pursuant to the arbitration. A single
arbitrator, who shall have the authority to allocate the costs of
any arbitration initiated under this paragraph, shall be selected
according to the JAMS Rules within ten (10) days of the submission
to JAMS/Endispute of the response to the statement of claim or the
date on which any such response is due, whichever is earlier. The
arbitrator shall conduct the arbitration in accordance with the
Federal Rules of Evidence. The arbitrator shall decide the amount
and extent of pre-hearing discovery which is appropriate. The
arbitrator shall have the power to enter any award of monetary
and/or injunctive relief (including the power issue permanent
injunctive relief and also the power to reconsider any prior request
for immediate injunctive relief by either of the parties and any
order as to immediate injunctive relief previously granted or denied
by a court in response to a request therefor by either of the
parties), including the power to render an award as provided in Rule
43 of the JAMS Rules; provided, however, that the arbitrator shall
not have the power to award punitive damages under any circumstances
(whether styled as punitive, exemplary, or treble damages, or any
penalty or punitive type of damages) regardless of whether such
damages may be available under applicable law, the parties hereby
waiving their rights to recover any such damages. The arbitrator
shall award the prevailing party its costs and reasonable attorneys'
fees, and the losing party shall bear the entire cost of the
arbitration, including the arbitrator's fees. All arbitration shall
be held in Ontario, California. In addition to the above court,
the arbitration award may be enforced in any court having
jurisdiction over the parties and the subject matter of the
arbitration. Notwithstanding the foregoing, the parties irrevocably
submit to the nonexclusive jurisdiction of the state and federal
courts situated where the respondent is domiciled or resides as of
the Effective Date in any action to enforce an arbitration award.
With respect to any request for immediate injunctive relief, that
state and federal courts in San Bernardino County, California shall
have exclusive jurisdiction and venue over any such disputes.
11.6 Limitation on Indemnification. No indemnified party
hereunder will be entitled to make a claim against any indemnifying
party under Section 11.2 or 11.3 unless and until (i) the aggregate
amount of losses indemnifiable by JNE exceeds Fifty Thousand Dollars
($50,000) and (ii) the aggregate amount of losses indemnifiable by
ANFS and/or AMERINET
<PAGE>
exceeds Two Hundred Fifty Thousand Dollars
($250,000), respectively, and then only to the extent of the excess.
11.7 Escrow.
(a) JNE Escrow Shares shall be placed with an escrow
agent, satisfactory to AFNS and JNE for a period beginning on the
Closing Date and ending on the Escrow Termination Date, to be
disbursed solely upon the joint signatures of ANFS, AMERINET and
JNE, all as set forth below. Disbursements from the escrow shall be
made for the payment of amounts, if any, to satisfy the
indemnification rights of ANFS and AMERINET pursuant to Section 11
hereof.
(b) The JNE Escrow Shares shall be disbursed during the
term hereof at any time, or from time to time, as ANFS or AMERINET
may give JNE a Notice of Claim. Such Notice of Claim must be for a
specified amount.
(i) JNE may give AMERINET a written Notice of Objection:
(1) attaching a copy of such Notice of Claim; (2) stating that, in
the good faith opinion of JNE, the claim described in such Notice of
Claim is invalid (either in whole or in specified party) under the
terms of Section 11 hereof; (3) giving the reasons for the alleged
invalidity; and (4) stating that, based on such alleged invalidity,
JNE object to the payment of any portion of the JNE Escrow Shares to
the requesting party on account thereof. In the event that a Notice
of Objection alleges that a Notice of Claim is only partially
invalid, JNE, within thirty (30) days of the receipt of such Notice
of Claim, agrees to pay over to ANFS or AMERINET, as applicable,
that portion of the amounts specified in such Notice of Claim as to
which no objection is made. JNE is not required to agree to make
any payments to ANFS or AMERINET in respect of a Notice of Claim
that has been objected to in a Notice of Objection except as
provided in the immediately preceding sentence.
(ii) ANFS, AMERINET, RETN and JNE agree to submit to final
and binding arbitration any and all disputes JNE has specified in a
Notice of Objection or ANFS or AMERINET have specified in a Notice
of Claim to which JNE has not responded within thirty (30) days of
receipt of such Notice of Claim. Any such dispute is subject to
arbitration in accordance with the JAMS Rules as provided in Section
11 hereof.
(c) The escrow shall be terminated on the Escrow
Termination Date; provided, however, that the escrow may continue
beyond such date if ANFS or AMERINET has asserted an indemnification
claim, and any such claim remains unsatisfied.
12. Miscellaneous.
<PAGE>
12.1 Governing Laws. It is the intention of the parties hereto
that the internal laws of the State of California (irrespective of
its choice of law principles) shall govern the validity of this
Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
12.2 Binding upon Successors and Assigns. Subject to, and unless
otherwise provided in, this Agreement, each and all of the
covenants, terms, provisions, and agreements contained herein shall
be binding upon, and inure to the benefit of, the permitted
successors, executors, heirs, representatives, administrators and
assigns of the parties hereto.
12.3 Severability. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be
invalid or unenforceable, the remainder of this Agreement and
application of such provision to other persons or circumstances
shall be interpreted so as best to reasonably effect the intent of
the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and
enforceable provision which will achieve, to the extent possible,
the economic, business and other purposes of the void or
unenforceable provision.
12.4 Entire Agreement. This Agreement, the exhibits hereto, the
documents referenced herein, and the exhibits thereto, constitute
the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements or understandings, inducements
or conditions, express or implied, written or oral, between the
parties with respect hereto and thereto. The express terms hereof
control and supersede any course of performance or usage of the
trade inconsistent with any of the terms hereof.
12.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original as against any
party whose signature appears thereon and all of which together
shall constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or
taken together, shall bear the signatures of all of the parties
reflected hereon as signatories.
12.6 Expenses. Except as provided to the contrary herein, each
party shall pay all of its own costs and expenses incurred with
respect to the negotiation, execution and delivery of this
Agreement, the exhibits hereto, and the other Transaction Documents.
12.7 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this
Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a
writing signed by the party to be bound thereby. The waiver by a
party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed
to constitute a waiver of any other default or any succeeding breach
or default.
<PAGE>
12.8 Survival of Agreements. All covenants, agreements,
representations and warranties made herein shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby notwithstanding any investigation
of the parties hereto and shall terminate on the date one year after
the Closing Date.
12.9 No Waiver. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right
of such party thereafter to enforce such provisions.
12.10 Attorneys' Fees. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party shall be
entitled to recover, as an element of the costs of suit and not as
damages, reasonable attorneys' fees to be fixed by the court
(including without limitation, costs, expenses and fees on any
appeal). The prevailing party shall be the party entitled to
recover its costs of suit, regardless of whether such suit proceeds
to final judgment. A party not entitled to recover its costs shall
not be entitled to recover attorneys' fees. No sum for attorneys'
fees shall be counted in calculating the amount of a judgment for
purposes of determining if a party is entitled to recover costs or
attorneys' fees.
12.11 Notices. Any notice provided for or permitted under this
Agreement will be treated as having been given when (a) delivered
personally, (b) sent by confirmed telex or telecopy, (c) sent by
commercial overnight courier with written verification of receipt,
or (d) mailed postage prepaid by certified or registered mail,
return receipt requested, to the party to be notified, at the
address set forth below, or at such other place of which the other
party has been notified in accordance with the provisions of this
Section 12.11.
RETN:
Jones Naughton Entertainment, Inc.
6255 Sunset Blvd., Suite 2000
Los Angeles, CA 90028
Attn. Joe Naughton
With copy to:
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
ANFS and AMERINET:
John J. Pembroke
AMERINET FINANCIAL SYSTEMS, INC.
<PAGE>
9627 Rocky Branch
Dallas, TX 75243
With copy to:
Pezzola & Reinke
Lake Merritt Plaza Bldg.
1999 Harrison Street, Suite 1300
Oakland, CA 94612
Attention: Donald C. Reinke, Esq.
Such notice will be treated as having been received upon actual
receipt.
12.12 Time. Time is of the essence of this Agreement.
12.13 Construction of Agreement. This Agreement has been
negotiated by the respective parties hereto and their attorneys and
the language hereof shall not be construed for or against any party.
The titles and headings herein are for reference purposes only and
shall not in any manner limit the construction of this Agreement
which shall be considered as a whole.
12.14 No Joint Venture. Nothing contained in this Agreement
shall be deemed or construed as creating a joint venture or
partnership between any of the parties hereto. No party is by
virtue of this Agreement authorized as an agent, employee or legal
representative of any other party. No party shall have the power to
control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party shall have any
power or authority to bind or commit any other. No party shall hold
itself out as having any authority or relationship in contravention
of this Section 12.14.
12.15 Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person, persons, entity
or entities may require.
12.16 Further Assurances. Each party agrees to cooperate
fully with the other parties and to execute such further
instruments, documents and agreements and to give such further
written assurances, as may be reasonably requested by any other
party to better evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
12.17 Absence of Third-Party Beneficiary Rights. No
provisions of this Agreement are intended, nor shall be interpreted,
to provide or create any third-party beneficiary
<PAGE>
rights or any other rights of any kind in any client, customer,
affiliate, stockholder, partner of any party hereto or any other
person or entity except employees and stockholders of RETN specifically
referred to herein, and, except as so provided, all provisions hereof
shall be personal solely between the parties to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
AMERINET FINANCIAL SYSTEMS, INC.
By:
Title:
JONES NAUGHTON ENTERTAINMENT, INC.
By:
Title:
AMERINET, INC.
By:
Title
REAL ESTATE TELEVISION NETOWRK, INC.
By:
Title
<PAGE>
EXHIBIT A
CERTIFICATE OF MERGER
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
<PAGE>
COUNSEL TO RETN
EXHIBIT C
<PAGE>
EXHIBIT D
FORM OF LEGAL OPINION TO BE DELIVERED BY
COUNSEL TO AMERINET
<PAGE>
STOCK PURCHASE AGREEMENT
by and between
AMERINET FINANCIAL SERVICES, INC.
a Nevada corporation
and
JONES NAUGHTON ENTERTAINMENT, INC.
a Colorado corporation
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated August ___,
1996, by and among AmeriNet Financial Services, Inc., a Nevada
corporation (hereinafter called "ANFS") and Jones Naughton
Entertainment, Inc., a Colorado corporation (hereinafter called "JNE").
W I T N E S S E T H
WHEREAS, JNE desires to sell 1,000 shares of the common
stock (the "RETN Shares") of Real Estate Television Network, Inc., a
Nevada corporation ("RETN") to ANFS, consisting of 100% of the
issued and outstanding common stock of RETN, on the terms and
conditions set forth in this Stock Purchase Agreement (hereinafter
called "Agreement"); and
WHEREAS, ANFS desires to issue and sell an aggregate of
1,250,000 of its Series A Convertible Preferred Stock (the
"Preferred Stock") to JNE in consideration for the transfer of the
RETN Shares to ANFS on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, in consideration of the premises and
respective mutual agreements, covenants, representations and
warranties herein contained, it is agreed between the parties hereto
as follows:
ARTICLE 1.
SALE AND PURCHASE OF THE SHARES
1. Sale of the RETN Shares. At the date of the
signing of this Agreement as provided in Section 3.1 hereto (the
"Closing"), subject to the terms and conditions herein set forth,
and on the basis of the representations, warranties and agreements
herein contained, JNE shall sell to ANFS, and ANFS shall purchase
from JNE, the RETN shares.
2. Sale of the ANFS Initial Preferred Shares. At
the Closing, subject to the terms and conditions herein set forth,
and on the basis of the representations, warrants and agreements
herein contained, ANFS shall sell to JNE and JNE shall purchase from
ANFS, 1,000,000 shares of Series A Preferred Stock (the "Preferred
Stock") of ANFS (the "ANFS Initial Preferred Shares"). The
Preferred Stock shall be in accordance with the terms of that
certain Certificate of Designation of Series A Convertible Preferred
Stock, attached hereto as Exhibit A and incorporated herein by
reference.
3. Sale of the ANFS Subsequent Preferred Shares.
On the date which is 180 days from the Closing, ANFS shall issue and
deliver to JNE an additional 250,000 shares of Preferred Stock
provided that (i) the Closing set forth herein shall have occurred
and (ii) RETN shall have sold and delivered not less than 10 real
estate satellite systems to new clients subsequent to the date of
Closing.
<PAGE>
4. Instruments of Conveyance and Transfer. At
the Closing, JNE shall deliver certificates representing 1,000
shares of RETN (100% of the issued and outstanding shares) to and
registered in ANFS's name, in form and substance satisfactory to
ANFS as shall be effective to vest in ANFS all right, title and
interest in and to all of the RETN Shares. At the Closing, ANFS
shall deliver certificates representing 1,000,000 shares of
Preferred Stock to and registered in JNE's name, in form and
substance satisfactory to JNE as shall be effective to vest in JNE
all right, title and interest in and to all of the ANFS Initial
Preferred Shares. At the date which is 180 days from the Closing,
and provided the conditions set forth in Section 1.3 have been
satisfied, ANFS shall deliver certificates representing 250,000
shares of Preferred Stock to and registered in JNE's name, in form
and substance satisfactory to JNE as shall be effective to vest in
JNE all right, title and interest in and to all of the ANFS
Subsequent Preferred Shares.
ARTICLE 1.
REPRESENTATIONS AND WARRANTIES
5. Representations and Warranties of JNE. To
induce ANFS to enter into this Agreement and to consummate the
transactions contemplated hereby, JNE represents and warrants, as of
the date hereof and as of the Closing, as follows:
6. Corporate Existence and Authority of JNE. JNE
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado. It has all
requisite corporate power, franchises, licenses, permits and
authority to own its properties and assets and to carry on its
business as it has been and is being conducted. It is in good
standing in each state, nation or other jurisdiction in each state,
nation or other jurisdiction wherein the character of the business
transacted by it makes such qualification necessary.
7. Corporate Existence and Authority of RETN.
RETN is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. It has all
requisite corporate power, franchises, licenses, permits and
authority to own its properties and assets and to carry on its
business as it has been and is being conducted. It is in good
standing in each state, nation or other jurisdiction in each state,
nation or other jurisdiction wherein the character of the business
transacted by it makes such qualification necessary.
8. Capitalization of RETN. The authorized equity
securities of RETN consists of ___________ shares of common stock,
of which 1,000 shares are issued and outstanding. No other shares
of capital stock of RETN are issued and outstanding. All of the
issued and outstanding shares have been duly and validly issued in
accordance and compliance with all applicable laws, rules and
regulations and are fully paid and nonassessable. There are no
options, warrants, rights, calls, commitments, plans, contracts or
other agreements of any character granted or issued by RETN which
provide
<PAGE>
for the purchase, issuance or transfer of any shares of the
capital stock of RETN nor are there any outstanding securities
granted or issued by RETN that are convertible into any shares of
the equity securities of RETN, and none is authorized. RETN is not
obligated or committed to purchase, redeem or otherwise acquire any
of its equity. All presently exercisable voting rights in RETN are
vested exclusively in its outstanding shares of common stock, each
share of which is entitled to one vote on every matter to come
before it's shareholders, and other than as may be contemplated by
this Agreement, there are no voting trusts or other voting
arrangements with respect to any of RETN's equity securities.
9. Subsidiaries. "Subsidiary" or "Subsidiaries"
means all corporations, trusts, partnerships, associations, joint
ventures or other Persons, as defined below, of which a corporation
or any other Subsidiary of such corporation owns not less than
twenty percent (20%)of the voting securities or other equity or of
which such corporation or any other Subsidiary of such corporation
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies, whether through ownership
of voting shares, management contracts or otherwise. "Person" means
any individual, corporation,trust, association, partnership,
proprietorship, joint venture or other entity. There are no
Subsidiaries of RETN.
10. Execution of Agreement. The execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not: (a) violate, conflict
with, modify or cause any default under or acceleration of (or give
any party any right to declare any default or acceleration upon
notice or passage of time or both), in whole or in part, any
charter, article of incorporation, bylaw, mortgage, lien, deed of
trust, indenture, lease, agreement, instrument, order, injunction,
decree, judgment, law or any other restriction of any kind to which
either JNE or RETN is a party or by which either of them or any of
their properties are bound; (b) result in the creation of any
security interest, lien, encumbrance, adverse claim, proscription or
restriction on any property or asset (whether real, personal, mixed,
tangible or intangible), right, contract, agreement or business of
JNE or RETN; (c) violate any law, rule or regulation of any federal
or state regulatory agency; or (d) permit any federal or state
regulatory agency to impose any restrictions or limitations of any
nature on JNE or RETN or any of their respective actions.
11. Taxes.
1 Except as set forth in Schedule 2.1.6, all taxes, assessments,
fees, penalties, interest and other governmental charges with
respect to RETN which have become due and payable on the date hereof
have been paid in full or adequately reserved against by RETN,
(including without limitation, income, property, sales, use,
franchise, capital stock, excise, added value, employees' income
withholding, social security and unemployment taxes), and all
interest and penalties thereon with respect to the periods then
ended and for all periods thereto;
<PAGE>
1 .1 Except as set forth in Schedule 2.1.6, there are
no agreements, waivers or other arrangements providing for an
extension of time with respect to the assessment of any tax or
deficiency against RETN, nor are there any actions, suits,
proceedings, investigations or claims now pending against RETN, nor
are there any actions, suits, proceedings, investigations or claims
now pending against RETN in respect of any tax or assessment, or any
matters under discussion with any federal, state, local or foreign
authority relating to any taxes or assessments, or any claims for
additional taxes or assessments asserted by any such authority, and
there is no basis for the assertion of any additional taxes or
assessments against RETN, and
1.2 The consummation of the transactions contemplated
by this Agreement will not result in the imposition of any
additional taxes on or assessments against RETN.
1. Disputes and Litigation. There is no suit,
action, litigation, proceeding, investigation, claim, complaint, or
accusation pending, threatened against or affecting RETN or any of
its properties, assets or business or to which RETN is a party, in
any court or before any arbitrator of any kind or before or by any
governmental agency (including, without limitation, any federal,
state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality), and there is no basis for
such suit, action, litigation, proceeding, investigation, claim,
complaint, or accusation; (b) there is no pending or threatened
change in any environmental, zoning or building laws, regulations or
ordinances which affect or could affect RETN or any of its
properties, assets or businesses; and (c) there is no outstanding
order, writ, injunction, decree, judgment or award by any court,
arbitrator or governmental body against or affecting RETN or any of
its properties, assets or business. There is no litigation,
proceeding, investigation, claim, complaint or accusation, formal or
informal, or arbitration pending, or any of the aforesaid
threatened, or any contingent liability which would give rise to any
right of indemnification or similar right on the part of any
director or officer of RETN or any such person's heirs, executors or
administrators as against RETN.
1. Compliance with laws. RETN has at all times
been, and presently is, in full compliance with, and has not
received notice of any claimed violation of, any applicable federal,
state, local, foreign and other laws, rules and regulations. RETN
has filed all returns, reports and other documents and furnished all
information required or requested by any federal, state, local or
foreign governmental agency and all such returns, reports, documents
and information are true and complete in all respects. All permits,
licenses, orders, franchises and approvals of all federal, state,
local or foreign governmental or regulatory bodies required of RETN
for the conduct of its business have been obtained, no violations
are or have been recorded in respect of any such permits, licenses,
orders, franchises and approvals, and there is no litigation,
proceeding, investigation, arbitration, claim, complaint or
accusation, formal or informal, pending or
<PAGE>
threatened, which may revoke, limit, or question the validity, sufficiency
or continuance of any such permit, license, order, franchise or approval.
Such permits, licenses, orders, franchises and approvals are valid and
sufficient for all activities presently carried on by RETN.
2. Guaranties. RETN has not guaranteed any
dividend, obligation or indebtedness of any Person; nor has any
Person guaranteed any dividend, obligation or indebtedness of RETN.
3. Books and Records. RETN keeps its books,
records and accounts (including, without limitation, those kept for
financial reporting purposes and for tax purposes) in accordance
with good business practice and in sufficient detail to reflect the
transactions and dispositions of its assets, liabilities and
equities. The minute books of the RETN contain records of its
shareholders' and directors' meetings and of action taken by such
shareholders and directors. The meeting of directors and
shareholders referred to in such minute books were duly called and
held, and the resolutions appearing in such minute books were duly
adopted. The signatures appearing on all documents contained in
such minute books are the true signatures of the persons purporting
to have signed the same.
4. Representations and Warranties of ANFS. To
induce JNE to enter into this Agreement and to consummate the
transactions contemplated hereby, ANFS represents and warrants, as
of the date hereof and as of the Closing, as follows:
5. Corporate Existence and Authority of ANFS.
ANFS is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. It has all
requisite corporate power, franchises, licenses, permits and
authority to own its properties and assets and to carry on its
business as it has been and is being conducted. It is in good
standing in each state, nation or other jurisdiction in each state,
nation or other jurisdiction wherein the character of the business
transacted by it makes such qualification necessary.
6. Capitalization of ANFS. The authorized equity
securities of ANFS consists of shares of common stock,
of which shares are issued and outstanding, and
10,000,000 shares of Preferred Stock, of which no shares are issued
and outstanding. No other shares of capital stock of ANFS are
issued and outstanding. All of the issued and outstanding shares
have been duly and validly issued in accordance and compliance with
all applicable laws, rules and regulations and are fully paid and
nonassessable. Except as set forth in Schedule 2.2.2, there are no
options, warrants, rights, calls, commitments, plans, contracts or
other agreements of any character granted or issued by ANFS which
provide for the purchase, issuance or transfer of any shares of the
capital stock of ANFS nor are there any outstanding securities
granted or issued by ANFS that are convertible into any shares of
the equity securities of ANFS, and none is authorized. Except as
set forth in Schedule 2.2.2, ANFS is not obligated or committed to
purchase, redeem or otherwise acquire any of its equity. All
presently exercisable voting rights in ANFS are vested exclusively
in its outstanding
<PAGE>
shares of common stock, each share of which is
entitled to one vote on every matter to come before it's
shareholders, and other than as may be contemplated by this
Agreement, there are no voting trusts or other voting arrangements
with respect to any of ANFS's equity securities.
7. Subsidiaries. There are no Subsidiaries of ANFS.
8. Execution of Agreement. The execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not: (a) violate, conflict
with, modify or cause any default under or acceleration of (or give
any party any right to declare any default or acceleration upon
notice or passage of time or both), in whole or in part, any
charter, article of incorporation, bylaw, mortgage, lien, deed of
trust, indenture, lease, agreement, instrument, order, injunction,
decree, judgment, law or any other restriction of any kind to which
ANFS is a party or by which it or any of its properties are bound;
(b) result in the creation of any security interest, lien,
encumbrance, adverse claim, proscription or restriction on any
property or asset (whether real, personal, mixed, tangible or
intangible), right, contract, agreement or business of ANFS; (c)
violate any law, rule or regulation of any federal or state
regulatory agency; or (d) permit any federal or state regulatory
agency to impose any restrictions or limitations of any nature on
ANFS or any of its actions.
9. Taxes.
1 All taxes, assessments, fees, penalties, interest and other
governmental charges with respect to ANFS which have become due and
payable on the date hereof have been paid in full or adequately
reserved against by ANFS, (including without limitation, income,
property, sales, use, franchise, capital stock, excise, added value,
employees' income withholding, social security and unemployment
taxes), and all interest and penalties thereon with respect to the
periods then ended and for all periods thereto;
1 .1 There are no agreements, waivers or other
arrangements providing for an extension of time with respect to the
assessment of any tax or deficiency against ANFS, nor are there any
actions, suits, proceedings, investigations or claims now pending
against ANFS, nor are there any actions, suits, proceedings,
investigations or claims now pending against ANFS in respect of any
tax or assessment, or any matters under discussion with any federal,
state, local or foreign authority relating to any taxes or
assessments, or any claims for additional taxes or assessments
asserted by any such authority, and there is no basis for the
assertion of any additional taxes or assessments against ANFS, and
1 .2 The consummation of the transactions contemplated
by this Agreement will not result in the imposition of any
additional taxes on or assessments against ANFS.
<PAGE>
1. Disputes and Litigation. There is no suit, action,
litigation, proceeding, investigation, claim, complaint, or
accusation pending, threatened against or affecting ANFS or any of
its properties, assets or business or to which ANFS is a party, in
any court or before any arbitrator of any kind or before or by any
governmental agency (including, without limitation, any federal,
state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality), and there is no basis for
such suit, action, litigation, proceeding, investigation, claim,
complaint, or accusation; (b) there is no pending or threatened
change in any environmental, zoning or building laws, regulations or
ordinances which affect or could affect ANFS or any of its
properties, assets or businesses; and (c) there is no outstanding
order, writ, injunction, decree, judgment or award by any court,
arbitrator or governmental body against or affecting ANFS or any of
its properties, assets or business. There is no litigation,
proceeding, investigation, claim, complaint or accusation, formal or
informal, or arbitration pending, or any of the aforesaid
threatened, or any contingent liability which would give rise to any
right of indemnification or similar right on the part of any
director or officer of ANFS or any such person's heirs, executors or
administrators as against ANFS.
1. Compliance with laws. ANFS has at all times
been, and presently is, in full compliance with, and has not
received notice of any claimed violation of, any applicable federal,
state, local, foreign and other laws, rules and regulations. ANFS
has filed all returns, reports and other documents and furnished all
information required or requested by any federal, state, local or
foreign governmental agency and all such returns, reports, documents
and information are true and complete in all respects. All permits,
licenses, orders, franchises and approvals of all federal, state,
local or foreign governmental or regulatory bodies required of ANFS
for the conduct of its business have been obtained, no violations
are or have been recorded in respect of any such permits, licenses,
orders, franchises and approvals, and there is no litigation,
proceeding, investigation, arbitration, claim, complaint or
accusation, formal or informal, pending or threatened, which may
revoke, limit, or question the validity, sufficiency or continuance
of any such permit, license, order, franchise or approval. Such
permits, licenses, orders, franchises and approvals are valid and
sufficient for all activities presently carried on by ANFS.
2. Guaranties. ANFS has not guaranteed any
dividend, obligation or indebtedness of any Person; nor has any
Person guaranteed any dividend, obligation or indebtedness of ANFS.
3. Books and Records. ANFS keeps its books,
records and accounts (including, without limitation, those kept for
financial reporting purposes and for tax purposes) in accordance
with good business practice and in sufficient detail to reflect the
transactions and dispositions of its assets, liabilities and
equities. The minute books of the ANFS contain records of its
shareholders' and directors' meetings and of action taken
<PAGE>
by such shareholders and directors. The meeting of directors and
shareholders referred to in such minute books were duly called and
held, and the resolutions appearing in such minute books were duly
adopted. The signatures appearing on all documents contained in
such minute books are the true signatures of the persons purporting
to have signed the same.
ARTICLE 4.
CLOSING AND DELIVERY OF DOCUMENTS
5. Closing. The Closing shall be deemed to have occurred as of the
date of signing of this Agreement. Subsequent to the signing, the following
shall occur as a single integrated transaction:
6. Delivery by JNE:
(a) JNE shall deliver to ANFS the stock
certificates and all instruments of conveyance and transfer required
by Section 1.1.
(b) JNE shall deliver, or cause to be delivered,
to ANFS such instruments, documents and certificates as are required
to be delivered by JNE or its representatives pursuant to the
provisions of this Agreement.
7. Delivery by ANFS:
(a) ANFS shall deliver to JNE the stock
certificates and all instruments of conveyance and transfer required
by Section 1.2.
(b) ANFS shall deliver, or cause to be delivered,
to JNE such instruments, documents and certificates as are required
to be delivered by ANFS or its representatives pursuant to the
provisions of this Agreement.
8. Subsequent Delivery by ANFS:
(a) On the date which is 180 days from the
Closing, provided the conditions of Section 1.3 are satisified, ANFS
shall deliver to JNE the stock certificates and all instruments of
conveyance and transfer required by Section 1.3.
(b) ANFS shall deliver, or cause to be delivered,
to JNE such instruments, documents and certificates as are required
to be delivered by ANFS or its representatives pursuant to the
provisions of this Agreement.
ARTICLE 9.
TERMINATION, AMENDMENT AND WAIVER
<PAGE>
10. Termination. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned
at any time prior to the Closing by the mutual consent of all of the
parties;
11. Waiver and Amendment. Any term, provision,
covenant, representation, warranty or condition of this Agreement
may be waived, but only by a written instrument signed by the party
entitled to the benefits thereof. The failure or delay of any party
at any time or times to require performance of any provision hereof
or to exercise its rights with respect to any provision hereof shall
in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant,
representation or warranty contained in this Agreement, in any one
or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such condition or breach or waiver of
any other condition or of the breach of any other term, provision,
covenant, representation or warranty. No modification or amendment
of this Agreement shall be valid and binding unless it be in writing
and signed by all parties hereto.
ARTICLE 12.
COVENANTS
13. To induce ANFS to enter into this Agreement
and to consummate the transactions contemplated hereby, and without
limiting any covenant, agreement, representation or warranty made
JNE covenants and agrees as follows:
14. Notices and Approvals. JNE agrees: (a) to give and
to cause RETN to give all notices to third parties which may be
necessary or deemed desirable by ANFS in connection with this
Agreement and the consummation of the transactions contemplated
hereby; (b) to use its best efforts to obtain and to cause RETN to
obtain, all federal and state governmental regulatory agency
approvals, consents, permit, authorizations, and orders necessary or
deemed desirable by ANFS in connection with this Agreement and the
consummation of the transaction contemplated hereby; and (c) to use
its best efforts to obtain, and to cause RETN to obtain, all
consents and authorizations of any other third parties necessary or
deemed desirable by ANFS in connection with this Agreement and the
consummation of the transactions contemplated hereby.
15. Information for ANFS's Statements and Applications.
JNE and RETN and their employees, accountants and attorneys shall
cooperate fully with ANFS in the preparation of any statements or
applications made by ANFS to any federal or state governmental
regulatory agency in connection with this Agreement and the
transactions contemplated hereby and to furnish ANFS with all
information concerning JNE and RETN necessary or deemed desirable by
ANFS for inclusion in such statements and applications, including,
without limitation, all requisite financial statements and schedules.
<PAGE>
16. Access to Information. ANFS, together with its
appropriate attorneys, agents and representatives, shall be
permitted to make the full and complete investigation of JNE and
RETN and have full access to all of the books and records of the
other during reasonable business hours. Notwithstanding the
foregoing, such parties shall treat all such information as
confidential and shall not disclose such information without the
prior consent of the other.
17. To induce JNE to enter into this Agreement and
to consummate the transactions contemplated hereby, and without
limiting any covenant, agreement, representation or warranty made
ANFS covenants and agrees as follows:
18. Consulting Agreement. ANFS agrees that ANFS shall
enter into a consulting agreement with an entity to be determined by
JNE pursuant to which such entity shall receive compensation equal
to 250,000 free trading shares of common stock of ANSF for the
period specified in such agreement.
19. Access to Information. JNE, together with its
appropriate attorneys, agents and representatives, shall be
permitted to make the full and complete investigation of ANFS and
have full access to all of the books and records of the other during
reasonable business hours. Notwithstanding the foregoing, such
parties shall treat all such information as confidential and shall
not disclose such information without the prior consent of the other.
ARTICLE 20.
MISCELLANEOUS
21. Expenses. Except as otherwise specifically
provided for herein, whether or not the transactions contemplated
hereby are consummated, each of the parties hereto shall bear all
taxes of any nature (including, without limitation, income,
franchise, transfer and sales taxes) and all fees and expenses
relating to or arising from its compliance with the various
provisions of this Agreement and such party's covenants to be
performed hereunder, and except as otherwise specifically provided
for herein, each of the parties hereto agrees to pay all of its own
expenses (including, without limitation, attorneys and accountants'
fees and printing expenses) incurred in connection with this
Agreement, the transactions contemplated hereby, the negotiations
leading to the same and the preparations made for carrying the same
into effect, and all such taxes, fees and expenses of the parties
hereto shall be paid prior to Closing.
22. Notices. Any notice, request, instruction or
other document required by the terms of this Agreement, or deemed by
any of the parties hereto to be desirable, to be given to any other
party hereto shall be in writing and shall be given by prepaid
telegram or delivered or mailed by registered or certified mail,
postage prepaid, with return receipt requested, to the following
addresses:
TO ANFS:
<PAGE>
AmeriNet Financial Services, Inc.
3400 Inland Empire Blvd., Suite 205
Ontario, CA 91764
Attn: John J. Pembroke
TO JNE or RETN:
Jones Naughton Entertainment, Inc.
6255 Sunset Blvd., Suite 2000
Los Angeles, CA 90028
Attn: Joe Naughton
with a copy to:
M. Richard Cutler
Cutler & Alami
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
The persons and addresses set forth above may be changed
from time to time by a notice sent as aforesaid. If notice is given
by delivery in accordance with the provisions of this Section, said
notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given forty-eight (48) hours after deposit thereof in the United
States mail. If notice is given by telegraph in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given at the time that the telegraphic agency shall confirm delivery
thereof to the addressee.
23. Entire Agreement. This Agreement, together
with the Schedule and exhibits hereto, sets forth the entire
agreement and understanding of the parties hereto with respect to
the transactions contemplated hereby, and supersedes all prior
agreements, arrangements and understandings related to the subject
matter hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written
or oral, express or implied, whether by statute or otherwise, has
been made by any party hereto which is not embodied in this
Agreement, or in the Schedule 1or exhibits hereto or the written
statements, certificates, or other documents delivered pursuant
hereto or in connection with the transactions contemplated hereby,
and no party hereto shall be bound by or liable for any alleged
understanding, promise, inducement, statement, representation,
warranty, covenant or condition not so set forth.
24. Survival of Representations. All statements
of fact (including financial statements) contained in the Schedule,
the exhibits, the certificates or any other instrument delivered by
or on behalf of the parties hereto, or in connection with the
transactions
<PAGE>
contemplated hereby, shall be deemed representations
and warranties by the respective party hereunder. All
representation, warranties agreements and covenants hereunder shall
survive the Closing and remain effective regardless of any
investigation or audit at any time made by or on behalf of the
parties or of any information a party may have in respect thereto.
Consummation of the transactions contemplated hereby shall not be
deemed or construed to be a waiver of any right or remedy possessed
by any party hereto, notwithstanding that such party knew or should
have known at the time of Closing that such right or remedy existed.
25. Incorporated by Reference. The Schedule, the
exhibits and all documents (including, without limitation, all
financial statements) delivered as part hereof or incident hereto
are incorporated as a part of this Agreement by reference.
26. Remedies Cumulative. No remedy herein
conferred upon Purchaser is intended to be exclusive of any other
remedy and each and every such remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
27. Execution of Additional Documents. Each party
hereto shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions as may be
reasonably required in order to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
28. Finders' and Related Fees. Each of the
parties hereto is responsible for, and shall indemnify the other
against, any claim by any third party to a fee, commission, bonus or
other remuneration arising by reason of any services alleged to have
been rendered to or at the instance of said party to this Agreement
with respect to this Agreement or to any of the transactions
contemplated hereby.
29. Governing Law. This Agreement has been
negotiated and executed in the State of California and shall be
construed and enforced in accordance with the laws of such state.
30. Forum. Each of the parties hereto agrees that
any action or suit which may be brought by any party hereto against
any other party hereto in connection with this Agreement or the
transactions contemplated hereby may be brought only in a federal or
state court in Orange County, California.
31. Binding Effect and Assignment. This Agreement
shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, executors, administrators, legal
representatives and assigns.
32. Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. In
making proof of this Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the date first written hereinabove.
AMERINET FINANCIAL SERVICES, INC., a
Nevada corporation ("ANFS")
By: /s/ John J. Pembroke
John J. Pembroke
Chairman and Chief Executive Officer
JONES NAUGHTON ENTERTAINMENT, INC.
a Colorado corporation ("JNE")
By: /s/ Joseph M. Naughton
Joseph M. Naughton
Chairman and Chief Executive Officer
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is entered
into as of this 12th day of February 1997 between JONES NAUGHTON
ENTERTAINMENT, INC., a Colorado corporation ("JNE"), AMERINET
FINANCIAL SYSTEMS, INC., a Florida corporation ("AFSI") and MRC
LEGAL SERVICES CORPORATION dba the Law offices of M. Richard Cutler,
Esq., as escrow agent (the "Escrow Agent").
R E C I T A L S
A. As of October 2, 1996 JNE, AFSI, ANFS, Inc. a
Delaware corporation ("ANFS") and Real Estate Television Network,
Inc., a Nevada corporation ("RETN") entered into an Agreement and
Plan of Reorganization (the "Agreement") providing for the merger of
RETN with and into ANFS. Unless otherwise set forth herein,
capitalized terms used herein shall have the meaning as set forth in
the Agreement; and
B. In connection with the merger, AFSI would initially
issue to JNE up to an aggregate of 1,000,000 shares of AFSI Series A
Preferred Stock (the "AFSI Stock"), a total of 400,000 of which
would be subject to a "lock-up" agreement to be released to JNE upon
the occurrence of certain contingencies. Up to an additional
400,000 shares of AFSI Series A Preferred Stock would be issued to
JNE upon the occurrence of certain contingencies.
C. Although a closing of the transaction represented by
the Agreement has not yet occurred, the parties are desirous that
the certificates representing 100% of the issued and outstanding
capital stock of RETN (the "RETN Stock") and the certificates
representing the AFSI Stock be held and released in accordance with
the terms and conditions of this Escrow Agreement. All other terms
and conditions of the Agreement shall remain in place and shall be
supplemented by, and not supplanted by, this Escrow Agreement.
D. Escrow Agent has agreed to act as the escrow agent
hereunder, in accordance with the terms and conditions set forth in
this Escrow Agreement.
NOW THEREFORE, for and in consideration of the foregoing and
of the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1. Appointment of Escrow Agent. AFSI and JNE
(collectively, the "Parties") hereby mutually appoint and designate
the Escrow Agent to receive, hold and release, as escrow agent, the
RETN Stock and the AFSI Stock, and the Escrow Agent hereby accepts
such appointment and designation.
2. Escrow Delivery. On or before February 14, 1997, JNE
shall deliver or cause to be delivered certificates representing the
RETN Stock to the Escrow Agent and AFSI shall deliver or cause to be
delivered certificates representing the AFSI Stock to the Escrow Agent.
3. Conditions of Escrow.
<PAGE>
3.1 The Escrow Deposit. Escrow Agent shall hold and
release the RETN Stock and the AFSI Stock as follows:
a. Release of RETN Stock From Escrow. Upon the occurrence of
any of the following events, the Escrow Agent shall (i) provide
notification to AFSI and JNE as set forth herein of the occurrence
of any such event and instruct AFSI to complete the filing of merger
documents of RETN with and into ANFS, and (ii) provided that the
Escrow Agent has not received an affidavit from AFSI or JNE,
notarized and signed under penalty of perjury, to the effect that
such an event has not occurred (in which case the Parties shall
proceed under Section 3.1(c) hereof), and upon the expiration of
five days from the date the notice is deemed given to AFSI and JNE
pursuant to Section 6 hereof, release and distribute the RETN Stock
as follows:
i. to JNE or AFSI, as the case may be, pursuant to joint
written instructions executed by JNE and AFSI; or
ii. to JNE or AFSI, as the case may be, pursuant to any
"final order" of a court of competent jurisdiction, any such order
being deemed to be "final" if (i) such order has not been reserved,
stayed, enjoined, set aside, annulled or suspended, (ii) no request
for a stay, suspension or an injunction, petition for
reconsideration or appeal, or sua sponte action with comparable
effect is pending with respect to the order, and (iii) the time for
filing any such request, petition or appeal or further taking of any
such sua sponte action has expired; or
iii. to AFSI or ANFS upon the receipt by the Escrow Agent of
written notification from AFSI that it has received, after the date
hereof, a minimum of $1,500,000 (as net proceeds) in equity
financing, or upon the receipt by the Escrow Agent of other
documentary evidence of the receipt and acceptance by AFSI, after
the date hereof, of a minimum of $1,500,000 (as net proceeds) in
equity financing; or
iv. to AFSI or ANFS upon receipt of written notification
from AFSI that it has determined, in its sole discretion, that ANFS
and/or AFSI has adequate financing to fund the operations of RETN
(the "AFSI Option"); or
v. to AFSI or ANFS on February 1, 1998.
b. Release of AFSI Stock From Escrow. Upon the
occurrence of any of the following events, the Escrow Agent shall
(i) provide notification to AFSI and JNE as set forth herein of the
occurrence of any such event and instruct AFSI to complete the
filing of merger documents of RETN with and into ANFS, and (ii)
provided that the Escrow Agent has not received an affidavit from
AFSI or JNE, notarized and signed under penalty of perjury, to the
effect that such an event has not occurred (in
<PAGE>
which case the Parties shall proceed under Section 3.1(c) hereof),
and upon the expiration of five days from the date the notice is
deemed given to AFSI and JNE pursuant to Section 6 hereof, release
and distribute the AFSI Stock as follows:
i. to JNE or AFSI, as the case may be, pursuant to joint
written instructions executed by JNE and AFSI; or
ii. to JNE or AFSI, as the case may be, pursuant to any
"final order" of a court of competent jurisdiction, any such order
being deemed to be "final" if (i) such order has not been reserved,
stayed, enjoined, set aside, annulled or suspended, (ii) no request
for a stay, suspension or an injunction, petition for
reconsideration or appeal, or sua sponte action with comparable
effect is pending with respect to the order, and (iii) the time for
filing any such request, petition or appeal or further taking of any
such sua sponte action has expired; or
iii. to JNE upon the receipt by the Escrow Agent of the
written notification referred to in Section 3.1(a)(iii) above, or
upon receipt of other documentary evidence of the receipt and
acceptance by AFSI, after the date hereof, of a minimum of
$1,500,000 (as net proceeds) in equity financing; or
iv. to JNE on February 1, 1998; or
v. to JNE upon the exercise by AFSI or ANFS of the AFSI
Option as defined above.
c. Conflicting Instructions. If a bona fide controversy
arises between the Parties concerning the release of either the RETN
Stock of the AFSI Stock hereunder, they shall notify the Escrow
Agent. In that event (unless the Escrow Agent determines in good
faith that a bona fide controvery does not exist) (or, in the
absence of such notification, if in the good faith judgment of the
Escrow Agent such a bona fide controversy exists), then,
notwithstanding any other provision hereof, the Escrow Agent shall
not resolve such controversy or take any action but shall be
required to await resolution of the controversy by joint
instructions from the Parties or by order of a court of competent
jurisdiction. If a suit is commenced against the Escrow Agent, it
may answer by way of interpleader and name JNE, RETN, AFSI and/or
ANFS as additional parties to such action, and the Escrow Agent may
tender the RETN Stock and/or the AFSI Stock into such court for
determination of the respective rights, titles and interests of the
Parties. Upon such tender, the Escrow Agent shall be entitled to
receive from the Parties its reasonable attorneys' fees and expenses
incurred in connection with said interpleader action or in any
related action or suit. As between JNE and AFSI, such fees,
expenses and other sums shall be paid by the party which fails to
prevail in the proceedings brought to determine the appropriate
distribution of the RETN Stock or the AFSI Stock, as the case may
be.
<PAGE>
If and when the Escrow Agent shall so interplead such Parties,
or either of them, and deliver the RETN Stock and/or the AFSI Stock
to the clerk of such court, all of its duties hereunder shall cease,
and it shall have no further obligation in this regard. Nothing
herein shall prejudice any right or remedy of the Escrow Agent.
4. Concerning Escrow Agent
4.1 Duties. Escrow Agent undertakes to perform all
duties which are expressly set forth herein; provided, however, that
the Escrow Agent shall not be required to make or be liable in any
manner for its failure to make any determination under the Agreement
or any other agreement, including whether any of JNE, AFSI and/or
ANFS is entitled to delivery of the RETN Stock and/or the AFSI Stock
under the Agreement.
4.2 Indemnification.
a. Escrow Agent may rely upon and shall be protected in
acting or refraining from acting upon any written notice,
instructions or request furnished to it hereunder and reasonably
believed by it to be genuine and authorized.
b. Escrow Agent shall not be liable for any action taken
by it in good faith and without gross negligence or wilful
misconduct, and believed by it to be authorized or within the rights
or powers conferred upon it by this Escrow Agreement, and may
consult with counsel of its own choice and shall have full and
complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the
opinion of such counsel.
c. JNE and AFSI hereby jointly and severally agree to
indemnify the Escrow Agent for, and hold the Escrow Agent harmless
against, any loss, liability or expense incurred without gross
negligence or wilful misconduct or bad faith on the part of the
Escrow Agent, arising out of or in connection with the Escrow
Agent's entering into this Escrow Agreement and carrying out the
Escrow Agent's duties hereunder, including, without limitation,
costs and expenses of defending the Escrow Agent against any claim
or liability with respect thereto.
d. Escrow Agent shall have no implied obligations or
responsibilities hereunder, nor shall it have any obligation or
responsibility to collect funds or seek the deposit of money or
property.
4.3 Other Matters. Escrow Agent (and any successor
escrow agent or agents) reserves the right to resign as the Escrow
Agent at any time, provided fifteen (15) days' prior written notice
is given to the other parties hereto, and provided further that a
mutually acceptable successor escrow agent(s) agrees in writing to
serve as escrow agent hereunder within such fifteen (15)-day period.
The Escrow Agent may petition any court in the State of California
having jurisdiction to designate a successor Escrow Agent. The
resignation of the Escrow Agent (and any successor escrow agent or
agents) shall be effective only upon delivery of the RETN Stock
and/or the AFSI
<PAGE>
Stock, as the case may be, to the successor escrow
agent(s). The Parties reserve the right to jointly remove the
Escrow Agent at any time, provided fifteen (15) days' prior written
notice is given to the Escrow Agent. In the event of litigation or
dispute by the Parties in which the performance of the duties of the
Escrow Agent is at issue, the Escrow Agent shall take no action
until such action is agreed in writing by the Parties, or until
receipt of any final order by a court of competent jurisdiction
directing the Escrow Agent to take such action.
5. Termination. This Escrow Agreement shall be
terminated upon the release of the RETN Stock and the AFSI Stock in
accordance with the terms and conditions hereof, or otherwise by
written mutual consent signed by all parties hereto.
6. Notice. All notices, demands, requests, or other
communications which may be or are required to be given, served or
sent by any party to any other party pursuant to this Escrow
Agreement shall be in writing and shall be hand delivered (including
delivery by courier) or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
IF TO JNE:
Jones Naughton Entertainment, Inc.
6255 Sunset Blvd., Suite 200
Los Angeles, CA 90028
Attn: Joe Naughton, President
Facsimile No.: 213-466-1892
IF TO AFSI:
AmeriNet Financial Systems, Inc.
3400 Inland Empire Blvd., Suite 205
Ontario, CA 91764
Attn: John Pembroke, President
Facsimile No.: 909-481-8446
With a copy to:
Alan S. Nopar, Esq.
AmeriNet Financial Systems, Inc.
2166 The Alameda
San Jose, CA 95126
Facsimile No.: 408-984-2689
IF TO THE ESCROW AGENT:
Law Offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
<PAGE>
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
or such other address as the addressee may indicate by written
notice to the other parties. Each notice, demand, request or
communication which shall be given or made in the manner described
above shall be deemed sufficiently given or made for all purposes at
such time as it delivered to the addressee (with the return receipt,
the delivery receipt or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.
7. Benefit and Assignment. This Escrow Agreement shall
be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns as permitted hereunder.
No person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision in this Escrow
Agreement against any of the parties hereto, and the covenants and
agreements set forth in this Escrow Agreement shall be solely for
the benefit of, and shall be enforceable only by, the parties hereto
or their respective successors and assigns this Escrow Agreement or
any rights hereunder without the prior written consent of the
parties hereto.
8. Entire Agreement; Amendment. This Escrow Agreement
contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written
agreements, commitments or understandings with respect to such
matters. This Escrow Agreement may not be changed orally, but only
by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought.
9. Headings. The headings of the sections and
subsections contained in this Escrow Agreement are inserted for
convenience only and do not form a part or affect the meaning,
construction or scope thereof.
10. Governing Law; Venue. This Escrow Agreement shall be
governed and constructed under and in accordance with the laws of
the State of California (but not including the conflicts of laws and
rules thereof). For purposes of any action or proceeding involving
this Escrow Agreement each of the parties to this Escrow Agreement
expressly submits to the jurisdiction of the federal and state
courts located in the State of California and consents to the
service of any process or paper by registered mail or by personal
service within or without the State of California in accordance with
applicable law, provided a reasonable time for appearance is allowed.
11. Signature in Counterparts. This Escrow Agreement may
be executed in separate counterparts, none of which need contain the
signature of all parties, each of which shall be deemed to be an
original and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this
Escrow Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto.
12. Attorney's Fees. Should any action be commenced
between the parties to this Agreement concerning the matters set
forth in this Agreement or the right and duties of either in
relation thereto, the prevailing party in such action shall be
entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its Attorney's Fees and Costs.
13. Fees and Expenses of Escrow Agent. Except as may
otherwise be provided in Section 3(c) and 4.2 hereof,
notwithstanding any other provision hereof, all fees of the Escrow
Agent hereunder shall be paid by JNE except with respect to the
first $500 of such fees, which shall be borne equally as between JNE
and AFSI, and all out-of-pocket expenses of the Escrow Agent shall
be borne equally by JNE and AFSI.
IN WITNESS WHEREOF, each of the parties has caused this
Escrow Agreement to be duly executed and delivered in its name and
on its behalf, all as of the date and year first above written.
JONES NAUGHTON ENTERTAINMENT, INC.
a Colorado corporation ("JNE")
By: /s/Joe Naughton
Joe Naughton, President
AMERINET FINANCIAL SYSTEMS, INC., a
Florida corporation ("AFSI")
By: /s/John Pembroke
John Pembroke, President
MRC LEGAL SERVICES CORPORATION, a California corporation
dba The Law Offices of M. Richard Cutler, Esq. ("ESCROW AGENT")
By: /s/M. Richard Cutler
M. Richard Cutler, President
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (THIS "AGREEMENT") is
entered, into effectively the day of
199__ by and between Jones Naughton Entertainment, Inc., a Colorado
Corporation ("Issuer") and , a, a non-USA
jurisdiction entity, herein referred to as ("Purchaser"), and is executed in
reliance upon the transaction exemption afforded by Regulation D,
Rule 504 ("Regulation D") as promulgated by the securities and
exchange Commission ("SEC"), under the Securities Act of 1993, as amended
(the "1993 Act").
WHEREAS, Issuer is a publicly traded corporation on the OTC Bulletin Board,
traded under the symbol "JNNE" that is not (1) subject to the reporting
requirements of section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, (ii) and investment company, or (iii) a development stage
company that either (A) has no specific business plan or purpose, or (B) has
indicated that its business plan is to engage in a merger or acquisition
with an unidentified company or companies, or other entity or person;
WHEREAS, Issuer desires to sell, and Purchaser desires to purchase, $ f
Common Stock of the Issuer, upon the terms and conditions specified herein;
NOW, THEREFORE, in consideration of the premises and the representations and
warranties contained herein, and other valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE OF SHARES; CLOSING
(a) Purchase and Sale. On the terms and subject to the conditions of this
Agreement, Issuer shall deliver to Purchaser, and Purchaser shall purchase
from Issuer, _________________Shares of Common Stock (the "Shares") of the
Issuer. The aggregate purchase price shall be _________________ Dollars
(b) Closing. The closing of the purchase and sale contemplated
by this Agreement shall take place effective on 1998 or on
such other date as the parties may mutually agree (the "Closing'). At
the Closing, Issuer shall deliver the Shares to the Purchaser against
payment of the purchase price therefore by check, wire transfer,
cancellation of indebtedness, or such other form of payment as shall be
mutually agreed upon by Purchaser and Issuer. In the event that payment
by Purchaser is made, in whole or in part, then purchaser shall surrender to
Issuer for cancellation at the closing any evidence of such indebtedness or
shall execute and instrument of cancellation in form and substances acceptable
to issuer. In addition, the Issuer at the Closing shall deliver to
Purchaser choosing to pay any part of the purchase price of the Shares by
cancellation of indebtedness, a check in the amount of any interest accrued
on such indebtedness through the Closing.
(c) Legends. The Shares shall be issued without a restrictive
legend pursuant to the terms of Regulation D.
2. REPRESENTATIONS OF PURCHASER
(a) Offshore Transaction. Purchaser represents and warrants to
Issuer as follows:
<PAGE>
(i) Purchaser is not a U.S. Person;
(ii) Purchaser is outside the United States and its territories as
of the date of the execution and delivery of this agreement;
(iii) Purchaser represents and warrants that Purchaser has sufficient
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of its acquisition of the Shares
hereunder and that Purchaser has had made available to it such information
with respect to Seller as it has deemed necessary or appropriate to make such
evaluation.
(iv) Purchaser acknowledges that the purchase of the Shares involves a high
degree of risk and further acknowledges that it can bear the economic risk
of the purchase of the Shares, including the total loss of its investment; and
(v) Purchaser understands that the Shares are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of federal and state securities laws and that the Issuer is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of Purchaser set forth herein
in order to determine the applicability of such exemptions and the suitability
of Purchaser to acquire the Shares.
(b) Independent Investigation Access. Purchaser acknowledges that
Purchaser, in making the decision to purchase the Shares subscribed for, has
relied upon independent investigations made by it and its purchaser
representatives, if any, and Purchaser and such representative, if any, have
prior to any sale to it, been given access and the opportunity to
examine all material books and records of the Issuer, all material contracts
and documents relating to this offering and an opportunity to ask questions
of, and to receive answers from the Issuer or any person acting on its behalf
concerning the terms and conditions of this offering. Purchaser and its
advisors, if any, have been furnished with access to all publicly
available materials relating to the offer and sale of the Shares which have
been requested. Purchaser and its advisors, if any have received complete and
satisfactory answers to any such inquires.
(c) Due Authorization, Binding Effect. This Agreement has been duty
authorized, executed and delivered on behalf of Purchaser and, assuming
the due authorization, execution and delivery by Issuer, this Agreement
constitutes the valid, legal and binding obligation of Purchaser, enforceable
in accordance with its terms, except to the extent that enforceability
may be limited by bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally;
(d) Accuracy of Representations. No representations or warranty made by
Purchaser in this Agreement and no certificate or document furnishes or to
be furnished to Issuer pursuant to this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
<PAGE>
(e) No Government Recommendation or Approval. Purchaser understands that no
federal or state agency has passed on or made any recommendation
or endorsement of the Shares.
3. ISSUER REPRESENTATIONS
(a) Due Authorization, Binding Effect. This Agreement has been
duly authorized, executed and delivered on behalf of Issuer and, assuming
the due authorization, execution and delivery by Purchaser, this Agreement
constitutes the valid, legal and binding obligation of Issuer, enforceable
in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally;
(b) Accuracy of Representations. No representation or warranty made by Issuer
in this Agreement and no certificate or document furnished or to be furnished
to Purchaser pursuant to this Agreement contains or will contain any untrue
statement of a statements contained herein or therein not misleading.
4. EXEMPTION; RELIANCE ON REPRESENTATION. Purchaser understands that
the offer and sale of the Shares is not being registered under the 1933 Act.
Issuer is relying on the rules governing offers and sales made outside the
United States and the provisions of REGULATION D.
5. TRANSFER AGENT INSTRUCTIONS. Issuer's transfer agent will be
instructed to issue one or more share certificates representing the Shares,
in the names of purchasers to be specified prior to Closing, and that the
Shares have been issued pursuant to Regulation D.
6. CONDITIONS TO OBLIGATIONS OF THE ISSUER. All obligations of the
issuer under this Agreement are subject to the fulfillment or satisfaction,
prior to or at Closing of each of the following conditions precedent (all of
winch may be waived by the Issuer):
(a) Execution of Agreement. Execution of this Agreement by
Purchaser;
(b) Receipt of Purchase Price. Delivery by Purchaser of
same-day funds as payment
in full for the purchase of the Shares, as set forth in paragraph I hereof,
(c) Accuracy of Representations. Each of the representations
and warranties of the present Purchaser herein being true and correct in all
material respects on the date hereof and as of the Closing, and the Purchaser
having performed or complied with all agreements and covenants contained in
this Agreement to be performed or complied with by it prior to or at the
Closing;
(d) No Court Action. Neither the Issuer nor the Purchaser being
precluded by an
order or preliminary or permanent injunction of a, court of
competent jurisdi ction from
consummating the sale and purchase of the Shares pursuant to this Agreement
(each party
agreeing to use its reasonable best efforts to have any such
injunction lifted ); and
(e) No Adverse Laws. There not having been any statute, rule or
regulation enacted or promulgated by any governmental body or agency after the
date hereof which is
<PAGE>
applicable to the purchase and sale of the Shares pursuant to this Agreement
which would render the consummation of any such purchase and sale illegal.
7. CONDITIONS TO PURCHASER'S OBLIGATIONS TO PURCHASE. Issuer
understands that Purchaser's obligation to purchase the Shares in
conditioned upon:
(a) Execution by Issuer. Execution by Issuer of this Agreement;
(b) Delivery Shares. Timely delivery of the Shares to Purchaser;
(c) Accuracy of Representations. Each of the representations and
warranties of the Issuer herein being true and correct in all material
respects on the date hereof and as of the Closing, and the Issuer having
performed or complied with all agreements and covenants contained in this
Agreement to be performed or complied with by it prior to or at the
Closing;
(d) No Court Action. Neither the Issuer nor the Purchaser being
precluded by an order or preliminary or permanent injunction of a court
of competent jurisdiction from consummating the sale and purchase of the
Shares pursuant to this Agreement (each party agreeing to use its reasonable
best efforts to have any such injunction lifted); and
(e) No Adverse Laws. There not having been any statue, rule or regulation
enacted or promulgated by any governmental body or agency after the date
hereof which is applicable to the purchase and sale of the Shares pursuant
to this Agreement which would render the consummation of any such purchase
and sale illegal.
8. SURVIVAL OF REPRESENTATIONS, ETC. All representations, warranties and
agreements made herein shall survive any investigation made by the Issuer
and the Purchaser and
shall survive the Closing.
9. TERMINATION. This agreement may be terminated:
(a) Mutual Consent. By mutual consent of the parties, on the date
specified i n writing
executed by the Issuer and the Purchaser;
(b) By the Issuer.. By the Issuer, upon written notice to the Issuer,
is any representation or warranty made in this Agreement by the Purchaser shall
have been false or incorrect in any material respect when made or shall have
become false or incorrect in any material respect thereafter, or if the
Purchaser shall fail to perform or observe any material covenant or agreement
made by it in this Agreement; or
(c) By the Purchaser. By the'. Purchaser, upon written notice to the
Issuer, if any representation or warranty made in this Agreement by the
Issuer shall have been false or incorrect in any material respect when made
or shall have become false or incorrect in any material respect thereafter,
or if the Issuer shall fail to perform or observe any material
covenant or agreement made by it in this Agreement
10. CONFIDENTIALITY. Each party to this Agreement agrees that, except as
required by law or as permitted by the mutual consent of all parties hereto,
the terms, conditions, and the
<PAGE>
existence of this Agreement shall be kept strictly confidential and shall
not be disclosed to any person or entity.
11. MISCELLANEOUS.
(a) Binding Effect, Assignment. This agreement shall inure to the
benefit of and be binding upon the parties hereto, their respective legal
representatives and successors. This Agreement may not be assigned.
(b) Further Assurances, Cooperation. Each party shall, upon
reasonable request by the other party, execute and deliver any additional
documents necessary or desirable to complete the sale, conveyance, transfer,
and assignment of the Shares acquired by Purchaser, pursuant to and in the
manner contemplated by this Agreement.
(c) Entire Agreement, Absence of Representation. This Agreement
constitutes the entire agreement between the parties hereto and supersedes
all prior arrangements, understands and agreements, oral or written, between
the parties hereto with respect to the subject matter hereof. The Purchaser
hereby acknowledges that in acquiring the Shares to be acquired hereunder,
the Purchaser has relied only upon the representations and warranties expressly
made in this Agreement, upon information contained in public reports
of Issuer, and upon the information referred to herein, and that no other
statements, representations or warranties, oral and written, express or implied
have been made or relied upon in connection with such acquisition or as an
inducement thereof.
(d) Execution in Cog Counterparts. This Agreement may be executed
in counter parts, each of which shall be deemed and original and all of which
shall be deemed to be one and the same instrument.
(e) Notices. All notices, request, permissions, waivers and
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by telegram, telex, facsimile transmission
or by mail (registered or certified mail, postage prepaid return receipt
requested) to the respective parties at the following respective
addresses or to such other address as any party hereto shall specify in a
notice to the other parties hereto in accordance with the terns hereof.
To Issuer:
Jones Naughton Entertainment, Inc.
6255 Sunset blvd., Suite 2000
Los Angeles, CA 90028
USA
To Purchaser:
(f) Amendments and Waivers. Tins Agreement may not be modified or
amended except by an instrument or instruments in writing signed BY the party
against whom enforcement of any such modification or amendment is sought. The
Issuer may, by an instrument in writing, waive compliance by the Purchaser with
any term or provision of
<PAGE>
this Agreement on the part of the Issuer to be performed or complied with.
The Purchaser may, by an instrument in writing waive compliance by the
Issuer, with any term or provision of this agreement on the part of the
Issuer to be performed or complied with. Any waiver of a breach of any term
or provision of this agreement shall not be construed as a waiver of any
subsequent beach.
(g) Headings: Severability. The headings contained in this
Agreement are for convenience of reference only and shall not affect the
interpretation or construction hereof. Any term or provision of this
agreement which is invalid or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
(h) Governing Law. This Agreement shall be construed (both as
to validity and performance) and enforced in accordance with and governed by
the internal laws of the State of California, applicable to agreements made
and to be performed wholly with in such jurisdiction and without regard to
conflicts of laws.
IN WITNESS WHEREOF, this Agreement was duly executed as of the day of
199
By: Official Signatory of Purchaser
Title:
Country of Execution:
ACCEPTED this day of ,199
BY
Its: Chairman/CEO
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is entered
into as of this 17th day of November 1997 between JONES NAUGHTON
ENTERTAINMENT, INC., a Colorado corporation ("JNE"), Michael Rost
("Purchaser") and MRC LEGAL SERVICES CORPORATION dba the Law offices
of M. Richard Cutler, Esq., as escrow agent (the "Escrow Agent").
R E C I T A L S
A. As of October 2, 1996 JNE, AFSI, ANFS, Inc. a
Delaware corporation ("ANFS") and Real Estate Television Network,
Inc., a Nevada corporation ("RETN") entered into an Agreement and
Plan of Reorganization (the "Agreement") providing for the
acquisition of RETN by AFSI through its wholly-owned subsidiary, ANFS.
B. In connection with the transaction, AFSI issued to
JNE an aggregate of 1,000,000 shares of AFSI Series A Preferred
Stock (the "AFSI Stock"), which have been subsequently been reduced
to 400,000 shares as a result of a reverse stock split. All of the
AFSI Stock is and has been held by the Escrow Agent pursuant to the
terms of an Escrow Agreement dated as of February 12, 1997.
C. In accordance with the terms of that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase
Agreements"), JNE has agreed to sell to Purchaser 22,223 shares (the
"Shares") of unrestricted common stock upon the conversion of
certain of the shares of AFSI Stock.
D. The parties hereto desire and the Escrow Agent has
agreed to hold the proceeds from the sale of the Shares (the "Cash
Consideration") and subsequently release such proceeds to JNE upon
the occurrence of certain events as set forth in this Escrow Agreement.
E. Escrow Agent has agreed to act as the escrow agent
hereunder, in accordance with the terms and conditions set forth in
this Escrow Agreement.
NOW THEREFORE, for and in consideration of the foregoing and
of the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1. Appointment of Escrow Agent. JNE and Purchaser
(collectively, the "Parties") hereby mutually appoint and designate
the Escrow Agent to receive, hold and release, as escrow agent, the
Cash Consideration, and the Escrow Agent hereby accepts such
appointment and designation.
2. Escrow Delivery. Upon closing of the transaction for
the sale of the Shares as set forth in the Stock Purchase Agreement,
Purchaser shall deliver the Cash Consideration to the Escrow Agent.
3. Conditions of Escrow.
<PAGE>
3.1 The Escrow Deposit. Escrow Agent shall hold and
release the Cash Consideration as follows:
a. Upon delivery of the Cash Consideration, the Escrow Agent
shall immediately release 5% of the Cash Consideration to JNE;
b. From the date of Closing until the Share Unrestricted Date
(defined below), the Escrow Agent may release up to an additional 5%
of the Cash Consideration at the direction and request of JNE to
unrelated third parties for the purpose of completing the conversion
of the Preferred Stock to common stock of AFSI, the removal of any
restrictions on the transfer of such shares and any related actions
or other matters required to undertake the transactions contemplated
by the Stock Purchase Agreement (the "Unrestricted Share Reserve");
c. Upon the date that the Purchaser receives the Shares without
restrictive legend (the "Share Unrestricted Date"), the Escrow Agent
shall release the balance of all Cash Consideration then in Escrow
to JNE (including, without limitation, any balance left of the
Unrestricted Share Reserve");
d. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to joint written
instructions executed by JNE and Purchaser;
e. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to any "final order" of a
court of competent jurisdiction, any such order being deemed to be
"final" if (i) such order has not been reserved, stayed, enjoined,
set aside, annulled or suspended, (ii) no request for a stay,
suspension or an injunction, petition for reconsideration or appeal,
or sua sponte action with comparable effect is pending with respect
to the order, and (iii) the time for filing any such request,
petition or appeal or further taking of any such sua sponte action
has expired; or
f. The Escrow Agent shall release the balance of the Cash
Consideration (less the full Unrestricted Share Reserve) upon
written notice by Purchaser if the Share Unrestricted Date has not
occurred on or before the later of March 31, 1998 or the date of
such notice by Purchaser.
g. Conflicting Instructions. If a bona fide controversy arises
between the Parties concerning the release of the Cash
Consideration, the Escrow Agent may submit such controversy for
resolution by joint written instructions of the parties or by order
of a court of competent jurisdiction. If a suit is commenced
against the Escrow Agent, it may answer by way of interpleader and
name JNE and Purchaser as additional parties to such action, and the
Escrow Agent may tender the Cash Consideration into such court for
determination of the respective rights, titles and interests of the
Parties. Upon such tender, the Escrow Agent shall be entitled to
receive from the Parties its reasonable attorneys' fees and expenses
incurred in connection with said interpleader
<PAGE>
action or in any related action or suit. As between JNE and Purchaser,
such fees, expenses and other sums shall be paid by the party which fails
to prevail in the proceedings brought to determine the appropriate
distribution of the Cash Consideration. If and when the Escrow Agent
shall so interplead such Parties, or either of them, and deliver the
Cash Consideration to the clerk of such court, all of its duties
hereunder shall cease, and it shall have no further obligation in
this regard. Nothing herein shall prejudice any right or remedy of
the Escrow Agent.
4. Concerning Escrow Agent
4.1 Duties. Escrow Agent undertakes to perform all
duties which are expressly set forth herein; provided, however, that
the Escrow Agent shall not be required to make or be liable in any
manner for its failure to make any determination under the Agreement
or any other agreement, including whether any of JNE or the
Purchaser is entitled to delivery of the Cash Consideration under
the Agreement.
4.2 Indemnification.
a. Escrow Agent may rely upon and shall be protected in acting
or refraining from acting upon any written notice, instructions or
request furnished to it hereunder and reasonably believed by it to
be genuine and authorized.
b. Escrow Agent shall not be liable for any action taken by it
in good faith and without gross negligence or wilful misconduct, and
believed by it to be authorized or within the rights or powers
conferred upon it by this Escrow Agreement, and may consult with
counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such
counsel.
c. JNE and Purchaser hereby jointly and severally agree to
indemnify the Escrow Agent for, and hold the Escrow Agent harmless
against, any loss, liability or expense incurred without gross
negligence or wilful misconduct or bad faith on the part of the
Escrow Agent, arising out of or in connection with the Escrow
Agent's entering into this Escrow Agreement and carrying out the
Escrow Agent's duties hereunder, including, without limitation,
costs and expenses of defending the Escrow Agent against any claim
or liability with respect thereto.
d. Escrow Agent shall have no implied obligations or
responsibilities hereunder, nor shall it have any obligation or
responsibility to collect funds or seek the deposit of money or
property.
4.3 Other Matters. Escrow Agent (and any successor
escrow agent or agents) reserves the right to resign as the Escrow
Agent at any time, provided fifteen (15) days' prior written notice
is given to the other parties hereto, and provided further that a
mutually acceptable successor escrow agent(s) agrees in writing to
serve as escrow agent hereunder within such fifteen (15)-day
<PAGE>
period. The Escrow Agent may petition any court in the State of
California having jurisdiction to designate a successor Escrow Agent.
The resignation of the Escrow Agent (and any successor escrow agent or
agents) shall be effective only upon delivery of the Cash
Consideration then in Escrow to the successor escrow agent(s). The
Parties reserve the right to jointly remove the Escrow Agent at any
time, provided fifteen (15) days' prior written notice is given to
the Escrow Agent. In the event of litigation or dispute by the
Parties in which the performance of the duties of the Escrow Agent
is at issue, the Escrow Agent shall take no action until such action
is agreed in writing by the Parties, or until receipt of any final
order by a court of competent jurisdiction directing the Escrow
Agent to take such action.
5. Termination. This Escrow Agreement shall be
terminated upon the release of the Cash Consideration in accordance
with the terms and conditions hereof, or otherwise by written mutual
consent signed by all parties hereto.
6. Notice. All notices, demands, requests, or other
communications which may be or are required to be given, served or
sent by any party to any other party pursuant to this Escrow
Agreement shall be in writing and shall be hand delivered (including
delivery by courier) or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
IF TO JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Attn: Joe Naughton, President
Facsimile No.: 714-994-3242
IF TO PURCHASER:
Michael Rost
21 Riverview Heights
Sioux Falls, SD 57105
Facsimile No.: (605) 333-0123
IF TO THE ESCROW AGENT:
Law Offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
or such other address as the addressee may indicate by written
notice to the other parties. Each notice, demand, request or
communication which shall be given or made in the manner described
<PAGE>
above shall be deemed sufficiently given or made for all purposes at
such time as it delivered to the addressee (with the return receipt,
the delivery receipt or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.
7. Benefit and Assignment. This Escrow Agreement shall
be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns as permitted hereunder.
No person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision in this Escrow
Agreement against any of the parties hereto, and the covenants and
agreements set forth in this Escrow Agreement shall be solely for
the benefit of, and shall be enforceable only by, the parties hereto
or their respective successors and assigns this Escrow Agreement or
any rights hereunder without the prior written consent of the
parties hereto.
8. Entire Agreement; Amendment. This Escrow Agreement
contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written
agreements, commitments or understandings with respect to such
matters. This Escrow Agreement may not be changed orally, but only
by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought.
9. Headings. The headings of the sections and
subsections contained in this Escrow Agreement are inserted for
convenience only and do not form a part or affect the meaning,
construction or scope thereof.
10. Governing Law; Venue. This Escrow Agreement shall be
governed and constructed under and in accordance with the laws of
the State of California (but not including the conflicts of laws and
rules thereof). For purposes of any action or proceeding involving
this Escrow Agreement each of the parties to this Escrow Agreement
expressly submits to the jurisdiction of the federal and state
courts located in the State of California and consents to the
service of any process or paper by registered mail or by personal
service within or without the State of California in accordance with
applicable law, provided a reasonable time for appearance is allowed.
11. Signature in Counterparts. This Escrow Agreement may
be executed in separate counterparts, none of which need contain the
signature of all parties, each of which shall be deemed to be an
original and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this
Escrow Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto.
12. Attorney's Fees. Should any action be commenced
between the parties to this Agreement concerning the matters set
forth in this Agreement or the right and duties of either in
relation thereto, the prevailing party in such action shall be
entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its Attorney's Fees and Costs.
13. Fees and Expenses of Escrow Agent. Except as may
otherwise be provided herein, all fees of the Escrow Agent hereunder
shall be paid by JNE.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Escrow Agreement to be duly executed and delivered in its name and
on its behalf, all as of the date and year first above written.
JONES NAUGHTON ENTERTAINMENT, INC.
a Colorado corporation ("JNE")
By: /s/Joe Naughton
Joe Naughton, President
PURCHASER
By:/s/Michael Rost
MRC LEGAL SERVICES CORPORATION, a California corporation
dba The Law Offices of M. Richard Cutler, Esq. ("ESCROW AGENT")
By: /s/ M. Richard Cutler
M. Richard Cutler, President
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated November 17,
1997 by and among Jones Naughton Entertainment, Inc., a Colorado
corporation (hereinafter called "JNE") and Joe Lynde ("Purchaser").
W I T N E S S E T H
WHEREAS, JNE is the owner of certain shares of Series A
Convertible Preferred Stock (the "Preferred Stock") of AmeriNet
Financial Systems, Inc. ("AFSI") and desires to convert such
Preferred Stock into unrestricted shares of common stock and sell
38,889 shares of such unrestricted common stock (the "Shares") to
Purchaser on the terms and conditions set forth in this Stock
Purchase Agreement (hereinafter called "Agreement"); and
WHEREAS, Purchaser desires to acquire the Shares at $2.25 per
share for an aggregate of $87,500 pursuant to the terms and
conditions set forth in this Stock Purchase Agreement; and
WHEREAS, the Preferred Stock is presently held in escrow and
shall be released in accordance with the terms of that certain
Escrow Agreement dated as of February 12, 1997 (the "Shares
Escrow"); and
WHEREAS, the proceeds for the sale of the Shares shall be held
in escrow and released to JNE pursuant to the terms hereof and of
that certain Escrow Agreement of even date herewith (the "Proceeds
Escrow").
NOW THEREFORE, in consideration of the premises and
respective mutual agreements, covenants, representations and
warranties herein contained, it is agreed between the parties hereto
as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 Sale of the Shares. At the date of the signing of this
Agreement as provided in Section 3.1 hereto (the "Closing"), subject
to the terms and conditions herein set forth, and on the basis of
the representations, warranties and agreements herein contained, JNE
shall sell to Purchaser and Purchaser shall purchase from JNE, the
Shares.
1.2 Instruments of Conveyance and Transfer. At the Closing,
JNE shall instruct the Escrow Agent under the Shares Escrow to
deliver certificates of the Preferred Stock which are convertible
into the Shares to the transfer agent of JNE for transfer and
delivery to Purchaser, together with appropriate medallion
guaranteed stock powers, sufficient to convert the Preferred Stock
and transfer the Shares into Purchaser's name, in form and substance
satisfactory to Purchaser as shall be effective to vest in Purchaser
all right, title and interest in and to all of the Shares.
<PAGE>
JNE shall provide an opinion of its counsel with respect to the
transferability of the Preferred Stock convertible into the Shares
to Purchaser in accordance with the terms of the Shares Escrow and
applicable state and federal securities laws.
1.3 Consideration. On or before November 21, 1997, Purchaser
shall pay to the Escrow Agent by wire transfer (to the instructions
attached hereto as Exhibit A) under the Proceeds Escrow an aggregate
of $2.25 per share or an aggregate of $87,500. The Escrow Agent
under the Proceeds Escrow shall immediately disburse 5% of such
funds to JNE and shall retain the balance to be disbursed in
accordance with the terms of the Proceeds Escrow. The terms and
conditions of the Proceeds Escrow are incorporated herein by reference.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of JNE. To induce
Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, JNE represents and warrants, as of
the date hereof and as of the Closing, as follows:
2.1.1 Corporate Existence and Authority. JNE is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado. It has all requisite
corporate power, franchises, licenses, permits and authority to own
its properties and assets and to carry on its business as it has
been and is being conducted. It is in good standing in each state,
nation or other jurisdiction in each state, nation or other
jurisdiction wherein the character of the business transacted by it
makes such qualification necessary.
2.1.2 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which JNE is a party or
by which either of them or any of their properties are bound; (b)
result in the creation of any security interest, lien, encumbrance,
adverse claim, proscription or restriction on any property or asset
(whether real, personal, mixed, tangible or intangible), right,
contract, agreement or business of JNE; (c) violate any law, rule or
regulation of any federal or state regulatory agency; or (d) permit
any federal or state regulatory agency to impose any restrictions or
limitations of any nature on JNE or any of its actions.
2.2 Representations and Warranties of Purchaser. To
induce JNE to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents and warrants,
as of the date hereof and as of the Closing, as follows:
<PAGE>
2.2.1 Authority of Purchaser. Purchaser has all requisite
power, corporate or otherwise, to enter into this Agreement and to
consummate the transactions contemplated hereunder.
2.2.2 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which Purchaser is a
party or by which it or any of its properties are bound; (b) result
in the creation of any security interest, lien, encumbrance, adverse
claim, proscription or restriction on any property or asset (whether
real, personal, mixed, tangible or intangible), right, contract,
agreement or business of Purchaser; (c) violate any law, rule or
regulation of any federal or state regulatory agency; or (d) permit
any federal or state regulatory agency to impose any restrictions or
limitations of any nature on Purchaser or any of its actions.
ARTICLE 3
CLOSING AND DELIVERY OF DOCUMENTS
3.1 Closing. The Closing shall be deemed to have occurred as
of the date of signing of this Agreement. Subsequent to the
signing, the following shall occur as a single integrated transaction:
3.2 Delivery by JNE:
(a) JNE shall instruct the Escrow Agent for the Shares Escrow
to immediately deliver to the transfer agent of JNE for immediate
transfer to Purchaser the stock certificates representing the
Preferred Stock convertible into the Shares and all instruments of
conveyance and transfer required by Section 1.1.
(b) JNE shall deliver to the transfer agent and the Purchaser
the opinion of its counsel as set forth in Section 1.2 hereof.
(c) JNE shall deliver, or cause to be delivered, to Purchaser
such instruments, documents and certificates as are required to be
delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
<PAGE>
3.3 Delivery by Purchaser:
(a) Purchaser shall deliver, or cause to be delivered, to the
Escrow Agent for the Proceeds Escrow the Consideration as required
by Section 1.3.
(b) Purchaser shall deliver, or cause to be delivered, to JNE
such instruments, documents and certificates as are required to be
delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
ARTICLE 4
TERMINATION, AMENDMENT AND WAIVER
4.1 Termination. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned
at any time prior to the Closing by the mutual consent of all of the
parties;
4.2 Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be
waived, but only by a written instrument signed by the party
entitled to the benefits thereof. The failure or delay of any party
at any time or times to require performance of any provision hereof
or to exercise its rights with respect to any provision hereof shall
in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant,
representation or warranty contained in this Agreement, in any one
or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such condition or breach or waiver of
any other condition or of the breach of any other term, provision,
covenant, representation or warranty. No modification or amendment
of this Agreement shall be valid and binding unless it be in writing
and signed by all parties hereto.
ARTICLE 5
MISCELLANEOUS
5.1 Expenses. Except as otherwise specifically provided
for herein, whether or not the transactions contemplated hereby are
consummated, each of the parties hereto shall bear all taxes of any
nature (including, without limitation, income, franchise, transfer
and sales taxes) and all fees and expenses relating to or arising
from its compliance with the various provisions of this Agreement
and such party's covenants to be performed hereunder, and except as
otherwise specifically provided for herein, each of the parties
hereto agrees to pay all of its own expenses (including, without
limitation, attorneys and accountants' fees and printing expenses)
incurred in connection with this Agreement, the transactions
contemplated hereby, the negotiations leading to the same and the
preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior
to Closing.
<PAGE>
5.2 Notices. Any notice, request, instruction or other
document required by the terms of this Agreement, or deemed by any
of the parties hereto to be desirable, to be given to any other
party hereto shall be in writing and shall be given by prepaid
telegram or delivered or mailed by registered or certified mail,
postage prepaid, with return receipt requested, to the following
addresses:
TO JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Facsimile No.: 714-994-3242
with a copy to:
Law offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
TO PURCHASER:
Joseph Lynde
Lynde Consulting
7863 Girard Avenue, Suite 310
La Jolla, CA 92037
Facsimile No.: (619) 551-9832
The persons and addresses set forth above may be changed from
time to time by a notice sent as aforesaid. If notice is given by
delivery in accordance with the provisions of this Section, said
notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given forty-eight (48) hours after deposit thereof in the United
States mail. If notice is given by telegraph in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given at the time that the telegraphic agency shall confirm delivery
thereof to the addressee.
5.3 Entire Agreement. This Agreement, together with the
Schedule and exhibits hereto, sets forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby, and supersedes all prior agreements,
arrangements and understandings related to the subject matter
hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written
or oral, express or implied, whether by statute or otherwise, has
been made by any party hereto which is not embodied in this
Agreement, or in the Schedule 1 or exhibits hereto or the written
statements, certificates, or other documents delivered pursuant
hereto or in connection with the transactions contemplated hereby,
and no party
<PAGE>
hereto shall be bound by or liable for any alleged
understanding, promise, inducement, statement, representation,
warranty, covenant or condition not so set forth.
5.4 Survival of Representations. All statements of fact
(including financial statements) contained in the Schedule, the
exhibits, the certificates or any other instrument delivered by or
on behalf of the parties hereto, or in connection with the
transactions contemplated hereby, shall be deemed representations
and warranties by the respective party hereunder. All
representation, warranties agreements and covenants hereunder shall
survive the Closing and remain effective regardless of any
investigation or audit at any time made by or on behalf of the
parties or of any information a party may have in respect thereto.
Consummation of the transactions contemplated hereby shall not be
deemed or construed to be a waiver of any right or remedy possessed
by any party hereto, notwithstanding that such party knew or should
have known at the time of Closing that such right or remedy existed.
5.5 Remedies Cumulative. No remedy herein conferred upon
Purchaser is intended to be exclusive of any other remedy and each
and every such remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise.
5.6 Execution of Additional Documents. Each party hereto
shall make, execute, acknowledge and deliver such other instruments
and documents, and take all such other actions as may be reasonably
required in order to effectuate the purposes of this Agreement and
to consummate the transactions contemplated hereby.
5.7 Finders' and Related Fees. Each of the parties
hereto is responsible for, and shall indemnify the other against,
any claim by any third party to a fee, commission, bonus or other
remuneration arising by reason of any services alleged to have been
rendered to or at the instance of said party to this Agreement with
respect to this Agreement or to any of the transactions contemplated
hereby.
5.8 Governing Law. This Agreement has been negotiated
and executed in the State of California and shall be construed and
enforced in accordance with the laws of such state.
5.9 Forum. Each of the parties hereto agrees that any
action or suit which may be brought by any party hereto against any
other party hereto in connection with this Agreement or the
transactions contemplated hereby may be brought only in a federal or
state court in Orange County, California.
5.10 Binding Effect and Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and
their respective heirs, executors, administrators, legal
representatives and assigns.
5.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. In
<PAGE>
making proof of this Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the date first written hereinabove.
JONES NAUGHTON ENTERTAINMENT, INC.
By: /s/ Joseph Naughton
Joseph Naughton, Chief Executive Officer
PURCHASER
By: /s/Joe Lynde
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is entered
into as of this 17th day of November 1997 between JONES NAUGHTON
ENTERTAINMENT, INC., a Colorado corporation ("JNE"), Joseph Lynde
("Purchaser") and MRC LEGAL SERVICES CORPORATION dba the Law offices
of M. Richard Cutler, Esq., as escrow agent (the "Escrow Agent").
R E C I T A L S
A. As of October 2, 1996 JNE, AFSI, ANFS, Inc. a
Delaware corporation ("ANFS") and Real Estate Television Network,
Inc., a Nevada corporation ("RETN") entered into an Agreement and
Plan of Reorganization (the "Agreement") providing for the
acquisition of RETN by AFSI through its wholly-owned subsidiary, ANFS.
B. In connection with the transaction, AFSI issued to
JNE an aggregate of 1,000,000 shares of AFSI Series A Preferred
Stock (the "AFSI Stock"), which have been subsequently been reduced
to 400,000 shares as a result of a reverse stock split. All of the
AFSI Stock is and has been held by the Escrow Agent pursuant to the
terms of an Escrow Agreement dated as of February 12, 1997.
C. In accordance with the terms of that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase
Agreements"), JNE has agreed to sell to Purchaser 38,889 shares (the
"Shares") of unrestricted common stock upon the conversion of
certain of the shares of AFSI Stock.
D. The parties hereto desire and the Escrow Agent has
agreed to hold the proceeds from the sale of the Shares (the "Cash
Consideration") and subsequently release such proceeds to JNE upon
the occurrence of certain events as set forth in this Escrow Agreement.
E. Escrow Agent has agreed to act as the escrow agent
hereunder, in accordance with the terms and conditions set forth in
this Escrow Agreement.
NOW THEREFORE, for and in consideration of the foregoing and
of the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1. APPOINTMENT OF ESCROW AGENT. JNE and Purchaser
(collectively, the "Parties") hereby mutually appoint and designate
the Escrow Agent to receive, hold and release, as escrow agent, the
Cash Consideration, and the Escrow Agent hereby accepts such
appointment and designation.
2. ESCROW DELIVERY. Upon closing of the transaction for
the sale of the Shares as set forth in the Stock Purchase Agreement,
Purchaser shall deliver the Cash Consideration to the Escrow Agent.
3. CONDITIONS OF ESCROW.
<PAGE>
3.1 The Escrow Deposit. Escrow Agent shall hold and
release the Cash Consideration as follows:
a. Upon delivery of the Cash Consideration, the Escrow Agent shall
immediately release 5% of the Cash Consideration to JNE;
b. From the date of Closing until the Share Unrestricted Date
(defined below), the Escrow Agent may release up to an additional 5%
of the Cash Consideration at the direction and request of JNE to
unrelated third parties for the purpose of completing the conversion
of the Preferred Stock to common stock of AFSI, the removal of any
restrictions on the transfer of such shares and any related actions
or other matters required to undertake the transactions contemplated
by the Stock Purchase Agreement (the "Unrestricted Share Reserve");
c. Upon the date that the Purchaser receives the Shares without
restrictive legend (the "Share Unrestricted Date"), the Escrow Agent
shall release the balance of all Cash Consideration then in Escrow
to JNE (including, without limitation, any balance left of the
Unrestricted Share Reserve");
d. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to joint written
instructions executed by JNE and Purchaser;
e. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to any "final order" of a
court of competent jurisdiction, any such order being deemed to be
"final" if (i) such order has not been reserved, stayed, enjoined,
set aside, annulled or suspended, (ii) no request for a stay,
suspension or an injunction, petition for reconsideration or appeal,
or sua sponte action with comparable effect is pending with respect
to the order, and (iii) the time for filing any such request,
petition or appeal or further taking of any such sua sponte action
has expired; or
f. The Escrow Agent shall release the balance of the Cash
Consideration (less the full Unrestricted Share Reserve) upon
written notice by Purchaser if the Share Unrestricted Date has not
occurred on or before the later of March 31, 1998 or the date of
such notice by Purchaser.
g. Conflicting Instructions. If a bona fide controversy arises
between the Parties concerning the release of the Cash
Consideration, the Escrow Agent may submit such controversy for
resolution by joint written instructions of the parties or by order
of a court of competent jurisdiction. If a suit is commenced
against the Escrow Agent, it may answer by way of interpleader and
name JNE and Purchaser as additional parties to such action, and the
Escrow Agent may tender the Cash Consideration into such court for
determination of the respective rights, titles and interests of the
Parties. Upon such tender, the Escrow Agent shall be entitled to
receive from the Parties its reasonable attorneys' fees and expenses
incurred in connection with said interpleader
<PAGE>
action or in any related action or suit. As between JNE and Purchaser,
such fees, expenses and other sums shall be paid by the party which fails
to prevail in the proceedings brought to determine the appropriate
distribution of the Cash Consideration. If and when the Escrow Agent
shall so interplead such Parties, or either of them, and deliver the
Cash Consideration to the clerk of such court, all of its duties
hereunder shall cease, and it shall have no further obligation in
this regard. Nothing herein shall prejudice any right or remedy of
the Escrow Agent.
4. CONCERNING ESCROW AGENT
4.1 Duties. Escrow Agent undertakes to perform all
duties which are expressly set forth herein; provided, however, that
the Escrow Agent shall not be required to make or be liable in any
manner for its failure to make any determination under the Agreement
or any other agreement, including whether any of JNE or the
Purchaser is entitled to delivery of the Cash Consideration under
the Agreement.
4.2 Indemnification.
a. Escrow Agent may rely upon and shall be protected in acting or
refraining from acting upon any written notice, instructions or
request furnished to it hereunder and reasonably believed by it to
be genuine and authorized.
b. Escrow Agent shall not be liable for any action taken by it in
good faith and without gross negligence or wilful misconduct, and
believed by it to be authorized or within the rights or powers
conferred upon it by this Escrow Agreement, and may consult with
counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such
counsel.
c. JNE and Purchaser hereby jointly and severally agree to
indemnify the Escrow Agent for, and hold the Escrow Agent harmless
against, any loss, liability or expense incurred without gross
negligence or wilful misconduct or bad faith on the part of the
Escrow Agent, arising out of or in connection with the Escrow
Agent's entering into this Escrow Agreement and carrying out the
Escrow Agent's duties hereunder, including, without limitation,
costs and expenses of defending the Escrow Agent against any claim
or liability with respect thereto.
d. Escrow Agent shall have no implied obligations or
responsibilities hereunder, nor shall it have any obligation or
responsibility to collect funds or seek the deposit of money or
property.
4.3 Other Matters. Escrow Agent (and any successor
escrow agent or agents) reserves the right to resign as the Escrow
Agent at any time, provided fifteen (15) days' prior written notice
is given to the other parties hereto, and provided further that a
mutually acceptable successor escrow agent(s) agrees in writing to
serve as escrow agent hereunder within such fifteen (15)-day
<PAGE>
period. The Escrow Agent may petition any court in the State of California
having jurisdiction to designate a successor Escrow Agent. The
resignation of the Escrow Agent (and any successor escrow agent or
agents) shall be effective only upon delivery of the Cash
Consideration then in Escrow to the successor escrow agent(s). The
Parties reserve the right to jointly remove the Escrow Agent at any
time, provided fifteen (15) days' prior written notice is given to
the Escrow Agent. In the event of litigation or dispute by the
Parties in which the performance of the duties of the Escrow Agent
is at issue, the Escrow Agent shall take no action until such action
is agreed in writing by the Parties, or until receipt of any final
order by a court of competent jurisdiction directing the Escrow
Agent to take such action.
5. TERMINATION. This Escrow Agreement shall be
terminated upon the release of the Cash Consideration in accordance
with the terms and conditions hereof, or otherwise by written mutual
consent signed by all parties hereto.
6. NOTICE. All notices, demands, requests, or other
communications which may be or are required to be given, served or
sent by any party to any other party pursuant to this Escrow
Agreement shall be in writing and shall be hand delivered (including
delivery by courier) or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
IF TO JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Attn: Joe Naughton, President
Facsimile No.: 714-994-3242
IF TO PURCHASER:
Joseph Lynde
Lynde Consulting
7863 Girard Avenue, Suite 310
La Jolla, CA 92037
Facsimile No.: (619) 551-9832
IF TO THE ESCROW AGENT:
Law Offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
<PAGE>
or such other address as the addressee may indicate by written
notice to the other parties. Each notice, demand, request or
communication which shall be given or made in the manner described
above shall be deemed sufficiently given or made for all purposes at
such time as it delivered to the addressee (with the return receipt,
the delivery receipt or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.
7. BENEFIT AND ASSIGNMENT. This Escrow Agreement shall
be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns as permitted hereunder.
No person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision in this Escrow
Agreement against any of the parties hereto, and the covenants and
agreements set forth in this Escrow Agreement shall be solely for
the benefit of, and shall be enforceable only by, the parties hereto
or their respective successors and assigns this Escrow Agreement or
any rights hereunder without the prior written consent of the
parties hereto.
8. ENTIRE AGREEMENT; AMENDMENT. This Escrow Agreement
contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written
agreements, commitments or understandings with respect to such
matters. This Escrow Agreement may not be changed orally, but only
by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought.
9. HEADINGS. The headings of the sections and
subsections contained in this Escrow Agreement are inserted for
convenience only and do not form a part or affect the meaning,
construction or scope thereof.
10. GOVERNING LAW; VENUE. This Escrow Agreement shall be
governed and constructed under and in accordance with the laws of
the State of California (but not including the conflicts of laws and
rules thereof). For purposes of any action or proceeding involving
this Escrow Agreement each of the parties to this Escrow Agreement
expressly submits to the jurisdiction of the federal and state
courts located in the State of California and consents to the
service of any process or paper by registered mail or by personal
service within or without the State of California in accordance with
applicable law, provided a reasonable time for appearance is allowed.
11. SIGNATURE IN COUNTERPARTS. This Escrow Agreement may
be executed in separate counterparts, none of which need contain the
signature of all parties, each of which shall be deemed to be an
original and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this
Escrow Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto.
12. ATTORNEY'S FEES. Should any action be commenced
between the parties to this Agreement concerning the matters set
forth in this Agreement or the right and duties of either in
relation thereto, the prevailing party in such action shall be
entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its Attorney's Fees and Costs.
<PAGE>
13. FEES AND EXPENSES OF ESCROW AGENT. Except as may
otherwise be provided herein, all fees of the Escrow Agent hereunder
shall be paid by JNE.
IN WITNESS WHEREOF, each of the parties has caused this
Escrow Agreement to be duly executed and delivered in its name and
on its behalf, all as of the date and year first above written.
JONES NAUGHTON ENTERTAINMENT, INC.
a Colorado corporation ("JNE")
By: /s/ Joe Naughton
Joe Naughton, President
PURCHASER
By:/s/Joseph Lynde
MRC LEGAL SERVICES CORPORATION, a California corporation
dba The Law Offices of M. Richard Cutler, Esq. ("ESCROW AGENT")
By: /s/ M. Richard Cutler
M. Richard Cutler, President
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated November 17,
1997 by and among Jones Naughton Entertainment, Inc., a Colorado
corporation (hereinafter called "JNE") and David Evans ("Purchaser").
W I T N E S S E T H
WHEREAS, JNE is the owner of certain shares of Series A
Convertible Preferred Stock (the "Preferred Stock") of AmeriNet
Financial Systems, Inc. ("AFSI") and desires to convert such
Preferred Stock into unrestricted shares of common stock and sell
22,223 shares of such unrestricted common stock (the "Shares") to
Purchaser on the terms and conditions set forth in this Stock
Purchase Agreement (hereinafter called "Agreement"); and
WHEREAS, Purchaser desires to acquire the Shares at $2.25 per
share for an aggregate of $50,000 pursuant to the terms and
conditions set forth in this Stock Purchase Agreement; and
WHEREAS, the Preferred Stock is presently held in escrow and
shall be released in accordance with the terms of that certain
Escrow Agreement dated as of February 12, 1997 (the "Shares
Escrow"); and
WHEREAS, the proceeds for the sale of the Shares shall be held
in escrow and released to JNE pursuant to the terms hereof and of
that certain Escrow Agreement of even date herewith (the "Proceeds
Escrow").
NOW THEREFORE, in consideration of the premises and
respective mutual agreements, covenants, representations and
warranties herein contained, it is agreed between the parties hereto
as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 Sale of the Shares. At the date of the signing of this
Agreement as provided in Section 3.1 hereto (the "Closing"), subject
to the terms and conditions herein set forth, and on the basis of
the representations, warranties and agreements herein contained, JNE
shall sell to Purchaser and Purchaser shall purchase from JNE, the
Shares.
1.2 Instruments of Conveyance and Transfer. At the Closing,
JNE shall instruct the Escrow Agent under the Shares Escrow to
deliver certificates of the Preferred Stock which are convertible
into the Shares to the transfer agent of JNE for transfer and
delivery to Purchaser, together with appropriate medallion
guaranteed stock powers, sufficient to convert the Preferred Stock
and transfer the Shares into Purchaser's name, in form and substance
satisfactory to Purchaser as shall be effective to vest in Purchaser
all right, title and interest in and to all of the Shares. JNE
<PAGE>
shall provide an opinion of its counsel with respect to the
transferability of the Preferred Stock convertible into the Shares
to Purchaser in accordance with the terms of the Shares Escrow and
applicable state and federal securities laws.
1.3 Consideration. On or before November 21, 1997, Purchaser
shall pay to the Escrow Agent by wire transfer (to the instructions
attached hereto as Exhibit A) under the Proceeds Escrow an aggregate
of $2.25 per share or an aggregate of $50,000.00. The Escrow Agent
under the Proceeds Escrow shall immediately disburse 5% of such
funds to JNE and shall retain the balance to be disbursed in
accordance with the terms of the Proceeds Escrow. The terms and
conditions of the Proceeds Escrow are incorporated herein by
reference. In the event the Consideration is returned to Purchaser
in accordance with Section 3(f) of the Proceeds Escrow, this Stock
Purchase Agreement shall thereupon cease and Purchaser shall no
longer be entitled to receipt of the Shares.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of JNE. To induce
Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, JNE represents and warrants, as of
the date hereof and as of the Closing, as follows:
2.1.1 Corporate Existence and Authority. JNE is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado. It has all requisite
corporate power, franchises, licenses, permits and authority to own
its properties and assets and to carry on its business as it has
been and is being conducted. It is in good standing in each state,
nation or other jurisdiction in each state, nation or other
jurisdiction wherein the character of the business transacted by it
makes such qualification necessary.
2.1.2 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which JNE is a party or
by which either of them or any of their properties are bound; (b)
result in the creation of any security interest, lien, encumbrance,
adverse claim, proscription or restriction on any property or asset
(whether real, personal, mixed, tangible or intangible), right,
contract, agreement or business of JNE; (c) violate any law, rule or
regulation of any federal or state regulatory agency; or (d) permit
any federal or state regulatory agency to impose any restrictions or
limitations of any nature on JNE or any of its actions.
2.2 Representations and Warranties of Purchaser. To
induce JNE to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents and warrants,
as of the date hereof and as of the Closing, as follows:
<PAGE>
2.2.1 Authority of Purchaser. Purchaser has all requisite
power, corporate or otherwise, to enter into this Agreement and to
consummate the transactions contemplated hereunder.
2.2.2 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which Purchaser is a
party or by which it or any of its properties are bound; (b) result
in the creation of any security interest, lien, encumbrance, adverse
claim, proscription or restriction on any property or asset (whether
real, personal, mixed, tangible or intangible), right, contract,
agreement or business of Purchaser; (c) violate any law, rule or
regulation of any federal or state regulatory agency; or (d) permit
any federal or state regulatory agency to impose any restrictions or
limitations of any nature on Purchaser or any of its actions.
ARTICLE 3
CLOSING AND DELIVERY OF DOCUMENTS
3.1 Closing. The Closing shall be deemed to have occurred as
of the date of signing of this Agreement. Subsequent to the
signing, the following shall occur as a single integrated transaction:
3.2 Delivery by JNE:
(a) JNE shall instruct the Escrow Agent for the Shares Escrow
to immediately deliver to the transfer agent of JNE for immediate
transfer to Purchaser the stock certificates representing the
Preferred Stock convertible into the Shares and all instruments of
conveyance and transfer required by Section 1.1.
(b) JNE shall deliver to the transfer agent and the Purchaser
the opinion of its counsel as set forth in Section 1.2 hereof.
(c) JNE shall deliver, or cause to be delivered, to Purchaser
such instruments, documents and certificates as are required to be
delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
3.3 Delivery by Purchaser:
(a) Purchaser shall deliver, or cause to be delivered, to the
Escrow Agent for the Proceeds Escrow the Consideration as required
by Section 1.3.
<PAGE>
(b) Purchaser shall deliver, or cause to be delivered, to JNE
such instruments, documents and certificates as are required to be
delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
ARTICLE 4
TERMINATION, AMENDMENT AND WAIVER
4.1 Termination. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned
at any time prior to the Closing by the mutual consent of all of the
parties;
4.2 Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be
waived, but only by a written instrument signed by the party
entitled to the benefits thereof. The failure or delay of any party
at any time or times to require performance of any provision hereof
or to exercise its rights with respect to any provision hereof shall
in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant,
representation or warranty contained in this Agreement, in any one
or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such condition or breach or waiver of
any other condition or of the breach of any other term, provision,
covenant, representation or warranty. No modification or amendment
of this Agreement shall be valid and binding unless it be in writing
and signed by all parties hereto.
ARTICLE 5
MISCELLANEOUS
5.1 Expenses. Except as otherwise specifically provided
for herein, whether or not the transactions contemplated hereby are
consummated, each of the parties hereto shall bear all taxes of any
nature (including, without limitation, income, franchise, transfer
and sales taxes) and all fees and expenses relating to or arising
from its compliance with the various provisions of this Agreement
and such party's covenants to be performed hereunder, and except as
otherwise specifically provided for herein, each of the parties
hereto agrees to pay all of its own expenses (including, without
limitation, attorneys and accountants' fees and printing expenses)
incurred in connection with this Agreement, the transactions
contemplated hereby, the negotiations leading to the same and the
preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior
to Closing.
5.2 Notices. Any notice, request, instruction or other
document required by the terms of this Agreement, or deemed by any
of the parties hereto to be desirable, to be given to any other
party hereto shall be in writing and shall be given by prepaid
telegram or delivered or mailed by registered or certified mail,
postage prepaid, with return receipt requested, to the following
addresses:
TO JNE:
<PAGE>
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Facsimile No.: 714-994-3242
with a copy to:
Law offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
TO PURCHASER:
David Evans
c/o Snell & Wilmer
111 East Broadway, Suite 900
Salt Lake City, Utah 84111-1004
Facsimile No.: (801) 237-1950
The persons and addresses set forth above may be changed from
time to time by a notice sent as aforesaid. If notice is given by
delivery in accordance with the provisions of this Section, said
notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given forty-eight (48) hours after deposit thereof in the United
States mail. If notice is given by telegraph in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given at the time that the telegraphic agency shall confirm delivery
thereof to the addressee.
5.3 Entire Agreement. This Agreement, together with the
Schedule and exhibits hereto, sets forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby, and supersedes all prior agreements,
arrangements and understandings related to the subject matter
hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written
or oral, express or implied, whether by statute or otherwise, has
been made by any party hereto which is not embodied in this
Agreement, or in the Schedule 1 or exhibits hereto or the written
statements, certificates, or other documents delivered pursuant
hereto or in connection with the transactions contemplated hereby,
and no party hereto shall be bound by or liable for any alleged
understanding, promise, inducement, statement, representation,
warranty, covenant or condition not so set forth.
5.4 Survival of Representations. All statements of fact
(including financial statements) contained in the Schedule, the
exhibits, the certificates or any other instrument delivered by or
on behalf of the parties hereto, or in connection with the
transactions contemplated hereby, shall be deemed representations
and warranties by the respective party hereunder. All
representation, warranties agreements and covenants hereunder shall
survive the Closing and remain effective
<PAGE>
regardless of any investigation or audit at any time made by or on
behalf of the parties or of any information a party may have in respect
thereto. Consummation of the transactions contemplated hereby shall not be
deemed or construed to be a waiver of any right or remedy possessed
by any party hereto, notwithstanding that such party knew or should
have known at the time of Closing that such right or remedy existed.
5.5 Remedies Cumulative. No remedy herein conferred upon
Purchaser is intended to be exclusive of any other remedy and each
and every such remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise.
5.6 Execution of Additional Documents. Each party hereto
shall make, execute, acknowledge and deliver such other instruments
and documents, and take all such other actions as may be reasonably
required in order to effectuate the purposes of this Agreement and
to consummate the transactions contemplated hereby.
5.7 Finders' and Related Fees. Each of the parties
hereto is responsible for, and shall indemnify the other against,
any claim by any third party to a fee, commission, bonus or other
remuneration arising by reason of any services alleged to have been
rendered to or at the instance of said party to this Agreement with
respect to this Agreement or to any of the transactions contemplated
hereby.
5.8 Governing Law. This Agreement has been negotiated
and executed in the State of California and shall be construed and
enforced in accordance with the laws of such state.
5.9 Forum. Each of the parties hereto agrees that any
action or suit which may be brought by any party hereto against any
other party hereto in connection with this Agreement or the
transactions contemplated hereby may be brought only in a federal or
state court in Orange County, California.
5.10 Binding Effect and Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and
their respective heirs, executors, administrators, legal
representatives and assigns.
5.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. In
making proof of this Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the date first written hereinabove.
JONES NAUGHTON ENTERTAINMENT, INC.
By: /s/ Joseph Naughton
Joseph Naughton, Chief Executive Officer
PURCHASER
By:/s/David Evans
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is entered
into as of this 17th day of November 1997 between JONES NAUGHTON
ENTERTAINMENT, INC., a Colorado corporation ("JNE"), David Evans
("Purchaser") and MRC LEGAL SERVICES CORPORATION dba the Law offices
of M. Richard Cutler, Esq., as escrow agent (the "Escrow Agent").
R E C I T A L S
A. As of October 2, 1996 JNE, AFSI, ANFS, Inc. a
Delaware corporation ("ANFS") and Real Estate Television Network,
Inc., a Nevada corporation ("RETN") entered into an Agreement and
Plan of Reorganization (the "Agreement") providing for the
acquisition of RETN by AFSI through its wholly-owned subsidiary, ANFS.
B. In connection with the transaction, AFSI issued to
JNE an aggregate of 1,000,000 shares of AFSI Series A Preferred
Stock (the "AFSI Stock"), which have been subsequently been reduced
to 400,000 shares as a result of a reverse stock split. All of the
AFSI Stock is and has been held by the Escrow Agent pursuant to the
terms of an Escrow Agreement dated as of February 12, 1997.
C. In accordance with the terms of that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase
Agreements"), JNE has agreed to sell to Purchaser 22,223 shares (the
"Shares") of unrestricted common stock upon the conversion of
certain of the shares of AFSI Stock.
D. The parties hereto desire and the Escrow Agent has
agreed to hold the proceeds from the sale of the Shares (the "Cash
Consideration") and subsequently release such proceeds to JNE upon
the occurrence of certain events as set forth in this Escrow Agreement.
E. Escrow Agent has agreed to act as the escrow agent
hereunder, in accordance with the terms and conditions set forth in
this Escrow Agreement.
NOW THEREFORE, for and in consideration of the foregoing and
of the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1. APPOINTMENT OF ESCROW AGENT. JNE and Purchaser
(collectively, the "Parties") hereby mutually appoint and designate
the Escrow Agent to receive, hold and release, as escrow agent, the
Cash Consideration, and the Escrow Agent hereby accepts such
appointment and designation.
2. ESCROW DELIVERY. Upon closing of the transaction for
the sale of the Shares as set forth in the Stock Purchase Agreement,
Purchaser shall deliver the Cash Consideration to the Escrow Agent.
3. CONDITIONS OF ESCROW.
<PAGE>
3.1 The Escrow Deposit. Escrow Agent shall hold and
release the Cash Consideration as follows:
a. From the date of Closing until the Share Unrestricted Date
(defined below), the Escrow Agent may release up to an additional 5%
of the Cash Consideration at the direction and request of JNE to
unrelated third parties for the purpose of completing the conversion
of the Preferred Stock to common stock of AFSI, the removal of any
restrictions on the transfer of such shares and any related actions
or other matters required to undertake the transactions contemplated
by the Stock Purchase Agreement (the "Unrestricted Share Reserve");
b. Upon the date that the Purchaser receives the Shares without
restrictive legend (the "Share Unrestricted Date"), the Escrow Agent
shall release the balance of all Cash Consideration then in Escrow
to JNE (including, without limitation, any balance left of the
Unrestricted Share Reserve");
c. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to joint written
instructions executed by JNE and Purchaser;
d. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to any "final order" of a
court of competent jurisdiction, any such order being deemed to be
"final" if (i) such order has not been reserved, stayed, enjoined,
set aside, annulled or suspended, (ii) no request for a stay,
suspension or an injunction, petition for reconsideration or appeal,
or sua sponte action with comparable effect is pending with respect
to the order, and (iii) the time for filing any such request,
petition or appeal or further taking of any such sua sponte action
has expired; or
e. The Escrow Agent shall release the balance of the Cash
Consideration (less the full Unrestricted Share Reserve) upon
written notice by Purchaser if the Share Unrestricted Date has not
occurred on or before the later of March 31, 1998 or the date of
such notice by Purchaser. Upon such event, the Escrow Agent shall
also notify Purchaser and JNE that the Stock Purchase Agreement has
terminated and that Purchaser is no longer entitled to receipt of
the Shares.
f. Conflicting Instructions. If a bona fide controversy arises
between the Parties concerning the release of the Cash
Consideration, the Escrow Agent may submit such controversy for
resolution by joint written instructions of the parties or by order
of a court of competent jurisdiction. If a suit is commenced
against the Escrow Agent, it may answer by way of interpleader and
name JNE and Purchaser as additional parties to such action, and the
Escrow Agent may tender the Cash Consideration into such court for
determination of the respective rights, titles and interests of the
Parties. Upon such tender, the Escrow Agent shall be entitled to
receive from the Parties its reasonable attorneys' fees and expenses
incurred in connection with said interpleader action or in any
related action or suit. As between JNE and Purchaser, such fees,
expenses and other sums shall be paid by the party which fails to
prevail in the proceedings brought to determine the appropriate
distribution
<PAGE>
of the Cash Consideration. If and when the Escrow Agent
shall so interplead such Parties, or either of them, and deliver the
Cash Consideration to the clerk of such court, all of its duties
hereunder shall cease, and it shall have no further obligation in
this regard. Nothing herein shall prejudice any right or remedy of
the Escrow Agent.
4. CONCERNING ESCROW AGENT
4.1 Duties. Escrow Agent undertakes to perform all
duties which are expressly set forth herein; provided, however, that
the Escrow Agent shall not be required to make or be liable in any
manner for its failure to make any determination under the Agreement
or any other agreement, including whether any of JNE or the
Purchaser is entitled to delivery of the Cash Consideration under
the Agreement.
4.2 Indemnification.
a. Escrow Agent may rely upon and shall be protected in acting
or refraining from acting upon any written notice, instructions or
request furnished to it hereunder and reasonably believed by it to
be genuine and authorized.
b. Escrow Agent shall not be liable for any action taken by it
in good faith and without gross negligence or wilful misconduct, and
believed by it to be authorized or within the rights or powers
conferred upon it by this Escrow Agreement, and may consult with
counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such
counsel.
c. JNE and Purchaser hereby jointly and severally agree to
indemnify the Escrow Agent for, and hold the Escrow Agent harmless
against, any loss, liability or expense incurred without gross
negligence or wilful misconduct or bad faith on the part of the
Escrow Agent, arising out of or in connection with the Escrow
Agent's entering into this Escrow Agreement and carrying out the
Escrow Agent's duties hereunder, including, without limitation,
costs and expenses of defending the Escrow Agent against any claim
or liability with respect thereto.
d. Escrow Agent shall have no implied obligations or
responsibilities hereunder, nor shall it have any obligation or
responsibility to collect funds or seek the deposit of money or
property.
4.3 Other Matters. Escrow Agent (and any successor
escrow agent or agents) reserves the right to resign as the Escrow
Agent at any time, provided fifteen (15) days' prior written notice
is given to the other parties hereto, and provided further that a
mutually acceptable successor escrow agent(s) agrees in writing to
serve as escrow agent hereunder within such fifteen (15)-day period.
The Escrow Agent may petition any court in the State of California
having jurisdiction to designate a successor Escrow Agent. The
resignation of the Escrow Agent (and any successor escrow agent or
agents) shall be effective only upon delivery of the Cash
Consideration then in
<PAGE>
Escrow to the successor escrow agent(s). The Parties reserve the right
to jointly remove the Escrow Agent at any time, provided fifteen (15) days'
prior written notice is given to the Escrow Agent. In the event of
litigation or dispute by the Parties in which the performance of the duties
of the Escrow Agent is at issue, the Escrow Agent shall take no action
until such action is agreed in writing by the Parties, or until receipt of
any final order by a court of competent jurisdiction directing the Escrow
Agent to take such action.
5. TERMINATION. This Escrow Agreement shall be
terminated upon the release of the Cash Consideration in accordance
with the terms and conditions hereof, or otherwise by written mutual
consent signed by all parties hereto.
6. NOTICE. All notices, demands, requests, or other
communications which may be or are required to be given, served or
sent by any party to any other party pursuant to this Escrow
Agreement shall be in writing and shall be hand delivered (including
delivery by courier) or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
IF TO JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Attn: Joe Naughton, President
Facsimile No.: 714-994-3242
IF TO PURCHASER:
David Evans
c/o Snell & Wilmer
111 East Broadway, Suite 900
Salt Lake City, Utah 84111-1004
Facsimile No.: (801) 237-1950
IF TO THE ESCROW AGENT:
Law Offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
or such other address as the addressee may indicate by written
notice to the other parties. Each notice, demand, request or
communication which shall be given or made in the manner described
above shall be deemed sufficiently given or made for all purposes at
such time as it delivered to the addressee (with the return receipt,
the delivery receipt or the affidavit of messenger being deemed
<PAGE>
conclusive but not exclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.
7. BENEFIT AND ASSIGNMENT. This Escrow Agreement shall
be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns as permitted hereunder.
No person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision in this Escrow
Agreement against any of the parties hereto, and the covenants and
agreements set forth in this Escrow Agreement shall be solely for
the benefit of, and shall be enforceable only by, the parties hereto
or their respective successors and assigns this Escrow Agreement or
any rights hereunder without the prior written consent of the
parties hereto.
8. ENTIRE AGREEMENT; AMENDMENT. This Escrow Agreement
contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written
agreements, commitments or understandings with respect to such
matters. This Escrow Agreement may not be changed orally, but only
by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought.
9. HEADINGS. The headings of the sections and
subsections contained in this Escrow Agreement are inserted for
convenience only and do not form a part or affect the meaning,
construction or scope thereof.
10. GOVERNING LAW; VENUE. This Escrow Agreement shall be
governed and constructed under and in accordance with the laws of
the State of California (but not including the conflicts of laws and
rules thereof). For purposes of any action or proceeding involving
this Escrow Agreement each of the parties to this Escrow Agreement
expressly submits to the jurisdiction of the federal and state
courts located in the State of California and consents to the
service of any process or paper by registered mail or by personal
service within or without the State of California in accordance with
applicable law, provided a reasonable time for appearance is allowed.
11. SIGNATURE IN COUNTERPARTS. This Escrow Agreement may
be executed in separate counterparts, none of which need contain the
signature of all parties, each of which shall be deemed to be an
original and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this
Escrow Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto.
12. ATTORNEY'S FEES. Should any action be commenced
between the parties to this Agreement concerning the matters set
forth in this Agreement or the right and duties of either in
relation thereto, the prevailing party in such action shall be
entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its Attorney's Fees and Costs.
13. FEES AND EXPENSES OF ESCROW AGENT. Except as may
otherwise be provided herein, all fees of the Escrow Agent hereunder
shall be paid by JNE.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Escrow Agreement to be duly executed and delivered in its name and
on its behalf, all as of the date and year first above written.
JONES NAUGHTON ENTERTAINMENT, INC.
a Colorado corporation ("JNE")
By: /s/ Joe Naughton
Joe Naughton, President
PURCHASER
By: /s/David Evans
MRC LEGAL SERVICES CORPORATION, a California corporation
dba The Law Offices of M. Richard Cutler, Esq. ("ESCROW AGENT")
By: /s/ M. Richard Cutler
M. Richard Cutler, President
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated November 17,
1997 by and among Jones Naughton Entertainment, Inc., a Colorado
corporation (hereinafter called "JNE") and Patricia L. Schonebaum
IRA Account ("Purchaser").
W I T N E S S E T H
WHEREAS, JNE is the owner of certain shares of Series A
Convertible Preferred Stock (the "Preferred Stock") of AmeriNet
Financial Systems, Inc. ("AFSI") and desires to convert such
Preferred Stock into unrestricted shares of common stock and sell
25,300 shares of such unrestricted common stock (the "Shares") to
Purchaser on the terms and conditions set forth in this Stock
Purchase Agreement (hereinafter called "Agreement"); and
WHEREAS, Purchaser desires to acquire the Shares at $2.25 per
share for an aggregate of $56,925.00 pursuant to the terms and
conditions set forth in this Stock Purchase Agreement; and
WHEREAS, the Preferred Stock is presently held in escrow and
shall be released in accordance with the terms of that certain
Escrow Agreement dated as of February 12, 1997 (the "Shares
Escrow"); and
WHEREAS, the proceeds for the sale of the Shares shall be held
in escrow and released to JNE pursuant to the terms hereof and of
that certain Escrow Agreement of even date herewith (the "Proceeds
Escrow").
NOW THEREFORE, in consideration of the premises and
respective mutual agreements, covenants, representations and
warranties herein contained, it is agreed between the parties hereto
as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 Sale of the Shares. At the date of the signing of this
Agreement as provided in Section 3.1 hereto (the "Closing"), subject
to the terms and conditions herein set forth, and on the basis of
the representations, warranties and agreements herein contained, JNE
shall sell to Purchaser and Purchaser shall purchase from JNE, the
Shares.
1.2 Instruments of Conveyance and Transfer. At the Closing,
JNE shall instruct the Escrow Agent under the Shares Escrow to
deliver certificates of the Preferred Stock which are convertible
into the Shares to the transfer agent of JNE for transfer and
delivery to Purchaser, together with appropriate medallion
guaranteed stock powers, sufficient to convert the Preferred Stock
and transfer the Shares into Purchaser's name, in form and substance
satisfactory to Purchaser as shall be effective to vest in Purchaser
all right, title and interest in and to all of the Shares. JNE
<PAGE>
shall provide an opinion of its counsel with respect to the
transferability of the Preferred Stock convertible into the Shares
to Purchaser in accordance with the terms of the Shares Escrow and
applicable state and federal securities laws.
1.3 Consideration. On or before November 21, 1997, Purchaser
shall pay to the Escrow Agent by wire transfer (to the instructions
attached hereto as Exhibit A) under the Proceeds Escrow an aggregate
of $2.25 per share or an aggregate of $56,925.00. The Escrow Agent
under the Proceeds Escrow shall immediately disburse 5% of such
funds to JNE and shall retain the balance to be disbursed in
accordance with the terms of the Proceeds Escrow. The terms and
conditions of the Proceeds Escrow are incorporated herein by reference.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of JNE. To induce
Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, JNE represents and warrants, as of
the date hereof and as of the Closing, as follows:
2.1.1 Corporate Existence and Authority. JNE is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado. It has all requisite
corporate power, franchises, licenses, permits and authority to own
its properties and assets and to carry on its business as it has
been and is being conducted. It is in good standing in each state,
nation or other jurisdiction in each state, nation or other
jurisdiction wherein the character of the business transacted by it
makes such qualification necessary.
2.1.2 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which JNE is a party or
by which either of them or any of their properties are bound; (b)
result in the creation of any security interest, lien, encumbrance,
adverse claim, proscription or restriction on any property or asset
(whether real, personal, mixed, tangible or intangible), right,
contract, agreement or business of JNE; (c) violate any law, rule or
regulation of any federal or state regulatory agency; or (d) permit
any federal or state regulatory agency to impose any restrictions or
limitations of any nature on JNE or any of its actions.
2.2 Representations and Warranties of Purchaser. To
induce JNE to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents and warrants,
as of the date hereof and as of the Closing, as follows:
<PAGE>
2.2.1 Authority of Purchaser. Purchaser has all requisite
power, corporate or otherwise, to enter into this Agreement and to
consummate the transactions contemplated hereunder.
2.2.2 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which Purchaser is a
party or by which it or any of its properties are bound; (b) result
in the creation of any security interest, lien, encumbrance, adverse
claim, proscription or restriction on any property or asset (whether
real, personal, mixed, tangible or intangible), right, contract,
agreement or business of Purchaser; (c) violate any law, rule or
regulation of any federal or state regulatory agency; or (d) permit
any federal or state regulatory agency to impose any restrictions or
limitations of any nature on Purchaser or any of its actions.
ARTICLE 3
CLOSING AND DELIVERY OF DOCUMENTS
3.1 Closing. The Closing shall be deemed to have occurred as
of the date of signing of this Agreement. Subsequent to the
signing, the following shall occur as a single integrated transaction:
3.2 Delivery by JNE:
(a) JNE shall instruct the Escrow Agent for the Shares Escrow
to immediately deliver to the transfer agent of ANFS for immediate
transfer to Purchaser the stock certificates representing the
Preferred Stock convertible into the Shares and all instruments of
conveyance and transfer required by Section 1.1.
(b) JNE shall deliver to the transfer agent and the Purchaser
the opinion of its counsel as set forth in Section 1.2 hereof.
(c) JNE shall deliver, or cause to be delivered, to Purchaser
such instruments, documents and certificates as are required to be
delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
<PAGE>
3.3 Delivery by Purchaser:
(a) Purchaser shall deliver, or cause to be delivered, to the
Escrow Agent for the Proceeds Escrow the Consideration as required
by Section 1.3.
(b) Purchaser shall deliver, or cause to be delivered, to JNE
such instruments, documents and certificates as are required to be
delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
ARTICLE 4
TERMINATION, AMENDMENT AND WAIVER
4.1 Termination. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned
at any time prior to the Closing by the mutual consent of all of the
parties;
4.2 Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be
waived, but only by a written instrument signed by the party
entitled to the benefits thereof. The failure or delay of any party
at any time or times to require performance of any provision hereof
or to exercise its rights with respect to any provision hereof shall
in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant,
representation or warranty contained in this Agreement, in any one
or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such condition or breach or waiver of
any other condition or of the breach of any other term, provision,
covenant, representation or warranty. No modification or amendment
of this Agreement shall be valid and binding unless it be in writing
and signed by all parties hereto.
ARTICLE 5
MISCELLANEOUS
5.1 Expenses. Except as otherwise specifically provided
for herein, whether or not the transactions contemplated hereby are
consummated, each of the parties hereto shall bear all taxes of any
nature (including, without limitation, income, franchise, transfer
and sales taxes) and all fees and expenses relating to or arising
from its compliance with the various provisions of this Agreement
and such party's covenants to be performed hereunder, and except as
otherwise specifically provided for herein, each of the parties
hereto agrees to pay all of its own expenses (including, without
limitation, attorneys and accountants' fees and printing expenses)
incurred in connection with this Agreement, the transactions
contemplated hereby, the negotiations leading to the same and the
preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior
to Closing.
<PAGE>
5.2 Notices. Any notice, request, instruction or other
document required by the terms of this Agreement, or deemed by any
of the parties hereto to be desirable, to be given to any other
party hereto shall be in writing and shall be given by prepaid
telegram or delivered or mailed by registered or certified mail,
postage prepaid, with return receipt requested, to the following
addresses:
TO JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Facsimile No.: 714-994-3242
with a copy to:
Law offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
TO PURCHASER:
Patricia L. Schonebaum IRA Account c/o Jeff Stroud
Lumiere
12835 E. Arapahoe Road
Englewood, CO 80112
Facsimile No.: (303) 792-2420
The persons and addresses set forth above may be changed from
time to time by a notice sent as aforesaid. If notice is given by
delivery in accordance with the provisions of this Section, said
notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given forty-eight (48) hours after deposit thereof in the United
States mail. If notice is given by telegraph in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given at the time that the telegraphic agency shall confirm delivery
thereof to the addressee.
5.3 Entire Agreement. This Agreement, together with the
Schedule and exhibits hereto, sets forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby, and supersedes all prior agreements,
arrangements and understandings related to the subject matter
hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written
or oral, express or implied, whether by statute or otherwise, has
been made by any party hereto which is not embodied in this
Agreement, or in the Schedule 1 or exhibits hereto or the written
statements, certificates, or other documents delivered pursuant
hereto or in connection with the transactions contemplated hereby,
and no party
<PAGE>
hereto shall be bound by or liable for any alleged
understanding, promise, inducement, statement, representation,
warranty, covenant or condition not so set forth.
5.4 Survival of Representations. All statements of fact
(including financial statements) contained in the Schedule, the
exhibits, the certificates or any other instrument delivered by or
on behalf of the parties hereto, or in connection with the
transactions contemplated hereby, shall be deemed representations
and warranties by the respective party hereunder. All
representation, warranties agreements and covenants hereunder shall
survive the Closing and remain effective regardless of any
investigation or audit at any time made by or on behalf of the
parties or of any information a party may have in respect thereto.
Consummation of the transactions contemplated hereby shall not be
deemed or construed to be a waiver of any right or remedy possessed
by any party hereto, notwithstanding that such party knew or should
have known at the time of Closing that such right or remedy existed.
5.5 Remedies Cumulative. No remedy herein conferred upon
Purchaser is intended to be exclusive of any other remedy and each
and every such remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise.
5.6 Execution of Additional Documents. Each party hereto
shall make, execute, acknowledge and deliver such other instruments
and documents, and take all such other actions as may be reasonably
required in order to effectuate the purposes of this Agreement and
to consummate the transactions contemplated hereby.
5.7 Finders' and Related Fees. Each of the parties
hereto is responsible for, and shall indemnify the other against,
any claim by any third party to a fee, commission, bonus or other
remuneration arising by reason of any services alleged to have been
rendered to or at the instance of said party to this Agreement with
respect to this Agreement or to any of the transactions contemplated
hereby.
5.8 Governing Law. This Agreement has been negotiated
and executed in the State of California and shall be construed and
enforced in accordance with the laws of such state.
5.9 Forum. Each of the parties hereto agrees that any
action or suit which may be brought by any party hereto against any
other party hereto in connection with this Agreement or the
transactions contemplated hereby may be brought only in a federal or
state court in Orange County, California.
5.10 Binding Effect and Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and
their respective heirs, executors, administrators, legal
representatives and assigns.
5.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
<PAGE>
In making proof of this Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the date first written hereinabove.
JONES NAUGHTON ENTERTAINMENT, INC.
By: /s/ Joseph Naughton
Joseph Naughton, Chief Executive Officer
PURCHASER
By:/s/Patricia L. Schonebaum
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is entered
into as of this 17th day of November 1997 between JONES NAUGHTON
ENTERTAINMENT, INC., a Colorado corporation ("JNE"), Patricia L.
Schonebaum IRA Account ("Purchaser") and MRC LEGAL SERVICES
CORPORATION dba the Law offices of M. Richard Cutler, Esq., as
escrow agent (the "Escrow Agent").
R E C I T A L S
A. As of October 2, 1996 JNE, AFSI, ANFS, Inc. a
Delaware corporation ("ANFS") and Real Estate Television Network,
Inc., a Nevada corporation ("RETN") entered into an Agreement and
Plan of Reorganization (the "Agreement") providing for the
acquisition of RETN by AFSI through its wholly-owned subsidiary, ANFS.
B. In connection with the transaction, AFSI issued to
JNE an aggregate of 1,000,000 shares of AFSI Series A Preferred
Stock (the "AFSI Stock"), which have been subsequently been reduced
to 400,000 shares as a result of a reverse stock split. All of the
AFSI Stock is and has been held by the Escrow Agent pursuant to the
terms of an Escrow Agreement dated as of February 12, 1997.
C. In accordance with the terms of that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase
Agreements"), JNE has agreed to sell to Purchaser 25,300 shares (the
"Shares") of unrestricted common stock upon the conversion of
certain of the shares of AFSI Stock.
D. The parties hereto desire and the Escrow Agent has
agreed to hold the proceeds from the sale of the Shares (the "Cash
Consideration") and subsequently release such proceeds to JNE upon
the occurrence of certain events as set forth in this Escrow Agreement.
E. Escrow Agent has agreed to act as the escrow agent
hereunder, in accordance with the terms and conditions set forth in
this Escrow Agreement.
NOW THEREFORE, for and in consideration of the foregoing and
of the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1. APPOINTMENT OF ESCROW AGENT. JNE and Purchaser
(collectively, the "Parties") hereby mutually appoint and designate
the Escrow Agent to receive, hold and release, as escrow agent, the
Cash Consideration, and the Escrow Agent hereby accepts such
appointment and designation.
2. ESCROW DELIVERY. Upon closing of the transaction for
the sale of the Shares as set forth in the Stock Purchase Agreement,
Purchaser shall deliver the Cash Consideration to the Escrow Agent.
3. CONDITIONS OF ESCROW.
<PAGE>
3.1 The Escrow Deposit. Escrow Agent shall hold and
release the Cash Consideration as follows:
a. Upon delivery of the Cash Consideration, the Escrow Agent shall
immediately release 5% of the Cash Consideration to JNE;
b. From the date of Closing until the Share Unrestricted Date
(defined below), the Escrow Agent may release up to an additional 5%
of the Cash Consideration at the direction and request of JNE to
unrelated third parties for the purpose of completing the conversion
of the Preferred Stock to common stock of AFSI, the removal of any
restrictions on the transfer of such shares and any related actions
or other matters required to undertake the transactions contemplated
by the Stock Purchase Agreement (the "Unrestricted Share Reserve");
c. Upon the date that the Purchaser receives the Shares without
restrictive legend (the "Share Unrestricted Date"), the Escrow Agent
shall release the balance of all Cash Consideration then in Escrow
to JNE (including, without limitation, any balance left of the
Unrestricted Share Reserve");
d. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to joint written
instructions executed by JNE and Purchaser;
e. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to any "final order" of a
court of competent jurisdiction, any such order being deemed to be
"final" if (i) such order has not been reserved, stayed, enjoined,
set aside, annulled or suspended, (ii) no request for a stay,
suspension or an injunction, petition for reconsideration or appeal,
or sua sponte action with comparable effect is pending with respect
to the order, and (iii) the time for filing any such request,
petition or appeal or further taking of any such sua sponte action
has expired; or
f. The Escrow Agent shall release the balance of the Cash
Consideration (less the full Unrestricted Share Reserve) upon
written notice by Purchaser if the Share Unrestricted Date has not
occurred on or before the later of March 31, 1998 or the date of
such notice by Purchaser.
g. Conflicting Instructions. If a bona fide controversy arises
between the Parties concerning the release of the Cash
Consideration, the Escrow Agent may submit such controversy for
resolution by joint written instructions of the parties or by order
of a court of competent jurisdiction. If a suit is commenced
against the Escrow Agent, it may answer by way of interpleader
<PAGE>
and name JNE and Purchaser as additional parties to such action, and the
Escrow Agent may tender the Cash Consideration into such court for
determination of the respective rights, titles and interests of the
Parties. Upon such tender, the Escrow Agent shall be entitled to
receive from the Parties its reasonable attorneys' fees and expenses
incurred in connection with said interpleader action or in any
related action or suit. As between JNE and Purchaser, such fees,
expenses and other sums shall be paid by the party which fails to
prevail in the proceedings brought to determine the appropriate
distribution of the Cash Consideration. If and when the Escrow Agent
shall so interplead such Parties, or either of them, and deliver the
Cash Consideration to the clerk of such court, all of its duties
hereunder shall cease, and it shall have no further obligation in
this regard. Nothing herein shall prejudice any right or remedy of
the Escrow Agent.
4. CONCERNING ESCROW AGENT
4.1 Duties. Escrow Agent undertakes to perform all
duties which are expressly set forth herein; provided, however, that
the Escrow Agent shall not be required to make or be liable in any
manner for its failure to make any determination under the Agreement
or any other agreement, including whether any of JNE or the
Purchaser is entitled to delivery of the Cash Consideration under
the Agreement.
4.2 Indemnification.
a. Escrow Agent may rely upon and shall be protected in acting
or refraining from acting upon any written notice, instructions or
request furnished to it hereunder and reasonably believed by it to
be genuine and authorized.
b. Escrow Agent shall not be liable for any action taken by it
in good faith and without gross negligence or wilful misconduct, and
believed by it to be authorized or within the rights or powers
conferred upon it by this Escrow Agreement, and may consult with
counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such
counsel.
c. JNE and Purchaser hereby jointly and severally agree to
indemnify the Escrow Agent for, and hold the Escrow Agent harmless
against, any loss, liability or expense incurred without gross
negligence or wilful misconduct or bad faith on the part of the
Escrow Agent, arising out of or in connection with the Escrow
Agent's entering into this Escrow Agreement and carrying out the
Escrow Agent's duties hereunder, including, without limitation,
costs and expenses of defending the Escrow Agent against any claim
or liability with respect thereto.
d. Escrow Agent shall have no implied obligations or
responsibilities hereunder, nor shall it have any obligation or
responsibility to collect funds or seek the deposit of money or
property.
4.3 Other Matters. Escrow Agent (and any successor
escrow agent or agents) reserves the right to resign as the Escrow
Agent at any time, provided fifteen (15) days' prior written notice
is given to the other parties hereto, and provided further that a
mutually acceptable successor escrow agent(s) agrees in writing to
serve as escrow agent hereunder within such fifteen (15)-day
<PAGE>
period. The Escrow Agent may petition any court in the State of
California having jurisdiction to designate a successor Escrow Agent.
The resignation of the Escrow Agent (and any successor escrow agent or
agents) shall be effective only upon delivery of the Cash
Consideration then in Escrow to the successor escrow agent(s). The
Parties reserve the right to jointly remove the Escrow Agent at any
time, provided fifteen (15) days' prior written notice is given to
the Escrow Agent. In the event of litigation or dispute by the
Parties in which the performance of the duties of the Escrow Agent
is at issue, the Escrow Agent shall take no action until such action
is agreed in writing by the Parties, or until receipt of any final
order by a court of competent jurisdiction directing the Escrow
Agent to take such action.
5. TERMINATION. This Escrow Agreement shall be
terminated upon the release of the Cash Consideration in accordance
with the terms and conditions hereof, or otherwise by written mutual
consent signed by all parties hereto.
6. NOTICE. All notices, demands, requests, or other
communications which may be or are required to be given, served or
sent by any party to any other party pursuant to this Escrow
Agreement shall be in writing and shall be hand delivered (including
delivery by courier) or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
IF TO JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Attn: Joe Naughton, President
Facsimile No.: 714-994-3242
IF TO PURCHASER:
Patricia L. Schonebaum IRA Account c/o Jeff Stroud
Lumiere
12835 E. Arapahoe Road
Englewood, CO 80112
Facsimile No.: (303) 792-2420
IF TO THE ESCROW AGENT:
Law Offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
<PAGE>
or such other address as the addressee may indicate by written
notice to the other parties. Each notice, demand, request or
communication which shall be given or made in the manner described
above shall be deemed sufficiently given or made for all purposes at
such time as it delivered to the addressee (with the return receipt,
the delivery receipt or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.
7. BENEFIT AND ASSIGNMENT. This Escrow Agreement shall
be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns as permitted hereunder.
No person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision in this Escrow
Agreement against any of the parties hereto, and the covenants and
agreements set forth in this Escrow Agreement shall be solely for
the benefit of, and shall be enforceable only by, the parties hereto
or their respective successors and assigns this Escrow Agreement or
any rights hereunder without the prior written consent of the
parties hereto.
8. ENTIRE AGREEMENT; AMENDMENT. This Escrow Agreement
contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written
agreements, commitments or understandings with respect to such
matters. This Escrow Agreement may not be changed orally, but only
by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought.
9. HEADINGS. The headings of the sections and
subsections contained in this Escrow Agreement are inserted for
convenience only and do not form a part or affect the meaning,
construction or scope thereof.
10. GOVERNING LAW; VENUE. This Escrow Agreement shall be
governed and constructed under and in accordance with the laws of
the State of California (but not including the conflicts of laws and
rules thereof). For purposes of any action or proceeding involving
this Escrow Agreement each of the parties to this Escrow Agreement
expressly submits to the jurisdiction of the federal and state
courts located in the State of California and consents to the
service of any process or paper by registered mail or by personal
service within or without the State of California in accordance with
applicable law, provided a reasonable time for appearance is allowed.
11. SIGNATURE IN COUNTERPARTS. This Escrow Agreement may
be executed in separate counterparts, none of which need contain the
signature of all parties, each of which shall be deemed to be an
original and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this
Escrow Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto.
12. ATTORNEY'S FEES. Should any action be commenced
between the parties to this Agreement concerning the matters set
forth in this Agreement or the right and duties of either in
relation thereto, the prevailing party in such action shall be
entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its Attorney's Fees and Costs.
<PAGE>
13. FEES AND EXPENSES OF ESCROW AGENT. Except as may
otherwise be provided herein, all fees of the Escrow Agent hereunder
shall be paid by JNE.
IN WITNESS WHEREOF, each of the parties has caused this
Escrow Agreement to be duly executed and delivered in its name and
on its behalf, all as of the date and year first above written.
JONES NAUGHTON ENTERTAINMENT, INC.
a Colorado corporation ("JNE")
By: /s/ Joe Naughton
Joe Naughton, President
PURCHASER
By:/s/Patricia Schonebaum
MRC LEGAL SERVICES CORPORATION, a California corporation
dba The Law Offices of M. Richard Cutler, Esq. ("ESCROW AGENT")
By: /s/ M. Richard Cutler
M. Richard Cutler, President
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated November 17,
1997 by and among Jones Naughton Entertainment, Inc., a Colorado
corporation (hereinafter called "JNE") and Patricia L. Schonebaum
("Purchaser").
W I T N E S S E T H
WHEREAS, JNE is the owner of certain shares of Series A
Convertible Preferred Stock (the "Preferred Stock") of AmeriNet
Financial Systems, Inc. ("AFSI") and desires to convert such
Preferred Stock into unrestricted shares of common stock and sell
19,145 shares of such unrestricted common stock (the "Shares") to
Purchaser on the terms and conditions set forth in this Stock
Purchase Agreement (hereinafter called "Agreement"); and
WHEREAS, Purchaser desires to acquire the Shares at $2.25 per
share for an aggregate of $43,076.25 pursuant to the terms and
conditions set forth in this Stock Purchase Agreement; and
WHEREAS, the Preferred Stock is presently held in escrow and
shall be released in accordance with the terms of that certain
Escrow Agreement dated as of February 12, 1997 (the "Shares
Escrow"); and
WHEREAS, the proceeds for the sale of the Shares shall be held
in escrow and released to JNE pursuant to the terms hereof and of
that certain Escrow Agreement of even date herewith (the "Proceeds
Escrow").
NOW THEREFORE, in consideration of the premises and
respective mutual agreements, covenants, representations and
warranties herein contained, it is agreed between the parties hereto
as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 Sale of the Shares. At the date of the signing of this
Agreement as provided in Section 3.1 hereto (the "Closing"), subject
to the terms and conditions herein set forth, and on the basis of
the representations, warranties and agreements herein contained, JNE
shall sell to Purchaser and Purchaser shall purchase from JNE, the
Shares.
1.2 Instruments of Conveyance and Transfer. At the Closing,
JNE shall instruct the Escrow Agent under the Shares Escrow to
deliver certificates of the Preferred Stock which are convertible
into the Shares to the transfer agent of JNE for transfer and
delivery to Purchaser, together with appropriate medallion
guaranteed stock powers, sufficient to convert the Preferred Stock
and transfer the Shares into Purchaser's name, in form and substance
satisfactory to Purchaser as shall be effective to vest in Purchaser
all right, title and interest in and to all of the Shares. JNE
<PAGE>
shall provide an opinion of its counsel with respect to the
transferability of the Preferred Stock convertible into the Shares
to Purchaser in accordance with the terms of the Shares Escrow and
applicable state and federal securities laws.
1.3 Consideration. On or before November 21, 1997, Purchaser
shall pay to the Escrow Agent by wire transfer (to the instructions
attached hereto as Exhibit A) under the Proceeds Escrow an aggregate
of $2.25 per share or an aggregate of $43,076.25. The Escrow Agent
under the Proceeds Escrow shall immediately disburse 5% of such
funds to JNE and shall retain the balance to be disbursed in
accordance with the terms of the Proceeds Escrow. The terms and
conditions of the Proceeds Escrow are incorporated herein by reference.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of JNE. To induce
Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, JNE represents and warrants, as of
the date hereof and as of the Closing, as follows:
2.1.1 Corporate Existence and Authority. JNE is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado. It has all requisite
corporate power, franchises, licenses, permits and authority to own
its properties and assets and to carry on its business as it has
been and is being conducted. It is in good standing in each state,
nation or other jurisdiction in each state, nation or other
jurisdiction wherein the character of the business transacted by it
makes such qualification necessary.
2.1.2 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which JNE is a party or
by which either of them or any of their properties are bound; (b)
result in the creation of any security interest, lien, encumbrance,
adverse claim, proscription or restriction on any property or asset
(whether real, personal, mixed, tangible or intangible), right,
contract, agreement or business of JNE; (c) violate any law, rule or
regulation of any federal or state regulatory agency; or (d) permit
any federal or state regulatory agency to impose any restrictions or
limitations of any nature on JNE or any of its actions.
2.2 Representations and Warranties of Purchaser. To
induce JNE to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents and warrants,
as of the date hereof and as of the Closing, as follows:
<PAGE>
2.2.1 Authority of Purchaser. Purchaser has all requisite
power, corporate or otherwise, to enter into this Agreement and to
consummate the transactions contemplated hereunder.
2.2.2 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which Purchaser is a
party or by which it or any of its properties are bound; (b) result
in the creation of any security interest, lien, encumbrance, adverse
claim, proscription or restriction on any property or asset (whether
real, personal, mixed, tangible or intangible), right, contract,
agreement or business of Purchaser; (c) violate any law, rule or
regulation of any federal or state regulatory agency; or (d) permit
any federal or state regulatory agency to impose any restrictions or
limitations of any nature on Purchaser or any of its actions.
ARTICLE 3
CLOSING AND DELIVERY OF DOCUMENTS
3.1 Closing. The Closing shall be deemed to have occurred as
of the date of signing of this Agreement. Subsequent to the
signing, the following shall occur as a single integrated transaction:
3.2 Delivery by JNE:
(a) JNE shall instruct the Escrow Agent for the Shares Escrow
to immediately deliver to the transfer agent of ANFS for immediate
transfer to Purchaser the stock certificates representing the
Preferred Stock convertible into the Shares and all instruments of
conveyance and transfer required by Section 1.1.
(b) JNE shall deliver to the transfer agent and the Purchaser
the opinion of its counsel as set forth in Section 1.2 hereof.
(c) JNE shall deliver, or cause to be delivered, to Purchaser
such instruments, documents and certificates as are required to be
delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
<PAGE>
3.3 Delivery by Purchaser:
(a) Purchaser shall deliver, or cause to be delivered, to the
Escrow Agent for the Proceeds Escrow the Consideration as required
by Section 1.3.
(b) Purchaser shall deliver, or cause to be delivered, to JNE
such instruments, documents and certificates as are required to be
delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
ARTICLE 4
TERMINATION, AMENDMENT AND WAIVER
4.1 Termination. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned
at any time prior to the Closing by the mutual consent of all of the
parties;
4.2 Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be
waived, but only by a written instrument signed by the party
entitled to the benefits thereof. The failure or delay of any party
at any time or times to require performance of any provision hereof
or to exercise its rights with respect to any provision hereof shall
in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant,
representation or warranty contained in this Agreement, in any one
or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such condition or breach or waiver of
any other condition or of the breach of any other term, provision,
covenant, representation or warranty. No modification or amendment
of this Agreement shall be valid and binding unless it be in writing
and signed by all parties hereto.
ARTICLE 5
MISCELLANEOUS
5.1 Expenses. Except as otherwise specifically provided
for herein, whether or not the transactions contemplated hereby are
consummated, each of the parties hereto shall bear all taxes of any
nature (including, without limitation, income, franchise, transfer
and sales taxes) and all fees and expenses relating to or arising
from its compliance with the various provisions of this Agreement
and such party's covenants to be performed hereunder, and except as
otherwise specifically provided for herein, each of the parties
hereto agrees to pay all of its own expenses (including, without
limitation, attorneys and accountants' fees and printing expenses)
incurred in connection with this Agreement, the transactions
contemplated hereby, the negotiations leading to the same and the
preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior
to Closing.
<PAGE>
5.2 Notices. Any notice, request, instruction or other
document required by the terms of this Agreement, or deemed by any
of the parties hereto to be desirable, to be given to any other
party hereto shall be in writing and shall be given by prepaid
telegram or delivered or mailed by registered or certified mail,
postage prepaid, with return receipt requested, to the following
addresses:
TO JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Facsimile No.: 714-994-3242
with a copy to:
Law offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
TO PURCHASER:
Patricia L. Schonebaum c/o Jeff Stroud
Lumiere Securities
12835 E. Arapahoe Road
Englewood, CO 80112
Facsimile No.: (303) 792-2420
The persons and addresses set forth above may be changed from
time to time by a notice sent as aforesaid. If notice is given by
delivery in accordance with the provisions of this Section, said
notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given forty-eight (48) hours after deposit thereof in the United
States mail. If notice is given by telegraph in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given at the time that the telegraphic agency shall confirm delivery
thereof to the addressee.
5.3 Entire Agreement. This Agreement, together with the
Schedule and exhibits hereto, sets forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby, and supersedes all prior agreements,
arrangements and understandings related to the subject matter
hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written
or oral, express or implied, whether by statute or otherwise, has
been made by any party hereto which is not embodied in this
Agreement, or in the Schedule 1 or exhibits hereto or the written
statements, certificates, or other documents delivered pursuant
hereto or in connection with the transactions contemplated hereby,
and no party
<PAGE>
hereto shall be bound by or liable for any alleged
understanding, promise, inducement, statement, representation,
warranty, covenant or condition not so set forth.
5.4 Survival of Representations. All statements of fact
(including financial statements) contained in the Schedule, the
exhibits, the certificates or any other instrument delivered by or
on behalf of the parties hereto, or in connection with the
transactions contemplated hereby, shall be deemed representations
and warranties by the respective party hereunder. All
representation, warranties agreements and covenants hereunder shall
survive the Closing and remain effective regardless of any
investigation or audit at any time made by or on behalf of the
parties or of any information a party may have in respect thereto.
Consummation of the transactions contemplated hereby shall not be
deemed or construed to be a waiver of any right or remedy possessed
by any party hereto, notwithstanding that such party knew or should
have known at the time of Closing that such right or remedy existed.
5.5 Remedies Cumulative. No remedy herein conferred upon
Purchaser is intended to be exclusive of any other remedy and each
and every such remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise.
5.6 Execution of Additional Documents. Each party hereto
shall make, execute, acknowledge and deliver such other instruments
and documents, and take all such other actions as may be reasonably
required in order to effectuate the purposes of this Agreement and
to consummate the transactions contemplated hereby.
5.7 Finders' and Related Fees. Each of the parties
hereto is responsible for, and shall indemnify the other against,
any claim by any third party to a fee, commission, bonus or other
remuneration arising by reason of any services alleged to have been
rendered to or at the instance of said party to this Agreement with
respect to this Agreement or to any of the transactions contemplated
hereby.
5.8 Governing Law. This Agreement has been negotiated
and executed in the State of California and shall be construed and
enforced in accordance with the laws of such state.
5.9 Forum. Each of the parties hereto agrees that any
action or suit which may be brought by any party hereto against any
other party hereto in connection with this Agreement or the
transactions contemplated hereby may be brought only in a federal or
state court in Orange County, California.
5.10 Binding Effect and Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and
their respective heirs, executors, administrators, legal
representatives and assigns.
5.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
<PAGE>
In making proof of this Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the date first written hereinabove.
JONES NAUGHTON ENTERTAINMENT, INC.
By: /s/ Joseph Naughton
Joseph Naughton, Chief Executive Officer
PURCHASER
By: /s/Patricia Schonebaum
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is entered
into as of this 17th day of November 1997 between JONES NAUGHTON
ENTERTAINMENT, INC., a Colorado corporation ("JNE"), Patricia L.
Schonebaum ("Purchaser") and MRC LEGAL SERVICES CORPORATION dba the
Law offices of M. Richard Cutler, Esq., as escrow agent (the "Escrow
Agent").
R E C I T A L S
A. As of October 2, 1996 JNE, AFSI, ANFS, Inc. a
Delaware corporation ("ANFS") and Real Estate Television Network,
Inc., a Nevada corporation ("RETN") entered into an Agreement and
Plan of Reorganization (the "Agreement") providing for the
acquisition of RETN by AFSI through its wholly-owned subsidiary, ANFS.
B. In connection with the transaction, AFSI issued to
JNE an aggregate of 1,000,000 shares of AFSI Series A Preferred
Stock (the "AFSI Stock"), which have been subsequently been reduced
to 400,000 shares as a result of a reverse stock split. All of the
AFSI Stock is and has been held by the Escrow Agent pursuant to the
terms of an Escrow Agreement dated as of February 12, 1997.
C. In accordance with the terms of that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase
Agreements"), JNE has agreed to sell to Purchaser 19,145 shares (the
"Shares") of unrestricted common stock upon the conversion of
certain of the shares of AFSI Stock.
D. The parties hereto desire and the Escrow Agent has
agreed to hold the proceeds from the sale of the Shares (the "Cash
Consideration") and subsequently release such proceeds to JNE upon
the occurrence of certain events as set forth in this Escrow Agreement.
E. Escrow Agent has agreed to act as the escrow agent
hereunder, in accordance with the terms and conditions set forth in
this Escrow Agreement.
NOW THEREFORE, for and in consideration of the foregoing and
of the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1. APPOINTMENT OF ESCROW AGENT. JNE and Purchaser
(collectively, the "Parties") hereby mutually appoint and designate
the Escrow Agent to receive, hold and release, as escrow agent, the
Cash Consideration, and the Escrow Agent hereby accepts such
appointment and designation.
2. ESCROW DELIVERY. Upon closing of the transaction for
the sale of the Shares as set forth in the Stock Purchase Agreement,
Purchaser shall deliver the Cash Consideration to the Escrow Agent.
3. CONDITIONS OF ESCROW.
<PAGE>
3.1 The Escrow Deposit. Escrow Agent shall hold and
release the Cash Consideration as follows:
a. Upon delivery of the Cash Consideration, the Escrow Agent shall
immediately release 5% of the Cash Consideration to JNE;
b. From the date of Closing until the Share Unrestricted Date
(defined below), the Escrow Agent may release up to an additional 5%
of the Cash Consideration at the direction and request of JNE to
unrelated third parties for the purpose of completing the conversion
of the Preferred Stock to common stock of AFSI, the removal of any
restrictions on the transfer of such shares and any related actions
or other matters required to undertake the transactions contemplated
by the Stock Purchase Agreement (the "Unrestricted Share Reserve");
c. Upon the date that the Purchaser receives the Shares without
restrictive legend (the "Share Unrestricted Date"), the Escrow Agent
shall release the balance of all Cash Consideration then in Escrow
to JNE (including, without limitation, any balance left of the
Unrestricted Share Reserve");
d. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to joint written
instructions executed by JNE and Purchaser;
e. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to any "final order" of a
court of competent jurisdiction, any such order being deemed to be
"final" if (i) such order has not been reserved, stayed, enjoined,
set aside, annulled or suspended, (ii) no request for a stay,
suspension or an injunction, petition for reconsideration or appeal,
or sua sponte action with comparable effect is pending with respect
to the order, and (iii) the time for filing any such request,
petition or appeal or further taking of any such sua sponte action
has expired; or
f. The Escrow Agent shall release the balance of the Cash
Consideration (less the full Unrestricted Share Reserve) upon
written notice by Purchaser if the Share Unrestricted Date has not
occurred on or before the later of March 31, 1998 or the date of
such notice by Purchaser.
g. Conflicting Instructions. If a bona fide controversy arises
between the Parties concerning the release of the Cash
Consideration, the Escrow Agent may submit such controversy for
resolution by joint written instructions of the parties or by order
of a court of competent jurisdiction. If a suit is commenced
against the Escrow Agent, it may answer by way of interpleader and
name JNE and Purchaser as additional parties to such action, and the
Escrow Agent may tender the Cash Consideration into such court for
determination of the respective rights, titles and interests of the
Parties. Upon such tender, the Escrow Agent shall be entitled to
receive from the Parties its reasonable attorneys' fees and expenses
incurred in connection with said interpleader
<PAGE>
action or in any related action or suit. As between JNE and Purchaser,
such fees, expenses and other sums shall be paid by the party which
fails to prevail in the proceedings brought to determine the appropriate
distribution of the Cash Consideration. If and when the Escrow Agent
shall so interplead such Parties, or either of them, and deliver the
Cash Consideration to the clerk of such court, all of its duties
hereunder shall cease, and it shall have no further obligation in
this regard. Nothing herein shall prejudice any right or remedy of
the Escrow Agent.
4. CONCERNING ESCROW AGENT
4.1 Duties. Escrow Agent undertakes to perform all
duties which are expressly set forth herein; provided, however, that
the Escrow Agent shall not be required to make or be liable in any
manner for its failure to make any determination under the Agreement
or any other agreement, including whether any of JNE or the
Purchaser is entitled to delivery of the Cash Consideration under
the Agreement.
4.2 Indemnification.
a. Escrow Agent may rely upon and shall be protected in acting
or refraining from acting upon any written notice, instructions or
request furnished to it hereunder and reasonably believed by it to
be genuine and authorized.
b. Escrow Agent shall not be liable for any action taken by it
in good faith and without gross negligence or wilful misconduct, and
believed by it to be authorized or within the rights or powers
conferred upon it by this Escrow Agreement, and may consult with
counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such
counsel.
c. JNE and Purchaser hereby jointly and severally agree to
indemnify the Escrow Agent for, and hold the Escrow Agent harmless
against, any loss, liability or expense incurred without gross
negligence or wilful misconduct or bad faith on the part of the
Escrow Agent, arising out of or in connection with the Escrow
Agent's entering into this Escrow Agreement and carrying out the
Escrow Agent's duties hereunder, including, without limitation,
costs and expenses of defending the Escrow Agent against any claim
or liability with respect thereto.
d. Escrow Agent shall have no implied obligations or
responsibilities hereunder, nor shall it have any obligation or
responsibility to collect funds or seek the deposit of money or
property.
4.3 Other Matters. Escrow Agent (and any successor
escrow agent or agents) reserves the right to resign as the Escrow
Agent at any time, provided fifteen (15) days' prior written notice
is given to the other parties hereto, and provided further that a
mutually acceptable successor escrow agent(s) agrees in writing to
serve as escrow agent hereunder within such fifteen (15)-day
<PAGE>
period. The Escrow Agent may petition any court in the State of
California having jurisdiction to designate a successor Escrow Agent.
The resignation of the Escrow Agent (and any successor escrow agent or
agents) shall be effective only upon delivery of the Cash
Consideration then in Escrow to the successor escrow agent(s). The
Parties reserve the right to jointly remove the Escrow Agent at any
time, provided fifteen (15) days' prior written notice is given to
the Escrow Agent. In the event of litigation or dispute by the
Parties in which the performance of the duties of the Escrow Agent
is at issue, the Escrow Agent shall take no action until such action
is agreed in writing by the Parties, or until receipt of any final
order by a court of competent jurisdiction directing the Escrow
Agent to take such action.
5. TERMINATION. This Escrow Agreement shall be
terminated upon the release of the Cash Consideration in accordance
with the terms and conditions hereof, or otherwise by written mutual
consent signed by all parties hereto.
6. NOTICE. All notices, demands, requests, or other
communications which may be or are required to be given, served or
sent by any party to any other party pursuant to this Escrow
Agreement shall be in writing and shall be hand delivered (including
delivery by courier) or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
IF TO JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Attn: Joe Naughton, President
Facsimile No.: 714-994-3242
IF TO PURCHASER:
Patricia L. Schonebaum c/o Jeff Stroud
Lumiere Securities
12835 E. Arapahoe Road
Englewood, CO 80112
Facsimile No.: (303) 792-2420
IF TO THE ESCROW AGENT:
Law Offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
<PAGE>
or such other address as the addressee may indicate by written
notice to the other parties. Each notice, demand, request or
communication which shall be given or made in the manner described
above shall be deemed sufficiently given or made for all purposes at
such time as it delivered to the addressee (with the return receipt,
the delivery receipt or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.
7. BENEFIT AND ASSIGNMENT. This Escrow Agreement shall
be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns as permitted hereunder.
No person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision in this Escrow
Agreement against any of the parties hereto, and the covenants and
agreements set forth in this Escrow Agreement shall be solely for
the benefit of, and shall be enforceable only by, the parties hereto
or their respective successors and assigns this Escrow Agreement or
any rights hereunder without the prior written consent of the
parties hereto.
8. ENTIRE AGREEMENT; AMENDMENT. This Escrow Agreement
contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written
agreements, commitments or understandings with respect to such
matters. This Escrow Agreement may not be changed orally, but only
by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought.
9. HEADINGS. The headings of the sections and
subsections contained in this Escrow Agreement are inserted for
convenience only and do not form a part or affect the meaning,
construction or scope thereof.
10. GOVERNING LAW; VENUE. This Escrow Agreement shall be
governed and constructed under and in accordance with the laws of
the State of California (but not including the conflicts of laws and
rules thereof). For purposes of any action or proceeding involving
this Escrow Agreement each of the parties to this Escrow Agreement
expressly submits to the jurisdiction of the federal and state
courts located in the State of California and consents to the
service of any process or paper by registered mail or by personal
service within or without the State of California in accordance with
applicable law, provided a reasonable time for appearance is allowed.
11. SIGNATURE IN COUNTERPARTS. This Escrow Agreement may
be executed in separate counterparts, none of which need contain the
signature of all parties, each of which shall be deemed to be an
original and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this
Escrow Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto.
12. ATTORNEY'S FEES. Should any action be commenced
between the parties to this Agreement concerning the matters set
forth in this Agreement or the right and duties of either in
relation thereto, the prevailing party in such action shall be
entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its Attorney's Fees and Costs.
<PAGE>
13. FEES AND EXPENSES OF ESCROW AGENT. Except as may
otherwise be provided herein, all fees of the Escrow Agent hereunder
shall be paid by JNE.
IN WITNESS WHEREOF, each of the parties has caused this
Escrow Agreement to be duly executed and delivered in its name and
on its behalf, all as of the date and year first above written.
JONES NAUGHTON ENTERTAINMENT, INC.
a Colorado corporation ("JNE")
By: /s/ Joe Naughton
Joe Naughton, President
PURCHASER
By:/s/Patricia Schonebaum
MRC LEGAL SERVICES CORPORATION, a California corporation
dba The Law Offices of M. Richard Cutler, Esq. ("ESCROW AGENT")
By: /s/ M. Richard Cutler
M. Richard Cutler, President
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated November 17,
1997 by and among Jones Naughton Entertainment, Inc., a Colorado
corporation (hereinafter called "JNE") and Joy F. Evans ("Purchaser").
W I T N E S S E T H
WHEREAS, JNE is the owner of certain shares of Series A
Convertible Preferred Stock (the "Preferred Stock") of AmeriNet
Financial Systems, Inc. ("AFSI") and desires to convert such
Preferred Stock into unrestricted shares of common stock and sell
22,223 shares of such unrestricted common stock (the "Shares") to
Purchaser on the terms and conditions set forth in this Stock
Purchase Agreement (hereinafter called "Agreement"); and
WHEREAS, Purchaser desires to acquire the Shares at $2.25 per
share for an aggregate of $50,000 pursuant to the terms and
conditions set forth in this Stock Purchase Agreement; and
WHEREAS, the Preferred Stock is presently held in escrow and
shall be released in accordance with the terms of that certain
Escrow Agreement dated as of February 12, 1997 (the "Shares
Escrow"); and
WHEREAS, the proceeds for the sale of the Shares shall be held
in escrow and released to JNE pursuant to the terms hereof and of
that certain Escrow Agreement of even date herewith (the "Proceeds
Escrow").
NOW THEREFORE, in consideration of the premises and
respective mutual agreements, covenants, representations and
warranties herein contained, it is agreed between the parties hereto
as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 Sale of the Shares. At the date of the signing of this
Agreement as provided in Section 3.1 hereto (the "Closing"), subject
to the terms and conditions herein set forth, and on the basis of
the representations, warranties and agreements herein contained, JNE
shall sell to Purchaser and Purchaser shall purchase from JNE, the
Shares.
1.2 Instruments of Conveyance and Transfer. At the Closing,
JNE shall instruct the Escrow Agent under the Shares Escrow to
deliver certificates of the Preferred Stock which are convertible
into the Shares to the transfer agent of JNE for transfer and
delivery to Purchaser, together with appropriate medallion
guaranteed stock powers, sufficient to convert the Preferred Stock
and transfer the Shares into Purchaser's name, in form and substance
satisfactory to Purchaser as shall be effective to vest in Purchaser
all right, title and interest in and to all of the Shares.
<PAGE>
JNE shall provide an opinion of its counsel with respect to the
transferability of the Preferred Stock convertible into the Shares
to Purchaser in accordance with the terms of the Shares Escrow and
applicable state and federal securities laws.
1.3 Consideration. On or before November 21, 1997, Purchaser
shall pay to the Escrow Agent by wire transfer (to the instructions
attached hereto as Exhibit A) under the Proceeds Escrow an aggregate
of $2.25 per share or an aggregate of $50,000.00. The Escrow Agent
under the Proceeds Escrow shall immediately disburse 5% of such
funds to JNE and shall retain the balance to be disbursed in
accordance with the terms of the Proceeds Escrow. The terms and
conditions of the Proceeds Escrow are incorporated herein by
reference. In the event the Consideration is returned to Purchaser
in accordance with Section 3(f) of the Proceeds Escrow, this Stock
Purchase Agreement shall thereupon cease and Purchaser shall no
longer be entitled to receipt of the Shares.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of JNE. To induce
Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, JNE represents and warrants, as of
the date hereof and as of the Closing, as follows:
2.1.1 Corporate Existence and Authority. JNE is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado. It has all requisite
corporate power, franchises, licenses, permits and authority to own
its properties and assets and to carry on its business as it has
been and is being conducted. It is in good standing in each state,
nation or other jurisdiction in each state, nation or other
jurisdiction wherein the character of the business transacted by it
makes such qualification necessary.
2.1.2 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which JNE is a party or
by which either of them or any of their properties are bound; (b)
result in the creation of any security interest, lien, encumbrance,
adverse claim, proscription or restriction on any property or asset
(whether real, personal, mixed, tangible or intangible), right,
contract, agreement or business of JNE; (c) violate any law, rule or
regulation of any federal or state regulatory agency; or (d) permit
any federal or state regulatory agency to impose any restrictions or
limitations of any nature on JNE or any of its actions.
2.2 Representations and Warranties of Purchaser. To
induce JNE to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents and warrants,
as of the date hereof and as of the Closing, as follows:
<PAGE>
2.2.1 Authority of Purchaser. Purchaser has all requisite
power, corporate or otherwise, to enter into this Agreement and to
consummate the transactions contemplated hereunder.
2.2.2 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which Purchaser is a
party or by which it or any of its properties are bound; (b) result
in the creation of any security interest, lien, encumbrance, adverse
claim, proscription or restriction on any property or asset (whether
real, personal, mixed, tangible or intangible), right, contract,
agreement or business of Purchaser; (c) violate any law, rule or
regulation of any federal or state regulatory agency; or (d) permit
any federal or state regulatory agency to impose any restrictions or
limitations of any nature on Purchaser or any of its actions.
ARTICLE 3
CLOSING AND DELIVERY OF DOCUMENTS
3.1 Closing. The Closing shall be deemed to have occurred as
of the date of signing of this Agreement. Subsequent to the
signing, the following shall occur as a single integrated transaction:
3.2 Delivery by JNE:
(a) JNE shall instruct the Escrow Agent for the Shares Escrow
to immediately deliver to the transfer agent of JNE for immediate
transfer to Purchaser the stock certificates representing the
Preferred Stock convertible into the Shares and all instruments of
conveyance and transfer required by Section 1.1.
(b) JNE shall deliver to the transfer agent and the Purchaser
the opinion of its counsel as set forth in Section 1.2 hereof.
(c) JNE shall deliver, or cause to be delivered, to Purchaser
such instruments, documents and certificates as are required to be
delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
3.3 Delivery by Purchaser:
(a) Purchaser shall deliver, or cause to be delivered, to the
Escrow Agent for the Proceeds Escrow the Consideration as required
by Section 1.3.
<PAGE>
(b) Purchaser shall deliver, or cause to be delivered, to JNE
such instruments, documents and certificates as are required to be
delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
ARTICLE 4
TERMINATION, AMENDMENT AND WAIVER
4.1 Termination. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned
at any time prior to the Closing by the mutual consent of all of the
parties;
4.2 Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be
waived, but only by a written instrument signed by the party
entitled to the benefits thereof. The failure or delay of any party
at any time or times to require performance of any provision hereof
or to exercise its rights with respect to any provision hereof shall
in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant,
representation or warranty contained in this Agreement, in any one
or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such condition or breach or waiver of
any other condition or of the breach of any other term, provision,
covenant, representation or warranty. No modification or amendment
of this Agreement shall be valid and binding unless it be in writing
and signed by all parties hereto.
ARTICLE 5
MISCELLANEOUS
5.1 Expenses. Except as otherwise specifically provided
for herein, whether or not the transactions contemplated hereby are
consummated, each of the parties hereto shall bear all taxes of any
nature (including, without limitation, income, franchise, transfer
and sales taxes) and all fees and expenses relating to or arising
from its compliance with the various provisions of this Agreement
and such party's covenants to be performed hereunder, and except as
otherwise specifically provided for herein, each of the parties
hereto agrees to pay all of its own expenses (including, without
limitation, attorneys and accountants' fees and printing expenses)
incurred in connection with this Agreement, the transactions
contemplated hereby, the negotiations leading to the same and the
preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior
to Closing.
5.2 Notices. Any notice, request, instruction or other
document required by the terms of this Agreement, or deemed by any
of the parties hereto to be desirable, to be given to any other
party hereto shall be in writing and shall be given by prepaid
telegram or delivered or mailed by registered or certified mail,
postage prepaid, with return receipt requested, to the following
addresses:
TO JNE
<PAGE>
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Facsimile No.: 714-994-3242
with a copy to:
Law offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
TO PURCHASER:
Joy F. Evans c/o David Evans
Snell & Wilmer
111 East Broadway, Suite 900
Salt Lake City, Utah 84111-1004
Facsimile No.: (801) 237-1950
The persons and addresses set forth above may be changed from
time to time by a notice sent as aforesaid. If notice is given by
delivery in accordance with the provisions of this Section, said
notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given forty-eight (48) hours after deposit thereof in the United
States mail. If notice is given by telegraph in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given at the time that the telegraphic agency shall confirm delivery
thereof to the addressee.
5.3 Entire Agreement. This Agreement, together with the
Schedule and exhibits hereto, sets forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby, and supersedes all prior agreements,
arrangements and understandings related to the subject matter
hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written
or oral, express or implied, whether by statute or otherwise, has
been made by any party hereto which is not embodied in this
Agreement, or in the Schedule 1 or exhibits hereto or the written
statements, certificates, or other documents delivered pursuant
hereto or in connection with the transactions contemplated hereby,
and no party hereto shall be bound by or liable for any alleged
understanding, promise, inducement, statement, representation,
warranty, covenant or condition not so set forth.
5.4 Survival of Representations. All statements of fact
(including financial statements) contained in the Schedule, the
exhibits, the certificates or any other instrument delivered by or
on behalf of the parties hereto, or in connection with the
transactions contemplated hereby, shall be deemed representations
and warranties by the respective party hereunder. All
representation, warranties agreements and covenants hereunder shall
survive the Closing and remain effective
<PAGE>
regardless of any investigation or audit at any time made by or on
behalf of the parties or of any information a party may have in respect
thereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed
by any party hereto, notwithstanding that such party knew or should
have known at the time of Closing that such right or remedy existed.
5.5 Remedies Cumulative. No remedy herein conferred upon
Purchaser is intended to be exclusive of any other remedy and each
and every such remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise.
5.6 Execution of Additional Documents. Each party hereto
shall make, execute, acknowledge and deliver such other instruments
and documents, and take all such other actions as may be reasonably
required in order to effectuate the purposes of this Agreement and
to consummate the transactions contemplated hereby.
5.7 Finders' and Related Fees. Each of the parties
hereto is responsible for, and shall indemnify the other against,
any claim by any third party to a fee, commission, bonus or other
remuneration arising by reason of any services alleged to have been
rendered to or at the instance of said party to this Agreement with
respect to this Agreement or to any of the transactions contemplated
hereby.
5.8 Governing Law. This Agreement has been negotiated
and executed in the State of California and shall be construed and
enforced in accordance with the laws of such state.
5.9 Forum. Each of the parties hereto agrees that any
action or suit which may be brought by any party hereto against any
other party hereto in connection with this Agreement or the
transactions contemplated hereby may be brought only in a federal or
state court in Orange County, California.
5.10 Binding Effect and Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and
their respective heirs, executors, administrators, legal
representatives and assigns.
5.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. In
making proof of this Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the date first written hereinabove.
<PAGE>
JONES NAUGHTON ENTERTAINMENT, INC.
By: /s/ Joseph Naughton
Joseph Naughton, Chief Executive Officer
PURCHASER
By:/s/Joy Evans
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is entered
into as of this 17th day of November 1997 between JONES NAUGHTON
ENTERTAINMENT, INC., a Colorado corporation ("JNE"), Joy F. Evans
("Purchaser") and MRC LEGAL SERVICES CORPORATION dba the Law offices
of M. Richard Cutler, Esq., as escrow agent (the "Escrow Agent").
R E C I T A L S
A. As of October 2, 1996 JNE, AFSI, ANFS, Inc. a
Delaware corporation ("ANFS") and Real Estate Television Network,
Inc., a Nevada corporation ("RETN") entered into an Agreement and
Plan of Reorganization (the "Agreement") providing for the
acquisition of RETN by AFSI through its wholly-owned subsidiary, ANFS.
B. In connection with the transaction, AFSI issued to
JNE an aggregate of 1,000,000 shares of AFSI Series A Preferred
Stock (the "AFSI Stock"), which have been subsequently been reduced
to 400,000 shares as a result of a reverse stock split. All of the
AFSI Stock is and has been held by the Escrow Agent pursuant to the
terms of an Escrow Agreement dated as of February 12, 1997.
C. In accordance with the terms of that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase
Agreements"), JNE has agreed to sell to Purchaser 22,223 shares (the
"Shares") of unrestricted common stock upon the conversion of
certain of the shares of AFSI Stock.
D. The parties hereto desire and the Escrow Agent has
agreed to hold the proceeds from the sale of the Shares (the "Cash
Consideration") and subsequently release such proceeds to JNE upon
the occurrence of certain events as set forth in this Escrow Agreement.
E. Escrow Agent has agreed to act as the escrow agent
hereunder, in accordance with the terms and conditions set forth in
this Escrow Agreement.
NOW THEREFORE, for and in consideration of the foregoing and
of the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1. APPOINTMENT OF ESCROW AGENT. JNE and Purchaser
(collectively, the "Parties") hereby mutually appoint and designate
the Escrow Agent to receive, hold and release, as escrow agent, the
Cash Consideration, and the Escrow Agent hereby accepts such
appointment and designation.
2. ESCROW DELIVERY. Upon closing of the transaction for
the sale of the Shares as set forth in the Stock Purchase Agreement,
Purchaser shall deliver the Cash Consideration to the Escrow Agent.
3. CONDITIONS OF ESCROW.
<PAGE>
3.1 The Escrow Deposit. Escrow Agent shall hold and
release the Cash Consideration as follows:
a. From the date of Closing until the Share Unrestricted Date
(defined below), the Escrow Agent may release up to an additional 5%
of the Cash Consideration at the direction and request of JNE to
unrelated third parties for the purpose of completing the conversion
of the Preferred Stock to common stock of AFSI, the removal of any
restrictions on the transfer of such shares and any related actions
or other matters required to undertake the transactions contemplated
by the Stock Purchase Agreement (the "Unrestricted Share Reserve");
b. Upon the date that the Purchaser receives the Shares without
restrictive legend (the "Share Unrestricted Date"), the Escrow Agent
shall release the balance of all Cash Consideration then in Escrow
to JNE (including, without limitation, any balance left of the
Unrestricted Share Reserve");
c. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to joint written
instructions executed by JNE and Purchaser;
d. The Escrow Agent may release the Cash Consideration to JNE or
Purchaser, as the case may be, pursuant to any "final order" of a
court of competent jurisdiction, any such order being deemed to be
"final" if (i) such order has not been reserved, stayed, enjoined,
set aside, annulled or suspended, (ii) no request for a stay,
suspension or an injunction, petition for reconsideration or appeal,
or sua sponte action with comparable effect is pending with respect
to the order, and (iii) the time for filing any such request,
petition or appeal or further taking of any such sua sponte action
has expired; or
e. The Escrow Agent shall release the balance of the Cash
Consideration (less the full Unrestricted Share Reserve) upon
written notice by Purchaser if the Share Unrestricted Date has not
occurred on or before the later of March 31, 1998 or the date of
such notice by Purchaser. Upon such event, the Escrow Agent shall
also notify Purchaser and JNE that the Stock Purchase Agreement has
terminated and that Purchaser is no longer entitled to receipt of
the Shares.
f. Conflicting Instructions. If a bona fide controversy arises
between the Parties concerning the release of the Cash
Consideration, the Escrow Agent may submit such controversy for
resolution by joint written instructions of the parties or by order
of a court of competent jurisdiction. If a suit is commenced
against the Escrow Agent, it may answer by way of interpleader and
name JNE and Purchaser as additional parties to such action, and the
Escrow Agent may tender the Cash Consideration into such court for
determination of the respective rights, titles and interests of the
Parties. Upon such tender, the Escrow Agent shall be entitled to
receive from the Parties its reasonable attorneys' fees and expenses
incurred in connection with said interpleader action or in any
related action or suit. As between JNE and Purchaser, such fees,
expenses and other sums shall be paid by the party which fails to
prevail in the proceedings brought to determine the appropriate
distribution
<PAGE>
of the Cash Consideration. If and when the Escrow Agent
shall so interplead such Parties, or either of them, and deliver the
Cash Consideration to the clerk of such court, all of its duties
hereunder shall cease, and it shall have no further obligation in
this regard. Nothing herein shall prejudice any right or remedy of
the Escrow Agent.
4. CONCERNING ESCROW AGENT
4.1 Duties. Escrow Agent undertakes to perform all
duties which are expressly set forth herein; provided, however, that
the Escrow Agent shall not be required to make or be liable in any
manner for its failure to make any determination under the Agreement
or any other agreement, including whether any of JNE or the
Purchaser is entitled to delivery of the Cash Consideration under
the Agreement.
4.2 Indemnification.
a. Escrow Agent may rely upon and shall be protected in acting or
refraining from acting upon any written notice, instructions or
request furnished to it hereunder and reasonably believed by it to
be genuine and authorized.
b. Escrow Agent shall not be liable for any action taken by it in
good faith and without gross negligence or wilful misconduct, and
believed by it to be authorized or within the rights or powers
conferred upon it by this Escrow Agreement, and may consult with
counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such
counsel.
c. JNE and Purchaser hereby jointly and severally agree to
indemnify the Escrow Agent for, and hold the Escrow Agent harmless
against, any loss, liability or expense incurred without gross
negligence or wilful misconduct or bad faith on the part of the
Escrow Agent, arising out of or in connection with the Escrow
Agent's entering into this Escrow Agreement and carrying out the
Escrow Agent's duties hereunder, including, without limitation,
costs and expenses of defending the Escrow Agent against any claim
or liability with respect thereto.
d. Escrow Agent shall have no implied obligations or
responsibilities hereunder, nor shall it have any obligation or
responsibility to collect funds or seek the deposit of money or
property.
4.3 Other Matters. Escrow Agent (and any successor
escrow agent or agents) reserves the right to resign as the Escrow
Agent at any time, provided fifteen (15) days' prior written notice
is given to the other parties hereto, and provided further that a
mutually acceptable successor escrow agent(s) agrees in writing to
serve as escrow agent hereunder within such fifteen (15)-day period.
The Escrow Agent may petition any court in the State of California
having jurisdiction to designate a successor Escrow Agent. The
resignation of the Escrow Agent (and any successor escrow agent or
agents) shall be effective only upon delivery of the Cash
Consideration then in
<PAGE>
Escrow to the successor escrow agent(s). The Parties reserve the right
to jointly remove the Escrow Agent at any time, provided fifteen (15)
days' prior written notice is given to the Escrow Agent. In the event
of litigation or dispute by the Parties in which the performance of the
duties of the Escrow Agent is at issue, the Escrow Agent shall take no action
until such action is agreed in writing by the Parties, or until receipt of
any final order by a court of competent jurisdiction directing the Escrow
Agent to take such action.
5. TERMINATION. This Escrow Agreement shall be
terminated upon the release of the Cash Consideration in accordance
with the terms and conditions hereof, or otherwise by written mutual
consent signed by all parties hereto.
6. NOTICE. All notices, demands, requests, or other
communications which may be or are required to be given, served or
sent by any party to any other party pursuant to this Escrow
Agreement shall be in writing and shall be hand delivered (including
delivery by courier) or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
IF TO JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Blvd., Suite 101
Buena Park, CA 90621-2045
Attn: Joe Naughton, President
Facsimile No.: 714-994-3242
IF TO PURCHASER:
Joy F. Evans c/o David Evans
Snell & Wilmer
111 East Broadway, Suite 900
Salt Lake City, Utah 84111-1004
Facsimile No.: (801) 237-1950
IF TO THE ESCROW AGENT:
Law Offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 714-719-1988
or such other address as the addressee may indicate by written
notice to the other parties. Each notice, demand, request or
communication which shall be given or made in the manner described
above shall be deemed sufficiently given or made for all purposes at
such time as it delivered to the addressee (with the return receipt,
the delivery receipt or the affidavit of messenger being deemed
<PAGE>
conclusive but not exclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.
7. BENEFIT AND ASSIGNMENT. This Escrow Agreement shall
be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns as permitted hereunder.
No person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision in this Escrow
Agreement against any of the parties hereto, and the covenants and
agreements set forth in this Escrow Agreement shall be solely for
the benefit of, and shall be enforceable only by, the parties hereto
or their respective successors and assigns this Escrow Agreement or
any rights hereunder without the prior written consent of the
parties hereto.
8. ENTIRE AGREEMENT; AMENDMENT. This Escrow Agreement
contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written
agreements, commitments or understandings with respect to such
matters. This Escrow Agreement may not be changed orally, but only
by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought.
9. HEADINGS. The headings of the sections and
subsections contained in this Escrow Agreement are inserted for
convenience only and do not form a part or affect the meaning,
construction or scope thereof.
10. GOVERNING LAW; VENUE. This Escrow Agreement shall be
governed and constructed under and in accordance with the laws of
the State of California (but not including the conflicts of laws and
rules thereof). For purposes of any action or proceeding involving
this Escrow Agreement each of the parties to this Escrow Agreement
expressly submits to the jurisdiction of the federal and state
courts located in the State of California and consents to the
service of any process or paper by registered mail or by personal
service within or without the State of California in accordance with
applicable law, provided a reasonable time for appearance is allowed.
11. SIGNATURE IN COUNTERPARTS. This Escrow Agreement may
be executed in separate counterparts, none of which need contain the
signature of all parties, each of which shall be deemed to be an
original and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this
Escrow Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto.
12. ATTORNEY'S FEES. Should any action be commenced
between the parties to this Agreement concerning the matters set
forth in this Agreement or the right and duties of either in
relation thereto, the prevailing party in such action shall be
entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its Attorney's Fees and Costs.
13. FEES AND EXPENSES OF ESCROW AGENT. Except as may
otherwise be provided herein, all fees of the Escrow Agent hereunder
shall be paid by JNE.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Escrow Agreement to be duly executed and delivered in its name and
on its behalf, all as of the date and year first above written.
JONES NAUGHTON ENTERTAINMENT, INC.
a Colorado corporation ("JNE")
By: /s/ Joe Naughton
Joe Naughton, President
PURCHASER
By:/s/Joy Evans
MRC LEGAL SERVICES CORPORATION, a California corporation
dba The Law Offices of M. Richard Cutler, Esq. ("ESCROW AGENT")
By: /s/ M. Richard Cutler
M. Richard Cutler, President
CONFIDENTIAL
AGREEMENT FOR PURCHASE AND SALE
OF ASSETS
between
SIGN PRODUCTS OF AMERICA, INC.
and
JONES NAUGHTON ENTERTAINMENT, INC.
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This Agreement for Purchase and Sale of Assets (this
"Agreement") is entered into as of this ___ day of March, 1998 by
and among SIGN PRODUCTS OF AMERICA, INC. a California corporation
("Seller"), and JONES NAUGHTON ENTERTAINMENT, INC., a Colorado
corporation ("Purchaser").
WHEREAS, Seller owns and operates a business known as
"Community Marquee" primarily engaged in the manufacture, marketing,
management and display of advertising and informational kiosks.
Seller's principal place of business is 8930 University Center Lane,
San Diego, California 92122. Seller owns equipment inventories,
contract rights with universities and with advertisers, leasehold
interests, permits and miscellaneous assets used in connection with
the operation of its business;
WHEREAS, Purchaser desires to acquire all the assets used or
useful, or intended to be used, in the operation of Seller's
business, and Seller desires to sell such assets to Purchaser.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Assets Purchased.
1.1 Assets Purchased. Seller agrees to sell, transfer,
convey and assign to Purchaser and Purchaser agrees to purchase from
Seller, subject to the terms and conditions set forth in this
Agreement, all of Seller's rights, title and interest in and to the
assets of the operation of the business of Seller known as
"Community Marquee" (the "Business"), including without limitation
those assets set forth on Exhibit A hereto ("Assets"), other than
those assets expressly excluded in paragraph 2 hereof. The parties
hereto acknowledge that such Assets constitute all of the assets
necessary for the operation of the Business.
1.2 No Liabilities Assumed. Purchaser accepts no
responsibility for any and all accounts payable, note obligations,
contingent liabilities or any other liabilities of the Business
prior to the Closing Date hereof. Seller represents and covenants
that any and all liabilities of the Business shall be paid in full
within 15 days of the Closing Date from the proceeds hereof.
Section 2. Excluded Assets. Assets excluded from this sale and
purchase are: Accounts Receivable as of the Closing Date with
respect to periods of operation preceding the Closing Date.
Section 3. Purchase Price for Assets. The purchase price for
the Assets shall be FIFTY THOUSAND DOLLARS AND NO/100 ($50,000),
which shall be paid by the Purchaser as follows:
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3.1 A total of $25,000 in a refundable deposit (the
"Deposit") shall be deposited by Purchaser on Tuesday, March 31,
1998 with the client trust account of John Smaha, counsel to Seller.
In the event the Closing Date does not occur on or before April 30,
1998, the Deposit shall be immediately returned to Purchaser upon
written request therefor if the Seller does not comply with the
terms of this Agreement.
3.2 A total of $25,000 shall be paid by Purchaser to
Seller at the Closing Date.
3.3 The remaining $25,000 shall be paid by Purchaser to
Seller in four equal quarterly installments of $6,250 (without
interest) at the 90 day, 180 day, 270 day and 350 day anniversaries
of the Closing Date (collectively, the "Installment Compensation").
Joe Naughton agrees to personally guarantee the Installment
Compensation.
Section 5. Adjustments. All revenues and expenses (including
but not limited to utilities, personal property taxes, rents, real
property taxes, wages, vacation pay, payroll taxes, and fringe
benefits of employees of Seller) from the operation of the Business
shall be prorated as of 5:00 p.m. as of the Closing Date. All
Business revenues relating to the period from and after the Closing
shall be the responsibility and property of Purchaser upon the
execution of this Agreement. All of the Business' accounts
receivable outstanding as of the execution of this Agreement which
relate to services prior to Closing shall be the property of the
Seller and no modification of the Purchase Price herein shall be
undertaken whether or not such accounts receivable are collected by
Seller. Revenues and expenses from the operation of the Business
relating to the period after the Closing shall be the property and
liabilities, respectively, of Purchaser.
Section 6. Seller's Representations and Warranties. Seller
represents and warrants to Purchaser as of the date hereof and as of
the Closing Date as follows:
6.1 Authority. Seller has full right, title, authority
and capacity to execute and perform this Agreement and to consummate
all of the transactions contemplated herein.
6.2 Business Location and Leases. There are no defaults
or events with respect to the location of the Business that, with
notice or lapse of time, or both, will constitute any manner of
default or obligation of Seller as to any real or personal property
leases. All of the leases referenced in this Agreement are valid
and in full force, and there are no defaults or events that, with
notice or lapse of time, or both, would constitute a default
thereunder.
6.3 Title to Assets. Except as may be described
in Exhibit A of this Agreement, Seller holds good and marketable
title to the Assets, free and clear of restrictions on or conditions
to transfer or assignment, and free and clear of liens, pledges,
charges, or encumbrances.
6.4 Brokers and Finders. Seller has not employed
any broker or finder in connection with the transactions
contemplated by this Agreement, or taken action that would give rise
to a valid claim against any party for a brokerage commission,
finder's fee, or other like payment.
6.5 Transfer Not Subject to Encumbrances or Third-Party Approval.
The execution and
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delivery of this Agreement by Seller and the consummation of the
contemplated transactions, will not result in the creation or imposition
of any valid lien, charge, or encumbrance on any of the Assets, and will
not require the authorization, consent, or approval of any third party,
including any governmental subdivision or regulatory agency.
6.6 Inventory. The inventory existing for Seller as of
the Closing will be set forth in Exhibit A to this Agreement (the
"Inventory"). The Inventory consists of kiosks, supplies,
advertising materials and other items of a quality and quantity
usable in the ordinary course of business for Seller. All items
included in the Inventory as of the Closing will be transferred to
Purchaser and shall be valued at Seller's cost and shall include
prepaid expenses. No items included in the Inventory have been
pledged as collateral or held by Seller on consignment from others.
6.7 Title to Assets. To the best of its knowledge except
as otherwise provided in this Agreement, Seller has good and
marketable title to all of the Assets, whether personal, mixed,
tangible or intangible. The Assets are owned by Seller free and
clear of all mortgages, liens, pledges, charges, encumbrances,
equities, claims, easements, rights of way, covenants, conditions,
or restrictions, except as may have otherwise been previously
disclosed herein. Seller has received no notice from any
governmental agency or any third party that it occupies the location
of the Business in violation of any law, ordinance, regulation or
decree.
6.8 Insurance. Seller has maintained and now maintains
adequate insurance protection against all liabilities, claims, risks
against which it is customary to insure. Existing insurance
policies held by Seller concerning the business of Seller will be
maintained in good standing up to and including the Closing.
6.9 Compliance with Laws; Structural Condition, Hazardous
Waste and Toxics. To the best of its knowledge and with no
notice(s) received, Seller has complied in all material respects
with and has not been cited for any violation of federal, state or
local environmental protection laws and/or regulations relating to
the Business or location of the Business, and no material capital
expenditures will be required for compliance with any federal, state
or local laws or regulations now in force or in effect relating to
the protection of the environment. Seller knows of no facts or
circumstances leading it to believe that any hazardous or toxic
substances may in any way be located or associated with any of the
Business or Business Locations.
6.10 Litigation. There is no suit, action, arbitration or
legal, administrative or other proceeding, or governmental
investigation pending or, to the best of Seller's knowledge,
threatened against or in any was affecting the Business. Seller is
not in default with respect to any order, writ, injunction, or
decree of any federal, state, local or foreign court, department,
agency or instrumentality.
6.11 Effect of Agreement. The transactions contemplated
by this Agreement will not result in or constitute in any manner any
of the following: (a) A default or an event that, with notice or
lapse of time or both, would be a default, breach or violation of
any lease, license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust, or other agreement,
instrument or arrangement to which Seller is a party, or by which
any of the property of Seller is
<PAGE>
bound; (b) An event that would permit any party to terminate any agreement
or to accelerate the maturity of any indebtedness or other obligation of
Seller, except as may have otherwise been previously disclosed to Purchaser,
in writing; (c) The creation or imposition of any lien, charge or
encumbrance on any of the assets of Seller; or (d) The violation of
any law, judgment, order or decree affecting the business or
properties of Seller.
6.12 Utilities and Access. To the best of Seller's
knowledge, all utility services necessary and sufficient for the
full use, occupancy, operation and disposition of the Business are
available and in full operating condition. The Business has full
and open access to a dedicated public right of way without further
condition or cost to Purchaser.
6.13 Full Disclosure. None of the representations and/or
warranties made by Seller or its principals made in any certificate,
document or memorandum furnished or to be furnished by any of them
in connection with this Agreement, or on their behalf, to the best
of their knowledge, contains or will contain any untrue statement of
a material fact, or omit any material fact, the omission of which
would in any way be misleading or damaging to Purchaser in
connection with this transaction upon the execution of this Agreement.
6.14 Preservation of Business. Seller has used its best
efforts to preserve its respective business organizations intact, up
to and including the date of this Agreement, and to preserve all
existing relationships with suppliers, customers and others having
business relationships with Seller or Purchaser and/or the Business.
6.15 Conduct of Business in Normal Course. Seller has
carried on the Business and activities of the Business diligently
and in substantially the same manner as it has previously been
carried out, and has not made or instituted any unusual or unlawful
methods of inventory levels, purchase, maintenance sale, lease,
management, accounting or operation that varies from those methods
previously used with respect to the operation of the Business and
has not made or agreed to make any contractual obligations under
which the Business might be directly or indirectly affected.
6.16 Licenses and Permits. Seller possesses all
certificates, licenses, permits, contracts, consents, approvals and
governmental and regulatory authorizations (the "Permits") necessary
for Seller's operation of the business in the manner presently
operated. The Permits are in full force and effect, there has not
occurred any event which is pending or threatened which would cause
permit revocation or suspension, or otherwise adversely effect the
maintenance of the Permits. No suspension or revocation of any such
Permits are pending or threatened, there is no action, investigation
or proceeding looking to or contemplating the revocation or
suspension of the Permits and there is no violation of any Permit
laws governing the issuance of the Permits in a way which would have
a material adverse effect on the operation of the Business. To the
extent permitted by law, for a period of one year after the closing
of the transactions contemplated under the terms of this Agreement,
Seller agrees and covenants to allow Purchaser to have use of, and
obtain the advantage of, the Permits by means of a power of attorney
or otherwise, unless and until Purchaser is able to obtain Permits
in its name or on its behalf for purposes of the continued operation
of the Business.
<PAGE>
6.17 Existing Agreements. Without the consent of the
Purchaser or unless provided otherwise herein, the Seller has not
modified, amended, canceled or terminated any existing contracts or
agreements, or agreed to do any of those acts, as such contracts or
agreements may in any way relate to the Business.
6.18 Sales and Use Tax on Prior Sales. Seller agrees to
furnish to Purchaser prior to the date of this Agreement, with
clearance certificates that Purchaser may reasonably request as
evidence that all sales and use tax liabilities of Seller, accruing
before the date of Closing, have been fully satisfied or provided
for.
6.19 Non-Competition Covenants. Seller, together with any
and all shareholders, directors, officers, partners, owners or other
affiliates of Seller, jointly and severally, agree, warrant and
covenant that they shall not compete directly or indirectly with the
Purchaser, in the business presently conducted by the Business
existing at the time of this Agreement for a five (5) year period of
time following the Closing. The Seller shall hold all data and
information obtained with respect to the Business in the same degree
of confidence as the Business maintains such data and information.
For a period of five (5) years from and after Closing, the Seller
shall not directly or indirectly induce or solicit, or directly or
indirectly aid or assist any other Person to induce or solicit,
current employees, salesmen, agents, consultants, distributors,
representatives, advisors, customers or suppliers of the Business to
terminate their employment or business relations with the Business,
nor for a period of five (5) years from and after Closing shall the
Sellers employ any employees, salesmen or agents of the Corporation
without written permission of the Purchaser. Nothing contained in
this paragraph shall prevent the Seller from purchasing less than
one percent (1%) of the issued and outstanding common stock of a
corporation which conducts such business if such stock is traded
upon the floor of the New York Stock Exchange or the American Stock
Exchange. In the event of a breach or threatened breach of this
Section, Purchaser shall be entitled to an injunction restraining
such breach; but nothing herein shall be construed as prohibiting
Purchaser from pursuing any other remedy available to Purchaser as a
result of such breach or threatened breach.
Section 7. Representations of Purchaser. Purchaser
represents and warrants as of the date hereof and as of the Closing
Date as follows:
7.1 Corporate Existence. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of Colorado. Purchaser has all requisite corporate power,
shareholder approval and authority to enter into this Agreement and
perform its obligations hereunder.
7.2 Authorization. The execution, delivery, and
performance of this Agreement have been duly authorized and approved
by the board of directors, and this Agreement constitutes a valid
and binding Agreement of Purchaser in accordance with its terms.
7.3 Brokers and Finders. Purchaser has not employed any
broker or finder in connection with the transaction contemplated by
this Agreement and has taken no action that would give rise to a
valid claim against any party for a brokerage commission, finder's
fee, or other like payment.
<PAGE>
7.4 Accuracy of Representations and Warranties. None of
the representations or warranties of Purchaser contain or will
contain any untrue statement of a material fact or omit or will omit
or misstate a material fact necessary in order to make the
statements contained herein not misleading.
Section 8. Covenants of Seller.
8.1 Seller's Operation of Business Prior to Closing.
Seller agrees that between the date of this Agreement and the
Closing Date, Seller will:
8.1.1 Continue to operate the business that is the subject
of this Agreement in the usual and ordinary course and in conformity
in all material respects with all applicable laws, ordinances,
regulations, rules, or orders, and will its best efforts to preserve
its business organization and preserve the continued operation of
its business with its customers, suppliers, and others having
business relations with Seller.
8.1.2 Not assign, sell, lease, or otherwise transfer or
dispose of any of the assets used in the performance of its
business, whether now owned or hereafter acquired, except in the
normal and ordinary course of business and in connection with its
normal operation.
8.1.3 Maintain its assets other than inventories in their
present condition, reasonable wear and tear and ordinary usage
excepted, and maintain the inventories at levels normally maintained.
8.2 Access to Premises and Information. At reasonable
times during normal business hours prior to the Closing Date, Seller
will provide Purchaser and its representatives with reasonable
access to the assets, titles, contracts, and records of Seller and
furnish such additional information concerning Seller's business as
Purchaser from time to time may reasonably request. Seller will
provide copies of any and all documents, contracts, and other
materials reasonably requested by Purchaser to complete its due
diligence investigation of Seller.
8.3 Employee Matters. Prior to the Closing Date, Seller
will not, without Purchaser's prior written consent, enter into any
material agreement with its employees, increase the rate of
compensation or bonus payable to or to become payable to any
employee, or effect any changes in the management, personnel
policies, or employee benefits, except in accordance with existing
employment practices.
8.4 Conditions and Best Efforts. Seller will use its
best efforts to effectuate the transactions contemplated by this
Agreement and to fulfill all the conditions of the obligations of
Seller under this Agreement, and will do all acts and things as may
be required to carry out its obligations under this Agreement and to
consummate and complete this Agreement.
Section 9. Covenants of Purchaser.
9.1 Conditions and Best Efforts. Purchaser will use its
best efforts to effectuate the transactions contemplated by this
Agreement and to fulfill all the conditions of Purchaser's
<PAGE>
obligations under this Agreement, and shall do all acts and things
as may be required to carry out Purchaser's obligations and to
consummate this Agreement.
9.2 Confidential Information. If for any reason the sale
of Assets is not closed, Purchaser hereto agrees to preserve the
secrecy of any and all information received from Seller in the
course of investigating, negotiating, and performing the
transactions contemplated by this Agreement, which shall be deemed
trade secrets of Seller. Said trade secrets include, but are not
limited to, prepared information packages; background information,
financials, related documents, intermediaries, employees, suppliers,
customers, contracts and financial considerations. Purchaser agrees
to preserve and protect the secrecy and confidentiality of such
information and shall disclose same to no third party without the
express written permission from Seller. This prohibition shall be
enforced from the date of this agreement and for a period of five
years thereafter.
Section 10. Conditions Precedent to Purchaser's Obligations. The
obligation of Purchaser to purchase the Assets is subject to the
fulfillment, prior to or at the Closing Date, of each of the
following conditions, any one or portion of which may be waived in
writing by Purchaser:
10.1 Representations, Warranties, and Covenants of Seller.
All representations and warranties made in this Agreement by Seller
shall be true as of the Closing Date as fully as though such
representations and warranties had been made on and as of the
Closing Date, and, as of the Closing Date, Seller shall not have
violated or shall have failed to perform in accordance with any
covenant contained in this Agreement.
10.2 Conditions of the Business. There shall have been no
material adverse change in the manner of operation of Seller's
business prior to the Closing Date.
10.3 No Suits or Actions. At the Closing Date no suit,
action, or other proceeding shall have been threatened or instituted
to restrain, enjoin, or otherwise prevent the consummation of this
Agreement or the contemplated transactions.
10.4 Seller's Performance. Seller shall have performed
and complied with all covenants and agreements, and satisfied all
conditions that it is required to otherwise satisfy pursuant to this
Agreement.
10.5 Purchaser's Corporate Approval. The Board of
Directors of Purchaser shall have duly authorized and approved the
execution and delivery of this Agreement and all corporate actions
necessary or proper to fulfill the obligations of Purchaser to be
performed under this Agreement.
10.6 Completion of Due Diligence Review. Purchaser shall
have completed its investigation and review of the books, records,
business, contracts, operations and assets of Seller and shall be
satisfied, in its sole and absolute discretion, with such review.
Section 11. Risk of loss. The risk of loss, damage, or
destruction to any of the equipment, inventory, or other personal
property to be conveyed to Purchaser under this Agreement shall be
borne by Seller to the time of Closing. In the event of such loss,
damage, or destruction, Seller, to
<PAGE>
the extent reasonable, shall replace the lost property or repair or
cause to repair the damaged property to its condition prior to the damage.
If replacement, repairs, or restorations are not completed prior to Closing,
then the purchase price shall be adjusted by an amount agreed upon by
Purchaser and Seller that will be required to complete the
replacement, repair, or restoration following Closing. If Purchaser
and Seller are unable to agree, then Purchaser, at its sole option
and notwithstanding any other provision of this Agreement, upon
notice to Seller, may rescind this Agreement and declare it to be of
no further force and effect, in which event there shall be no
Closing of this Agreement and all the terms and provisions of this
Agreement shall be deemed null and void.
Section 12. Indemnification and Survival.
12.1 Survival of Representations and Warranties. All
representations and warranties made in this Agreement shall survive
the Closing of this Agreement, except that any party to whom a
representation or warranty has bee made in this Agreement shall be
deemed to have waived any misrepresentation or breach of
representation or warranty of which such party had knowledge prior
to Closing. Any party learning of a misrepresentation or breach of
representation or warranty under this Agreement shall immediately
give written notice thereof to all other parties to this Agreement.
12.2 Seller's Indemnification.
12.2.1 Seller hereby agrees to indemnify and hold Purchaser,
it successors, and assigns harmless from and against:
12.2.2 Any and all claims, liabilities, and obligations of
every kind and description, contingent or otherwise, (i) arising out
of or related to the operation of Seller's business prior to the
close of business on the day before the Closing Date and (ii)
arising out of or related to the operations of the Business prior to
the Closing Date to the extent brought by or in any way related to
that certain business operation known as "CampusLink".
12.2.3 Any and all damage resulting from any material
misrepresentation, breach of warranty or covenant, or nonfulfillment
of any agreement on the part of Seller under this Agreement.
12.2.4 Seller understands and agrees that the Installment
Compensation payable hereunder may be immediately offset by
Purchaser against any and all indemnification claims or other claims
against Seller in accordance with the terms of this Agreement.
Section 13. Closing.
13.1 Time and Place. This Agreement shall be closed at
1:00 p.m.on April 3, 1998 or that date upon which all of the
conditions set forth herein have been satisfied, or at such other
time as the parties may agree in writing at a location to be agreed
upon by the parties.
13.2 Bulk Transfers. At the Closing, Seller shall provide
Purchaser with evidence of satisfaction of any applicable Uniform
Bulk Transfers Act. In the event any creditor of Seller claims the
benefit of the Bulk Transfers Act as against Purchaser or any of the
assets being conveyed to
<PAGE>
Purchaser under this Agreement, Seller shall immediately pay or otherwise
satisfy such claim or undertake its defense. Seller shall indemnify and hold
Purchaser harmless from and against any and all loss, expense, or damage
resulting from the failure to comply with the Bulk Transfers Act.
Section 14. Miscellaneous Provisions.
14.1 Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified, or supplemented only
by a written agreement signed by all of the parties hereto.
14.2 Notices. All notices, requests, demands, and other
communications required or permitted hereunder will be in writing
and will be deemed to have been duly given when delivered by hand or
two days after being mailed by certified or registered mail, return
receipt requested, with postage prepaid:
If, to Purchaser:
Jones Naughton Entertainment, Inc.
19932 Malaga Lane
Yorba Linda, CA 92686
Facsimile No.: (714) 994-3242
With a copy to:
Law offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Facsimile No.: (714) 719-1988
or to such other person or address as Purchaser furnish to Seller
pursuant to the above.
<PAGE>
If, to Seller:
Sign Products of America
8930 University Center Lane
San Diego, CA 92122
Facsimile No.: (619) 450-4333
With a copy to:
John Smaha, Esq.
8910 University Center Lane, Suite 400
San Diego, CA 92122
Facsimile No.: (619) 450-9676
or to such other address as Seller furnish to Purchaser pursuant to
the above.
14.3 Attorney Fees. In the event an arbitration, suit or
action is brought by any party under this Agreement to enforce any
of its terms, or in any appeal therefrom, it is agreed that the
prevailing party shall be entitled to reasonable attorneys fees to
be fixed by the arbitrator, trial court, and/or appellate court.
14.4 Law Governing. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
14.5 Titles and Captions. All section titles or captions
contained in this Agreement are for convenience only and shall not
be deemed part of the context nor affect the interpretation of this
Agreement.
14.6 Pronouns and Plurals. All pronouns and any
variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the person
or persons may require.
14.7 Entire Agreement. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject
matter of this Agreement. Any amendments to this Agreement must be
in writing and signed by the party against whom enforcement of that
amendment is sought.
14.8 Agreement Binding. This Agreement shall be binding
upon the heirs, executors, administrators, successors and assigns of
the parties hereto.
14.9 Arbitration. If at any time during the term of this
Agreement any dispute, difference, or disagreement shall arise upon
or in respect of the Agreement, and the meaning and construction
hereof, every such dispute, difference, and disagreement shall be
referred to a single arbiter agreed upon by the parties, or if no
single arbiter can be agreed upon, an arbiter or arbiters shall be
selected in accordance with the rules of the American Arbitration
Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing
commercial rules of the American Arbitration Association, and
judgment upon the
<PAGE>
award rendered by the arbiter may be entered in any court having
jurisdiction thereof.
14.10 Presumption. This Agreement or any Section thereof
shall not be construed against any party due to the fact that said
Agreement or any Section thereof was drafted by said party.
14.11 Further Action. The parties hereto shall execute and
deliver all documents, provide all information and take or forbear
from all such action as may be necessary or appropriate to achieve
the purpose of the Agreement.
14.12 Counterparts. This Agreement may be executed in
several counterparts and all so executed shall constitute one
Agreement, binding on all the parties hereto even though all the
parties are not signatories to the original or the same counterpart.
14.13 Parties in Interest. Nothing herein shall be
construed to be to the benefit of any
third party, nor is it intended that any provision shall be for the
benefit of any third party.
14.14 Savings Clause. If any provision of this Agreement,
or the application of such provision to any person or circumstance,
shall be held invalid, the remainder of this Agreement, or the
application of such provision to persons or circumstances other than
those as to which it is held invalid, shall not be affected thereby.
The parties hereto hereby agree to the foregoing and execute
this Agreement as of the date first above written.
SIGN PRODUCTS OF AMERICA, INC. JONES NAUGHTON ENTERTAINMENT, INC.
a California corporation a Colorado corporation
by: /s/ Hui Hua Wo by: /s/ Joseph Naugton
Hui Hua Wu, President Joseph Naughton, President
Attached Exhibits: A - List of Assets
<PAGE>
Exhibit "A"
LIST OF ASSETS
1. Four existing kiosk units, including phone equipment
2. Designs, plans and technical specifications for the existing
units and any future prototypes
3. Software and computer design equipment associated with the
creation of advertisements.
4. All contracts for advertising on existing kiosks
5. All contracts with colleges and other locations on existing
kiosks
6. Any and all contracts in negotiations with respect to
advertising and/or locations for new or existing kiosks
7. Any and all promotional material such as catalogs, brochures,
marketing information, sales lists, potential client lists,
existing client lists and other relevant material to sales
and marketing either in print or electronic format
8. All books and records of the Business
9. Any and all trademarks, tradenames or other intangible assets
related to the Business
10. The tradename "Community Marquee"
11. Any and all kiosk inventory, including without limitation
parts, supplies and existing completed kiosks
AGREEMENT FOR PURCHASE AND SALE
OF ASSETS
between
AFFILIATED MARKETING SERVICES, INC.
("Seller")
and
AMS ACQUISITION CORP.
("Purchaser")
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This Agreement for Purchase and Sale of Assets (this
"Agreement") is entered into as of this 8th day of July, 1998 by and
among Affiliated Marketing Services, Inc., a California corporation
("Seller"), AMS Acquisition Corp., a Nevada corporation
("Purchaser"), and Paul Hentschl, an individual ("Hentschl", and
each of Seller, Purchaser, and Hentschl shall be referred to as a
"Party" and collectively as the "Parties").
WHEREAS, Seller owns and operates several different
publishing and advertising business divisions (the "Divisions"),
including but not limited to Entertainer and Lifestyle Magazine
("Entertainer"), Smart Shoppers' Savings Guide ("Smart Shopper"),
and Escondido Recreation Activities & Community Newsletter
("Escondido Newsletter"). Seller's principal place of business is
12760 High Bluff Drive, Suite 310, San Diego, California 92130.
Seller owns equipment, inventories, contract rights with
advertisers, leasehold interests, permits and miscellaneous assets
used in connection with the operation of its business;
WHEREAS, Purchaser desires to acquire all the assets used or
useful, or intended to be used, in the operation of Seller's
business, and Seller desires to sell such assets to Purchaser.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Assets Purchased.
1.1 Assets Purchased. Seller agrees to sell, transfer,
convey and assign to Purchaser and Purchaser agrees to purchase from
Seller, subject to the terms and conditions set forth in this
Agreement, all of Seller's rights, title and interest in and to the
assets of the operation of the Divisions (the "Business"), including
without limitation all of the accounts receivable of the Business
and those assets set forth on Schedule 1.1 hereto ("Assets"), other
than those assets expressly excluded in paragraph 2 hereof. The
parties hereto acknowledge that such Assets constitute all of the
assets necessary for the operation of the Business.
1.2 Liabilities Assumed. Purchaser accepts
responsibility for and shall assume all liabilities relating to the
Business set forth in Schedule 1.2 attached hereto, including but
not limited to the accounts payable and note obligations (including
that certain Promissory Note dated March 20, 1997 between Seller and
James Wellborn which is assigned to Purchaser pursuant to this
Agreement) set forth therein. The Purchaser does not accept
responsibility for or assume any contingent liabilities or any other
liabilities of the Business not set forth on Schedule 1.2. Seller
represents and covenants that any and all liabilities of the
Business not assumed by Purchaser shall be paid in full within 15
days of the Closing Date from the proceeds hereof, with the
exception of $31,230.79 in payroll tax liabilities not assumed by
Purchaser which shall be paid by Seller.
Section 2. Excluded Assets. Assets excluded from this sale and
purchase are those set forth on Schedule 2 attached hereto.
<PAGE>
Section 3. Purchase Price for Assets. The purchase price for
the Assets shall be FIVE HUNDRED NINETY EIGHT THOUSAND TWO HUNDRED
THIRTY DOLLARS AND NO/100 ($598,230), which shall be paid by the
Purchaser as follows:
3.1 A total of $100,000 shall be paid by Purchaser to
Seller at the Closing Date.
3.2 A total of $100,000 shall be paid by Purchaser to
Seller no later than ninety (90) days following the Closing Date.
In the event that Purchaser defaults on the payment described in
this Section 3.2, defined as not delivering payment within ten (10)
days of date payment is due, then Seller shall have the benefits of
that certain First Company Security Agreement attached hereto as
Exhibit A.
3.3 On the Closing Date, Purchaser shall deliver to
Seller a secured promissory note (the "Note Consideration") in the
amount of Three Hundred Ninety Eight Thousand Two Hundred Thirty
($398,230), bearing interest at the rate of seven percent (7%) per
annum and secured by the assets of Purchaser. A copy of the Note
Consideration is attached hereto as Exhibit B.
3.4 Effective as of the Closing Date, Purchaser shall
assume the obligations of Seller under that certain Promissory Note
dated March 20, 1997 between Seller and James Wellborn (the
"Wellborn Note"), a copy of which has been attached hereto as
Exhibit C. Within five (5) business days of the Closing Date,
Purchaser shall provide notice to James Wellborn of the assumption
hereof.
3.5 Effective as of the Closing Date, Purchaser shall
enter into a three (3) year employment contract with Paul Hentschl
("Hentschl"), a copy of which is attached hereto as Exhibit D,
whereby Hentschl will be appointed President of Purchaser at an
annual salary equal to Eighty Four Thousand Dollars ($84,000) per
year, a bonus equal to two percent (2%) of the gross revenues of
Purchaser, and an automobile allowance not to exceed Four Hundred
Fifty Dollars ($450) per month.
Section 4. Adjustments. All revenues and expenses not otherwise
assigned or assumed in accordance with Sections 1.1, 1.2, and 1.3
herein (including but not limited to utilities, personal property
taxes, rents, real property taxes, wages, vacation pay, payroll
taxes, and fringe benefits of employees of Seller) from the
operation of the Business shall be prorated as of 5:00 p.m. as of
the Closing Date. All Business revenues relating to the period from
and after the Closing shall be the responsibility and property of
Purchaser upon the execution of this Agreement. Revenues and
expenses from the operation of the Business relating to the period
after the Closing shall be the property and liabilities,
respectively, of Purchaser.
Section 5. Seller's Representations and Warranties. Seller
represents and warrants to Purchaser as of the date hereof and as of
the Closing Date as follows:
5.1 Authority. Seller has full right, title, authority
and capacity to execute and perform this Agreement and to consummate
all of the transactions contemplated herein.
<PAGE>
5.2 Business Location and Leases. There are no defaults
or events with respect to the location of the Business that, with
notice or lapse of time, or both, will constitute any manner of
default or obligation of Seller as to any real or personal property
leases. All of the leases referenced in this Agreement are valid
and in full force, and there are no defaults or events that, with
notice or lapse of time, or both, would constitute a default
thereunder.
5.3 Brokers and Finders. Seller has not employed
any broker or finder in connection with the transactions
contemplated by this Agreement, or taken action that would give rise
to a valid claim against any party for a brokerage commission,
finder's fee, or other like payment.
5.4 Transfer Not Subject to Encumbrances or
Third-Party Approval. Except as may be described in Schedule 5.4 of
this Agreement, the execution and delivery of this Agreement by
Seller and the consummation of the contemplated transactions, will
not result in the creation or imposition of any valid lien, charge,
or encumbrance on any of the Assets, and will not require the
authorization, consent, or approval of any third party, including
any governmental subdivision or regulatory agency.
5.5 Inventory. The inventory existing for Seller as of
the Closing will be set forth in Schedule 5.5 of this Agreement (the
"Inventory"). The Inventory consists of office supplies and other
items of a quality and quantity usable in the ordinary course of
business for Seller. All items included in the Inventory as of the
Closing will be transferred to Purchaser and shall be valued at
Seller's cost and shall include prepaid expenses. No items included
in the Inventory have been pledged as collateral or held by Seller
on consignment from others.
5.6 Title to Assets. To the best of its knowledge except
as otherwise provided in Schedule 5.4 of this Agreement, Seller has
good and marketable title to all of the Assets, whether personal,
mixed, tangible or intangible. The Assets are owned by Seller free
and clear of all mortgages, liens, pledges, charges, encumbrances,
equities, claims, easements, rights of way, covenants, conditions,
or restrictions, except as may have otherwise been previously
disclosed herein. Seller has received no notice from any
governmental agency or any third party that it occupies the location
of the Business in violation of any law, ordinance, regulation or
decree.
5.7 Insurance. Seller has maintained and now maintains
adequate insurance protection against all liabilities, claims, risks
against which it is customary to insure. Existing insurance
policies held by Seller concerning the business of Seller will be
maintained in good standing up to and including the Closing.
5.8 Compliance with Laws; Structural Condition, Hazardous
Waste and Toxics. To the best of its knowledge and with no
notice(s) received, Seller has complied in all material respects
with and has not been cited for any violation of federal, state or
local environmental protection laws and/or regulations relating to
the Business or location of the Business, and no material capital
expenditures will be required for compliance with any federal, state
or local laws or regulations now in force or in effect relating to
the protection of the environment. Seller knows of no facts or
circumstances leading it to believe that any hazardous or toxic
substances may in any way be located or associated with any of the
Business or Business Locations.
<PAGE>
5.9 Litigation. Except as set forth in Schedule 5.9 of
this Agreement, there is no suit, action, arbitration or legal,
administrative or other proceeding, or governmental investigation
pending or, to the best of Seller's knowledge, threatened against or
in any was affecting the Business. Seller is not in default with
respect to any order, writ, injunction, or decree of any federal,
state, local or foreign court, department, agency or instrumentality.
5.10 Effect of Agreement. The transactions contemplated
by this Agreement will not result in or constitute in any manner any
of the following: (a) A default or an event that, with notice or
lapse of time or both, would be a default, breach or violation of
any lease, license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust, or other agreement,
instrument or arrangement to which Seller is a party, or by which
any of the property of Seller is bound; (b) An event that would
permit any party to terminate any agreement or to accelerate the
maturity of any indebtedness or other obligation of Seller, except
as may have otherwise been previously disclosed to Purchaser, in
writing; (c) The creation or imposition of any lien, charge or
encumbrance on any of the assets of Seller except as herein
provided; or (d) The violation of any law, judgment, order or decree
affecting the business or properties of Seller.
5.11 Utilities and Access. To the best of Seller's
knowledge, all utility services necessary and sufficient for the
full use, occupancy, operation and disposition of the Business are
available and in full operating condition. The Business has full
and open access to a dedicated public right of way without further
condition or cost to Purchaser.
5.12 Full Disclosure. None of the representations and/or
warranties made by Seller or its principals made in any certificate,
document or memorandum furnished or to be furnished by any of them
in connection with this Agreement, or on their behalf, to the best
of their knowledge, contains or will contain any untrue statement of
a material fact, or omit any material fact, the omission of which
would in any way be misleading or damaging to Purchaser in
connection with this transaction upon the execution of this Agreement.
5.13 Preservation of Business. Seller has used its best
efforts to preserve its respective business organizations intact, up
to and including the date of this Agreement, and to preserve all
existing relationships with suppliers, customers and others having
business relationships with Seller or Purchaser and/or the Business.
5.14 Conduct of Business in Normal Course. Seller has
carried on the Business and activities of the Business diligently
and in substantially the same manner as it has previously been
carried out, and has not made or instituted any unusual or unlawful
methods of inventory levels, purchase, maintenance sale, lease,
management, accounting or operation that varies from those methods
previously used with respect to the operation of the Business and
has not made or agreed to make any contractual obligations under
which the Business might be directly or indirectly affected.
5.15 Licenses and Permits. Seller possesses all
certificates, licenses, permits, contracts, consents, approvals and
governmental and regulatory authorizations (the "Permits") necessary
for Seller's operation of the business in the manner presently
operated. The Permits are in full force and
<PAGE>
effect, there has not occurred any event which is pending or threatened
which would cause permit revocation or suspension, or otherwise adversely
effect the maintenance of the Permits. No suspension or revocation of any
such Permits are pending or threatened, there is no action, investigation
or proceeding looking to or contemplating the revocation or
suspension of the Permits and there is no violation of any Permit
laws governing the issuance of the Permits in a way which would have
a material adverse effect on the operation of the Business. To the
extent permitted by law, for a period of one year after the closing
of the transactions contemplated under the terms of this Agreement,
Seller agrees and covenants to allow Purchaser to have use of, and
obtain the advantage of, the Permits by means of a power of attorney
or otherwise, unless and until Purchaser is able to obtain Permits
in its name or on its behalf for purposes of the continued operation
of the Business.
5.16 Existing Agreements. Without the consent of the
Purchaser or unless provided otherwise herein, the Seller has not
modified, amended, canceled or terminated any existing contracts or
agreements, or agreed to do any of those acts, as such contracts or
agreements may in any way relate to the Business.
5.17 Sales and Use Tax on Prior Sales. Seller agrees to
furnish to Purchaser prior to the date of this Agreement, with
clearance certificates that Purchaser may reasonably request as
evidence that all sales and use tax liabilities of Seller, accruing
before the date of Closing, have been fully satisfied or provided
for.
5.18 Non-Competition Covenants. Seller, together with any
and all shareholders, directors, officers, partners, owners or other
affiliates of Seller, jointly and severally, agree, warrant and
covenant that they shall not compete directly or indirectly with the
Purchaser, in the business presently conducted by the Business
existing at the time of this Agreement for a five (5) year period of
time following the Closing. The Seller shall hold all data and
information obtained with respect to the Business in the same degree
of confidence as the Business maintains such data and information.
For a period of five (5) years from and after Closing, the Seller
shall not directly or indirectly induce or solicit, or directly or
indirectly aid or assist any other Person to induce or solicit,
current employees, salesmen, agents, consultants, distributors,
representatives, advisors, customers or suppliers of the Business to
terminate their employment or business relations with the Business,
nor for a period of five (5) years from and after Closing shall the
Sellers employ any employees, salesmen or agents of the Purchaser
without written permission of the Purchaser. Nothing contained in
this paragraph shall prevent the Seller from purchasing less than
one percent (1%) of the issued and outstanding common stock of a
corporation which conducts such business if such stock is traded
upon the floor of the New York Stock Exchange or the American Stock
Exchange. In the event of a breach or threatened breach of this
Section, Purchaser shall be entitled to an injunction restraining
such breach; but nothing herein shall be construed as prohibiting
Purchaser from pursuing any other remedy available to Purchaser as a
result of such breach or threatened breach.
Section 6. Representations of Purchaser. Purchaser
represents and warrants as of the date hereof and as of the Closing
Date as follows:
6.1 Corporate Existence. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of Nevada. Purchaser has all requisite corporate power,
<PAGE>
shareholder approval and authority to enter into this Agreement and
perform its obligations hereunder.
6.2 Authorization. The execution, delivery, and
performance of this Agreement have been duly authorized and approved
by the board of directors, and this Agreement constitutes a valid
and binding Agreement of Purchaser in accordance with its terms.
6.3 Brokers and Finders. Purchaser has not employed any
broker or finder in connection with the transaction contemplated by
this Agreement and has taken no action that would give rise to a
valid claim against any party for a brokerage commission, finder's
fee, or other like payment.
6.4 Accuracy of Representations and Warranties. None of
the representations or warranties of Purchaser contain or will
contain any untrue statement of a material fact or omit or will omit
or misstate a material fact necessary in order to make the
statements contained herein not misleading.
Section 7. Covenants of Seller.
7.1 Seller's Operation of Business Prior to Closing.
Seller agrees that between the date of this Agreement and the
Closing Date, Seller will:
7.1.1 Continue to operate the business that is the subject
of this Agreement in the usual and ordinary course and in conformity
in all material respects with all applicable laws, ordinances,
regulations, rules, or orders, and will its best efforts to preserve
its business organization and preserve the continued operation of
its business with its customers, suppliers, and others having
business relations with Seller.
7.1.2 Not assign, sell, lease, or otherwise transfer or
dispose of any of the assets used in the performance of its
business, whether now owned or hereafter acquired, except in the
normal and ordinary course of business and in connection with its
normal operation.
7.1.3 Maintain its assets other than inventories in their
present condition, reasonable wear and tear and ordinary usage
excepted, and maintain the inventories at levels normally maintained.
7.2 Access to Premises and Information. At reasonable
times during normal business hours prior to the Closing Date, Seller
will provide Purchaser and its representatives with reasonable
access to the assets, titles, contracts, and records of Seller and
furnish such additional information concerning Seller's business as
Purchaser from time to time may reasonably request. Seller will
provide copies of any and all documents, contracts, and other
materials reasonably requested by Purchaser to complete its due
diligence investigation of Seller.
7.3 Employee Matters. Prior to the Closing Date, Seller
will not, without Purchaser's prior written consent, enter into any
material agreement with its employees, increase the rate of
compensation or bonus payable to or to become payable to any
employee, or effect any changes in
<PAGE>
the management, personnel policies, or employee benefits, except
in accordance with existing employment practices.
7.4 Conditions and Best Efforts. Seller will use its
best efforts to effectuate the transactions contemplated by this
Agreement and to fulfill all the conditions of the obligations of
Seller under this Agreement, and will do all acts and things as may
be required to carry out its obligations under this Agreement and to
consummate and complete this Agreement.
Section 8. Covenants of Purchaser.
8.1 Conditions and Best Efforts. Purchaser will use its
best efforts to effectuate the transactions contemplated by this
Agreement and to fulfill all the conditions of Purchaser's
obligations under this Agreement, and shall do all acts and things
as may be required to carry out Purchaser's obligations and to
consummate this Agreement.
8.2 Confidential Information. If for any reason the sale
of Assets is not closed, Purchaser hereto agrees to preserve the
secrecy of any and all information received from Seller in the
course of investigating, negotiating, and performing the
transactions contemplated by this Agreement, which shall be deemed
trade secrets of Seller. Said trade secrets include, but are not
limited to, prepared information packages; background information,
financials, related documents, intermediaries, employees, suppliers,
customers, contracts and financial considerations. Purchaser agrees
to preserve and protect the secrecy and confidentiality of such
information and shall disclose same to no third party without the
express written permission from Seller. This prohibition shall be
enforced from the date of this agreement and for a period of five
years thereafter.
Section 9. Conditions Precedent to Purchaser's Obligations. The
obligation of Purchaser to purchase the Assets is subject to the
fulfillment, prior to or at the Closing Date, of each of the
following conditions, any one or portion of which may be waived in
writing by Purchaser:
9.1 Representations, Warranties, and Covenants of Seller.
All representations and warranties made in this Agreement by Seller
shall be true as of the Closing Date as fully as though such
representations and warranties had been made on and as of the
Closing Date, and, as of the Closing Date, Seller shall not have
violated or shall have failed to perform in accordance with any
covenant contained in this Agreement.
9.2 Conditions of the Business. There shall have been no
material adverse change in the manner of operation of Seller's
business prior to the Closing Date.
9.3 No Suits or Actions. At the Closing Date no suit,
action, or other proceeding shall have been threatened or instituted
to restrain, enjoin, or otherwise prevent the consummation of this
Agreement or the contemplated transactions.
9.4 Seller's Performance. Seller shall have performed
and complied with all covenants and agreements, and satisfied all
conditions that it is required to otherwise satisfy pursuant to this
Agreement.
<PAGE>
9.5 Purchaser's Corporate Approval. The Board of
Directors of Purchaser shall have duly authorized and approved the
execution and delivery of this Agreement and all corporate actions
necessary or proper to fulfill the obligations of Purchaser to be
performed under this Agreement.
9.6 Completion of Due Diligence Review. Purchaser shall
have completed its investigation and review of the books, records,
business, contracts, operations and assets of Seller and shall be
satisfied, in its sole and absolute discretion, with such review.
Section 10. RISK OF LOSS. The risk of loss, damage, or
destruction to any of the equipment, inventory, or other personal
property to be conveyed to Purchaser under this Agreement shall be
borne by Seller to the time of Closing. In the event of such loss,
damage, or destruction, Seller, to the extent reasonable, shall
replace the lost property or repair or cause to repair the damaged
property to its condition prior to the damage. If replacement,
repairs, or restorations are not completed prior to Closing, then
the purchase price shall be adjusted by an amount agreed upon by
Purchaser and Seller that will be required to complete the
replacement, repair, or restoration following Closing. If Purchaser
and Seller are unable to agree, then Purchaser, at its sole option
and notwithstanding any other provision of this Agreement, upon
notice to Seller, may rescind this Agreement and declare it to be of
no further force and effect, in which event there shall be no
Closing of this Agreement and all the terms and provisions of this
Agreement shall be deemed null and void.
Section 11. Indemnification and Survival.
11.1 Survival of Representations and Warranties. All
representations and warranties made in this Agreement shall survive
the Closing of this Agreement, except that any party to whom a
representation or warranty has been made in this Agreement shall be
deemed to have waived any misrepresentation or breach of
representation or warranty of which such party had knowledge prior
to Closing. Any party learning of a misrepresentation or breach of
representation or warranty under this Agreement shall immediately
give written notice thereof to all other parties to this Agreement.
11.2 Seller's Indemnification.
11.2.1 Seller hereby agrees to indemnify and hold
Purchaser, it successors, and assigns harmless from and against:
11.2.2 Any and all claims, liabilities, and obligations of
every kind and description, contingent or otherwise, arising out of
or related to the operation of Seller's business prior to the close
of business on the day before the Closing Date.
11.2.3 Any and all damage resulting from any material
misrepresentation, breach of warranty or covenant, or nonfulfillment
of any agreement on the part of Seller under this Agreement.
11.2.4 Seller understands and agrees that the Installment
Compensation payable hereunder may be offset by Purchaser against
any and all indemnification claims or other claims against Seller in
accordance with the terms of this Agreement provided written notice
and a reasonable opportunity to respond to the claim is provided to
Seller.
<PAGE>
Section 12. Closing.
12.1 Time and Place. This Agreement shall be closed on
July 8, 1998 or that date upon which all of the conditions set forth
herein have been satisfied, or at such other time as the parties may
agree in writing at a location to be agreed upon by the parties.
12.2 Bulk Transfers. Within sixty (60) days following the
Closing, Seller shall provide Purchaser with evidence of
satisfaction of any applicable Uniform Bulk Transfers Act. In the
event any creditor of Seller claims the benefit of the Bulk
Transfers Act as against Purchaser or any of the assets being
conveyed to Purchaser under this Agreement, Seller shall immediately
pay or otherwise satisfy such claim or undertake its defense.
Seller shall indemnify and hold Purchaser harmless from and against
any and all loss, expense, or damage resulting from the failure to
comply with the Bulk Transfers Act.
Section 13. Miscellaneous Provisions.
13.1 Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified, or supplemented only
by a written agreement signed by all of the parties hereto.
13.2 Notices. All notices, requests, demands, and other
communications required or permitted hereunder will be in writing
and will be deemed to have been duly given when delivered by hand or
two days after being mailed by certified or registered mail, return
receipt requested, with postage prepaid:
If to Purchaser:
AMS Acquisition Corp.
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joseph Naughton, Chief Executive Officer
Facsimile No.: (949) 994-3242
With a copy to:
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: (949) 719-1988
or to such other person or address as Purchaser furnish
to Seller pursuant to the above.
If to Seller:
Affiliated Marketing Services, Inc.
13939 Barrymore
San Diego, CA 92129
Attn: Paul Hentschl
Facsimile No.: ( )
<PAGE>
With a copy to:
Kennerson Schwartz Semerdjian & Haile LLP
101 West Broadway, Suite 480
San Diego, CA 92101
Attn: John K. Grant, Esq.
Facsimile No.: (619) 236-8827
or to such other address as Seller furnish to Purchaser
pursuant to the above.
13.3 Attorney Fees. In the event an
arbitration, suit or action is brought by any party under
this Agreement to enforce any of its terms, or in any
appeal therefrom, it is agreed that the prevailing party
shall be entitled to reasonable attorneys fees to be fixed
by the arbitrator, trial court, and/or appellate court.
13.4 Law Governing. This Agreement shall be
governed by and construed in accordance with the laws of
the State of California.
13.5 Titles and Captions. All section titles or
captions contained in this Agreement are for convenience
only and shall not be deemed part of the context nor
affect the interpretation of this Agreement.
13.6 Pronouns and Plurals. All pronouns and any
variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the
identity of the person or persons may require.
13.7 Entire Agreement. This Agreement, along
with its attachments and exhibits, contains the entire
understanding between and among the parties and supersedes
any prior understandings and agreements among them
respecting the subject matter of this Agreement. Any
amendments to this Agreement must be in writing and signed
by the party against whom enforcement of that amendment is
sought.
13.8 Agreement Binding. This Agreement shall be
binding upon the heirs, executors, administrators,
successors and assigns of the parties hereto.
13.9 Presumption. This Agreement or any Section
thereof shall not be construed against any party due to
the fact that said Agreement or any Section thereof was
drafted by said party.
13.10 Further Action. The parties hereto shall
execute and deliver all documents, provide all information
and take or forbear from all such action as may be
necessary or appropriate to achieve the purpose of the
Agreement.
13.11 Counterparts. This Agreement may be
executed in several counterparts and all so executed shall
constitute one Agreement, binding on all the parties
hereto even though all the parties are not signatories to
the original or the same counterpart.
<PAGE>
13.12 Parties in Interest. Nothing herein shall
be construed to be to the benefit of any
third party, nor is it intended that any provision shall
be for the benefit of any third party.
13.13 Savings Clause. If any provision of this
Agreement, or the application of such provision to any
person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as
to which it is held invalid, shall not be affected thereby.
<PAGE>
The parties hereto hereby agree to the foregoing and execute this
Agreement as of the date first above written.
"Seller" "Purchaser"
Affiliated Marketing Services, Inc. AMS Acquisition Corp.
/s/ Paul Hentschl /s/ Joseph Naughton
By: Paul Hentschl By: Joseph Naughton
Its: President Its: Chief Executive Officer
Attached Schedules and Exhibits:
Schedule 1.1 Assets
Schedule 1.2 Liabilities
Schedule 2 Excluded Assets
Schedule 5.4 Encumbrances or Third-Party Approvals
Schedule 5.5 Inventory
Schedule 5.6 Title to Assets
Schedule 5.9 Litigation
Exhibit A First Company Security Agreement
Exhibit B Promissory Note and Security Agreement
Exhibit C Wellborn Note
Exhibit D Employment Contract
<PAGE>
Schedule 1.1
ASSETS
<PAGE>
Schedule 1.2
LIABILITIES
<PAGE>
Schedule 2
EXCLUDED ASSETS
<PAGE>
Schedule 5.4
ENCUMBRANCES AND THIRD-PARTY APPROVALS
<PAGE>
Schedule 5.5
INVENTORY
<PAGE>
Schedule 5.9
LITIGATION
<PAGE>
Exhibit "A"
FIRST COMPANY SECURITY AGREEMENT
<PAGE>
Exhibit "B"
PROMISSORY NOTE AND SECURITY AGREEMENT
<PAGE>
Exhibit "C"
WELLBORN NOTE
<PAGE>
Exhibit "D"
EMPLOYMENT CONTRACT
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made, entered
into, and effective as of July 8, 1998 ("Effective Date"), by and
between AMS Acquisition Corp., a Nevada corporation (the "Company")
and Paul Hentschl ("Employee").
RECITALS
WHEREAS, the Company desires to benefit from Employee's
expertise and employ Employee and Employee is willing to accept such
employment.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto hereby agree as
follows:
AGREEMENT
1. Term and Duties.
The Company hereby employs Employee as President as of the
Effective Date for a period of three (3) years, at which time this
Agreement shall terminate unless extended by mutual agreement of the
parties. Employee shall faithfully and diligently perform all
professional duties and acts as may be reasonably requested of
Employee by the Company or its officers consistent with the function
of a President in this or a similar company.
2. Duties.
Employee agrees to perform Employee's services to the best of
Employee's ability. Employee agrees throughout the term of this
Agreement to devote sufficient time, energy and skill to the
business of the Company and to the promotion of the best interests
of the Company. Employee will be provided with appropriate
equipment, secretarial help, supplies, and other facilities and
services suitable to Employee's position and adequate for the
performance of his duties. Employees duties shall include, but not
be limited to the Company's business development, costs, budgeting,
efficiency, and managing the workforce.
3. Compensation.
3.1 Subject to the termination of this Agreement as
provided herein, the Company shall compensate Employee for his
services as follows (collectively referred to as the "Compensation"):
(a) Employee shall receive an annual salary ("Salary") of
Eighty Four Thousand Dollars ($84,000.00) payable in semi-monthly
installments in accordance with the Company's practices, less normal
payroll deductions.
(b) Employee shall receive, in addition to the Salary set
forth above, a cash bonus (the "Bonus"), payable quarterly, equal to
two percent (2%) of the
<PAGE>
gross revenues of the Company for the previous quarter, provided that
certain minimum revenue levels are met for each quarter according to
the following formula:
(1) In year one (1) of this Agreement, the revenue
projections, by quarter, are as follows:
First Quarter (7/1/98 - 9/30/98) $210,000
Second Quarter (10/1/98 - 12/31/98) $230,000
Third Quarter (1/1/99 - 3/31/99) $250,000
Fourth Quarter (4/1/99 - 6/30/99) $310,000
For each quarter during year one (1), the Bonus will be
dependent upon the Company reaching the revenue projection for that
quarter. If the projected revenue figure is met or exceeded,
Employee shall receive the two percent (2%) Bonus based upon the
actual revenue figure for the quarter. If the projected revenue
figure is not met, no Bonus will be paid.
(2) If, by the end of year one (1) of this Agreement, the
Company's revenues match or exceed its expenses, as determined by
generally accepted accounting principles, then a Bonus shall be
payable in years two (2) and three (3) of this Agreement according
to the same schedule set forth in 3.1(b)(1) above. The parties
hereto agree to account for the revenues and expenses to each other
fully and in good faith.
(3) The terms of the Bonus are subject to mutual
reevaluation and change as agreed to between the parties.
(c) Employee shall be entitled to an automobile allowance,
payable to Employee or his assigns, not to exceed Four Hundred Fifty
Dollars ($450.00) per month.
(d) At the completion of each of the one (1) year periods
called for under this Agreement, Employee shall have the option to
purchase Three Hundred Thirty Three Thousand Three Hundred Thirty
Three (333,333) shares (the "Shares") of the restricted (as that
term is defined under Rule 144 of the Securities Act of 1933) common
stock of Jones Naughton Entertainment, Inc., a Colorado corporation,
at the price of twenty five cents ($0.25) per share. The options
granted hereunder shall be exercisable for a period of three (3)
years from the date Employee is entitled to exercise them. If, at
the end of a given year, Employee has not exercised his options
hereunder, then the options shall be carried forward and added to
the next year's options. If, in any of the three (3) years, the
Company's gross revenues exceed Two Million Dollars ($2,000,000),
then Employee shall receive the Shares free
<PAGE>
of charge as an additional bonus. The Company agrees to obtain
the consent of Jones Naughton Entertainment, Inc. to this Section 3.1(d).
3.2 In addition to the Compensation set forth above, the
Company shall periodically review Employee's performance and
services rendered with a view to paying discretionary bonuses based
upon above-average or outstanding performance for a prior period.
Any such bonuses approved by the Company shall be paid to Employee
within 30 days of the grant thereof.
3.3 In addition to the Compensation stated above,
commencing with the Effective Date, Employee shall be eligible to
participate in a health insurance plan, including dependent
coverage, supplied by the Company, the terms and conditions of which
are substantially similar to those currently provided to Employee by
his employer. In addition, Employee shall be entitled to
participate in a group life, workers' compensation, health plan, or
accidental insurance plan, the terms and conditions of which are
substantially similar to those currently provided to Employee by his
employer, which will be adopted by the Company for the benefit of
executive officers or employees. Employee shall be entitled to such
sick leave and paid holidays and to such other perquisites of
employment as customarily are extended by the Company to executive
officers or employees. In addition, Employee shall be entitled to
such other benefits as the Company may elect to provide generally,
from time to time, to executive officers or employees.
4. Disclosure of Confidential Information.
4.1 Employee shall not, during the term of this
Agreement and thereafter, communicate, divulge, or use for the
benefit of himself or any other person, partnership, association, or
corporation, either directly or indirectly, any information or
knowledge concerning Company and any information, including but not
limited to pricing schedules, customer lists, communication
techniques, invoicing, and billing which may be communicated to
Employee by Company during the term of this Agreement.
4.2 Employee agrees that any and all customer lists,
pricing schedules, products, formulas, inventions, schematics,
techniques, and goods created by Employee while rendering services
to Company shall be considered the property of the Company which
shall own all rights and interest in the same.
4.3 Employee covenants and agrees that during the term
of this Agreement he will not do any act, or fail to do any act, the
result of which may be prejudicial or injurious to the business and
goodwill of the Company.
5. Expenses.
The Company shall reimburse Employee for all reasonable
business related expenses incurred by Employee in the course of his
normal duties on behalf of the Company. In reimbursing Employee
for expenses, the ordinary and usual business guidelines and
documentation requirements
<PAGE>
shall be adhered to by the Company and Employee. Any expenses which,
individually or in the aggregate, exceed Five Hundred Dollars ($500.00)
must be consented to by the Company in writing prior to being incurred by
Employee.
6. Termination.
6.1 Termination by the Company. The Company reserves
the right to terminate this Agreement at any time for "cause". For
the purposes of this Agreement, an event or occurrence constituting
"cause" shall include, but not be limited to:
6.1.1 Employee's failure or refusal, after notice thereof,
to perform specific directives of the Board of Directors of the
Company, when such directives are consistent with the scope and
nature of the Employee's duties and responsibilities as set forth
herein or the commission of any intentional tort by the Employee
against the Company, or any breach by the Employee of any of the
covenants set forth in paragraphs 4 or 9 of this Agreement;
6.1.2 Drunkenness or use of drugs which interferes with the
performance of Employee's obligations under this Agreement,
continuing after notice thereof;
6.1.3 Any act of dishonesty or moral turpitude by the
Employee which constitutes a crime under the laws of the place where
the act was committed;
6.1.4 Any willful or intentional act by Employee which,
although not a crime, is of such impropriety or magnitude that it
substantially adversely affects the business and the reputation of
the Company.
6.1.5 Any material breach by Employee of that certain Asset
Purchase Agreement dated as of June 30, 1998 by and between AMS
Acquisition Corp., a Nevada corporation, Affiliated Marketing
Services, Inc., a California corporation, and Paul Hentschl.
In the event Employee is terminated for cause as defined
herein, Employee shall not be entitled to any bonus, termination or
severance payment of any sort.
6.2 Termination upon Death or Disability. This
Agreement shall be terminated upon the death of the Employee or, at
the Company's discretion, if the Employee suffers any physical or
mental disability that would prevent the performance of his duties
under this Agreement. Such a termination, in the case of
disability, shall be effected by giving thirty (30) days written
notice of termination to Employee.
6.3 Termination by Employee. This Agreement may be
terminated by the Employee by giving the Company at least thirty
(30) days notice in advance. In the event that this Agreement is
terminated prior to the completion of the term of employment
specified herein, Employee shall
<PAGE>
be entitled to compensation earned by and vested in him prior to the
date of termination as provided for in this Agreement, computed pro-rata
up to and including that date.
7. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of
the parties hereto their respective devisees, legatees, heirs, legal
representatives, successors, and permitted assigns. The preceding
sentence shall not affect any restriction on assignment set forth
elsewhere in this Agreement.
8. Notices.
All notices provided for in this Agreement shall be in
writing signed by the party giving such notice, and delivered
personally or sent by overnight courier or messenger or sent by
registered or certified mail (air mail if overseas), return receipt
requested, or by telex, facsimile transmission, telegram or similar
means of communication. Notices shall be deemed to have been
received on the date of personal delivery, telex, facsimile
transmission, telegram or similar means of communication, or if sent
by overnight courier or messenger, shall be deemed to have been
received on the next delivery day after deposit with the courier or
messenger, or if sent by certified or registered mail, return
receipt requested, shall be deemed to have been received on the
third business day after the date of mailing. Notices shall be sent
to the addresses set forth below:
If to the Company:
AMS Acquisition Corporation
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joseph Naughton, Chief Executive Officer
Facsimile No.: (949) 994-3242
With a copy to:
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: (949) 719-1988
If to the Purchaser:
Paul Hentschl
13939 Barrymore
San Diego, CA 92129
Facsimile No.: ( )
<PAGE>
With a copy to:
Kennerson Schwartz Semerdjian & Haille LLP
101 West Broadway, Suite 480
San Diego, CA 92101
Attn: John K. Grant, Esq.
Facsimile No.: (619) 236-8827
9. Assignment.
Subject to all other provisions of this Agreement, any attempt to
assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or otherwise, to any person, firm,
company, or corporation without the prior written consent of the
other party, shall be invalid, and may, at the option of such other
party, result in an incurable event of default resulting in
termination of this Agreement and all rights hereby conferred.
10. Choice of Law.
This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State
of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the
principles of conflict of laws.
11. Jurisdiction.
The parties submit to the jurisdiction of the Courts of the State
of California or a Federal Court empaneled in the State of
California for the resolution of all legal disputes arising under
the terms of this Agreement, including, but not limited to,
enforcement of any arbitration award.
12. Entire Agreement.
Except as provided herein, this Agreement, including exhibits,
contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other
oral, written, or other communications between them concerning the
subject matter of this Agreement. There are no representations,
agreements, arrangements, or understandings, oral or written,
between and among the parties hereto relating to the subject matter
of this Agreement that are not fully expressed herein.
13. Severability.
If any provision of this Agreement is unenforceable, invalid, or
violates applicable law, such provision, or unenforceable portion of
such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
14. Captions.
<PAGE>
The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the
relationship of the parties, and shall not affect this Agreement or
the construction of any provisions herein.
15. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
16. Modification.
No change, modification, addition, or amendment to this Agreement
shall be valid unless in writing and signed by all parties hereto.
17. Waiver.
No waiver of any breach, covenant, representation, warranty
or default of this Agreement by any party shall be considered to be
a waiver of any other breach, covenant, representation, warranty or
default of this Agreement.
18. Interpretation
The terms and conditions of this Agreement shall be deemed to
have been prepared jointly by all of the Parties hereto. Any
ambiguity or uncertainty existing hereunder shall not be construed
against any one of the drafting parties, but shall be resolved by
reference to the other rules of interpretation of contracts as they
apply in the State of California.
19. Attorneys' Fees.
Except as otherwise provided herein, if a dispute should arise
between the parties including, but not limited to arbitration, the
prevailing party shall be reimbursed by the non-prevailing party for
all reasonable expenses incurred in resolving such dispute,
including reasonable attorneys' fees.
20. Taxes.
Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make
such payment. Any withholding taxes in the nature of a tax on
income shall be deducted from payments due, and the party required
to withhold such tax shall furnish to the party receiving such
payment all documentation necessary to prove the proper amount to
withhold of such taxes and to prove payment to the tax authority of
such required withholding.
21. Not for the Benefit of Creditors or Third Parties.
<PAGE>
The provisions of this Agreement are intended only for the
regulation of relations among the parties. This Agreement is not
intended for the benefit of creditors of the parties or other third
parties and no rights are granted to creditors of the parties or
other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted,
adopted, or acted in reliance upon this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the Effective Date.
"Company" "Employee"
AMS Acquisition Corp. /s/ Paul Hentschl
Paul Hentschl
/s/ Joseph Naughton
By: Joseph Naughton
Its: Chief Executive Officer
FIRST COMPANY SECURITY AGREEMENT
Date: July 8, 1998
The undersigned (herein referred to as "Debtor") hereby
agrees in favor of Affiliated Marketing Services, Inc., a California
corporation, or its lawful assigns (herein referred to as "Secured
Party"), as follows:
1. In consideration of the delivery of a promise to pay
$100,000 under that certain Agreement for Purchase and Sale of
Assets between Secured Party and Debtor dated July 8, 1998 (the
"Agreement"), Debtor hereby grants to Secured Party a continuing
security interest in, and Debtor hereby assigns to Secured Party the
Collateral described in Exhibit A hereto, to secure the payment,
performance and observance of the obligations of Debtor under the
Agreement (the foregoing being herein referred to as the
"Obligations").
2. Debtor warrants, represents and covenants that: (a)
the chief executive office and other places of business of Debtor,
the books and records relating to the Collateral and the Collateral
are, and will continue to be located at the address set forth below
and Debtor will not change any of the same without prior written
notice to and consent of Secured Party; (b) the Collateral is now,
and at all times will be, owned by Debtor free and clear of all
liens, security interest, claims and encumbrances, unless previously
disclosed to Secured Party; (c) Debtor will not assign, sell,
mortgage, lease, transfer, pledge, grant a security interest in or
lien upon, encumber, or otherwise dispose of or abandon, nor will
Debtor suffer or permit any of the same to occur with respect to,
any part or all of the Collateral, without prior written notice to
Secured Party; (d) Debtor has made, and will continue to make
payment or deposit or otherwise provide for the payment, when due,
of all taxes, assessments or contributions required by law which
have been or may be levied or assessed against Debtor with respect
to any of the Collateral; (e) Secured Party shall at all times have
free access to and right of inspection of the Collateral and any
records pertaining thereto; (f) at any time and from time to time,
Debtor shall, at its sole cost and expense, execute and deliver to
Secured Party such financing statements pursuant to the Uniform
Commercial Code ("UCC"), applications for certificate of title and
other papers, documents or instruments as may be requested by
Secured Party in connection with this Security Agreement, and Debtor
hereby authorizes Secured Party to execute and file at any time and
from time to time one or more financing statements or copies thereof
of this Security Agreement with respect to the Collateral signed
only by Secured Party.
3. Each of the following events shall constitute an
event of default ("Default") under this Security Agreement: (a)
Debtor shall default in the punctual payment of any sum payable with
respect to, or in the observance or performance of any of the terms
and conditions of any Obligations; (b) the making or filing of any
lien, levy, or execution on or seizure, attachment of or garnishment
of, any Collateral; (c) Debtor shall become insolvent or commit an
act of bankruptcy or make an assignment for the benefit of
creditors; (d) there shall be filed by or against any Obligor any
petition for any relief under the bankruptcy laws of the United
States now or hereafter in effect; (e) the usual business of Debtor
shall be terminated or suspended.
4. Upon the occurrence of any Default and at any time
thereafter, Secured Party may,
<PAGE>
without notice to or demand upon Debtor, declare any Obligations
immediately due and payable and Secured Party shall have all rights
and remedies of a secured party under the UCC.
5. Debtor hereby releases Secured Party from any claims,
causes of action and demands at any time arising out of or with
respect to this Security Agreement, the Obligations, the Collateral
and its use and/or actions taken or omitted to be taken by Secured
Party with respect thereto, and Debtor hereby agrees to hold Secured
Party harmless from and with respect to any and all such claims,
causes of action and demands. No act, omission or delay by Secured
Party shall constitute a waiver of its rights and remedies hereunder
or otherwise. Debtor hereby waives presentment, notice of dishonor
and protest of all instruments included in or evidencing any
Obligations or Collateral, and all other notices and demands
whatsoever (except as expressly provided herein.) No provision
hereof shall be modified, altered or limited except by a written
instrument expressly referring to this Security Agreement and to
such provision, and executed by the party to be charged. This
Security Agreement and all Obligations shall be binding upon the
heirs, executors, administrators, successors, or assigns of Debtor
and shall, together with the rights and remedies of Secured Party
hereunder, inure to the benefit of Secured Party, its successors,
endorses and assigns. This Security Agreement and the Obligations
shall be governed in all respects by the laws of the State of
California applicable to contracts executed and to be performed in
such State. If any term of this Security Agreement shall be held to
be invalid, illegal or unenforceable, the validity of all other
terms hereof shall in no way be affected thereby.
IN WITNESS WHEREOF, the undersigned has executed or caused
this Security Agreement to be executed as of the date first above
set forth.
"Debtor" Address:
AMS ACQUISITION CORP. 5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
/s/Joseph Naughton
By: Joseph Naughton
Its: President
"Secured Party"
Affiliated Marketing Services, Inc. 13939 Barrymore
San Diego, CA 92129
/s/ Paul Hentschl
By: Paul Hentschl
Its: President
<PAGE>
EXHIBIT A
PROPERTY SUBJECT TO SECURITY INTEREST
With respect to AMS Acquisition Corp. (the "Company"), the
Collateral includes (i) all equipment, machinery, vehicles,
furniture, tools, dies, jigs, and fixtures, and all attachments,
accessions and equipment now or hereafter affixed thereto or used in
connection therewith, and all substitutions and replacements
thereof, wherever located, whether now owned or hereafter acquired
(the "Equipment"); (ii) all raw materials, work in process, finished
goods, and all other inventory (as defined in the Uniform Commercial
Code) of whatsoever kind or nature, and all wrapping, packaging,
advertising and shipping materials, and any documents relating
thereto, and all labels and other devices, names or marks affixed or
to be affixed thereto for purposes of selling or of identifying the
same or the seller or manufacturer thereof and all of the Company's
right, title and interest therein and thereto, wherever located,
whether now owned or hereafter acquired (the "Inventory"); (iii) all
present and future accounts, contract rights, chattel paper,
documents, instruments, trademarks, trade names, service names and
general intangibles, whether now owned or hereafter acquired, the
Company's interest in the goods represented thereby or described in
copies of invoices delivered to the Company; all returned, reclaimed
or repossessed goods with respect thereto; all rights and remedies
of Debtor under or in connection with such collateral (the
"Accounts"); (iv) all books, records and other property and general
intangibles at any time relating to the Equipment, Inventory and
Accounts ("Records"); and (v) all products and proceeds of the
foregoing, in any form, including without limitation, any claims
against third parties for loss or damage to or destruction of any or
all of the Equipment, Inventory and Accounts (the "Proceeds").
COMPANY SECURITY AGREEMENT
Date: July 8, 1998
The undersigned (herein referred to as "Debtor") hereby
agrees in favor of Paul Hentschl, or his lawful assigns (herein
referred to as "Secured Party"), as follows:
1. In consideration of the delivery of a Promissory Note
dated July 8, 1998, in the principal amount of Three Hundred Ninety
Eight Thousand Two Hundred Thirty Dollars ($398,230), Debtor hereby
grants to Secured Party a continuing security interest in, and
Debtor hereby assigns to Secured Party the Collateral described in
Exhibit A hereto, to secure the payment, performance and observance
of the obligations of Debtor under the Promissory Note (the
foregoing being herein referred to as the "Obligations").
2. Debtor warrants, represents and covenants that: (a)
the chief executive office and other places of business of Debtor,
the books and records relating to the Collateral and the Collateral
are, and will continue to be located at the address set forth below
and Debtor will not change any of the same without prior written
notice to and consent of Secured Party; (b) the Collateral is now,
and at all times will be, owned by Debtor free and clear of all
liens, security interest, claims and encumbrances, unless previously
disclosed to Secured Party; (c) Debtor will not assign, sell,
mortgage, lease, transfer, pledge, grant a security interest in or
lien upon, encumber, or otherwise dispose of or abandon, nor will
Debtor suffer or permit any of the same to occur with respect to,
any part or all of the Collateral, without prior written notice to
Secured Party; (d) Debtor has made, and will continue to make
payment or deposit or otherwise provide for the payment, when due,
of all taxes, assessments or contributions required by law which
have been or may be levied or assessed against Debtor with respect
to any of the Collateral; (e) Secured Party shall at all times have
free access to and right of inspection of the Collateral and any
records pertaining thereto; (f) at any time and from time to time,
Debtor shall, at its sole cost and expense, execute and deliver to
Secured Party such financing statements pursuant to the Uniform
Commercial Code ("UCC"), applications for certificate of title and
other papers, documents or instruments as may be requested by
Secured Party in connection with this Security Agreement, and Debtor
hereby authorizes Secured Party to execute and file at any time and
from time to time one or more financing statements or copies thereof
of this Security Agreement with respect to the Collateral signed
only by Secured Party.
3. Each of the following events shall constitute an
event of default ("Default") under this Security Agreement: (a)
Debtor shall default in the punctual payment of any sum payable with
respect to, or in the observance or performance of any of the terms
and conditions of any Obligations; (b) the making or filing of any
lien, levy, or execution on or seizure, attachment of or garnishment
of, any Collateral; (c) Debtor shall become insolvent or commit an
act of bankruptcy or make an assignment for the benefit of
creditors; (d) there shall be filed by or against any Obligor any
petition for any relief under the bankruptcy laws of the United
States now or hereafter in effect; (e) the usual business of Debtor
shall be terminated or suspended.
4. Upon the occurrence of any Default and at any time
thereafter, Secured Party may, without notice to or demand upon
Debtor, declare any Obligations immediately due and payable and
<PAGE>
Secured Party shall have all rights and remedies of a secured party
under the UCC.
5. Debtor hereby releases Secured Party from any claims,
causes of action and demands at any time arising out of or with
respect to this Security Agreement, the Obligations, the Collateral
and its use and/or actions taken or omitted to be taken by Secured
Party with respect thereto, and Debtor hereby agrees to hold Secured
Party harmless from and with respect to any and all such claims,
causes of action and demands. No act, omission or delay by Secured
Party shall constitute a waiver of its rights and remedies hereunder
or otherwise. Debtor hereby waives presentment, notice of dishonor
and protest of all instruments included in or evidencing any
Obligations or Collateral, and all other notices and demands
whatsoever (except as expressly provided herein.) No provision
hereof shall be modified, altered or limited except by a written
instrument expressly referring to this Security Agreement and to
such provision, and executed by the party to be charged. This
Security Agreement and all Obligations shall be binding upon the
heirs, executors, administrators, successors, or assigns of Debtor
and shall, together with the rights and remedies of Secured Party
hereunder, inure to the benefit of Secured Party, its successors,
endorses and assigns. This Security Agreement and the Obligations
shall be governed in all respects by the laws of the State of
California applicable to contracts executed and to be performed in
such State. If any term of this Security Agreement shall be held to
be invalid, illegal or unenforceable, the validity of all other
terms hereof shall in no way be affected thereby.
IN WITNESS WHEREOF, the undersigned has executed or caused
this Security Agreement to be executed as of the date first above
set forth.
"Debtor" Address:
AMS ACQUISITION CORP. 5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
By: /s/Joseph Naughton
Its: President
"Secured Party" 13939 Barrymore
San Diego, CA 92129
/s/Paul Hentschl
Paul Hentschl
<PAGE>
EXHIBIT A
PROPERTY SUBJECT TO SECURITY INTEREST
With respect to AMS Acquisition Corp. (the "Company"), the
Collateral includes (i) all equipment, machinery, vehicles,
furniture, tools, dies, jigs, and fixtures, and all attachments,
accessions and equipment now or hereafter affixed thereto or used in
connection therewith, and all substitutions and replacements
thereof, wherever located, whether now owned or hereafter acquired
(the "Equipment"); (ii) all raw materials, work in process, finished
goods, and all other inventory (as defined in the Uniform Commercial
Code) of whatsoever kind or nature, and all wrapping, packaging,
advertising and shipping materials, and any documents relating
thereto, and all labels and other devices, names or marks affixed or
to be affixed thereto for purposes of selling or of identifying the
same or the seller or manufacturer thereof and all of the Company's
right, title and interest therein and thereto, wherever located,
whether now owned or hereafter acquired (the "Inventory"); (iii) all
present and future accounts, contract rights, chattel paper,
documents, instruments, trademarks, trade names, service names and
general intangibles, whether now owned or hereafter acquired, the
Company's interest in the goods represented thereby or described in
copies of invoices delivered to the Company; all returned, reclaimed
or repossessed goods with respect thereto; all rights and remedies
of Debtor under or in connection with such collateral (the
"Accounts"); (iv) all books, records and other property and general
intangibles at any time relating to the Equipment, Inventory and
Accounts ("Records"); and (v) all products and proceeds of the
foregoing, in any form, including without limitation, any claims
against third parties for loss or damage to or destruction of any or
all of the Equipment, Inventory and Accounts (the "Proceeds").
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES
LAW AND MAY NOT BE TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE
SECURITIES LAWS, OR (II) IN THE OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE SECURITIES ACT OR
SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH TRANSFER.
AMS ACQUISITION CORP.
SECURED PROMISSORY NOTE
$398,230.00 Buena Park,
California July 8, 1998
FOR VALUE RECEIVED, the undersigned, AMS Acquisition Corp., a
Nevada corporation (the "Company"), hereby promises to pay to the
order of Paul Hentschl, or his lawful assigns (the "Purchaser"), in
lawful money of the United States of America, and in immediately
available funds, the principal sum of THREE HUNDRED NINETY EIGHT
THOUSAND TWO HUNDRED THIRTY DOLLARS ($398,230.00). The principal
hereof and any unpaid accrued interest thereon shall be due and
payable on or before 5:00 p.m., Pacific Standard Time, on July 8,
2001 (unless the payment date is accelerated as provided in Section
7 hereof or extended as provided in Section 2 hereof). Payment of
all amounts due hereunder shall be made at the address of the
Purchaser provided for herein. The Company further promises to pay
simple interest at the rate of 7.00% percent per annum on the
outstanding principal balance hereof, such interest to be payable
monthly in arrears on the 1st day of each month, commencing August
1, 1998.
1. SECURITY. This Note is secured by and entitled to
the benefits of a certain Company Security Agreement (the "Company
Security Agreement") dated as of even date herewith, among the
Company and the Purchaser.
2. EXTENSION OF MATURITY DATE. Purchaser shall have the
right, in its sole discretion, to extend the maturity of this Note,
each such extension exercisable only by the Purchaser by delivering
to the Company written notice of such extension at any time prior to
the maturity date then in effect.
3. TRANSFERABILITY. Subject to the provisions herein,
this Note shall be freely transferable by the Purchaser provided
such transfer is in compliance with applicable federal and state
securities laws.
4. DEFAULT. The occurrence of any one of the following
events shall constitute an Event of Default:
<PAGE>
(a) The non-payment, when due, of any principal or
interest pursuant to this Note;
(b) The material breach of any representation or warranty
in this Note. In the event the Purchaser becomes aware of a breach
of this Section 4(b), the Purchaser shall notify the Company in
writing of such breach and the Company shall have ten (10) business
days after notice to cure such breach;
(c) The material breach of any covenant or undertaking in
this Note, not otherwise provided for in this Section 4;
(d) The commencement by the Company of any voluntary
proceeding under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, receivership, dissolution, or
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or the adjudication of the Company as insolvent
or bankrupt by a decree of a court of competent jurisdiction; or the
petition or application by the Company for, acquiescence in, or
consent by the Company to, the appointment of any receiver or
trustee for the Company or for all or a substantial part of the
property of the Company; or the assignment by the Company for the
benefit of creditors; or the written admission of the Company of its
inability to pay its debts as they mature; or
(e) The commencement against the Company of any
proceeding relating to the Company under any bankruptcy,
reorganization, arrangement, insolvency, adjustment of debt,
receivership, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, provided, however,
that the commencement of such a proceeding shall not constitute an
Event of Default unless the Company consents to the same or admits
in writing the material allegations of same, or said proceeding
shall remain undismissed for 20 days; or the issuance of any order,
judgment or decree for the appointment of a receiver or trustee for
the Company or for all or a substantial part of the property of the
Company, which order, judgment or decree remains undismissed for 20
days; or a warrant of attachment, execution, or similar process
shall be issued against any substantial part of the property of the
Company.
Upon the occurrence of any Default or Event of Default, the
Purchaser may, by written notice to the Company, declare all or any
portion of the unpaid principal amount due to Purchaser immediately
due and payable, in which event it shall immediately be and become
due and payable, provided that upon the occurrence of an Event of
Default as set forth in paragraph (d) or paragraph (e) hereof, all
or any portion of the unpaid principal amount due to Purchaser shall
immediately become due and payable without any such notice.
5. PREPAYMENT. The Company may, at its option, at any
time and from time to time, prepay all or any part of the principal
balance of this Note, without penalty or premium, provided that
concurrently with each such prepayment the Company shall pay accrued
interest on the principal so prepaid to the date of such prepayment.
<PAGE>
6. NOTICES. All notices provided for in this Note shall
be in writing signed by the party giving such notice, and delivered
personally or sent by overnight courier or messenger or sent by
registered or certified mail (air mail if overseas), return receipt
requested, or by telex, facsimile transmission, telegram or similar
means of communication. Notices shall be deemed to have been
received on the date of personal delivery, telex, facsimile
transmission, telegram or similar means of communication, or if sent
by overnight courier or messenger, shall be deemed to have been
received on the next delivery day after deposit with the courier or
messenger, or if sent by certified or registered mail, return
receipt requested, shall be deemed to have been received on the
third business day after the date of mailing. Notices shall be sent
to the addresses set forth below:
If to the Company:
AMS Acquisition Corporation
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joseph Naughton, Chief Executive Officer
Facsimile No.: (949) 994-3242
With a copy to:
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: (949) 719-1988
If to the Purchaser:
Paul Hentschl
13939 Barrymore
San Diego, CA 92129
Facsimile No.: ( )
With a copy to:
Kennerson Schwartz Semerdjian & Haille LLP
101 West Broadway, Suite 480
San Diego, CA 92101
Attn: John K. Grant, Esq.
Facsimile No.: (619) 236-8827
<PAGE>
7. CHOICE OF LAW, JURISDICTION. This Note and the rights of
the parties hereunder shall be governed by and construed in
accordance with the laws of the State of California including all
matters of construction, validity, performance, and enforcement and
without giving effect to the principles of conflict of laws. The
parties submit to the jurisdiction of the Courts of the State of
California or a Federal Court empaneled in the State of California
for the resolution of all legal disputes arising under the terms of
this Note.
8. ATTORNEYS' FEES. Except as otherwise provided
herein, if a dispute should arise between the parties including, but
not limited to arbitration, the prevailing party shall be reimbursed
by the nonprevailing party for all reasonable expenses incurred in
resolving such dispute, including reasonable attorneys' fees
exclusive of such amount of attorneys' fees as shall be a premium
for result or for risk of loss under a contingency fee arrangement.
9. CONFORMITY WITH LAW. It is the intention of the
Company and of the Purchaser to conform strictly to applicable usury
and similar laws. Accordingly, notwithstanding anything to the
contrary in this Note, it is agreed that the aggregate of all
charges which constitute interest under applicable usury and similar
laws that are contracted for, chargeable or receivable under or in
respect of this Note, shall under no circumstances exceed the
maximum amount of interest permitted by such laws, and any excess,
whether occasioned by acceleration or maturity of this Note or
otherwise, shall be canceled automatically, and if theretofore paid,
shall be either refunded to the Company or credited on the Principal
amount of this Note.
IN WITNESS WHEREOF, the Company has signed and sealed this
Note and delivered it in Buena Park, California as of the date first
written above.
AMS ACQUISITION CORP.
/s/Joseph Naughton
By: Joseph Naughton
Its: Chief Executive Officer
AGREEMENT FOR PURCHASE AND SALE
OF ASSETS
between
AMS ACQUISITION CORP.
("Seller")
and
AFFILIATED MARKETING SERVICES, INC.
("Purchaser")
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This Agreement for Purchase and Sale of Assets (this
"Agreement") is entered into as of this 31st day of December, 1998
by and among AMS Acquisition Corp., a Nevada corporation ("Seller"),
Affiliated Marketing Services, Inc., a California corporation
("Purchaser"), and Paul Hentschl, an individual ("Hentschl", and
each of Seller, Purchaser, and Hentschl shall be referred to as a
"Party" and collectively as the "Parties").
WHEREAS, on July 8, 1998, Seller acquired from Purchaser,
under the terms of that certain Agreement for Purchase and Sale of
Assets dated July 8, 1998 (the "First Purchase Agreement"), several
different publishing and advertising business divisions (the
"Divisions"), including but not limited to Entertainer and Lifestyle
Magazine ("Entertainer"), Smart Shoppers' Savings Guide ("Smart
Shopper"), Escondido Recreation Activities & Community Newsletter
("Escondido Newsletter"), and all equipment, inventories, contract
rights with advertisers, leasehold interests, permits and
miscellaneous assets used in connection with the operation of its
business (collectively the "Business");
WHEREAS, in connection with the First Purchase Agreement,
Seller assumed certain liabilities of Purchaser and entered into an
employment agreement (the "Employment Agreement") with Hentschl;
WHEREAS, Purchaser desires to acquire all of the assets of
Seller, assume all of the liabilities and obligations of Seller, and
Seller desires to sells its assets to Purchaser.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Assets Purchased.
1.1 Assets Purchased. Seller agrees to sell, transfer,
convey and assign to Purchaser and Purchaser agrees to purchase from
Seller, subject to the terms and conditions set forth in this
Agreement, all of Seller's rights, title and interest in and to all
of the assets of the Business, including without limitation all of
the accounts receivable of the Business and those assets set forth
on Schedule 1.1 hereto ("Assets"), other than those assets expressly
excluded in paragraph 2 hereof. The parties hereto acknowledge that
such Assets constitute all of the assets necessary for the operation
of the Business.
1.2 Liabilities Assumed. Purchaser accepts
responsibility for and shall assume all liabilities of the Business,
including without limitation those set forth in Schedule 1.2
attached hereto, including but not limited to the accounts payable
and note obligations (including that certain Promissory Note dated
March 20, 1997 between Seller and James Wellborn which is assigned
to Purchaser pursuant to this Agreement) set forth therein.
1.2.1 As a material term of this Agreement, Purchaser
agrees to pay, in full, any and all obligations of Seller due and
owing to any tax authority, including but not limited to the
California Board of Equalization, California Franchise Tax Board,
and the Employment
<PAGE>
Development Department, which accrued between
July 8, 1998 and the Closing Date as defined herein. Purchaser
further agrees that these obligations will be paid no later than
ninety (90) days after the Closing Date and that proof of payment
satisfactory to Seller shall be provided to Seller immediately upon
payment of any obligation. Hentschl agrees to personally guarantee
payment under this Section 1.2.1 and to execute the Unconditional
Personal Guarantee attached hereto as Exhibit "A."
Section 2. Excluded Assets. Assets excluded from this sale and
purchase are those set forth on Schedule 2 attached hereto.
Section 3. Release of Obligations. Seller, Purchaser, and
Hentschl shall be relieved of any and all obligations to each other,
including but not limited to those arising out of the First Purchase
Agreement, whether paid, unpaid, accrued, or accruing in the future,
except as set forth in this Agreement.
Section 4. Adjustments. All Business revenues relating to the
period from and after the Closing shall be the responsibility and
property of Purchaser upon the execution of this Agreement.
Revenues and expenses from the operation of the Business relating to
the period after the Closing shall be the property and liabilities,
respectively, of Purchaser.
Section 5. Seller's Representations and Warranties. Seller
represents and warrants to Purchaser as of the date hereof and as of
the Closing Date as follows:
5.1 Authority. Seller has full right, title, authority
and capacity to execute and perform this Agreement and to consummate
all of the transactions contemplated herein.
5.2 Brokers and Finders. Seller has not employed
any broker or finder in connection with the transactions
contemplated by this Agreement, or taken action that would give rise
to a valid claim against any party for a brokerage commission,
finder's fee, or other like payment.
5.3 Preservation of Business. Seller has used its best
efforts to preserve its respective business organizations intact, up
to and including the date of this Agreement, and to preserve all
existing relationships with suppliers, customers and others having
business relationships with Seller or Purchaser and/or the Business.
5.4 Conduct of Business in Normal Course. Seller has
carried on the Business and activities of the Business diligently
and in substantially the same manner as it has previously been
carried out, and has not made or instituted any unusual or unlawful
methods of inventory levels, purchase, maintenance sale, lease,
management, accounting or operation that varies from those methods
previously used with respect to the operation of the Business and
has not made or agreed to make any contractual obligations under
which the Business might be directly or indirectly affected.
<PAGE>
5.5 No Liabilities Not Disclosed. Seller hereby
represents and warrants that it has disclosed all known liabilities
in Schedule 1.2 and that it has not incurred any liabilities to
which Purchaser and Hentschl are not aware.
Section 6. Representations of Purchaser. Purchaser
represents and warrants as of the date hereof and as of the Closing
Date as follows:
6.1 Corporate Existence. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of California. Purchaser has all requisite corporate
power, shareholder approval and authority to enter into this
Agreement and perform its obligations hereunder.
6.2 Authorization. The execution, delivery, and
performance of this Agreement have been duly authorized and approved
by the board of directors, and this Agreement constitutes a valid
and binding Agreement of Purchaser in accordance with its terms.
6.3 Brokers and Finders. Purchaser has not employed any
broker or finder in connection with the transaction contemplated by
this Agreement and has taken no action that would give rise to a
valid claim against any party for a brokerage commission, finder's
fee, or other like payment.
6.4 Accuracy of Representations and Warranties. None of
the representations or warranties of Purchaser contain or will
contain any untrue statement of a material fact or omit or will omit
or misstate a material fact necessary in order to make the
statements contained herein not misleading.
Section 7. Covenants of Seller.
7.1 Seller's Operation of Business Prior to Closing.
Seller agrees that between the date of this Agreement and the
Closing Date, Seller will:
7.1.1 Continue to operate the business that is the subject
of this Agreement in the usual and ordinary course and in conformity
in all material respects with all applicable laws, ordinances,
regulations, rules, or orders, and will use its best efforts to
preserve its business organization and preserve the continued
operation of its business with its customers, suppliers, and others
having business relations with Seller.
7.1.2 Not assign, sell, lease, or otherwise transfer or
dispose of any of the assets used in the performance of its
business, whether now owned or hereafter acquired, except in the
normal and ordinary course of business and in connection with its
normal operation.
7.1.3 Maintain its assets other than inventories in their
present condition, reasonable wear and tear and ordinary usage
excepted, and maintain the inventories at levels normally maintained.
<PAGE>
7.2 Access to Premises and Information. At reasonable
times during normal business hours prior to the Closing Date, Seller
will provide Purchaser and its representatives with reasonable
access to the assets, titles, contracts, and records of Seller and
furnish such additional information concerning Seller's business as
Purchaser from time to time may reasonably request. Seller will
provide copies of any and all documents, contracts, and other
materials reasonably requested by Purchaser to complete its due
diligence investigation of Seller.
7.3 Employee Matters. Prior to the Closing Date, Seller
will not, without Purchaser's prior written consent, enter into any
material agreement with its employees, increase the rate of
compensation or bonus payable to or to become payable to any
employee, or effect any changes in the management, personnel
policies, or employee benefits, except in accordance with existing
employment practices. Seller further agrees that it will not
terminate the employment agreement of Hentschl prior to the Closing
Date except in the event of illegal acts by Hentschl.
7.4 Conditions and Best Efforts. Seller will use its
best efforts to effectuate the transactions contemplated by this
Agreement and to fulfill all the conditions of the obligations of
Seller under this Agreement, and will do all acts and things as may
be required to carry out its obligations under this Agreement and to
consummate and complete this Agreement.
7.5 Release. Effective as of the Closing Date, each of
Seller and Joseph Naughton shall release and discharge Purchaser and
Hentschl, their affiliates, divisions, predecessors, successors and
assigns, and each and all of their present and former agents,
officers, directors, attorneys, and employees, from and against any
and all claims, agreements, contracts, covenants, representations,
obligations, losses, liabilities, demands and causes of action which
Seller may now or hereafter have or claim to have against Purchaser
and Hentschl arising out of or pertaining to the subject matter of
the First Purchase Agreement. This release of claims and defenses
shall not alter the prospective duties between the parties under
this Agreement.
Section 8. Covenants of Purchaser.
8.1 Conditions and Best Efforts. Purchaser will use its
best efforts to effectuate the transactions contemplated by this
Agreement and to fulfill all the conditions of Purchaser's
obligations under this Agreement, and shall do all acts and things
as may be required to carry out Purchaser's obligations and to
consummate this Agreement.
8.2 Financial Statements. Purchaser shall, at the
Closing or such other time as the Parties agree, provide to Seller
all data reasonable requested by Seller that is necessary for the
preparation of financial statements, reconciliation of bank
accounts, and preparation of tax returns for the period from July
8, 1998 through the Closing Date, including but not limited to
monthly income and expense statements, balance sheets, and cash flow
statements for the applicable period.
8.3 Release. Effective as of the Closing Date, Purchaser
shall release and discharge Seller and Joseph Naughton (the
"Released Parties"), their affiliates, divisions, predecessors,
successors and assigns, and each and all of their present and former
agents, officers, directors, attorneys, and employees, from and
against any and all claims, agreements, contracts, covenants,
<PAGE>
representations, obligations, losses, liabilities, demands and
causes of action which Purchaser may now or hereafter have or claim
to have against the Released Parties arising out of or pertaining to
the subject matter of the First Purchase Agreement. This release of
claims and defenses shall not alter the prospective duties between
the parties under this Agreement.
Section 9. Risk of Loss. The risk of loss, damage, or
destruction to any of the equipment, inventory, or other personal
property to be conveyed to Purchaser under this Agreement shall be
borne by Purchaser to the time of Closing.
Section 10. Survival of Representations and Warranties. All
representations and warranties made in this Agreement shall survive
the Closing of this Agreement, except that any party to whom a
representation or warranty has been made in this Agreement shall be
deemed to have waived any misrepresentation or breach of
representation or warranty of which such party had knowledge prior
to Closing. Any party learning of a misrepresentation or breach of
representation or warranty under this Agreement shall immediately
give written notice thereof to all other parties to this Agreement.
Section 11. Closing.
11.1 Time and Place. The transactions contemplated by
this Agreement shall be closed on the close of business on January
11, 1999 or that date upon which all of the conditions set forth
herein have been satisfied, or at such other time as the parties may
agree in writing at a location to be agreed upon by the parties.
Section 12. Miscellaneous Provisions.
12.1 Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified, or supplemented only
by a written agreement signed by all of the parties hereto.
12.2 Notices. All notices, requests, demands, and other
communications required or permitted hereunder will be in writing
and will be deemed to have been duly given when delivered by hand or
two days after being mailed by certified or registered mail, return
receipt requested, with postage prepaid:
If to Seller:
AMS Acquisition Corp.
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joseph Naughton,
Chief Executive Officer
Facsimile No.: (949) 994-3242
With a copy to:
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: (949) 719-1988
<PAGE>
or to such other person or address as Seller may furnish to Purchaser
pursuant to the above.
If to Purchaser:
Affiliated Marketing Services, Inc.
13939 Barrymore
San Diego, CA 92129
Attn: Paul Hentschl
Facsimile No.: ( )
With a copy to:
Kennerson Schwartz Semerdjian & Haile LLP
101 West Broadway, Suite 480
San Diego, CA 92101
Attn: John K. Grant, Esq.
Facsimile No.: (619) 236-8827
or to such other address as Purchaser may furnish to Seller
pursuant to the above.
12.3 Attorney Fees. In the event an
arbitration, suit or action is brought by any party under
this Agreement to enforce any of its terms, or in any
appeal therefrom, it is agreed that the prevailing party
shall be entitled to reasonable attorneys fees to be fixed
by the arbitrator, trial court, and/or appellate court.
12.4 Law Governing. This Agreement shall be
governed by and construed in accordance with the laws of
the State of California.
12.5 Titles and Captions. All section titles or
captions contained in this Agreement are for convenience
only and shall not be deemed part of the context nor
affect the interpretation of this Agreement.
12.6 Pronouns and Plurals. All pronouns and any
variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the
identity of the person or persons may require.
12.7 Entire Agreement. This Agreement, along
with its attachments and exhibits, contains the entire
understanding between and among the parties and supersedes
any prior understandings and agreements among them
respecting the subject matter of this Agreement. Any
amendments to this Agreement must be in writing and signed
by the party against whom enforcement of that amendment is
sought.
12.8 Agreement Binding. This Agreement shall be
binding upon the heirs, executors, administrators,
successors and assigns of the parties hereto.
12.9 Presumption. This Agreement or any Section
thereof shall not be construed against any party due to
the fact that said Agreement or any Section thereof was
drafted by said party.
<PAGE>
12.10 Further Action. The parties hereto shall
execute and deliver all documents, provide all information
and take or forbear from all such action as may be
necessary or appropriate to achieve the purpose of the
Agreement.
12.11 Counterparts. This Agreement may be
executed in several counterparts and all so executed shall
constitute one Agreement, binding on all the parties
hereto even though all the parties are not signatories to
the original or the same counterpart.
12.12 Parties in Interest. Nothing herein shall
be construed to be to the benefit of any
third party, nor is it intended that any provision shall
be for the benefit of any third party.
12.13 Savings Clause. If any provision of this
Agreement, or the application of such provision to any
person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as
to which it is held invalid, shall not be affected thereby.
12.14 Section 1542 Release. It is understood and
agreed by all Parties hereto that all rights under Section
1542 of the Civil Code of California, which provides as
follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time
of executing the release, which if known by him must have materially
affected his settlement with the debtor."
are hereby expressly waived. Each Party acknowledges and
agrees such Party understands the consequences of a waiver
of Section 1542 of the California Civil Code and assumes
full responsibility for any and all injuries, damages,
losses or liabilities that may hereinafter arise out of or
be related to matters released hereunder. Each Party
understands and acknowledges that the significance and
consequence of this waiver of Section 1542 of the Civil
Code is that even if such Party should eventually suffer
additional damages arising out of the subject matter of
the Dispute, it will not be permitted to make any claim
for those damages. Furthermore, each Party acknowledges
that they intend these consequences even as to claims for
damages that may exist as of the date of this Agreement
but which a Party does not know exists, and which, if
known, would materially affect each Party's decision to
execute this Agreement, regardless of whether each Party's
lack of knowledge is the result of ignorance, oversight,
error, negligence, or any other cause.
<PAGE>
The parties hereto hereby agree to the foregoing and execute this
Agreement as of the date first above written.
"Purchaser" "Seller"
Affiliated Marketing Services, Inc. AMS Acquisition Corp.
/s/ Paul Hentschl /s/ Joseph Naughton
By: Paul Hentschl By: Joseph Naughton
Its: President Its: Chief Executive Officer
Executed to signify compliance with Paragraph 7.5 hereof
only:
/s/ Joseph Naughton
Joseph Naughton
Executed to signify compliance with Paragraph 8.3 hereof
only:
/s/ Paul Hentschl
Paul Hentschl
<PAGE>
Schedule 1.1
ASSETS
<PAGE>
Schedule 1.2
LIABILITIES
<PAGE>
Schedule 2
EXCLUDED ASSETS
<PAGE>
Exhibit "A"
UNCONDITIONAL PERSONAL GUARANTY
Paul Hentschl ("Guarantor"), hereby irrevocably and
unconditionally guarantees to AMS Acquisition Corp, or assigns
(the "Holder") under that certain Agreement for Purchase and
Sale of Assets between Holder and Affiliated Marketing
Services, Inc. dated as of December 31, 1998 (the "Asset
Purchase Agreement") prompt payment, performance and
observance of any and all obligations (past due and future),
indebtedness, liabilities, obligations and agreements of any
kind due under Section 1.2.1 thereof, however evidenced,
whether as principal, surety, endorser, guarantor or
otherwise, whether now existing or hereafter arising, whether
direct or indirect, absolute or contingent, joint or several,
due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, original, renewed or
extended, whether arising under any guaranty, endorsement or
undertaking, whether arising directly or acquired from others,
and of all agreements, documents and instruments evidencing
any of the foregoing or under which any of the foregoing may
have been issued, created, assumed or guaranteed, including
without limitation, charges, commissions, interests, expenses,
fees, costs and reasonable attorney's fees chargeable to
Holder in connection with any or all of the foregoing (all of
the foregoing being herein referred to, jointly and severally,
as the "Obligations"). THIS IS A CONTINUING GUARANTY.
GENERAL TERMS
1. Guarantor is executing this guaranty in order to
induce Holder to execute the Asset Purchase Agreement.
2. This Guaranty is effective as of the date hereof and
shall continue so long as Holder may have any obligations to
tax authorities arising out of the period from July 9, 1998 to
the Closing Date under the Asset Purchase Agreement.
3. The Guarantor waives notice of acceptance of this
guaranty, notice of any liability to which it may apply, and
waives presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such obligations, diligence by
the Holder in collection of any indebtedness or other
obligation guaranteed herein or other such notice.
4. Holder may, without affecting the Guarantor's
obligations herein: (i) grant renewals, extensions or
modifications of the obligation or indebtedness; (ii) change
the manner, place or terms of payment, and/or change or extend
the time of payment of, renew or alter, any liability under
the Asset Purchase Agreement, any security therefor, or any
liability incurred directly or indirectly in respect thereof;
(iii) surrender or release any and all security or collateral;
(iv) release co-guarantors if any; (v) sell, exchange,
release, surrender, realize upon or otherwise deal with in any
manner and in any order any property by whomsoever at any time
pledged or mortgaged to secured, or howsoever securing, the
obligations hereby guaranteed or any liabilities (including
any of those hereunder) incurred directly or indirectly in
respect thereof or hereof, and/or any offset thereagainst, or
fail to perfect, or continue the perfection of, any lien or
security interest in any such property, or delay in the
perfection of any such lien or security interest; or (vi)
exercise or refrain from exercising any rights against
Affiliated Marketing Services, Inc. or others (including the
undersigned) or otherwise act or refrain from acting.
<PAGE>
5. Holder shall have no obligation to: (i) first
institute suit against Affiliated Marketing Services, Inc.
prior to demanding payment under this guaranty; (ii) exhaust
any remedies it may have against Affiliated Marketing
Services, Inc. or (iii) give notice of acceptance of this
guaranty.
6. Holder may in its sole discretion seek to enforce
this guaranty solely against the Guarantor. In the event
Holder is required to enforce this guaranty against Guarantor,
the undersigned Guarantor shall pay all costs and expenses of
every kind for collection, including reasonable attorneys'
fees. The undersigned waives the right of trial by jury in
the event of any litigation between the parties hereto in
respect of any matter arising under this guaranty and agree
that, should Holder bring any judicial proceedings in relation
to any such matter, the undersigned will not interpose any
counterclaim or setoff of any nature.
7. No delay on the part of Holder in exercising any of
its options, powers or rights, or partial or single exercise
thereof, shall constitute a waiver thereof. No waiver of any
of their rights hereunder, and no modification or amendment of
this Guaranty, shall be deemed to be made by Holder unless the
same shall be in writing, duly signed on behalf of such
Holder, and each such waiver, if any, shall apply only with
respect to the specific instance involved, and shall in no way
impair the rights of Holder or the obligations of the
undersigned to Holder in any other respect at any other time.
No invalidity, irregularity or unenforceability of all or any
part of the obligations hereby guaranteed or of any security
therefor shall affect, impair or be a defense to this
guaranty, and this guaranty is a primary obligation of the
undersigned.
8. Any and all rights and claims of the undersigned
against Affiliated Marketing Services, Inc. or any of its
property, arising by reason of any payment by the undersigned
to Holder pursuant to the provisions of this guaranty, shall
be subordinate and subject in right of payment to the prior
payment in full of all obligations to Holder.
9. Together with the Asset Purchase Agreement, this is
the entire agreement of the parties and this agreement may be
modified only by a written agreement executed by both parties.
10. This guaranty and the rights and obligations of
Holder and of the undersigned hereunder shall be governed and
construed in accordance with the laws of the state of
California. This guaranty is binding upon the undersigned,
his executors, administrators, successors or assigns, and
shall inure to the benefit of Holder, its successors and
assigns. In the event Holder brings any action or suit in any
court of record of California or federal courts located in
California to enforce any or all of the obligations of the
undersigned hereunder, service of process may be made upon the
undersigned by mailing a copy of the summons to Affiliated
Marketing Services, Inc.'s address.
READ THIS AGREEMENT CAREFULLY. THIS IS AN AGREEMENT TO
GUARANTY THE DEBTS OF ANOTHER. THIS MEANS THAT YOU MAY HAVE
TO PAY THE WHOLE DEBT OR OBLIGATION OF AMS ACQUISITION CORP.
AS SET FORTH IN THE ASSET PURCHASE AGREEMENT.
Dated: January 11, 1999
/s/ Paul Hentschl
Paul Hentschl
Guarantor
ADDENDUM
This Addendum ("Addendum") to that certain Agreement for
Purchase and Sale of Assets between AMS Acquisition Corp. ("Seller")
and Affiliated Marketing Services, Inc. ("Purchaser") dated December
31, 1998 (the "Agreement") is executed this 13th day of January,
1999.
WHEREAS, pursuant to Section 11 of the Agreement, the Closing
is scheduled to take place on January 11, 1999;
WHEREAS, pursuant to Section 8.2 of the Agreement, Purchaser is
required to provide certain documentation to Seller and Purchaser
has informed Seller that Purchaser requires several days following
the Closing to create and produce the documents required therein;
WHEREAS, the Parties hereto agree that the Closing should be
effective as of January 11, 1999 but that it should not be
consummated until such time as Purchaser delivers the Exhibits to
the Agreement and the documents required by Section 8.2 thereof;
NOW, THEREFORE, in consideration of the mutual covenants and
agreement contained herein, the Parties agree as follows:
1. Purchaser shall use his best efforts to create and deliver
to Seller the Exhibits to the Agreement and the documents
required by Section 8.2 thereof, and for purposes of
creating those Exhibits and documents the effective date
of the closing shall be January 11, 1999.
2. The actual Closing of the contemplated transaction and the
parties obligations under the Agreement shall not happen
until Purchaser has delivered, to Seller's satisfaction as
to the form, accuracy, and completeness thereof, the items
referenced in Paragraph 1 hereof.
3. In the event that Purchaser has not delivered the items
referenced in Paragraph 1 hereof to Seller's satisfaction
by January 25, 1999, then the Agreement shall be declared
canceled.
The Parties hereto hereby agree to the foregoing and execute
this Addendum as of the date first written above.
"Purchaser" "Seller"
Affiliated Marketing Services, Inc. AMS Acquisition Corp.
/s/ Paul Hentschl /s/ Joseph Naughton
By: Paul Hentschl By: Joseph Naughton
Its: President Its: Chief Executive Officer
JOINT VENTURE AGREEMENT
This Joint Venture Agreement (the "Agreement") is entered
into this 26th day of February, 1999 by and between Jones Naughton
Entertainment, Inc., a Colorado corporation ("JNE") and Scott
Claverie, an individual ("Claverie"). JNE and Claverie shall be
collectively referred to herein as the parties.
RECITALS
WHEREAS, JNE is the owner of 100% of the outstanding common
stock of AMS Acquisition Corp., a Nevada corporation ("AMS"),
consisting of 100,000 shares;
WHEREAS, JNE and Claverie desire to jointly own and operate a
venture which will own and operate an Internet-based infomercial web
site (the "Business").
NOW, THEREFORE, for good and adequate consideration, the
receipt of which is hereby acknowledged, the parties hereby agree as
follows:
1. Ownership. JNE will transfer to Claverie 25,000 shares of
AMS common stock. In addition, JNE will grant to Claverie
warrants to acquire an additional 26,000 shares of AMS common
stock at a price of $1.00 per share, said warrants to be
exercisable during the thirty (30) days following the end of
the first profitable quarter of operations, as determined in
accordance with generally accepted accounting principles, but
in no event later than twelve (12) months from the date
hereof. Profitability calculations shall include salary
and/or wages paid to Claverie and others. In the event that
profits are distributed or losses allocated from the Company,
they shall be distributed or allocated pro-rata in accordance
with each parties stock ownership during the relevant period.
2. Transfer of Assets. JNE will fund AMS with the sum of
$25,000 within three (3) business days of execution of this
Agreement which shall be used for working capital purposes.
Claverie will transfer to AMS all equipment, intellectual
property, technology, etc. associated with the Business.
3. Name Change. The parties hereby agree to change the name of
the company from AMS Acquisition Corp., a Nevada corporation,
to Go On-line.com, Inc. within thirty (30) days of the
execution of this Agreement.
4. Officers and Directors. Scott Claverie will be President of
the Business and Joseph Naughton will be the Chief Executive
Officer, Secretary and Treasurer all to serve at the
direction of the Board of Directors. Both Scott Claverie and
Joseph Naughton will be directors to serve at the discretion
of the shareholders. The parties agree to use mutual best
efforts to identify a third party to serve on the board of
directors.
5. Nondisclosure. Each party hereto agrees to keep the terms of
this Agreement and the transactions contemplated hereby as
confidential and shall not disclose such information to any
third party, other than professional advisors utilized to
negotiate and consummate the
<PAGE>
transactions contemplated hereby. The parties hereto agree that
in the event there is a breach of the foregoing confidentiality
provision, the damage to the parties hereto would be difficult to
estimate and as a result, in the event of such a breach, the
non-breaching party, in addition to any and all other
remedies allowed by law, would be entitled to injunctive
relief enjoining the actions of the breaching party.
6. Representations and Warranties.
Each party hereby represents, warrants and covenants as follows:
a. When executed and delivered, the terms hereof shall
constitute a valid and legally binding agreement
enforceable in accordance with its terms, except as
may be limited by bankruptcy, insolvency or other
laws affecting generally the enforceability of
creditors rights and by limitations on the
availability of equitable remedies.
b. Neither the execution and delivery of this Agreement
nor the consummation or performance of the
transactions contemplated herein will violate any
law, rule, regulation, writ, judgment, injunction,
decree, determination, or other order of any court,
government or governmental agency or instrumentality,
domestic or foreign, or conflict with or result in
any breach of any of the terms of or the creation or
imposition of any mortgage, deed of trust, pledge,
lien, security interest or other charge or
encumbrance of any nature pursuant to the terms of
any contract or agreement.
7. Severability. If any portion of this Agreement is found by a
court of competent jurisdiction to be void or unenforceable,
that portion shall be deemed to be reformed to the extent
necessary to cause such portion to be enforceable and the
same shall not affect the remainder of this Agreement, which
shall be given full force and effect without regard to the
invalid or unenforceable portions.
8. Entire Agreement. This Agreement, which may be signed in
duplicate or counterparts, replaces and supersedes all
previous Agreements between the parties hereto, and contains
the entire understanding between the parties, and may not be
changed, altered, amended, or modified, except in writing,
duly executed by each of the parties.
9. Assignment. This Agreement may not be assigned or
transferred by either party hereto without the prior written
consent of all other parties hereto.
10. Notices. All notices, requests, instruments or documents
hereunder shall be in writing and delivered personally or
sent by registered or certified mail, postage prepaid, or by
facsimile transmission, telegraphic or similar conveyance:
If to JNE:
Joseph Naughton
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
<PAGE>
If to Claverie:
Scott Claverie
Facsimile: (916) 342-6790
If delivered personally, the date on which a notice, request,
instruction or document is delivered shall be the date on
which delivery is made, and, if delivered by mail, the date
on which such notice, request, instruction or document is
deposited in the mail shall be the date of delivery. Each
notice, request, instruction or document shall bear the date
on which it is delivered.
11. Governing Law. This Agreement shall be governed by the laws
of the State of California, United States of America.
12. Attorney's Fees. Should any action be commenced between the
parties to this Agreement concerning the matters set forth in
this Agreement or the rights and duties of either in relation
thereto, the prevailing party in such action shall be
entitled, in addition to such other relief as may be granted,
to a reasonable sum as and for its Attorney's Fees and Costs.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first
written above.
JONES NAUGHTON ENTERTAINMENT, INC.
/s/Scott Claverie
Scott Claverie
/s/Joseph Naughton
By: Joseph Naughton
Its: Chairman
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made, entered
into, and effective as of April 12, 1999 ("Effective Date"), by and
between Jones Naughton Entertainment, Inc., a Colorado corporation
(the "Company") and James Cannon ("Employee").
RECITALS
WHEREAS, the Company desires to benefit from Employee's
expertise and employ Employee and Employee is willing to accept such
employment.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto hereby agree as
follows:
AGREEMENT
1. Term and Duties.
The Company hereby employs Employee as President of its
Community Marquee Division (the "Division") as of the Effective Date
for a period of one (1) year, at which time this Agreement shall
terminate unless extended by mutual agreement of the parties.
Employee shall faithfully and diligently perform all professional
duties and acts as may be reasonably requested of Employee by the
Company or its officers consistent with the function of a Division
President in this or a similar company.
2. Duties.
Employee agrees to perform Employee's services to the best of
Employee's ability. Employee agrees throughout the term of this
Agreement to devote sufficient time, energy and skill to the
business of the Company and the Division and to the promotion of the
best interests of the Company and the Division. Employee will be
provided with appropriate equipment, secretarial help, supplies, and
other facilities and services suitable to Employee's position and
adequate for the performance of his duties in the discretion of the
Board of Directors. Employees duties shall include, but not be
limited to the Division's business development, costs, budgeting,
efficiency, and managing the workforce.
3. Compensation.
3.1 Subject to the termination of this Agreement as
provided herein, the Company shall compensate Employee for his
services as follows (collectively referred to as the "Compensation"):
(a) Employee shall receive an annual salary ("Salary") of
Sixty Thousand Dollars ($60,000.00) payable in semi-monthly
installments in accordance with the Company's practices, less normal
payroll deductions.
<PAGE>
(b) Employee shall receive, in addition to the Salary set
forth above, a cash bonus (the "Bonus"), payable quarterly, equal to
twenty percent (20%) of the net (after taking into account fees,
commissions, etc. payable by the Company) advertising revenues of
the Community Marquee Division generated as a result of Employee's
direct efforts during the previous quarter.
(c) In the alternative to the Bonus set forth in Paragraph
3.1(b) hereof, Employee shall receive a cash bonus (the "Third-Party
Bonus"), payable quarterly, equal to twenty-five percent (25%) of
the net (after taking into account fees, commissions, etc. payable
by the Company) advertising revenues of the Community Marquee
Division generated by parties other than Employee. Employee
understands and agrees that any fees, commissions, bonuses, etc.
payable to a third-party for generating said advertising revenues
shall not be paid by the Company but shall be paid, if necessary,
out of the Third-Party Bonus payable to Employee.
(d) In addition to the Salary, Bonus, and Third-Party Bonus
set forth herein, Employee shall be granted options to acquire
common stock of the Company as follows: For every twenty-five (25)
kiosks shipped and installed by the Division, up to a maximum of one
hundred fifty (150) kiosks, Employee shall receive options to
acquire 25,000 shares of Company common stock at an exercise price
equal to sixty-percent (60%) of the closing bid price on the last
business day of the month in which Employee became eligible hereunder.
3.2 In the event that this Agreement is extended by
mutual agreement of the parties as set forth in Paragraph 1 hereof,
Employee shall accrue vacation time beginning in Year 2 of this
Agreement at the rate of two (2) weeks per year, up to a maximum
accrual of four (4) weeks.
3.3 In the event that Employee is eligible to have his
insurance benefits extended by his previous employer under COBRA,
then the Company agrees to pay, if requested by Employee, the cost
of Employee's COBRA payments for as long as reasonably practicable
thereunder.
3.4 In addition to the Compensation set forth above, the
Company shall periodically review Employee's performance and
services rendered with a view to paying discretionary bonuses based
upon above-average or outstanding performance for a prior period.
Any such bonuses approved by the Company shall be paid to Employee
within 30 days of the grant thereof.
4. Disclosure of Confidential Information.
4.1 Employee shall not, during the term of this
Agreement and thereafter, communicate, divulge, or use for the
benefit of himself or any other person, partnership, association, or
corporation, either directly or indirectly, any information or
knowledge concerning the Company or the Division and any
information, including but not limited to pricing schedules,
customer lists, communication techniques, invoicing, and billing
which may be communicated to Employee by the Company or the Division
during the term of this Agreement.
<PAGE>
4.2 Employee agrees that any and all customer lists,
pricing schedules, products, formulas, inventions, schematics,
techniques, and goods created by Employee while rendering services
to Company shall be considered the property of the Company which
shall own all rights and interest in the same.
4.3 Employee covenants and agrees that during the term
of this Agreement he will not do any act, or fail to do any act, the
result of which may be prejudicial or injurious to the business and
goodwill of the Company or the Division.
5. Expenses.
The Company shall reimburse Employee for all reasonable
business related expenses incurred by Employee in the course of his
normal duties on behalf of the Company. In reimbursing Employee
for expenses, the ordinary and usual business guidelines and
documentation requirements shall be adhered to by the Company and
Employee. Any expenses which, individually or in the aggregate,
exceed Five Hundred Dollars ($500.00) must be consented to by the
Company in writing prior to being incurred by Employee.
6. Termination.
6.1 Termination by the Company. The Company reserves
the right to terminate this Agreement at any time for "cause". For
the purposes of this Agreement, an event or occurrence constituting
"cause" shall include, but not be limited to:
6.1.1 Employee's failure or refusal, after notice thereof,
to perform specific directives of the Board of Directors of the
Company, when such directives are consistent with the scope and
nature of the Employee's duties and responsibilities as set forth
herein or the commission of any intentional tort by the Employee
against the Company, or any breach by the Employee of any of the
covenants set forth in paragraphs 4 or 9 of this Agreement;
6.1.2 Drunkenness or use of drugs which interferes with
the performance of Employee's obligations under this Agreement,
continuing after notice thereof;
6.1.3 Any act of dishonesty or moral turpitude by the
Employee which constitutes a crime under the laws of the place where
the act was committed;
6.1.4 Any willful or intentional act by Employee which,
although not a crime, is of such impropriety or magnitude that it
substantially adversely affects the business and the reputation of
the Company.
In the event Employee is terminated for cause as defined
herein, Employee shall not be entitled to any bonus, termination or
severance payment of any sort.
<PAGE>
6.2 Termination upon Death or Disability. This
Agreement shall be terminated upon the death of the Employee or, at
the Company's discretion, if the Employee suffers any physical or
mental disability that would prevent the performance of his duties
under this Agreement. Such a termination, in the case of
disability, shall be effected by giving thirty (30) days written
notice of termination to Employee.
6.3 Termination with Notice. This Agreement may be
terminated by either the Employee or the Company, with or without
cause, by giving the other party at least thirty (30) days notice in
advance. In the event that this Agreement is terminated prior to
the completion of the term of employment pursuant to this paragraph,
Employee shall be entitled to compensation earned by and vested in
him prior to the date of termination as provided for in this
Agreement, computed pro-rata up to and including that date.
7. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of
the parties hereto their respective devisees, legatees, heirs, legal
representatives, successors, and permitted assigns. The preceding
sentence shall not affect any restriction on assignment set forth
elsewhere in this Agreement.
8. Notices.
All notices provided for in this Agreement shall be in
writing signed by the party giving such notice, and delivered
personally or sent by overnight courier or messenger or sent by
registered or certified mail (air mail if overseas), return receipt
requested, or by telex, facsimile transmission, telegram or similar
means of communication. Notices shall be deemed to have been
received on the date of personal delivery, telex, facsimile
transmission, telegram or similar means of communication, or if sent
by overnight courier or messenger, shall be deemed to have been
received on the next delivery day after deposit with the courier or
messenger, or if sent by certified or registered mail, return
receipt requested, shall be deemed to have been received on the
third business day after the date of mailing. Notices shall be sent
to the addresses set forth below:
If to the Company:
Jones Naughton Entertainment, Inc.
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joseph Naughton, Chief Executive Officer
Facsimile No.: (714) 994-3242
With a copy to:
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: (949) 719-1988
<PAGE>
If to the Purchaser:
James Cannon
5217 Happy Hollow Road
Atlanta, GA 30360
Facsimile No.: (770) 394-8347
9. Assignment.
Subject to all other provisions of this Agreement, any attempt to
assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or otherwise, to any person, firm,
company, or corporation without the prior written consent of the
other party, shall be invalid, and may, at the option of such other
party, result in an incurable event of default resulting in
termination of this Agreement and all rights hereby conferred.
10. Choice of Law.
This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State
of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the
principles of conflict of laws.
11. Jurisdiction.
The parties submit to the jurisdiction of the Courts of the State
of California or a Federal Court empaneled in the State of
California, County of Orange, for the resolution of all legal
disputes arising under the terms of this Agreement, including, but
not limited to, enforcement of any arbitration award.
12. Entire Agreement.
Except as provided herein, this Agreement, including exhibits,
contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other
oral, written, or other communications between them concerning the
subject matter of this Agreement. There are no representations,
agreements, arrangements, or understandings, oral or written,
between and among the parties hereto relating to the subject matter
of this Agreement that are not fully expressed herein.
13. Severability.
If any provision of this Agreement is unenforceable, invalid, or
violates applicable law, such provision, or unenforceable portion of
such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
<PAGE>
14. Captions.
The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the
relationship of the parties, and shall not affect this Agreement or
the construction of any provisions herein.
15. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
16. Modification.
No change, modification, addition, or amendment to this Agreement
shall be valid unless in writing and signed by all parties hereto.
17. Waiver.
No waiver of any breach, covenant, representation, warranty
or default of this Agreement by any party shall be considered to be
a waiver of any other breach, covenant, representation, warranty or
default of this Agreement.
18. Interpretation
The terms and conditions of this Agreement shall be deemed to
have been prepared jointly by all of the Parties hereto. Any
ambiguity or uncertainty existing hereunder shall not be construed
against any one of the drafting parties, but shall be resolved by
reference to the other rules of interpretation of contracts as they
apply in the State of California.
19. Attorneys' Fees.
Except as otherwise provided herein, if a dispute should arise
between the parties including, but not limited to arbitration, the
prevailing party shall be reimbursed by the non-prevailing party for
all reasonable expenses incurred in resolving such dispute,
including reasonable attorneys' fees.
20. Taxes.
Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make
such payment. Any withholding taxes in the nature of a tax on
income shall be deducted from payments due, and the party required
to withhold such tax shall furnish to the party receiving such
payment all documentation necessary to prove the proper amount to
withhold of such taxes and to prove payment to the tax authority of
such required withholding.
<PAGE>
21. Not for the Benefit of Creditors or Third Parties.
The provisions of this Agreement are intended only for the
regulation of relations among the parties. This Agreement is not
intended for the benefit of creditors of the parties or other third
parties and no rights are granted to creditors of the parties or
other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted,
adopted, or acted in reliance upon this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the Effective Date.
"Company" "Employee"
Jones Naughton Entertainment, Inc. James Cannon
/s/ James Cannon
/s/ Joseph Naughton
By: Joseph Naughton
Its: Chief Executive Officer
STOCK EXCHANGE AGREEMENT
STOCK EXCHANGE AGREEMENT, dated as of April 19, 1999 by and
between SCOTT CLAVERIE ("PURCHASER") and JONES NAUGHTON
ENTERTAINMENT, INC. ("SELLER").
W I T N E S S E T H
WHEREAS, PURCHASER and SELLER are parties to that certain Joint
Venture Agreement dated February 26, 1999, wherein PURCHASER was
granted warrants (the "Warrants") to acquire 26,000 shares of AMS
Acquisition Corp., a Nevada corporation ("AMS");
SELLER desires to exchange 1,250,000 shares of Jones Naughton
Entertainment, Inc. Common Stock (the "Shares") for the Warrants on
the terms and conditions set forth in this Stock Exchange Agreement
(hereinafter called "Agreement"); and
WHEREAS, PURCHASER desires to acquire the Shares on the terms
and conditions set forth herein;
NOW THEREFORE, in consideration of the promises and respective
mutual agreements herein contained, it is agreed by and between the
parties hereto as follows:
ARTICLE 1
EXCHANGE OF THE SHARES
1.1 Exchange of the Shares. Upon the execution of this
Agreement as provided in Section 3.1 hereto (the "Closing"), subject
to the terms and conditions herein set forth, and on the basis of
the representations, warranties and agreements herein contained,
SELLER shall exchange with PURCHASER, and PURCHASER shall exchange
with SELLER, the Shares and the Warrants, respectively.
1.2 Instruments of Conveyance and Transfer. Simultaneously
with the Closing, SELLER shall deliver a certificate or certificates
representing the Shares to PURCHASER, in form and substance
satisfactory to PURCHASER, as shall be effective to vest in
PURCHASER all right, title and interest in and to all of the Shares,
as set forth in Section 3 herein.
1.3 Consideration and Payment for the Shares. In
consideration for the Shares PURCHASER shall execute a Termination
of Warrant in form and substance substantially similar to Exhibit A
attached hereto and made a part hereof.
ARTICLE 2
REPRESENTATIONS AND COVENANTS OF SELLER AND PURCHASER
2.1 The SELLER hereby represents and warrants that:
<PAGE>
(a) It shall transfer title, in and to the Shares, to the
PURCHASER free and clear of all liens, security
interests, pledges, encumbrances, charges,
restrictions, demands and claims, of any kind and
nature whatsoever, whether direct or indirect or
contingent, except as set forth in Paragraph 2.2 herein.
(b) If the Company at any time proposes to register any
of its securities under the Securities Act of 1933,
including under an SB-2 Registration Statement or
otherwise, it will give written notice to PURCHASER
of its intention so to do. Upon the written request
of PURCHASER given within 30 days after receipt of
any such notice, the Company will use its best
efforts to cause all of the Shares to be registered
under the Act (with the securities which the Company
at the time propose to register); provided, however,
that the Company may, as a condition precedent to its
effective such registration, require PURCHASER to
agree with the Company and the managing underwriter
or underwriters of the offering to be made by the
Company in connection with such registration that
PURCHASER will not sell any securities of the same
class or convertible into the same class as those
registered by the Company (including any class into
which the securities registered by the Company are
convertible) for such reasonable period after such
registration becomes effective (not exceeding 90
days) as shall then be specified in writing by such
underwriter or underwriters if in the opinion of such
underwriter or underwriters the Company's offering
would be materially adversely affected in the absence
of such an agreement. All expenses incurred by the
Company in complying with this section, including
without limitation all registration and filing fees,
listing fees, printing expenses, fees and
disbursements of all independent accountants, or
counsel for the Company and the expense of any
special audits incident to or required by any such
registration and the expenses of complying with the
securities or blue sky laws of any jurisdiction shall
be paid by the Company.
2.2 On the Closing Date as defined herein in Section 3.1, the
SELLER shall deliver to the PURCHASER certificates representing the
Shares subject to no liens, security interests, pledges,
encumbrances, charges, restrictions, demands or claims in any other
party whatsoever, except as set forth in the legend on the
certificate(s), which legend shall provide as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE,
AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF FOR A PERIOD OF ONE
YEAR FROM THE ISSUANCE THEREOF EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE LAWS OR (ii) UPON THE EXPRESS WRITTEN
<PAGE>
AGREEMENT OF THE COMPANY AND COMPLIANCE, TO THE EXTENT
APPLICABLE, WITH RULE 144 UNDER THE ACT (OR ANY SIMILAR
RULE UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES.)
2.3. The PURCHASER hereby represents and warrants that:
(a) PURCHASER acknowledges that the Shares will be
"restricted securities" (as such term is defined in
Rule 144 promulgated under the Securities Act of
1933, as amended ("Rule 144")), that the Shares will
include the foregoing restrictive legend, and, except
as otherwise set forth in this Agreement, that the
Shares cannot be sold for a period of one year from
the date of issuance unless registered with the SEC
and qualified by appropriate state securities
regulators, or unless PURCHASER obtains written
consent from the SELLER and otherwise complies with
an exemption from such registration and qualification
(including, without limitation, compliance with Rule
144).
(b) The PURCHASER has the full right, power and authority
to enter into this Agreement and to carry out and
consummate the transaction contemplated herein. This
Agreement constitutes the legal, valid and binding
obligation of PURCHASER.
(c) The PURCHASER acknowledges that investment in
the Shares involves substantial risks and is suitable only
for persons of adequate financial means who can bear the
economic risk of an investment in the Shares for an
indefinite period of time. PURCHASER further represents
that he:
(1) has adequate means of providing for his or her current needs
and possible personal contingencies, has no need for liquidity
in his investment in the Shares, is able to bear the substantial
economic risks of an investment in the Shares for an indefinite period,
and, at the present time, can afford a complete loss of his
investment;
(2) is an "Accredited Investor" as that term is defined in Section
501(a) of Regulation D promulgated underthe Securities Act of 1933,
as amended (the "Act"), in that (i) PURCHASER is a natural person
whose individual net worth, or joint net worth with PURCHASER's spouse,
exceeds $1,000,000 and either he is able to bear the economic risk of
investment in the proposed investments or the proposed investments will
not exceed 10% of his net worth or joint net worth with PURCHASER's
spouse and/or (ii) PURCHASER is a natural person who had individual
income in excess of $200,000 in each of the two most recent years, or
joint income withsuch investor's spouse in excess of $300,000 in each
of those years and reasonably expects to reach the same income level
in the current year, and either
<PAGE>
PURCHASER is able to bear the economic risk of investment in the
proposed investments or the proposed investments will not exceed
10% of his or her net worth or joint net worth with PURCHASER's
spouse;
(3) does not have an overall commitment to investments which are not
readily marketable that is disproportionate to his net worth,
and that his investment in the Shares will not cause such overall
commitment to become excessive;
(4) is acquiring the Shares for his own account, for investment
purposes only and not with a view toward resale, assignment or
distribution thereof, and no other person has a direct or indirect,
beneficial interest, in whole or in part, in such Shares;
(5) has such knowledge and experience in financial, tax and business
matters that he is capable of evaluating the merits and risks of
an investment in the Shares;
(6) has been given the opportunity to ask questions of and to receive
answers from persons acting on each of the SELLERS' behalf concerning
the terms and conditions of this transaction and also has been given
the opportunity to obtain any additional information which each
of the SELLERS possess or can acquire without unreasonable effort
or expense. As a result, PURCHASER is cognizant of the financial
condition, capitalization, use of proceeds from this financing and
the operations and financial condition of Jones Naughton
Entertainment, Inc., has available full information concerning their
affairs and has been able to evaluate the merits and risks of
the investment in the Shares; and
ARTICLE 3
CLOSING AND DELIVERY OF DOCUMENTS
3.1 Closing. The Closing shall be deemed to have occurred
upon the date of signing of this Agreement. Subsequent to the
signing, the following shall occur as a single integrated transaction:
3.2 Delivery by SELLER.
(a) SELLER shall deliver to the PURCHASER the stock
certificate and any and all other instruments of conveyance
and transfer required by Section 1.2.
<PAGE>
(b) SELLER shall deliver, or cause to be delivered, to the
PURCHASER such instruments, documents and certificates as are
required to be delivered by SELLER or its representatives
pursuant to the provisions of this Agreement.
3.3 Delivery by PURCHASER.
(a) The PURCHASER shall deliver the Termination of Warrant as
required in Section 1.3.
(b) The PURCHASER shall deliver, or cause to be delivered, to
SELLER such instruments, documents and certificates as are
required to be delivered by the PURCHASER or its
representatives pursuant to the provisions of this Agreement.
ARTICLE 4
TERMINATION, AMENDMENT AND WAIVER
4.1 Termination. Notwithstanding anything to the contrary
contained in this Agreement, this Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time
prior to delivery of the Shares and Termination of Warrant solely by
the mutual consent of all of the parties.
4.2 Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be
waived, but only by a written instrument signed by the party
entitled to the benefits thereof. The failure or delay of any party
at any time or times to require performance of any provision hereof
or to exercise its rights with respect to any provision hereof shall
in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant,
representation or warranty contained in this Agreement, in any one
or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such condition or breach or waiver of
any other condition or of the breach of any other term, provision,
covenant, representation or warranty. No modification or amendment
of this Agreement shall be valid and binding unless it be in writing
and signed by all parties hereto.
ARTICLE 5
MISCELLANEOUS
5.1 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to
the transactions contemplated hereby, and supersedes all prior
agreements, arrangements and understandings related to the subject
matter hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written
or oral, express or implied, whether by statute or otherwise, has
been made by any party hereto which is not embodied in this
Agreement or the written statements, certificates, or other
documents delivered pursuant hereto or in connection with the
transactions contemplated hereby, and no party hereto shall be bound
by or liable for any alleged understanding, promise, inducement,
statement, representation, warranty, covenant or condition not so
set forth.
<PAGE>
5.2 Notices. All notices provided for in this Agreement
shall be in writing signed by the party giving such notice, and
delivered personally or sent by overnight courier or messenger or
sent by registered or certified mail (air mail if overseas), return
receipt requested, or by telex, facsimile transmission, telegram or
similar means of communication. Notices shall be deemed to have
been received on the date of personal delivery, telex, facsimile
transmission, telegram or similar means of communication, or if sent
by overnight courier or messenger, shall be deemed to have been
received on the next delivery day after deposit with the courier or
messenger, or if sent by certified or registered mail, return
receipt requested, shall be deemed to have been received on the
third business day after the date of mailing. Notices shall be sent
to the addresses set forth below:
If to SELLER:
Jones Naughton Entertainment, Inc.
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Facsimile (714) 994-3242
Attn: Joe Naughton
With a copy to:
Law Offices of M. Richard Cutler, Esq.
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Facsimile: (949) 719-1988
Attention: M. Richard Cutler, Esq.
If to Purchaser:
Scott Claverie
Facsimile: (916) 342-6790
5.3 Arbitration. If a dispute or claim shall arise with
respect to any of the terms or provisions of this Agreement, or with
respect to the performance by either of the parties under this
Agreement, then either party may, by notice as herein provided,
require that the dispute be submitted under the Commercial
Arbitration Rules of Judicial Mediation and Arbitration Services,
Inc. to an arbitrator in good standing with Judicial Mediation and
Arbitration Services, Inc. within fifteen (15) days after such
notice is given. The written decision of the single arbitrator
ultimately appointed by or for both parties shall be binding and
conclusive on the parties. Judgment may be entered on such written
decision by the single arbitrator in any court having jurisdiction
and the parties consent to the jurisdiction of the Municipal and
Superior Court of Orange County, California for this purpose. Any
arbitration undertaken pursuant to the terms of this section shall
occur in Orange County, California.
<PAGE>
5.4 Choice of Law and Venue. This Agreement and the
rights of the parties hereunder shall be governed by and construed
in accordance with the laws of the State of California including all
matters of construction, validity, performance, and enforcement and
without giving effect to the principles of conflict of laws. Any
action brought by any party hereto shall be brought within the State
of California, County of Orange.
5.5 Jurisdiction. The parties submit to the jurisdiction
of the Courts of the State of California or a Federal Court
empaneled in the State of California for the resolution of all legal
disputes arising under the terms of this Agreement, including, but
not limited to, enforcement of any arbitration award.
5.6 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but
all of which shall together constitute one and the same instrument.
5.7 Attorneys' Fees. Except as otherwise provided herein,
if a dispute should arise between the parties including, but not
limited to arbitration, the prevailing party shall be reimbursed by
the nonprevailing party for all reasonable expenses incurred in
resolving such dispute, including reasonable attorneys' fees
exclusive of such amount of attorneys' fees as shall be a premium
for result or for risk of loss under a contingency fee arrangement.
5.8 Taxes. Any income taxes required to be paid in
connection with the payments due hereunder, shall be borne by the
party required to make such payment. Any withholding taxes in the
nature of a tax on income shall be deducted from payments due, and
the party required to withhold such tax shall furnish to the party
receiving such payment all documentation necessary to prove the
proper amount to withhold of such taxes and to prove payment to the
tax authority of such required withholding.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written hereinabove.
PURCHASER SELLER
SCOTT CLAVERIE Jones Naughton Entertainment, Inc.
/s/Scott Claverie /s/Joseph Naughton
By: Joseph Naughton
Its: President
<PAGE>
EXHIBIT "A"
TERMINATION OF WARRANT
This Termination of Warrant is effective that 19th day of
April, 1999, by and between Scott Claverie ("Holder") and Jones
Naughton Entertainment, Inc., a Colorado corporation ("JNE").
WHEREAS, Holder and JNE are parties to that certain Joint
Venture Agreement dated February 26, 1999, wherein Holder was
granted warrants (the "Warrants") to acquire 26,000 shares (the
"Warrant Shares") of AMS Acquisition Corp., a Nevada corporation
("AMS");
WHEREAS, by their execution hereof, the parties desire to
terminate the Warrants and any and all of Holder's rights to acquire
the Warrant Shares.
NOW, THEREFORE, BE IT RESOLVED, THAT the Warrants and any and
all of Holder's rights to the Warrant Shares are hereby terminated
in their entirety.
IN WITNESS WHEREOF, the parties hereto have executed this
Termination of Warrant as of the date first written hereinabove.
HOLDER JNE
Scott Claverie Jones Naughton Entertainment, Inc.
/s/Scott Claverie /s/Joseph Naughton
By: Joseph Naughton
Its: President
JONES NAUGHTON ENTERTAINMENT, INC.
CONSULTING AGREEMENT
This Consulting Agreement (this "Agreement"), made and
entered into as of this 1st day of May, 1999 by and between Jones
Naughton Entertainment, Inc., a Colorado corporation ("JNE" or the
"Company") and Michael Abelson ("Abelson" or the "Consultant").
RECITALS
WHEREAS, JNE wishes to engage the consulting services of
Consultant; and
WHEREAS, Consultant wishes to provide JNE with consulting
services.
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereto hereby agree as follows:
1. CONSULTING SERVICES
JNE hereby authorizes, appoints and engages the Consultant to
perform the following services in accordance with the terms and
conditions set forth in this Agreement:
The Consultant will assist in the creation and development of
the Company's real estate website for its GoOn-line.com operating
division. Consultant will report directly to Joe Naughton,
President of the JNE. In addition, Consultant will work with Mr.
Naughton and the Company's Board of Directors to write a profile of
the Company and each of its operating divisions which can be used as
the basis for the Company's overall business plan.
2. TERM OF AGREEMENT
This Agreement shall be in full force and effect as of the
date hereof and for a period of one (1) year herefrom. JNE shall
have the right to terminate this Agreement in the event of the death
or assignment for the benefit of creditors of the Consultant, or on
thirty (30) days notice to Consultant, with or without cause.
Consultant shall have the right to terminate this Agreement if JNE
fails to comply with the terms of this Agreement, including without
limitation its responsibilities for compensation as set forth in
this Agreement, or on thirty (30) days notice to JNE, with or
without cause.
3. COMPENSATION TO CONSULTANT
a. Consultant shall receive cash consideration in the amount
of Five Thousand Dollars ($5,000) per month (the "Compensation"),
payable monthly beginning on the last day of the month following
the date of this Agreement.
b. In addition to the Compensation stated above, commencing
with the effective date of this Agreement, Consultant shall receive
a quarterly bonus (the "Bonus") equal to
<PAGE>
fifteen percent (15%) of the gross revenues earned by the Company through
its real estate web site developed by Consultant for the Company's
GoOn-line.com division. The Bonus shall be paid within 30 days of the end
quarters ending on March 31, June 30, September 31, and December 31.
Consultant may be entitled to additional bonuses or compensation as
agreed by the Company and Consultant. In the event of the
termination of this Agreement, Consultant shall be entitled to
receive the Bonus for revenues earned by the Company, as described
herein, for a period of five (5) years from the date of termination.
In the event that the Company is acquired or merged with another
entity, the Company hereby agrees that it will ensure that the terms
of this Paragraph 3(c) will be assumed by the acquiring or surviving
entity, unless waived in writing by Consultant.
c. In addition to the Compensation and Bonus stated above,
commencing with the effective date of this Agreement, Consultant
shall receive options (the "Options") to acquire shares of Company
common stock as follows:
(1) For every Five Hundred Thousand Dollars ($500,000) in
gross revenues attributable to the real estate web site developed by
Consultant for the Company's GoOn-line.com division, up to a maximum
of Ten Million Dollars ($10,000,000), Consultant shall receive
options to acquire 25,000 shares of restricted (as that term is
defined under Rule 144 of the Securities Act of 1933) Company common
stock at an exercise price which is sixty percent (60%) of the bid
price on the last day of the month in which the revenue milestone
was reached. The Options shall be exercisable immediately and for a
period of three (3) years from the date earned.
d. The Company shall reimburse Consultant for all reasonable
business related expenses incurred by Consultant in the course of
his normal duties on behalf of the Company. In reimbursing
Consultant for expenses, the ordinary and usual business guidelines
and documentation requirements shall be adhered to by the Company
and Consultant. Any expenses which, individually or in the
aggregate, exceed Five Hundred Dollars ($500.00) must be consented
to by the Company in writing prior to being incurred by Consultant.
4. REPRESENTATIONS AND WARRANTIES OF CONSULTANT
Consultant represents and warrants to and agrees with JNE
that:
a. This Agreement has been duly authorized, executed and
delivered by Consultant. This Agreement constitutes the valid, legal
and binding obligation of Consultant, enforceable in accordance with
its terms, except as rights to indemnity hereunder may be limited by
applicable federal or state securities laws, and except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditor's rights generally.
<PAGE>
b. The consummation of the transactions contemplated hereby
will not result in any breach of the terms or conditions of, or
constitute a default under, any agreement or other instrument to
which Consultant is a party, or violate any order, applicable to
Consultant, of any court or federal or state regulatory body or
administrative agency having jurisdiction over Consultant or over
any of its property, and will not conflict with or violate the terms
of Consultants's current employment.
c. The parties hereto acknowledge and agree that JNE shall
have the right to refuse any course of action proposed by Consultant
and to refuse any customer or sale identified by Consultant or any
other source.
5. REPRESENTATIONS AND WARRANTIES OF JNE
JNE hereby represents, warrants, covenants to and agrees
with Consultant that:
a. This Agreement has been duly authorized, and executed by
JNE. This Agreement constitutes the valid, legal and binding
obligation of JNE, enforceable in accordance with its terms, except
as rights to indemnity hereunder may be limited by applicable
federal or state securities laws, except in each case as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditor's rights generally.
b. There is not now pending or, to the knowledge of JNE,
threatened, any action, suit or proceeding to which JNE is a party
before or by any court or governmental agency or body which might
result in a material adverse change in the financial condition of
JNE. The performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in a breach of the
terms or conditions of, or constitute a default under, any statute,
indenture, mortgage or other material Agreement or instrument to
which JNE is a party, or violate any order, applicable to JNE, or
governmental agency having jurisdiction over JNE or over any of its
property.
6. INDEPENDENT CONTRACTOR
Both JNE and the Consultant agree that the Consultant will
act as an independent contractor in the performance of his duties
under this Agreement. Nothing contained in this Agreement shall be
construed to imply that Consultant, or any employee, agent or other
authorized representative of Consultant, is a partner, joint
venturer, agent, officer or employee of JNE. Neither party hereto
shall have any authority to bind the other in any respect vis a vis
any third party, it being intended that each shall remain an
independent contractor and responsible only for its own actions.
7. NOTICES
Any notice, request, demand, or other communication given
pursuant to the terms of this Agreement shall be deemed given upon
delivery, if hand delivered or sent via facsimile, or Forty-Eight
(48) hours after deposit in the United States mail, postage prepaid,
and sent certified or registered mail, return receipt requested,
correctly addressed to the addresses of the parties indicated below
or at such other address as such party shall in writing have advised
the other party.
If to JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joseph Naughton, Chief Executive Officer
Facsimile No.: (714) 994-3242
With a copy to:
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: (949) 719-1988
If to Consultant:
Michael Abelson
Abelson & Company
P.O. Box 340
College Station, Texas 77841
Facsimile (409) 696-2272
8. ASSIGNMENT
This contract shall inure to the benefit of the parties
hereto, their heirs, administrators and successors in interest.
This Agreement shall not be assignable by either party hereto
without the prior written consent of the other.
9. CHOICE OF LAW AND VENUE
This Agreement and the rights of the parties hereunder shall
be governed by and construed in accordance with the laws of the
State of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the
principles of conflict of laws. Any action brought by any party
hereto shall be brought within the State of California, County of
Orange.
10. NONDISCLOSURE
Each party hereto agrees to keep the terms of this Agreement
and the transactions contemplated hereby as confidential and shall
not disclose such information to any third party, other
<PAGE>
than professional advisors utilized to negotiate and consummate the
transactions contemplated hereby. The parties hereto agree that in
the event there is a breach of the foregoing confidentiality
provision, the damage to the parties hereto would be difficult to
estimate and as a result, in the event of such a breach, the
non-breaching party, in addition to any and all other remedies
allowed by law, would be entitled to injunctive relief enjoining the
actions of the breaching party.
11. ENTIRE AGREEMENT
Except as provided herein, this Agreement, including
exhibits, contains the entire agreement of the parties, and
supersedes all existing negotiations, representations, or agreements
and all other oral, written, or other communications between them
concerning the subject matter of this Agreement. There are no
representations, agreements, arrangements, or understandings, oral
or written, between and among the parties hereto relating to the
subject matter of this Agreement that are not fully expressed herein.
12. SEVERABILITY
If any provision of this Agreement is unenforceable, invalid,
or violates applicable law, such provision, or unenforceable portion
of such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
13. CAPTIONS
The captions in this Agreement are inserted only as a matter
of convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the
relationship of the parties, and shall not affect this Agreement or
the construction of any provisions herein.
14. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
15. MODIFICATION
No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties
hereto.
16. ATTORNEYS FEES
Except as otherwise provided herein, if a dispute should
arise between the parties including, but not limited to arbitration,
the prevailing party shall be reimbursed by the non-prevailing party
for all reasonable expenses incurred in resolving such dispute,
including reasonable attorneys' fees.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the Effective Date.
"JNE" "CONSULTANT"
Jones Naughton Entertainment, Inc. Michael Abelson
a Colorado corporation
/s/ Joe Naughton /s/ Michael Abelson
By: Joe Naughton
Its: President
MARKETING AGREEMENT
This Marketing Agreement (the "Agreement") is entered into
effective this 3rd day of May, 1999 by and between Jones Naughton
Entertainment, Inc., a Colorado corporation ("JNE") and PDQ Internet
("PDQ"). JNE and PDQ shall be collectively referred to herein as
the parties.
RECITALS
WHEREAS, JNE, through its Community Marquee Division, desires
assistance in the marketing and placement of its advertising kiosks
("Kiosks") and marquees ("Marquees").
WHEREAS, PDQ desires to assist JNE as set forth herein.
NOW, THEREFORE, for good and adequate consideration, the
receipt of which is hereby acknowledged, the parties hereby agree as
follows:
1. Exclusive Territory.
A. PDQ will have the exclusive rights to market the Kiosks
and Marquees throughout that portion of the State of Florida located
South of I-40 (the "Exclusive Territory").
B. In addition, PDQ shall have, for a period of six months
beginning on June 1, 1999, the exclusive rights to market the Kiosks
and Marquees at Convention and Visitors Bureaus throughout the
entire United States (the "C&V Exclusive Territory").
2. Guaranteed Installations.
A. PDQ guarantees, for a period of five (5) years from the
date hereof (the "Guarantee Period"), the installation of Kiosks at
a rate of a minimum of twenty (20) Kiosks per month (the "Kiosk
Guarantee"). PDQ's performance under the Kiosk Guarantee shall be
measured on a quarterly basis (i.e., at the end of each calendar
quarter, PDQ guarantees the installation of at least 60 Kiosks).
B. PDQ further guarantees, during the Guarantee Period, that
each of the Kiosks installed as a result of the Kiosk Guarantee will
have purchased a minimum of eight (8) screen savers, each at a
monthly rate of at least Fifty Dollars ($50.00) per month (the
"Screen Saver Guarantee") (The net revenue received as a result of
the Screen Saver Guarantee ($400 per month) shall be referred to as
the "Screen Saver Guarantee Revenue"). PDQ may, in its discretion,
sell more than eight (8) screen savers at a rate in excess of Fifty
Dollars ($50.00) per month (see Paragraph 4C below).
C. PDQ further guarantees, beginning in the seventh (7th)
month of the Guarantee Period, that at least fifty percent (50%) of
the Kiosks installed as a result of the Kiosk Guarantee will have,
as an additional sale attached therewith, a Marquee that is affixed
to the Kiosk or located adjacent thereto (the "Marquee Guarantee").
Each of
<PAGE>
the Marquee's installed under this Marquee Guarantee will
have at least ten (10) advertising panels contained therein, and
each panel will be subscribed for at a minimum rate of One Thousand
Five Hundred Dollars ($1,500) per year (the net revenue received as
a result of the Marquee Guarantee ($15,000 per year) shall be
referred to as the "Marquee Guarantee Revenue"). PDQ may, in its
discretion, place more than ten (10) advertising panels in each
Marquee at a rate in excess of One Thousand Five Hundred Dollars
($1,500) per year (see Paragraph 4C below).
3. Failure of PDQ to satisfy Guarantees. At the end of each
calendar quarter, PDQ's performance under the Kiosk Guarantee, the
Screen Saver Guarantee, and the Marquee Guarantee (collectively the
"Guarantees") will be evaluated. In the event that PDQ is unable to
satisfy any of the Guarantees as set forth in Paragraph 2 hereof for
any given quarter, then PDQ shall be given a period of three (3)
months (the "Guarantee Satisfaction Period") to satisfy its
obligations thereunder. If, at the end of the Guarantee
Satisfaction Period, PDQ has not satisfied its obligations under the
Guarantees for the previously deficient quarter, then PDQ shall
forfeit one-half (1/2) of all consideration to which it is entitled
under Paragraph 4 hereof until such time as any and all
deficiencies, including any deficiencies which may have occurred
subsequent to the Guarantee Satisfaction Period, have been satisfied
in full.
4. Consideration to PDQ. As consideration for their obligations
hereunder, PDQ shall receive:
A. For the first One Hundred (100) Kiosks installed as a
result of PDQ's efforts, wherever located, PDQ shall receive twenty
percent (20%) of the Internet Access Revenues (defined as gross
revenues received by each Kiosk for access to the Internet, however
paid by the customer, minus commissions, maintenance, sales tax,
installation charges, and communication charges).
B. For all subsequent Kiosks installed as a result of PDQ's
efforts, wherever located, PDQ shall receive twenty five percent
(25%) of the Internet Access Revenues.
C. PDQ shall receive ten percent (10%) of the net (gross
revenue minus commissions, maintenance, sales tax, and installation
charges) Screen Saver Guarantee Revenue and the Marquee Guarantee
Revenue. PDQ shall receive ninety percent (90%) of the net (as
defined above) revenues received in excess of the Screen Saver
Guarantee Revenue and the Marquee Guarantee Revenue.
D. Options.
(1) Immediately upon the installation of one hundred
Kiosks, wherever located, PDQ shall be granted an option,
exercisable for a period of two (2) years from the grant thereof, to
acquire 100,000 shares of JNE common stock at a price of $0.45 per
share.
(2) Immediately upon the installation of five hundred (500)
Kiosks, wherever located, PDQ shall be granted an option,
exercisable for a period of two (2)
<PAGE>
years from the grant thereof, to acquire 250,000 shares of JNE
common stock at a price which is the lower of (i) $0.75 per share,
or (ii) sixty percent (60%) of the average bid price for the ten (10)
days immediately following the grant thereof.
(3) Immediately upon the installation of one thousand
(1000) Kiosks, wherever located, PDQ shall be granted an option,
exercisable for a period of two (2) years from the grant thereof, to
acquire 250,000 shares of JNE common stock at a price which is the
lower of (i) $1.25 per share, or (ii) sixty percent (60%) of the
average bid price for the ten (10) days immediately following the
grant thereof.
5. Additional Terms.
A. JNE will manufacture, deliver, and install the Kiosks and
Marquees at no cost to PDQ, except the offsets as set forth in
Paragraph 4 hereof. Both JNE and PDQ agree that JNE shall have a
reasonable time to deliver the Kiosks and Marquees following the
receipt of orders to do so.
B. JNE will provide PDQ with audio/visual training aids. In
addition, all leads generated in the Exclusive Territory shall be
given to PDQ for follow-up at PDQ's discretion and expense.
C. This Agreement shall be in full force and effect for the
term of the Guarantee Period. At the end of the Guarantee Period,
this Agreement, and all the obligations of the parties hereunder,
shall automatically terminate.
6. Nondisclosure. Each party hereto agrees to keep the terms of this
Agreement and the transactions contemplated hereby as confidential
and shall not disclose such information to any third party, other
than professional advisors utilized to negotiate and consummate the
transactions contemplated hereby. The parties hereto agree that in
the event there is a breach of the foregoing confidentiality
provision, the damage to the parties hereto would be difficult to
estimate and as a result, in the event of such a breach, the
non-breaching party, in addition to any and all other remedies
allowed by law, would be entitled to injunctive relief enjoining the
actions of the breaching party.
7. Representations and Warranties.
Each party hereby represents, warrants and covenants as
follows:
A. When executed and delivered, the terms hereof shall
constitute a valid and legally binding agreement enforceable
in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other laws affecting generally the
enforceability of creditors rights and by limitations on the
availability of equitable remedies.
<PAGE>
B. Neither the execution and delivery of this Agreement nor
the consummation or performance of the transactions contemplated
herein will violate any law, rule, regulation, writ, judgment,
injunction, decree, determination, or other order of any court,
government or governmental agency or instrumentality, domestic or
foreign, or conflict with or result in any breach of any of the
terms of or the creation or imposition of any mortgage, deed of
trust, pledge, lien, security interest or other charge or
encumbrance of any nature pursuant to the terms of any contract or
agreement.
8. Severability. If any portion of this Agreement is found by a
court of competent jurisdiction to be void or unenforceable, that
portion shall be deemed to be reformed to the extent necessary to
cause such portion to be enforceable and the same shall not affect
the remainder of this Agreement, which shall be given full force and
effect without regard to the invalid or unenforceable portions.
9. Entire Agreement. This Agreement, which may be signed in
duplicate or counterparts, replaces and supersedes all previous
Agreements between the parties hereto, and contains the entire
understanding between the parties, and may not be changed, altered,
amended, or modified, except in writing, duly executed by each of
the parties.
10. Assignment. This Agreement may not be assigned or transferred by
either party hereto without the prior written consent of all other
parties hereto.
11. Notices. All notices, requests, instruments or documents
hereunder shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, or by facsimile
transmission, telegraphic or similar conveyance:
If to JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joseph Naughton
Facsimile (714) 994-3242
If to PDQ:
PDQ Internet
Attn: Stanley Appel
Facsimile ( )
If delivered personally, the date on which a notice, request,
instruction or document is delivered shall be the date on which
delivery is made, and, if delivered by mail, the date on which such
notice, request, instruction or document is deposited in the mail
shall be the date of delivery. Each notice, request, instruction or
document shall bear the date on which it is delivered.
<PAGE>
12. Governing Law. This Agreement shall be governed by the laws of
the State of California, United States of America.
13. Attorney's Fees. Should any action be commenced between the
parties to this Agreement concerning the matters set forth in this
Agreement or the rights and duties of either in relation thereto,
the prevailing party in such action shall be entitled, in addition
to such other relief as may be granted, to a reasonable sum as and
for its Attorney's Fees and Costs.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first
written above.
JONES NAUGHTON ENTERTAINMENT, INC.
/s/Joseph Naughton
By: Joseph Naughton
Its: President
PDQ Internet
/s/Stanley Appel
By: Stanley Appel
MARKETING AGREEMENT
This Marketing Agreement (the "Agreement") is entered into
effective this 4th day of June, 1999 by and between Jones Naughton
Entertainment, Inc., a Colorado corporation ("JNE") and ieXe
("ieXe"). JNE and ieXe shall be collectively referred to herein as
the parties.
RECITALS
WHEREAS, JNE, through its GoOn-line Kiosk division, desires
assistance in the marketing and placement of its advertising kiosks
("Kiosks").
WHEREAS, ieXe desires to assist JNE as set forth herein.
NOW, THEREFORE, for good and adequate consideration, the
receipt of which is hereby acknowledged, the parties hereby agree as
follows:
1.Exclusive Territory. ieXe will have the exclusive rights to
market the Kiosks to hotels and/or motels throughout Canada and to
those additional hotels identified on Exhibit A attached hereto and
made a part hereof (the "Exclusive Territory").
2.Guaranteed Installations. ieXe guarantees, for a period of five
(5) years from the date hereof (the "Guarantee Period"), the
installation of Kiosks at a rate of a minimum of twenty (20) Kiosks
per month (the "Kiosk Guarantee"). ieXe's performance under the
Kiosk Guarantee shall be measured on a quarterly basis (i.e., at the
end of each calendar quarter, ieXe guarantees the installation of at
least 60 Kiosks).
Both JNE and ieXe hereby acknowledge and agree that each Kiosk
installed shall meet the following minimum requirements ("Minimum
Requirements"): (i) the Kiosk shall be installed pursuant to a
"site agreement" with a minimum term of at least four (4) years, and
(ii) the Kiosks shall be installed only in hotels and/or motels
within the Exclusive Territory that have a minimum of One Hundred
(100) rooms.
At the end of each calendar quarter, ieXe's performance under the
Kiosk Guarantee will be evaluated. In the event that ieXe is unable
to satisfy the Kiosk Guarantee as set forth above, then the
exclusivity described in Paragraph 1 hereof will be terminated until
such time as ieXe is able to satisfy the Kiosk Guarantee.
3.Consideration to ieXe. As consideration for their obligations
hereunder, ieXe shall receive consideration as follows:
A. Cash Consideration. ieXe shall begin receiving cash
consideration in accordance with the schedule set forth on Exhibit B
attached hereto once it has installed a minimum of forty (40) Kiosks
which meet the Minimum Requirements.
<PAGE>
B. Options.
(1) Immediately upon the installation of Three Hundred
(300) Kiosks meeting the Minimum Requirements, ieXe shall be granted
an option, exercisable for a period of one (1) year from the grant
thereof, to acquire 100,000 shares of JNE common stock at a price of
$0.75 per share.
(2) Immediately upon the installation of Seven Hundred
Fifty (750) Kiosks meeting the Minimum Requirements, ieXe shall be
granted an option, exercisable for a period of one (1) year from the
grant thereof, to acquire 100,000 shares of JNE common stock at a
price of $1.00 per share.
(3) Immediately upon the installation of One Thousand
(1000) Kiosks meeting the Minimum Requirements, ieXe shall be
granted an option, exercisable for a period of one (1) year from the
grant thereof, to acquire 250,000 shares of JNE common stock at a
price of $1.50 per share.
All shares of JNE common stock acquired as a result of the exercise
of the options will be "restricted" securities as that term is
defined under Rule 144 of the Securities Act of 1933 and may not be
sold for a period of at least twelve (12) months.
4. Additional Terms.
A. JNE will manufacture, deliver, and install the Kiosks at
no cost to ieXe. Both JNE and ieXe agree that JNE shall have a
reasonable time to deliver the Kiosks following the receipt of
orders to do so.
B. JNE will provide ieXe with training aids. In addition,
all leads generated in the Exclusive Territory shall be given to
ieXe for follow-up at ieXe's discretion and expense.
C. This Agreement shall be in full force and effect for the
term of the Guarantee Period. At the end of the Guarantee Period,
this Agreement, and all the obligations of the parties hereunder,
shall automatically terminate.
5. Nondisclosure. Each party hereto agrees to keep the terms of this
Agreement and the transactions contemplated hereby as confidential
and shall not disclose such information to any third party, other
than professional advisors utilized to negotiate and consummate the
transactions contemplated hereby. The parties hereto agree that in
the event there is a breach of the foregoing confidentiality
provision, the damage to the parties hereto would be difficult to
estimate and as a result, in the event of such a breach, the
non-breaching party, in addition to any and all other remedies
allowed by law, would be entitled to injunctive relief enjoining the
actions of the breaching party.
<PAGE>
6. Representations and Warranties.
Each party hereby represents, warrants and covenants as
follows:
A. When executed and delivered, the terms hereof shall constitute a
valid and legally binding agreement enforceable in accordance with
its terms, except as may be limited by bankruptcy, insolvency or
other laws affecting generally the enforceability of creditors
rights and by limitations on the availability of equitable remedies.
B. Neither the execution and delivery of this Agreement nor
the consummation or performance of the transactions contemplated
herein will violate any law, rule, regulation, writ, judgment,
injunction, decree, determination, or other order of any court,
government or governmental agency or instrumentality, domestic or
foreign, or conflict with or result in any breach of any of the
terms of or the creation or imposition of any mortgage, deed of
trust, pledge, lien, security interest or other charge or
encumbrance of any nature pursuant to the terms of any contract or
agreement.
7. Severability. If any portion of this Agreement is found by a
court of competent jurisdiction to be void or unenforceable, that
portion shall be deemed to be reformed to the extent necessary to
cause such portion to be enforceable and the same shall not affect
the remainder of this Agreement, which shall be given full force and
effect without regard to the invalid or unenforceable portions.
8. Entire Agreement. This Agreement along with the exhibits attached
hereto, which may be signed in duplicate or counterparts, replaces
and supersedes all previous Agreements between the parties hereto,
and contains the entire understanding between the parties, and may
not be changed, altered, amended, or modified, except in writing,
duly executed by each of the parties.
9. Assignment. This Agreement may not be assigned or transferred by
either party hereto without the prior written consent of all other
parties hereto.
10. Notices. All notices, requests, instruments or documents
hereunder shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, or by facsimile
transmission, telegraphic or similar conveyance:
If to JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joseph Naughton
Facsimile (714) 994-3242
<PAGE>
If to ieXe:
ieXe
One Eglinton Avenue East, Suite 508
Toronto, Ontario M4P3A1
Attn: Roy D. Murad
Facsimile ( )
If delivered personally, the date on which a notice, request,
instruction or document is delivered shall be the date on which
delivery is made, and, if delivered by mail, the date on which such
notice, request, instruction or document is deposited in the mail
shall be the date of delivery. Each notice, request, instruction or
document shall bear the date on which it is delivered.
11. Governing Law; Venue. This Agreement shall be governed by the
laws of the State of California, United States of America. Any
cause of action brought by an party hereunder shall be brought in
the court of proper jurisdiction in Orange County, California.
12. Attorney's Fees. Should any action be commenced between the
parties to this Agreement concerning the matters set forth in this
Agreement or the rights and duties of either in relation thereto,
the prevailing party in such action shall be entitled, in addition
to such other relief as may be granted, to a reasonable sum as and
for its Attorney's Fees and Costs.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first
written above.
JONES NAUGHTON ENTERTAINMENT, INC.
/s/Joseph Naughton
By: Joseph Naughton
Its: President
ieXe
/s/Roy D. Murad
By: Roy D. Murad
Its:
<PAGE>
EXHIBIT A
HOTELS/MOTELS PART OF EXCLUSIVE TERRITORY
<PAGE>
EXHIBIT B
SCHEDULE OF CASH CONSIDERATION
Beginning sixty (60) days following the installation of the
minimum number of Kiosks meeting the Minimum Requirements as
identified in column A below, ieXe shall be paid the monthly
consideration as identified in column B below. The consideration
set forth in column B shall not be cumulative (i.e. upon the
installation of 80 Kiosks, the total cash consideration paid to ieXe
will be the sum of $7,200 per month until the termination of this
Agreement or until the next milestone is met).
Column A Column B
(Number of Kiosks Installed) (Monthly Cash Consideration ($))
40 $ 3,600
80 7,200
120 10,800
160 14,400
200 18,000
250 26,250
300 31,500
400 44,500
500 55,500
600 70,200
700 81,900
800 93,600
900 135,000
1,000 150,000
REORGANIZATION AND STOCK PURCHASE AGREEMENT
by and between
Jones Naughton Entertainment, Inc.
a Colorado corporation
and
Auctionomics, Inc.
a Nevada corporation
and its shareholders
<PAGE>
REORGANIZATION AND STOCK PURCHASE AGREEMENT
REORGANIZATION AND STOCK PURCHASE AGREEMENT ("Agreement"),
dated June 10, 1999, by and among Jones Naughton Entertainment,
Inc., a Colorado corporation (hereinafter referred to as "JNNE"),
Auctionomics, Inc., a Nevada corporation (hereinafter referred to as
"Auction"), and Harvey A. Turell, an individual and Nathan
Wolfstein, an individual (each of Turell and Wolfstein shall be
referred to as a "Shareholder" and collectively the "Shareholders").
Each of JNNE, Auction, and the Shareholders shall be referred to
herein as a "Party" and collectively as the "Parties."
W I T N E S S E T H
WHEREAS, the Shareholders collectively own 100% of the issued
and outstanding common stock of Auction as set forth in Exhibit "A"
attached hereto;
WHEREAS, The Shareholders desire to sell and JNNE desires to
purchase 7,500 of the shares of Auction owned by the Shareholders
(the "Auction Shares") in accordance with the terms set forth herein;
NOW THEREFORE, in consideration of the premises and
respective mutual agreements, covenants, representations and
warranties herein contained, it is agreed between the parties hereto
as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 Sale of the Auction Shares. At the Closing, subject to
the terms and conditions herein set forth, and on the basis of the
representations, warranties and agreements herein contained, the
Shareholders shall sell to JNNE and JNNE shall purchase from the
Shareholders, all of the Auction Shares. JNNE shall pay to the
Shareholders, or their assigns, as consideration for the receipt of
the Auction Shares, the following:
A. JNNE shall cause to be issued, within thirty (30) days of
the Closing, an aggregate of 500,000 shares of JNNE "restricted"
common stock (the "JNNE Shares");
B. JNNE shall execute, within thirty (30) days of the
Closing, warrants to acquire 500,000 shares of JNNE "restricted"
common stock exercisable for a period of two (2) years from the
Closing at an exercise price of $0.50 per share (the "JNNE Warrants");
C. Within ten (10) days of the Closing, JNNE shall provide
Auction with the sum of Twenty Five Thousand Dollars ($25,000) for
working capital purposes.
D. Auction shall execute a Consulting Agreement with the
Shareholders in form and substance subtstantially similar to Exhibit
"D" attached hereto.
<PAGE>
E. The Shareholders, or their assigns, will be entitled to a
bonus equal to 25% of the Auction net income before taxes at the end
of each fiscal year for so long as one or both remains a shareholder
of Auction. If the number of shares of Auction stock owned by the
Shareholders is reduced by their own actions, then the distribution
will be adjusted down proportionately. The exact method of this
distribution will be mutually agreed upon by the parties.
1.2 Position and Title. Effective as of the Closing, Harvey
A. Turell shall serve as the President of Auction, and Joe Naughton
shall serve as its Secretary and Treasurer. Each of the
Shareholders will also be appointed as a Director of Auction, to
serve at the discretion of the Auction shareholders. Effective as
of the Closing, JNNE will appoint one (1) member to the Auction
Board of Directors, of which there will be three (3) members.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Auction and The
Shareholders. To induce JNNE to enter into this Agreement and to
consummate the transactions contemplated hereby, Auction and the
Shareholders represent and warrant, as of the date hereof and as of
the Closing, as follows:
2.1.1 Auction and the Shareholders have the full right,
power and authority to enter into this Agreement and to carry out
and consummate the transaction contemplated herein. This Agreement
constitutes the legal, valid and binding obligation of Auction and
the Shareholders.
2.1.2 Corporate Existence and Authority of Auction.
Auction is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada. It has all
requisite corporate power, franchises, licenses, permits and
authority to own its properties and assets and to carry on its
business as it has been and is being conducted. It is in good
standing in each state, nation or other jurisdiction wherein the
character of the business transacted by it makes such qualification
necessary.
2.1.3 Capitalization of Auction. The authorized equity
securities of Auction consists of 100,000 shares of common stock,
par value $0.001, of which 10,000 shares are issued and outstanding.
No other shares of capital stock of Auction are issued and
outstanding. All of the issued and outstanding shares have been
duly and validly issued in accordance and compliance with all
applicable laws, rules and regulations and are fully paid and
nonassessable. There are no options, warrants, rights, calls,
commitments, plans, contracts or other agreements of any character
granted or issued by Auction which provide for the purchase,
issuance or transfer of any shares of the capital stock of Auction
nor are there any outstanding securities granted or issued by
Auction that are convertible into any shares of the equity
securities of Auction, and none is authorized. Auction is not
obligated or committed to purchase, redeem or otherwise acquire any
of its equity. All presently exercisable voting rights in Auction
are vested exclusively in its outstanding shares of common stock,
each share of which is entitled to one vote on every matter to come
before
<PAGE>
it's shareholders, and other than as may be contemplated by
this Agreement, there are no voting trusts or other voting
arrangements with respect to any of Auction's equity securities.
2.1.4 Subsidiaries. "Subsidiary" or "Subsidiaries" means
all corporations, trusts, partnerships, associations, joint ventures
or other Persons, as defined below, of which a corporation or any
other Subsidiary of such corporation owns not less than twenty
percent (20%) of the voting securities or other equity or of which
such corporation or any other Subsidiary of such corporation
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies, whether through ownership
of voting shares, management contracts or otherwise. "Person" means
any individual, corporation, trust, association, partnership,
proprietorship, joint venture or other entity. There are no
Subsidiaries of Auction.
2.1.5 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which either Auction or
the Shareholders are a party or by which either of them or any of
their properties are bound; (b) result in the creation of any
security interest, lien, encumbrance, adverse claim, proscription or
restriction on any property or asset (whether real, personal, mixed,
tangible or intangible), right, contract, agreement or business of
Auction or the Shareholders; (c) violate any law, rule or regulation
of any federal or state regulatory agency; or (d) permit any federal
or state regulatory agency to impose any restrictions or limitations
of any nature on Auction or the Shareholders or any of their
respective actions.
2.1.6 Taxes.
2.1.6.1 All taxes, assessments, fees, penalties, interest
and other governmental charges with respect to Auction which have
become due and payable on the date hereof have been paid in full or
adequately reserved against by Auction, (including without
limitation, income, property, sales, use, franchise, capital stock,
excise, added value, employees' income withholding, social security
and unemployment taxes), and all interest and penalties thereon with
respect to the periods then ended and for all periods thereto;
2.1.6.2 There are no agreements, waivers or other
arrangements providing for an extension of time with respect to the
assessment of any tax or deficiency against Auction, nor are there
any actions, suits, proceedings, investigations or claims now
pending against Auction, nor are there any actions, suits,
proceedings, investigations or claims now pending against Auction in
respect of any tax or assessment, or any matters under discussion
with any federal, state, local or foreign authority relating to any
taxes or
<PAGE>
assessments, or any claims for additional taxes or assessments asserted
by any such authority, and there is no basis for the assertion of any
additional taxes or assessments against Auction, and
2.1.6.3 The consummation of the transactions contemplated by
this Agreement will not result in the imposition of any additional
taxes on or assessments against Auction.
2.1.7 Disputes and Litigation. There is no suit, action,
litigation, proceeding, investigation, claim, complaint, or
accusation pending, threatened against or affecting Auction or any
of its properties, assets or business or to which Auction is a
party, in any court or before any arbitrator of any kind or before
or by any governmental agency (including, without limitation, any
federal, state, local, foreign or other governmental department,
commission, board, bureau, agency or instrumentality), and there is
no basis for such suit, action, litigation, proceeding,
investigation, claim, complaint, or accusation; (b) there is no
pending or threatened change in any environmental, zoning or
building laws, regulations or ordinances which affect or could
affect Auction or any of its properties, assets or businesses; and
(c) there is no outstanding order, writ, injunction, decree,
judgment or award by any court, arbitrator or governmental body
against or affecting Auction or any of its properties, assets or
business. There is no litigation, proceeding, investigation, claim,
complaint or accusation, formal or informal, or arbitration pending,
or any of the aforesaid threatened, or any contingent liability
which would give rise to any right of indemnification or similar
right on the part of any director or officer of Auction or any such
person's heirs, executors or administrators as against Auction.
2.1.8 Compliance with laws. Auction has at all times been,
and presently is, in full compliance with, and has not received
notice of any claimed violation of, any applicable federal, state,
local, foreign and other laws, rules and regulations. Auction has
filed all returns, reports and other documents and furnished all
information required or requested by any federal, state, local or
foreign governmental agency and all such returns, reports, documents
and information are true and complete in all respects. All permits,
licenses, orders, franchises and approvals of all federal, state,
local or foreign governmental or regulatory bodies required of
Auction for the conduct of its business have been obtained, no
violations are or have been recorded in respect of any such permits,
licenses, orders, franchises and approvals, and there is no
litigation, proceeding, investigation, arbitration, claim, complaint
or accusation, formal or informal, pending or threatened, which may
revoke, limit, or question the validity, sufficiency or continuance
of any such permit, license, order, franchise or approval. Such
permits, licenses, orders, franchises and approvals are valid and
sufficient for all activities presently carried on by Auction.
2.1.9 Guaranties. Auction has not guaranteed any dividend,
obligation or indebtedness of any Person; nor has any Person
guaranteed any dividend, obligation or indebtedness of Auction.
2.1.10 Books and Records. Auction keeps its books, records
and accounts (including, without limitation, those kept for
financial reporting purposes and for tax
<PAGE>
purposes) in accordance with good business practice and in sufficient
detail to reflect the transactions and dispositions of its assets,
liabilities and equities. The minute books of Auction contain records
of its shareholders' and directors' meetings and of action taken by such
shareholders and directors. The meeting of directors and
shareholders referred to in such minute books were duly called and
held, and the resolutions appearing in such minute books were duly
adopted. The signatures appearing on all documents contained in
such minute books are the true signatures of the persons purporting
to have signed the same. A true and accurate list of Auction assets
and liabilities as of the Closing Date is attached hereto as Exhibit
"B". Further, attached hereto as Exhibit "C" is a list of all
contracts to which Auction is a party or obligated, and Auction
hereby represents and warrants that there are no other material
contracts or agreements in existence as of the Closing Date.
2.1.11 The Shareholders acknowledge that all of the JNNE
Shares and all shares of JNNE common stock issued upon exercise of
the JNNE Warrants will be "restricted securities" (as such term is
defined in Rule 144 promulgated under the Securities Act of 1933, as
amended ("Rule 144")), that the Shares will include the restrictive
legend set forth in Section 3.2 hereof, and, except as otherwise set
forth in this Agreement, that the shares cannot be sold for a period
of one year from the date of issuance unless registered with the
United States Securities and Exchange Commission ("SEC") and
qualified by appropriate state securities regulators, or unless The
Shareholders obtains written consent from JNNE and otherwise
complies with an exemption from such registration and qualification
(including, without limitation, compliance with Rule 144).
2.2 Representations and Warranties of JNNE. To induce
Auction and the Shareholders to enter into this Agreement and to
consummate the transactions contemplated hereby, JNNE represents and
warrants, as of the date hereof and as of the Closing, as follows:
2.2.1 Corporate Existence and Authority of JNNE. JNNE is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado. It has all requisite
corporate power, franchises, licenses, permits and authority to own
its properties and assets and to carry on its business as it has
been and is being conducted. It is in good standing in each state,
nation or other jurisdiction in each state, nation or other
jurisdiction wherein the character of the business transacted by it
makes such qualification necessary.
2.2.2 Capitalization of JNNE. The authorized equity
securities of JNNE consists of 100,000,000 shares of common stock,
of which approximately 74,000,000 shares are issued and outstanding
as of the date hereof. No other shares of capital stock of JNNE are
issued and outstanding. All of the issued and outstanding shares
have been duly and validly issued in accordance and compliance with
all applicable laws, rules and regulations and are fully paid and
nonassessable. All presently exercisable voting rights in JNNE are
vested exclusively in its outstanding shares of common stock, each
share of which is entitled to one vote on every matter to come
before it's shareholders, and other than as may be contemplated by
this Agreement, there are no voting trusts or other voting
arrangements with respect to any of JNNE's equity securities.
<PAGE>
2.2.3 Subsidiaries. JNNE currently has one subsidiary,
namely AMS Acquisition Corp., a Nevada corporation.
2.2.4 Execution of Agreement. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage
of time or both), in whole or in part, any charter, article of
incorporation, bylaw, mortgage, lien, deed of trust, indenture,
lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which JNNE is a party or
by which it or any of its properties are bound; (b) result in the
creation of any security interest, lien, encumbrance, adverse claim,
proscription or restriction on any property or asset (whether real,
personal, mixed, tangible or intangible), right, contract, agreement
or business of JNNE; (c) violate any law, rule or regulation of any
federal or state regulatory agency; or (d) permit any federal or
state regulatory agency to impose any restrictions or limitations of
any nature on JNNE or any of its actions.
2.2.5 Registration Rights. If the Company at any time
proposes to register any of its securities under the Act, including
under an SB-2 Registration Statement or otherwise, it will each such
time give written notice to the Shareholders of its intention so to
do. Upon the written request of the Shareholders given within 30
days after receipt of any such notice, the Company will use its best
efforts to cause the JNNE Shares and all shares underlying the
exercise of the JNNE Warrants to be registered under the Act (with
the securities which the Company at the time propose to register);
provided, however, that the Company may, as a condition precedent to
its effective such registration, require each Shareholder to agree
with the Company and the managing underwriter or underwriters of the
offering to be made by the Company in connection with such
registration that such Shareholder will not sell any securities of
the same class or convertible into the same class as those
registered by the Company (including any class into which the
securities registered by the Company are convertible) for such
reasonable period after such registration becomes effective (not
exceeding 90 days) as shall then be specified in writing by such
underwriter or underwriters if in the opinion of such underwriter or
underwriters the Company's offering would be materially adversely
affected in the absence of such an agreement. All expenses incurred
by the Company in complying with this Section, including without
limitation all registration and filing fees, listing fees, printing
expenses, fees and disbursements of all independent accountants, or
counsel for the Company and the expense of any special audits
incident to or required by any such registration and the expenses of
complying with the securities or blue sky laws of any jurisdiction
shall be paid by the Company.
ARTICLE 3
CLOSING AND DELIVERY OF DOCUMENTS
3.1 Closing. The Closing shall be deemed to have occurred as
of the date that each of the Parties hereto have executed this
Agreement. Subsequent to the Closing the following shall occur as a
single integrated transaction:
<PAGE>
3.2 Delivery by JNNE:
(a) Subsequent to the satisfaction of the requirements of
Section 5.1.4 hereof, JNNE shall deliver to the Shareholders the
JNNE Shares and all instruments of conveyance and transfer required
by Section 1.1(A) subject to no liens, security interests, pledges,
encumbrances, charges, restrictions, demands or claims in any other
party whatsoever, except as set forth in the legend on the
certificate(s), which legend shall provide as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE,
AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF FOR A PERIOD OF ONE
YEAR FROM THE ISSUANCE THEREOF EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE LAWS OR (ii) UPON THE EXPRESS WRITTEN
AGREEMENT OF THE COMPANY AND COMPLIANCE, TO THE EXTENT
APPLICABLE, WITH RULE 144 UNDER THE ACT (OR ANY SIMILAR
RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES).
(b) Subsequent to the satisfaction of the requirements of
Section 5.1.4 hereof, JNNE shall deliver to the Shareholders the
JNNE Warrants.
3.3 Delivery by The Shareholders:
(a) The Shareholders shall deliver to JNNE all of the Auction
Shares and all instruments of conveyance and transfer required by
Section 1.1.
ARTICLE 4
CONDITIONS, TERMINATION, AMENDMENT AND WAIVER
4.1 Conditions Precedent. This Agreement, and the
transactions contemplated hereby, shall be subject to the approval
of the Board of Directors of JNNE, which shall be delivered at the
Closing.
4.2 Termination. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned
at any time prior to the Closing by the mutual consent of all of the
parties;
4.3 Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be
waived, but only by a written instrument signed by the party
<PAGE>
entitled to the benefits thereof. The failure or delay of any party
at any time or times to require performance of any provision hereof
or to exercise its rights with respect to any provision hereof shall
in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant,
representation or warranty contained in this Agreement, in any one
or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such condition or breach or waiver of
any other condition or of the breach of any other term, provision,
covenant, representation or warranty. No modification or amendment
of this Agreement shall be valid and binding unless it be in writing
and signed by all parties hereto.
ARTICLE 5
COVENANTS
5.1 To induce JNNE to enter into this Agreement and to
consummate the transactions contemplated hereby, and without
limiting any covenant, agreement, representation or warranty made
the Shareholders covenant and agree as follows:
5.1.1 Notices and Approvals. The Shareholders agrees: (a)
to give and to cause Auction to give all notices to third parties
which may be necessary or deemed desirable by JNNE in connection
with this Agreement and the consummation of the transactions
contemplated hereby; (b) to use its best efforts to obtain and to
cause Auction to obtain, all federal and state governmental
regulatory agency approvals, consents, permit, authorizations, and
orders necessary or deemed desirable by JNNE in connection with this
Agreement and the consummation of the transaction contemplated
hereby; and (c) to use its best efforts to obtain, and to cause
Auction to obtain, all consents and authorizations of any other
third parties necessary or deemed desirable by JNNE in connection
with this Agreement and the consummation of the transactions
contemplated hereby.
5.1.2 Information for JNNE's Statements and Applications.
The Shareholders and Auction and their employees, accountants and
attorneys shall cooperate fully with JNNE in the preparation of any
statements or applications made by JNNE to any federal or state
governmental regulatory agency in connection with this Agreement and
the transactions contemplated hereby and to furnish JNNE with all
information concerning the Shareholders and Auction necessary or
deemed desirable by JNNE for inclusion in such statements and
applications, including, without limitation, all requisite financial
statements and schedules.
5.1.3 Access to Information. JNNE, together with its
appropriate attorneys, agents and representatives, shall be
permitted to make the full and complete investigation of the
Shareholders and Auction and have full access to all of the books
and records of the other during reasonable business hours.
Notwithstanding the foregoing, such parties shall treat all such
information as confidential and shall not disclose such information
without the prior consent of the other.
5.1.4 Conditions Subsequent. The Shareholders and Auction
acknowledge and agree that they will be responsible for the
development and delivery of an Internet web site
<PAGE>
to market and sell merchandise in an auction format. The Shareholders
and Auction agree to work with Joe Naughton, President of JNNE, in the
development of said site. In addition, Auction shall demonstrate
that it has at least three (3) working relationships with
significant auction vendors. If, in the event JNNE has not consented
(which consent shall not be unreasonably withheld but shall be in
the sole discretion of JNNE) to the satisfaction of Auction's
obligations under this Section 5.1.4 within sixty (60) days of the
Closing, then JNNE shall have the option, in its sole discretion, to
terminate this Agreement and cancel each and all of the transactions
called for herein. In the event of an anticipated termination of
this Agreement pursuant to this Section 5.1.4, JNNE shall provide
written notice to the Shareholders and Auction within the sixty (60)
day time period and the Shareholders and Auction shall have a period
of not less than ten (10) days to correct any deficiencies set forth
in the notice. In the event of the termination of this Agreement
pursuant to this Section 5.1.4, then (i) the Shareholders and
Auction shall repay to JNNE the sums paid by JNNE in accordance with
Section 1.1(C) hereof and shall return to JNNE the JNNE Shares and
the Warrants issued in accordance with Section 1.1(A) and 1.1(B)
hereof, and (ii) JNNE shall return to the Shareholders the Auction
Shares.
5.2 To induce the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby,
and without limiting any covenant, agreement, representation or
warranty made JNNE covenants and agrees as follows:
5.2.1 Access to Information. The Shareholders, together with
his appropriate attorneys, agents and representatives, shall be
permitted to make the full and complete investigation of JNNE and
have full access to all of the books and records of the other during
reasonable business hours. Notwithstanding the foregoing, such
parties shall treat all such information as confidential and shall
not disclose such information without the prior consent of the other.
ARTICLE 6
MISCELLANEOUS
6.1 Expenses. Except as otherwise specifically provided
for herein, whether or not the transactions contemplated hereby are
consummated, each of the parties hereto shall bear all taxes of any
nature (including, without limitation, income, franchise, transfer
and sales taxes) and all fees and expenses relating to or arising
from its compliance with the various provisions of this Agreement
and such party's covenants to be performed hereunder, and except as
otherwise specifically provided for herein, each of the parties
hereto agrees to pay all of its own expenses (including, without
limitation, attorneys and accountants' fees and printing expenses)
incurred in connection with this Agreement, the transactions
contemplated hereby, the negotiations leading to the same and the
preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior
to Closing.
6.2 Notices. Any notice, request, instruction or other
document required by the terms of this Agreement, or deemed by any
of the parties hereto to be desirable, to be given to any other
party
<PAGE>
hereto shall be in writing and shall be given by prepaid
telegram or delivered or mailed by registered or certified mail,
postage prepaid, with return receipt requested, to the following
addresses:
To JNNE:
Jones Naughton Entertainment, Inc.
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joe Naughton
Facsimile (714) 994-3242
with a copy to:
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile (949) 719-1988
To Auction or The Shareholders:
Harvey A. Turell
Nathan Wolfstein
Auctionomics, Inc.
18226 Ventura Boulevard, Unit 103
Tarzana, CA 91356
Facsimile (818) 343-7119
The persons and addresses set forth above may be changed from
time to time by a notice sent as aforesaid. If notice is given by
delivery in accordance with the provisions of this Section, said
notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given forty-eight (48) hours after deposit thereof in the United
States mail. If notice is given by telegraph in accordance with the
provisions of this Section, such notice shall be conclusively deemed
given at the time that the telegraphic agency shall confirm delivery
thereof to the addressee.
6.3 Entire Agreement. This Agreement, together with the
schedule and exhibits hereto, sets forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby, and supersedes all prior agreements,
arrangements and understandings related to the subject matter
hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written
or oral, express or implied, whether by statute or otherwise, has
been made by any party hereto which is not embodied in this
Agreement, or exhibits hereto or the written statements,
certificates, or other documents delivered pursuant hereto or in
connection with the transactions contemplated hereby, and no party
hereto shall be
<PAGE>
bound by or liable for any alleged understanding, promise, inducement,
statement, representation, warranty, covenant or condition not so set
forth.
6.4 Survival of Representations. All statements of fact
(including financial statements) contained in the schedules, the
exhibits, the certificates or any other instrument delivered by or
on behalf of the parties hereto, or in connection with the
transactions contemplated hereby, shall be deemed representations
and warranties by the respective party hereunder. All
representation, warranties agreements and covenants hereunder shall
survive the Closing and remain effective regardless of any
investigation or audit at any time made by or on behalf of the
parties or of any information a party may have in respect thereto.
Consummation of the transactions contemplated hereby shall not be
deemed or construed to be a waiver of any right or remedy possessed
by any party hereto, notwithstanding that such party knew or should
have known at the time of Closing that such right or remedy existed.
6.5 Incorporated by Reference. All documents (including,
without limitation, all financial statements) delivered as part
hereof or incident hereto are incorporated as a part of this
Agreement by reference.
6.6 Remedies Cumulative. No remedy herein conferred upon
and Party is intended to be exclusive of any other remedy and each
and every such remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise.
6.7 Execution of Additional Documents. Each party hereto
shall make, execute, acknowledge and deliver such other instruments
and documents, and take all such other actions as may be reasonably
required in order to effectuate the purposes of this Agreement and
to consummate the transactions contemplated hereby.
6.8 Finders' and Related Fees. Each of the parties
hereto is responsible for, and shall indemnify the other against,
any claim by any third party to a fee, commission, bonus or other
remuneration arising by reason of any services alleged to have been
rendered to or at the instance of said party to this Agreement with
respect to this Agreement or to any of the transactions contemplated
hereby.
6.9 Governing Law. This Agreement has been negotiated
and executed in the State of California and shall be construed and
enforced in accordance with the laws of such state.
6.10 Forum. Each of the parties hereto agrees that any
action or suit which may be brought by any party hereto against any
other party hereto in connection with this Agreement or the
transactions contemplated hereby may be brought only in a federal or
state court in Orange County, California.
6.11 Attorneys' Fees. Except as otherwise provided
herein, if a dispute should arise between the parties including, but
not limited to arbitration, the prevailing party shall be reimbursed
by the nonprevailing party for all reasonable expenses incurred in
resolving such dispute, including
<PAGE>
reasonable attorneys' fees exclusive of such amount of attorneys'
fees as shall be a premium for result or for risk of loss under a
contingency fee arrangement.
6.12 Binding Effect and Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and
their respective heirs, executors, administrators, legal
representatives and assigns.
6.13 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. In
making proof of this Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the date first written hereinabove.
JONES NAUGHTON ENTERTAINMENT, INC.
a Colorado corporation ("JNNE")
/s/ Joe Naughton
By: Joe Naughton
Its: President and CEO
AUCTIONOMICS, INC.
a Nevada corporation ("AUCTION")
By:/s/Harvey A. Turell
<PAGE>
EXHIBIT "A"
Auction Shares
Harvey A. Turell 5,000 Shares
Nathan Wolfstein 5,000 Shares
<PAGE>
EXHIBIT "B"
Auction Assets and Liabilities
NONE.
<PAGE>
EXHIBIT "C"
Auction Contracts
NONE.
<PAGE>
EXHIBIT "D"
Consulting Agreement
AUCTIONOMICS, INC.
a Nevada corporation
CONSULTING AGREEMENT
This Consulting Agreement (this "Agreement"), made and
entered into as of this 10th day of June, 1999 by and between
Auctionomics, Inc., a Nevada corporation ("Auction" or the
"Company") and WLTC, LLC, a California Limited Liability Company
(the "Consultant").
RECITALS
WHEREAS, Auction wishes to engage the consulting services of
Consultant; and
WHEREAS, Consultant wishes to provide Auction with consulting
services.
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereto hereby agree as follows:
1. CONSULTING SERVICES
Auction hereby authorizes, appoints and engages the
Consultant to perform the following services in accordance with the
terms and conditions set forth in this Agreement:
The Consultant will assist in the business development of
Auction, including communication with customers, marketing, etc. In
addition, Consultant's members, principals, or employees may serve
as an officer and/or director of Auction at the discretion of
Auction's Board of Directors and Shareholders.
2. TERM OF AGREEMENT
This Agreement shall be in full force and effect as of the
date hereof and shall remain in effect for so long as Harvey A.
Turrell, who is a member of Consultant, shall remain a shareholder
of Auction. At such time as Mr. Turrell ceases to be a shareholder
of Auction, then this Agreement the obligations of all parties
hereunder shall immediately be terminated in their entirety.
3. COMPENSATION TO CONSULTANT
a. The Company shall pay to Consultant a sum equal to twenty
percent (20%) of the gross revenues to the Company generated as a
result of Consultants efforts, payable on a quarterly basis within
thirty (30) days of the end of the preceding calendar quarter.
Gross revenues is defined as gross revenues minus any amounts
payable to third parties as referral fees, finder's fees,
co-marketing fees, or similar fees payable in the generation of
gross revenues).
b. The Company shall reimburse Consultant for all reasonable
business related expenses incurred by Consultant in the course of
his normal duties on behalf of the Company.
<PAGE>
In reimbursing Consultant for expenses, the ordinary and usual business
guidelines and documentation requirements shall be adhered to by the Company
and Consultant. Any expenses which, individually or in the
aggregate, exceed Five Hundred Dollars ($500.00) must be consented
to by the Company in writing prior to being incurred by Consultant.
4. REPRESENTATIONS AND WARRANTIES OF CONSULTANT
Consultant represents and warrants to and agrees with
Auction that:
a. This Agreement has been duly authorized, executed and
delivered by Consultant. This Agreement constitutes the valid, legal
and binding obligation of Consultant, enforceable in accordance with
its terms, except as rights to indemnity hereunder may be limited by
applicable federal or state securities laws, and except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditor's rights generally.
b. The consummation of the transactions contemplated hereby
will not result in any breach of the terms or conditions of, or
constitute a default under, any agreement or other instrument to
which Consultant is a party, or violate any order, applicable to
Consultant, of any court or federal or state regulatory body or
administrative agency having jurisdiction over Consultant or over
any of its property, and will not conflict with or violate the terms
of Consultants's current employment.
c. The parties hereto acknowledge and agree that Auction
shall have the right to refuse any course of action proposed by
Consultant and to refuse any customer or sale identified by
Consultant or any other source.
5. REPRESENTATIONS AND WARRANTIES OF AUCTION
Auction hereby represents, warrants, covenants to and agrees
with Consultant that:
a. This Agreement has been duly authorized, and executed by
Auction. This Agreement constitutes the valid, legal and binding
obligation of Auction, enforceable in accordance with its terms,
except as rights to indemnity hereunder may be limited by applicable
federal or state securities laws, except in each case as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditor's rights generally.
b. There is not now pending or, to the knowledge of
Auction, threatened, any action, suit or proceeding to which Auction
is a party before or by any court or governmental agency or body
which might result in a material adverse change in the financial
condition of Auction. The performance of this Agreement and the
consummation of the transactions contemplated hereby will not result
in a breach of the terms or conditions of, or constitute a default
under, any statute, indenture, mortgage or other
material Agreement or instrument to which Auction is a party, or violate
any order, applicable to Auction, or governmental agency having jurisdiction
over Auction or over any of its property.
6. INDEPENDENT CONTRACTOR
Both Auction and the Consultant agree that the Consultant
will act as an independent contractor in the performance of his
duties under this Agreement. Nothing contained in this Agreement
shall be construed to imply that Consultant, or any employee, agent
or other authorized representative of Consultant, is a partner,
joint venturer, agent, officer or employee of Auction. Neither
party hereto shall have any authority to bind the other in any
respect vis a vis any third party, it being intended that each shall
remain an independent contractor and responsible only for its own
actions.
7. NOTICES
Any notice, request, demand, or other communication given
pursuant to the terms of this Agreement shall be deemed given upon
delivery, if hand delivered or sent via facsimile, or Forty-Eight
(48) hours after deposit in the United States mail, postage prepaid,
and sent certified or registered mail, return receipt requested,
correctly addressed to the addresses of the parties indicated below
or at such other address as such party shall in writing have advised
the other party.
If to Auction:
Auctionomics, Inc.
c/o Jones Naughton Entertainment, Inc.
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joseph Naughton, Chief Executive Officer
Facsimile No.: (714) 994-3242
With a copy to:
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: (949) 719-1988
<PAGE>
If to Consultant:
WLTC, LLC
18226 Ventura Boulevard, Unit 103
Tarzana, CA 91356
Attn: Harvey A. Turrell
Facsimile No.: (818) 343-7119
8. ASSIGNMENT
This contract shall inure to the benefit of the parties
hereto, their heirs, administrators and successors in interest.
This Agreement shall not be assignable by either party hereto
without the prior written consent of the other.
9. CHOICE OF LAW AND VENUE
This Agreement and the rights of the parties hereunder shall
be governed by and construed in accordance with the laws of the
State of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the
principles of conflict of laws. Any action brought by any party
hereto shall be brought within the State of California, County of
Orange.
10. NONDISCLOSURE
Each party hereto agrees to keep the terms of this Agreement
and the transactions contemplated hereby as confidential and shall
not disclose such information to any third party, other than
professional advisors utilized to negotiate and consummate the
transactions contemplated hereby. The parties hereto agree that in
the event there is a breach of the foregoing confidentiality
provision, the damage to the parties hereto would be difficult to
estimate and as a result, in the event of such a breach, the
non-breaching party, in addition to any and all other remedies
allowed by law, would be entitled to injunctive relief enjoining the
actions of the breaching party.
11. SEVERABILITY
If any provision of this Agreement is unenforceable, invalid,
or violates applicable law, such provision, or unenforceable portion
of such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
12. CAPTIONS
The captions in this Agreement are inserted only as a matter
of convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the
relationship of the parties, and shall not affect this Agreement or
the construction of any provisions herein.
<PAGE>
13. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
14. MODIFICATION
No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties
hereto.
15. ATTORNEYS FEES
Except as otherwise provided herein, if a dispute should
arise between the parties including, but not limited to arbitration,
the prevailing party shall be reimbursed by the non-prevailing party
for all reasonable expenses incurred in resolving such dispute,
including reasonable attorneys' fees.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the Effective Date.
"Auction" "Consultant"
Auctionomics, Inc. WLTC, LLC
a Nevada corporation a California Limited
Liability Company
/s/Joe Naughton /s/Harvey A. Turell
By: Joe Naughton By: Harvey A. Turell
Its: Secretary, Director Its:
VENDOR AGREEMENT
THIS VENDOR AGREEMENT (hereinafter "Agreement") is made
and entered into between GoOn-line.com, its assigns, and successors
(hereinafter "GoOn-line") and 5th Avenue Channel, its assigns, and
successors (hereinafter "5th Avenue"), on this ____th day of June,
1999. Each of GoOn-line and 5th Avenue shall be referred to as a
"Party" and collectively as the "Parties."
RECITALS
WHEREAS, GoOn-line is in the business of marketing and
selling, via the Internet, goods and products directly to consumers;
WHEREAS, 5th Avenue maintains an inventory of goods and
products and has the ability to ship said goods and products
directly to consumers;
WHEREAS, the Parties desire to enter into an agreement
whereby 5th Avenue will allow and assist GoOn-line in selling its
goods and products on GoOn-line's web site, and 5th Avenue will drop
ship the goods and products directly to the purchaser, in accordance
with the terms and conditions hereof.
NOW, THEREFORE, the Parties hereto agree as follows:
1. APPOINTMENT OF GOON-LINE. Effective upon execution of
this Agreement, 5th Avenue grants to GoOn-line the
non-exclusive right to market and sell all goods and
products to which the Parties mutually and from time to
time agree (the "Products") may be sold through
GoOn-line's Internet web site or through any other means
in which GoOn-line may obtain orders for said Products.
GoOn-line will have the unrestricted right to market the
Products in any method or manner, at its sole discretion.
The Parties agree that on a periodic basis they will
review and update the available Products subject to this
Agreement.
2. NOTIFICATIONS. Immediately upon the receipt of an order for
any particular product, GoOn-line will notify 5th Avenue via
email, or any other agreed upon method of notification, of
said sale (the "Sale Notification"). Within forty eight (48)
hours of receipt of the Sale Notification, 5th Avenue will
either (i) ship the specified Product directly to the
purchaser in accordance with instructions received from
GoOn-line, and notify GoOn-line via email or any other agreed
upon method of notification of the exact date of said
shipment (the "Shipment Notification"), or (ii) notify
GoOn-line of the status of shipment of the specified Product,
including the date when it is anticipated that the specified
Product will be shipped to the purchaser, and subsequently
provide GoOn-line with Shipment Notification within twenty
four (24) hours of shipment.
3. SHIPPING. GoOn-line will be responsible for all shipping
charges arising out of this Agreement, and may charge the
purchaser for shipping charges, including a reasonable mark
<PAGE>
up. 5th Avenue will have available at least two (2) shipping
options, namely Ground Shipping and Express Overnight.
4. PRODUCT PROFIT MARGIN AND PRICING. The Parties shall
periodically review and mutually agree upon the profit margin
for each Product. 5th Avenue reserves the right to designate
a "lowest selling price" for any Product.
5. PAYMENT. GoOn-line will be responsible for processing the
customers payment and will collect the purchase price from
the purchaser upon receipt of the Shipment Notification.
GoOn-line will forward payment to 5th Avenue within ten (10)
days of receipt of the Shipment Notification, minus any
credited returns as set forth in Section 6 hereof. GoOn-line
will be responsible for applying and collecting any
applicable sales tax.
6. RETURNS. GoOn-line will communicate with the purchaser
regarding complaints and returns, and will receive any and
all returns from the purchaser. Although subject to change
by GoOn-line, it is anticipated that their return policy will
allow purchasers up to thirty (30) days to return Product.
Products deemed to be defective by GoOn-line will be returned
to 5th Avenue, and a credit for the net cost of the Product
will be applied to the next payment due to 5th Avenue in
accordance with Section 5 hereof. Only Products that are in
re-sellable condition (i.e. the box is intact and the product
not used) shall be returned to 5th Avenue. Any Products
returned to GoOn-line that is not in a re-sellable condition
shall not be eligible for a return credit and shall be the
property of GoOn-line.
7. NONSOLICITATION. Each of the Parties hereto, their
officers, directors, and employees, acknowledge that each
Parties relationships with its employees, customers,
clients, suppliers, sponsors and other persons are
valuable business assets. The Parties hereto agree that
they shall not, and their officers, directors, agents, and
employees shall not, directly or indirectly, attempt to
solicit or otherwise communicate with the other Party's
suppliers, customers, clients, sponsors, or employees
without the written consent of the affected Party.
8. TRADEMARKS. This Agreement shall not entitle either Party
to the use of the other Party's trademarks and other
intellectual property with the written consent of the
affected Party.
9. PRESS RELEASES AND OTHER MARKETING MATERIALS. Either
Party to this agreement must obtain approval for any and
all press releases, advertisements, or any other marketing
materials related to the Products, this Agreement, or the
transactions contemplated herein, prior to dissemination.
10. RELATIONSHIP OF PARTIES. 5th Avenue's relationship to
GoOn-line hereunder shall be that of an independent vendor.
Neither party shall be deemed to be the agent of the other,
and neither shall have the authority to act on behalf of the
other party except in the matter and extent agreed to in
writing. Nothing contained in this Agreement shall be
construed to imply that 5th Avenue or GoOn-line, or any
employee, agent or other authorized representative of any
such party, is a partner, joint venturer, agent officer or
employee of the other. Neither party hereto shall have any
authority to bind the other in any respect vis a vis any
third party, it being intended that each shall remain an
independent contractor and responsible only for
<PAGE>
its own actions. 5th Avenue and GoOn-line are independent
contractors, each responsible for its own actions, costs and
expenses. Neither 5th Avenue nor GoOn-line shall have any
right to, and shall not, commit the other party to any
agreement, contract, or undertaking or waive or compromise
any of such other party's rights against customers or other
parties.
11. TAXES. GoOn-line is not responsible for any taxes,
unemployment insurance, insurance, Social Security, or any
local, state, or federal fees and/or taxes incurred by 5th
Avenue, its agents or employees. 5th Avenue is responsible
for all state, local, and federal taxes and fees on all
monies paid to 5th Avenue by GoOn-line. Conversely,
GoOn-line shall be responsible for all applicable state,
federal, and local taxes and fees on all monies paid to
GoOn-line by its purchasers.
12. CONFIDENTIAL INFORMATION. The Parties hereby acknowledges
and agrees that all information disclosed by either Party,
whether written or oral, relating to their business
activities, customer names, addresses, all operating plans,
information relating to existing services, new or envisioned
products or services and the development thereof, scientific,
engineering, or technical information, marketing or product
promotional material, including brochures, product
literature, plan sheets, and any and all reports generated to
customers, unpublished list of names, and all information
relating to order processing, pricing, cost and quotations,
and any and all information relating to either Party's
relationship with customers, is considered confidential
information, and is proprietary to, and is considered the
invaluable trade secret of the holding party (collectively
"Confidential Information"). Any disclosure of any
Confidential Information by either Party, its employees,
agents or representatives shall cause immediate, substantial,
and irreparable harm and loss to the affected Party, and
their competitive position in the marketplace. Each Party
desires to keep such Confidential Information in the
strictest confidence, and each Party's agreement to do so is
a continuing condition of the receipt and possession of
Confidential Information, and a material provision of this
Agreement, and a condition that shall survive the termination
of this Agreement. Consequently, each Party shall use
Confidential Information for the sole purpose of performing
its obligations as provided herein. Accordingly, each party
agrees:
A. not to disclose Confidential Information to future or
existing competitors;
B. to limit dissemination of Confidential Information to
only those employees who have a need to know such
Confidential Information in order perform their
duties as set forth herein;
C. to return Confidential Information, including all
copies and records thereof, to the respective Party
upon request or termination of the Agreement as
provided herein, whichever occurs first.
13. TERM AND TERMINATION. This Agreement shall be for an initial
term of ____ months. Either Party may terminate this
Agreement at any time upon thirty (30) days written notice
given by the terminating party. Notwithstanding the above,
if either Party defaults in the performance of any material
obligation in this Agreement, then the non-defaulting party
may
<PAGE>
give written notice to the defaulting party, and if such
default is not cured within ten (10) days following such
notice, the non-defaulting party shall be entitled to
terminate this Agreement.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the Parties hereto with
respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and
understandings related to the subject matter hereof. No
understanding, promise, inducement, statement of intention,
representation, warranty, covenant or condition, written or
oral, express or implied, whether by statute or otherwise,
has been made by any Party hereto which is not embodied in
this Agreement or the written statements, certificates, or
other documents delivered pursuant hereto or in connection
with the transactions contemplated hereby, and no party
hereto shall be bound by or liable for any alleged
understanding, promise, inducement, statement,
representation, warranty, covenant or condition not so set
forth.
15. NOTICES. All notices provided for in this Agreement shall be
in writing signed by the party giving such notice, and
delivered personally or sent by overnight courier or
messenger or sent by registered or certified mail (air mail
if overseas), return receipt requested, or by telex,
facsimile transmission, telegram or similar means of
communication. Notices shall be deemed to have been received
on the date of personal delivery, telex, facsimile
transmission, telegram or similar means of communication, or
if sent by overnight courier or messenger, shall be deemed to
have been received on the next delivery day after deposit
with the courier or messenger, or if sent by certified or
registered mail, return receipt requested, shall be deemed to
have been received on the third business day after the date
of mailing. Notices shall be sent to the addresses set forth
below:
If to GoOn-line:
GoOn-line.com
Attn: Scott Claverie
Facsimile (____)
If to 5th Avenue:
5th Avenue Channel
Attn:
Facsimile (___)
16. CHOICE OF LAW. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance
with the laws of the State of California including all
matters of construction, validity, performance, and
enforcement and without giving effect to the principles of
conflict of laws.
<PAGE>
17. JURISDICTION. The parties submit to the jurisdiction of the
Courts of the State of California or a Federal Court
empaneled in the State of California for the resolution of
all legal disputes arising under the terms of this Agreement,
including, but not limited to, enforcement of any arbitration
award.
18. VENUE. The parties hereto hereby consent to the venue and
jurisdiction of the Superior Court of the State of
California, Orange County, Central District and waive all
defenses of improper venue or jurisdiction.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which shall together constitute one and the same
instrument.
20. AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by a
written agreement signed by all of the parties hereto.
21. TITLES AND CAPTIONS. All section titles or captions
contained in this Agreement are for convenience only and
shall not be deemed part of the context nor affect the
interpretation of this Agreement.
22. PRONOUNS AND PLURALS. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person or
persons may require.
23. AGREEMENT BINDING. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of
the parties hereto.
24. PRESUMPTION. This Agreement or any Section thereof shall not
be construed against any party due to the fact that said
Agreement or any Section thereof was drafted by said party.
25. FURTHER ACTION. The parties hereto shall execute and deliver
all documents, provide all information and take or forbear
from all such action as may be necessary or appropriate to
achieve the purpose of the Agreement.
26. PARTIES IN INTEREST. Nothing herein shall be construed to be
to the benefit of any third party, nor is it intended that
any provision shall be for the benefit of any third party.
27. SAVINGS CLAUSE. If any provision of this Agreement, or the
application of such provision to any person or circumstance,
shall be held invalid, the remainder of this Agreement, or
the application of such provision to persons or circumstances
other than those as to which it is held invalid, shall not be
affected thereby.
28. SEVERABILITY. Should any provision or any part of this
agreement be held unenforceable by any court or arbitrator,
then the remainder of the agreement shall be given full force
and effect and the invalid provision shall be deemed severed
from this agreement.
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first written above.
GoOn-line.com 5th Avenue Channel
By: /s/ Scott Claverie By:
Scott Claverie Its:
Its: President
ADDENDUM TO
REORGANIZATION AND STOCK PURCHASE AGREEMENT
This Addendum ("Addendum") to that certain Reorganization and
Stock Purchase Agreement by and between Jones Naughton
Entertainment, Inc. and Auctionomics, Inc. and its shareholders
("Agreement") dated June 10, 1999 is executed effective this 25th
day of June, 1999.
Capitalized terms used herein shall have the same meaning as in
the Agreement.
1. As an additional term of the Agreement, the Parties hereby
agree as follows:
JNNE and the Shareholders each agree that, in the event
additional shares of Auction are issued to the
Shareholders, JNNE or any entity controlled by JNNE, then
both JNNE and the Shareholders, or either of them, as the
case may be, will be issued that number of shares, without
consideration, so that the number of shares that each owns
relative to the other shall remain constant on a pari
passu basis. This anti-dilution provision shall not apply
in the event that shares of Auction are issued to any
party other than the Shareholders, JNNE or any entity
controlled by JNNE, in which event both JNNE and the
Shareholders will experience equal dilution relative to
their respective shareholdings at the time of the
transaction.
The balance of the terms of the Agreement are hereby
acknowledged and agreed to and shall remain in full force and effect.
JONES NAUGHTON ENTERTAINMENT, INC. AUCTIONOMICS, INC.
a Colorado corporation ("JNNE") a Nevada corporation ("AUCTION")
/s/ Joe Naughton
By: Joe Naughton By: /s/Harvey A. Turell
Its: President and CEO Its:
/s/ Harvey A. Turell /s/ Nathan Wolfstein
Harvey A. Turell, an individual Nathan Wolfstein, an individual
SECURITIES SUBSCRIPTION AGREEMENT
THIS SECURITIES SUBSCRIPTION AGREEMENT, dated as of _____________
("Agreement"), is executed in reliance upon the exemption from
registration afforded by Rule 504 promulgated under Regulation D
by the Securities and Exchange Commission ("SEC"), under
the Securities Art of 1933, as amended. Capitalized terms
used herein and not defined shall have the meanings given
to them in Rule 504 and Regulation D.
This Agreement has been executed by the undersigned buyer ("Buyer") in
connection with the private placement of 3% Series A Convertible Debentures
of Jones Naughton Entertainment, Inc., a corporation organized under the
laws of Colorado, with its principal executive offices located at 5681 Beach
Boulevard, Suite 101, Buena Park, California 90621, hereinafter referred to
as ("Seller"). Buyer hereby represents and warrants to, and agrees with
Seller:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN
AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER
(THE "1933 ACT"), AND RULE 504 OF REGULATION D PROMULGATED THEREUNDER.
1. Agreement to Subscribe; Purchase Price.
(a) Subscription. The undersigned Buyer hereby subscribes for and agrees to
purchase the Seller's 3% Series A Convertible Debenture substantially in the
form of the Debenture attached as Exhibit A hereto and having an aggregate
original principal face amount of U.S. $________ (singly, a "Debenture," and
collectively, the "Debentures"), at an aggregate purchase price of 100% of
the face amount of such Debentures as set forth in subsection (b) herein.
(b) Payment. The Purchase Price for the Debenture shall be ______________
United States Dollars (U.S. $___________ ) ("Purchase Price"), which
shall be payable at closing, pursuant to paragraph c herein, in accordance
with the terms and conditions of an Escrow Agreement which is attached
hereto and shall be executed simultaneously with this Agreement ("Escrow
Agreement").
(c) Closing. Subject to the satisfaction of the conditions set
forth in Sections 7 and 8 hereof, the Closing of the transactions
contemplated by this Agreement shall
<PAGE>
take place when (i) Seller delivers the Debentures to the Escrow Agent, and
(ii) Buyer delivers to the Escrow Agent the purchase price of the Debentures
less any sums required to be paid pursuant to the Escrow Agreement.
2. Buyer Representations and Covenants;
Access to Information.
In connection with the purchase and sale of the Debenture, Buyer represents
and warrants to, and covenants and agrees with Seller as follows,
(i) Buyer is not, and on the closing date will not be, an
affiliate of Seller;
(ii) Buyer is purchasing the Securities for its own account and Buyer is
qualified to purchase the Securities under the laws of its jurisdiction of
residence, and the offer and sale of the Securities will not violate the
securities laws or other laws of such jurisdiction;
(iii) All offers and sales of any of the Securities by Buyer shall be made
in compliance with any applicable securities laws of any applicable
jurisdiction and in accordance with Rule 504, as applicable, of Regulation D
or pursuant to registration of securities under the 1953 Act or pursuant to
an exemption from registration;
(iv) Buyer understands that the Securities are not registered under the 1933
Act and are being offered and sold to it in reliance on specific exclusions
from the registration requirements of Federal and State securities laws, and
that Seller is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of Buyer set
forth herein in order to determine the applicability of such exclusions and
the suitability of Buyer and any purchaser from Buyer to acquire the
Securities;
(v) Buyer shall comply with Rule 504 promulgated under Regulation D;
(vi) Buyer has the full right, power and authority to enter into this
Agreement and to consummate the transaction contemplated herein. This
Agreement has been duly authorized, validly executed and delivered on behalf
of Buyer and is a valid and binding agreement in accordance with its terms,
subject to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally;
<PAGE>
(vii) The execution and delivery of this Agreement and the consummation of
the Purchase Of the Securities and the transactions contemplated by this
Agreement do not and will not conflict with or result in a breach by Buyer
of any of the term or provisions of, or constitute a default under, the
articles of incorporation or by-laws (or similar constitutive documents) of
Buyer or any indenture, mortgage, deed of trust, or other material agreement
or instrument to which Buyer is a party or by which it or any of its
properties or assets are bound, or any existing applicable law, rule or
regulation of the United States or any State thereof or any applicable
decree, judgment or order of any Federal or State court, Federal or State
regulatory body, administrative agency or other United States governmental
body having jurisdiction over buyer or any of its properties or assets;
(viii) All invitations, offers and sales of or in respect of, any of the
Securities, by Buyer and any distribution by Buyer of any documents relating
to any invitation, offer or sale by it of any of the Securities will be in
compliance with applicable laws and regulations, will be made in such a
manner that no prospectus need be filed and no other filing need by made by
Seller with any regulatory authority or stock exchange in any country or any
political sub-division of any country, and Bayer will make no
misrepresentations nor omissions of material fact in the invitation, offer
or resale of the Debentures;
(ix) The Buyer (or others for whom it is contracting hereunder) has been
advised to consult its own legal and tax advisors with respect to applicable
resale restrictions and applicable tax considerations and it (or others for
whom it is contracting hereunder) is solely responsible (and the Seller is
not in any way responsible) for compliance with applicable resale
restrictions and applicable tax legislation;
(x) Buyer understands that no Federal or State or foreign government agency
has passed on or made any recommendation or endorsement of the Securities;
(xi) Buyer has had an opportunity to discuss with the officers of Seller,
all matters relating to the securities, financial condition, operations and
prospects of Seller and any questions raised by Buyer have been answered to
Buyer's satisfaction.
(xii) Buyer acknowledges that the purchase of the Securities involve a high
degree of risk. Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
purchasing the Securities- Buyer understands that the Securities are not
being registered under
<PAGE>
the 1933 Act, and therefore, Buyer must bear the economic risk of this
investment for an indefinite period of time; and
(xiii) Buyer is not a "10-percent Shareholder" (as defined in Section
871(h)(3)(B) of the U.S. Internal Revenue Code) of Seller.
3. Seller Representations and Covenants
(a) Seller is a corporation duly organized and validly existing under the
laws of the State of Colorado, and is in good standing under such laws- The
Seller has all requisite corporate power and authority to own, lease and
operate its properties and assets, and to carry on its business as presently
conducted. The Seller is qualified to do business as a foreign corporation
in each jurisdiction in which the ownership of its property or the nature of
its business requires such qualification, except where failure to so qualify
would not have a material adverse effect on the Seller
(b) There are 100,000,000 shares of Seller's Common Stock, $0. 001 par value
per share ("Common Stock"), authorized and 39,735,106 as of July 30, 1998
outstanding. The Common Stock trades on OTC Bulletin Board. All issued and
outstanding shares of Common Stock have been authorized and validly issued
and are My paid and assessable
(c) My execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default (with or without notice or
lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of. any obligation or to a loss of a material
benefit, under, any provision of the Articles of Incorporation, and any
amendments thereto, By-laws, Stockholders Agreements and any amendments
thereto of the Seller or any material mortgage, indenture, lease or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law ordinance, rule or regulation applicable to the
Seller, its properties or assets.
(d) The Seller is not subject to the reporting requirements of Sections 13
or 15(d) of the Securities and Exchange Act, is not an investment company or
a developmental stage company that either has no specific business plan or
purpose.
(e) There is no fact known to the Seller that has not been publicly
disclosed by the Seller or disclosed in writing to the Buyer which could
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise) or in the earnings, business affairs, properties or
assets of the Seller, or could reasonably be expected to materially and
adversely affect the ability of the Seller to perform its obligations
pursuant to this Agreement.
<PAGE>
(f) No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Seller is required
in connection with the valid execution and delivery of this Agreement, or
the offer, sale or issuance of the debentures or Common Stock, or the
consummation of any other transaction contemplated hereby, except the filing
with the SEC of Form D. A copy of such filed Form D will be sent to the
Escrow Agent.
(g) There is no action, proceeding or investigation pending, or to the
Seller's knowledge, threatened, against the Seller which might result,
either individually or in the aggregate, in any material adverse change in
the business, prospects, conditions, affairs or operations of the Seller.
The Seller is not a party to or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. is no action, suit proceeding or investigation by the
Seller currently pending or which the Seller intends to initiate. The SEC
has not issued any order suspending trading in the Seller's Common Stock.
(h) There are no other material outstanding debt or equity
securities presently convertible into Common Stock other than the Debentures.
(i) The Seller has not sold any securities within The 12 month period prior
to the date the Common Stock was first offered in reliance on any exemption
under Section 3(b) of the 1933 Act or in violation of Section 5(a) of the
1933 Act.
j) The issuance, sale and delivery of the Debentures have been duly
authorized by all required corporate action on the part of the Seller, and
when issued, sold and delivered in accordance with the terms hereof and
thereof for the consideration expressed herein and therein, will be duly and
validly issued, fully paid and non-assessable. The Common Stock issuable
upon conversion of the Debenture has been duly and validly reserved for
issuance and upon issuance in accordance with the terms of the Debentures,
shall be duly and validly issued, fully paid, and non-assessable There are
no pre-emptive rights of any shareholder of Seller.
(k) This Agreement has been duly authorized, validly executed and delivered
on behalf of Seller and is a valid and binding agreement in accordance with
its terms, subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights generally - The
Seller has all requisite right, power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. All
corporate action on the part of the Seller, its directors and shareholders
necessary for the authorization, execution, delivery and performance of this
Agreement and the Debentures has been taken. Upon their issuance to the
Buyer and delivery to the Escrow Agent, as defined in and pursuant to the
Escrow Agreement, the Debentures will be validly issued and nonassessable,
and will be free of any liens or encumbrances.
<PAGE>
4. Exemption; Reliance on Representations. Buyer understands that the offer
and sale of the Securities are not being registered under the 1933 Act.
Seller and Buyer are relying on the rules governing offers and sales made
pursuant to Rule 504 promulgated under Regulation D.
5. Transfer Agent Instructions.
(a) Debentures. Upon the conversion of the Debentures, the Buyer or holder
shall give a notice of conversion to the Seller and the Seller shall
instruct its transfer agent to issue one or more Certificates representing
that number of shares of Common Stock into which the Debenture or Debentures
are convertible in accordance with the provisions regarding conversion set
forth in Exhibit . The Seller shall act as Debenture Registrar and shall
maintain an appropriate ledger containing the necessary information with
respect to each Debenture.
(b) Common Stock to be Issued Without Restrictive Legend. Upon the conversion
of any Debenture, Seller shall instruct Seller's transfer agent to issue
Stock Certificates up to the total of the "Conversion Amount" (as defined it
the Debenture) and any "Interest Shares" (as defined in the Debenture)
without restrictive legend in the name of the Buyer (or its nominee) and in
such denominations to be specified at conversion representing the number of
shares of Common Stock issuable upon such conversion, as applicable. The
Common Stock shall be immediately freely transferable on the books and
records of Seller.
6. Delivery Instructions. The Debentures being purchased
hereunder, and the Purchase Price, shall be delivered to the Escrow Agent
pursuant to the Escrow Agreement.
7. Conditions To Seller's Obligation To Sell. Seller's
obligation to sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement as
executed by Buyer.
(b) All of the representations and warranties of the Buyer contained in this
Agreement shall be true and correct on the Payment Date with the same force
and effect as if made on and as of the Payment Date. The Buyer shall have
performed or complied with all agreements and satisfied all conditions on
its part to be performed, complied with or satisfied at or prior to the
Payment Date.
(c) No order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Act shall have
been issued, and no proceedings for that purpose shall have been commenced
or shall be pending or, to the knowledge of the Seller, be contemplated. No
stop order suspending the sale of the Debentures or Common Stock shall have
been issued, and no proceedings for that purpose shall have been commenced
or shall be pending or, to the knowledge of the Seller, be contemplated.
<PAGE>
(d) No action shall have been taken and no statute, rule, regulation or
order shall have been enacted, adopted or issued by any governmental agency
that would prevent the issuance of the Debentures or Common Stock. No
injunction, restraining order or order of any nature by a federal or state
court of competent jurisdiction shall have been issued that would prevent
the issuance of the Debentures.
(e) The funding by the Buyer of the Escrow Fund.
8. Conditions To Buyers Obligation To Purchase. Buyer's
obligation to purchase the Debentures is conditioned upon:
(a) The confirmation of receipt and acceptance by Seller of this
Agreement as evidenced by execution of this Agreement of the duly authorized
officer of Seller.
(b) Delivery of the Debentures to the Escrow Agent.
9. No Shareholder Approval. Seller hereby agrees that from the
Closing Date until the issuance of Common Stock upon
the conversion of the Debentures, Seller will
not take any action Which would require Seller to seek shareholder
approval of such issuance unless such
shareholder approval is required by law or
regulatory body (including but not limited to the NASDAQ Stock
Market, Inc.) as a result of the issuance of the Securities
hereunder.
10. Miscellaneous.
(a) This Agreement together with the Debentures and Escrow Agreement,
constitutes the entire agreement between the parties, and neither party
shall be liable or bound to the other in any mariner by any warranties,
representations or covenants except as specifically set forth herein- Any
previous agreement among the parties related to the transactions described
herein is superseded hereby. The term and conditions of this Agreement shall
inure to the benefit of and be binding upon the restrictive successors and
assigns of the parties hereto. Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties
hereto, and their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
(b) Buyer is an independent contractor and is not the agent of
Seller. Buyer is not authorized to bind Seller or to make any representation
or warranties on behalf of Seller.
(c) All representations and warranties contained in this
Agreement by Seller and Buyer shall survive the closing of the transactions
contemplated by this Agreement.
(d) This Agreement shall be construed in accordance with the laws of New
York applicable to contracts made and wholly to be performed within the
State of New York and shall be binding upon the successors and assigns of
each party hereto. Buyer and Seller hereby
<PAGE>
mutually waive trial by jury and consent to exclusive jurisdiction and venue
in the courts of the State of New York. At Buyer's election, any dispute
between the parties may be arbitrated rather than litigated in the courts,
before the arbitration board of the National Association of Securities
Dealers in New York City and pursuant to its rules. Upon demand made by the
Buyer to the Seller, Seller agrees to submit to and participate in such
arbitration. This Agreement may be executed in counterparts, and the
facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
(e) Seller agrees to indemnify and hold Buyer harmless from any and all
claims, damages and liabilities arising from Seller's breach of its
representations and/or covenants set forth herein.
(f) Buyer agrees to indemnify and hold Seller harmless from any and all
claims, damages and liabilities arising from Buyer's breach of its
representations and warranties set forth in this Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed This Agreement as of the
date first set forth above.
Official Signatory of Seller:
JONES NAUGHTON ENTERTAINMENT, INC.
By: /s/Joseph Naughton
Title: President
Accepted this _______ day of _______________
Official Signatory of Buyer:
By: _____________________
Address of Buyer:
DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
WITH THE UNWED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED
BY SECTION 3(B) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER (THE 111933 ACT"), AND RULE 504 OF
REGULATION D PROMULGATED THEREUNDER.
A-001 US $____________
JONES NAUGHTON ENTERTAINMENT, INC.
3% SERIES A CONVERTIBLE DEBENTURE
DUE JULY 30, 2000
THIS DEBENTURE of Jones Naughton Entertainment, Inc., a corporation duly
organized and existing under the laws of Colorado ("Company"), designated
as its 3% Series A Convertible Debentures Due July 30, 2000, in an
aggregate principal face amount not exceeding ___________________ Dollars
(U.S. $___________), which Debentures are being purchased at 100% of the face
amount of such Debentures.
FOR VALUE RECEIVED, the Company promises to pay to ________________ the
registered holder hereof and his authorized successors and permitted assigns
("Holder"), the aggregate principal face sum not to exceed _________________
Dollars (U.S. $__________) on July 30, 2000 ("Maturity Date"), and to
pay interest on the principal sum outstanding, at the rate of 3% per annum
commencing January 30, 1999 and due in full at the Maturity Date pursuant to
paragraph 4(b) herein. Accrual of outstanding principal sum has been made or
duly provided for the interest so payable will be paid to the person in
whose name this Debenture is registered on the records of the Company
regarding registration and transfers of the Debentures ("Debenture
Register"); provided, however, that the Company's obligation to a transferee
of this Debenture arises only if such transfer, sale or other disposition is
made in accordance with the terms and conditions of the Securities
Subscription Agreement dated as of _______________ between the Company and
_________________ ("Subscription Agreement").The principal of, and interest on,
this Debenture are payable at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder hereof from
time to time. The Company will pay the outstanding principal due upon THIS
DEBENTURE before or on the Maturity Date, less any
<PAGE>
amounts required by law to be deducted or withheld, to the Holder of this
Debenture by check if paid more than 10 days prior to the Maturity Date or
by wire transfer and addressed to such Holder at the last address appearing
on the Debenture Register. The forwarding of such check or wire transfer
shall constitute a payment of outstanding principal hereunder and shall
satisfy and discharge the liability for principal on this Debenture -to the
extent of the sum represented by such check or wire transfer. Interest shall
be payable in Common Stock (as defined below) pursuant to paragraph 4(b)
herein.
This Debenture is subject to the following additional provisions
1. The Debentures are issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples thereof. The Debentures are exchangeable
for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holders surrendering the same,
but not less than U.S. $10,000. No service charge will be made for such
registration or transfer or exchange, except that Holder shall pay any tax
or other governmental charges payable in connection therewith.
2. The Company shall be entitled to withhold from all payments
any amounts required to be withheld under the applicable laws.
3. This Debenture may be transferred or exchanged only in compliance with
the Securities Act of 1953, as amended ("Act") and applicable state
securities laws. Prior to due presentment for transfer of this Debenture,
the Company and any agent of the Company- may treat the person in whose name
this Debenture is duly registered on the Company's Debenture Register as the
owner hereof for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected or
bound by notice to the contrary. Any Holder of this Debenture, electing to
exercise the right of conversion set forth in Section 4(a) hereof, in
addition to the requirements set forth in Section 4(a), and any prospective
transferee of this Debenture, are also required to give the Company written
confirmation that the Debenture is being converted ("Notice of Conversion")
in the form annexed hereto as Exhibit I.
4. (a) The Holder of this Debenture is entitled, at its option, at any time
immediately following execution of this Agreement and delivery of the
Debenture hereof, to convert all or any amount over $10,000 of the principal
face amount. of this Debenture then outstanding into shares of Common Stock,
$0.001 par value per share, of the Company ("Common Stock"), at a conversion
price ("Conversion Price") for each share of Common Stock equal 75% of the
average closing bid. price of the Common Stock for the day immediately
preceding the date of receipt by the Company of Notice of Conversion
("Conversion Share"). However, if the conversion price is below $0.05 per
share, then the Holder is limited to converting a maximum of 25% of the
then outstanding principal in any 7 business day period. If the number of
resultant Conversion Shares would as a matter of law or pursuant to
regulatory authority require the Company to seek shareholder approval of
such issuance, the Company shall, as soon as practicable, take the necessary
steps to seek such approval. Such conversion shall be effectuated, as
provided in a certain Escrow Agreement executed simultaneously with this
Debenture, by the Company delivering the Conversion Shares to the Holder
within 10
<PAGE>
business days of receipt by the Company of the Notice of Conversion. Once
the Holder has received such Conversion Shares, the Escrow Agent shall
surrender the Debentures to be converted to the Company, executed by the
Holder of this Debenture evidencing such Holder's intention to convert this
Debenture or a specified portion hereof, and accompanied by proper
assignment hereof in blank. Accrued but unpaid interest shall be subject to
conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share.
(b) Interest at the rate of 3% per annum shall be paid by issuing Common
Stock of the Company as follows: Based on the average closing bid price of
the Common Stock for the day immediately preceding the date of the monthly
interest payment due ("Market Price"), the Company shall issue to the
Holder shares of Common Stock in an amount equal to the total
monthly interest accrued and due divided by 75% of
the Market Price ("Interest Shares"). The dollar amount of interest payable
pursuant to this paragraph 4(b) shall be calculated based upon the total
amount of payments actually made by the Holder in connection with the
purchase of the Debentures at the time any interest payment is due. If such
payment is made by check, interest shall accrue beginning 10 days from the
date the check is received by the Company. If such payment is made by wire
transfer directly into the Company's account, interest shall accrue
beginning on the date the wire transfer is received by the Company. Common
Stock issued pursuant hereto shall be issued pursuant to Rule 504 of
Regulation D in accordance with the terms of the Subscription Agreement.
(C) At any time after 90 days the Company shall have the option to pay to
the Holder 120% of the principal amount of the Debenture, in full, to the
extent conversion has not occurred pursuant to paragraph 4(a) herein, or pay
upon maturity if the Debenture is not converted. The Company shall give the
Holder 5 days written notice and the Holder during such 5 days shall have
the option to convert the Debenture or any part thereof into shares of
Common Stock at the Conversion Price set forth in paragraph 4(a) of this
Debenture. Any shares issued pursuant to this paragraph 4(C) shall be issued
pursuant to Rule 504 of Regulation D.
5. No provision of this Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of,
and interest on, this Debenture at the time, place, and rate, and in the
form, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment,
notice of non-payment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate, and diligence in taking any
action to collect amounts called for hereunder and shall be directly and
primarily liable for the payment of all sums owing and to be owing hereto
7. The Company agrees to pay all costs and expenses, including reasonable
attorneys' fees, which may be incurred by the Holder in collecting any
amount due under this Debenture.
8. If one or more of the following described "Events of
Default" shall occur and continue for 30 days, unless a different time
frame is noted below:
<PAGE>
(a) The Company shall default in the payment of principal or interest on
this Debenture; or
(b) Any of the representations or warranties made by the Company herein, in
the Subscription Agreement, or in any certificate or financial or other
written statements heretofore or hereafter furnished by or on behalf of the
Company in connection with the execution and delivery of this Debenture
or the Subscription Agreement shall be false or misleading in any material
respect at the time made; or
(C) The Company shall fail to perform or observe, in any material respect,
any other covenant, term, provision, condition, agreement or obligation
of the Company under this Debenture and such failure shall continue
uncured for a period of thirty (30) days after notice from the Holder of
such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
inability to Pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or -commence proceedings for its dissolution;
or (4) apply for or consent to the appointment of a trustee, liquidator or
receiver for its or for a substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial pan of its property or business without its
consent and shall not be discharged within thirty (30) days after
such appointment; or
(f) Any governmental agency or ally court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of
the whole or any substantial portion of the properties or assets of the
Company; or
(g) Any money judgment, writ or warrant of attachment, or similar process,
in excess of One Hundred Thousand ($100,000) Dollars in the aggregate
shall be entered or filed against the Company or any of its properties or
other assets and shall remain unpaid, unvacated, unbonded or unstayed for
a period of fifteen (15) days or in any event later than five (5) days prior
to the date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings, or
other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company; or
(i) The Company shall have its Common Stock delisted from the over-the
counter market; or
<PAGE>
(j) The Company shall not deliver to the Buyer the Common Stock pursuant to
paragraph 4 herein without restrictive legend within 3 business days.
Then, or at any time thereafter, unless cured, and in each and every such
case, unless such Event of Default shall have been waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any subsequent
default) at the option of the Holder and in the Holder's sole discretion,
the Holder may consider this Debenture immediately due and payable, without
presentment, demand, protest or (further) notice of any kind (other than
notice of acceleration), all of which are hereby expressly waived, anything
herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and without expiration of
any period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law.
9. This Debenture represents a prioritized obligation of the Company.
However, no recourse shall be had for the payment of the principal of, or
the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Company or any successor
corporation, whether by virtue of any constitution., statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released
10. In case any provision of this Debenture is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it
is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
11. This Debenture and the agreements referred to in this Debenture
constitute the fall and entire understanding and agreement between the
Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.
12. This Debenture shall be governed by and construed in accordance with the
laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and
assigns of each party hereto. The Holder and the Company hereby mutually
waive trial by jury and consent to exclusive jurisdiction and venue in the
courts of the State of New York. At Holder's election, any dispute between
the parties may be arbitrated rather than litigated in the courts, before
the arbitration board of the National Association of Securities Dealers in
New York City and pursuant to its rules. Upon demand made by the Holder to
the Company, the Company agrees to submit to and participate in such
arbitration. This Agreement may be executed in counterparts, and the
facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: ____________________
JONES NAUGHTON ENTERTAINMENT, INC.
BY:/s/Joseph Naughton
Title: President
ESCROW AGREEMENT
ESCROW AGREEMENT ("Escrow Agreement') dated as of _____________ by and among
JONES NAUGHTON ENTERTAINMENT, INC. , a Colorado corporation, with a
principal place of business at 5681 Beach Boulevard, Suite 101, Buena Park,
California 90621, ("JNE"), and Y.L. Hirsch, having an address at ___________
and EDWARD H. BURNBAUM, ESQ., having a principal place of business
at 300 East 42nd Street, Now York, New York 10017 ("Escrow Agent").
WHEREAS:
A. Purchaser and JNE entered into a Securities Subscription
Agreement dated as of ________________ ("Agreement"), in which, inter alia,
Purchaser agreed to purchase JNE's 3 % Series A Convertible
Debentures ("Debentures");
B. Pursuant to the Agreement, the Debentures are to be delivered
to the Escrow Agent to hold and administer in accordance with the terms and
conditions of this Escrow Agreement.
NOW THEREFORE, in consideration of the respective premises, mutual covenants
and agreements of the parties hereto, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Appointment of Escrow Agent. Escrow Agent is hereby appointed
as escrow agent and the Escrow Agent hereby accepts such appointment. The
Escrow Agent shall act in accordance with the instructions set forth in this
Escrow Agreement and any further instructions given to it by written
instrument signed by JNE and Purchaser.
2. Issuance and Delivery of the Debentures and Payment by the
Purchaser to the Escrow Agent.
On the date hereof, JNE shall issue in the name of the Purchaser and deposit
with the Escrow Agent the Debentures in the face amount of $___________ as
provided in the Agreement, and the Purchaser shall deposit with the Escrow
Agent the sum of $__________. Upon receipt of the Debentures from JNE, Escrow
Agent shall immediately wire the funds to JNE, to an account designated
in writing by JNE, in the sum of $___________ representing the Purchase
Price of thev Debentures, provided that JNE has delivered to
Portfolio investment Strategies Corp. ("PISC") the fee, as
defined in a certain Compensation Agreement between JNE and
PISC dated July 30, 1998.
<PAGE>
3. Custody and Disposition of the Debentures. The Escrow Agent shall
hold and dispose of the Debentures only in accordance with
the terms of this Escrow Agreement.
4. Conversion of Debentures.
(a) As Provided in paragraph 4 of the Debentures, Purchaser may
give Notice of Conversion of the Debentures to JNE and Escrow Agent by
facsimile to the number set forth in Section 10 below. Conversion of
Debentures may take place at any time Until the Maturity Date of the
Debentures, as defined in the Debentures. As provided in paragraph 4 of the
Debentures, within 10 business days of receipt of the Notice of Conversion,
JNE shall deliver to the Purchaser, or to an account designated by Purchaser
in the Notice of Conversion, certificates representing the shares of common
stock to which the Purchaser shall be entitled by reason of the conversion
("Certificates").
(b) If JNE fails to timely deliver Certificates, as provided in
Section 5(a) above, then JNE shall pay Purchaser $150 per day
for each day late in delivering Certificates
up to and including the 10th late day and $500 per day for each day late
in delivering the Certificates after the 11th th day late
through the 70th day late ("Liquidated Damages"). Any Liquidated
Damages incurred by JNE shall be payable immediately and in cash
upon demand in writing by Purchaser, or its agent, to JNE.
However, such Liquidated Damages may be paid pursuant to
the Resolution, as defined below, by issuing shares of
stock to the Escrow Agent upon instruction issued by the
Escrow Agent to Transfer Agent as defined below.
Notwithstanding anything contained in the Agreement
to the contrary, Purchaser shall be required to pay the Liquidated
Damages set forth in this Section 5(c).
(C) Upon conversion of the entire principal face amount of the
Debentures into Certificates, or upon redemption of the Debentures by JNE,
as provided in Section 4(C) of the Debentures, the original Debentures held
by the Escrow Agent pursuant to this Escrow Agreement shall be surrender and
delivered to JNE, and NONE OF the parties shall have any further obligations
to the other.
5. Issuance and Delivery of the Resolution to Escrow Agent.
On the date hereof, JNE shall deliver to the Escrow Agent a resolution in
the form annexed hereto as Exhibit it ("Resolution"), instructing JNE's
transfer agent American Securities Transfer, Inc., 938 Quail Street, Suite
101, Lakewood, Colorado 80215, ("Transfer Agent") to issue to Purchaser
shares of JNE's common stock registered in the name of the Purchaser,
without restrictive legend as provided in Section 5(b) of the Agreement, and
to satisfy any Liquidated Damages which are required to be paid by JNE
pursuant to Section 4(b) of this Escrow Agreement, in an amount equal up to
$___________, or at some lesser amount as the Escrow Agent, in his sole
discretion may direct the Transfer Agent, at a share price which is
calculated in accordance with Section 4(a) of the Debenture
<PAGE>
with respect to the Conversion, Shams (as defined therein), Section 4(b) of
the Debenture with respect to Interest Shares (as defined therein) and
shares issued as Liquidated Damages pursuant to Section 4(b) hereof, and
providing that JNE shall not change its transfer agent from the Transfer
Agent, without the express written consent and directive of the Escrow Agent
6. Bankruptcy. In the event any proceeding under the Bankruptcy
Laws of the United States or any proceedings under any state laws for the
protection of debtors or creditors, are filed, voluntarily or involuntarily,
by or on behalf of JNE, then JNE shall be required to honor any Notices of
Conversion given by Purchaser either before or after bankruptcy.
7. Indemnification. Purchaser and JNE agree, jointly and
severally to indemnify, defend and hold harmless the Escrow Agent from and
against any and all costs (including, without limitation, legal fees and
expenses), liabilities, claims and losses arising out of or in connection
with this Escrow Agreement or any action or failure to act by the Escrow
Agent under this Escrow Agreement, except as provided in paragraph 8 below.
8. Concerning the Escrow A . To induce the Escrow Agent to act
hereunder, it is further agreed by the undersigned that:
(a) This Escrow Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto- No
implied duties or obligations shall on the part of the Escrow Agent shall be
read into this Escrow Agreement. The Escrow Agent shall not BE BOUND BY THE
provisions of any agreement among the other parties hereto except this
Escrow Agreement.
(b) The Escrow Agent shall not be liable for any action or
failure to act in its capacity as Escrow Agent hereunder unless such action
or failure to act shall constitute willful misconduct on the part of the
Escrow Agent, in which case there shall be no indemnification obligations.
(c) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety
or validity of the service thereof. The Escrow Agent may act in reliance
upon any instrument or signature believed by it to be genuine and may
assume, unless he has actual knowledge to the contrary, that any person
purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
(d) The Escrow Agent may act pursuant to the advice of counsel
with respect to any matter relating to this Escrow Agreement and shall not
be, liable for any action taken or omitted in accordance with such advice,
except as provided in paragraph 8(b) above.
<PAGE>
(e) The Escrow Agent does not have any interest in the Debentures,
Conversion Shares or any other property deposited hereunder but is serving
as escrow holder only and having only possession thereof, and is not
charged with any duty or responsibility to determine the
validity or enforceability of any such documents.
(f) The Escrow Agent (and any successor Escrow Agent) may at any
time resign as such by delivering the Debentures to any successor Escrow
Agent, jointly designated by the other parties hereto in writing, or to any
court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from ANY AND ALL FURTHER obligations arising in connection
with this Escrow Agreement thereafter. The resignation of the Escrow Agent
will take effect on the earlier of (a) the appointment of a successor
(including a court of competent jurisdiction) or (b) the day which is 30
days after the date of delivery of its written notice of resignation to the
other parties hereto- If at that time the Escrow Agent has not received a
designation of a successor Escrow Agent, the Escrow Agent's sole
responsibility after that time SHALL be to safekeep the Debentures AND NOT
make delivery or disposition thereof until receipt of a designation of
successor Escrow Agent or a joint written disposition instruction by the
other parties hereto or a final order of a court of competent jurisdiction.
(g) In the event of any disagreement among the parties hereto
resulting in adverse claims or demands being made in connection with the
Debentures, or in the event that the Escrow Agent otherwise determines that
the Debentures should be retained, then the Escrow Agent may retain the
Debentures until the Escrow Agent shall have received (i) a final
nonappealable order of a court of competent jurisdiction directing delivery
of the Debentures, or (ii) a written agreement executed by the other parties
hereto directing delivery of the Debentures, in which case the Escrow Agent
shall promptly deliver the Debentures in accordance with such order or
agreement. Any court order referred to in (i) above shall be accompanied by
a legal opinion by counsel for the presenting party reasonably satisfactory
to the Escrow Agent to the effect that said court order is final and
nonappealable. The Escrow Agent shall act on such court order and legal
opinion without further question.
(h) This Escrow Agreement shall be binding upon and inure solely
to the benefit of the parties hereto an their respective successors
(including successors by way of merger) and assigns, heirs, administrators;
and representatives and shall not be enforceable by or inure to the benefit
of any third party except as provided in paragraph (g) with respect to a
resignation by the Escrow Agent.
(i) This Escrow Agreement may 'be modified by a writing signed by
all the parties hereto, and no waiver hereunder shall be effective unless in
a writing signed by the party to be charged.
9. Governing Law. This Escrow Agreement shall be governed in all
respects by the internal laws of the State of New York. The parties agree to
submit to the
<PAGE>
jurisdiction and venue of any state or federal court in New York City having
subject matter jurisdiction over the matter. Service may be made by
certified mail, return receipt requested, to the parties at the addresses
set forth in paragraph 10 below, but the parties shall not be precluded from
making service in any other manner permitted by law.
10. All notices (except Notices of Conversion which shall be governed by
Section 4(a) above), requests, consents and other communications hereunder
shall be in writing, shall be delivered by hand or sent by U.S. Express
Mail, Fedex or some other reliable overnight courier service for next day
delivery. Each such notice or other communication shall for all purposes of
this Escrow Agreement be treated as effective or having been given when
delivered if delivered personally, or, if sent by overnight express mail
service, 1 day after the same has been deposited with the U.S. Postal
Service, Fedex or the overnight courier, All such notices must also be sent
by facsimile on the same day to the parties as follows:
If to JNE:
Jones Naughton Entertainment, Inc.
5681 Beach Boulevard
Suite 101
Buena Park, California 90621
Attn: Joseph Naughton, President
Fax: 714-994-3242
with a copy to:
Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, California 92660
Attn: M. Richard Cutler
Fax: 949-719-1998
If to Purchaser:
________________
________________
________________
________________
<PAGE>
with a copy to:
Portfolio investment Strategies Corp.
6 Lake Street, Suite 1800
Monroe, New York 10950
Fax: 914-774-7275
If to Escrow Agent:
Edward H. Burnbaum, Esq.
300 East 42nd Street
New York, New York 10017
Fax: 212-986-2907
11. Counterparts. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument
12. Fees of Escrow Agent. In consideration of the performance of this Escrow
Agreement, Purchaser shall pay the Escrow Agent a fee of $______ ("Fee").
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be duly executed and delivered, as of the day and year first
above written.
JONES NAUGHTON ENTERTAINMENT, INC.
BY:/s/Joseph Naughton
President
PURCHASER:
By:_________________
ESCROW AGENT:
By:/s/Edward H. Burnbaum, Esq.
eOfficeSuites, Inc.
OFFICE LEASE
BASIC PROVISIONS
A. Parties. This Lease ("Lease"), dated for reference purposes only,
August 12, 1999, is made by and between e0fficeSuites, Inc., a California
corporation (hereinafter "Landlord") and Jones Naughton Entertainment a
corporation (hereinafter
"Tenant"), (collectively the "Parties,' or individually a "Party").
B. Premises. That certain Suite commonly known by space #231 (hereinafter
"Premises") as shown on Exhibit "B" attached hereto and located within an
office building, and street address of 13101 Washington Boulevard, in
the City of Culver City, County of Los Angeles, State of
California ("Buildings").
C. Term. Twelve (12) months and sixteen 20 days ("Original Term")
commencing August 12, 1999 ("'Commencement Date") and ending September 30,
2000 with a month to month tenancy thereafter ("Ending Date").
RECURRING MONTHLY RENT
D. Ban Rent. Monthly base rent payable on the first day of each
month of $ 995.00 $995.00 Commencing\ August 12, 1999 A late fee will be
charged of ten percent (10%) of any amount due if more than five (5) days
late.
E. Additional Rent.
(i) Telephone lines and voice mails 1 @ $125.00 - $125.00
(ii) Additional Telephone Line(s):
(iii) Additional Telephone Instrument(s):
(iv) High Speed Internet Service: 1 @ $69.00 = $ 69.00
(v) E-Mail Boxe(s):
(vi) Additional Voice Mail:
(vii) Parking Space(s): 1 @ $65.00 = $ 65.00
(viii)Storage Space(s):
(ix) Other
TOTAL RE RECURRING ADDITIONAL RENT $259.00
TOTAL MONTHLY RENT (plus Monthly Variable Rent) see Paragraph 5B: $1,254.00
Monthly Variable Rent- Tenant's monthly credit limit for telephone usage,
overnight mail service, photocopying, and other related services shall not
exceed N/A in an), single month, Paragraph 5B.
NON-RECURRING EXPENSE
G. Move In Fee. Tenant shall pay to Landlord a move in fee in
the amount of: $150.00
H. Internet. High speed internet service (TI internet installation) of:
I. Telephone Installation. Amount for initial telephone installation of:
$125.00
J. Pro Rata First Month Rent: (from August 12, 1999 to August 31, 1999)
$809.03
K. Security Deposit. Security Deposit of $995.00
$995.00
TOTAL NON-RECURRING EXPENSES $2,079.03
TO AMOUNT DUE AT LEASE SIGNING $2,079.03
<PAGE>
L. Permitted Use: General Business Office. Use. and limited to no more than 3
persons working from said Premises.
M. Parking Spaces. Tenant is granted I reserved parking space(s) and 0
unreserved spaces.
N. Guarantor. The obligations of the Tenant under this Lease are to be
guaranteed by N/A ("Guarantor"), Exhibit "B".
0. Addenda. N/A.
P. Furnishing. Landlord will provide office furniture to Tenant for use
in the Premises as more particularly described in Exhibit "C" attached hereto.
Q. SERVICES INCLUDED WITH BASE. MONTHLY RENT
Voice wail; (ii) 5 hours free use of furnished conference room or office for
meetings per month (not cumulative). Additional hours of use will be billed at
the rate established in the Price Schedule; (iii) Company name identification
on suite door and on Building directory; (iv) Daily mail sorting-, (v)
Telephone system ,professional staff to answer phone; (vi) Janitorial services
and utilities (excluding telephone).
R. SERVICES NOT INCLUDED IN THE BASE MONTHLY RENT
(i) Word processing, facsimile, postage, photocopying and other support
services; (ii) High speed Internet access; (iii) E-Mail; (iv) Web Hosting
<PAGE>
GENERAL PROVISIONS
1. PARTIES. This Lease is made by and between eOfficeSuites, Inc.
(hereinafter called "Landlord") and Tenant as shown on the Basic Provisions,
Page 1 Section A.
2. PREMISES. Landlord agrees to lease to Tenant and Tenant agrees to
lease from LANDLORD the following portions of the Building located at
13101 Washington Boulevard, Los Angeles, California 90066 ("Building").
(a) An exclusive right to occupy Suite No(s) as, identified on Basic
Provisions, Page 1, Section "B"; ("Premises") with all its improvements and
furnishings; and,
(b) A non-exclusive right in common with other Tenants of the
Building to use the Reception Room, Conference Room(s) and such other common
areas provided for Tenant use in the Building by Landlord. Tenant further
agrees to abide by the rules and regulations governing the use of said common
area facilities as set forth by Landlord from time to time.
3. TERM. The Term of this Lease shall be far the period as specified IN THE
BASIC Provisions, Page 1, Section C.
4. POSSESSION. If Landlord, for any reason whatsoever, cannot deliver
possession of the said Premises to the Tenant at the commencement of the Term
hereof, this Lease shall not be void or voidable, nor shall Landlord be
liable to Tenant for any loss or damage resulting therefrom, nor shall the
expiration date of the above Term be in any way be extended, but in that event,
all rent shall be abated during the period between the commencement of said
Term, and the time when Landlord deliver possession. Any occupancy prior to the
commencement date hereof, shall be subject to all of the provisions of this
Lease. If Landlord cannot deliver possession within thirty (30) days of the
commencement date of this Lease, either landlord or Tenant may cancel this
Agreement.
5. (A) RENT Tenant agrees to pay to Landlord as rent for the Premises being
the monthly sum as stated in the Base Provisions, Page I Section I "D",
Additional Rent, (Section "E") and monthly variable rent, Section "F" (and
Paragraph 5B below) on or before the FIRST of each month, except that the
first month's rent shall be paid upon the execution hereof rent for any
period during the term hereof which is for less than one (1) month shall be
a prorated portion of the monthly rent herein, based upon a thirty (30) day
month. Tenant agrees to pay rent for the entire term of the Lease. Said rent
shall be paid to Landlord without deduction or offset. Said
payments shall be made payable to: eOfficeSuites, Inc. 13101 Washington
Boulevard, Suite 100, Los Angeles, CA 90006 or to such other person or at
such other place as Landlord may from time to time, designate in writing.
(B) Rent shall include, Base Rent, additional Rent and Monthly Variable
which includes but is not limited to, telephone charges, photocopying,
facsimile, overnight mail service, etc. provided by Landlord to Tenant
or any charges arising out of Tenant's use of the Premises as
provided for herein shall all be deemed Rent. Failure to pay Rent, when
due shall constitute an event of material default under This Lease.
7. SECURITY DEPOSIT. Upon execution of this Lease by Tenant, Tenant will
pay Security deposit in the amount of as shown on the Basic Provisions, Page 1,
Section "K" with payment made payable to Landlord. Said Security Deposit will
not be interest bearing to Tenant. Said Security Deposit shall not
be applied as Rent by Landlord or Tenant except however, upon termination or
upon default of this Lease. Landlord may claim and retain such amount of said
Security Deposit as is reasonably necessary to remedy any default of the
Tenant in the payment of Rent, to damages to the Promises including
<PAGE>
Tenant to landlord. Tenant acknowledges inspection of the flooring, wall
covering, ceiling and door(s) and furnishing (described in Exhibit "C").
hereto, by taking possession of the premises, tenant acknowledges that the
Premises and all its furnishings are in good order and condition except as
otherwise stated herein. In the event Tenant has paid all of the Rent and
leaves the Premises in good condition and other sums due under this Lease,
Landlord shall return to Tenant said security deposit less any offsets from
above, within thirty (30) days after Tenant vacates the premises.
8. USE. Tenant shall use the Premises for general office purposes only and
shall not use or permit the premises to be used for any other purpose
without the prior written consent of Landlord. Tenant shall not have more
than the number of persons ass shown on the Basic Provisions, Page 1,
Section L, occupy the Premises on its behalf and only occupy the Premises
for the stated business purpose. Tenant shall not do or permit anything to
be done in or about the Premises which will in any way obstruct or interfere
with the rights of other tenants, occupants or use of the Building, or which
shall increase the fire insurance rate or the liability insurance rate on
the Building. In addition, Tenant shall not use or permit anything to be
done in or about the Premises which violates any law, statute, ordinance
or governmental rule or regulation now in force or which may hereafter be
enacted or promulgated, Tenant shall not use or store items on the Premises
or in the Building including possessing any hazardous or toxic substances.
Tenant shall be responsible for any and all costs of said
violations, and shall hold Landlord harmless from any such claims against
Landlord caused by Tenant's acts or actions.
9. ALTERATIONS, ADDITIONS AND REPAIRS. Landlord shall provide carpets, window
coverings and furnishings. Without exception, tenant shall not make any
alterations, additions or improvements to or of the Premises or any part
thereof without the prior written consent of Landlord. Any alterations or
improvements to or OF SAID Premises, including but not limited to wall
coverings, paneling and built-in cabinet work, and private security alarms
shall, on the expiration of the term hereof, become a pan of the realty and
belong to Landlord and shall be surrendered with the Premises. Damage caused
by the removal of an), trade fixtures shall be the responsibility of Tenant
In the event Landlord consents to the making of any alterations, additions
or improvements to the Premises by Tenant, the same. shall be made by Tenant
at Tenant's sole cost and expense. Upon expiration or sooner termination of
the term hereof, Tenant shall, upon written demand by Landlord, at Tenant's
sole cost and expense, forthwith and with all due diligence, remove any
alterations, additions or improvements made by Tenant designated by Landlord
to be removed, and Tenant shall, forthwith and with all due diligence at its
sole costs and expense, repair any damage to the Premises caused by such
removal prior to Tenant's vacating Premises. It is understood and agreed
that Landlord is under no obligation to make any repairs, alterations,
replacements or improvements to the Premises. Tenant may not make any
penetration into the walls, ceilings, roof, floors, except for hanging of no
more than three (3) pictures per Premises. Tenant shall be liable for any
damage caused by any penetration.
Landlord shall repair and maintain, within a reasonable period of time, the
structural portions of the Building,, including the basic plumbing, air
conditioning, heating and electrical systems, installed or furnished by
Landlord, unless such maintenance and repairs are caused in part or in whole
by the act, neglect, fault or omission of any duty by Tenant, its agents,
invitees or employees, in which case Tenant shall be responsible to pay the
reasonable cost of such maintenance and repairs.
Landlord may in the future remodel or refurbish portions of the Building.
Such remodeling and/or refurbishing may include Tenant's Premises. Tenant
further agrees that Tenant will not through any act or omission on the part
of Tenant, in any way hinder, impede, or frustrate the efforts of the
Landlord in completing such remodeling or refurbishing in a. timely fashion.
Tenant agrees that Landlord shall reserves the right upon Landlord giving
thirty (30) days advance written notice to Tenant at Landlord's
<PAGE>
10. LIENS. Tenant shall keep the Premises and the Building free from any liens
arising out of any work performed or from any obligations incurred by
Tenant, or permit it the use of the leased Premises by any person or persons
other than Tenant.
11. ASSIGNMENT AND SUBLETTING. Tenant shall not assign or sublet or permit the
use of the Premises by any person or persons other than Tenant without the
prior written approval of Landlord, Any subletting or assignment of this
Lease or the Premises which is not in compliance with the provisions of this
paragraph shall be void and shall, at the option of Landlord, terminate this
Lease. The consent by Landlord to a subletting or an assignment shall not be
construed as releasing tenant from any, liability or obligation hereunder.
In no event shall Tenant sublet all or any part of the Premises for a rent
greater than Tenant is paving to Landlord. This includes no assignment or
sublease by Tenant to any corporation or entity in which more than
twenty-five percent (25%) for Tenant's Premises.
12. TELEPHONE SYSTEM. The exclusive telephone system for the Premises will
be provided by Landlord for which Tenant will be obligated to pay on at least
a monthly basis all charges and costs in connection therewith as part of the
monthly variable Rent as provided for in Page 1, Section "E" and
Paragraph 5B of this lease together with Tenant's payment of Monthly Base
Rent and Additional Rent, Tenant is not to use or have installed any other
telephone service onto the. Premises other than provided
by Landlord. Tenant has been provided with a credit limit, see Basic
Provisions, Page 1, Section F of this Lease. If Tenant should exceed said
credit during or at the end of any monthly period, Tenant agrees that Landlord
without notice shall have the right to immediately disconnect Tenant's
telephone services and cease all other services under Basic Provision Section,
E and paragraph 5 of this lease including not answering Tenant's telephone by
the receptionist and all other additional rent services until paid in full.
13. INDEMNIFICATION. Tenant shall at all times mentioned herein
(including paragraph 20 default) indemnify and hold Landlord harmless
from any and all costs, claims or liability of any kind including
direct, indirect. incidental, special or consequential damages arising out
of (a) Tenant's use and occupancy of the Premises, (b) the conduct of
Tenant's business or any work, activity or other things allowed or
permitted by Tenant to be done in or on the Premises: (C) any
breach or default in the performance of any of Tenant's obligations under
this Lease; (d) any misrepresentation or breach of warranty by Tenant under
this Lease; and/or (e) any other acts or omissions of Tenant, its agents,
employees or contractors; (f) loss of use or change of any service provided
by Landlord including telephone, internet and others unauthorized access to
or alteration of data, material sent or received. Tenant shall, at Tenant's
expense, and by counsel satisfactory to Landlord, defend Landlord in any
action or proceeding arising from any such claim or liability and shall
indemnify Landlord from and against all costs, attorney . 's fees, expert
witness fees and any other expenses incurred in such action or proceeding,
As a material part of the consideration for Landlord's execution of this
Lease, Tenant hereby assumes all risk of damage to property or injury to
persons in, or about the Premises from any cause, and Tenant hereby waives
all claims in respect thereof against Landlord, except for any claim arising
out of Landlord's gross negligence or willful misconduct. Tenant expressly
agrees to waive, and agrees not to make any claim for damages, direct or
consequential, arising out of any failure to furnish any service, error or
omission with respect thereto, or any delay or interruption of the same.
14. LIABILITY INSURANCE. Tenant shall, at Tenant's expense,' obtain and
keep in force during the term of this Lease, a policy of comprehensive public
liability insurance with extended coverage insuring Landlord and Tenant against
fire, Theft, or other insurable loss, any liability arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Tenant shall deliver to Landlord, prior to occupancy of
the Premises, copies of polices of liability insurance required herein or
certificates evidencing the existence and amounts of such insurance with
loss payable clauses satisfactory to Landlord and with Landlord being a named
insured. No policy shall be cancelable or subject to reduction or coverage
except after ten (10) days prior written notice to Landlord.
<PAGE>
Tenant is urged to obtain business interruption insurance to cover any
loss caused by interruption of any Landlord services.
15. SERVICES AND UTILITIES. Throughout the term of this Lease, and all
renewal terms, Landlord, at its sole expense, shall famish or cause to be
furnished to Tenant the following services and utilities:
(a) Electricity: Electric current in such quantities as Tenant may
reasonably require for
ordinary lighting and light business machine purposes;
(b) Air Systems: Heating, ventilation and air conditioning during
regular business hours as specified in the rules and regulations,
(c) Exterior Maintenance: Maintenance of exterior surfaces and
grounds surrounding the Building including both garage levels;
(d) Telephone, telephone system;
(e) Janitorial Services: Janitorial services as provided by Landlord
shall include, but shall not be limited to, the following: emptying of
refuse baskets, vacuuming of carpets, damp mopping of floors, cleaning
of bathrooms, supplying normal bathroom supplies and interior and
exterior window cleaning.
To the extent that Landlord provides Tenant with individual thermostats to
control the temperature in the Premises., Tenant shall be solely responsible
for any damage or problems caused by Tenant's improper use of said
thermostats. Further, Tenant shall not use any apparatus or device in the
Promises which %%,III in any way increase the amount of electricity usually
furnished or supplies for the use of the Premises as GENERAL OFFICE SPACE;
nor connect with electrical current except through existing electrical
outlets in the Premises, any apparatus or device for the purpose of using
electric current. In the event Tenant has an excess demand for electricity,
as determined by Landlord, Tenant agrees to pay Landlord as reasonable power
surcharge as estimated by a utility company or electrical engineer.
16. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with
the rules and regulations that Landlord shall, from time to time.
promulgate. Landlord reserves the right, from time to time, to make all
reasonable modifications TO SAID RULES. The additions and modifications to
those rules shall be binding upon Tenant upon delivery of a copy of them to
Tenant. Landlord shall not be responsible to Tenant for the nonperformance
of any of said rules by any other tenants or occupants. Attached to and made
a part of this Lease is a list of rules and regulations which shall be
signed by Tenant and Landlord, and which shall be INCORPORATED into the Lease.
17. HOLDING OVER. If Tenant remains in possession of the Premises or any
part thereof after the agreed upon Ending Date, such occupancy shall be a
tenancy from month-mouth at a rental in the amount of one and one half times
(1 1/2) the last monthly rental, plus all other charges payable hereunder, and
upon all the terms hereof applicable to a month-to-Month tenancy. Either
Party, may terminate a month to-month tenancy upon thirty (30) days written
notice.
18. ENTRY BY LANDLORD. Landlord reserves and shall at any and all times
have the right to enter the Promises, inspect the same, supply janitorial
service and any other service to be provided by Landlord to
Tenant hereunder, to submit said Premises to prospective purchasers or
tenants, to post notices of non-responsibility, and to alter, improve or
repair the Promises and any portion of the Building of which the
Premises are a part that Landlord may deem necessary without abatement of
rent. Landlord shall have at all times a key with which to unlock all of the
doors to the Premises, excluding files and safes, and Landlord shall have the
right to use any and all means which Landlord may deem proper to open said
doors in an emergency, without liability to Tenant except for any failure to
exercise due rare for Tenant's property.
19. DAMAGE AND RECONSTRUCTION. In the event of damage greater than fifty
percent (50%) the Premises either Party shall have the right to terminate
this Lease.
<PAGE>
20. DEFAULT. The occurrence of any of the following events shall
constitute a material default and breach of the Lease by Tenant,
permitting Landlord to immediately terminate this Lease and/or recover
possession and damages from Tenant;
(a) The vacating or abandonment of the Premises by Tenant;
(b) The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder including Additional
Rent, as and when due, where such failure continues for a period of
three (3) days after written notice hereof from Landlord to Tenant.
(1) If Tenant has not paid the Rent in full, by the fifth (5th) day of the
month, said amount is deemed delinquent and Tenant shall pay a late charge
equal to ten percent (10%) of such installment. If the rent is not paid in
full by the tenth (10th) of the month, Landlord way disconnect Tenant's
telephone services, without further notice, and discontinue all other
variable services until the Rent and all charges are paid in full, in which
event the rent still accrues and Tenant waives any and all claims for
damages against Landlord by reason of the termination of said service.
Landlord shall not be liable for any loss of business or damages of any sort
occurring through; or in connection with. or incidental to the furnishing of
any variable services, or failure to furnish, telephone, or reception
service, or for authorizing or permitting the telephone vendor to disconnect
Tenant's telephone service if Tenant has not paid its rent and variable
expenses in full.
(2) If two or more checks are dishonored by Tenant's bank in a twelve-month
period, Landlord may require, during the balance of Tenant's tenancy,
payment by cashier's check or money order. Tenant's failure to comply
therewith will constitute a material breach and permit Landlord to terminate
this Lease. Tenant hereby agrees to pay the sum of Twenty Dollars ($20.00)
for each dishonored check.
(c) The failure by Tenant to observe or perform any of the
provisions of this Lease to be observed or performed by Tenant, other
than described in paragraphs (4) and (b) above, where such
failure shall continue for a period of ten (10) days after written notice
thereof from Landlord to Tenant. In the event any such default, in addition
to the remedies specified above, Landlord may exercise any rights or
remedies available to Landlord under the laws or judicial decision of
the State of California.
21. SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind
the heirs, successors, executors, administrators and assigns of the Parties
hereto.
22. NOTICES. Any notice to Landlord shall be sent, in writing, to;
e0fficeSuites, Inc., 13101 Washington Boulevard, #100, Los Angeles, CA 90066,
and any notice to Tenant shall be sent or hand delivered, in, writing, to
Tenant's Premises in the Building. Either Party may provide for
a different address by notifying the other Party, in writing, of said change
as provided for herein.
23. ENTIRE AGREEMENT, MERGER AND WAVER. This Lease Agreement and its
Exhibits expresses and contains the entire agreement of the Parties hereto
and there are no warranties, representations, or agreements between them,
except as herein contained. This Lease supersedes any prior agreement, and
may not be modified, amended or supplemented except in writing signed by
both Landlord and Tenant. No consent given or waiver made by Landlord of any
breach by Tenant of any provision of this Lease shall operate or be
construed in any manner as waiver of any subsequent breach of the same or of
any other provision.
<PAGE>
24. HIRING LANDLORD'S EMPLOYEES. Tenant agrees in the event that Tenant
hires Landlord's employees during the term of the lease, extension or renewal
of this Lease, or within sixty (60) days after Tenant moves out of the
Building, Tenant shall be liable to Landlord for damages payable upon
demand, in the sum of twenty-five percent (25%) of the annual compensation
of each employee involved. It being mutually agreed by Tenant and Landlord
that this provision for liquidated damages is reasonable and that the actual
damage which would be sustained by Landlord as the result of failure to
keep the agreement would be, from the nature of this case, impractical or
extremely difficult to fix. This compensation for liquidated damages is in
addition to Landlord's right to immediately terminate this
Lease for breach thereof and to obtain a restraining order against tenant.
25. EXEMPTION OF LANDLORD FROM LIABILITY; WAIVER. Landlord shall not be
liable for any damage or injury either directly, indirectly, incidental,
special or consequential damages to the person, business (or any loss of
income therefrom), goods, wares, merchandise or other property of
Tenant, Tenant's employees, invitees, customers or any other person in or
about the Premises, whether such damage or injury is caused by or results
from (a) fire, steam electricity, water, gas or rain; (b) the
breakage, leakage, obstruction or other defects of pipes, sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixture or any
other case; electricity, telephone or Internet access or disruption
to Tenant's business (c) conditions arising in or about the Premises or
upon other portions of any Building of which the Premises is a part, or
from other sources or places, or (d) any act or omission of
any other Tenant of which the Premises is a part. Landlord shall not be
liable for any such damage or injury even though the cause of or the means
or repairing such damage or injury are not accessible to Tenant. Tenant,
as a material part of the consideration to be rendered to Landlord, hereby
waives all claims against Landlord for the foregoing damages from any cause
arising at any time. The provisions of this Section shall not, however,
exempt Landlord from liability for Landlord's gross negligence or
willful misconduct. It is recommended that Tenant maintain a back up modern
in the event there is any interruption in Landlord's high speed internet
access. Tenant acknowledges that there is no alarm system servicing the
Premises or Building. Any security devices including camera, window, contacts
are for different purposes and not to be relied upon by Tenant. Tenant
shall not hold Landlord responsible or liable for absence of security
Landlord shall not be liable for any damages, theft of any vehicle on or
near the Premises.
26. SUITE KEYS. Each Tenant shall receive one (1) suite key for each
suite leased. In the event Tenant loses this key, or any other keys
issued by Landlord to Tenant, Tenant shall be charged and pay the sum
of Twenty Five Dollars ($25.00) for each key.
27. BROKERS. Tenant warrants that it has had no dealings with any real
estate broker or agents in connection with the negotiation of this Lease,
and it knows of no other real estate broker or agent who is
entitled to a commission in connection with this Lease.
28. SEVERABILITY. A determination by a court of competent jurisdiction
that any provision of this Lease or any part Thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such
provision or this Lease, which shall remain in full force and effect.
29. JOINT AND SEVERAL LIABILITY. All Parties signing this Lease as
Tenant shall be jointly and severally liable for all obligations of Tenant.
30. NO OPTION. The submission of this Lease for examination does not
constitute a reservation of or option to lease the Premises and this
Lease becomes effective only upon execution and delivery thereof
by Landlord and Tenant.
<PAGE>
31. ESTOPPEL CERTIFICATES. Within ten (10) days after delivery to Tenant
by Landlord or its representative, Tenant shall execute acknowledge and
deliver to Landlord an Estoppel Certificate in the form provided by Landlord
certifying (a) that this Lease is unmodified and in fall force and if there
have been modifications, that this Lease is in full force, as modified
together with the date and nature of each modification, (b) the amount of
Base Rent, most recent, and the date to which the rent has been paid; (c)
that there are no defaults under the Lease claimed by Tenant; and (d)
other matters as may be reasonably requested by Landlord.
32. ATTORNEY FEES. In the event any legal action arises as a result of
any breach of this lease or its interpretation, the prevailing Party shall
be entitled to its' reasonable attorney fees and costs associated
with such enforcement including its expenses prior to the bringing of any
lawsuit.
33. TIME IS OF THE ESSENCE. Time is of the essence in the Lease and all
of its provisions.
35. FORCE MAJEURE. If Landlord shall be delayed or prevented from the
performance of any act required under this Lease by reason of acts of God,
strikes, lockouts, labor trouble, restrictive governmental laws or
regulations, or other causes without fault and beyond the control of the
Landlord, performance of said act(s) shall be. excused for the period of
the delay, except nothing in this Section excuses Tenant from prompt
payment of any rent or other changes as required elsewhere in this Lease.
The Parties hereto have executed this Lease on the date above, and agree to
be bound by its terms.
By:
"LANDLORD" "TENANT"
e0fficeSuites, Inc.,
A California Corporation
By: /s/ Joseph M. Naughton
Jones Naughton Entertainment
DATED: DATED:
<PAGE>
eOFFICESUITES, INC.
13101 Washington Boulevard
Los Angeles, CA 90066
PRICE SCHEDULE
Additional Services Available on a
"Pay as Needed" Basis
COMMUNICATIONS
A. TI Internet service $69.00/month
Internet installation $125.00
e-mail service $10.00/month
web hosting service per schedule
B. Postal Services:
Postage Plus 20%
C. FedEx, UPS and Messenger Service available.
Contact Communications Dept. for pricing and delivery options
D. Fax Services
Incoming (per page) $1.50
outgoing
Domestic (first page) $1.50
Domestic: (each additional page) $1.50
International (first page) $5.00
International (each additional page) $1.50
E. Conference Facilities:
Garden & 2nd Floor Conference Rooms (one hour min.) $25.00/hour
$125.00/day
Lobby & Executive Conference Rooms (one hour min.) $45.00/hour
Coffee set-up (includes coffee, tea & water, cups, sugar, etc.)
- for Conference Room reservations only $15.00/pot
F. Administrative Assistance - (clerical duties to include
collating, sorting, mailing, mail forwarding, etc.) $15.00/hr
<PAGE>
COPYING
copies $.10/each
Copier Card replacement $15.00
TELEPHONE & VOICE MAIL
A. 2 Telephone lines, 1 fax line & 1 telephone Instrument $125.00/month
B. Telephone installation (3 lines) $125.00
C. Additional telephone instrument $25.00/month
D. Additional telephone line $25.00/month
E. Additional voice mail $10.00/month
STORAGE
Small locker $50.00/month
Large locker $100.00/month
PARKING
Reserved - per space $65.00/month
Unreserved - per space $40.00/month
Garage remote replacement $35.00
SIGNAGE (Included in move in fee)
Door sign $25.00
Building Directory Listing $25.00
SUITE KEYS
Additional key $5.00/each
Lost Key (includes one now suite key) $25.00
Change of Suite Lock $100.00
INCIDENTAL LABOR
One hour minimum, 48 hour notice require $35.00/hour
RETURNED CHECK FEE $20.00
MOVE IN FEE or INTERNAL MOVE $150.00
MOVE IN CREDIT CHECK $35.00
ALL PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE
<PAGE>
eOfficeSuites, Inc.
13101 Washington Boulevard
Los Angeles, CA 90066
Rules and Regulations
1) Tenant advertisement, name or notice shall not be inscribed,
displayed, printed or affixed on or to any part of the Building,
premise without the written consent of the Landlord.
2) Passages in the common areas. shall not be obstructed by the tenants
or tenants' possession.
3) Tenant shall not alter locks or add locks.
4) Restrooms shall be used only for purpose in which it was constructed.
5) Tenant "I not overload the floor of the Premises (50 lbs. per square
foot) place in the Premises or install refrigerators, fish tanks, water
filled devices, or deface the premises.
6) NO furniture, appliance, freight or equipment of any kind shall be
brought into the Building without prior written approval from the Landlord
7) Tenant shall not keep or use foul or noxious gases or substances on
the Premises.
8) Tenant shall not cook, wash, lodge or perform any improper,
objectionable, unlawful or immoral activity.
9) Tenant shall not use or keep flammable/combustible substances in the
Building.
10) Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord.
11) Tenants and guests shall not smoke in any part of the Building
including the atrium area.
12) Tenant shall not introduce electrical/telegraphic or any other wiring
to the Premises without written consent of Landlord.
13) Tenant shall not introduce telephonic equipment to the Premises.
14) Landlord at its sole expense shall furnish heating , ventilation and
air-conditioning during the hours of 8.30 a.m. to 5:30 p.m., Monday through
Friday except holidays.
15) NO vending machines or appliances of any description shall be
installed by Tenant without written consent of Landlord.
16) Access to business support services consisting of reception area,
waiting area, administrative mom, phone answering, word-processing,
postal and conference room usage is limited to normal business hours of
8:30 a.m. to 5:30 p.m.. Monday through Friday except holidays.
<PAGE>
17) Landlord reserves the right to exclude or expel from the Building any
persons who in any manner, act in violation of this Lease and any of the.
rules and regulations of the Building including excess noise.
18) Tenant shall not disturb, solicit, or canvass any occupant of the
Building and shall cooperate to prevent same.
19) Tenant shall not use the name of the Building in connection with or in
promoting or advertising the business of Tenant except as Tenant's address
without written consent of Landlord.
20) Landlord has right to control the public portions, facilities, heating
and air conditioning as well as facilities furnished for the common use of
the Tenants as it deems best for the benefit of the Tenants generally.
21) Tenant doors and doors opening to public corridors on the Building
shall be kept closed.
22) Tenant must use at desk area a chair mat for the carpet.
23) Tenant shall not warehouse, store and/or stock items in the
Premises or about the Premises including goods, boxes, records and supplies.
24) Tenant shall not do anything which will cause any usual wear and tear
to Landlord's furnishings.
25) No pets allowed. Pets are defined as any living being other than plants
and humans.
26) Tenant accepts responsibility for the actions and behavior of its
visitors (adult or child). Should the visitor in the judgment of the
Landlord create a problem, the Tenant agrees to control or remove, if
necessary, said visitor from the premise and pay for any damages.
27) It is the Tenant's responsibility to review additional
"move-in-package" for general information and suggestions.
28) Tenant shall not have a private security alarm.
29) Tenant parking is available on a reserved basis only at Landlord's
prevailing rates. Parking spaces may, be reserved on an availability basis.
Tenants may only park in the spaces designated by Landlord. Violators will
be towed at Tenant's expense. Parking spaces are for passenger vehicles only
no trucks or oversized vehicles are permitted. All vehicles are to be
properly maintained to prevent the loss of fluids, oil, petroleum products
or liquids on the parking surface. Visitors parked in reserved spaces will
be towed, at their expense. All Tenants shall be responsible for alerting
their visitors about the towing policy.
30) Tenant may move-in or move-out of the. Building during the days and
hours as expressly prescribed by the Landlord and may only use those areas,
corridors, hallways, stairways, elevators, entrances and exits as specified
by the Landlord. Tenant shall be fully responsible for any damages it may
causes to the Building by Tenant's moving.
<PAGE>
31) Tenant's internet connection provided by Landlord will not be used to
violate any laws, interfere or disrupt other Tenants' use, connection, or
transmissions or enjoyment of similar services.
32) In order that the air conditioning and heating, system ("System") may
efficiently operate, no windows shall be opened during normal business hours
or while the System is operational. If Tenant should be in violation after a
written warning, Tenant shall be charged $100.00 for each violation
thereafter. A new violation shall be if the window is not completely closed
within a reasonable time after delivery of said written notice of violation.
The Tenant agrees this charge is reasonable because it would be impractical
or extremely difficult to fix the exact amount of costs.
Tenant has read and understands and agrees to be bound by the above Rules
and Regulations.
Tenant
/s/ Joseph M. Naughton
Jones Naughton Entertainment
Date:
<PAGE>
[DIAGRAM]
[of eOfficeSuites Seconde Floor]
<PAGE>
List of Furniture
Exhibit "C"
CONSULTING AND FINANCIAL SERVICES AGREEMENT
THIS AGREEMENT is executed and made effective as of the 15th day of
September, 1999, between Patrick M. Rost, (herein referred to as Rost), and
Jones Naughton Entertainment, Inc. a Colorado corporation (herein referred
to as JNE).
WHEREAS, Rost for purposes of this Agreement is engaged in providing
consulting and FINANCIAL services in the areas of developing, managing and
marketing financial services for its clients; and
WHEREAS, JNE has expertise in developing e-commerce businesses for the
professional and consumer market worldwide; and
WHEREAS, JNE desires to have the services of Rost made available to it on
the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, receipt of which is hereby acknowledged by each party, the
parties hereto agree as follows:
1. Consulting and Financial Services.
* Assist in the Creation of an investor package
* Broker/Dealer Relations: Disseminate IR packages and corporate profiles to
pre-qualified brokers.
* Introduction of market makers interested in making a market in the "Public
Company" stock.
* Increase awareness amongst institutional and individual investors.
* Introduce industry analysts to the company.
* Assist in the drafting and dissemination of press releases through
appropriate wire services.
* Maintain broadcast fax list and mailing list for new press releases through
appropriate wire services.
* Answer all shareholders inquiries
* Organize and attend any conference or industry forums on behalf of "Public
Company"
* PMR and Associates agrees to abide by all federal and state laws and
regulations concerning investor relations, stock promotions and public
disclosure requirements.
* PMR and Associates agrees to keep all information confidential derived
from this agreement until otherwise agreed upon by the parties.
2. Term. The term of this Agreement shall be for the period from
March 1, 1999 to December 31,2000. This Agreement may be extended for such
other additional periods by mutual Agreement executed in writing between the
parties.
3. Compensation. During the term hereof, AND AS FULL I AND adequate
payment for the services provided by Rost hereunder, JNE shall pay to Rost a
the following:
A. Retainer: 200,000 (two hundred thousand) common shares in "JNNE"
of restricted stock for one year under rule 144 for consulting services.
B. Options: "Public Company" agrees to grant Patrick M. Rost an option to
purchase 1,000,000 (one million) free trading shares of common stock subject
to a registration for a purchase of $0.50 (fifty cents). These options are
to expire on December 31, 2000.
<PAGE>
4. Termination. By thirty (30) days prior written notice to the other,
either JNE or Rost may terminate the Agreement at any time for failure of
the other to comply with the terms and conditions. In the event (if such
termination, Rost, shall be entitled to payment under the provisions set
forth herein, for all amounts earned at the time of the termination.
Termination for failure of the other party to perform shall not prejudice
said party in any respect.
5. Indemnity. The parties agree to indemnify, defend, and hold harmless the
other, their officers, employees and agents, harmless from and against any
loss, liability, claim or demand on account of injury to or death of persons
(including employees of the indemnifying party) or damage to or loss of
property of third parties arising directly or indirectly out of acts or
omissions of the indemnifying party, their employees or agents in the
performance of the services hereunder.
6. Independent Contractor. Nothing in the Agreement shall be deemed to
constitute Rost or any of Rost's employees or agents to be the agent,
representative or Rost of JNE. Rost shall be an independent contractor and
shall have responsibility for and control over the details and means of
performing the services hereunder and shall be subject to the directions of
JNE only with respect to the scope and general results required.
7. Further Assurances. At any time, and from time to time, each party will
execute such additional instruments and take such action as may be
reasonably requested by the other party to confirm or otherwise carry out
the intent and purposes of this Agreement.
8. Waiver. Any failure on the part of either party hereto to comply with any
of their obligations, agreement,.;. or conditions hereunder may be waived
only in writing by the party to whom such compliance is owed.
9. Governing Law. This Agreement shall be construed and governed by
the laws of tile State of California.
10. Interpretation. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be valid and effective under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement. The parties
acknowledge and agree that this Agreement was a product of negotiation
between the parties and no provision or term herein shall be in any manner
construed against either party as the drafter thereof.
11. Counterparts, Telefacsimile. This Agreement may be executed in
counterparts. and each counterpart or set thereof shall be deemed to be a
duplicate original. Executed copies of this Agreement may be delivered by
telefacsimile, and delivery of a duplicate original and sufficient delivery
to result in entry to this Agreement by the transmitting party, provided
however, that within ten (10) days thereunder a signed duplicate original
shall be forwarded to the party to whom a telefacsimile copy was forwarded.
IN WI MESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
JONES NAUGHTON ENTERTAINMENT INC. PATRICK M. ROST
By: /s/Joseph M. Naughton By:/s/ Patrick M. Rost
Joseph M. Naughton
Chairman/CEO
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made, entered
into, and effective as of October 1, 1999 ("Effective Date"), by and
between AMS Acquisition Corp, a Nevada corporation (the "Company")
and Matt Herman ("Employee").
RECITALS
WHEREAS, the Company desires to benefit from Employee's
expertise and employ Employee and Employee is willing to accept such
employment.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto hereby agree as
follows:
AGREEMENT
1. Term and Duties.
The Company hereby employs Employee as Executive Vice
President and Director of Technical Support as of the Effective Date
for a period of three (3) years, at which time this Agreement shall
terminate unless extended by mutual agreement of the parties.
Employee shall faithfully and diligently perform all professional
duties and acts as may be reasonably requested of Employee by the
Company or its officers consistent with the function of a President
in this or a similar company.
2. Duties.
Employee shall have supervision and control over, and
responsibility for, the Company's technical support function and
shall have such other powers and duties as may from time to time be
prescribed by the Board of Directors, provided that such duties are
reasonable and customary for a Executive Vice President and Director
of Technical Support. Employee will perform Employee's services to
the best of Employee's ability. Employee agrees throughout the term
of this Agreement to devote sufficient time, energy and skill to the
business of the Company and to the promotion of the best interests
of the Company. Employee will be provided with appropriate
equipment, secretarial help, supplies, and other facilities and
services suitable to Employee's position and adequate for the
performance of his duties in the discretion of the Board of
Directors.
3. Compensation.
3.1 Subject to the termination of this Agreement as
provided herein, the Company shall compensate Employee for his
services as follows (collectively referred to as the "Compensation"):
(a) Employee shall receive an annual salary ("Salary") of
Eighty Thousand Dollars ($80,000.00) payable in semi-monthly
installments in accordance with the Company's practices, less normal
payroll deductions. At the
<PAGE>
beginning of the second year of this Agreement, the Salary shall be
increased to Ninety Thousand Dollars ($90,000.00) per year. At the
beginning of the third year of this Agreement, the Salary shall be increased
to One Hundred Thousand Dollars ($100,000.00) per year.
(b) Employee shall receive, in addition to the Salary set
forth above, a cash bonus (the "Bonus"), payable annually following
the end of each fiscal year, equal to one eighth (1/8) of one
percent (1%) of the gross sales of the Company, if and only if the
Company is profitable for the corresponding fiscal year.
(c) In addition to the Salary and Bonus set forth above,
Employee shall be granted options to acquire common stock of the
Company as follows: At the end of Year 1, Employee will become
eligible to purchase up to 200,000 shares of common stock at a price
of $0.25 per share; at the end of each of Years 2 and 3, Employee
will become eligible to purchase 200,000 shares of common stock at a
price equal to the average closing bid price on the five (5)
business days immediately preceding the anniversary date of this
Agreement. All options granted hereunder shall be exercisable for a
period of two (2) years from their date of grant.
(d) Employee will be provided with medical insurance under
a plan and with a provider chosen by the Company. Until such time
as a plan is chosen by the Company, the Company shall reimburse
Employee for any COBRA premiums paid by Employee.
3.2 Employee shall accrue vacation time beginning in Year
1 of this Agreement at the rate of three (3) weeks per year.
Employee shall be allowed a customary number of paid sick days in
accordance with Company policy.
3.3 In addition to the Compensation set forth above, the
Company shall periodically review Employee's performance and
services rendered with a view to paying discretionary bonuses based
upon above-average or outstanding performance for a prior period.
Any such bonuses approved by the Company shall be paid to Employee
within 30 days of the grant thereof.
4. Disclosure of Confidential Information.
4.1 Employee shall not, during the term of this
Agreement and thereafter, communicate, divulge, or use for the
benefit of himself or any other person, partnership, association, or
corporation, either directly or indirectly, any information or
knowledge concerning the Company and any information, including but
not limited to pricing schedules, customer lists, communication
techniques, invoicing, and billing which may be communicated to
Employee by the Company during the term of this Agreement.
<PAGE>
4.2 Employee agrees that any and all customer lists,
pricing schedules, products, formulas, inventions, schematics,
techniques, and goods created by Employee while rendering services
to Company shall be considered the property of the Company which
shall own all rights and interest in the same.
4.3 Employee covenants and agrees that during the term
of this Agreement he will not do any act, or fail to do any act, the
result of which may be prejudicial or injurious to the business and
goodwill of the Company.
5. Expenses.
The Company shall reimburse Employee for all reasonable
business related expenses incurred by Employee in the course of his
normal duties on behalf of the Company. In reimbursing Employee
for expenses, the ordinary and usual business guidelines and
documentation requirements shall be adhered to by the Company and
Employee. Any expenses which, individually or in the aggregate,
exceed Five Hundred Dollars ($500.00) must be consented to by the
Company in writing prior to being incurred by Employee.
6. Termination.
6.1 Termination by the Company. The Company reserves
the right to terminate this Agreement at any time for "cause". For
the purposes of this Agreement, an event or occurrence constituting
"cause" shall include, but not be limited to:
6.1.1 Employee's failure or refusal, after notice thereof,
to perform specific directives of the Board of Directors of the
Company, when such directives are consistent with the scope and
nature of the Employee's duties and responsibilities as set forth
herein or the commission of any intentional tort by the Employee
against the Company, or any breach by the Employee of any of the
covenants set forth in paragraphs 4 or 9 of this Agreement;
6.1.2 Drunkenness or use of drugs which interferes with
the performance of Employee's obligations under this Agreement,
continuing after notice thereof;
6.1.3 Any act of dishonesty or moral turpitude by the
Employee which constitutes a crime under the laws of the place where
the act was committed;
6.1.4 Any willful or intentional act by Employee which,
although not a crime, is of such impropriety or magnitude that it
substantially adversely affects the business and the reputation of
the Company.
In the event Employee is terminated for cause as defined
herein, Employee shall not be entitled to any bonus, termination or
severance payment of any sort.
<PAGE>
6.2 Termination upon Death or Disability. This
Agreement shall be terminated upon the death of the Employee or, at
the Company's discretion, if the Employee suffers any physical or
mental disability that would prevent the performance of his duties
under this Agreement. Such a termination, in the case of
disability, shall be effected by giving thirty (30) days written
notice of termination to Employee.
6.3 Termination with Notice. This Agreement may be
terminated by either the Employee or the Company, with or without
cause, by giving the other party at least thirty (30) days notice in
advance. In the event that this Agreement is terminated by the
Company prior to the completion of the term of employment pursuant
to this paragraph, Employee shall be entitled to compensation earned
by and vested in him prior to the date of termination as provided
for in this Agreement, computed pro-rata up to and including that
date, plus ninety (90) days of Salary. In the event this Agreement
is terminated by the Employee, Employee shall be entitled to
compensation earned by and vested in him prior to the date of
termination.
7. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of
the parties hereto their respective devisees, legatees, heirs, legal
representatives, successors, and permitted assigns. The preceding
sentence shall not affect any restriction on assignment set forth
elsewhere in this Agreement.
8. Notices.
All notices provided for in this Agreement shall be in
writing signed by the party giving such notice, and delivered
personally or sent by overnight courier or messenger or sent by
registered or certified mail (air mail if overseas), return receipt
requested, or by telex, facsimile transmission, telegram or similar
means of communication. Notices shall be deemed to have been
received on the date of personal delivery, telex, facsimile
transmission, telegram or similar means of communication, or if sent
by overnight courier or messenger, shall be deemed to have been
received on the next delivery day after deposit with the courier or
messenger, or if sent by certified or registered mail, return
receipt requested, shall be deemed to have been received on the
third business day after the date of mailing. Notices shall be sent
to the addresses set forth below:
If to the Company:
Jones Naughton Entertainment, Inc.
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attn: Joseph Naughton, Chief Executive Officer
Facsimile No.: (714) 994-3242
<PAGE>
With a copy to:
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: (949) 719-1988
If to the Employee:
Matt Herman
Facsimile No.:
9. Assignment.
Subject to all other provisions of this Agreement, any attempt to
assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or otherwise, to any person, firm,
company, or corporation without the prior written consent of the
other party, shall be invalid, and may, at the option of such other
party, result in an incurable event of default resulting in
termination of this Agreement and all rights hereby conferred.
10. Choice of Law.
This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State
of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the
principles of conflict of laws.
11. Jurisdiction.
The parties submit to the jurisdiction of the Courts of the State
of California or a Federal Court empaneled in the State of
California, County of Orange, for the resolution of all legal
disputes arising under the terms of this Agreement, including, but
not limited to, enforcement of any arbitration award.
12. Entire Agreement.
Except as provided herein, this Agreement, including exhibits,
contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other
oral, written, or other communications between them concerning the
subject matter of this Agreement. There are no representations,
agreements, arrangements, or understandings, oral or
<PAGE>
written, between and among the parties hereto relating to the subject
matter of this Agreement that are not fully expressed herein.
13. Severability.
If any provision of this Agreement is unenforceable, invalid, or
violates applicable law, such provision, or unenforceable portion of
such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
14. Captions.
The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the
relationship of the parties, and shall not affect this Agreement or
the construction of any provisions herein.
15. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
16. Modification.
No change, modification, addition, or amendment to this Agreement
shall be valid unless in writing and signed by all parties hereto.
17. Waiver.
No waiver of any breach, covenant, representation, warranty
or default of this Agreement by any party shall be considered to be
a waiver of any other breach, covenant, representation, warranty or
default of this Agreement.
18. Interpretation
The terms and conditions of this Agreement shall be deemed to
have been prepared jointly by all of the Parties hereto. Any
ambiguity or uncertainty existing hereunder shall not be construed
against any one of the drafting parties, but shall be resolved by
reference to the other rules of interpretation of contracts as they
apply in the State of California.
19. Attorneys' Fees.
Except as otherwise provided herein, if a dispute should arise
between the parties including, but not limited to arbitration, the
prevailing party shall be reimbursed by the non-prevailing party for
all reasonable expenses incurred in resolving such dispute,
including reasonable attorneys' fees.
<PAGE>
20. Taxes.
Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make
such payment. Any withholding taxes in the nature of a tax on
income shall be deducted from payments due, and the party required
to withhold such tax shall furnish to the party receiving such
payment all documentation necessary to prove the proper amount to
withhold of such taxes and to prove payment to the tax authority of
such required withholding.
21. Not for the Benefit of Creditors or Third Parties.
The provisions of this Agreement are intended only for the
regulation of relations among the parties. This Agreement is not
intended for the benefit of creditors of the parties or other third
parties and no rights are granted to creditors of the parties or
other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted,
adopted, or acted in reliance upon this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the Effective Date.
"Company" "Employee"
AMS Acquisition Corp. Matt Herman
/s/ Matt Herman
By:/s/Joseph Naughton
REVISED PROPOSAL FOR LEASE
TO: Jones Naughton Entertainment, Inc.
ATTN: Joe Naughton, President
LOCATION: 5681 Beach Blvd., Buena Park, CA 90621
SPACE: Suite 100 containing Approximately 1600 sq. ft. first floor (with 7
offices) excluding a small file storage room for Fonte.
LEASE TERMS: Three (3) year beginning upon completion of remodeling
(improvements) with option to renew 3 more years at same rent and electric
costs based on prorated sq. ft.
RENT: $1,600.00 per month, plus a pro-rated share of the building electric
bill (calculated by square feet). Lessor is to consult with an energy
efficiency company to obtain recommendation on how to lower the electric
bill. Copies of electric bill statements will be provided to tenant upon
request.
TENANT IMPROVEMENTS: Partitioning according to plans approved by tenant,
painting, medium grade carpeting (plan and colors to be approved by
tenant), including the removal one suite entrance door and 2
windows on the hallway. The changes have been discussed, a sketch of the
floor plan has been submitted and the parties are in agreement.
Vic's (VC Tax & Accounting) office to be repainted and soiled
ceiling boards replaced. Tentative plan to revise and upgraded
exterior on building names with off-white letters on green background.
It is contemplated that the remodeling work will begin immediately.
Preliminary bids and prices have been obtained and indicate a total
of approx $6,200 for all tenant improvements to be paid by landlord*.
Arrangements will be to do its much of the work as possible in
the evenings & week ends and with the least amount of disruption
to the tenants to the best of the workers ability and practicality. Tenant
accepts and agrees to this arrangement and
understand that nothing can be guaranteed as to noise and dust during this
project. *Tenant agrees to pay the first
year's rent in advance to help defray the costs of improvements.
OPTION TO, LEASE SUITE 101: Tenant will have the first right to lease suite
101 (approx 900 sq. ft.) currently being leased by Dennis Real Estate &
College. They have indicated they need a larger space and will move as soon
as they find another place. Their lease ends on August 21, 1999. They have
been advised another tenant is interested in their space, and have been told
they would be released from their lease earlier if they want to vacate prior
to August 21, 1999. They could continue on a month to month basis until
Naughton is ready to add that suite to their lease.
OTHER LEASE TERMS:
Lessor's responsibility: To pay property taxes, utilities, and
or lessee and his guests.
Lessees's responsibility: To maintain suite; Provide public liability
insurance and provide Lessor with copy.
DATED: July 21, 1999
/s/Joe Naughton, President
/s/Anthony N. Fonte, owner/Lessor
DESIGNARTS
25 MAIN STREET - CHICO, CALIFORNIA
LEASE AGREEMENT
This Lease, made between GoOn-Line.com, Inc. hereinafter referred to as
Lessee, and Design Arts, Building Associates, hereinafter referred to as
Lessor, provides as follows:
1. USE AND PREMISES
Lessor hereby leases to Lessee, and Losses hires from Lessor, for the
purpose of occupying and using the promises for general office use and for
no other purpose, a portion of those certain premises, with the
appurtenances, situated in the City of Chico, County of Butte, State of
California, and commonly described as follows:
Suite 201 of the Design Arts Building, 25 Main Street, Chico, California and
more particularly described on Exhibit "A" attached hereto. Mailed Notices
under this agreement shall be addressed to the tenant at suite 201, Design
Arts Building, 25 Main Street, Chico CA 95928
2. TERM AND RENT
Term: The term shall be for five (5) years, commencing on May 15, 1999 and
ending sixty (50) months thereafter, and subject to any hereinafter
described option, all being subject to the following promises, covenants and
conditions:
Rent: Lessee shall pay to Lessor, without deduction or offset, a bass rent
of $19,380 annually during the term hereof, payable in equal monthly
installments of $1,615.00, in advance on the fifteenth (15th) day of each
full calendar month during the term hereof.
All rents shall be paid to the Lessor or its authorized agent at 25 Main
Street, Chico, California.
Late Payment Penalty: Payment is due on the 15th day of each month and late
by the 25th. If paid after the 10th a late fee of $5 per day will be charged
beginning the 15th of the month to the 25th ($50) plus $5
<PAGE>
per day thereafter until paid. The rent must be AT THE DESIGN ARTS BUILDING
OFFICE BY THE 25TH TO avoid a penally charge.
The Base monthly rent shall be adjusted every twelve (12) months and as
scheduled below during the term hereof, and any extension increases shall
conform to the following schedule
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
year starting annualized rent monthly rent Increase
2 5/15/00 $19,961 $1,603.45 1.03
3 5/15/01 $20,560 $1,713.35 1.03
4 5/15/02 $21,177 $1,764.75 1.03
5 5/15/03 $21,812 $1,817.70 1.03
</TABLE>
initial payment: Lessee shall pay to Lessor, on or before May 15, 1999,
the security deposit (if any), and either the first months rent or an
advance payment of rent as follows:
Advance payments: In the event that Lessee prepays rent for twelve months or
more in advance. the scheduled RENTS SHALL BE DISCOUNTED twenty five
percent. The advance rent for the first year Is $14,500.
option: During the period between May 15. 2000 and June 15, 2000, and the
period between May 15, 2002 and June 15, 2002, Lessee shall have the option
to terminate this lease without penalty or obligation, upon written notice.
3. POSSESSION
If Lessor, for any reason whatsoever, cannot deliver possession of the said
premises to Lessee at the commencement of said term, as hereinbetore and
hereinafter specified, this lease shall not be void or voidable, nor shall
Lessor be liable to Lessee for any loss or damage resulting therefrom, but
in that event there shall be a proportionate abatement of rent covering the
period between the commencement of the said term and the time when Lessor
can deliver possession. Lessee agrees to take possession and begin payment
of rent on May 15th 1999. If Lessor cannot deliver possession of the premises
at that time, the Lessor shall have the option to terminate this lease
without penalty or obligation.
4. USES PROHIBITED
Lessee shall not use, or permit said promises, or any part thereof, to be
used for any purpose or purposes other than the purpose or purposes for
which the said premises are hereby leased; and no use shall be made or
<PAGE>
permitted to be made of the said promises, nor acts done, which will
Increase the existing rate of insurance upon the building In which said
promises may be located, or cause a cancellation of any Insurance policy
covering said building, or any part thereof; nor shall Lessee sell. or
permit to be kept, used or sold, in or about said premises, any article
which may be prohibited by the standard form of fire insurance policies,
Lessee shall, at its sole cost and expense, comply with any and all
requirements of any insurance organization or company pertaining to said
premises, necessary for the maintenance of reasonable fire and public
liability Insurance covering said building and appurtenances. Lessor
warrants that the proposed use Is not prohibited by insurance policies in
effect at the time of occupancy.
Lessee shall not commit any waste upon the promises, or any nuisance or act
which may disturb the quiet enjoyment of any tenant in the building.
5. Maintenance, Repairs, Alterations
Lessee acknowledges that the promises are in good order and repair, unless
otherwise indicated herein, subject to any hidden or latent detects or
listed items, if any. Lessee shall, at its own expense and at all times,
maintain the promises in good and sale condition and shall surrender the
same. at termination hereof, In as good condition as received, normal wear
and tear, damage by fire, or other casualty, and hidden or latent defects
not caused by Lessee's occupancy excepted. Losses shall be responsible for
all repairs required, excepting the roof, exterior walls, structural
foundations, heating/ventilation/air conditioning system, and building
plumbing and electrical systems, which shall be maintained by Lessor. Lessor
shall maintain in good condition the common areas, sidewalks, patios,
landscaping, and parking.
No improvement or alteration of the premises. shall be made without the
prior written consent of the Lessor, which consent shall not be unreasonably
withhold. Prior to the commencement of any substantial repair, improvement,
or alteration. Lessee shall give Lessor at least two (2) days written notice
in order that Lessor may post appropriate notices to avoid any liability for
lions.
6. FREE FROM LIENS
Lessee shall keep the promises and the property in which the premises are
situated free from any liens arising out of any work performed, material
furnished, or obligation incurred by Lessee.
7. COMPLIANCE WITH GOVERNMENTAL REGULATIONS
Lessee shall, at its sole cost and expense, comply with all statutes,
ordinances and requirements of all Municipal, State and Federal authorities
now in force, or which may hereafter be in force, pertaining to the said
<PAGE>
premises. The commencement or pendency of any state or federal court
proceeding against lessee regarding the use of premises shall, after Lessee
has 30 days written notice to cure, be deemed a breach hereof.
8. INDEMNIFICATION OF LESSOR
Lessee, as a material part of the consideration to be rendered to Lessor,
hereby waives all claims against Lessor for damages to goods, wares and
merchandise, and all other personal property in, upon and about said
premises, from any cause arising at any time, and Lessee will hold Lessor
exempt and harmless from any damage or injury to any person, or to the
goods, wares and merchandise and all other personal property of any person,
arising from the use of the premises by Lessee, or from the failure of
Lessee to keep the premises in good condition and repair as herein provided,
unless caused or contributed to by the negligence of Lessor, Lessor's
employees, contractors, or agents.
9. UTILITIES
Lessee shall contract for and pay for telephone service, janitorial
services, trash collection and all other service supplied to the Lessee's
premises. The cost of building utilities, which include water, common area
janitorial services, natural gas and electrical power are included in the
rent and will be paid by Lessor. Lessor reserves the right to evaluate and
equitably adjust Lessee's rent based on actual utility usage. Lessor and
Lessee agree that the normal working hours for the building are Monday-
Friday from 7:00 am to 6:00pm. Reasonable charges for Utility usage beyond
normal working hours may be imposed.
10. ENTRY BY LESSOR
Lessee shall permit Lessor and its agents to enter into and upon said
premises at all reasonable times, and upon reasonable notice, for the
purpose of inspecting the same or for the purpose of maintaining the
building in which said premises are situated, or for the purpose of making
repairs, alterations or additions to any other portion at said building,
including the erection and maintenance of such scaffolding, material
supplies, canopies, fences and props as may be required, or for the purpose
of posting notices of non-responsibility for Lessee's alterations, additions
or repairs, or for the purpose of placing upon the property in which said
premises are located any usual or ordinary "For Sale" signs, without any
rebate of rent and without any liability to Lessee for any loss of
occupation or quiet enjoyment of the premises thereby occasioned; and shall
permit Lessor and Its agents, at any time within sixty (60) days prior to
the expiration of this lease, to place upon said premises any usual or
ordinary "To Let" or "For Lease" signs and exhibit the premises to
prospective tenants at reasonable hours and after reasonable notice.
11. DESTRUCTION OF PREMISES
<PAGE>
In the event of a partial destruction of the said promises during the said
term, from any cause, Lessor shall forthwith repair the same, provided such
repairs can be made within sixty (60) days from date of destruction under
the laws and regulations of the State, Federal, County or Municipal
authorities. Partial destruction shall not terminate this lease, except that
Lessee shall be entitled to a proportionate deduction in rent while such
repairs are being made, based upon the extent to which the making of such
repairs shall interfere with the business carried on by Lessee In the said
premises. In the event that Lessor does not elect to make, or cannot make,
such repairs within such sixty (60) days of date of destruction, or such
repairs cannot be made under such laws and regulations, this lease may be
terminated at the option of either party. In respect to any partial
destruction which Lessor is obligated to repair, or may elect to repair
under the terms of this paragraph, the provisions of Section 1932,
Subdivision 2 of the civil Code of the State of California are waived by
Lessee. In the event that the building in which the premises are situated
are destroyed to the extent of not less than thirty-three and one-third
percent (33-1/3%) of the replacement cost thereof. Lessor may elect to
terminate this lease, whether the promises are injured or not. A total
destruction of the building in which the said promises are situated shall
terminate this lease effective as of the date of destruction.
In the event of any dispute between Lessor and Lessee relative to the
provisions of this paragraph, they shall each select an arbitrator. the two
arbitrators so selected shall select a third arbitrator and the three
arbitrators so selected shall hear and determine the controversy and their
decision shall be final and binding upon both Lessor and Lessee, who shall
bear the cost of such arbitration equally between them.
12. ASSIGNMENTS AND SUBLETTING
Lessee shall not assign this lease nor sublet any portion of the premises
without prior written consent of the Lessor, which shall not be unreasonably
withheld. Any such assignment or subletting without consent shall be void
and, at the option of the Lessor, may terminate this lease. A consent to one
assignment or subletting shall not be deemed to be a consent to any
subsequent assignment or subletting, and any such subsequent assignment or
subletting without Lessor's consent shall be void and shall, at Lessor's
option, terminate this lease. Lessor may require reasonable financial
information and reasonable credit information from the proposed transferee,
and Lessor may require that the proposed transferee demonstrate a reasonable
amount of credit worthiness. Lessor may require that rents paid by a
sublessee be paid jointly to the Lessee and the Lessor. Furthermore, Lessor
may require that the proposed now use(s) be consistent with the terms and
conditions of this lease agreement. Use of the promises by other related
entities of the Lessee shall not be deemed an assignment or sublease as
contemplated herein. Lessee shall have the right to assign or sublease to a
related entity of Lessee. "Related entity" as used herein shall mean parent
company, any subsidiary, or affiliated company of Lessee.
13. INSOLVENCY OR BANKRUPTCY
<PAGE>
Either (a) the appointment of a receiver to take possession of all or
substantially all of the assets of Lessee without being discharged within 30
days, or (b) a general assignment by Lessee for the benefit of creditors, or
(c) any action taken or suffered by Lessee under any insolvency or
bankruptcy act without being discharged or removed within 30 days shall
constitute a breach of this lease by Lessee. After such 30 day discharge or
cure period, this lease shall immediately terminate after a written notice
of termination from Lessor to Lessee.
14. REMEDIES OF OWNER ON DEFAULT
In the event of any breach of this lease by, then Lessor,
besides other rights or remedies it may have, shall
have the immediate right of re-entry and may remove all persons and property
from the promises; such property may be removed and stored in a public
warehouse or elsewhere at the cost and for the account of Lessee. Should
Lessor elect to re-enter, as herein provided, or should it take possession
pursuant to legal proceedings or pursuant to any notice provided for by law,
it may either terminate this lease or from time to time, without terminating
this lease, re-let said premises or any part thereof for such term or terms
(which may be for a term extending beyond the term of this lease) and at
such rental or rentals and upon such other terms and conditions as Lessor in
Its reasonable discretion may deem advisable with the right to make
alterations and repairs to said premises, upon each such re-letting (a)
Lessee shall be immediately liable to pay Lessor, in addition to any
Indebtedness other than rent due hereunder, the cost and expenses of such
re-letting and of such alteration and repairs. incurred by Lessor, and the
amount, it any, by which the rent reserved in this lease for the period of
such re-letting (up to but not beyond the term of this lease) exceeds the
amount agreed to be paid as rent for the premises for such period of such
re-letting; or (b) at the option of Lessor rents received by such Lessor
from such re-letting shall be applied: first, to the payment of any
indebtedness, other than rent due hereunder from Lessee to Lessor; second.
to the payment of any reasonable costs and expenses of such reletting and of
such alterations and repair; third, to the payment of rent due and unpaid
hereunder and the residue, if any, shall be held by Lessor and applied in
payment of future rent as the same may become due and payable hereunder, If
Lessee has been credited with any rent to be received by such re-letting
under option (a), and such rent shall not be promptly paid to Lessor by the
new tenant, or it such rentals received from such reletting under option (b)
during any month be less than that to be paid during that month by Lessee
hereunder, Lessee shall pay any such deficiency to Lessor. Such deficiency
shall be calculated and paid monthly. No such re-entry or taking possession
of said premises by Lessor shall be construed as an election on its part to
terminate this lease unless a written notice of such intention be given to
Lessee or unless the termination thereof be decreed by a Court of competent
jurisdiction. Notwithstanding any such re-letting without termination,
Lessor may at any time thereafter elect to terminate this lease for any
previous breach. Should Lessor at any time terminate this lease for any
breach, in addition to any other remedy it may have, it may recover from
Lessee all reasonable damages it may incur by reason of such breach,
including the reasonable cost of
<PAGE>
amount of rent and charges equivalent to rent reserved in this lease for the
remainder of the stated term, over the then reasonable rental value of the
premises for the remainder of the stated term, all of which amounts shall be
immediately due and payable from Lessee to Lessor.
15. SURRENDER OF LEASE
The voluntary and other surrender of this lease by Lessee, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Lessor, terminate all or any existing subleases or subtenancies, or may, at
the option of Lessor, operate as an assignment to Lessor of any or all such
subleases or subtenancies.
16. ATTORNEY'S FEE
In the event that Lessor Is required to employ an attorney to enforce the
terms and conditions of this agreement or to recover possession of the
promises from Lessee, Lessee shall pay to Lessor a reasonable attorney's
fees actually incurred whether or not a legal action is filed or a judgement
is obtained.
17. NOTICES
Any notice which either party may or is required to give, shall be given by
mailing the same, postage prepaid, to Lessee at the promises, or Lessor at
the address shown above, or at such other places as may be designated by the
parties from time to time. Notice shall be deemed given when deposited in
the United States mail registered for delivery, return receipt requested.
18. SECURITY
A security deposit of two thousand five hundred dollars
($2500.00) shall secure the performance of the Lessee's obligations
hereunder. Lessor may, but shall not be obligated, to apply all or portions
of said deposit an account of Lessee's obligations hereunder. Any balance
remaining upon termination shall be returned to Lessee. Lessee shall not
have the right to apply the security deposit in payment of the lost month's
rent. In the event that Lessor elects to pay rent in advance for the first
year, under the provisions of article 2, the payment of the security
deposit shall be waived, and any deposit paid shall be applied against the
amount of the advance rent.
19. WAIVER
No failure of Lessor to enforce any term hereof shall be deemed
to be a waiver. The subsequent acceptance of rent hereunder by Lessor shall
not be deemed to be a waiver of any preceding breach by Lessee of any term,
covenant or condition of this lease, other than the failure of Lessee to pay
the particular rental so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
20. HOLDING OVER
<PAGE>
Any holding over after the expiration of the said term shall be construed to
be a tenancy from month to month, at a rental of 1.25 times the then current
monthly rent and shall otherwise be on the terms and conditions herein, as
applicable.
21. SUCCESSORS AND ASSIGNS
This lease is binding on the heirs, successors, executors, administrators
and assigns of the parties hereto.
22. TIME
Time is of the essence of this lease.
23. TAXES AND ASSESSMENTS
In the event that in any tax year during the term of this lease any
Municipal, State, County, or political subdivision shall assess any new or
special assessments or levies, the Lessee shall pay to Lessor for such year,
upon demand, an amount equal to Lessee's pro-rata share of the total special
assessment or levy. The pro-rata share shall be determined by the following
formula:
Lessee's leased gross area (square feet) per Exhibit "A" = Lessee's pro-rata
share of taxes
Total of occupied tenant areas (square feet)
Lessee shall pay, before delinquency, any and all taxes levied or assessed
and which become payable during the term hereof upon Lessee's equipment,
furniture, fixtures, and other personal properly located In the premises.
It is further agreed by the parties that Lessee shall have the right to
protest in its own name, or in the name of Lessor, any and all tax
assessments or levies during the term of this lease.
24. LIABILITY INSURANCE
During the entire term and any extension or renewal thereof, Lessee, at its
own expense, shall maintain in full force a policy or policies of
comprehensive public liability insurance, including property damage with
provision for plate glass damage, written by one or more responsible
insurance companies licensed to do business in California, that will insure
Lessee and Lessor against liability for any injury to persons and property
and for death of any person or persons occurring in or about the promises.
Lessee will deliver to Lessor acceptable certificates of insurance. The
liability under such insurance shall not be less that One Million Dollars
($1,000,000.00) for any one person killed or injured; not less than One
Million Dollars ($1,000,000.00) for any one accident, and not less than
Fifty Thousand Dollars ($50,000.00) for property damage.
<PAGE>
Without limitations an any other right of remedy of Lessor, Lessee shall
indemnify, defend and save Lessor, its successors and assigns, harmless from
all loss or damage, including reasonable attorney's fees, suffered or
incurred by Lessor by reason of Lessee's failure to provide and maintain the
insurance Lessee is required to provide and maintain. Each of the foregoing
policies shall contain the agreement of the insurer to give Lessor at least
thirty (30) days notice prior to cancellation of or material change in said
policies, or any of them. To the maximum extent permitted by insurance
policies which may be owned by Lessor or Lessee, Lessee and Lessor, for the
benefit of each other, waive any and all right of subrogation which might
otherwise exist.
Notwithstanding any other provisions of this Agreement to the contrary, such
party hereto waives any right of recovery against the other for any loss or
damage to personal property against which the waiving party is protected by
Insurance, but such waiver shall not apply to any excess of such loss,
damage or injury over the amount covered by the insurance.
25. OTHER INSURANCE
Lessor agrees to maintain insurance on ail Lessor's real
and personal property for fire, extended coverage, vandalism, and malicious
mischief.
26. IMPROVEMENTS
(a) BY LESSOR: Lessor will re-clean and paint Suite 201 prior to Possession
by the Lessor. Al light fixture parts will BE FULLY In place and in good
working order. Additionally, Lessor agrees to provide new dedicated heat
pump air conditioning unit for suite 201 prior to June 15,1999. No other
improvements are to be provided by Lessor.
(b) BY LESSEE - Improvements made by the Lessee require that the Lessee
shall, at Lessee's sole cost and expense, cause a general description and
approximate cost sheet to be prepared for Improvement and refurbishing of
the promises to be made by Lessee, and Lessee shall submit said description
and costs to Lessor for Lessor's review and approval as to the type of
construction and the class and design of such Improvement. Lessor shall not
unreasonably withhold such review and approval. Lessor shall have ten (10)
days from the time that Lessee submits said description and costs to
approve or disapprove the same. Upon approval from Lessor, Losses shall at
Its sole cost and expense, and in accordance with all laws, ordinances,
rules and regulations of any government authority applicable thereto,
Immediately commence the work of improvement and refurbishing of the
promises In accordance with said description and costs which, upon approval
of Lessor, shall be marked Exhibit "C" and shall become a part hereof.
Lessee shall thereafter diligently prosecute to completion Lessee's work.
Lessor shall have the right of review and acceptance of all contractors,
subcontractors, and other vendors as required to complete approved
improvements.
<PAGE>
Lessee shall notify Lessor, in writing, prior to the first day work is
initiated by Lessee on the premises in order that Lessor may have adequate
opportunity to post a "Notice of Non-Responsibility" on the premises and
have such notice recorded in the Office of the County Clerk of the County of
Butte.
27. COMMON RESTROOMS, LOBBY, ELEVATOR
Lessor agrees to provide and maintain common restroom facilities, lobby
areas, patios, and elevator for Lessee and Lessee's guests, invitees and
employees to be used jointly with other tenants In the building.
28. ON-SITE PARKING
Lessor agrees to provide and maintain seventeen (17) parking spaces, more
particularly described on Exhibit "D" attached hereto. Spaces indicated as
"Customer Parking Only" and "Handicapped Parking Only" will be maintained as
such. Lessee and employees of Lessee's business are prohibited from using
the customer designated spaces except for live (5) minute loading and
unloading. Spaces indicated as "Assigned" are for use by building tenants
and assigned in accordance with the Lessors parking assignment plan.
Lessee understands and agrees that "Assigned" parking space availability is
not guaranteed by this lease.
29. SIGNAGE
Exterior Signage for Lessee's premises is allowable providing the signage
conforms to the City of Chico requirements, conforms to Design Arts Building
signage standards, and Lessor's prior written consent is first had and
obtained. Lessors consent and acceptance shall not unreasonably be withheld.
Lessor shall have the right of review and acceptance of all contractors,
sub-contractors, and other vendors as required to complete approved signs.
30. TRADE FIXTURES
Any and all improvements made to the promises during the term hereof shall
belong to the Lessor, except trade fixtures of the Lessee. Lessee may, upon
termination hereof, remove its trade fixtures, but shall repair or pay for
all repairs necessary for damages to the premises occasioned by removal.
31. HAZARDOUS MATERIALS
Lessee shall not use, store, or dispose of any hazardous substances upon the
premises, except use and storage of such substances if they are customarily
used in lessee's business, and such use and storage complies with all
environmental laws. Hazardous substances means any hazardous waste,
substance or toxic materials regulated under any environmental laws or
regulations applicable to the property, Lessee shall provide Lessor with a
list of substances used in the course of the Lessee's business within ten
(10) days following commencement of this lease.
<PAGE>
32. INSPECTION OF PREMISES
Lessee covenants that it or its authorized agents have made an inspection of
the promises. its improvements and equipment, and accepts them in their
present condition, subject to review of Lessor improvement when performed,
hidden or latent defects, and listed items specifically excepted. Lessee has
not relied on the representations of Lessee's or Lessor's agents, but has at
all times relied an its independent inspection.
33. COVENANT OF FAIR DEALING
Each party to this lease agrees to cooperate fully and in good faith and
covenants to deal fairly with the other to ensure that the terms and
conditions of this lease are carried out to the fullest possible extent for
the best interest of the parties.
34. ABANDONMENT OF PROMISES
Lessee shall not vacate or abandon the premises at any time during the term
hereof, and if Lessee shall abandon or vacate the premises, or be
dispossessed by process of law. or otherwise, any personal property
belonging to Lessee left upon the promises shall be deemed to be abandoned,
at the option of Lessor. It shall be conclusively presumed that Losses has
not vacated or abandoned the premises it Lessee Is not otherwise in default
or breach of this lease.
35. CONDEMNATION
It any part of the promises shall be taken or condemned for public use, and a
part thereof remains which is susceptible of occupation hereunder, this
lease shall, as to the part taken, terminate as of the date the condemnor
acquires possession. and thereafter Losses shall be required to pay such
proportion of the rent for the remaining term as the value of the promises
remaining bears to the total value of the promises at the date of
condemnation provided however, that Lessor may at its option, terminate this
lease as of the date the condemnor acquires possession. In the event that
the premises are condemned in whole. or that such portion is condemned that
the remainder is not susceptible for use hereunder, this lease shall
terminate upon the date upon which the condemnor acquires possession. All
sums which may be payable on account of any condemnation shall belong to the
Lessor, and Lessee shall not be entitled to any part thereof, provided
however, that Lessee shall be entitled to retain any amount awarded to it
for its trade fixtures or moving, expenses.
36. Estoppel Certificate
(it) Losses shall, at any time upon not less than ten (10) days prior
written notice from Lessor, execute, acknowledge and deliver to Lessor a
statement in writing (1] certifying that this Lease is unmodified and in
full force and effect (or, if modified, stating the nature of such
modification and certifying That this Lease, as so
<PAGE>
modified, is in full force and effect), the amount of 2 security deposit,
and the date to which the rent and other charges are paid in advance, it
any, and 12) acknowledging that there are not, to the best of Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder, or
specifying such defaults if any are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer to the
Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement within
such time shall be a material breach and default of this Lease, or such
failure shall be conclusive upon Lessee [1] that this Lease is in full force
and effect, without modification except as may be represented by Lessor, 121
that there are no uncured defaults in Lessor's performance, and (31 that not
more than one month's rent has been paid in advance.
37. FORCE MAJEURE
Neither party shall be in default in the event that performance is prevented
due to reasons beyond that party's control.
ENTIRE AGREEMENT: The foregoing constitutes the entire agreement between the
parties and may be modified only by a writing signed by both parties. The
following Exhibits, it any, have been made a part of this lease before the
parties' execution hereof:
Exhibit "A" - space location drawings;
Exhibit "B" -not applicable
Exhibit "C" - Lessee improvement/refurbishment cost sheet, if any
[future application]
Exhibit "D" - Location drawing of Design Arts Building parking spaces.
IN WITNESS WHEREOF, the parties have executed this lease at Chico,
California this twenty-ninth day of April 1999.
/s/David Martin Griffith
Lessor: David Martin Griffith, partner, design arts building associates
/s/Scott Claverie
Lessee: Scott Claverie, President, GoOn-line.com, Inc.
<PAGE>
Diagram - Exhibit "A" - space location drawings
<PAGE>
Diagram - Exhibit "D" - Location drawing of Design Arts Building
parking spaces.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), is made as of
September 20, 1999, by and between Go Online Networks Corporation, a
corporation organized under the laws of the State of Delaware, with
headquarters located at 5681 Beach Blvd., Suite 101, Buena Park,
California 90621 (the "Company") and the buyer set forth on the
execution page hereof (the "Buyer").
RECITALS
A. The Company and the Buyer are executing and delivering
this Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act") and Section 4(2) under the 1933 Act;
B. The Buyer desires to purchase from the Company, and the
Company desires to sell to the Buyer, for the amounts and upon the
terms and conditions stated in this Agreement, in a closing (the
"Closing") as herein described, certain of the Company's convertible
notes as listed and described in Recital B(i) immediately below, and
certain warrants as listed and described in Recital B(ii) below.
(i) At the Closing (the "Closing"), the Company's Series
1999-A Eight Percent (8%) Convertible Notes, the form of which is
attached hereto as Exhibit A (the "Notes"), which may be converted
into common stock of the Company, $.001 par value per share ("Common
Stock"), upon the terms and conditions hereof and upon the terms and
conditions of the Notes. The purchase price for the Notes sold
pursuant to this Agreement shall be as stated in Section 1(a) below.
The total aggregate principal amount of Notes to be issued and sold
by the Company at the Closing is Five Hundred Thirty-Eight Thousand
Four Hundred Sixty-Two Dollars ($538,462), all in accordance with
the terms of this Agreement and of the Notes.
(ii) At the Closing, as additional consideration for Buyer's
purchase of the Notes a warrant (the "Warrants") to purchase 175,000
shares of Common Stock at a purchase price of $.50 per share, which
Warrants must be exercised if at all, on or before December 31,
2000. The Warrants shall be substantially in the form attached
hereto as Exhibit B.
The Common Stock into which the Notes may (in accordance with their
terms) be convertible shall be collectively referred to herein as
the "Conversion Shares." Certain shares of Common Stock may (at the
Company's option as described in the Notes) be issued to the Buyer
in payment of interest (the "Interest Shares"). The Common Stock
received upon exercise of the Warrants shall be referred to as the
"Warrant Shares." The Notes, the Conversion Shares, the
<PAGE>
Interest Shares (if any), the Warrants and the Warrant Shares may be
collectively referred to herein as the "Securities."
C. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement (the "Registration Rights Agreement")
substantially in the form of Exhibit C attached hereto pursuant to
which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the
parties, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
a. Purchase. The Buyer hereby agrees to purchase from the
Company, and the Company agrees to sell to the Buyer, $538,462.00 in
aggregate principal amount of Notes at the Closing. The purchase
price (the "Purchase Price") for the Notes purchased at the Closing
shall be $350,000.00.
b. The Closing. The date of the Closing (the "Closing
Date") shall be September 21, 1999. The Purchase Price for the Notes
being purchased at the Closing shall be delivered to the Escrow
Agent (as defined in the Escrow Agreement substantially in the form
of Exhibit D attached hereto (the "Escrow Agreement")) on behalf of
the Company on or before the Closing Date. On or before the Closing
Date, the Company shall deliver the original Notes and Warrants
being purchased at the Closing, duly issued, authorized and executed
by the authorized officers on behalf of the Company, to the Escrow
Agent (as defined in the Escrow Agreement) on behalf of the Buyer.
c. Form of Payment. The Buyer shall pay the Purchase Price
for the Securities purchased at the Closing by wire transfer of
immediately available funds in United States Dollars, to be
deposited into the Escrow Account as defined in the Escrow
Agreement, against delivery to the Escrow Agent of duly executed
Notes and Warrants being purchased by the Buyer hereunder at such
Closing. The Escrow Agent shall be responsible for delivery of the
Purchase Price to the Company and the Notes and Warrants to the
Buyer in accordance with the terms of the Escrow Agreement and with
the instructions of the said parties.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer understands, agrees with, and represents and warrants to
the Company with respect to its purchase hereunder, that:
<PAGE>
a. Investment Purposes; Compliance With 1933 Act. The Buyer
is purchasing the Securities for its own account for investment only
and not with a view towards, or in connection with, the public sale
or distribution thereof, except pursuant to sales registered under
or exempt from the 1933 Act. The Buyer is not purchasing the
Securities for the purpose of covering short sale positions in the
Common Stock established on or prior to the Closing Date. The Buyer
agrees to offer, sell or otherwise transfer the Securities only (i)
in accordance with the terms of this Agreement, the Notes and the
Warrants, as applicable, and (ii) pursuant to registration under
the 1933 Act or to an exemption from registration under the 1933 Act
and any other applicable securities laws. The Buyer does not by its
representations contained in this Section 2(a) agree to hold the
Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time pursuant to a
registration statement or in accordance with an exemption from
registration under the 1933 Act, in all cases in accordance with
applicable state and federal securities laws. The Buyer understands
that it shall be a condition to the issuance of the Conversion
Shares and the Interest Shares (if any) that the Conversion Shares
and the Interest Shares (if any) be and are subject to the
representations set forth in this Section 2(a).
b. Accredited Investor Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501 (a) of Regulation D.
The Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and
risks of an investment made pursuant to this Agreement. The Buyer
is aware that it may be required to bear the economic risk of an
investment made pursuant to this Agreement for an indefinite period
of time, and is able to bear such risk for an indefinite period.
c. Reliance on Exemptions. The Buyer understands the
Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of the applicable
United States federal and state securities laws and that the Company
is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, acknowledgments,
understandings, agreements and covenants of the Buyer set forth
herein in order to determine the availability of such exemptions and
the eligibility of the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer
and sale of the Securities that have been requested by the Buyer.
The Buyer and its advisors, if any, have been afforded the
opportunity to ask all such questions of the Company as they have in
their discretion deemed advisable. The Buyer understands that its
investment in the Securities involves a high degree of risk. The
Buyer has sought such accounting, legal and tax advice as it has
considered necessary to an informed investment decision with respect
to the investment made pursuant to this Agreement.
e. No Government Review. The Buyer understands that no
United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the
investment in the Securities, nor have such authorities passed upon
or endorsed the merits of the offering of the Securities.
<PAGE>
f. Transfer or Resale. The Buyer understands that: (i)
except as provided in the Registration Rights Agreement, the
Securities have not been and are not being registered under the 1933
Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless either (a) subsequently
registered thereunder or (b) the Buyer shall have delivered to the
Company an opinion by counsel reasonably satisfactory to the
Company, in form, scope and substance reasonably satisfactory to the
Company, to the effect that the securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, (ii) any sale of such securities
made in reliance on Rule 144 (as hereafter defined) may be made only
in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of such securities under circumstances in
which the seller (or the person though whom the sale is made) may be
deemed to be an underwriter (as that term is defined in the 1933
Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder, and (iii)
neither the Company nor any other person is under any obligation to
register such securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to this Agreement or
the Registration Rights Agreement).
g. Legend. The Buyer understands that the Notes, the
Warrants, and until such time as the Conversion Shares, the Warrant
Shares and the Interest Shares (if any) (collectively, the
"Registrable Securities"), have been registered under the 1933 Act
as contemplated by the Registration Rights Agreement or otherwise
may be sold by the Buyer pursuant to Rule 144 (as amended, or any
applicable rule which operates to replace said Rule) promulgated
under the 1933 Act ("Rule 144"), the stock certificates representing
the Registrable Securities will bear a restrictive legend (the
"Legend") in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
SECURITIES LAWS (COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE LAWS, OR (II) AN
OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE
EXCEPTION TO OR EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
LAWS.
The Legend shall be removed and the Company will issue certificates
without the Legend to the holder of the applicable Notes or any
Registrable Securities upon which the Legend is stamped, in
accordance with Section 5(b).
h. Authorization; Enforcement. This Agreement, the
Registration Rights Agreement and the Escrow Agreement have been
duly and validly authorized, executed and delivered by the Buyer and
are each and collectively valid and binding agreements of the Buyer
enforceable in
<PAGE>
accordance with their terms, subject as to
enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company understands, agrees with, and represents and warrants to
the Buyer that:
a. Organization and Qualification. The Company and its
subsidiaries are corporations duly organized and existing in good
standing under the laws of the respective jurisdictions in which
they are incorporated, except as would not have a Material Adverse
Effect (as defined below), and have the requisite corporate power to
own their properties and to carry on their business as now being
conducted. Each of the Company and its subsidiary is duly qualified
as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary and where the failure so to
qualify would have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the operations,
properties or financial condition of the Company and its
subsidiaries taken as a whole. The Common Stock is eligible to trade
and is listed for trading on the OTC Bulletin Board Market. The
Company has received no notice, either written or oral, with respect
to the continued eligibility of the Common Stock for such listing,
and the Company has maintained all requirements for the continuation
of such listing, and the Company does not reasonably anticipate that
the Common Stock will be delisted from the OTC Bulletin Board Market
for the foreseeable future; except that, with respect to the
representations contained in this sentence, the NASD has imposed a
requirement that every company that trades on the OTC Bulletin Board
Market become a reporting issuer under the 1934 Act and have all
comments on filings cleared within certain time limits imposed by
the NASD. The Company must become a reporting issuer on or before
January 1, 1999. The Company shall use its best efforts to meet such
deadline, and shall use its best efforts to continue to have its
stock eligible to trade on the OTC Bulletin Board Market or a
comparable national securities market or exchange. The Company has
complied with all requirements of the National Association of
Securities Dealers and the OTC Bulletin Board Market with respect to
the issuance of the Securities.
b. Authorization; Enforcement. (i) The Company has the
requisite corporate power and authority to enter into and perform
this Agreement, the Registration Rights Agreement and the Escrow
Agreement, to issue and sell the Notes and the Registrable
Securities in accordance with the terms hereof, and to perform its
obligations under the Notes in accordance with the requirements of
the same, (ii) the execution, delivery and performance of this
Agreement, the Notes, the Warrants, the Registration Rights
Agreement and the Escrow Agreement by the Company and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by the Company's Board of
Directors and no further consent or authorization of the Company,
its Board of Directors, or its stockholders is required, (iii) this
Agreement, the Registration Rights Agreement, the Escrow Agreement
and, on the Closing Date, the Notes and Warrants sold at the
Closing, have been duly and validly authorized, executed and
delivered by the Company, and (iv) this Agreement, the Notes (when
issued), the Warrants
<PAGE>
(when issued), the Registration Rights
Agreement and the Escrow Agreement constitute the valid and binding
obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to,
or affecting, generally, the enforcement of creditors' rights and
remedies or by other equitable principles of general application.
The Company (and its legal counsel) has examined this Agreement and
is satisfied in its sole discretion that this Agreement and the
accompanying Exhibits, Schedules and the Addenda, if any, are in
accordance with Regulation D and the 1933 Act and are effective to
accomplish the purposes set forth herein and therein.
c. Capitalization. As of August 1, 1999, the authorized
capital stock of the Company consists of (I) 100,000,000 shares of
Common Stock of which 71,302,677 shares were issued and outstanding,
and (II) 20,000,000 shares of Preferred Stock of which 499,333
shares were issued and outstanding. All of such outstanding shares
have been validly issued and are fully paid and nonassessable. No
shares of Common Stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances. Except as disclosed in
Schedule 3(c) (attached if applicable), as of the effective date of
this Agreement, (i) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities, and (iii) there are no
agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of its or
their securities under the 1933 Act (except as provided herein and
in the Registration Rights Agreement). If requested by the Buyer,
the Company has furnished to the Buyer, and the Buyer acknowledges
receipt of same by its signature hereafter, true and correct copies
of the Company's Certificate of Incorporation, as amended, as in
effect on the date hereof ("Certificate of Incorporation"), and the
Company's Bylaws, as in effect on the date hereof (the "Bylaws").
d. Issuance of Securities. The Registrable Securities are
all duly authorized and reserved for issuance, and in all cases upon
issuance shall be validly issued, fully paid and non-assessable,
free from all taxes, liens and charges with respect to the issue
thereof, and will not be subject to preemptive rights or other
similar rights of stockholders of the Company.
e. Acknowledgment Regarding Buyer's Purchase of the
Securities. The Company acknowledges and agrees that the Buyer is
not acting as financial advisor to or fiduciary of the Company (or
in any similar capacity with respect to this Agreement or the
transactions contemplated hereby), that this Agreement and the
transactions contemplated hereby, and the relationship between the
Buyer and the Company, are and will be considered "arms-length"
notwithstanding any other or prior agreements or nexus between the
Buyer and the Company, whether or not disclosed, and that any
statement made by the Buyer, or any of its representatives or
agents, in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation, is merely
incidental to the Buyer's purchase of the Securities and has not
been relied upon in any way by the Company, its officers or
directors. The Company
<PAGE>
further represents to the Buyer that the
Company's decision to enter into this Agreement and the transactions
contemplated hereby have been based solely upon an independent
evaluation by the Company, its officers and directors.
f. No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances which
would prevent the parties hereto from consummating the transactions
contemplated hereby pursuant to an exemption from registration under
the 1933 Act and specifically in accordance with the provisions of
Regulation D. The transactions contemplated hereby are exempt from
the registration requirements of the 1933 Act, assuming the accuracy
of the representations and warranties contained herein of the Buyer.
g. No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby will not (i) result in a
violation of the Certificate of Incorporation or Bylaws or (ii)
conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the
Company or any of its subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations)
applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound
or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse
Effect). Except as set forth in Schedule 3(g) (attached if
applicable), neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or other
organizational documents, and neither the Company nor any of
its/subsidiaries is in default (and no event has occurred which,
with notice or lapse of time or both, would put the Company or any
of its subsidiaries in default) under, nor has there occurred any
event giving others (with notice or lapse of time or both) any
rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any
of its subsidiaries is a party, except for possible defaults or
rights as would not, in the aggregate or individually, have a
Material Adverse Effect. The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted so
long as the Buyer owns any of the Securities, in violation of any
law, ordinance or regulation of any governmental entity, except for
possible violations which neither singly or in the aggregate would
have a Material Adverse Effect. Except as specifically contemplated
by this Agreement and as required under the 1933 Act and any
applicable state securities laws (any of which exceptions are set
forth in Schedule 3(g)), the Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it
to execute, deliver or perform any of its obligations under this
Agreement, the Notes, the Warrants, the Registration Rights
Agreement or the Escrow Agreement in accordance with the terms
hereof and thereof, or to perform its obligations with respect to
the Notes exactly as described in the Notes (once issued), and with
respect to the Warrants exactly as described in the Warrants (once
issued).
<PAGE>
h. Financial Statements. The Company has
delivered to the Buyer as requested by the Buyer (or the Buyer has
otherwise obtained) true and complete copies of the Company's
audited financial statements through December 31, 1998 and unaudited
financial statements through June 30, 1999. As of their respective
dates, the financial statements of the Company complied as to form
in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto.
Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of
the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the
Company to the Buyer (including the information referred to in
Section 2(d) of this Agreement) contains any untrue statement of a
material fact or omits to state any material fact necessary in order
to make the statements therein, in the light of the circumstance
under which they are or were made, not misleading. Except as set
forth in the financial statements of the Company, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to the date
of such financial statements and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be
reflected in such financial statements, in each case of clause (i)
and (ii) next above which, individually or in the aggregate, are not
material to the financial condition, business, operations,
properties, operating results or prospects of the Company. The said
financial statements contain a complete and accurate list of all
material undischarged written and oral contracts, agreements, leases
or other instruments to which the Company or any subsidiary is a
party or by which the Company or any subsidiary is subject (each a
"Contract"). None of the Company, its subsidiaries or, to the best
of the Company's knowledge, any of the other parties thereto, is in
breach or violation of any Contract, which breach or violation would
have a Material Adverse Effect. No event, occurrence or condition
exists which, with the lapse of time, the giving of notice, or both,
or the happening of any further event or condition, would become a
default by the Company or its subsidiaries thereunder which would
have a Material Adverse Effect.
i. Absence of Certain Changes. Except as disclosed in
Schedule 3(i) (attached if applicable), since at least June 30,
1999, there has been no material adverse change and no material
adverse development in the business, properties, operation,
financial condition, results of operations or prospects of the
Company. The Company has not taken any steps, and does not
currently have any reasonable expectation of taking any steps, to
seek protection pursuant to any bankruptcy law nor does the Company
have any knowledge that its creditors intend to initiate involuntary
bankruptcy proceedings. The Company shall, at least until Buyer no
longer holds any of the Securities, maintain its corporate existence
in good standing and shall pay all taxes when due except for taxes
it reasonably disputes.
j. Absence of Litigation. Except as set forth in Schedule
3(j) (attached if applicable), there is no action, suit, proceeding,
inquiry or investigation before or by any court,
<PAGE>
public board orbody pending or, to the knowledge of the Company,
threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or
which would adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations
under, this Agreement or any of the documents contemplated herein.
k. Foreign Corrupt Practices. Neither the Company nor any
of its subsidiaries, nor any officer, director or other person
acting on behalf of the Company or any subsidiary has, in the course
of his actions for or on behalf of the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity, made any direct or
indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act
of 1977, as amended; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
l. Brokers; No General Solicitation. The Company has taken
no action that would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments relating to
this Agreement and the transactions contemplated hereby. The
Company and the Buyer both acknowledge that no broker or finder was
involved with respect to the transactions contemplated hereby, other
than Bridgewater Capital Corporation. Neither the Company nor any
distributor participating on the Company's behalf in the
transactions contemplated hereby nor any person acting for the
Company, or any such distributor, has conducted any "general
solicitation," as described in Rule 502(c) under Regulation D, with
respect to the Securities being offered hereby.
m. Acknowledgment of Dilution. The number of Conversion
Shares issuable upon conversion of the Notes may increase
substantially in certain circumstances, including the circumstance
wherein the trading price of the Common Stock declines. The
Company's executive officers and directors have studied and fully
understand the nature of the securities being sold hereunder and
recognize they have a potential dilutive effect. The board of
directors of the Company has concluded in its good faith business
judgment that such issuance is in the best interests of the Company.
The Company acknowledges that its obligation to issue Conversion
Shares upon conversion of the Notes is binding upon it and
enforceable regardless of the dilution that such issuance may have
on the ownership interests of other stockholders.
n. Eligibility to File Registration Statement. The Company
is currently eligible to file a registration statement with the SEC
either on Form S-1 or Form S-B2 under the 1933 Act.
o. Non-Disclosure of Non-Public Information.
(a) The Company shall in no event disclose non-public information to the
Buyer, advisors to or representatives of the Buyer unless prior to
such disclosure of information the Company marks such information as
"non-public information confidential" and provides the Buyer, such
advisors and representatives with the opportunity to accept or
refuse to accept such non-public information for review. The Company
may, as a condition to disclosing any non-public information
hereunder, require the
<PAGE>
Buyer, its advisors and representatives to
enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Buyer.
(b) Nothing herein shall require the Company to disclose
non-public information to the Buyer, its advisors or
representatives, and the Company represents that it does not
disseminate non-public information to investors who purchase stock
in the Company in a public offering, to money managers or to
securities analysts; provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove
provided, immediately notify the advisors and representatives of the
Buyer and, if any, underwriters, of any event or the existence of
any circumstance (without any obligation to disclose the specific
event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company
specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus
included in the registration statement to be filed pursuant to the
Registration Rights Agreement, would cause such prospectus to
include a material misstatement or to omit a material fact required
to be stated therein in order to make the statements therein, in
light of the circumstances in which they were made, not misleading.
Nothing herein shall be construed to mean that such persons or
entities other than the Buyer (without the written consent of the
Buyer prior to disclosure of such information) may not obtain
non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall
prevent any such persons or entities from notifying the Company of
their opinion that, based upon such due diligence by such persons or
entities, that the registration statement contains an untrue
statement of a material fact or omits a material fact required to be
stated in such registration statement or necessary to make the
statements contained therein, in light of the circumstances in which
they were made, not misleading.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts
timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
b. Securities Laws. The Company agrees to timely file a
Form D (or equivalent form required by applicable state law) with
respect to the Securities if and as required under Regulation D and
applicable state securities laws and to provide a copy thereof to
the Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as is necessary to sell
the Securities being sold to the Buyer on each such date under
applicable securities laws of the United States, and shall if
specifically so requested provide evidence of any such action so
taken to the Buyer on or prior to the Closing Date.
c. Reporting Status; Covenant to Become a "Reporting
Issuer". As of the date of this Agreement, the Company is not
subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). As a
material inducement to the Buyer to enter into this Agreement and to
complete the transactions contemplated hereby, the Company agrees,
on or before the date which is thirty (30) days following the date
of this Agreement, to file with the SEC all reports and other
documents and things necessary to become
<PAGE>
a "reporting issuer" subject to the reporting requirements of Section
13 or 15(d) of the 1934 Act (the "Reporting Requirements"). The Company
will use its best efforts to become a reporting issuer within sixty (60)
days after the date of this Agreement. The Company may utilize any means
permitted by the SEC to become subject to the Reporting
Requirements, including without limitation filing Form 10 or Form
10-SB, or Form SB-2 with the SEC. Thereafter, and for so long as the
Buyer beneficially owns any of the Securities, the Company shall
file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations hereunder would permit such
termination. As a material inducement for the Buyer to execute this
Agreement and to effect the transactions contemplated herein, the
Company agrees that, if it has not become a reporting issuer subject
to the Reporting Requirements within one hundred twenty (120) days
after the date hereof (the "Reporting Deadline"), then the Company
will make payments to the Buyer, as liquidated damages and in such
amounts and at such times as shall be determined pursuant to this
Section 2(b) as partial relief for the damage to the Buyer by reason
of any delay in or reduction of its ability to resell the Securities
(which remedy shall be exclusive of any other remedies available at
law or in equity), an amount to be determined as follows. The
Company shall pay to the Buyer an amount equal to the purchase price
for the Notes purchased at the Closing (the "Aggregate Note Price")
multiplied by two hundredths (.02) times the sum of the number of
months (prorated for partial months) beginning the day after the
Reporting Deadline and ending on the date the Company becomes a
reporting issuer subject to the Reporting Requirements, provided,
however, that there shall be excluded from such period any delays
which are solely attributable to the delays or improper action of
the Buyer.
d. Use of Proceeds. The Company will use the proceeds from
the sale of the Securities to purchase 75 internet kiosks
($250,000), undertake advertising with Doubleclick.com for Shop
GoOnline ($50,000) and for software development for Auctionomics,
Inc. ($50,000).
e. Financial Information. After becoming a reporting issuer
as described in Section 4(c) above, until such time as the Buyer no
longer beneficially owns Notes and Warrants, the Company agrees to
send the following reports to the Buyer: (i) after filing with the
SEC, a copy of each of its Annual Reports, its quarterly Reports,
and any reports filed on Form 8-K; and (ii) as soon as practicable
after release thereof, copies of all press releases issued by the
Company or any of its subsidiaries.
f. Reservation of Shares. The Company shall at all times
have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the
issuance of all of the Conversion Shares, the Warrant Shares and the
Interest Shares (if any). Prior to complete conversion of the Notes
and exercise of the Warrants, the Company shall not reduce the
number of shares of Common Stock reserved for issuance hereunder
without the written consent of the Buyer except for a reduction
proportionate to a reverse stock split effected for a business
purpose other than affecting the requirements of this Section, which
reverse stock split affects all shares of Common Stock equally.
<PAGE>
g. Listing. Upon the Closing, the Company shall promptly
secure the listing of the Registrable Securities underlying the
Notes and the Warrants upon each national securities exchange or
automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and
shall maintain, so long as any other shares of Common Stock shall be
so listed, such listing of shares of Registrable Securities from
time to time issued under the terms of this Agreement and the
Registration Rights Agreement. The Company shall at all times comply
in all respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the National Association
of Securities Dealers and the OTC Bulletin Board Market (or such
other national securities exchange or market on which the Common
Stock may then be listed, as applicable).
h. Prospectus Delivery Requirement. The Buyer understands
that the 1933 Act requires delivery of a prospectus relating to the
Common Stock in connection with any sale thereof pursuant to a
registration statement under the 1933 Act covering any resale by the
Buyer of the Common Stock being sold, and the Buyer shall comply
with any applicable prospectus delivery requirements of the 1933 Act
in connection with any such sale.
i. Intentional Acts or Omissions. Neither party shall
intentionally perform any act which if performed, or omit to perform
any act which if omitted to be performed, would prevent or excuse
the performance of this Agreement or any of the transactions
contemplated hereby.
j. No Shorting. As a material inducement for the Company
to enter into this Agreement, the Buyer represents that it has not
as of the date hereof, and covenants on behalf of itself and its
affiliates that neither Buyer nor any affiliate of Buyer will at any
time in which the Buyer or any affiliate of the Buyer beneficially
owns any of the Securities, engage in any short sales of, or hedging
or arbitrage transactions with respect to, the Common Stock, or sell
"put" options or similar instruments with respect to the Common
Stock. The Company acknowledges that a sale of Conversion Shares (or
Warrant Shares) on the date a conversion of the Notes (or exercise
notice for the Warrants) is made, even if such sale is made prior to
delivery of the notice of conversion with respect to such Conversion
Shares (or exercise notice with respect to such Warrant Shares), is
not a "short sale" for purposes of this Section 4(j).
k. Expenses. The Company agrees to pay to or at the
direction of the Buyer the sum of $2,500 at the Closing as
reimbursement for the attorney's fees and expenses of the Buyer
incurred by it in connection with the transactions contemplated by
this Agreement.
1. Conversion Restrictions. Notwithstanding
anything to the contrary set forth herein or in the Notes, in no
event shall any holder of the Notes be entitled to convert Notes in
excess of such portion of the principal of the Notes that, upon
giving effect to such conversion, would cause the aggregate number
of shares of Common Stock beneficially owned by the holder and its
affiliates to exceed 9.99% of the outstanding shares of the Common
Stock following such conversion. For purposes of the foregoing
proviso, the aggregate number of shares of Common Stock beneficially
owned by the holder and its affiliates shall include the number of
shares of Common Stock issuable upon conversion of the Notes with
respect to which the determination of such proviso is being made..
Except as set forth in the preceding sentence, for purposes of this
<PAGE>
Section 2(a), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended. The limitations imposed by this Section 4(l) on conversion
of Notes shall no longer apply, and the holder of the Notes may
convert all or any portion of the Notes, irrespective of the
resulting beneficial ownership of the Company's Common Stock, should
any of the following events occur: (I) The Company shall either:
(i) become insolvent; (ii) admit in writing its inability to pay its
debts generally or as they become due; (iii) make an assignment for
the benefit of creditors or commence proceedings for its
dissolution; or (iv) apply for, or consent to the appointment of, a
trustee, liquidator, or receiver for its or for a substantial part
of its property or business; or (II) A trustee, liquidator or
receiver shall be appointed for the Company or for a substantial
part of its property or business without the Company's consent and
such appointment is not discharged within sixty (60) days after such
appointment; or (III) Any governmental agency or any court of
competent jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any substantial
portion of the properties or assets of the Company and shall not be
dismissed within sixty (60) days thereafter; or (IV) Any money
judgment, writ or Note of attachment, or similar process in excess
of Two Hundred Thousand United States Dollars (US$350,000.00) in the
aggregate shall be entered or filed against the Company or any of
its properties or assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of fifteen (15) days or in any
event later than five (5) days prior to the date of any proposed
sale thereunder; or (V) Bankruptcy, reorganization, insolvency or
liquidation proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted against the
Company, shall not be dismissed within sixty days after such
institution or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the
material allegations of, or default in answering a petition filed
in, any such proceeding
m. Restriction on Below Market Issuance of
Securities. Until the date which is nine (9) months from the
Closing Date, the Company shall not issue or agree to issue {other
than (i) to the Buyer pursuant to the transactions contemplated
herein, (ii) pursuant to any employee stock option plan or employee
stock purchase plan of the Company established during the term of
this restriction for a legitimate business purpose and not to avoid
the restrictions imposed in this Section 4(m), (iii) pursuant to any
existing security, option, warrant, scrip, call or commitment or
right in each case as disclosed on Schedule 3(c) hereof, or (iv)
with the consent of the Buyer, not to be unreasonably withheld} any
equity securities of the Company (or any security convertible into
or exercisable or exchangeable, directly or indirectly, for equity
securities of the Company) or debt securities of the Company if such
securities are issued at a price (or provide for a conversion,
exercise or exchange price) which may be (i) less than the lesser of
(a) the market price on the date of issuance or (b) $.30 per share
(in the case of Common Stock) or (ii) $.30 per share on the date of
conversion, exercise or exchange (in the case of securities
convertible into or exercisable or exchangeable, directly or
indirectly, for Common Stock).
5. LEGEND AND TRANSFER INSTRUCTIONS.
a. Transfer Agent Instructions. The Company shall instruct
its transfer agent to issue certificates, registered in the name of
the Buyer or its nominee, for the Conversion Shares,
<PAGE>
the Warrant Shares and the Interest Shares (if any) in accordance
with the terms of the applicable Notes and Warrants and in such
amounts as specified from time to time by the Buyer to the Company, upon
conversion of the Notes or exercise of the Warrants (as applicable).
All such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement only to the extent required by
applicable law and as specified in this Agreement and the Exhibits
and Addenda hereto. The Company warrants that no instruction other
than such instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof in the
case of the Conversion Shares, the Warrant Shares and the Interest
Shares (if any) prior to the registration of same under the 1933
Act, will be given by the Company to its transfer agent and that the
Conversion Shares, the Warrant Shares and the Interest Shares (if
any) shall otherwise be freely transferable on the books and records
of the Company as and to the extent permitted by applicable law and
provided by this Agreement, the Warrants and the Registration Rights
Agreement. Nothing in this Section shall affect in any way the
Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Conversion Shares, the Warrant
Shares and/or the Interest Shares (if any). If the Buyer (x)
provides the Company with an opinion of counsel reasonably
satisfactory to Company that registration by the Buyer of the Notes,
the Warrants, the Warrant Shares, the Conversion Shares and/or the
Interest Shares (if any) is not required under the 1933 Act, or (y)
transfers Securities to an affiliate which is an accredited investor
(in accordance with the provisions of this Agreement) or in
compliance with Rule 144, then in either instance the Company shall
permit the said transfer, and if applicable promptly (and in all
events within two (2) trading days) instruct its transfer agent to
issue one or more certificates in such name and in such
denominations as specified by the Buyer.
b. Removal of Legends. The Legend shall be removed and the
Company shall issue a certificate without such Legend to the holder
of any Security upon which it is stamped, and a certificate for a
security shall be originally issued without the Legend, if, unless
otherwise required by state securities laws, (x) the sale of such
Security is registered under the 1933 Act, or (y) such holder
provides the Company with an opinion by counsel reasonably
satisfactory to the Company, that is in form, substance and scope
reasonably satisfactory to the Company, to the effect that a public
sale or transfer of such Security may be made without registration
under the 1933 Act or (z) such holder provides the Company with
assurances reasonably satisfactory to the Company and its counsel,
that such Security can be sold pursuant to Rule 144. The Buyer
agrees that its sale of all Securities, including those represented
by a certificate(s) from which the Legend has been removed, or which
were originally issued without the Legend, shall be made only
pursuant to an effective registration statement (and to deliver a
prospectus in connection with such sale) or in compliance with an
exemption from the registration requirements of the 1933 Act. In
the event the Legend is removed from any Security or any Security is
issued without the Legend and thereafter the effectiveness of a
registration statement covering the sales of such Security is
suspended or the Company determines that a supplement or amendment
thereto is required by applicable securities laws, then upon
reasonable advance notice to the holder of such Security, the
Company shall be entitled to require that the Legend be placed upon
any such Security which cannot then be sold pursuant to an
<PAGE>
effective registration statement or Rule 144 or with respect to
which the opinion referred to in clause (y) next above has not been
rendered, which Legend shall be removed when such Security may be sold
pursuant to an effective registration statement or Rule 144 (or such
holder provides the opinion with respect thereto described in clause
(y) next above.
c. Conversion of Notes. The Buyer shall have the right to
convert the Notes sold hereunder by delivering via facsimile an
executed and completed Notice of Conversion (as defined in the
Notes) to the Company and delivering within two (2) business days
thereafter the original Notice of Conversion and (once it has been
fully converted) the original Note being converted by express
courier to the Company. Each date on which a Notice of Conversion is
telecopied to the Company in accordance with the provisions hereof
shall be deemed a "Conversion Date." The Company will transmit the
certificates representing the shares of Common Stock issuable upon
conversion of any Notes (along with a replacement Note representing
the amount of principal of said Note not so converted, if
applicable) to the Buyer via express courier, within three (3)
business days after the relevant Conversion Date (with respect to
each conversion, the "Deadline"). Time is of the essence with
respect to the requirements of the immediately preceding sentence.
d. Injunctive Relief for Breach. The Company acknowledges
that a breach of its obligations under Sections 5(a), 5(b) and 5(c)
above will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transactions contemplated hereby.
Accordingly the Company agrees that the remedy at law for a breach
of its obligations under such Sections would be inadequate and
agrees, in the event of a breach or threatened breach by the Company
of the provisions of such Sections, the Buyer shall be entitled, in
addition to all other remedies at law or in equity, to an injunction
restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without
any bond or other security being required.
e. Liquidated Damages for Non-Delivery of
Certificates. In addition to the provisions of Section 5(d) above,
the Company understands and agrees that a delay in the issuance of
the Certificates beyond the Deadline will result in substantial
economic loss and other damages to the Buyer. As partial
compensation to the Buyer for such loss, the Company agrees to pay
liquidated damages (and which the Company acknowledges is not a
penalty) to the Buyer for issuance and delivery of the Certificates
after the Deadline, in accordance with the following schedule (where
"No. Business Days Late" is defined as the number of business days
beyond five (5) business days from the date of delivery by the Buyer
to the Company of a facsimile Notice of Conversion (or, if later,
from the date on which all other necessary documentation duly
executed and in proper form required for conversion of Notes as
described in this Agreement, including the original Notice of
Conversion, all in accordance with this Agreement only if such
necessary documentation has not been delivered to the Company within
the two (2) business day period after the facsimile delivery to the
Company of the Notice of Conversion required in this Agreement)):
No. Business Days Late Liquidated Damages
(in US$)
1 $300
2 $400
<PAGE>
3 $500
4 $600
5 $700
6 $800
7 $900
8 $1,000
9 $1,000
10 $1,500
11+ $1,500 + $500 for
each Business Day Late
beyond 11 days
The Company shall pay the Buyer any liquidated damages
incurred as called for under this Section 5(e) by certified or
cashier's check upon the earlier of (i) issuance of the Certificates
to the Buyer or (ii) each monthly anniversary of the receipt by the
Company of the Buyer's Notice of Conversion. Nothing herein shall
limit the Buyer's right to pursue actual damages for the Company's
failure to issue and deliver the Certificates to the Buyer in
accordance with the terms of this Agreement or for breach by the
Company of this Agreement.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to sell Notes at the Closing
is subject to the satisfaction, on or before the Closing Date, of
each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at
any time in its sole discretion:
a. The parties shall have executed this Agreement, the
Registration Rights Agreement and the Escrow Agreement, and the
parties shall have delivered the respective documents or signature
pages thereof (via facsimile or otherwise as permitted in the Escrow
Agreement) to the Escrow Agent.
b. The Buyer shall have delivered to the Escrow Agent on
behalf of the Company the Purchase Price for the Notes and Warrants
purchased at the Closing, by wire transfer of immediately available
funds pursuant to the wiring instructions provided by the Escrow
Agent.
c. The representations and warranties of the Buyer shall be
true and correct in all material respects as of the date made and as
of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction or any self regulatory organization having authority
over the matters
<PAGE>
contemplated hereby which restricts or prohibits
the consummation of any of the transactions contemplated herein.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer to purchase Notes and Warrants is
subject to the satisfaction, on or before the Closing Date, of each
of the following conditions, provided that these conditions are for
the sole benefit of the Buyer and may be waived by the Buyer at any
time in its sole discretion:
a. The parties shall have executed this Agreement, the
Registration Rights Agreement and the Escrow Agreement, the parties
shall have delivered the respective documents or signature pages
thereof (via facsimile or otherwise as permitted in the Escrow
Agreement) to the Escrow Agent on behalf of each other.
b. The representations and warranties of the Company shall
be true and correct in all material respects as of the date made and
as of Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyer may
require a certificate, executed by the Chief Executive Officer of
the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by the
Buyer.
c. With respect to the Closing, the Company shall have
issued and have duly executed by the authorized officers of the
Company, and delivered to the Escrow Agent on behalf of the Buyer,
the Note and Warrant being sold at the Closing (via facsimile or
otherwise as required by the Escrow Agreement, provided that any
permitted facsimile of such documents shall be followed with
physical delivery to the Escrow Agent of the original instrument or
security within one (1) business day after facsimile of same to the
Escrow Agent).
d. The Common Stock shall be authorized for quotation on the
OTC Bulletin Board Market (or another national securities exchange
or market) and trading in the Common Stock on such market shall not
have been suspended by the SEC or other relevant regulatory agency.
e. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction or any self regulatory organization having authority
over the matters contemplated hereby which restricts or prohibits
the consummation of any of the transactions contemplated herein.
f. The Escrow Agent shall have received on behalf of the
Buyer the opinion of Company counsel, dated as of the Closing Date,
substantially in the form attached hereto as Exhibit E.
<PAGE>
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws. In the event
of any litigation regarding the interpretation or application of
this Agreement, the parties irrevocably consent to jurisdiction in
any of the state or federal courts located in the State of Delaware
and waive their rights to object to venue in any such court,
regardless of the convenience or inconvenience thereof to any party.
Service of process in any civil action relating to or arising out
of this Agreement (including also all Exhibits or Addenda hereto) or
the transaction(s) contemplated herein may be accomplished in any
manner provided by law. The parties hereto agree that a final,
non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on
such judgment or in any other lawful manner.
b. Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts
have been signed by each party and signature pages from such
counterparts have been delivered to the Escrow Agent on behalf of
the other party. In the event any signature page is delivered by
facsimile transmission (which the parties agree is an acceptable
form of delivery), the party using such means of delivery shall
cause three (3) additional originally executed signature pages to be
physically delivered to the Escrow Agent on behalf of the other
party within two (2) business days of the execution and delivery
hereof.
c. Headings; Gender, Etc. The headings of this Agreement
are for convenience of reference and shall not form a part of, or
affect the interpretation of this Agreement. As used herein, the
masculine shall refer to the feminine and neuter, the feminine to
the masculine and neuter, and the neuter to the masculine and
feminine, as the context may require. As used herein, unless the
context clearly requires otherwise, the words "herein," "hereunder"
and "hereby," shall refer to this entire Agreement and not only to
the Section or paragraph in which such word appears. If any date
specified herein falls upon a Saturday, Sunday or public or legal
holidays, the date shall be construed to mean the next business day
following such Saturday, Sunday or public or legal holiday. For
purposes of this Agreement, a "business day" is any day other than a
Saturday, Sunday or public or legal holiday.
d. Severability. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other
jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of
the parties with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither the
Company nor the Buyer makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.
<PAGE>
f. Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by U. S. Mail or
delivered personally or by courier or via facsimile (if via
facsimile, to be followed within three (3) business days by an
original of the notice document via U.S. Mail or courier) and shall
be effective five (5) days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon
receipt, if delivered personally or by courier or by facsimile, in
each case properly addressed to the party to receive the same. The
addresses for such communications shall be:
If to the Company:
Go Online Networks Corporation
5681 Beach Blvd., Suite 101
Buena Park, CA 90621
Telephone: 714-736-0988
Facsimile: 714-736-9488
Attention: Mr. Joseph Naughton, President & CEO
With a copy to:
Cutler Law Group
610 Newport Center Drive, Suite 800
Newport Beach, California 92660
Telephone: 949.719.1977
Facsimile: 949.719.1988
Attention: Mr. M. Richard Cutler, Esq.
If to the Buyer, at the address on the signature page of this
Agreement. Each party shall provide written notice to the other
party of any change in address.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective
successors and assigns. Neither the Company nor the Buyer shall
assign this Agreement or any rights or obligations hereunder without
the prior written consent of the other (which consent shall not be
unreasonably withheld), and in any event any assignee of the Buyer
shall be an accredited investor (as defined in Regulation D), in the
written opinion of counsel who is reasonably satisfactory to the
Company and in form, substance and scope reasonably satisfactory to
the Company. Notwithstanding the foregoing, if applicable, any of
the entities constituting the Buyer (if greater than one (1) entity)
may assign its rights hereunder to any of its "affiliates," as that
term is defined under the 1934 Act, without the consent of the
Company; provided, however, that any such assignment shall not
release such assigning entity from its obligations hereunder unless
such obligations are assumed by such affiliate and the Company has
prior to such assignment and assumption consented in writing to the
same; and no such assignment shall be made unless it is made in
accordance with any applicable securities laws of any applicable
jurisdiction. Any request for an assignment made hereunder by the
Buyer shall be accompanied by a legal opinion in form, substance and
scope reasonably satisfactory to the Company, that such assignment
is proper under applicable law. Notwithstanding anything herein to
the contrary, Buyer may pledge the Securities as collateral for a
bona fide loan pursuant to a security agreement with a third party
lender, and such pledge
<PAGE>
shall not be considered an assignment in
violation of this Agreement so long as it is made in compliance with
all applicable law.
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
i. Survival. Unless this Agreement is terminated under
Section 8(1), the representations and warranties of the Company and
the Buyer contained in Sections 2 and 3 and the agreements and
covenants set forth in Sections 4, 5 and 8 shall survive the Closing
of the purchase and sale of Securities purchased and sold hereby.
j. Publicity. The Company and the Buyer shall have the
right to review before issuance by the other, any press releases or
any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be
entitled, without prior consultation with or approval of the Buyer,
to make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations.
k. Further Assurance. Each party shall do and perform, or
cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not
have occurred on or before ten (10) business days from the date
hereof, this Agreement shall terminate at the close of business on
such date. Neither party may unilaterally terminate this Agreement
after the Closing for any reason other than a material breach of
this Agreement by the non-terminating party, other than as specified
in Section 4(l) above. Such termination shall not be the sole remedy
for a breach of this Agreement by the non-terminating party, and
each party shall retain all of its rights hereunder at law or in
equity. Notwithstanding anything herein to the contrary, a party
whose breach of a covenant or representation and warranty or failure
to satisfy a condition prevented the Closing shall not be entitled
to terminate this Agreement.
m. Remedies. No provision of this Agreement providing for
any specific remedy to a party shall be construed to limit such
party to the specific remedy described, and any other remedy that
would otherwise be available to such party at law or in equity shall
be so available. Nothing in this Agreement shall limit any rights a
party may have with any applicable federal or state securities laws
with respect to the transactions contemplated hereby.
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date
first written above.
[SIGNATURE PAGE FOLLOWS]
List of Exhibits
Exhibit A Form of Note
Exhibit B Warrant to Purchase Common Stock
Exhibit C Registration Rights Agreement
Exhibit D Escrow Agreement
Exhibit E Opinion of Counsel for Go Online Networks Corporation
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT DATED
AS OF SEPTEMBER 20, 1999]
COMPANY:
GO ONLINE NETWORKS CORPORATION
By: /s/ Joseph M. Naughton
Mr. Joseph M. Naughton, President &
Chief Executive Officer
BUYER:
TRITON PRIVATE EQUITIES FUND, L.P.
By: Triton Capital Management, L.L.C., a
General Partner
By: /s/ John C. Tausche
Mr. John C. Tausche, Managing Member
BUYER'S ADDRESS:
225 North Market Street
Suite 220
Wichita, Kansas 67202
Telephone: 316.262.8874
Telecopier: 316.262.6801
<PAGE>
SECURITIES PURCHASE AGREEMENT
Schedule 3(c)
Outstanding Options to Purchase Common Stock:
None
Outstanding Warrants to Purchase Common Stock:
Option to Purchase 1,000,000 shares at an exercise price of $.50 per
share until December 31, 2000 issued to Patrick Rost
Promissory Notes Convertible Into Common Stock:
None
Commitments to Sell and Register Common Stock:
Commitment to sell 666,667 shares of common stock to Patrick Rost
for $200,000.00, including piggyback registration rights.
Commitment to sell 83,334 shares of common stock to Mark Mintz for
$25,000, including piggyback registration rights.
Commitment to issue 135,000 shares of common stock to Cutler Law
Group or assigns in consideration for legal fees relating to SB-2
registration statement, including piggyback registration rights.
<PAGE>
SECURITIES PURCHASE AGREEMENT
Schedule 3(g)
Registration of all the Registrable Securities under the Securities
Act of 1933, as amended, requires the filing of a registration
statement with the Securities and Exchange Commission and a
declaration of effectiveness of the registration statement by the
Securities and Exchange Commission.
See also Schedule 3(c)
Schedule 3(j)
Litigation:
The Company is presently a plaintiff in an action
entitled Jones Naughton Entertainment, Inc. v. AmeriNet Financial
Systems, Inc. filed in the California Superior Court. The action
relates to the Company's claim for the value of securities issued to
the Company in connection with the Company's sale of Real Estate
Television Network, Inc. ("RETN") to AmeriNet. The Company also
seeks damages (up to $60 million) for diminution of its market value
and other damages from AmeriNet's breaches. AmeriNet has
counterclaimed in the action for up to $200,000 that AmeriNet
provided to RETN while AmeriNet ran RETN. The Company believes that
AmeriNet's counterclaims are frivolous and are vigorously
prosecuting the primary action and defending the counterclaim.
EXHIBIT A (Form of Note)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
SECURITIES LAWS (COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE LAWS, OR (II) AN
OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE
EXCEPTION TO OR EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
LAWS.
DATE: SEPTEMBER 21, 1999
NOTE # 01
U.S.$538,462.00
GO ONLINE NETWORKS CORPORATION
SERIES 1999-A EIGHT PERCENT (8%) CONVERTIBLE PROMISSORY NOTE
DUE OCTOBER 1, 2001
THIS NOTE is one of a duly authorized issue of Notes (a
"Note" or the "Notes") of Go Online Networks Corporation, a
corporation duly organized and validly existing under the laws of
the State of Delaware (the "Company") designated as its Series
1999-A Eight Percent (8%) Convertible Notes Due October 1, 2001, in
an aggregate principal face value for all Notes of this series of
Five Hundred Thirty-Eight Thousand Four Hundred Sixty-Two and no/100
United States Dollars (US$538,462.00).
FOR VALUE RECEIVED, the Company promises to pay to THE
TRITON PRIVATE EQUITIES FUND, L.P., the registered holder hereof and
its successors and assigns (the "Holder"), the principal sum of Five
Hundred Thirty-Eight Thousand Four Hundred Sixty-Two and no/100
United States Dollars ($538,462.00) on October 1, 2001 (the
"Maturity Date"), and to pay interest on the principal sum
outstanding, at the rate of eight percent (8%) per annum due and
payable in quarterly installments in arrears, on June 30, September
30, December 31 and March 31 of each year during the term of this
Note, with the first such payment to be made on December 31, 1999.
Accrual of interest on the outstanding principal amount, payable in
cash or Common Stock (defined hereinafter) at the Holder's option,
shall commence on the date hereof and shall continue until payment
in full of the outstanding principal amount has been made or duly
provided for. The interest so payable will be paid to the person in
whose name this Note (or one or more predecessor
<PAGE>
Notes) is registered on the records of the Company regarding registration
and transfers of the Note (the "Note Register"); provided, however, that
the Company's obligation to a transferee of this Note arises only if
such transfer, sale or other disposition is made in accordance with
the terms and conditions of that Securities Purchase Agreement of
even date herewith between the Company and The Triton Private
Equities Fund, L.P. (the "Securities Purchase Agreement").
The principal of, and interest on, this Note are payable
in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts, at the address last appearing on the Note Register of the
Company as designated in writing by the Holder hereof from time to
time. The Company will pay the outstanding principal of and any and
all accrued and unpaid interest due upon this Note on the Maturity
Date, less any amounts required by law to be deducted or withheld,
to the record Holder of this Note as of the fifth business day (as
defined in the Securities Purchase Agreement) prior to the Maturity
Date and addressed to such Holder at the last address appearing on
the Note Register. The forwarding of such funds shall constitute a
payment of outstanding principal and interest hereunder and shall
satisfy and discharge the liability for principal and interest on
this Note to the extent of the sum represented by such payment plus
any amounts so deducted or withheld. Except as herein provided, this
Note may not be prepaid without the prior written consent of the
Holder. Interest may at the Holder's option be paid in Common Stock,
with the number of shares of Common Stock to be delivered in payment
of such interest determined by taking the dollar amount of interest
being paid divided by [the average of the closing bid prices for the
Common Stock for the ten (10) trading days prior to the due date of
such interest payment multiplied by ninety percent (.90)].
This Note is subject to the following additional provisions:
1. Note Exchangeable. The Note is exchangeable
commencing thirty (30) days from the date hereof for an equal
aggregate principal amount of Notes of different authorized
denominations, as requested by the Holder surrendering the same, but
not of denominations of less than Fifty Thousand United States
Dollars (US$50,000.00) without the Company's written consent. No
service charge will be made for such registration or transfer or
exchange.
2. Withholding. The Company shall be
entitled to withhold from all payments of principal or interest
pursuant to this Note any amounts required to be withheld under the
applicable provisions of the United States income tax or other
applicable laws at the time of such payments.
3. Transfer/Exchange of Note; Registered Holder;
Opinion of Counsel; Legend. This Note has been issued subject to
investment representations of the original purchaser hereof and may
be transferred or exchanged only in compliance with the Securities
Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. Prior to due presentment for transfer of this Note,
the Company and any agent of the Company may treat the person in
whose name this Note is duly registered on the Company's Note
Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not his Note
be overdue, and neither the Company nor any such agent shall be
affected or bound by notice to the contrary.
<PAGE>
The Holder understands and acknowledges by its acceptance
hereof that (i) except as provided in the Securities Purchase
Agreement and in that Registration Rights Agreement attached as
Exhibit C to the Securities Purchase Agreement (the "Registration
Rights Agreement"), both such documents incorporated herein by
reference, this Note and the shares of common stock in the Company
issuable upon conversion thereof as herein provided ("Conversion
Shares") have not been and are not being registered under the 1933
Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (a) subsequently registered
thereunder, or (b) the Holder shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, substance and
scope to the Company, to the effect that the securities to be sold,
assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration; (ii) any sale of
such securities made in reliance on Rule 144 promulgated under the
1933 Act may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such
securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance
with some other regulation and/or exemption under the 1933 Act or
the rules and regulations of the United States Securities and
Exchange Commission (the "SEC") thereunder; and (iii) neither the
Company nor any other person is under any obligation to register
such securities under the 1933 Act or any state securities laws
(other than pursuant to the terms of the Securities Purchase
Agreement and the Registration Rights Agreement) or to comply with
the terms and conditions of any exemption thereunder.
Any Conversion Shares issued upon conversion of this
Note, and if applicable, any common stock of the Company issued in
payment of interest as herein provided, shall, if and only to the
extent required by law, bear legends in similar form to the legends
set forth on the first page of this Note.
4. Conversion of Note into Common Stock;
Redemption by the Company.
(a) The Holder of this Note is entitled, at its
option, at any time commencing the earlier of (i) the date on which
the Registration Statement (as defined in the Securities Purchase
Agreement) is declared effective by the SEC; or (ii) the date which
is one hundred twenty (120) days after the date first written at the
top of this Note, to convert all or a portion of the original
principal face amount of this Note into shares of common stock in
the Company, $.001 par value per share (defined herein as the
"Common Stock"), at a conversion price (the "Conversion Price") for
each share of Common Stock equal to the lesser of (x) one hundred
twenty-five percent (125%) of the closing bid price for the Common
Stock on the date of issuance of this Note, or (y) a percentage (the
"Applicable Percentage") of the average of the three (3) lowest
closing bid prices for the Common Stock for the twenty (20) trading
days immediately preceding the Conversion Date (as hereinafter
defined), as reported on the National Association of Securities
Dealers OTC Bulletin Board Market (or on such other national
securities exchange or market as the Common Stock may trade at such
time). The Applicable Percentage shall be equal to the following:
(i) for conversions made on or before 120 days after the date of
this Note, 105%; (ii) for conversions made between 121 and 150 days
after the date of this Note, 103%; (iii) for conversions made
between 151 and 180 days after the date of this Note, 100%; (iv) for
conversions made between 181 and 210 days after the date of this
Note, 97%; or (v) for conversions made after 210 days after
<PAGE>
the date of this Note, 95%.
Any conversion of this Note shall be achieved by
submitting to the Company the fully completed form of conversion
notice attached hereto as Exhibit I (a "Notice of Conversion"),
executed by the Holder of this Note evidencing such Holder's
intention to convert this Note or the specified portion (as herein
provided) hereof. A Notice of Conversion may be submitted via
facsimile to the Company at the telecopier number for the Company
provided in the Securities Purchase Agreement (or at such other
number as requested in advance of such conversion in writing by the
Company), and if so submitted the original Notice of Conversion
shall be delivered to the Company within three (3) business days
thereafter. The Company and the Holder shall each keep records with
respect to the portion of this Note then being converted and all
portions previously converted; upon receipt by the Holder of the
requisite Conversion Shares, the outstanding principal amount of the
Note shall be reduced by the amount specified in the Notice of
Conversion resulting in such Conversion Shares. The Company may from
time to time, but is not required to, instruct the Holder and the
Holder shall surrender this Note along with the Notice of Conversion
for the purposes of making a notation thereon as to the amount of
principal being converted, or of canceling this Note and issuing a
new Note in the same form with the principal amount of such Note
reduced by the amount converted. Such new or notated Note shall be
delivered to the Holder within three (3) business days after such
Holder's surrender to the Company. No fractional shares or scrip
representing fractions of shares will be issued on conversion, but
the number of shares issuable shall be rounded to the nearest whole
share. Accrued interest on the converted portion of the Note shall
be payable upon conversion thereof, in cash or Common Stock at the
Conversion Price, at the Company's option. The date on which a
notice of conversion is given (the "Conversion Date") shall be
deemed to be either the date on which the Company receives from the
Holder an original Notice of Conversion duly executed, or, if
earlier, the date set forth in such Notice of Conversion if the
original Notice of Conversion is received by the Company within
three (3) business days thereafter.
In all cases, the Company shall deliver the Conversion
Shares to the Holder within three (3) business days after the
Conversion Date with respect to such Conversion Shares being
delivered, and at the address specified in the Notice of Conversion.
The Company acknowledges that the Securities Purchase Agreement
requires that the Company pay liquidated damages for late or
non-delivery of Conversion Shares.
Subject to the provisions of Paragraph 4(b) hereof, at
the Maturity Date, the remaining portion of this Note which remains
unconverted, if any, plus accrued interest shall be automatically
converted into shares of Common Stock as of the Maturity Date, as if
the Holder had converted the remaining portion of this Note
according to the provisions of this Section 4, with the Conversion
Date being equivalent in such event to the Maturity Date, as if the
Holder had provided the Company with a Notice of Conversion with
respect to the outstanding principal amount of this Note on the
Maturity Date. Other than a conversion made on the Maturity Date in
accordance with this paragraph, conversions of this Note must be
effected in increments of at least Ten Thousand U.S. Dollars
($10,000) of principal amount of this Note (or such lesser
outstanding principal amount of this Note).
<PAGE>
(b) Notwithstanding anything herein to the
contrary, the Company shall have the right (but not the obligation)
to redeem all or any portion of this Note, provided the Company is
not then in violation of any of its obligations under this Note or
under the Securities Purchase Agreement or any addenda thereto,
under the following conditions. At any time prior to delivery of any
Notice of Conversion (in this Section 4(b), a "Notice") to the
Company by the Holder in accordance with the terms of this Note, the
Company may give to the Holder notice (a "Redemption Notice") that
it intends to pay the Holder the Cash Redemption Amount (as
hereinafter defined) with respect to all or such portion of the Note
referred to in the Redemption Notice. The "Cash Redemption Amount"
shall be equal to one hundred percent (100%) of the face amount of
the portion of the Note to be redeemed pursuant to the Redemption
Notice, and shall be paid to the Holder according to the Holder's
written instructions to the Company within three (3) business days
after delivery of the Redemption Notice with respect to such Note or
portion thereof to be redeemed. If the Company does not redeem
within the time limits herein specified and according to the terms
of this Section 4(b), then unless waived by the Holder, the
Redemption Notice shall be null and void, and the Holder may convert
all or such portion of this Note as the Holder in its discretion
determines.
5. Obligations of the Company Herein are
Unconditional. No provision of this Note shall alter or impair the
obligation of the Company, which obligation is absolute and
unconditional, to repay the principal amount of this Note at the
time, place, rate, and in the coin currency, hereinabove stated.
This Note and all other Notes now or hereafter issued in replacement
of this Note on the same or similar terms are direct obligations of
the Company. This Note ranks at least equally with all other Notes
now or hereafter issued under the terms set forth herein. The
Conversion Price and number of shares of Common Stock issuable upon
conversion shall be subject to adjustment from time to time as
provided in Section 6 below.
6. Adjustments.
(a) In the event the Company should at any time or
from time to time, after the date of this Note, fix a record date
for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable
in additional shares of Common Stock (equal to at least ten percent
(10%) or more of the Company's then issued and outstanding shares of
Common Stock) or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly
additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by
such holder for the additional shares of Common Stock or the Common
Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such dividend, distribution, split or
subdivision if no record date is fixed), the Conversion Price shall
be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of this Note shall be increased in
proportion to such increase in the aggregate number of shares of
Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
(b) If the number of shares of Common Stock outstanding at any time
after the date of this Note is decreased by a combination of the
outstanding shares of Common Stock, then,
<PAGE>
following the record date of such combination, the Conversion Price
shall be appropriately increased so that the number of shares of
Common Stock issuable upon conversion of this Note shall be
decreased in proportion to such decrease in outstanding shares.
(c) In the event the Company, at any time while
all or any portion of this Note is outstanding, shall be
consolidated with or merged into any other corporation or
corporations or shall sell or lease all or substantially all of its
property and business as an entirety, then lawful provisions shall
be made as part of the terms of such consolidation, merger, sale or
lease so that the holder of this Note may thereafter receive in lieu
of such Common Stock otherwise issuable to such holder upon
conversion of this Note, but at the conversion rate which would
otherwise be in effect at the time of conversion, as hereinbefore
provided, the same kind and amount of securities or assets as may be
issuable, distributable or payable upon such consolidation, merger,
sale or lease with respect to Common Stock of the Company.
7. Reservation of Shares. The Company
shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of this Note, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all of the outstanding principal amount, and if at any
time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of this Note, in
addition to such other remedies as shall be available to Holder, the
Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase the number of authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes, including without limitation, using
its best efforts to obtain the requisite stockholder approval
necessary to increase the number of authorized shares of the
Company's Common Stock.
8. Note Holder Not Deemed a Stockholder. No Holder, as such, of this
Note shall be entitled (prior to conversion of this Note into Common Stock,
and only then to the extent of such conversion) to vote or receive dividends
or be deemed the holder of shares of the Company for any purpose, nor shall
anything contained in this Note be construed to confer upon the Holder hereof,
as such, any of the rights of a stockholder of the Company or any right to
vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the holder of this Note of the Conversion
Shares which he or she is then entitled to receive upon the due
conversion of all or a portion of this Note. Notwithstanding the
foregoing, the Company will provide the Holder with copies of the
same notices and other information given to the stockholders of the
Company generally, contemporaneously with the giving thereof to the
stockholders.
9. No Limitation on Corporate Action. No provisions of this Note
and no right or option granted or conferred hereunder shall in any
way limit, affect or abridge the exercise by the Company of any of its
corporate rights or powers to recapitalize, amend its Certificate of
Incorporation, reorganize, consolidate or merge with or into another
corporation, or to transfer all or any part of its property or assets,
or the exercise of any other of its corporate rights and powers.
<PAGE>
10. Representations of Holder. Upon conversion of all or a portion of
this Note, the Holder shall confirm in writing, in a form reasonably
satisfactory to the Company, that the Conversion Shares so purchased are
being acquired solely for the Holder's own account and not as a nominee for
any other party, and that such Holder is an Accredited Investor (as
defined in Rule 501(a) of Regulation D promulgated under the 1933
Act). The Company acknowledges that Holder's duly executed
certification on the Notice of Conversion is satisfactory
confirmation of the facts set forth in the immediately preceding
sentence. If such Holder cannot make such representations because
they would be factually incorrect, it shall be a condition to such
Holder's conversion of all or a portion of the Note that the Company
receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its
securities upon conversion of the Note shall not violate any United
States or state securities laws.
11. Waiver of Demand, Presentment, Etc. The
Company hereby expressly waives demand and presentment for payment,
notice of nonpayment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, bringing
of suit and diligence in taking any action to collect amounts called
for hereunder and shall be directly and primarily liable for the
payment of all sums owing and to be owing hereunder, regardless of
and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder.
12. Attorney's Fees. The Company agrees to
pay all costs and expenses, including without limitation reasonable
attorney's fees, which may be incurred by the Holder in collecting
any amount due under this Note or in enforcing any of Holder's
conversion rights as described herein.
13. Default. If one or more of the following
described "Events of Default" shall occur:
(a) The Company shall continue in default in the
payment of principal or interest on this Note for a period of ten
(10) days after a notice of default is received by the Company with
respect to any such payment, or the Company shall not timely honor
any Notice of Conversion as specified herein and in the Securities
Purchase Agreement; or
(b) Any of the representations or warranties made
by the Company herein, in the Securities Purchase Agreement, the
Registration Rights Agreement, or in any certificate or financial or
other written statement heretofore or hereafter furnished by or on
behalf of the Company in connection with the execution and delivery
of this Note or the Securities Purchase Agreement or the
Registration Rights Agreement shall be false or misleading in any
material respect at the time made and the Holder shall have provided
seven (7) days prior written notice to the Company of the alleged
misrepresentation or breach of warranty and the same shall continue
uncured for a period of seven (7) days after such written notice
from the Holder; or
(c) The Company shall fail to perform or observe,
in any material respect, any other covenant, term, provision,
condition, agreement or obligation of the Company under this
<PAGE>
Note or the Securities Purchase Agreement and such failure shall continue
uncured for a period of seven (7) days after written notice from the
Holder of such failure; or
(d) The Company shall either: (i) become
insolvent; (ii) admit in writing its inability to pay its debts
generally or as they become due; (iii) make an assignment for the
benefit of creditors or commence proceedings for its dissolution; or
(iv) apply for, or consent to the appointment of, a trustee,
liquidator, or receiver for its or for a substantial part of its
property or business; or
(e) A trustee, liquidator or receiver shall be
appointed for the Company or for a substantial part of its property
or business without the Company's consent and such appointment is
not discharged within sixty (60) days after such appointment; or
(f) Any governmental agency or any court of
competent jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any substantial
portion of the properties or assets of the Company and shall not be
dismissed within sixty (60) days thereafter; or
(g) Any money judgment, writ or Note of
attachment, or similar process in excess of Three Hundred Fifty
Thousand United States Dollars (US$350,000.00) in the aggregate
shall be entered or filed against the Company or any of its
properties or assets and shall remain unpaid, unvacated, unbonded or
unstayed for a period of fifteen (15) days or in any event later
than five (5) days prior to the date of any proposed sale
thereunder; or
(h) Bankruptcy, reorganization, insolvency or
liquidation proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted against the
Company, shall not be dismissed within sixty days after such
institution or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the
material allegations of, or default in answering a petition filed
in, any such proceeding; or
(i) The Company shall have its Common Stock
delisted from the OTC Bulletin Board Market or suspended from
trading thereon, and shall not have its Common Stock relisted on the
same or another national securities exchange, or have such
suspension lifted, as the case may be, within ninety days after such
delisting or suspension; or
(j) The Company shall have received a notice of
default on the payment of any debt(s) aggregating in excess of Three
Hundred Fifty Thousand United States Dollars (US$350,000.00) beyond
any applicable grace period;
then, or at any time thereafter, and in any and every such case,
unless such Event of Default shall have been waived in writing by
the Holder (which waiver in one instance shall not be deemed to be a
waiver in another instance or for any other prior or subsequent
Event of Default) at the option of the Holder and in the Holder's
sole discretion, the Holder may immediately accelerate the maturity
<PAGE>
hereof, whereupon all principal and interest hereunder shall be
immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived by the
Company, anything herein or in any Note or other instrument
contained to the contrary notwithstanding, and the Holder may
immediately, and upon the expiration of any period of grace, enforce
any and all of the Holder's rights and remedies provided herein or
any other rights or remedies afforded by law or equity.
14. Note a General Unsecured Obligation of the
Company. This Note represents a general unsecured obligation of
the Company. No recourse shall be had for the payment of the
principal of, or the interest on, this Note, or for any claim based
thereon, or otherwise in respect hereof, against any incorporator,
shareholder, officer, director, or agent of the Company or any
successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof,
expressly waived and released.
15. Enforceability. In case any provision
of this Note is held by a court of competent jurisdiction to be
excessive in scope or otherwise invalid or unenforceable, such
provision shall be adjusted rather than voided, if possible, so that
it is enforceable to the maximum extent possible, and the validity
and enforceability of the remaining provisions of this Note will not
in any way be affected or impaired thereby.
16. Entire Agreement. This Note and Exhibit I
attached hereto, the Securities Purchase Agreement and the Exhibits
attached thereto and the Registration Rights Agreement and the
Exhibits attached thereto (if any) constitute the full and entire
understanding between the Company and the Holder with respect to the
subject matter hereof and thereof. Neither this Note nor any term
hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the Company and the Holder.
17. Governing Law. This Note shall be
governed by and construed in accordance with the laws of the state
of Delaware without giving effect to applicable principles of
conflict of law.
18. Headings. Headings in this Note are for
convenience only, and shall not be used in the construction of this
Note.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed by an officer thereunto duly
authorized, all as of the date first hereinabove written.
GO ONLINE NETWORKS CORPORATION
By: /s/ Joseph M. Naughton
Mr. Joseph M. Naughton,
Chief Executive Officer
<PAGE>
EXHIBIT I
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in Order to Convert the Note)
The Undersigned hereby irrevocably elects to convert $
of the Eight Percent (8%) Convertible Note Due October 1, 2001,
No. 01, into shares of Common Stock of Go Online Networks Corporation
(the "Company"), according to the terms and conditions set forth in such
Note, as of the date written below. If securities are to be issued to a
person other than the Undersigned, the Undersigned agrees to pay all
applicable transfer taxes with respect thereto.
The Undersigned represents that it, as of this date, is
an "accredited investor" as such term is defined in Rule 501(a) of
Regulation D promulgated by the SEC under the 1933 Act.
The Undersigned also represents that the Conversion
Shares are being acquired for the Holder's own account and not as a
nominee for any other party. The Undersigned represents and warrants
that all offers and sales by the Undersigned of the Conversion
Shares shall be made pursuant to registration of the same under the
1933 Act, or pursuant to an exemption from registration under the
1933 Act. The Undersigned acknowledges that the Conversion Shares
shall if (and only if) required by law contain the legend contained
on page 1 of the Note.
Conversion Date:*
Applicable Conversion Price:
Holder (Print True Legal Name):
Signature of Duly Authorized Representative of Holder)
Address of Holder:
* This original Notice of Conversion must be received by the Company
by the third business day following the Conversion Date.
EXHIBIT B
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
SECURITIES LAWS (COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE LAWS, OR (II) AN
OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE
EXCEPTION TO OR EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
LAWS.
GO ONLINE NETWORKS CORPORATION
WARRANT TO PURCHASE COMMON STOCK
Number of Shares: 175,000
Date of Issuance: September 21, 1999
Go Online Networks Corporation, a Delaware corporation
(the "Company"), hereby certifies that, for value received, the
Triton Private Equities Fund, L.P., and permitted assigns, the
registered holder hereof ("Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender
of this Warrant, at any time after the date hereof, but not after
5:00 P.M. New York time on the Expiration Date (as defined herein)
175,000 fully paid and nonassessable shares of Common Stock (as
defined herein) of the Company (each a "Warrant Share" and
collectively the "Warrant Shares") at a purchase price of U.S.$0.50
per share (the "Exercise Price") in lawful money of the United
States. The number of Warrant Shares purchasable hereunder and the
Exercise Price are subject to adjustment as provided in Section 9
below.
Section 1.
(a) Definitions. The following words and terms used in this
Warrant shall have the following meanings:
"Common Stock" means (a) the Company's common stock and
(b) any capital stock into which such Common Stock shall have been
changed or any capital stock resulting from a reclassification of
such Common Stock.
"Convertible Securities" mean any securities issued by the
Company which are convertible into or exchangeable for, directly or
indirectly, shares of Common Stock.
<PAGE>
"Expiration Date" means December 31, 2000.
"Market Price" means the closing bid price on the day
prior to the date on which the Exercise Form is delivered to the
Company, as quoted on the National Association of Securities
Dealers' OTC Bulletin Board Market or such other national securities
exchange or market on which the Common Stock may then be listed.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Purchase Agreement" shall mean the Securities
Purchase Agreement between the holder hereof (or its predecessor in
interest) and the Company for the purchase of this Warrant and the
other Securities (as defined in the Securities Purchase Agreement).
"Transfer" shall include any disposition of this Warrant
or any Warrant Shares, or of any interest in either thereof which
would constitute a sale thereof within the meaning of the Securities
Act of 1933, as amended, or applicable state securities laws.
"Warrant" shall mean this Warrant and all Warrants issued
in exchange, transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S.$0.50 per share.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to the Company shall be deemed to include the
Company's successors; and (B) to any applicable law defined or
referred to herein, shall be deemed references to such applicable
law as the same may have been or may be amended or supplemented from
time to time.
(ii) When used in this Warrant, unless the otherwise
specified in a particular instance, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the
words "Section," "Schedule," and "Exhibit" shall refer to Sections
of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.
(iii) Whenever the context so requires the neuter gender
includes the masculine or feminine, and the singular number includes
the plural, and vice versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this
Warrant may be exercised by the Holder, as a whole or in part, at
any time prior to 5:00 P.M. New York Time on the Expiration Date.
The rights represented by this Warrant may be exercised by the
Holder, as a whole or from time to time in part (except that this
Warrant shall not be exercisable as to a fractional share) by (i)
delivery of a written notice, in the form of the exercise form
attached as Exhibit I hereto (an "Exercise Form"), of the Holder's
election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) payment to the
Company of an amount equal to the Warrant Exercise Price
<PAGE>
multiplied by the number of Warrant Shares as to which the Warrant is
being exercised (plus any applicable issue or transfer taxes) in
immediately available funds (either by wire transfer or a certified
or cashier's check drawn on a United States bank), for the number of
Warrant Shares as to which this Warrant shall have been exercised,
and (iii) the surrender of this Warrant, properly endorsed, at the
principal office of the Company (or at such other agency or office
of the Company as the Company may designate by notice to the
Holder).
The Warrant Shares so purchased shall be deemed to be
issued to the Holder or Holder's designees, as the record owner of
such Warrant Shares, as of the date on which this Warrant shall have
been surrendered, the completed Exercise Agreement shall have been
delivered, and payment shall have been made for such Warrant Shares
as set forth above.
In the event of any exercise of the rights represented by
this Warrant in compliance with this Section 2(a), a certificate or
certificates for the Warrant Shares so purchased, registered in the
name of, or as directed by, the Holder, shall be delivered to, or as
directed by, the Holder within three (3) business days after such
rights shall have been so exercised.
(b) Unless this Warrant shall have expired or shall have
been fully exercised, the Company shall issue a new Warrant
identical in all respects to the Warrant exercised except (i) it
shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under the Warrant
exercised, less the number of Warrant Shares with respect to which
such Warrant is exercised, and (ii) the holder thereof shall be
deemed to have become the holder of record of such Warrant Shares
immediately prior to the close of business on the date on which the
Warrant is surrendered and payment of the amount due in respect of
such exercise and any applicable taxes is made, irrespective of the
date of delivery of such share certificate, except that, if the date
of such surrender and payment is a date when the stock transfer
books of the Company are properly closed, such person shall be
deemed to have become the holder of such Warrant Shares at the
opening of business on the next succeeding date on which the stock
transfer books are open.
(c) In the case of any dispute with respect to an
exercise, the Company shall promptly issue such number of Warrant
Shares as are not disputed in accordance with this Section.
Section 3. Covenants as to Common Stock. The Company
covenants and agrees that all Warrant Shares which may be issued
upon the exercise of the rights represented by this Warrant will,
upon issuance, be validly issued, fully paid and nonassessable. The
Company further covenants and agrees that during the period within
which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient
number of shares of Common Stock to provide for the exercise of the
rights then represented by this Warrant and that the par value of
said shares will at all times be less than or equal to the
applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to
pay any tax or taxes attributable to the initial issuance of the
Warrant Shares or any permitted transfer involved in the issue or
delivery of any certificates for Warrant Shares in a name other than
that of the registered holder hereof or upon any permitted transfer
of this Warrant.
<PAGE>
Section 5. Warrant Holder Not Deemed a Stockholder. No
holder, as such, of this Warrant shall be entitled to vote or
receive dividends or be deemed the holder of shares of the Company
for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due
exercise of this Warrant. Notwithstanding the foregoing, the Company
will provide the holder of this Warrant with copies of the same
notices and other information given to the stockholders of the
Company generally, contemporaneously with the giving thereof to the
stockholders.
Section 6. No Limitation on Corporate Action. No
provisions of this Warrant and no right or option granted or
conferred hereunder shall in any way limit, affect or abridge the
exercise by the Company of any of its corporate rights or powers to
recapitalize, amend its Certificate of Incorporation, reorganize,
consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise
of any other of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this
Warrant, by the acceptance hereof, represents that it is acquiring
this Warrant and the Warrant Shares for its own account for
investment and not with a view to, or for sale in connection with,
any distribution hereof or of any of the shares of Common Stock or
other securities issuable upon the exercise thereof, and not with
any present intention of distributing any of the same. Upon
exercise of this Warrant, the holder shall, if requested by the
Company, confirm in writing, in a form satisfactory to the Company,
that the Warrant Shares so purchased are being acquired solely for
the holder's own account and not as a nominee for any other party,
for investment, and not with a view toward distribution or resale.
If such holder cannot make such representations because they would
be factually incorrect, it shall be a condition to such holder's
exercise of the Warrant that the Company receive such other
representations as the Company considers reasonably necessary to
assure the Company that the issuance of its securities upon exercise
of the Warrant shall not violate any United States or state
securities laws.
Section 8. Transfer.
(a) The holder of this Warrant understands that (i) this
Warrant and the Warrant Shares have not been and are not being
registered under the Securities Act or any state securities laws
(other than as described in the Securities Purchase Agreement and
the Registration Rights Agreement), and may not be offered for sale,
sold, assigned or transferred unless (a) subsequently registered
thereunder, or (b) pursuant to an exemption from such registration;
(ii) any sale of such securities made in reliance on Rule 144
promulgated under the Securities Act may be made only in accordance
with the terms of said Rule and further, if said Rule is not
applicable, any resale of such securities under circumstances in
which the seller (or the person through whom the sale is made) may
be deemed to be an underwriter (as that term is defined in the
Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the
Securities and Exchange Commission thereunder; and (iii) neither the
Company nor any other person is under any obligation to register
such securities (other than as described in the Securities Purchase
Agreement and the Registration Rights
<PAGE>
Agreement) under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
Section 9. Adjustments.
(a) Reclassification and Reorganization. In case of any
reclassification, capital reorganization or other change of
outstanding shares of the Common Stock, or in case of any
consolidation or merger of the Company with or into another
corporation (other than a consolidation or merger in which the
Company is the continuing corporation and which does not result in
any reclassification, capital reorganization or other change of
outstanding shares of Common Stock), the Company shall cause
effective provision to be made so that the Holder shall have the
right thereafter, by exercising this Warrant, to purchase the kind
and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital
reorganization or other change, consolidation or merger by a holder
of the number of shares of Common Stock that could have been
purchased upon exercise of the Warrant immediately prior to such
reclassification, capital reorganization or other change,
consolidation or merger. Any such provision shall include provision
for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 9. The
foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive consolidations
or mergers. If the consideration received by the holders of Common
Stock is other than cash, the value shall be as determined by the
Board of Directors of the Company acting in good faith.
(b) Dividends and Stock Splits. If and whenever the
Company shall effect a stock dividend, a stock split, a stock
combination, or a reverse stock split of the Common Stock, the
number of Warrant Shares purchasable hereunder and the Warrant
Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith.
The number of shares, as so adjusted, shall be rounded down to the
nearest whole number and the Warrant Exercise Price shall be rounded
to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant.
If this Warrant is lost, stolen or destroyed, the Company shall, on
receipt of an indemnification undertaking reasonably satisfactory to
the Company, issue a new Warrant of like denomination and tenor as
the Warrant so lost, stolen or destroyed. In the event the holder
hereof asserts such loss, theft or destruction of this Warrant, the
Company may require such holder to post a bond issued by a surety
reasonably satisfactory to the Company with respect to the issuance
of such new Warrant.
Section 11. Notice. Any notices required or permitted to
be given under the terms of this Warrant shall be sent by mail or
delivered personally or by courier and shall be effective five days
after being placed in the mail, if mailed, certified or registered,
return receipt requested, or upon receipt, if delivered personally
or by courier or by facsimile, in each case properly addressed to
the party to receive the same. The addresses for such
communications shall be:
<PAGE>
If to the Company:
Go Online Networks Corporation
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Telephone: 714-736-0988
Facsimile: 714-736-9488
Attention: Mr. Joseph M. Naughton, President & CEO
With a copy to:
Cutler Law Group
610 Newport Center Drive, Suite 800
Newport Beach, California 92660
Telephone: 949.719.1977
Facsimile: 949.719.1988
Attention: Mr. M. Richard Cutler, Esq.
If to Holder, to it at the address set forth below Holder's
signature on the signature page of the Securities Purchase Agreement
(Holder is defined therein as the "Buyer"). Each party shall
provide notice to the other party of any change in address.
Section 12. Registration Right. Notwithstanding anything
herein to the contrary, unless this Warrant has been registered in
accordance with the Registration Rights Agreement, during the term
of exercise of this Warrant, if the Company proposes to file a
registration statement for a public offering of any of its
securities under the Securities Exchange Act of 1934, as amended, it
will give written notice, at least twenty (20) days prior to the
filing of each such registration statement, to the holder of the
Warrant and/or the Common Stock previously received upon exercise
hereof (and not previously sold by such holder) of its intention to
do so. Upon the holder's request within ten (10) days after it has
received such notice from the Company, the Company shall include the
Warrant and/or the Common Stock received upon such exercise owned in
such registration statement such that said Warrant and/or Common
Stock received upon such exercise shall be registered or qualified
under such registration statement. This provision is not applicable
to a registration statement filed on Form S-4 or Form S-8, nor is it
applicable to the Warrant once it has expired under the terms hereof
or has been exercised and the holder received non-restricted Common
Stock upon such exercise.
Section 13. Miscellaneous. This Warrant and any term
hereof may be changed, waived, discharged, or terminated only by an
instrument in writing signed by the party or holder hereof against
which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof. This Warrant shall be governed by and interpreted under the
laws of the State of Delaware. Headings are for convenience only and
shall not affect the meaning or construction of any of the
provisions hereof. This Warrant shall be binding upon the Company
and its successors and assigns and shall inure to the benefit of
the Holder and its successors and assigns. The Holder may not assign
this Warrant except in accordance with applicable federal and state
securities laws. The Holder shall immediately notify the Company
with respect to any permitted assignment of this Warrant.
Section 14. Date. The date of this Warrant is September
21, 1999. This Warrant, in all events, shall be wholly void and of
no effect after the close of business on the Expiration Date, except
that notwithstanding any other provisions hereof, the provisions of
Section 8 shall continue in full force and
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effect after such date as to any Warrant Shares or other securities
issued upon the exercise of this Warrant.
GO ONLINE NETWORKS CORPORATION
By: /s/ Joseph M. Naughton
Mr. Joseph M. Naughton, President & CEO
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EXHIBIT I TO WARRANT
EXERCISE FORM TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS WARRANT
GO ONLINE NETWORKS CORPORATION
The undersigned hereby exercises the right to purchase the
number of Warrant Shares covered by the Warrant attached hereto as
specified below according to the conditions thereof and herewith
makes payment of U.S. $ , the aggregate Warrant
Exercise Price of such Warrant Shares in full pursuant to the terms
and conditions of the Warrant.
(i) The undersigned agrees not to offer, sell, transfer or
otherwise dispose of any Common Stock obtained upon exercise of the
Warrant, except under circumstances that will not result in a
violation of the 1933 Act or applicable state securities laws.
(ii) The undersigned requests that the stock certificates
for the Warrant Shares be issued, and a Warrant representing any
unexercised portion hereof be issued, pursuant to the terms of the
Warrant in the name of the Holder (or such other person(s) indicated
below) and delivered to the undersigned (or designee(s)) at the
address or addresses set forth below.
Dated:
HOLDER:
By:
Name:
Title:
Address:
Number of Warrant Shares
Being Purchased:
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of September 20, 1999, between Go Online Networks
Corporation, a Delaware corporation (the "Company"), and the
Purchaser named on the signature page hereof (the "Purchaser").
This Agreement is being entered into pursuant to that Securities
Purchase Agreement, dated as of the date hereof, by and between the
Company and the Purchaser (the "Purchase Agreement").
The Company and the Purchaser hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
"Advice" shall have the meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition,
"control," when used with respect to any Person, means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section 3(n).
"Board" shall have the meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking
institutions in the state of Delaware generally are authorized or
required by law or other government actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.001 per
share.
"Effectiveness Date" means with respect to the Registration
Statement the 90th day following the Closing Date.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
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"Event" shall have the meaning set forth in Section 7(e)(i).
"Event Date" shall have the meaning set forth in Section 7(e)(i).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the 30th day following the Closing Date.
"Holder" or "Holders" means the holder or
holders, as the case may be, from time to time of Registrable
Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Note" or "Notes" means the Series 1999-A Eight Percent (8%)
Convertible Notes of the Company, the form of which is shown as
Exhibit A to the Purchase Agreement, issued or to be issued to the
Purchaser pursuant to the Purchase Agreement.
"OTC Bulletin Board" shall mean the over-the-counter electronic
bulletin board.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part
of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering
of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to
the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means (i) the shares of Common Stock
issuable upon conversion of the Note (the "Conversion Shares") and
exercise of the Warrants (the "Warrant Shares"), and upon any stock
split, stock dividend, recapitalization or similar event with
respect to such Conversion Shares, Warrant Shares or any Note, (ii)
the shares of Common Stock issuable upon exercise of warrants issued
to the placement advisor in connection with the sale of the Note and
the Warrants, (iii) the shares of Common Stock issued upon any
redemption of Note pursuant to the terms of the Notes and (iv) any
other dividend or other distribution with
<PAGE>
respect to, conversion or exchange of, or in replacement of,
Registrable Securities; provided, however, that Registrable Securities
shall include (but not be limited to) a number of shares of Common Stock
(the "Required Number") equal to no less than the greater of (x)
1,800,000 shares of Common Stock, or (y) 200% of the maximum number of
shares of Common Stock which would be issuable upon conversion of the Note
and upon exercise of the Warrants, assuming such conversion and exercise
occurred on the Closing Date or the Filing Date, whichever date
would result in the greater number of Registrable Securities.
Notwithstanding anything contained herein to the contrary, if the
actual number of shares of Common Stock issuable upon conversion of
the Note and upon exercise of the Warrants exceeds the Required
Number, the term "Registrable Securities" shall be deemed to include
such additional shares of Common Stock as are necessary to include
all of the shares of Common Stock issuable upon conversion of the
Note and upon exercise of the Warrants.
"Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2(a),
including (in each case) the Prospectus, amendments and supplements
to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holder, for which
the Holder will be reimbursed by the Company pursuant to Section 4.
2. Registration.
(a) Required Registration. On or prior to the Filing Date
the Company shall prepare and file with the Commission a
Registration Statement covering all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form SB-2 (except if the Company
is not then eligible to register for resale the Registrable
Securities on Form SB-2, in which case such registration shall be on
another appropriate form in accordance herewith). The Company shall
use its best efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible
after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until such date as
is
<PAGE>
the earlier of (x) the date when all Registrable Securities
covered by such Registration Statement have been sold or (y) the
date on which the Registrable Securities may be sold without any
restriction pursuant to Rule 144(k) as determined by the counsel to
the Company pursuant to a written opinion letter, addressed to the
Company's transfer agent to such effect (the "Effectiveness
Period"). If an additional Registration Statement is required to be
filed because the actual number of shares of Common Stock into which
the Note is convertible and the Warrants are exercisable exceeds the
number of shares of Common Stock initially registered in respect of
the Conversion Shares and the Warrant Shares based upon the
computation on the Closing Date, the Company shall have twenty (20)
Business Days to file such additional Registration Statement, and
the Company shall use its best efforts to cause such additional
Registration Statement to be declared effective by the Commission as
soon as possible, but in no event later than thirty (30) days after
filing.
(b) Shelf Registration. As soon as possible but no later
than thirty (30) days after becoming eligible to file a registration
statement for a secondary or resale offering of the Registrable
Securities on Form S-3, the Company shall prepare and file with the
Commission a post-effective amendment to Form SB-2 (or such other
applicable form filed in accordance with Section 2(a) above) on Form
S-3 to continue the registration of all Registrable Securities
pursuant to a "shelf" Registration Statement on Form S-3 covering
all Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. Notwithstanding anything to
the contrary contained herein, at no time during the Effectiveness
Period shall any of the Registrable Securities cease being registered.
3. Registration Procedures.
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form SB-2 (or if the
Company is not then eligible to register for resale the Registrable
Securities on Form SB-2 such registration shall be on another
appropriate form in accordance herewith) in accordance with the
method or methods of distribution thereof as specified by the Holder
(except if otherwise directed by the Holder), and cause the
Registration Statement to become effective and remain effective as
provided herein; provided, however, that not less than five (5)
Business Days prior to the filing of the Registration Statement or
any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated therein by
reference), the Company shall (i) furnish to the Holder and any
Special Counsel, copies of all such documents proposed to be filed,
which documents (other than those incorporated by reference) will be
subject to the review of the Holder and such Special Counsel, and
(ii) at the request of the Holder cause its officers and directors,
counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of
counsel to such Holder, to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holder or any Special Counsel shall
reasonably object in writing within three (3) Business Days of their
receipt thereof.
<PAGE>
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement
as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale
under the Securities Act all of the Registrable Securities; (ii)
cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement, and as so supplemented or amended to
be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as
promptly as possible to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto
and as promptly as possible provide the Holder true and complete
copies of all correspondence from and to the Commission relating to
the Registration Statement; and (iv) comply in all material respects
with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by
the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holder
thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented.
(c) Notify the Holder of Registrable Securities to be sold
and any Special Counsel as promptly as possible (and, in the case of
(i)(A) below, not less than five (5) Business Days prior to such
filing) and (if requested by any such Person) confirm such notice in
writing no later than one (1) Business Day following the day (i)(A)
when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B)
when the Commission notifies the Company whether there will be a
"review" of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement and (C) with
respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request
by the Commission or any other Federal or state governmental
authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement covering any or all of
the Registrable Securities or the initiation of any Proceedings for
that purpose; (iv) if at any time any of the representations and
warranties of the Company contained in any agreement contemplated
hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction,
or the initiation or threatening of any Proceeding for such purpose;
and (vi) of the occurrence of any event that makes any statement
made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in
the case of the Registration Statement or the Prospectus, as the
case may be, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness
of the Registration Statement or (ii) any suspension of the qualification
(or exemption from qualification) of any of the Registrable Securities for
sale in any jurisdiction, at the earliest practicable moment.
<PAGE>
(e) If requested by the Holders of a majority in interest of
the Registrable Securities, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement
such information as the Company reasonably agrees should be included
therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to the Holder and any Special Counsel, without
charge, at least one conformed copy of each Registration Statement
and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated
therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to the Holder and any Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement
thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with
the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate
with the selling Holders and any Special Counsel in connection with
the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for
offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably
requests in writing, to keep each such registration or qualification
(or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to
take any action that would subject it to general service of process
in any such jurisdiction where it is not then so subject or subject
the Company to any material tax in any such jurisdiction where it is
not then so subject.
(i) Cooperate with the Holder to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be
sold pursuant to a Registration Statement, which certificates shall be
free of all restrictive legends, and to enable such Registrable Securities
to be in such denominations and registered in such names as any Holder may
request at least two (2) Business Days prior to any sale of
Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material
fact
<PAGE>
required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the OTC
Bulletin Board and any other securities exchange, quotation system,
market or over-the-counter bulletin board, if any, on which similar
securities issued by the Company are then listed as and when
required pursuant to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to
its security holders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 not later than 45
days after the end of any 12-month period (or 90 days after the end
of any 12-month period if such period is a fiscal year) commencing
on the first day of the first fiscal quarter of the Company after
the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) Require each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the
Registration Statement, and the Company may exclude from such
registration the Registrable Securities of any such Holder who fails
to furnish such information within a reasonable time prior to the
filing of each Registration Statement, supplemented Prospectus
and/or amended Registration Statement.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (if such reference to such
Holder by name or otherwise is not required by the Securities Act or
any similar federal statute then in force) the deletion of the
reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that
such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such
Registration Statement and any post-effective amendments thereto
have become effective as contemplated by Section 3(c) and (ii) it
and its officers, directors or Affiliates, if any, will comply with
the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable
Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii),
3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder's receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of
<PAGE>
any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration
Statement.
(n) If (i) there is material non-public information regarding
the Company which the Company's Board of Directors (the "Board")
reasonably determines not to be in the Company's best interest to
disclose and which the Company is not otherwise required to
disclose, or (ii) there is a significant business opportunity
(including, but not limited to, the acquisition or disposition of
assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction)
available to the Company which the Board reasonably determines not
to be in the Company's best interest to disclose and which the
Company would be required to disclose under the Registration
Statement, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to exceed
20 consecutive days, provided that the Company may not postpone or
suspend its obligation under this Section 3(n) for more than 45 days
in the aggregate during any 12 month period (each, a "Blackout
Period"); provided, however, that no such postponement or suspension
shall be permitted for consecutive 20 day periods, arising out of
the same set of facts, circumstances or transactions.
4. Registration Expenses
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required
to be made with the OTC Bulletin Board and each other securities
exchange or market on which Registrable Securities are required
hereunder to be listed, (B) with respect to filings required to be
made with the Commission, (C) with respect to filings required to be
made under the OTC Bulletin Board and (D) in compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holder in connection with Blue Sky
qualifications of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under
the laws of such jurisdictions as the Holders of a majority of
Registrable Securities may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates
for Registrable Securities and of printing prospectuses if the
printing of prospectuses is requested by the holders of a majority
of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special
Counsel for the Holder, in the case of the Special Counsel, to a
maximum amount of $2,500.00, (v) Securities Act liability insurance,
if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement,
including, without limitation, the Company's independent public
accountants (including the expenses of any comfort letters or costs
associated with the delivery by independent public accountants of a
comfort letter or comfort letters). In addition, the Company shall
be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by
this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or
accounting duties), the expense
<PAGE>
of any annual audit, the fees and expenses incurred in connection with
the listing of the Registrable Securities on any securities exchange as
required hereunder.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and
hold harmless each Holder, the officers, directors, agents, brokers
(including brokers who offer and sell Registrable Securities as
principal as a result of a pledge or any failure to perform under a
margin call of Common Stock), investment advisors and employees of
each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of
preparation and attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or
alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or
in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light
of the circumstances under which they were made) not misleading,
except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder
expressly for use therein, which information was reasonably relied
on by the Company for use therein or to the extent that such
information relates to such Holder or such Holder's proposed method
of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto. The Company
shall notify the Holder promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of an Indemnified Party and
shall survive the transfer of the Registrable Securities by the Holder.
(b) Indemnification by Holder. The Holders shall, severally
and not jointly, indemnify and hold harmless the Company, the
directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers,
agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration
<PAGE>
Statement, any Prospectus, or any form of prospectus, or arising
solely out of or based solely upon any omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which
they were made) not misleading, to the extent, but only to the
extent, that such untrue statement or omission is contained in or
omitted from any information so furnished in writing by such Holder
to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration
Statement, such Prospectus or such form of prospectus or to the
extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly
for use in the Registration Statement, such Prospectus or such form
of Prospectus Supplement. Notwithstanding anything to the contrary
contained herein, the Holder shall be liable under this Section 5(b)
for only that amount as does not exceed the net proceeds to such
Holder as a result of the sale of Registrable Securities pursuant to
such Registration Statement.
(c) Conduct of Indemnification Proceedings. If
any Proceeding shall be brought or asserted against any Person
entitled to indemnity hereunder (an "Indemnified Party"), such
Indemnified Party promptly shall notify the Person from whom
indemnity is sought (the "Indemnifying Party) in writing, and the
Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced
the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party
has agreed in writing to pay such fees and expenses; or (2) the
Indemnifying Party shall have failed promptly to assume the defense
of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and
such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not
have the right to assume the defense thereof and such counsel shall
be at the expense of the Indemnifying Party). The Indemnifying Party
shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability
on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten (10) Business Days of written notice
thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may
require such Indemnified Party to undertake to reimburse all such
fees and expenses to the extent it is finally judicially determined
that such Indemnified
<PAGE>
Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party because
of a failure or refusal of a governmental authority to enforce such
indemnification in accordance with its terms (by reason of public
policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such
Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party
shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied
by, such Indemnifying, Party or Indemnified Party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount
paid or payable by a party as a result of any Losses shall be deemed
to include, subject to the limitations set forth in Section 5(c),
any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the
extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the
Holder shall be liable or required to contribute under this Section
5(c) for only that amount as does not exceed the net proceeds to
such Holder as a result of the sale of Registrable Securities
pursuant to such Registration Statement.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in
this Section are in addition to any liability that the Indemnifying
Parties may have to the Indemnified Parties
6. Rule 144.
As long as any Holder owns Preferred Shares, Conversion Shares,
Warrants or Warrant Shares, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after
the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act and to promptly furnish the Holder with true and complete copies
of all such filings. As long as any Holder owns Preferred Shares,
Conversion Shares, Warrants or Warrant Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the
Exchange Act, it will prepare and furnish to the Holder and make
publicly available in accordance with Rule 144(c) promulgated under
the Securities Act annual and quarterly financial statements,
together with a
<PAGE>
discussion and analysis of such financial statements
in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section
13(a) or 15(d) of the Exchange Act, as well as any other information
required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any
Holder may reasonably request, all to the extent required from time
to time to enable such Person to sell Conversion Shares and Warrant
Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including providing any legal opinions of
counsel to the Company referred to in the Purchase Agreement. Upon
the request of any Holder, the Company shall deliver to such Holder
a written certification of a duly authorized officer as to whether
it has complied with such requirements.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by
a Holder, of any of their obligations under this Agreement, each
Holder or the Company, as the case may be, in addition to being
entitled to exercise all rights granted by law and under this
Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not
provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense
that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any
of its subsidiaries has, as of the date hereof entered into and
currently in effect, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with
the rights granted to the Holder in this Agreement or otherwise
conflicts with the provisions hereof except for registration rights
provisions disclosed in the Company's Disclosure Schedule to the
Purchase Agreement. Except for registration rights provisions
disclosed in the Company's Disclosure Schedule to the Purchase
Agreement, neither the Company nor any of its subsidiaries has
previously entered into any agreement currently in effect granting
any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without
the written consent of the Holders of a majority of the then
outstanding Registrable Securities, the Company shall not grant to
any Person the right to request the Company to register any
securities of the Company under the Securities Act unless the rights
so granted are subject in all respects to the prior rights in full
of the Holder set forth herein, and are not otherwise in conflict
with the provisions of this Agreement. This Section 7(b) shall not
prohibit the Company from entering into any agreements concerning
the registration of securities on Form S-8 or Form S-4.
(c) [Intentionally Omitted.]
(d) Piggy-Back Registrations. If at any time when there is
not an effective Registration Statement covering (i) Conversion
Shares or (ii) Warrant Shares, the Company shall determine to
prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others
under the Securities Act of any of its equity
<PAGE>
securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or its then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock
option or other employee benefit plans, the Company shall send to
each holder of Registrable Securities written notice of such
determination and, if within thirty (30) days after receipt of such
notice, any such holder shall so request in writing (which request
shall specify the Registrable Securities intended to be disposed of
by the Purchaser), the Company will cause the registration under the
Securities Act of all Registrable Securities which the Company has
been so requested to register by the holder, to the extent requisite
to permit the disposition of the Registrable Securities so to be
registered, provided that if at any time after giving written notice
of its intention to register any securities and prior to the
effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the
Company may, at its election, give written notice of such
determination to such holder and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such
registration (but not from its obligation to pay expenses in
accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay
registering any Registrable Securities being registered pursuant to
this Section 7(d) for the same period as the delay in registering
such other securities. The Company shall include in such
registration statement all or any part of such Registrable
Securities such holder requests to be registered; provided, however,
that the Company shall not be required to register any Registrable
Securities pursuant to this Section 7(d) that are eligible for sale
pursuant to Rule 144(k) of the Securities Act. In the case of an
underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the
Registrable Securities in such registration statement, then if the
Company after consultation with the managing underwriter should
reasonably determine that the inclusion of such Registrable
Securities, would materially adversely affect the offering
contemplated in such registration statement, and based on such
determination recommends inclusion in such registration statement of
fewer or none of the Registrable Securities of the Holder, then (x)
the number of Registrable Securities of the Holders included in such
registration statement shall be reduced pro-rata among such Holders
(based upon the number of Registrable Securities requested to be
included in the registration), if the Company after consultation
with the underwriter(s) recommends the inclusion of fewer
Registrable Securities, or (y) none of the Registrable Securities of
the Holder shall be included in such registration statement, if the
Company after consultation with the underwriter(s) recommends the
inclusion of none of such Registrable Securities; provided, however,
that if securities are being offered for the account of other
persons or entities as well as the Company, such reduction shall not
represent a greater fraction of the number of Registrable Securities
intended to be offered by the Holder than the fraction of similar
reductions imposed on such other persons or entities (other than the
Company).
(e) Failure to File Registration Statement and Other Events.
The Company and the Purchaser agree that the Holder will suffer
damages if the Registration Statement is not filed on or prior to
the Filing Date and not declared effective by the Commission on or
prior to the Effectiveness Date and maintained in the manner
contemplated herein during the Effectiveness Period or if certain
other events occur. The Company and the Holder further agree that
it would not be feasible to ascertain the extent of such damages
with precision. Accordingly, if (i) the Registration Statement is
not filed on or prior to the Filing Date, or is not
<PAGE>
declared effective by the Commission on or prior to the Effectiveness
Date (or in the event an additional Registration Statement is filed
because the actual number of shares of Common Stock into which the
Note is convertible and the Warrants are exercisable exceeds the
number of shares of Common Stock initially registered is not filed
and declared effective within the time periods set forth in Section
2(a)), or (ii) the Company fails to file with the Commission a
request for acceleration in accordance with Rule 12dl-2 promulgated
under the Exchange Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that a Registration Statement will not be
"reviewed," or not subject to further review, or (iii) the
Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective as to all
Registrable Securities at any time prior to the expiration of the
Effectiveness Period, without being succeeded immediately by a
subsequent Registration Statement filed with and declared effective
by the Commission, or (iv) trading in the Common Stock shall be
suspended or if the Common Stock is delisted from the OTC Bulletin
Board for any reason for more than ninety (90) days in the
aggregate, or (v) the conversion rights of the Holder are suspended
for any reason, including by the Company, or (vi) the Company
breaches in a material respect any covenant or other material term
or condition to this Agreement, the Certificate of Designation, the
Purchase Agreement (other than a representation or warranty
contained therein) or any other agreement, document, certificate or
other instrument delivered in connection with the transactions
contemplated hereby and thereby, and such breach continues for a
period of thirty days after written notice thereof to the Company,
or (vii) the Company has breached Section 3(n) of this Agreement
(any such failure or breach being referred to as an "Event"), the
Company shall pay in cash as liquidated damages for such failure and
not as a penalty to the Holder an amount equal to 2% of the Holder's
pro rata share of the purchase price paid by the Holder for all
Notes purchased and then outstanding pursuant to the Purchase
Agreement for each thirty (30) day period until the applicable Event
has been cured, which shall be pro rated for such periods less than
thirty (30) days (the "Periodic Amount"). Payments to be made
pursuant to this Section 7(e) shall be due and payable immediately
upon demand in immediately available funds. The parties agree that
the Periodic Amount represents a reasonable estimate on the part of
the parties, as of the date of this Agreement, of the amount of
damages that may be incurred by the Holder if the Registration
Statement is not filed on or prior to the Filing Date or has not
been declared effective by the Commission on or prior to the
Effectiveness Date and maintained in the manner contemplated herein
during the Effectiveness Period or if any other Event as described
herein has occurred.
(f) Specific Enforcement, Consent to Jurisdiction.
(i) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the
provisions of this Registration Rights Agreement or the Purchase
Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent
or cure breaches of the provisions of this Registration Rights
Agreement or the Purchase Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to
any other remedy to which any of them may be entitled by law or equity.
(ii) Each of the Company and the Purchaser (i) hereby
irrevocably submits to the jurisdiction of the United States
District Court sitting in the State of Delaware for
<PAGE>
the purposes of any suit, action or proceeding arising out of or relating
to this Agreement or the Purchase Agreement and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such
court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or
proceeding is improper. Each of the Company and the Purchaser
consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and
notice thereof. Nothing in this Section 7(f) shall affect or limit
any right to serve process in any other manner permitted by law.
(g) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the
same shall be in writing and signed by the Company and the Holder.
Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates
exclusively to the rights of Holder and that does not directly or
indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to
which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the
immediately preceding sentence.
(h) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be
in writing and shall be deemed given and effective on the earlier of
(i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified
for notice prior to 5:00 p.m., pacific standard time, on a Business
Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice later than 5:00 p.m., pacific
standard time, on any date and earlier than 11:59 p.m., pacific
time, on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service
or (iv) actual receipt by the party to whom such notice is required
to be given. The addresses for such communications shall be with
respect to the Holder at its address set forth in the Purchase
Agreement, or with respect to the Company, addressed to:
Go Online Networks Corporation
5681 Beach Boulevard, Suite 101
Buena Park, CA 90621
Attention: Mr. Joseph M. Naughton, President and CEO
Telephone No.: 714-736-0988
Facsimile No.: 714-736-9488
or to such other address or addresses or facsimile number or numbers
as any such party may most recently have designated in writing to
the other parties hereto by such notice. Copies of notices to the
Company (other than conversion notices for the Notes or exercise
notices for the Warrants) shall be sent to Mr. Richard M. Cutler,
Esq., 610 Newport Center Drive, Suite 800, Newport Beach, California
92660. Copies of notices to the Holder shall be sent to H. Glenn
<PAGE>
Bagwell, Jr., Esq., 3005 Anderson Drive, Suite 204, Raleigh, North
Carolina 27609, Telephone No.: (919) 785-3113, Facsimile No.: (919)
785-3116.
(i) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors
and permitted assigns and shall inure to the benefit of the Holder
and its successors and assigns. The Company may not assign this
Agreement or any of its rights or obligations hereunder without the
prior written consent of the Holder. The Purchaser may assign its
rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(j) Assignment of Registration Rights. The rights of each
Holder hereunder, including the right to have the Company register
for resale Registrable Securities in accordance with the terms of
this Agreement, shall be automatically assignable by each Holder to
any transferee of such Holder of all or a portion of the Notes or
the Registrable Securities if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time
after such transfer or assignment, furnished with written notice of
(a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment
the further disposition of such securities by the transferee or
assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this
Section, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions of this Agreement, and
(v) such transfer shall have been made in accordance with the
applicable requirements of the Purchase Agreement. In addition,
each Holder shall have the right to assign its rights hereunder to
any other Person with the prior written consent of the Company,
which consent shall not be unreasonably withheld. The rights to
assignment shall apply to the Holders (and to subsequent) successors
and assigns.
(k) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be
deemed to be an original and, all of which taken together shall
constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature
shall create a valid binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same
force and effect as if such facsimile signature were the original
thereof.
(l) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
without regard to principles of conflicts of law thereof.
(m) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(n) Severability. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void
or unenforceable in any respect, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use
<PAGE>
their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(o) Headings. The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed
to limit or affect any of the provisions hereof.
(p) Shares Held by the Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities
held by the Company or its Affiliates (other than any Holder or
transferees or successors or assigns thereof if such Holder is
deemed to be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether
such consent or approval was given by the Holders of such required
percentage and shall not be counted as outstanding.
(q) Notice of Effectiveness. Within two (2) business days
after the Registration Statement which includes the Registrable
Securities is ordered effective by the Commission, the Company shall
deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities and to the
Purchaser (with copies to the Holders whose Registrable Securities
are included in such Registration Statement, if other than the
Purchaser) confirmation that the Registration Statement has been
declared effective by the Commission in the form attached hereto as
Exhibit A.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized
persons as of the date first indicated above.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT DATED AS OF
SEPTEMBER 20, 1999]
GO ONLINE NETWORKS CORPORATION
By: /s/ Joseph M. Naughton
Name: Mr. Joseph M. Naughton,
Title: President & Chief Executive Officer
THE TRITON PRIVATE EQUITIES FUND, L.P.
By: Triton Capital Management, L.L.C.
By: /s/ John C. Tausche
Mr. John C. Tausche, Managing Member
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT
[NAME AND ADDRESS OF TRANSFER AGENT]
Attn:
The Triton Private Equities Fund, L.P.
C/o Triton Capital Mangement, L.L.C.
225 North Market Street, Suite 220
Wichita, Kansas 67202
Attn: Mr. John C. Tausche
Re: GO ONLINE NETWORKS CORPORATION
Ladies and Gentlemen:
We are counsel to Go Online Networks Corporation, a Delaware
corporation (the "Company"), and have represented the Company in
connection with that certain Securities Purchase Agreement (the
"Purchase Agreement"), dated as of September 20, 1999 by and among
the Company and the Purchaser named therein (the "Holder") pursuant
to which the Company issued to the Holder its Series 1999-A Eight
Percent (8%) Convertible Notes (the "Notes") and may issue warrants
(the "Warrants") to purchase shares of the Company's common stock,
par value $.001 per share (the "Common Stock"). Pursuant to the
Purchase Agreement, the Company has also entered into a Registration
Rights Agreement with the Holder (the "Registration Rights
Agreement"), dated as of September 20, 1999, pursuant to which the
Company agreed, among other things, to register the Registrable
Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the
Notes and exercise of the Warrants, under the Securities Act of
1933, as amended (the "1933 ACT"). In connection with the Company's
obligations under the Registration Rights Agreement, on
, 1999, the Company filed a Registration
Statement on Form ___ (File No. 333- ) (the
"Registration Statement") with the Securities and Exchange
Commission (the "SEC") relating to the resale of the Registrable
Securities which names the Holder as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an
order declaring the Registration Statement effective under the 1933
Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of
a member of the SEC's staff, that any stop order suspending its
effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act
pursuant to the Registration Statement.
Very truly yours,
[COMPANY COUNSEL]
By:
EXHIBIT D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is dated as of
September 20, 1999, by and among Go Online Networks Corporation, a
corporation organized under the laws of the State of Delaware (the
"Company"), the buyer set forth on the execution page hereof (the
"Buyer") and H. GLENN BAGWELL, JR., a duly licensed attorney who
practices law in the State of North Carolina, U.S.A., as Escrow
Agent (the "Escrow Agent").
Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in that Securities Purchase
Agreement between the Company and the Buyer dated of even date
herewith (the "Securities Purchase Agreement").
W I T N E S S E T H:
WHEREAS, the Buyer and the Company have entered into the
Securities Purchase Agreement, pursuant to which the Company has
agreed to sell, and the Buyer has agreed to purchase, at the
Closing, a number of Notes along with a number of Warrants
(collectively, the "Securities"); and
WHEREAS, the Buyer and the Company have agreed to
effectuate the Closing utilizing an escrow arrangement as described
in this Agreement; and
WHEREAS, it is a condition of the Company's obligation to
sell, and the Buyer's obli-gation to purchase, the Securities, that
this Agreement be executed and delivered; and
WHEREAS, the Escrow Agent is willing to act hereunder on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants
and obligations set forth below, the parties hereto hereby agree as
follows:
1. ESCROW ACCOUNT.
1.1 Deposit. On the Closing Date, by wire
transfer of immediately available funds in United States Dollars,
Buyer shall deposit the full Purchase Price (the "Escrow") with the
Escrow Agent, to be held by the Escrow Agent in a separate
non-interest bearing account (the "Escrow Account"), established at
Wachovia Bank, N.A., (the "Bank"), subject to the terms and
provisions contained herein. At the request of the Company the
Escrow Agent shall provide the Company with all Bank statements,
notices and other writings which it receives from the Bank in
connection with the Escrow Account.
<PAGE>
2. DISBURSEMENT OF ESCROW/SECURITIES.
2.1 Disbursement. At the Closing, upon
receipt by the Escrow Agent of all of the moneys, documents, and
things from the respective parties with respect to such Closing as
described in the Securities Purchase Agreement and as further
described in Sections 2.1(a) and 2.1(b) below, the Escrow Agent
shall deliver to each party via facsimile the documents and things
(or if requested by the parties, only the signature pages thereto)
to have been delivered by the other party in accordance with the
Securities Purchase Agreement and this Agreement. The Escrow Agent
shall transfer, by the next business day following the Closing, by
wire transfer to the Company the full Escrow then held, less $2,500
in legal fees to Glen Bagwell and $35,000 in fees payable to
Bridgewater Capital Corporation. The Escrow Agent shall, upon
receipt thereof, deliver (via overnight delivery service) to the
Company originals of all other documents and things listed in
Section 2.1(b) below. The Escrow Agent shall, upon receipt thereof,
deliver (via overnight delivery service) originals of all of the
documents and things listed in Section 2.1(a) below to the Buyer at
the address provided in writing by the Buyer to the Escrow Agent.
The Closing may take place via facsimile. This shall be
accomplished in the following manner. Each party shall deliver via
facsimile to the Escrow Agent, at the telecopier number provided on
the signature page to this Agreement, the first page and the fully
executed signature page to each of the documents and things to be
executed by such party at the Closing. If stock certificates, Notes
or Warrants are to be delivered, each such certificate or document
shall be delivered via overnight courier to the Escrow Agent. Upon
receipt of the requisite documents and things via facsimile or
otherwise from each party, the Escrow Agent shall in turn send to
each party the documents and things received from the other party.
Thereafter, upon receipt by the Escrow Agent of the Purchase Price
and the original Notes and Warrants being sold at such Closing, the
Escrow Agent shall wire transfer the Escrow (less the charges and
fees set forth above) to the Company. Nothing herein to the contrary
notwithstanding, the Escrow Agent shall not release the Escrow to
the Company prior to taking physical possession of the Notes and
Warrants being sold at the Closing; likewise, the Escrow Agent shall
not release the original Notes or Warrants being sold at the Closing
prior to receipt in the Escrow Account of the Purchase Price for
such Securities. Each party closing the transactions contemplated
herein via facsimile shall deliver via overnight courier service to
the Escrow Agent complete originals of all documents and things (as
called for in Sections 2.1(a) and 2.1(b) below) within one (1)
business day after such delivery via facsimile. Each party hereby
agrees that a facsimile of each document and thing to be delivered
hereunder, once delivered to the Escrow Agent, shall be binding upon
such party in the same manner as would an original to the full
extent allowed by applicable law.
(a). Items to be Delivered by the Company to the Escrow Agent.
At the Closing. On the Closing Date, the Company
shall deliver to the Escrow Agent on behalf of the Buyer, unless
otherwise stated, three (3) fully executed (by the authorized
officer(s) of the Company) originals of each of the following
documents: (I) the Securities Purchase Agreement, (II) the
Registration Rights Agreement of even date herewith between the
Company and the Buyer, (III) a Note or Notes, as applicable, along
with one (1) copy of each Note issued by the Company; (IV) the fully
executed Warrant along with one (1) copy of the
<PAGE>
Warrant; (V) the executed original Legal Opinion (Exhibit E to the
Securities Purchase Agreement) along with one (1) copy thereof; and
(VII) this Agreement.
(b) Items to be Delivered by the Buyer to the Escrow Agent.
At the Closing. On or before the Closing Date, the Buyer shall
deliver to the Escrow Agent on behalf of the Company, unless
otherwise stated, three (3) fully executed originals of each of the
following documents: (I) the Securities Purchase Agreement, (II) the
Registration Rights Agreement of even date herewith between the
Company and the Buyer, (III) this Agreement; and (IV) the full
purchase price for the Securities being purchased at such Closing,
via wire transfer to the Escrow Account.
2.2 Controversies. If any controversy
arises between two or more of the parties hereto, or between any of
the parties hereto and any person not a party hereto, as to whether
or not or to whom the Escrow Agent shall deliver the Escrow or any
portion thereof or as to any other matter arising out of or relating
to this Escrow Agreement, the Escrow Agent shall not be required to
determine the same and need not make any delivery of the Escrow
concerned or any portion thereof but may retain the same until the
rights of the parties to the dispute shall have been finally
determined by agreement or by final judgment of a court of competent
jurisdiction after all appeals have been finally determined (or the
time for further appeals has expired without an appeal having been
made). The Escrow Agent shall deliver that portion of the Escrow
concerned covered by such agreement or final order within five (5)
days after the Escrow Agent receives a copy thereof. The Escrow
Agent shall assume that no such controversy has arisen unless and
until it receives written notice from the Buyer or the Company that
such controversy has arisen, which refers specifically to this
Agreement and identifies the adverse claimants to the controversy.
2.3 No Other Disbursements. No portion of
the Escrow monies shall be disbursed or otherwise transferred except
in accordance with this Section 2, Section 4 or Section 5.1(b).
Without limiting the foregoing, neither Escrow Agent nor the Buyer
shall be entitled to any right of offset against the Escrow or
otherwise entitled to receive any portion of the Escrow.
3. ESCROW AGENT. The acceptance by the
Escrow Agent of his duties hereunder is subject to the following
terms and conditions, which the parties to this Agreement hereby
agree shall govern and control with respect to the rights, duties,
liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or
liable in any manner whatever for the sufficiency, correctness,
genuineness or validity of any cash, investments or other amounts
deposited with or held by it.
3.2 The Escrow Agent shall be protected in acting
upon any written notice, certificate, instruction, request or other
paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties.
<PAGE>
3.3 The Escrow Agent shall not be liable for any
act done hereunder except in the case of his willful misconduct or
bad faith.
3.4 The Escrow Agent shall not be obligated or
permitted to investigate the correctness or accuracy of any document
or to determine whether or not the signatures contained in said
documents are genuine or to require documentation or evidence
substantiating any such document or signature.
3.5 The Escrow Agent shall have no duties as Escrow Agent
except those which are expressly set forth herein, and in any
modification or amendment hereof; provided, however, that no such
modification or amendment hereof shall affect his duties unless it
shall have given his written consent thereto. The Escrow Agent shall
not be prohibited from owning an equity interest in the Company, the
Buyer, another buyer, any of their respective subsidiaries or any
third party that is in any way affiliated with or conducts business
with either the Company, the Buyer or another buyer.
3.6 The Company and the Buyer specifically
acknowledge that the Escrow Agent is a practicing attorney in
Raleigh, North Carolina U.S.A., and may have worked with or be
affiliated with the Company, the Buyer, or affiliates of either of
them on other unrelated transactions, and that they and each of them
has specifically requested that the Escrow Agent draft the documents
for the said transactions and act as Escrow Agent with respect to
the said transactions. Each party represents that it has retained
legal and other counsel of its choosing with respect to the
transac-tions contemplated herein and in the Securities Purchase
Agreement, and is satisfied in its sole discretion with the form and
content of the documentation drafted by the Escrow Agent. The Escrow
Agent may own an equity interest in the Company and/or may be an
equity owner of the Buyer or another buyer, and may increase or sell
any such interest, so long as in accordance with any and all
applicable law. The said parties hereby waive any objection to the
Escrow Agent so acting based upon conflict of interest or lack of
impartiality. The Escrow Agent agrees to act impartially and in
accordance with the terms of this Agreement and with the parties'
respective instructions, so long as they are not in conflict with
the terms of this Agreement.
4. TERMINATION. This Agreement shall
terminate on the earlier of (a) the date on which the Escrow and all
other escrowed documents and things described herein shall have been
fully disbursed in accordance with the terms and conditions of this
Agreement, (b) any other date agreed to by the Buyer and the
Company, or (c) the next business day after the expiration of the
last of the Notes and the Warrants to be issued by the Company in
accordance with the terms of the Securities Purchase Agreement, in
which event the Escrow shall be disbursed in full to the Company.
5. MISCELLANEOUS.
5.1 Indemnification of Escrow Agent.
(a) The Company and the Buyer each agree, jointly
and severally, to indemnify the Escrow Agent for, and to hold him
harmless against, any loss incurred without willful
<PAGE>
misconduct or bad faith on the Escrow Agent's part, arising out of
or in connection with the administration of this Agreement, including
the costs and expenses of defending himself against any claim or
liability in connection with the exercise or performance of any of
his powers or duties hereunder. This indemnification shall not apply
to a party with respect to a direct claim against the Escrow Agent
by such party alleging in good faith a breach of this Agreement by
the Escrow Agent, which claim results in a final non-appealable
judgment against the Escrow Agent with respect to such claim.
(b) In the event of any dispute as to the nature
of the rights or obligations of the Buyer, the Company or the Escrow
Agent hereunder, the Escrow Agent may at any time or from time to
time interplead, deposit and/or pay all or any part of the Escrow
Funds with or to a court of competent jurisdiction sitting in Wake
County, North Carolina or in any appropriate federal court, in
accordance with the procedural rules thereof. The Escrow Agent shall
give notice of such action to the Company and the Buyer. Upon such
interpleader, deposit or payment, the Escrow Agent shall immediately
and automatically be relieved and discharged from all further
obligations and responsibilities hereunder, including the decision
to interplead, deposit or pay such funds.
5.2 Amendments. This Agreement may be
modified or amended only by a written instrument executed by each of
the parties hereto.
5.3 Notices. All communications required or
permitted to be given under this Agreement to any party hereto shall
be sent by first class mail or facsimile to such party at the
address, except in the case of the Escrow Agent, of such party set
forth in the Securities Purchase Agreement and, in the case of the
Escrow Agent, at 3005 Anderson Drive, Suite 204, Raleigh, North
Carolina U.S.A. 27609.
5.5 Successors and Assigns. This
Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however, that
the Escrow Agent shall not assign his duties under this Agreement.
5.6 Governing Law. This Agreement shall be
governed by and construed and interpreted in accordance with the
laws of the State of North Carolina.
5.7 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be an
original, and all of which together shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
[SIGNATURE PAGE TO ESCROW AGREEMENT DATED AS OF SEPTEMBER 20, 1999]
THE COMPANY:
GO ONLINE NETWORKS CORPORATION
By: Joseph M. Naughton
Mr. Joseph M. Naughton, President and CEO
THE BUYER:
THE TRITON PRIVATE EQUITIES FUND, L.P.
By: Triton Capital Management, L.L.C., its General Partner
By: /s/ John C. Tausche
Mr. John C. Tausche, Managing Member
ESCROW AGENT:
/s/ H. Glenn Bagwell, Jr.
H. GLENN BAGWELL, JR., ESQ.
Address:
3005 Anderson Drive, Suite 204
Raleigh, North Carolina USA 27609
Telephone 919.785.3113
Telecopier 919.785.3116
This agreement is entered into on as exclusive rights basis between GoOnline
Networks, Inc. (hereinafter referred to as "GoOn-line Kiosk") and
(hereinafter referred to as "Hotel") located at
RECITALS
1. GoOn-line Kiosk is engaged in the business of installing information
centers known as kiosks in public locations throughout the United States and
internationally.
2. GoOn-line Kiosk custom designs kiosks with several available features
depending on certain factors concerning the site location. The most common
features used are the back-lit translucent ad panels with touch-tone dialing
connections, computer terminals for Internet access with keyboards and monitors
integrated into the kiosk design, currency payment slots, coupon racks, video
monitors and electronic messaging scrolling banners.
3. GoOn-line Kiosk makes every effort to work very closely with the managers
of the site location to design a kiosk that is most aesthetically pleasing and
generates the most customers' visibility and usage.
4. GoOn-line Kiosk derives revenue from the sale of advertisements and
payments received for Internet access by users of the kiosk.
5. Hotel is a hotel enterprise offering accommodations for rent to the
general public.
6. Hotel is desirous of entering into this agreement to offer their
customers a visually appealing information center with Internet access and ad
panels notifying customers of certain goods and services available to them.
TERM AND CONDITIONS
1. Hotel agrees to allow GoOn-line Kiosk to install a kiosk in the hotel
lobby in a suitable location agreeable to both parties. The kiosk and all
related equipment will remain the sole property of GoOnline Kiosk.
2. GoOn-line Kiosk agrees to pay Hotel $45.00 per month or 10% of the usage
fees derived from the Internet access terminal, whichever is greater.
Calculation of the monthly revenue for this purpose will commence 45 days after
installation of the Internet access terminal and be paid quarterly.
3. GoOn-line Kiosk has the right to cancel upon 30 days written notice, to
remove the Internet access terminal if the Internet access terminal is not
providing an average of $15.00 per day in usage fees for the preceding 90 days.
4. GoOn-line Kiosk agrees to pay for the installation of a dedicated
telephone line and for the monthly charges incurred to maintain those lines.
Hotel gives GoOn-Line KIOSK permission to install a telephone line into said
hotel, at no expense to the Hotel. GoOn-line Kiosk accepts no liability for
holes in walls, pillars or floors which are necessary for the installation or
removal of the kiosk(s) and equipment, or as a result of vandalism.
5. GoOn-line Kiosk will supply Hotel with quarterly accounting of all
revenue and expenses generated by the information center.
6. GoOn-line Kiosk agrees to inspect the kiosk regularly and provide
maintenance of the information center at their expense. GoOn-line Kiosk shall
have the right to change the type of kiosk equipment at this location.
<PAGE>
7. Hotel agrees to notify GoOn-line Kiosk if any maintenance should be
needed in a timely manner. Only GoOn-line KIOSK or a duly authorized
representative is allowed to open, adjust, remove, disconnect, repair, replace
or alter the kiosk in any way.
8. Should any dispute arise involving the terms and conditions of this
agreement, such dispute will be decided by the AMERICAN ARBITRATION ASSOCIATION
in a binding decision.
9. This exclusive site agreement is for four (4) years, with a second
four-year option exercisable upon written notice, by registered mail from Hotel
to GoOn-line Kiosk, ninety days before the end of the first four-year period.
10. GoOn-line Kiosk agrees to pay Hotel for that portion of liability
insurance naming GoOn-line Kiosk as an additional insured.
All of the above terms and conditions are agreed upon by the parties signing
below.
GoOn-line Kiosk Date
Auctionomics, Inc.
18226 Ventura Boulevard, Suite 103
Tarzana, CA 91346
July 1, 1999
Mr. Larry Makowski:
ClassifiedAuctions.com, LLC
Re: Agreement between ClassifiedAuctions.com, LLC and Auctionomics, Inc.
Dear Mr. Makowski:
This letter will evidence the provisions of the agreement between
Auctionomics, Inc. ("Auctionomics") and ClassifiedAuctions.com, LLC
("Classified"). In consideration of the mutual covenants contained herein, and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, we hereby agree as follows:
1. Classified will provide an operational online auction site for use by
Auctionomics in the Auctionomics online internet mall. Auctionomics will use
the classifiedauctions.com web site as the exclusive online aucction site for
----------------------
its online Internet mall and Classified will not allow any other Internet mall
to use said site or its platform during the term hereof.
2. This agreement will have a term of 2 years commencing on the date hereof
and will automatically renew at the end of the initial two year period for an
additional two years unless proper notice is given. Proper notice is written
notice of the desire to terminate the agreement received no less than 90 days
before the end of any two year period.
3. Classified will award a 20% referral fee to Auctionomics for any fees
that Classified charges to customers that are referred to the
classifiedauction.com web site through the efforts of Auctionomics.
---
If the foregoing correctly states our understanding, please evidence your
acceptance and approval in the space below and return a fully executed copy of
the letter agreement to me.
Very truly yours,
AUCTIONOMICS, INC.
By: /s/ Harvey A. Turell
-------------------------
Harvey Turell, President
<PAGE>
AGREED AND APPROVED
CLASSIFIEDAUCTIONS.COM, LLC
By: /s/ Larry A. Makowski
--------------------------
[INGRAM MICRO LOGO]
September 28, 1999
Joseph M. Naughton
GO ONLINE NETWORKS CORP,
25 Main Street Suite 201
Chico, CA 95928-5489
Dear Mr. Naughton:
Welcome to Ingram Micro Inc., the leader in computer and technology related
distribution. As an account holder, we offer you the advantage of one stop
shopping with prompt and courteous service. We have established an account for
GO ONLINE NETWORKS CORP and assigned Customer Number 50-324346.
Terms of payment are Net 30 days from the date of invoice With a limit of
$15,000.00. Your assistance in seeing that our terms of sale are honored will be
appreciated. I will be your Senior Credit Representative and may be reached at
(714) 566-1000, extension 23795. Your Sales Representative may be reached at
(800) 456-8000.
When making a payment to Ingram Micro, please be sure to indicate your account
number along with which invoices are being paid to ensure proper posting. To
help you maintain your account you will receive's statement within 15 days of
each month end.
Information about Ingram Micro program and services is available on our Web
site. You can search for the products you need, generate quotes and place orders
all in one convenient online location www.ingrammicro.com To obtain your
Internet ID, please call our Electronic Commerce Support team at 1-800-616-4665.
Thank you for choosing Ingram Micro Inc. as your distributor of choice. We will
strive to fulfill our commitment to excellence In service and support
Please note that accounts with no activity for 12 months are subject to
deletion.
Sincerely,
Leslie Bowman
Senior Credit Representative
[INGRAM MICRO LOGO]
[GRAPHIC OMITED]
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else's creative work. Accordingly, You agree not to send any such ideas to
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Service and not submit any creative ideas, suggestions or materials.
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part of LinkShare and LinkShare shall not be liable or owe any compensation for
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You acknowledge that, in the course of using the Service you will obtain
information relating to the Service and/or to LinkShare ("Proprietary In
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as expressly authorized by this Agreement) or disclose Proprietary Information
without the prior written consent of LinkShare, or unless such Proprietary
Information becomes part of the public domain without breach of this Agreement
by You.
10. Disclaimers.
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Some links in the Service lead to sites maintained by individuals or
organizations other than LinkShare over whom LinkShare has no control. LinkShare
provides these links merely as a convenience to you, and the inclusion of any
link does not imply any endorsement by LinkShare of the linked sites, their
content or owners. TO THE FULLEST EXTENT PERMISSABLE PURSUANT TO APPLICABLE
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LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, IN RELATION TO THE SERVICE, ITS USE, THE RESULTS OF SUCH USE, LINKS AND
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THAT DEFECTS WILL BE CORRECTED, (C) THAT THERE ARE NO VIRUSES OR OTHER HARMFUL
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REGARDING CORRECTNESS, ACCURACY, OR RELIABILITY. APPLICABLE LAW MAY NOT ALLOW T
HE EXCLUSION OF IMPLIED WARRANTIES SO THE ABOVE EXCLUSION MAY NOT APPLY TO YOU.
10.2 LinkShare makes no representations whatsoever about any other website
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LinkShare has no control over the content on that website. In addition, a link
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items as viruses, worms, trojan horses and other items of a destructive nature.
11. Limitation Of Remedies And Liability.
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SERVICE,
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INFORMATION OR IF YOUR INFORMATION CONTAINS ERRORS, YOUR SOLE REMEDY FOR SUCH
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[email protected]. Upon termination, your access to the Service will be
suspended within ten (10) days. You are responsible for all actions and charges
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12.2 LinkShare may, in its sole discretion, terminate or suspend Your access
to
all or part of the Service for any reason, including without limitation, breach
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12.3 Upon termination, You shall no longer be entitled to use the Service and
the licenses granted hereunder shall terminate and You shall immediately return
or destroy all Proprietary Information, but the terms of this Agreement will
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13. Nonassignability.
Neither the rights nor the obligations arising under this Agreement are a
ssignable or transferable by You, and any such attempted assignment or transfer
shall be void and without effect. LinkShare may assign this Agreement to any
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14. Controlling Law and Severability.
The Service is controlled and operated from its offices within the State of New
York. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to its conflict of law provisions.
In the event of any dispute concerning the Service, or any matter related to
this Agreement, You agree that the litigation shall be in state or federal
courts in New York City. In the event that any of the provisions of this
Agreement shall be held by a court or other tribunal of competent jurisdiction
to be unenforceable, such provisions shall be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain in full
force and effect and enforceable.
15. Entire Agreement.
This Agreement constitutes the entire agreement between LinkShare and You
pertaining to the subject matter hereof, and any and all written or oral
agreements heretofore existing between the parties hereto are expressly
cancelled. Any modifications of this Agreement must be in writing and signed by
both parties hereto.
16. Export.
You shall not remove or export from the United States or reexport from anywhere
any part of the Service or any direct product thereof to Cuba, Libya, North
Korea, Iran, Iraq or Rwanda or to any Group D:1 or E:2 country (or any national
of such country) specified in the then current Supplement No. 1 to part 740 of
the U.S. Export Administration Regulations (or any successor supplement or
regulations) or otherwise except in compliance with and with all licenses and
approvals required under applicable export laws and regulations, including
without limitation, those of the U.S. Department of Commerce.
17. BASIS OF BARGAIN.
EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS AND LIABILITY AND
REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL BARGAINED FOR BASES OF THIS
AGREEMENT AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND REFLECTED IN
DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS AGREEMENT AND
IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT.
18. Force Majeure.
Neither party shall be liable hereunder by reason of any failure or delay in the
performance of its obligations hereunder on account of strikes, shortages,
riots, insurrection, fires, flood, storm, explosions, acts of God, war,
governmental action labor conditions, earthquakes or any other cause which is
beyond the reasonable control of such party.
19. Jurisdictional Issues
Information LinkShare publishes on the Web may contain references or cross
references to LinkShare's products, programs and services that are not announced
or available in you country. Such references do not imply that LinkShare
intends to announce such products, programs or services in your country. Except
as described otherwise, all materials in LinkShare's site are made available
only to provide information about LinkShare. LinkShare controls and operates
its site from its offices in the state of New York, United States of America and
makes no representations or warranties that these materials are appropriate or
available for use in other locations, and access to them from territories where
their contents are illegal is prohibited. If you use LinkShare's site from
other locations, you are responsible for compliance with applicable local laws.
Any claim relating to the materials in the LinkShare website shall be governed
by the internal substantive laws of the state of New York.
Official Correspondence must be sent via postal mail to:
95 Horatio Street, Suite 107, New York, New York 10014, USA.
LINKSHARE, LINKSHARE SYNERGY(tm) and THE LINKSHARE NETWORK(tm) are trademarks of
LinkShare Corporation. Other product and company names mentioned herein may be
the trademarks of their respective owners.
Copyright ? 1997 LinkShare Corporation. Any rights not expressly granted herein
are reserved.
Should You have any questions concerning this Agreement contact LinkShare
Corporation at [email protected]
[GRAPHIC OMITED]
June 22, 1999
(INFOTOUCH LOGO)
Mr. Joseph Naughton
Chairperson
Jones Naughton
5681 Beach Blvd. Suite 101
Buena Park, CA 90621
Re: Confirmation of Initial Order and Stategic Alliance with Jones Naughton
Dear Sir,
The following has been sent to you pursuant to our discussions of a strategic
vendor/client relationship between Info Touch Technologies and Jones Naughton
respectively.
Info Touch is pleased to enter into a sales agreement with Jones Naughton for
the sale of 50 Surfnet Internet terminals. This purchase will be taking place
during the subsequent 45 days.
It is the intention of both parties to enter into a formal strategic alliance
and supply agreement whereby the provisioning of kiosks would be determined on a
monthly basis.
Respectfully,
/s/ Hamed Shahbazi
Hamed Shahbazi
CEO
Info Touch Technologies Corp.
(INFOTOUCH LOGO)
Sales Quote
Date: Wednesday, May 19, 1999
To:
Joseph Naughton
Chairman
Jones Naughton Entertainment, Inc
Dear Joseph,
As per the request of Mr. Hamed Shahbazi, here are the prices for the Surfnet
models you requested followed by the volume discounts:
<PAGE>
All prices are in USD
Item No. Description QTY Unit Price
ITT-TKK-NSTA Turnkey Netflyer Kiosk 1 $4,495.50
Specifications:
Housing
ITT-ENC-NSTA -Constructed of MDF board and high pressure laminates
CPU System
ITT-SYS-CPU -Intel Celeron 333 MMX w/64 MB SDRAM
3.5 GB Removable HD. 4 MB Video Card, 16 Bit Sound Card.
56K V90 modem, 36 CD ROM, 1.44 MB Floppy Drive
ITT-VIS-CR17 -17" Monitor Built by Scepter
Accessories:
ITT-ACC-CCS -Credit Card Reader (swipe)
ITT-ACC-PBR -Powerbar (Surge Protector)
ITT-ACC-CSKB -Compact Keyboard
ITT-ACC-GPM -Cirque Glidepoint Touchpad Mouse
ITT-ACC-CCAM -USB Full motion color camera
ITT-ACC-HST -Armored telephone Handset
ITT-ACC-USBM -US bill acceptor (1,5,10,20) accepts new and old bills
ITT-ACC-RBT -Reboot Switch Card
Software:
ITT-SOFT-W98 -Windows 98
ITT-SUR-CORE -Surfnet complete software package including the Co-branding
customization and full motion video e-mail.
ITT-SUR-RMT -Remote software package
Crate:
ITT-ACC-CRA -Full wooden Shipping Crate and packing supplies
Item No. Description QTY Unit Price
ITT-TKK-ELNT Turnkey Elantra Net 1 $4,495.00
Specifications:
Housing
ITT-ENC-NSTA -Constructed of durable ABS plastic, MDF board, and high
pressure laminates
CPU System
ITT-SYS-CPU -Intel Celeron 333 MMX w/64 MB SDRAM
3.5 GB Removable HD. 4 MB Video Card, 16 Bit Sound Card.
56K V90 modem, 36 CD ROM, 1.44 MB Floppy Drive
ITT-VIS-CR17 -17" Monitor Built by Scepter
Accessories:
ITT-ACC-CCS -Credit Card Reader (swipe)
ITT-ACC-PBR -Powerbar (Surge Protector)
<PAGE>
ITT-ACC-CSKB -Compact Keyboard
ITT-ACC-GPM -Cirque Glidepoint Touchpad Mouse
ITT-ACC-CCAM -USB Full motion color camera
ITT-ACC-HST -Armored telephone Handset
ITT-ACC-USBM -US bill acceptor (1,5,10,20) accepts new and old bills
ITT-ACC-RBT -Reboot Switch Card
Software:
ITT-SOFT-W98 -Windows 98
ITT-SUR-CORE -Surfnet complete software package including the Co-branding
customization and full motion video e-mail.
ITT-SUR-RMT -Remote software package
Crate:
ITT-ACC-CRA -Full wooden Shipping Crate and packing supplies
Item No. Description QTY Unit Price
ITT-TKK-MNET Turnkey Micronet FXII 1 $4,695.00
Specifications:
Housing
ITT-ENC-NSTA -Constructed of MDF Board and High Pressure laminates.
CPU System
ITT-SYS-CPU -Intel Celeron 400 MMX w/64 MB SDRAM 4.3 GB HD, 4 MB Video Card,
16 Bit Sound card, 56K Modem V.90, 36X+CD ROM, 1.44 MB Floppy Drive
ITT-VIS-LC12 -12.1" Flat panel active matrix display
Accessories:
ITT-ACC-CCS -Credit Card Reader (swipe)
ITT-ACC-PBR -Powerbar (Surge Protector)
ITT-ACC-CSKB -Compact Keyboard
ITT-ACC-GPM -Cirque Glidepoint Touchpad Mouse
ITT-ACC-CCAM -USB Full motion color camera
ITT-ACC-HST -Armored telephone Handset
ITT-ACC-USBM -US bill acceptor (1,5,10,20) accepts new and old bills
ITT-ACC-RBT -Reboot Switch Card
Software:
ITT-SOFT-W98 -Windows 98
ITT-SUR-CORE -Surfnet complete software package including the Co-branding
customization and full motion video e-mail.
ITT-SUR-RMT -Remote software package
Crate:
ITT-ACC-CRA -Full wooden Shipping Crate and packing supplies
Volume Discounts:
<PAGE>
As expressed by Mr. Shahbazi, Jones Naughton Entertainment, Inc would like the
volume price to reflect the number of units ordered on monthly basis. The two
options were ordering in lots of 20 units/month or 40 units/month:
Surfnet Model Unit Price (orders of Unit Price
(orders of 20/month) 40/month)
Net Flyer $3195.00 $3095.00
Elantra Net $3195.00 $3095.00
Micronet FX II $3395.00 $3295.00
Payment Terms.
Payment terms are 50% upon order and 50% upon completion. All units are F.O.B.
manufacturing facility in Burnaby, BC.
Please note that Info Touch offers remote monitoring services, On-site services
and shipping and handling services to facilitate the management of your
terminals.
If you have any questions or comments about this quote, please contact me.
Thank you for your considerations,
/s/ Joseph Nakhla
Joseph Nakhla
Corporate Sales Manager
Infotouch Technologies
iCom
Network
March 8, 1999
To:
From:
Re: Memo of UnderstandingBInternet Kiosks
This Memo of Understanding (hereinafter "MOU") is between (company) (hereinafter
"Contract Vendor") and iCom Network, Inc. (hereinafter "iCom") regarding the
service and maintenance of iCom's installed Internet Kiosks.
1.) Icom owns and operates public internet Kiosks under the brand name of
NetSiteJ and/or NetZoneJ throughout the U.S. which requires service and
maintenance.
2.) Contract Vendor agrees to service, collect monies from, repair, clean
and otherwise perform general maintenance in Contract Vendor's territory to
Internet Kiosks so designated by iCom in a timely and professional manner using
qualified and experienced technicians. Contract Vendor must maintain a
reasonable quality of service acceptable to iCom based on industry standards.
3.) Contract Vendor agrees to review online Internet Kiosk reports provided
by iCom to determine daily status of kiosks and perform any repair service calls
needed within 24 hours.
4.) Contract Bendor agrees to perform a miimum of (1) service call per month
per kiosk to change dollar bill boxes and perform general cleaning functions.
5.) Contract Bendor agrees to properly label and send via Federal Express
using iCom's account number on a weekly basis all dollar bill boxes removed from
kiosks. Contract Vendor understands the contents of the dollar bill boxes are
not t be removed and/or tampered with in any form.
6.) Icom agrees to pay Contract Vendor a fee of (fees) revenue per kiosk per
month for services performed. Contract Vendor must provide iCom an invoice
every month for services rendered.
7.) Icom agrees to provide Contract Vendor all necessary parts needed to
perform service and repair functions on kiosks.
8.) Each party shall have the right to terminate this MOU immediately by
written notice to the other if the party has materilly breached any obligation
herein.
<PAGE>
Both parties have reviewed this MOU and agree to abide by all requirements.
/s/ Eric Wagner
Eric Wagner
iCom Network, Inc.
10225 Barnes Canyon Rd Suite A-111
San Diego, CA 92121
[WEBSITE RESULTS LOGO]
INVOICE
INVOICE DATE: 06114199
TRAFFIC INSERTION ORDER:
Scott Claverie
GoOn-line.com
25 Main Street
Chico, CA 95928
Tel- 530-891-4100
Fax: 530-896-8284
SEARCH ENGINE MARKETING PACKAGE
1. Keyword evaluation by Internet marketing specialist. 2. Creation of search
engine-focused Smart Pages for multiple keywords/keyword phrases (creation of 4
Smart Pages per keyword). 3. Submission and monitoring of Smart Pages to Major
Search engines for indexing and subsequent traffic.
Total Visitors: 9,000 Per Visitor $.15 Per visitor delivered to client site via
SmartPage Technology from the major search engines wtih a total number of
visitors not to exceed 9, 000 unique visitors Retainer will be prepaid against
traffic fulfillment to, Website Results, at the agreed upon rate of $.15 per
visitor. Website Results and client will evaluate the traffic delivered at the
conclusion of this campaign and create a Phase 11 thereafter. Website Results
services are ongoing, however, client reserves the right to terminate said
services at the conclusion of the "test" campaign.
Total Campaign: $1,295.00 (Now due & payable)
Respectfully,
Jeff Reynolds
Website Results
1
GO ONLINE NETWORKS CORPORATION
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED HEREIN BY
OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD
BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES AUTHORITIES, NOR HAVE SUCH AUTHORITIES CONFIRMED THE ACCURACY OR
DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE
INVESTOR MUST RELY ON ITS OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE
RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED DISCLOSURE
DOCUMENTS AS EXHIBIT J.
<PAGE>
17
THIS INVESTMENT AGREEMENT (this "Agreement") is made as of the ___ day of
, 1999, by and between Go Online Networks Corporation, a corporation duly
organized and validly existing under the laws of the State of Delaware (the
"Company"), and the undersigned Investor executing this Agreement ("Investor").
RECITALS:
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue to the Investor, and the
Investor shall purchase from the Company, from time to time as provided herein,
shares of the Company's Common Stock, par value $0.001 per share (the "Common
Stock"), as part of an offering of Common Stock by the Company to Investor, for
a maximum aggregate offering amount of Ten Million Dollars ($10,000,000) (the
"Maximum Offering Amount"); and
WHEREAS, the solicitation of this Investment Agreement and, if accepted by
the Company, the offer and sale of the Common Stock are being made pursuant to
the Company's Registration Statement on Form SB-2, file number 333-88615 filed
on October 7, 1999 under the Securities Act of 1933, as amended (the "Act").
TERMS:
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Investment Agreement (including the
-------------------
recitals above), the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"20% Approval" shall have the meaning set forth in Section 5.26.
"AAA" shall have the meaning set forth in Section 7.8.
"Accredited Investor" shall have the meaning set forth in Section 3.1.
"Act" shall mean the Securities Act of 1933, as amended.
"Advance Put Notice" shall have the meaning set forth in Section 2.3.1(a),
the form of which is attached hereto as Exhibit E.
"Advance Put Notice Confirmation" shall have the meaning set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit F.
"Advance Put Notice Date" shall have the meaning set forth in Section
2.3.1(a).
"Affiliate" shall have the meaning as set forth Section 6.5.
<PAGE>
"Aggregate Issued Shares" equals the aggregate number of shares of Common
Stock issued to Investor pursuant to the terms of this Agreement or the
Registration Rights Agreement as of a given date, including Put Shares and
Warrant Shares.
"Agreed Upon Procedures Report" shall have the meaning set forth in Section
2.6.3(b).
"Agreement" shall mean this Investment Agreement.
"Annual Commitment Amount" shall have the meaning set forth in Section 2.7.
"Automatic Termination" shall have the meaning set forth in Section 2.3.2.
"Bid Price" shall mean the bid price of the Common Stock on the Company's
Principal Market.
"Bring Down Cold Comfort Letters" shall have the meaning set forth in
Section 2.3.6(b).
"Business Day" shall mean any day during which the Principal Market is open
for business.
"Calendar Month" shall mean the period of time beginning on the numeric day
in question in a calendar month (the "Numeric Day") and for Calendar Months
thereafter, beginning on the earlier of (i) the same Numeric Day of the next
calendar month or (ii) the last day of the next calendar month. Each Calendar
Month shall end on the day immediately preceding the beginning of the next
succeeding Calendar Month.
"Cap Amount" shall have the meaning set forth in Section 2.3.11.
"Capital Raising Limitations" shall have the meaning set forth in Section
6.6.1.
"Capitalization Schedule" shall have the meaning set forth in Section
3.2.4, and shall be attached hereto as Exhibit K.
"Closing" shall mean one of (i) the Investment Commitment Closing and (ii)
each closing of a purchase and sale of Common Stock pursuant to Section 2.
<PAGE>
"Closing Bid Price" means, for any security as of any date, the last
closing bid price for such security on the O.T.C. Bulletin Board, or, if the
O.T.C. Bulletin Board is not the principal securities exchange or trading market
for such security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by such principal securities exchange or trading market, or if the
foregoing do not apply, the last closing bid price of such security in the
over-the-counter market on the electronic bulletin board for such security, or,
if no closing bid price is reported for such security, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as mutually determined by the Company and the Investor in this Offering. If the
Company and the Investor in this Offering are unable to agree upon the fair
market value of the Common Stock, then such dispute shall be resolved by an
investment banking firm mutually acceptable to the Company and the Investor in
this offering and any fees and costs associated therewith shall be paid by the
Company.
"Commitment Evaluation Period" shall have the meaning set forth in Section
2.7.
"Commitment Warrant" shall have the meaning set forth in Section 2.7.
"Common Shares" shall mean the shares of Common Stock of the Company.
"Common Stock" shall mean the common stock of the Company, par value $0.001
per share.
"Company" shall mean Go Online Networks Corporation, a corporation duly
organized and validly existing under the laws of the State of Delaware.
"Company Termination" shall have the meaning set forth in Section 2.3.14.
"Conditions to Investor's Obligations" shall have the meaning as set forth
in Section 2.2.4.
"Delisting Event" shall mean any time during the term of this Investment
Agreement, that the Company's Common Stock is not listed for and actively
trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq
National Market, the American Stock Exchange, or the New York Stock Exchange or
is suspended or delisted with respect to the trading of the shares of Common
Stock on such market or exchange.
"Disclosure Documents" shall have the meaning as set forth in Section
3.2.4.
"Due Diligence Review" shall have the meaning as set forth in Section 2.6.
"Effective Date" shall have the meaning set forth in Section 2.3.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Extended Put Period" shall mean the period of time between the Advanced
Put Notice Date until the Pricing Period End Date.
<PAGE>
"Gross Discount Amount," for each Purchase of Put Shares, shall equal the
product of (i) the difference of one minus the quotient obtained when the Put
Share Price for such Purchase is divided by the Market Price for such Purchase,
multiplied by (ii) the Put Dollar Amount paid to the Company by the Investor for
the Put Shares in that Purchase.
"Impermissible Put Cancellation" shall have the meaning set forth in
Section 2.3.1(e).
"Indemnified Liabilities" shall have the meaning set forth in Section 9.
"Indemnities" shall have the meaning set forth in Section 9.
"Indemnitor" shall have the meaning set forth in Section 9.
"Individual Put Limit" shall have the meaning set forth in Section 2.3.1
(b).
"Ineffective Period" shall mean any period of time that the Registration
Statement or any Supplemental Registration Statement (each as defined in this
Investment Agreement and the Registration Rights Agreement) becomes ineffective
or unavailable for use for the sale or resale, as applicable, of any or all of
the Registrable Securities (as defined in the Investment Agreement and
Registration Rights Agreement) for any reason (or in the event the prospectus
under either of the above is not current and deliverable) during any time period
required under this Investment Agreement and the Registration Rights Agreement.
"Intended Put Share Amount" shall have the meaning set forth in Section
2.3.1(a).
"Investment Commitment Closing" shall have the meaning set forth in Section
2.2.3.
"Investment Commitment Opinion of Counsel" shall mean an opinion from
Company's independent counsel, substantially in the form attached as Exhibit B,
or such other form as agreed upon by the parties, as to the Investment
Commitment Closing.
"Investment Date" shall mean the date of the Investment Commitment Closing.
"Investor" shall have the meaning set forth in the preamble hereto.
"Key Employee" shall have the meaning set forth in Section 5.18, as set
forth in Exhibit N.
"Late Payment Amount" shall have the meaning set forth in Section 2.3.8.
<PAGE>
"Look Back Period" shall mean the period of ten (10) consecutive trading
days during the Pricing Period ending immediately prior to the Put Closing Date.
"Major Transaction" shall mean and shall be deemed to have occurred at such
time upon any of the following events:
(i) a consolidation, merger or other business combination or event or
transaction following which the holders of Common Stock of the Company
immediately preceding such consolidation, merger, combination or event either
(i) no longer hold a majority of the shares of Common Stock of the Company or
(ii) no longer have the ability to elect the board of directors of the Company
(a "Change of Control"); provided, however, that if the other entity involved in
such consolidation, merger, combination or event is a publicly traded company
with "Substantially Similar Trading Characteristics" (as defined below) as the
Company and the holders of Common Stock are to receive solely Common Stock or no
consideration (if the Company is the surviving entity) or solely common stock of
such other entity (if such other entity is the surviving entity), such
transaction shall not be deemed to be a Major Transaction (provided the
surviving entity, if other than the Company, shall have agreed to assume all
obligations of the Company under this Investment Agreement and the Registration
Rights Agreement). For purposes hereof, an entity shall have Substantially
Similar Trading Characteristics as the Company if the average daily dollar
trading volume of the common stock of such entity is equal to or in excess of $
for the 90th through the 31st day prior to the public announcement of such
transaction;
(ii) the sale or transfer of all or substantially all of the Company's
assets; or
(iii) a purchase, tender or exchange offer made to the holders of
outstanding shares of Common Stock, such that following such purchase, tender or
exchange offer a Change of Control shall have occurred.
"Market Price" shall equal the average of the five (5) lowest Closing Bid
Prices for the Common Stock on the Principal Market during the Look Back Period
for the applicable Put.
"Material Facts" shall have the meaning set forth in Section 2.3.6(a).
"Maximum Offering Amount" shall mean Ten Million Dollars ($10,000,000).
"Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.11.
"NASD" shall have the meaning set forth in Section 6.10.
"NYSE" shall have the meaning set forth in Section 6.10.
<PAGE>
"Numeric Day" shall mean the numerical day of the month of the Investment
Date.
"Offering" shall mean the Company's offering of Common Stock and Warrants
issued under this Investment Agreement.
"Officer's Certificate" shall mean a certificate, signed by an officer of
the Company, to the effect that the representations and warranties of the
Company in this Agreement required to be true for the applicable Closing are
true and correct in all material respects and all of the conditions and
limitations set forth in this Agreement for the applicable Closing are
satisfied.
"Opinion of Counsel" shall mean, as applicable, the Investment Commitment
Opinion of Counsel, the Put Opinion of Counsel and the Purchase Warrant Opinion
of Counsel.
"Payment Due Date" shall have the meaning set forth in Section 2.3.8.
"Pricing Period" shall have the meaning set forth in Section 2.3.7(b).
"Pricing Period End Date" shall mean the last Business Day of any Pricing
Period.
"Pricing Period Extension" shall have the meaning set forth in Section
2.3.7(b).
"Principal Market" shall mean the Nasdaq Small Cap Market, the O.T.C.
Bulletin Board, the Nasdaq National Market, the American Stock Exchange or the
New York Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock.
"Proceeding" shall have the meaning as set forth Section 5.1.
"Purchase" shall have the meaning set forth in Section 2.3.7(a).
"Purchase Warrants" shall have the meaning set forth in Section 2.4.2.
"Purchase Warrant Exercise Price" shall have the meaning set forth in
Section 2.4.2.
"Purchase Warrant Opinion of Counsel" shall mean an opinion from Company's
independent counsel, substantially in the form attached as Exhibit O, or such
other form as agreed upon by the parties, as to the issuance of Purchase
Warrants to the Investor.
"Put" shall have the meaning set forth in Section 2.3.1(d).
<PAGE>
"Put Cancellation" shall have the meaning set forth in Section 2.3.13(a).
"Put Cancellation Notice Confirmation" shall have the meaning set forth in
Section 2.3.13(c), the form of which is attached hereto as Exhibit S.
"Put Cancellation Date" shall have the meaning set forth in Section
2.3.13(a).
"Put Cancellation Notice" shall have the meaning set forth in Section
2.3.13(a), the form of which is attached hereto as Exhibit Q.
"Put Closing" shall have the meaning set forth in Section 2.3.8.
"Put Closing Date" shall have the meaning set forth in Section 2.3.8.
"Put Date" shall mean the date that is specified by the Company in any Put
Notice for which the Company intends to exercise a Put under Section 2.3.1,
unless the Put Date is postponed pursuant to the terms hereof, in which case the
"Put Date" is such postponed date.
"Put Dollar Amount" shall be determined by multiplying the Put Share Amount
by the Put Share Price with respect to such Put Date, subject to the limitations
herein.
"Put Notice" shall have the meaning set forth in Section 2.3.1(d), the form
of which is attached hereto as Exhibit G.
"Put Notice Confirmation" shall have the meaning set forth in Section
2.3.1(d), the form of which is attached hereto as Exhibit H.
"Put Opinion of Counsel" shall mean an opinion from Company's independent
counsel, in the form attached as Exhibit I, or such other form as agreed upon by
the parties, as to any Put Closing.
"Put Share Amount" shall have the meaning as set forth Section 2.3.1(b).
"Put Share Price" shall have the meaning set forth in Section 2.3.1(c).
"Put Shares" shall mean shares of Common Stock that are purchased by the
Investor pursuant to a Put.
"Registrable Securities" shall mean those shares of the Common Stock of the
Company together with any capital stock issued in replacement of, in exchange
for or otherwise in respect of such Common Stock, that are: (i) issuable or
issued to the Investor pursuant to this Investment Agreement, and (ii) issuable
or issued upon exercise of the Warrants; provided, however, that notwithstanding
the above, the following shall not be considered Registrable Securities:
<PAGE>
(a) any Common Stock which would otherwise be deemed to be Registrable
Securities, if and to the extent that those shares of Common Stock may be resold
in a public transaction without volume limitations or other material
restrictions without registration under the Act, including without limitation,
pursuant to Rule 144 under the Act; and
(b) any shares of Common Stock which have been sold in a private
transaction in which the transferor's rights under this Agreement are not
assigned.
"Registration Opinion" shall have the meaning set forth in Section
2.3.6(a).
"Registration Opinion Deadline" shall have the meaning set forth in Section
2.3.6(a).
"Registration Rights Agreement" shall mean that certain registration rights
agreement entered into by the Company and Investor on even date herewith, in the
form attached hereto as Exhibit A, or such other form as agreed upon by the
parties.
"Registration Statement" shall mean the Registration Statement filed by the
Company on Form SB-2 on October 7, 1999 covering the offer and sale of the
Registrable Securities pursuant to this Agreement.
"Reporting Issuer" shall have the meaning set forth in Section 6.2.
"Required Put Documents" shall have the meaning set forth in Section 2.3.5.
"Risk Factors" shall have the meaning set forth in Section 3.2.4, attached
hereto as Exhibit J.
"Schedule of Exceptions" shall have the meaning set forth in Section 5, and
is attached hereto as Exhibit C.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean this Investment Agreement, together with the Common
Stock of the Company, the Warrants and the Warrant Shares issuable pursuant to
this Investment Agreement.
"Share Authorization Increase Approval" shall have the meaning set forth in
Section 5.26.
"Stockholder 20% Approval" shall have the meaning set forth in Section
6.12.
"Supplemental Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
<PAGE>
"Term" shall mean the term of this Agreement, which shall be a period of
time beginning on the Effective Date of this Agreement and ending on the
Termination Date.
"Termination Date" shall mean the earlier of (i) the date that is three (3)
years after the Effective Date of this Agreement, or (ii) the date that is
thirty (30) Business Days after the later of (a) the Put Closing Date on which
the sum of the aggregate Put Share Price for all Put Shares equals the Maximum
Offering Amount, (b) the date that the Company has delivered a Termination
Notice to the Investor, and (c) the date that all of the Warrants have been
exercised.
"Termination Notice" shall have the meaning as set forth in Section 2.3.14.
"Third Party Report" shall have the meaning set forth in Section 3.2.4.
"Transaction Documents" shall have the meaning set forth in Section 9.
"Truncated Pricing Period" shall have the meaning set forth in Section
2.3.7(b).
"Truncated Put Share Amount" shall have the meaning set forth in Section
2.3.13(b).
"Twelve Month Anniversary" shall mean the date that is the same Numeric Day
of the twelfth (12th) calendar month after the Investment Date, and the date
that is the same Numeric Day of each twelfth (12th) calendar month thereafter,
provided that if such date is not a Business Day, the next Business Day
thereafter.
"Unlegended Share Certificates" shall mean a certificate or certificates
(in denominations as instructed by Investor) representing the shares of Common
Stock to which the Investor is then entitled to receive, registered in the name
of Investor or its nominee (as instructed by Investor) and not containing a
restrictive legend, including but not limited to the Put Shares for the
applicable Put and Warrant Shares.
"Use of Proceeds Schedule" shall have the meaning as set forth in Section
3.2.4.
"Variable Priced Securities" shall have the meaning set forth in Section
6.6.1.
"Warrant Shares" shall mean the Common Stock issuable upon exercise of the
Warrants and the Commitment Warrants.
"Warrants" shall mean the Purchase Warrants and the Commitment Warrants.
<PAGE>
2. Purchase and Sale of Common Stock.
2.1 Offer to Subscribe.
Subject to the terms and conditions herein and the satisfaction of the
conditions to closing set forth in Sections 2.2 and 2.3 below, Investor hereby
agrees to purchase such amounts of Common Stock and accompanying Warrants as the
Company may, in its sole and absolute discretion, from time to time elect to
issue and sell to Investor according to one or more Puts pursuant to Section 2.3
below.
2.2 Investment Commitment.
2.2.1 [Intentionally Left Blank].
2.2.2 [Intentionally Left Blank].
2.2.3 Investment Commitment Closing. The closing of this Investment
Agreement (the "Investment Commitment Closing") shall be deemed to occur when
this Investment Agreement and the Registration Rights Agreement have been
executed by both Investor and the Company, and the other Conditions to
Investor's Obligations set forth in Section 2.2.4 below have been met.
2.2.4 Conditions to Investor's Obligations. As a prerequisite to the
Investment Commitment Closing and the Investor's obligations hereunder, all of
the following (the "Conditions to Investor's Obligations") shall have been
satisfied prior to or concurrently with the Company's execution and delivery of
this Agreement:
(a) the following documents shall have been delivered to the Investor: (i)
the Registration Rights Agreement, in the form attached hereto as Exhibit A, or
such other form as agreed upon by the parties, (the "Registration Rights
Agreement") (executed by the Company and Investor), (ii) the Investment
Commitment Opinion of Counsel (signed by the Company's counsel), and (iii) a
Secretary's Certificate as to (A) the resolutions of the Company's board of
directors authorizing this transaction, (B) the Company's Certificate of
Incorporation, and (C) the Company's Bylaws;
(b) this Investment Agreement, accepted by the Company, shall have been
received by the Investor;
(c) the Company's Registration Statement on Form SB-2, File No. 333-88615,
shall have been declared effective by the SEC;
<PAGE>
(d) the Company's Common Stock shall be listed for trading and actually
trading on the O.T.C. Bulletin Board or the Nasdaq Small Cap Market;
(e) other than continuing losses described in the Risk Factors set forth in
the Disclosure Documents (provided for in Section 3.2.4), as of the Closing
there have been no material adverse changes in the Company's business prospects
or financial condition since the date of the last balance sheet included in the
Disclosure Documents, including but not limited to incurring material
liabilities; and
(f) the representations and warranties of the Company in this Agreement
shall be true and correct in all material respects and the conditions to
Investor's obligations set forth in this Section 2.2.4 shall have been satisfied
as of such Closing; and the Company shall deliver an Officer's Certificate,
signed by an officer of the Company, to such effect to the Investor.
2.3 Puts of Common Shares to the Investor.
2.3.1 Procedure to Exercise a Put. Subject to the Individual Put Limit,
the Maximum Offering Amount and the Cap Amount (if applicable), and the other
conditions and limitations set forth in this Agreement, at any time beginning on
the date on which the Registration Statement is declared effective by the SEC
(the "Effective Date"), the Company may, in its sole and absolute discretion,
elect to exercise one or more Puts according to the following procedure:
(a) Delivery of Advance Put Notice. At least ten (10) Business Days but not
more than twenty (20) Business Days prior to any intended Put Date (unless
otherwise agreed in writing by the Investor), the Company shall deliver advance
written notice (the "Advance Put Notice," the form of which is attached hereto
as Exhibit E, the date of such Advance Put Notice being the "Advance Put Notice
Date") to Investor stating the Put Date for which the Company shall, subject to
the limitations and restrictions contained herein, exercise a Put and stating
the number of shares of Common Stock (subject to the Individual Put Limit and
the Maximum Put Dollar Amount) which the Company intends to sell to the Investor
(the "Intended Put Share Amount").
<PAGE>
Notwithstanding the above, if more than two (2) Calendar Months have passed
since the date of the previous Put Closing, the Company shall deliver the
Advance Put Notice at least twenty (20) Business Days prior to any intended Put
Date, unless waived in writing by the Investor. In order to effect delivery of
the Advance Put Notice, the Company shall (i) send the Advance Put Notice by
facsimile on such date so that such notice is received by the Investor by 6:00
p.m., New York time, and (ii) surrender such notice on such date to a courier
for overnight delivery to the Investor (or two (2) day delivery in the case of
an Investor residing outside of the U.S.). Upon receipt by the Investor of a
facsimile copy of the Advance Put Notice, the Investor shall, within two (2)
Business Days, send, via facsimile, a confirmation of receipt (the "Advance Put
Notice Confirmation," the form of which is attached hereto as Exhibit F) of the
Advance Put Notice to the Company specifying that the Advance Put Notice has
been received and affirming the intended Put Date and the Intended Put Share
Amount.
(b) Put Share Amount. The "Put Share Amount" is the number of shares of
Common Stock that the Investor shall be obligated to purchase in a given Put,
and shall equal the lesser of (i) the Intended Put Share Amount, and (ii) the
Individual Put Limit. The "Individual Put Limit" shall equal 20% of the sum of
the daily reported trading volume in the outstanding Common Stock on the
Company's Principal Market during the Pricing Period, as extended or shortened
under the terms hereof. Notwithstanding the above, the Company shall have the
right to seek a one-time waiver of the "Put Share Amounts" and depending on
market conditions and business operations, such waiver shall not be unreasonably
withheld
(c) Put Share Price. The purchase price for the Put Shares (the "Put Share
Price") shall equal 82.5% of the Market Price for such Put.
<PAGE>
(d) Delivery of Put Notice. After delivery of an Advance Put Notice, on the
Put Date specified in the Advance Put Notice, or on the sixth (6th) Business Day
following the last day of the previous Pricing Period, whichever is later, the
Company shall deliver written notice (the "Put Notice," the form of which is
attached hereto as Exhibit G) to Investor stating (i) the Put Date and (ii) the
Intended Put Share Amount as specified in the Advance Put Notice (such exercise
a "Put"). In order to effect delivery of the Put Notice, the Company shall (i)
send the Put Notice by facsimile on the Put Date so that such notice is received
by the Investor by 6:00 p.m., New York time, and (ii) surrender such notice on
the Put Date to a courier for overnight delivery to the Investor (or two (2) day
delivery in the case of a Investor residing outside of the U.S.). Upon receipt
by the Investor of a facsimile copy of the Put Notice, the Investor shall,
within two (2) Business Days, send, via facsimile, a confirmation of receipt
(the "Put Notice Confirmation," the form of which is attached hereto as Exhibit
H) of the Put Notice to Company specifying that the Put Notice has been received
and affirming the Put Date and the Intended Put Share Amount.
(e) Delivery of Required Put Documents. On or before the Put Date for such
Put, the Company shall deliver the Required Put Documents (as defined in Section
2.3.5 below) to the Investor (or to an agent of Investor, if Investor so
directs). Unless otherwise specified by the Investor, the Put Shares of Common
Stock shall be transmitted electronically pursuant to such electronic delivery
system as the Investor shall request; otherwise delivery shall be by physical
certificates. If the Company has not delivered all of the Required Put Documents
to the Investor on or before the Put Date, the Put shall be automatically
cancelled, unless the Investor agrees to delay the Put Date by up to three (3)
Business Days, in which case the Pricing Period begins on the Business Day
following such new Put Date. If the Company has not delivered all of the
Required Put Documents to the Investor on or before the Put Date (or new Put
Date, if applicable), and the Investor has not agreed in writing to delay the
Put Date, the Put is automatically canceled (an "Impermissible Put
Cancellation") and, unless the Put was otherwise canceled in accordance with the
terms of Section 2.3.13, the Company shall pay the Investor reasonable due
diligence expenses up $5,000 incurred in preparation for the canceled Put and
the Company may deliver an Advance Put Notice for the subsequent Put no sooner
than ten (10) Business Days after the date that such Put was canceled.
2.3.2 Termination of Right to Put. The Company's right to require the
Investor to purchase any subsequent Put Shares shall terminate permanently (an
"Automatic Termination"), unless waived in writing by the Investor, upon the
occurrence of any of the following:
<PAGE>
(a) the Company shall not exercise a Put or any Put thereafter if, at any
time, either the Company or any director or executive officer of the Company has
engaged in a transaction or conduct related to the Company that gives rise to
(i) a Securities and Exchange Commission enforcement action, or (ii) a civil
judgment or criminal conviction for fraud or misrepresentation, or for any other
offense that, if prosecuted criminally, would constitute a felony under
applicable law;
(b) the Company shall not exercise a Put or any Put thereafter, on any date
after (i) any Ineffective Period or Delisting Event, both as defined in the
Registration Rights Agreement, that last for four (4) consecutive months, or
(ii) a cumulative time period, including both Ineffective Periods and Delisting
Events, that lasts for an aggregate of four (4) months;
(c) the Company shall not exercise a Put or any Put thereafter if at any
time the Company has filed for and/or is subject to any bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors instituted by or against
the Company or any subsidiary of the Company; provided that in the event that an
involuntary bankruptcy petition is filed against the Company, the Company shall
have sixty (60) days to obtain dismissal of such petition before such Put
prohibition shall initiate; and
(d) the Company shall not exercise a Put after the sooner of (i) the date
that is three (3) years after the Effective Date of this Agreement, or (ii) the
Put Closing Date on which the aggregate of the Put Dollar Amounts for all Puts
equals the Maximum Offering Amount.
2.3.3 Put Limitations. The Company's right to exercise a Put shall be
limited as follows, unless waived in writing by the Investor:
(a) [Intentionally Left Blank].
(2) notwithstanding the amount of any Put, the Investor shall not be
obligated to purchase any additional Put Shares once the aggregate Put Dollar
Amount paid by Investor equals the Maximum Offering Amount;
<PAGE>
(c) the Investor shall not be obligated to acquire and pay for the Put
Shares with respect to any Put for which the Company has announced a subdivision
or combination, including a reverse split, of its Common Stock or has subdivided
or combined its Common Stock during the Extended Put Period;
(d) the Investor shall not be obligated to acquire and pay for the Put
Shares with respect to any Put for which the Company has paid a dividend of its
Common Stock or has made any other distribution of its Common Stock during the
Extended Put Period;
(e) the Investor shall not be obligated to acquire and pay for the Put
Shares with respect to any Put for which the Company has made, during the
Extended Put Period, a distribution of all or any portion of its assets or
evidences of indebtedness to the holders of its Common Stock; or
(f) the Investor shall not be obligated to acquire and pay for the Put
Shares with respect to any Put for which a Major Transaction has occurred during
the Extended Put Period;
2.3.4 Conditions Precedent to the Right of the Company to Deliver an
Advance Put Notice or a Put Notice and the Obligation of the Investor to
Purchase Put Shares. The right of the Company to deliver an Advance Put Notice
or a Put Notice and the obligation of the Investor hereunder to acquire and pay
for the Put Shares incident to a Put Closing is subject to the satisfaction, on
(i) the date of delivery of such Advance Put Notice or Put Notice and (ii) the
applicable Put Closing Date, of each of the following conditions, unless waived
in writing by the Investor:
(a) the Company's Common Stock shall be listed for and actively trading on
the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq National
Market or the New York Stock Exchange and the Put Shares shall be so listed, and
subject to NASD Rule 4820, to the Company's knowledge there shall be no notice
of any suspension or delisting with respect to the trading of the shares of
Common Stock on such market or exchange;
<PAGE>
(b) the Registration Statement covering the sale of the Registrable
Securities to the Investor shall be effective and, if so required, the Company
shall have satisfied any and all obligations pursuant to the Registration Rights
Agreement, including, but not limited to, the filing of the Supplemental
Registration Statement with the SEC with respect to the resale of all
Registrable Securities and the requirement that the Supplemental Registration
Statement shall have been declared effective by the SEC for the resale of all
Registrable Securities; and the Company shall have satisfied and shall be in
compliance with any and all obligations pursuant to this Agreement and the
Warrants;
(c) there shall have been no material adverse changes in the Company's
business prospects or financial condition, including but not limited to
incurring material liabilities, except as disclosed in the SEC documents filed
by the Company since the date of this Investment Agreement;
(d) the representations and warranties of the Company shall be true and
correct in all material respects as if made on such date and the conditions to
Investor's obligations set forth in this Section 2.3.4 are satisfied as of such
Closing, and the Company shall deliver a certificate, signed by an officer of
the Company, to such effect to the Investor;
(e) the Company shall have reserved for issuance a sufficient number of
Common Shares for the purpose of enabling the Company to satisfy any obligation
to issue Common Shares pursuant to any Put and to effect exercise of the
Warrants;
(f) the Registration Statement or Supplemental Registration Statement is not
subject to an Ineffective Period as defined in the Registration Rights
Agreement, the prospectus included therein is current and deliverable, and to
the Company's knowledge there is no notice of any investigation or inquiry
concerning any stop order with respect to the Registration Statement or
Supplemental Registration Statement; and
(g) if the Aggregate Issued Shares after the Closing of the Put would exceed
the Cap Amount, the Company shall have obtained the Stockholder 20% Approval as
specified in Section 6.12.
2.3.5 Documents Required to be Delivered on the Put Date as Conditions
to Closing of any Put. The Closing of any Put and Investor's obligations
hereunder shall additionally be conditioned upon the delivery to the Investor of
each of the following (the "Required Put Documents") on or before the applicable
Put Date, unless waived or extended in writing by the Investor:
(a) a number of Unlegended Share Certificates equal to the Intended Put
Share Amount, in denominations of not more than 1,000 shares per certificate;
<PAGE>
<PAGE>
(b) the following documents: Put Opinion of Counsel, Officer's Certificate,
Put Notice, any required Registration Opinion, and any report or disclosure
required under Section 2.3.6 or Section 2.6;
(3) current Risk Factors; and
(d) all documents, instruments and other writings required to be delivered
on or before the Put Date pursuant to any provision of this Agreement in order
to implement and effect the transactions contemplated herein.
2.3.6 Accountant's Letter and Registration Opinion.
<PAGE>
(a) The Company shall have caused to be delivered to the Investor, (i)
whenever required by Section 2.3.6(b) or by Section 2.6, and (ii) on the date
that is three (3) Business Days prior to each Put Date (the "Registration
Opinion Deadline"), an opinion of the Company's independent counsel, in
substantially the form of Exhibit R (the "Registration Opinion"), addressed to
the Investor stating, inter alia, that no facts ("Material Facts") have come to
such counsel's attention that have caused it to believe that the Registration
Statement is subject to an Ineffective Period or to believe that the
Registration Statement, any Supplemental Registration Statement (as each may be
amended, if applicable), and any related prospectuses, contains an untrue
statement of material fact or omits a material fact required to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. If a Registration Opinion cannot be delivered by the
Company's independent counsel to the Investor on the Registration Opinion
Deadline due to the existence of Material Facts or an Ineffective Period, the
Company shall promptly notify the Investor and as promptly as possible amend
each of the Registration Statement and any Supplemental Registration Statement,
as applicable, and any related prospectus or cause such Ineffective Period to
terminate, as the case may be, and deliver such Registration Opinion and updated
prospectus as soon as possible thereafter. If at any time after a Put Notice
shall have been delivered to Investor but before the related Pricing Period End
Date, the Company acquires knowledge of such Material Facts or any Ineffective
Period occurs, the Company shall promptly notify the Investor and shall deliver
a Put Cancellation Notice to the Investor pursuant to Section 2.3.13 by
facsimile and overnight courier by the end of that Business Day.
(b) (i) the Company shall engage its independent auditors to perform the
procedures in accordance with the provisions of Statement on Auditing Standards
No. 71, as amended, as agreed to by the parties hereto, and reports thereon (the
"Bring Down Cold Comfort Letters") as shall have been reasonably requested by
the Investor with respect to certain financial information contained in the
Registration Statement and shall have delivered to the Investor such a report
addressed to the Investor, on the date that is three (3) Business Days prior to
each Put Date.
(2) in the event that the Investor shall have requested delivery of an
"Agreed Upon Procedures Report" pursuant to Section 2.6, the Company shall
engage its independent auditors to perform certain agreed upon procedures and
report thereon as shall have been reasonably requested by the Investor with
respect to certain financial information of the Company and the Company shall
deliver to the Investor a copy of such report addressed to the Investor. In the
event that the report required by this Section 2.3.6(b) cannot be delivered by
the Company's independent auditors, the Company shall, if necessary, promptly
revise the Registration Statement and the Company shall not deliver a Put Notice
until such report is delivered.
2.3.7 Mechanics of Purchase of Put Shares.
(a) Investor's Obligation and Right to Purchase Shares. Subject to the
conditions set forth in this Agreement, following the Investor's receipt of a
validly delivered Put Notice, the Investor shall be required to purchase (each a
"Purchase") from the Company a number of Put Shares equal to the Put Share
Amount, in the manner described below.
<PAGE>
(b) Pricing Period. For purposes hereof, the "Pricing Period," shall mean,
unless otherwise shortened or lengthened under the terms of this Agreement, the
period beginning on the Business Day immediately following the Put Date and
ending on and including the date which is twenty (20) Business Days after such
Put Date; provided that, if a Put Cancellation Notice has been delivered to the
Investor after the Put Date, the Pricing Period for such Put shall end at the
close of trading on the last full trading day on the Principal Market that ends
prior to the moment of initial delivery of the Put Cancellation Notice (a
"Truncated Pricing Period") to the Investor.
2.3.8 Mechanics of Put Closing. Each of the Company and the Investor
shall deliver all documents, instruments and writings required to be delivered
by either of them pursuant to this Agreement at or prior to each Closing.
Subject to such delivery and the satisfaction of the conditions set forth in
Sections 2.3.4 and 2.3.5, the closing of the purchase by the Investor of Put
Shares shall occur by 5:00 PM, New York time, on the date which is five (5)
Business Days following the applicable Pricing Period End Date (or such other
time or later date as is mutually agreed to by the Company and the Investor)
(the "Payment Due Date") at the offices of Investor. On each Closing Date, the
Investor shall deliver to the Company, in the manner specified in Section 8
below, the Put Dollar Amount to be paid for such Put Shares, determined as
aforesaid. The closing (each a "Put Closing") for each Put shall occur on the
date that both (i) the Company has delivered to the Investor all Required Put
Documents, and (ii) the Investor has delivered to the Company such Put Dollar
Amount and any Late Payment Amount, if applicable (each a "Put Closing Date").
2.3.9 [Intentionally Left Blank].
1.1.10 Limitation on Short Sales. The Investor and its Affiliates
shall not engage in short sales of the Company's Common Stock; provided,
however, that the Investor may enter into any short sale or other hedging or
similar arrangement it deems appropriate with respect to Put Shares after it
receives a Put Notice with respect to such Put Shares so long as such sales or
arrangements do not involve more than the number of such Put Shares specified in
the Put Notice.
2.3.11 Cap Amount. If the Company becomes listed on the Nasdaq Small
Cap Market or the Nasdaq National Market, then, unless the Company has obtained
Stockholder 20% Approval as set forth in Section 6.12 or unless otherwise
permitted by Nasdaq, in no event shall the Aggregate Issued Shares exceed the
maximum number of shares of Common Stock (the "Cap Amount") that the Company
can, without stockholder approval, so issue pursuant to Nasdaq Rule
4460(i)(1)(d)(ii) (or any other applicable Nasdaq Rules or any successor rule)
(the "Nasdaq 20% Rule").
<PAGE>
2.3.12 Investor's Right to Defer Receipt. If at any time the Investor
would have the right to receive shares of Common Stock from the Company, and/or
the right to receive a Warrant or Warrants by reason of Section 2.4 hereof, and
as a result of receiving such additional shares of Common Stock or such Warrants
the Investor would be deemed to be, after taking into account Common Shares
previously acquired from the Company, Warrant Shares deemed to be beneficially
owned pursuant to ownership of the Warrants, and any other shares of Common
Stock of the Company deemed to be beneficially owned by the Investor, the
beneficial owner (within the meaning of Section 13(d) of the Exchange Act) of
9.9% of the Common Stock of the Company, the Investor may elect to defer receipt
of all or any portion of such Common Shares from the Company and/or defer
receipt of all or any portion of such Warrant or Warrants, by sending a notice
to the Company of such election. Such election shall not affect the Investor's
obligation to pay for Put Shares, as if such election had not been made, nor
shall it affect (other than by way of deferral, as set forth herein) the
Investor's absolute and unconditional right to receive the shares of Common
Stock and/or Warrants to which it was otherwise entitled. In the event the
Investor makes such election, (i) it may waive such election, in whole or in
part, at any time effective on sixty one (61) days' prior notice to the Company
and (ii) may waive it effective immediately upon notice to the Company in the
event of the announcement by the Company or any third party of a Major
Transaction. The Company shall deliver the shares and/or Warrants to which the
Investor is entitled on the effective date of the waiver in the case of clause
(i)
2.3.13 Put Cancellation.
(4) Mechanics of Put Cancellation. Subject to the limitations below, at any
time from the Advance Put Notice Date through the last day of the Pricing
Period, the Company may cancel a Put (a "Put Cancellation"), in whole or in
part, by delivering written notice to the Investor (the "Put Cancellation
Notice"), attached as Exhibit Q, by facsimile and overnight courier. The "Put
Cancellation Date" shall be the date that the Put Cancellation Notice is first
received by the Investor, if such notice is received by the Investor by 6:00
p.m., New York time, and shall be the following date, if such notice is received
by the Investor after 6:00 p.m., New York time. The Investor shall, within one
(1) Trading Day of receipt of a Put Cancellation, send, via facsimile, a
confirmation of receipt (the "Put Cancellation Confirmation," the form of which
is attached hereto as Exhibit S) of the Put Cancellation Notice to Company
specifying that the Put Cancellation Notice has been received;
<PAGE>
(b) Limitations of Put Cancellation. The Company may not deliver a Put
Cancellation Notice unless (i) the Company discovers the existence of Material
Facts or any Ineffective Period occurs after a Put Date but before the Put
Closing (in which case Put Cancellation is mandatory), or (ii) the Closing Bid
Price on the Put Cancellation Date is less than eighty percent (80%) of the
Closing Bid Price on the applicable Advance Put Notice Date. Notwithstanding
any Put Cancellation Notice, the Put shall remain effective with respect to the
number of shares of Common Stock sold by the Investor from the Advance Put
Notice Date through the close of trading on the Put Cancellation Date and the
Pricing Period shall end on the Put Cancellation Date.
(c) Effect of Canceling a Put. Once the Company delivers a valid Put
Cancellation Notice, (i) the Pricing Period shall end on the close of trading on
the Put Cancellation Date ("Truncated Pricing Period") and the Pricing Period
End Date shall be deemed to be the Put Cancellation Date for purposes of
calculating the Put Share Price and (ii) the Investor shall not be obligated to
purchase any shares of Common Stock for that Put. Notwithstanding the above,
the Company shall be obligated, upon canceling any Put, to issue to the Investor
Unlegended Share Certificates representing a number of shares of Common Stock
equal to the number of shares of Common Stock sold, if any, by the Investor from
the Advance Put Notice Date through the close of trading on the Put Cancellation
Date, but not exceeding the Intended Put Share Amount.
(d) Put Cancellation Notice Confirmation. Upon receipt by the Investor of a
facsimile copy of the Put Cancellation Notice, the Investor shall promptly send,
via facsimile, a confirmation of receipt (the "Put Cancellation Notice
Confirmation") of the Put Cancellation Notice to Company specifying that the Put
Cancellation Notice has been received and affirming the Put Cancellation Date
and the number of shares of Common Stock that have been sold by the Investor
from the Advance Put Notice Date through the close of trading on the Put
Cancellation Date.
2.3.14 Investment Agreement Cancellation. The Company may terminate (a
"Company Termination") its right to initiate future Puts by providing written
notice ("Termination Notice") to the Investor, by facsimile and overnight
courier, at any time, provided that such termination shall have no effect on the
parties' other rights and obligations under this Agreement, the Registration
Rights Agreement or the Warrants.
<PAGE>
2.3.15 Return of Excess Common Shares. In the event that the number of
Shares purchased by the Investor pursuant to its obligations hereunder is less
than the Intended Put Share Amount, the Investor shall promptly return to the
Company any shares of Common Stock in the Investor's possession that are not
being purchased by the Investor.
2.4 Warrants.
2.4.1 [Intentionally Omitted].
2.4.2 Purchase Warrants. Within five (5) Business Days of the end of
each Pricing Period, the Company shall issue and deliver to the Investor a
warrant ("Purchase Warrant"), in the form attached hereto as Exhibit D, or such
other form as agreed upon by the parties, to purchase a number of shares of
Common Stock equal to 10% of the number of Put Shares issued to Investor in that
Put. Each Purchase Warrant shall be exercisable at a price (the "Purchase
Warrant Exercise Price") which shall initially equal 100% of the Market Price on
the Pricing Period End Date. Each Purchase Warrant shall be immediately
exercisable at the Purchase Warrant Exercise Price, and shall have a term
beginning on the date of issuance and ending on date that is three (3) years
thereafter. The Warrant Shares shall be covered by the Registration Statement
or, if necessary, registered for resale pursuant to the Registration Rights
Agreement. Concurrently with the issuance and delivery of the Purchase Warrant
to the Investor, the Company shall deliver to the Investor a Purchase Warrant
Opinion of Counsel (signed by the Company's independent counsel).
2.5 [Intentionally Left Blank].
2.6 Due Diligence Review. The Company shall make available for
inspection and review by the Investor (the "Due Diligence Review"), advisors to
and representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of Common Stock on behalf of the Investor
pursuant to the Registration Statement, any Supplemental Registration Statement,
or amendments or supplements thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC Documents and other filings with the SEC,
and all other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such information reasonably
requested by the Investor or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective accountants
and attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
<PAGE>
2.6.1 Treatment of Nonpublic Information. The Company shall not
disclose nonpublic information to the Investor or to its advisors or
representatives unless prior to disclosure of such information the Company
identifies such information as being nonpublic information and provides the
Investor and such advisors and representatives with the opportunity to accept or
refuse to accept such nonpublic information for review. The Company may, as a
condition to disclosing any nonpublic information hereunder, require the
Investor and its advisors and representatives to enter into a confidentiality
agreement (including an agreement with such advisors and representatives
prohibiting them from trading in Common Stock during such period of time as they
are in possession of nonpublic information) in form reasonably satisfactory to
the Company and the Investor.
Nothing herein shall require the Company to disclose nonpublic information
to the Investor or its advisors or representatives, and the Company represents
that it does not disseminate nonpublic information to any investors who purchase
stock in the Company in a public offering, to money managers or to securities
analysts, provided, however, that notwithstanding anything herein to the
contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
nonpublic information (whether or not requested of the Company specifically or
generally during the course of due diligence by and such persons or entities),
which, if not disclosed in the Prospectus included in the Registration
Statement, would cause such Prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Nothing contained in this Section 2.6 shall be construed to mean
that such persons or entities other than the Investor (without the written
consent of the Investor prior to disclosure of such information) may not obtain
nonpublic information in the course of conducting due diligence in accordance
with the terms of this Agreement; provided, however, that in no event shall the
Investor's advisors or representatives disclose to the Investor the nature of
the specific event or circumstances constituting any nonpublic information
discovered by such advisors or representatives in the course of their due
diligence without the written consent of the Investor prior to disclosure of
such information.
2.6.2 Disclosure of Misstatements and Omissions. The Investor's
advisors or representatives shall make complete disclosure to the Investor's
counsel of all events or circumstances constituting nonpublic information
discovered by such advisors or representatives in the course of their due
diligence upon which such advisors or representatives form the opinion that the
Registration Statement contains an untrue statement of a material fact or omits
a material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in the light of the circumstances in
which they were made, not misleading. Upon receipt of such disclosure, the
Investor's counsel shall consult with the Company's independent counsel in order
to address the concern raised as to the existence of a material misstatement or
omission and to discuss appropriate disclosure with respect thereto; provided,
however, that such consultation shall not constitute the advice of the Company's
independent counsel to the Investor as to the accuracy of the Registration
Statement and related Prospectus.
<PAGE>
1.1.11 Procedure if Material Facts are Reasonably Believed to be Untrue
or are Omitted. In the event after such consultation the Investor or the
Investor's counsel reasonably believes that the Registration Statement contains
an untrue statement or a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading,
(a) the Company shall file with the SEC an amendment to the Registration
Statement responsive to such alleged untrue statement or omission and provide
the Investor, as promptly as practicable, with copies of the Registration
Statement and related Prospectus, as so amended, or
(b) if the Company disputes the existence of any such material misstatement
or omission, (i) the Company's independent counsel shall provide the Investor's
counsel with a Registration Opinion and (ii) in the event the dispute relates to
the adequacy of financial disclosure and the Investor shall reasonably request,
the Company's independent auditors shall provide to the Company a letter
("Agreed Upon Procedures Report") outlining the performance of such "agreed upon
procedures" as shall be reasonably requested by the Investor and the Company
shall provide the Investor with a copy of such letter.
2.7. Commitment Payments. On the date of the Investment Commitment
Closing, the Company shall pay to the Investor an amount equal to $250,000 (the
"Initial Commitment Fee"), representing 2_% of the Maximum Offering Amount.
Such amount shall be payable in either cash or by delivering to the Investor a
number of unrestricted shares of the Company's common stock which, when
multiplied by the average Closing Bid Price of the Company's common stock for
the five (5) trading days immediately prior to the date of the Investment
Commitment Closing, will equal the Initial Commitment Fee.
<PAGE>
On each anniversary of the Investment Commitment Closing, if the Investor
has not purchased a number of Put Shares for an aggregate Put Dollar Amount of
at least $1,000,000 (the "Annual Commitment Amount") during the preceding twelve
(12) Calendar Months (each such period a "Commitment Evaluation Period"), the
Company, in consideration of the Investor's commitment costs, including but not
limited to, due diligence expenses, shall deliver to the Investor a warrant
(each a "Commitment Warrant") to purchase a number of shares of the Company's
Common Stock equal to 10% of the number of shares of the Company's Common Stock
determined by dividing (i) the Commitment Shortfall, which shall be equal to the
Annual Commitment Amount less the actual aggregate Put Dollar Amount for the
relevant Commitment Evaluation Period, by (ii) the average Closing Bid Price of
the Company's Common Stock for the five (5) Trading Days ending on the last day
of the relevant Commitment Evaluation Period. The Commitment Warrant shall be
immediately exercisable, shall have an exercise price equal to 100% of the price
determined in clause (ii) above and shall be exercisable for a period of three
(3) years. The Warrant Shares shall be registered for resale pursuant to the
Registration Rights Agreement.
3. Representations, Warranties and Covenants of Investor. Investor hereby
represents and warrants to and agrees with the Company as follows:
1.3 Accredited Investor. Investor is an accredited investor
("Accredited Investor"), as defined in Rule 501 of Regulation D, and has checked
the applicable box set forth in Section 12 of this Agreement.
3.2 Investment Experience; Access to Information; Independent
Investigation.
3.2.1 Access to Information. Investor or Investor's professional
advisor has been granted the opportunity to ask questions of and receive answers
from representatives of the Company, its officers, directors, employees and
agents concerning the terms and conditions of this Offering, the Company and its
business and prospects, and to obtain any additional information which Investor
or Investor's professional advisor deems necessary to verify the accuracy and
completeness of the information received.
1.3.10 Reliance on Own Advisors. Investor has relied completely on the
advice of, or has consulted with, Investor's own personal tax, investment, legal
or other advisors and has not relied on the Company or any of its affiliates,
officers, directors, attorneys, accountants or any affiliates of any thereof and
each other person, if any, who controls any of the foregoing, within the meaning
of Section 15 of the Act for any tax or legal advice (other than reliance on
information in the Disclosure Documents as defined in Section 3.2.4 below and on
the Opinion of Counsel). The foregoing, however, does not limit or modify
Investor's right to rely upon covenants, representations and warranties of the
Company in this Agreement.
3.2.3 Capability to Evaluate. Investor has such knowledge and
experience in financial and business matters so as to enable such Investor to
utilize the information made available to it in connection with the Offering in
order to evaluate the merits and risks of the prospective investment, which are
substantial, including without limitation those set forth in the Disclosure
Documents (as defined in Section 3.2.4 below).
<PAGE>
3.2.4 Disclosure Documents. Investor, in making Investor's investment
decision to subscribe for the Investment Agreement hereunder, represents that
(a) Investor has received and had an opportunity to review (i) the Company's
preliminary Registration Statement on Form SB-2, together with all amendments
thereto and comments from the SEC thereon (ii) the Company's audited financial
statements for the years ended December 31, 1998 and 1997, (iii) the Company's
unaudited financial statements for the six (6) months ended June 30, 1999 and
1998, (iv) the Risk Factors, attached as Exhibit J, (the "Risk Factors"), (v)
the Capitalization Schedule, attached as Exhibit K, (the "Capitalization
Schedule"), and (vi) the Use of Proceeds Schedule, attached as Exhibit L, (the
"Use of Proceeds Schedule"); (b) Investor has read, reviewed, and relied solely
on the documents described in (a) above, the Company's representations and
warranties and other information in this Agreement, including the exhibits,
documents prepared by the Company which have been specifically provided to
Investor in connection with this Offering (the documents described in this
Section 3.2.4 (a) and (b) are collectively referred to as the "Disclosure
Documents"), and an independent investigation made by Investor and Investor's
representatives, if any; (c) Investor has, prior to the date of this Agreement,
been given an opportunity to review material contracts and documents of the
Company which have been filed as exhibits to the Company's Registration
Statement and has had an opportunity to ask questions of and receive answers
from the Company's officers and directors; and (d) is not relying on any oral
representation of the Company or any other person, nor any written
representation or assurance from the Company other than those contained in the
Disclosure Documents or incorporated herein or therein. The foregoing, however,
does not limit or modify Investor's right to rely upon covenants,
representations and warranties of the Company in Sections 5 and 6 of this
Agreement. Investor acknowledges and agrees that the Company has no
responsibility for, does not ratify, and is under no responsibility whatsoever
to comment upon or correct any reports, analyses or other comments made about
the Company by any third parties, including, but not limited to, analysts'
research reports or comments (collectively, "Third Party Reports"), and Investor
has not relied upon any Third Party Reports in making the decision to invest.
3.2.5 Investment Experience; Fend for Self. Investor has substantial
experience in investing in securities and it has made investments in securities
other than those of the Company. Investor acknowledges that Investor is able to
fend for Investor's self in the transaction contemplated by this Agreement, that
Investor has the ability to bear the economic risk of Investor's investment
pursuant to this Agreement and that Investor is an "Accredited Investor" by
virtue of the fact that Investor meets the investor qualification standards set
forth in Section 3.1 above. Investor has not been organized for the purpose of
investing in securities of the Company, although such investment is consistent
with Investor's purposes.
3.3 Registered Securities; Investment Intent; Resale Restrictions.
<PAGE>
3.3.1 Registered Securities. The Investor understands that the Company
has filed a Registration Statement on Form SB-2 covering the shares of Common
Stock, and Warrants and Warrant Shares to be issued to Investor at each Put
Closing, and as such, such securities shall be registered under the Act
(collectively, the "Registered Securities").
3.3.2 Investment Intent. The Investor is entering into this Agreement
for its own account and the Investor has no present arrangement (whether or not
legally binding) at any time to sell the Common Stock to or through any person
or entity; provided, however, that by making the representations herein, the
Investor, except as required by Section 3.3.3 below, does not agree to hold the
Common Stock for any minimum or other specific term and reserves the right to
dispose of the Common Stock at any time in accordance with federal and state
securities laws applicable to such disposition.
3.4 Due Authorization.
3.4.1 Authority. The person executing this Investment Agreement, if
executing this Agreement in a representative or fiduciary capacity, has full
power and authority to execute and deliver this Agreement and each other
document included herein for which a signature is required in such capacity and
on behalf of the subscribing individual, partnership, trust, estate, corporation
or other entity for whom or which Investor is executing this Agreement. Investor
has reached the age of majority (if an individual) according to the laws of the
state in which he or she resides.
3.4.2 Due Authorization. If Investor is a corporation, Investor is duly
and validly organized, validly existing and in good tax and corporate standing
as a corporation under the laws of the jurisdiction of its incorporation with
full power and authority to purchase the Securities to be purchased by Investor
and to execute and deliver this Agreement.
3.4.3 Partnerships. If Investor is a partnership, the representations,
warranties, agreements and understandings set forth above are true with respect
to all partners of Investor (and if any such partner is itself a partnership,
all persons holding an interest in such partnership, directly or indirectly,
including through one or more partnerships), and the person executing this
Agreement has made due inquiry to determine the truthfulness of the
representations and warranties made hereby.
3.4.4 Representatives. If Investor is purchasing in a representative or
fiduciary capacity, the representations and warranties shall be deemed to have
been made on behalf of the person or persons for whom Investor is so purchasing.
4. Acknowledgments. Investor is aware that:
<PAGE>
4.1 Risks of Investment. Investor recognizes that an investment in the
Company involves substantial risks, including the potential loss of Investor's
entire investment herein. Investor recognizes that the Disclosure Documents,
this Agreement and the exhibits hereto do not purport to contain all the
information, which would be contained in a registration statement under the Act;
4.2 No Government Approval. No federal or state agency has passed upon
the Securities, recommended or endorsed the Offering, or made any finding or
determination as to the fairness of this transaction;
4.3 [Intentionally Left Blank.]
4.4 Restrictions on Transfer. Unless the Investor has otherwise
satisfied the requirements of Section 3.3.3 above, Investor may not attempt to
sell, transfer, assign, pledge or otherwise dispose of all or any portion of the
Securities or any component thereof.
4.5 [Intentionally Left Blank.]
4.6 [Intentionally Left Blank.]
4.7 Legends. Neither the certificates representing the Put Shares nor
the certificates representing the Warrant Shares shall bear a restrictive
legend.
5. Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to Investor (which shall be true at
the signing of this Agreement, and as of any such later date as contemplated
hereunder) and agrees with Investor that, except as set forth in the Schedule of
Exceptions attached hereto as Exhibit C:
5.1 Organization, Good Standing, and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, USA and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on the business or properties of the Company and its
subsidiaries taken as a whole. The Company is not the subject of any pending,
threatened or, to its knowledge, contemplated investigation or administrative or
legal proceeding (a "Proceeding") by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, or the Securities and Exchange
Commission, The National Association of Securities Dealer, Inc. The Nasdaq
Stock Market, Inc. or any state securities commission, or any other governmental
entity, which have not been disclosed in the Disclosure Documents. None of the
disclosed Proceedings, if any, will have a material adverse effect upon the
Company or the market for the Common Stock. Except as set forth in the
Disclosure documents, the Company has no subsidiaries.
<PAGE>
5.2 Corporate Condition. The Company's condition is, in all material
respects, as described in the Disclosure Documents (as further set forth in any
subsequently filed Disclosure Documents, if applicable), except for changes in
the ordinary course of business and normal year-end adjustments that are not, in
the aggregate, materially adverse to the Company. Except for continuing losses,
there have been no material adverse changes to the Company's business, financial
condition, or prospects since the dates of such Disclosure Documents. The
financial statements as contained in the Form SB-2 have been prepared in
accordance with generally accepted accounting principles, consistently applied
(except as otherwise permitted by Regulation S-X of the Exchange Act), subject,
in the case of the unaudited financial statements, to customary year-end
adjustments and the absence of certain footnotes, and fairly present the
financial condition of the Company as of the dates of the balance sheets
included therein and the results of its operations and cash flows for the
periods then ended. Without limiting the foregoing, there are no material
liabilities, contingent or actual, that are not disclosed in the Disclosure
Documents (other than liabilities incurred by the Company in the ordinary course
of its business, consistent with its past practice, after the period covered by
the Disclosure Documents). The Company has paid all material taxes that are
due, except for taxes that it reasonably disputes. There is no material claim,
litigation, or administrative proceeding pending or, to the best of the
Company's knowledge, threatened against the Company, except as disclosed in the
Disclosure Documents. This Agreement and the Disclosure Documents do not contain
any untrue statement of a material fact and do not omit to state any material
fact required to be stated therein or herein necessary to make the statements
contained therein or herein not misleading in the light of the circumstances
under which they were made. No event or circumstance exists relating to the
Company which, under applicable law, requires public disclosure but which has
not been so publicly announced or disclosed.
5.3 Authorization. All corporate action on the part of the Company by
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance and delivery of the Common
Stock being sold hereunder and the issuance (and/or the reservation for
issuance) of the Warrants and the Warrant Shares have been taken, and this
Agreement and the Registration Rights Agreement constitute valid and legally
binding obligations of the Company, enforceable in accordance with their terms,
except insofar as the enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, or other similar laws affecting creditors' rights
generally or by principles governing the availability of equitable remedies.
The Company has obtained all consents and approvals required for it to execute,
deliver and perform each agreement referenced in the previous sentence.
<PAGE>
5.4 Valid Issuance of Common Stock. The Common Stock and the Warrants,
when issued, sold and delivered in accordance with the terms hereof, for the
consideration expressed herein, will be validly issued, fully paid and
nonassessable and, based in part upon the representations of Investor in this
Agreement, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Warrant Shares, when issued in accordance with the
terms of the Warrants, shall be duly and validly issued and outstanding, fully
paid and nonassessable, and based in part on the representations and warranties
of Investor, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Put Shares, the Warrants and the Warrant Shares will
be issued free of any preemptive rights.
5.5 Compliance with Other Instruments. The Company is not in violation
or default of any provisions of its Certificate of Incorporation or Bylaws, each
as amended and in effect on and as of the date of the Agreement, or of any
material provision of any material instrument or material contract to which it
is a party or by which it is bound or of any provision of any federal or state
judgment, writ, decree, order, statute, rule or governmental regulation
applicable to the Company, which would have a material adverse effect on the
Company's business or prospects, or on the performance of its obligations under
this Agreement or the Registration Rights Agreement. The execution, delivery
and performance of this Agreement and the other agreements entered into in
conjunction with the Offering and the consummation of the transactions
contemplated hereby and thereby will not (a) result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument or contract or
an event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company, which would have a material adverse effect on the
Company's business or prospects, or on the performance of its obligations under
this Agreement or the Registration Rights Agreement, (b) violate the Company's
Certificate of Incorporation or By-Laws, or (c) violate any statute, rule or
governmental regulation applicable to the Company which violation would have a
material adverse effect on the Company's business or prospects.
5.6 [Intentionally Left Blank.].
5.7 Capitalization. The capitalization of the Company as of June 30,
1999 is, and the capitalization as of the Closing, subject to exercise of any
outstanding warrants and/or exercise of any outstanding stock options, after
taking into account the offering of the Securities contemplated by this
Agreement and all other share issuances occurring prior to this Offering, will
be, as set forth in the Capitalization Schedule as set forth in Exhibit K.
There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities. Except as
disclosed in the Capitalization Schedule, as of the date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe for,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company, or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company, and
(ii) there are no agreements or arrangements under which the Company is
obligated to register the sale of any of its securities under the Act (except
the Registration Rights Agreement).
<PAGE>
5.8 Intellectual Property. The Company has valid, unrestricted and
exclusive ownership of or rights to use the patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology and other
intellectual property necessary to the conduct of its business. Exhibit M lists
all patents, trademarks, trademark registrations, trade names and copyrights of
the Company. The Company has granted such licenses or has assigned or otherwise
transferred a portion of (or all of) such valid, unrestricted and exclusive
patents, trademarks, trademark registrations, trade names, copyrights, know-how,
technology and other intellectual property necessary to the conduct of its
business as set forth in Exhibit M. The Company has been granted licenses,
know-how, technology and/or other intellectual property necessary to the conduct
of its business as set forth in Exhibit M. To the best of the Company's
knowledge after due inquiry, the Company is not infringing on the intellectual
property rights of any third party, nor is any third party infringing on the
Company's intellectual property rights. There are no restrictions in any
agreements, licenses, franchises, or other instruments that preclude the Company
from engaging in its business as presently conducted.
5.9 Use of Proceeds. As of the date hereof, the Company expects to use
the proceeds from this Offering (less fees and expenses) for the purposes and in
the approximate amounts set forth on the Use of Proceeds Schedule set forth as
Exhibit L hereto. These purposes and amounts are estimates and are subject to
change without notice to any Investor.
1.4 No Rights of Participation. No person or entity, including, but
not limited to, current or former stockholders of the Company, underwriters,
brokers, agents or other third parties, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the financing contemplated by this Agreement which has not been waived.
5.11 Company Acknowledgment. The Company hereby acknowledges that,
subject to Section 3.3.3, Investor may elect to hold the Securities for various
periods of time, as permitted by the terms of this Agreement, the Warrants, and
other agreements contemplated hereby, and the Company further acknowledges that
Investor has made no representations or warranties, either written or oral, as
to how long the Securities will be held by Investor or regarding Investor's
trading history or investment strategies.
5.12 [Intentionally Left Blank].
5.13 Underwriter's Fees and Rights of First Refusal. The Company shall
be obligated to pay 10% of the proceeds received pursuant to the Offering to any
underwriter, broker, agent or other representative other than the Investor in
connection with this Offering.
5.14 [Intentionally Left Blank.]
5.15 [Intentionally Left Blank.]
5.16 [Intentionally Left Blank].
<PAGE>
5.17 Foreign Corrupt Practices. Neither the Company, nor any director,
officer, agent, employee or other person acting on behalf of the Company has, in
the course of its actions for, or on behalf of, the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
1.5 Key Employees. Each "Key Employee" (as defined in Exhibit N) is
currently serving the Company in the capacity disclosed in Exhibit N. No Key
Employee, to the best knowledge of the Company and its subsidiaries, is, or is
now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best knowledge of the Company,
any intention to terminate his employment with, or services to, the Company.
5.19 Representations Correct. The foregoing representations, warranties
and agreements are true, correct and complete in all material respects, and
shall survive any Put Closing and the issuance of the shares of Common Stock
thereby.
5.20 Tax Status. The Company has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and as set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.
<PAGE>
5.21 Transactions With Affiliates. Except as set forth in the
Disclosure Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
5.22 Application of Takeover Protections. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under Delaware law which is or could become
applicable to the Investor as a result of the transactions contemplated by this
Agreement, including, without limitation, the issuance of the Common Stock, any
exercise of the Warrants and ownership of the Common Shares and Warrant Shares.
The Company has not adopted and will not adopt any "poison pill" provision that
will be applicable to Investor as a result of transactions contemplated by this
Agreement.
5.23 Other Agreements. The Company has not, directly or indirectly,
made any agreements with the Investor under a subscription in the form of this
Agreement for the purchase of Common Stock, relating to the terms or conditions
of the transactions contemplated hereby or thereby except as expressly set forth
herein, respectively, or in exhibits hereto or thereto.
5.24 Major Transactions. There are no other Major Transactions
currently pending or contemplated by the Company.
5.25 Financings. Except as set forth in Exhibit , there are no
other financings currently pending or contemplated by the Company.
<PAGE>
5.26 Shareholder Authorization. The Company shall, at its next annual
shareholder meeting following its listing on either the Nasdaq Small Cap Market
or the Nasdaq National Market, or at a special meeting to be held as soon as
practicable thereafter, use its best efforts to obtain approval of its
shareholders to (i) authorize the issuance of the full number of shares of
Common Stock which would be issuable under this Agreement and eliminate any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or any of its securities with respect to the
Company's ability to issue shares of Common Stock in excess of the Cap Amount
(such approvals being the "20% Approval") and (ii) the increase in the number of
authorized shares of Common Stock of the Company (the "Share Authorization
Increase Approval") such that at least [27,027,027] shares can be reserved for
this Offering. In connection with such shareholder vote, the Company shall use
its best efforts to cause all officers and directors of the Company to promptly
enter into irrevocable agreements to vote all of their shares in favor of
eliminating such prohibitions. As soon as practicable after the 20% Approval and
the Share Authorization Increase Approval, the Company agrees to use its best
efforts to reserve [27,027,027] shares of Common Stock for issuance under this
Agreement.
6. Covenants of the Company.
6.1 Independent Auditors. The Company shall, until at least the
Termination Date, maintain as its independent auditors an accounting firm
authorized to practice before the SEC.
6.2 Corporate Existence and Taxes. The Company shall, until at least
the Termination Date, maintain its corporate existence in good standing and,
concurrent with the Effective Date of its Registration Statement file a Form 8-A
under the Securities Exchange Act of 1934 (the "Exchange Act") and remain a
"Reporting Issuer" (defined as a Company which files periodic reports under the
Exchange Act) (provided, however, that the foregoing covenant shall not prevent
the Company from entering into any merger or corporate reorganization as long as
the surviving entity in such transaction, if not the Company, assumes the
Company's obligations with respect to the Common Stock and has Common Stock
listed for trading on a stock exchange or on Nasdaq and is a Reporting Issuer)
and shall pay all its taxes when due except for taxes which the Company
disputes.
6.3 Registration Rights. The Company will enter into a registration
rights agreement covering the resale of the Common Shares and the Warrant
Shares, if necessary, substantially in the form of the Registration Rights
Agreement attached as Exhibit A.
6.4 [Intentionally Omitted].
6.5 Asset Transfers. The Company shall not (i) transfer, sell, convey
or otherwise dispose of any of its material assets to any subsidiary except for
a cash or cash equivalent consideration and for a proper business purpose or
(ii) transfer, sell, convey or otherwise dispose of any of its material assets
to any Affiliate, as defined below, during the Term of this Agreement. For
purposes hereof, "Affiliate" shall mean any officer of the Company, director of
the Company or owner of twenty percent (20%) or more of the Common Stock or
other securities of the Company.
6.6 Capital Raising Limitations; Rights of First Refusal.
<PAGE>
6.6.1 Capital Raising Limitations. During the period from the date
of this Agreement until the earlier of (i) the Termination Date, or (ii) (a) in
the case of a Company Termination, the date of such Company Termination, or (b)
in the case of an Automatic Termination that is not waived by the Investor, the
date of such Automatic Termination, the Company shall not issue or sell, or
agree to issue or sell, for cash in private capital raising transactions (the
following to be collectively referred to herein as, the "Variable Priced
Securities"), any debt or equity securities which are convertible into,
exercisable or exchangeable for, or carry the right to receive additional shares
of Common Stock either (i) at any conversion, exercise or exchange rate or other
price that is based upon and/or varies with the trading prices of or quotations
for Common Stock at any time after the initial issuance of such debt or equity
security, or (ii) with a fixed conversion, exercise or exchange price that is
subject to being reset at some future date at any time after the initial
issuance of such debt or equity security or upon the occurrence of specified
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock. During the period from the date of this
Agreement until the Termination Date, the Company shall not issue or sell, or
agree to issue or sell, for cash in private capital raising transactions any
securities of the Company pursuant to an equity line structure or format similar
in nature to this Offering without obtaining the prior written approval of the
Investor of the Offering (the limitations referred to in this sentence are
collectively referred to as the "Capital Raising Limitations").
6.6.2 Investor's Right of First Refusal. For any private capital
raising transactions of Variable Priced Securities or equity line structured
investments which close after the Capital Raising Deadline and on or prior to
the date that is six (6) months after the Termination Date of this Agreement,
not including any warrants issued in conjunction with this Investment Agreement,
the Company agrees to deliver to Investor, at least ten (10) days prior to the
closing of such transaction, written notice describing the proposed transaction,
including the terms and conditions thereof, and providing the Investor and its
affiliates an option during the ten (10) day period following delivery of such
notice to purchase the securities being offered in such transaction on the same
terms as contemplated by such transaction.
6.6.3 Exceptions to the Capital Raising Limitation and Rights of First
Refusal. Notwithstanding the above, the Capital Raising Limitations and the
Rights of First Refusal shall not apply to any transaction involving issuances
of securities in connection with a merger, consolidation, acquisition or sale of
assets, or in connection with any strategic partnership or joint venture (the
primary purpose of which is not to raise equity capital), or in connection with
the disposition or acquisition of a business, product or license by the Company
or exercise of options by employees, consultants or
directors. The Capital Raising Limitations also shall not apply to (a) the
issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof, (b)
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option or restricted stock plan for the
benefit of the Company's employees, directors or consultants, or (c) the
issuance of debt securities, with no equity feature, incurred solely for working
capital purposes.
6.7 Financial 10-KSB Statements, Etc. and Current Reports on Form 8-K.
The Company shall deliver to the Investor copies of its annual reports on Form
10-KSB, and quarterly reports on Form 10-QSB and shall deliver to the Investor
current reports on Form 8-K within two (2) days of filing for the Term of this
Agreement.
<PAGE>
6.8 Opinion of Counsel. Investor shall, concurrent with the purchase of
the Common Stock and accompanying Warrants pursuant to this Agreement, receive
an opinion letter from the Company's legal counsel, in the form attached as
Exhibit B or in such form as agreed upon by the parties, as to the Investment
Commitment Closing and in the form attached as Exhibit I or in such form as
agreed upon by the parties, as to any Put Closing.
[6.9 Removal of Legend. If the certificates representing any Securities
are issued with a restrictive Legend in accordance with the terms of this
Agreement, the Legend shall be removed and the Company shall issue a certificate
without such Legend to the holder of any Security upon which it is stamped, and
a certificate for a security shall be originally issued without the Legend, if
(a) the sale of such Security is registered under the Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions (the reasonable
cost of which shall be borne by the Investor), to the effect that a public sale
or transfer of such Security may be made without registration under the Act, or
(c) such holder provides the Company with reasonable assurances that such
Security can be sold pursuant to Rule 144. Each Investor agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which were originally issued without the Legend,
pursuant to an effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of the Act.]
6.10 Listing. Subject to the remainder of this Section 6.10, the
Company shall ensure that its shares of Common Stock (including all Warrant
Shares) are listed and available for trading on the O.T.C. Bulletin Board.
Thereafter, the Company shall (i) use its best efforts to continue the listing
and trading of its Common Stock on the O.T.C. Bulletin Board or to become
eligible for and listed and available for trading on the Nasdaq Small Cap
Market, the NMS, or the New York Stock Exchange ("NYSE"); and (ii) comply in all
material respects with the Company's reporting, filing and other obligations
under the By-Laws or rules of the National Association of Securities Dealers
("NASD") and such exchanges, as applicable.
<PAGE>
6.11 The Company's Instructions to Transfer Agent. The Company will
instruct the Transfer Agent of the Common Stock, by delivering instructions in
the form of Exhibit T hereto, to issue certificates, registered in the name of
each Investor or its nominee, for the Put Shares and Warrant Shares in such
amounts as specified from time to time by the Company upon any exercise by the
Company of a Put and/or exercise of the Warrants by the holder thereof. Such
certificates shall not bear a Legend unless issuance with a Legend is permitted
by the terms of this Agreement and Legend removal is not permitted by Section
6.9 hereof and the Company shall cause the Transfer Agent to issue such
certificates without a Legend. Nothing in this Section shall affect in any way
Investor's obligations and agreement set forth in Sections 3.3.3 hereof with
respect to any resale of the Securities. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to a Investor by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 6.11 will be inadequate and agrees, in the event
of a breach or threatened breach by the Company of the provisions of this
Section 6.11, that a Investor shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6.12 Stockholder 20% Approval. Prior to the closing of any Put that
would cause the Aggregate Issued Shares to exceed the Cap Amount, the Company
shall obtain approval of its stockholders to authorize (i) the issuance of the
full number of shares of Common Stock which would be issuable pursuant to this
Agreement but for the Cap Amount and eliminate any prohibitions under applicable
law or the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the Company
or any of its securities with respect to the Company's ability to issue shares
of Common Stock in excess of the Cap Amount (such approvals being the
"Stockholder 20% Approval").
6.13 Press Release. The Company agrees that the Investor shall have the
right to review and comment upon any press release issued by the Company in
connection with the Offering which approval shall not be unreasonably withheld
by Investor.
6.14 Change in Law or Policy. In the event of a change in law, or
policy of the SEC, as evidenced by a No-Action letter or other written
statements of the SEC or the NASD which causes the Investor to be unable to
perform its obligations hereunder, this Agreement shall be automatically
terminated and no further Commitment Warrants shall be due.
7. Investor Covenant/Miscellaneous.
7.1 Representations and Warranties Survive the Closing; Severability.
Investor's and the Company's representations and warranties shall survive the
Investment Date and any Put Closing contemplated by this Agreement
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, or is altered by a term required by the Securities
Exchange Commission to be included in the Registration Statement, this Agreement
shall continue in full force and effect without said provision; provided that if
the removal of such provision materially changes the economic benefit of this
Agreement to the Investor, the Investor, at its option, may terminate this
Agreement or require that other terms of the Agreement be amended to compensate
for such material economic changes.
<PAGE>
7.2 Successors and Assigns. This Agreement shall not be assignable
without the Company's written consent. If assigned, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Investor may assign Investor's rights hereunder, in
connection with any private sale of the Common Stock of such Investor, so long
as, as a condition precedent to such transfer, the transferee executes an
acknowledgment agreeing to be bound by the applicable provisions of this
Agreement in a form acceptable to the Company and provides an original copy of
such acknowledgment to the Company.
7.3 Execution in Counterparts Permitted. This Agreement may be executed
in any number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one (1) instrument.
7.4 Titles and Subtitles; Gender. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. The use in this Agreement of a
masculine, feminine or neither pronoun shall be deemed to include a reference to
the others.
7.5 Written Notices, Etc. Any notice, demand or request required or
permitted to be given by the Company or Investor pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally, or by facsimile or upon receipt if by overnight or two (2) day
courier, addressed to the parties at the addresses and/or facsimile telephone
number of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing; provided,
however, that in order for any notice to be effective as to the Investor such
notice shall be delivered and sent, as specified herein, to all the addresses
and facsimile telephone numbers of the Investor set forth at the end of this
Agreement or such other address and/or facsimile telephone number as Investor
may request in writing.
7.6 Expenses. Except as set forth in the Registration Rights Agreement,
each of the Company and Investor shall pay all costs and expenses that it
respectively incurs, with respect to the negotiation, execution, delivery and
performance of this Agreement.
7.7 Entire Agreement; Written Amendments Required. This Agreement,
including the Exhibits attached hereto, the Common Stock certificates, the
Warrants, the Registration Rights Agreement, and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof, and no party
shall be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
Except as expressly provided herein, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
<PAGE>
7.8 Arbitration. Except as otherwise provided in Section 6.11 of this
Agreement, any controversy or claim arising out of or related to the Transaction
Documents or the breach thereof, shall be settled by binding arbitration in
Wilmington, Delaware in accordance with the Expedited Procedures (Rules 53-57)
of the Commercial Arbitration Rules of the American Arbitration Association
("AAA"). A proceeding shall be commenced upon written demand by Company or any
Investor to the other. The arbitrator(s) shall enter a judgment by default
against any party, which fails or refuses to appear in any properly noticed
arbitration proceeding. The proceeding shall be conducted by one (1) arbitrator,
unless the amount alleged to be in dispute exceeds two hundred fifty thousand
dollars ($250,000), in which case three (3) arbitrators shall preside. The
arbitrator(s) will be chosen by the parties from a list provided by the AAA, and
if they are unable to agree within ten (10) days, the AAA shall select the
arbitrator(s). The arbitrators must be experts in securities law and financial
transactions. The arbitrators shall assess costs and expenses of the
arbitration, including all attorneys' and experts' fees, as the arbitrators
believe is appropriate in light of the merits of the parties' respective
positions in the issues in dispute. Each party submits irrevocably to the
jurisdiction of any state court sitting in Wilmington, Delaware or to the United
States District Court sitting in Delaware for purposes of enforcement of any
discovery order, judgment or award in connection with such arbitration. The
award of the arbitrator(s) shall be final and binding upon the parties and may
be enforced in any court having jurisdiction. The arbitration shall be held in
such place as set by the arbitrator(s) in accordance with Rule 55.
Although the parties, as expressed above, agree that all claims, including
claims that are equitable in nature, for example specific performance, shall
initially be prosecuted in the binding arbitration procedure outlined above, if
the arbitration panel dismisses or otherwise fails to entertain any or all of
the equitable claims asserted by reason of the fact that it lacks jurisdiction,
power and/or authority to consider such claims and/or direct the remedy
requested, then, in only that event, will the parties have the right to initiate
litigation respecting such equitable claims or remedies. The forum for such
equitable relief shall be in either a state or federal court sitting in
Wilmington, Delaware. Each party waives any right to a trial by jury, assuming
such right exists in an equitable proceeding, and irrevocably submits to the
jurisdiction of said Delaware court. Delaware law shall govern both the
proceeding as well as the interpretation and construction of the Transaction
Documents and the transaction as a whole.
<PAGE>
8. Subscription and Wiring Instructions; Irrevocability.
8.1 Subscription
(a) Wire transfer of Subscription Funds. Investor shall deliver Put
Dollar Amounts (as payment towards any Put Share Price) by wire transfer, to
the Company pursuant to a wire instruction letter to be provided by the Company,
and signed by the Company.
(b) Irrevocable Subscription. Investor hereby acknowledges and agrees,
subject to the provisions of any applicable laws providing for the refund of
subscription amounts submitted by Investor, that this Agreement is irrevocable
and that Investor is not entitled to cancel, terminate or revoke this Agreement
or any other agreements executed by such Investor and delivered pursuant hereto,
and that this Agreement and such other agreements shall survive the death or
disability of such Investor and shall be binding upon and inure to the benefit
of the parties and their heirs, executors, administrators, successors, legal
representatives and assigns. If the Securities subscribed for are to be owned by
more than one person, the obligations of all such owners under this Agreement
shall be joint and several, and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and his heirs, executors, administrators, successors,
legal representatives and assigns.
8.2 Acceptance of Subscription. Ownership of the number of securities
purchased hereby will pass to Investor upon the Warrant Closing or any Put
Closing.
8.3 [Intentionally Omitted]
9. Indemnification.
<PAGE>
In consideration of the Investor's execution and delivery of the Investment
Agreement, the Registration Rights Agreement and the Warrants (the "Transaction
Documents") and acquiring the Securities thereunder and in addition to all of
the Company's other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless Investor and all of its
stockholders, officers, directors, employees and direct or indirect investors
and any of the foregoing person's agents, members, partners or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorney's fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
documents contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim, derivative or otherwise, by any
stockholder of the Company based on a breach or alleged breach by the Company or
any of its officers or directors of their fiduciary or other obligations to the
stockholders of the Company.
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which it
would be required to make if such foregoing undertaking was enforceable which is
permissible under applicable law.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought, such
Indemnified Party will, if a claim in respect thereof is to be made against the
other party (hereinafter "Indemnitor") under this Section 9, deliver to the
Indemnitor a written notice of the commencement thereof and the Indemnitor shall
have the right to participate in and to assume the defense thereof with counsel
reasonably selected by the Indemnitor, provided, however, that an Indemnified
Party shall have the right to retain its own counsel, with the reasonably
incurred fees and expenses of such counsel to be paid by the Indemnitor, if
representation of such Indemnified Party by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential conflicts of
interest between such Indemnified Party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
Indemnitor within a reasonable time of the commencement of any such action, if
prejudicial to the Indemnitor's ability to defend such action, shall relieve the
Indemnitor of any liability to the Indemnified Party under this Section 9, but
the omission to so deliver written notice to the Indemnitor will not relieve it
of any liability that it may have to any Indemnified Party other than under this
Section 9 to the extent it is prejudicial.
10. [Intentionally Left Blank].
11. [Intentionally Left Blank].
12. Accredited Investor. Investor is an "accredited investor" because (check
all applicable boxes):
(a) it is an organization described in Section 501(c)(3) of the
Internal Revenue Code, or a corporation, limited duration company, limited
liability company, business trust, or partnership not formed for the specific
purpose of acquiring the securities offered, with total assets in excess of
$5,000,000.
<PAGE>
(b) any trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment.
(c) a natural person, who
is a director, executive officer or general partner of the issuer of the
securities being offered or sold or a director, executive officer or general
partner of a general partner of that issuer.
has an individual net worth, or joint net worth with that person's spouse, at
the time of his purchase exceeding $1,000,000.
had an individual income in excess of $200,000 in each of the two most recent
years or joint income with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the same income level
in the current year.
(d) an entity each equity owner of which is an entity described in a -
b above or is an individual who could check one (1) of the last three (3) boxes
under subparagraph (c) above.
(e) other [specify]
_________________________________________________________
<PAGE>
The undersigned hereby subscribes for ___________% of the Maximum Offering
Amount and acknowledges that this Agreement and the subscription represented
hereby shall not be effective unless accepted by the Company as indicated below.
IN WITNESS WHEREOF, the undersigned Investor does represent and certify
under penalty of perjury that the foregoing statements are true and correct and
that Investor by the following signature(s) executed this Agreement.
Dated this __ day of ___________, 1999.
Your Signature PRINT EXACT NAME IN WHICH
YOU WANT THE SECURITIES TO
BE REGISTERED
SECURITY DELIVERY INSTRUCTIONS:
Your Signature
Please type or print address where delivered your security is to be:
ATTN:
_____________________________
Title/Representative Capacity
(if applicable)
Name of Company You Represent Street Address
(if applicable)
Place of Execution of this Agreement City, State or Province, Country,
Offshore Postal Code
<PAGE>
NOTICE DELIVERY INSTRUCTIONS: WITH A COPY DELIVERED TO:
Please print address where any Notice Please print address where Copy is
is to be delivered to be delivered
ATTN: ___________________________ ATTN: ____________________________
Street Address Street Address
City, State or Province, Country, City, State or Province, Country,
Offshore Postal Code Offshore Postal Code
Telephone: _____________________ Telephone: ______________________
Facsimile: ______________________ Facsimile: _______________________
Facsimile: ______________________ Facsimile: _______________________
THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF 100% OF THE MAXIMUM
OFFERING AMOUNT ON THE ____ DAY OF _______________, 1999.
GO ONLINE NETWORKS CORPORATION
By: ______________________
Joseph M. Naughton
Address: GO ONLINE NETWORKS CORPORATION
5681 Beach Boulevard, Suite 101/100
Buena Park, California 90621
Telephone No.: (714) 736-9888
Fax No.: (714) ___________
<PAGE>
EXHIBIT E
ADVANCE PUT NOTICE
GO ONLINE NETWORKS CORPORATION (the "Company") hereby intends, subject to
the Individual Put Limit (as defined in the Investment Agreement), to elect to
exercise a Put to sell the number of shares of Common Stock of the Company
specified below, to _____________________________, the Investor, as of the
Intended Put Date written below, all pursuant to that certain Investment
Agreement (the "Investment Agreement") by and between the Company and Triton
Private Equities Fund, L.P. dated on or about _________, 1999.
Date of Advance Put Notice: ___________________
Intended Put Date :____________________________
Intended Put Share Amount: ____________________
GO ONLINE NETWORKS CORPORATION
By: _____________________
Address: GO ONLINE NETWORKS CORPORATION
5681 Beach Boulevard, Suite 101/100
Buena Park, California 90621
Telephone No.: (714) 736-9888
Fax No.: (714) ___________
<PAGE>
EXHIBIT F
CONFIRMATION OF ADVANCE PUT NOTICE
_________________________, the Investor, hereby confirms receipt of GO
ONLINE NETWORKS CORPORATION's (the "Company") Advance Put Notice on the Advance
Put Date written below, and its intention to elect to exercise a Put to sell
shares of common stock ("Intended Put Share Amount") of the Company to the
Investor, as of the intended Put Date written below, all pursuant to that
certain Investment Agreement (the "Investment Agreement") by and between the
Company and Triton Private Equities Fund, L.P. dated on or about ____________,
1999.
Date of Confirmation: _____________________
Date of Advance Put Notice: _______________
Intended Put Date: ________________________
Intended Put Share Amount: ________________
INVESTOR(S)
___________________________________
Investor's Name
By: _______________________________
(Signature)
Address: _____________________________
_____________________________
_____________________________
Telephone No.: _________________
Facsimile No.: __________________
<PAGE>
EXHIBIT G
PUT NOTICE
GO ONLINE NETWORKS CORPORATION (the "Company") hereby elects to exercise a
Put to sell shares of common stock ("Common Stock") of the Company to
_____________________________, the Investor, as of the Put Date, at the Put
Share Price and for the number of Put Shares written below, all pursuant to that
certain Investment Agreement (the "Investment Agreement") by and between the
Company and Triton Private Equities Fund, L.P. dated on or about ____________,
1999.
Put Date :
Intended Put Share Amount (from Advance Put Notice):
Common Shares
Note: Capitalized terms shall have the meanings ascribed to them in this
Investment Agreement.
GO ONLINE NETWORKS CORPORATION
By: _____________________
Joseph M. Naughton
Address: GO ONLINE NETWORKS CORPORATION
5681 Beach Boulevard, Suite 101/100
Buena Park, California 90621
Telephone No.: (714) 736-9888
Fax No.: (714) ___________
<PAGE>
EXHIBIT H
CONFIRMATION OF PUT NOTICE
_________________________________, the Investor, hereby confirms receipt of
GO ONLINE NETWORKS CORPORATION (the "Company") Put Notice and election to
exercise a Put to sell ___________________________ shares of common stock
("Common Stock") of the Company to Investor, as of the Put Date, all pursuant to
that certain Investment Agreement (the "Investment Agreement") by and between
the Company and Triton Private Equities Fund, L.P. dated on or about
____________, 1999.
Date of this Confirmation: ________________
Put Date: ______________
Number of Put Shares of Common Stock to be Issued: _________
Volume Evaluation Period: _____ Business Days
Pricing Period: _____ Business Days
INVESTOR(S)
___________________________________
Investor's Name
By: _______________________________
(Signature)
Address: _________________________________
_________________________________
_________________________________
Telephone No.: _________________
Facsimile No.: __________________
<PAGE>
EXHIBIT Q
PUT CANCELLATION NOTICE
GO ONLINE NETWORKS CORPORATION (the "Company") hereby cancels the Put
specified below, pursuant to that certain Investment Agreement (the "Investment
Agreement") by and between the Company and Triton Private Equities Fund, L.P.
dated on or about _____________, 1999 as of the close of trading on the date
specified below (the "Cancellation Date," which date must be on or after the
date that this notice is delivered to the Investor), provided that such
cancellation shall not apply to the number of shares of Common Stock equal to
the Truncated Put Share Amount (as defined in the Investment Agreement).
Cancellation Date: _____________________
Put Date of Put Being Canceled: __________
Number of Shares Put on Put Date: _________
Reason for Cancellation (check one):
[ ] Material Facts, Ineffective Registration Period.
[ ] Delisting Event
The Company understands that, by canceling this Put, it must give twenty
(20) Business Days advance written notice to the Investor before effecting the
next Put.
GO ONLINE NETWORKS CORPORATION
By: _____________________
Joseph M. Naughton
Address: GO ONLINE NETWORKS CORPORATION
5681 Beach Boulevard, Suite 101/100
Buena Park, California 90621
Telephone No.: (714) 736-9888
Fax No.: (714) ___________
<PAGE>
EXHIBIT S
PUT CANCELLATION NOTICE CONFIRMATION
The undersigned Investor to that certain Investment Agreement (the
"Investment Agreement") by and between the Company, and Triton Private Equities
Fund, L.P. dated on or about _____________, 1999, hereby confirms receipt of Go
Online Networks Corporation's (the "Company") Put Cancellation Notice, and
confirms the following:
DATE OF THIS CONFIRMATION:
PUT CANCELLATION DATE:
INVESTOR(S)
___________________________________
Investor's Name
By: _______________________________
(Signature)
Address: _________________________________
_________________________________
_________________________________
Telephone No.: _________________
Facsimile No.: __________________
F:\LAW\JNE\triton2\Investment Agreement.wpd
1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
November 29, 1999, by and Go Online Networks Corporation, a corporation duly
incorporated and validly existing under the laws of the State of Delaware (the
"Company") and the Investor as named on the signature page hereto (hereinafter
referred to as "Investor").
RECITALS:
WHEREAS, pursuant to the Company's offering ("Offering") of up to Ten Million
Dollars ($10,000,000), excluding any funds paid upon exercise of the Warrants,
of Common Stock of the Company pursuant to that certain Investment Agreement of
even date herewith (the "Investment Agreement") between the Company and the
Investor, the Company has agreed to sell and the Investor has agreed to
purchase, from time to time as provided in the Investment Agreement, shares of
the Company's Common Stock for a maximum aggregate offering amount of Ten
Million Dollars ($10,000,000);
WHEREAS, pursuant to the terms of the Investment Agreement, the Company has
agreed to issue to the Investor, from time to time, Purchase Warrants, as
defined in the Investment Agreement, to purchase a number of shares of Common
Stock, exercisable for three (3) years from the date of issuance (collectively,
the "Investor Warrants" or the "Warrants");
WHEREAS, pursuant to the terms of the Investment Agreement, the Company has
filed a registration Statement under the Securities Act of 1933, as amended (the
"Act"), on Form SB-2 (File No.333-88615) covering the sale of Common Stock to be
issued to the Investor in the Offering and the Common Stock issuable upon
exercise of the Investor Warrants; and
WHEREAS, the Investor and Company desire to enter into this Registration Rights
Agreement to provide the Investor with additional registration rights with
respect to the resale of the Common Stock to be issued to the Investor in the
Offering and the Common issuable upon exercise of the Investor Warrants.
TERMS:
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement (including the
Recitals above), the following terms shall have the following meanings (such
meanings to be equally applicable to both singular and plural forms of the terms
defined):
<PAGE>
11
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"Act" shall mean the Securities Act of 1933, as amended, together with the rules
and regulations promulgated thereunder.
"Additional Registration Statement" shall have the meaning set forth in
Section 3(b).
"Agreement" shall have the meaning set forth in the preamble hereto.
"Amended Registration Statement" shall have the meaning set forth in Section
3(b).
"Business Day" shall have the meaning set forth in the Investment
Agreement.
"Closing Bid Price" shall have the meaning set forth in the Investment
Agreement.
"Common Stock" shall mean the common stock, par value $0.001, of the
Company.
"Company" shall have the meaning set forth in the preamble hereto.
"Due Date" shall mean the date that is one hundred twenty (120) days after the
date of the Investor's Resale Registration Notice.
"Effective Date" shall have the meaning the date that the registration
statement in question shall have been declared effective by the SEC.
"Filing Date" shall mean the date that is forty five (45) days after the
date of the Investor's Resale Registration Notice.
"Holder" shall mean Investor, and any other person or entity owning or
having the right to acquire Registrable Securities or any permitted assignee
thereof.
"Initial Registration Statement" shall have the meaning set forth in
Section 2.2.
"Investment Agreement" shall have the meaning set forth in the Recitals
hereto.
"Investor" shall have the meaning set forth in the preamble to this
Agreement.
"Investor Warrants" shall have the meaning set forth in the above Recitals.
"Offering" shall have the meaning set forth in the recitals hereto.
"Put" shall have the meaning as set forth in the Investment Agreement.
<PAGE>
"Register," "Registered," and "Registration" shall mean and refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Act"), and pursuant to Rule 415 under the Act or any successor rule, and the
declaration or ordering of effectiveness of such registration statement or
document.
"Registrable Securities" shall have the meaning set forth in Section 2.1.
"Registration Period" shall have the meaning set forth in Section 2.7.
"Registration Statement" shall mean either the Initial Registration
Statement or the Resale Registration Statement.
"Resale Registration Statement" shall have the meaning set forth in Section 2.3.
"Rule 144" shall mean Rule 144, as amended, promulgated under the Act.
"SEC" shall have the meaning set forth in Section 3(a).
"Supplemental Registration Statement" shall have the meaning set forth in
Section 3(b).
"Warrants" shall have the meaning set forth in the above Recitals.
"Warrant Shares" shall mean shares of Common Stock issuable upon exercise
of any Warrant.
2. Required Registration.
2.1 Registrable Securities. "Registrable Securities" shall mean those
shares of the Common Stock of the Company together with any capital stock issued
in replacement of, in exchange for or otherwise in respect of such Common Stock,
that are: (i) issuable or issued to the Investor pursuant to the Investment
Agreement or in this Agreement, and (ii) issuable or issued upon exercise of the
Investor Warrants; provided, however, that notwithstanding the above, the
following shall not be considered Registrable Securities:
(a) any Common Stock which would otherwise be deemed to be Registrable
Securities, if and to the extent that those shares of Common Stock may be resold
in a public transaction without volume limitations or other material
restrictions without registration under the Act, including without limitation,
pursuant to Rule 144 under the Act; and
(b) any shares of Common Stock which have been sold in a private
transaction in which the transferor's rights under this Agreement are not
assigned.
<PAGE>
2.2 Filing of Initial Registration Statement. The Company filed on
October 7, 1999, a registration statement (the "Initial Registration Statement")
on Form SB-2 (File No. 333-88615), covering the offer and sale of a number of
shares of Common Stock as Registrable Securities equal to at least Twenty Seven
Million (27,000,000) shares of Common Stock, and which covers, to the extent
allowed by applicable law, such additional shares of Common Stock, if any, that
may become registrable pursuant to Rule 416 of the Act. The Company shall use
its reasonable best efforts to cause the Initial Registration Statement to be
declared effective by the SEC on or before (the date of such
effectiveness referred to herein as the "Effective Date").
2.3 Filing of Resale Registration Statement. Upon the receipt of a
written notice from the Investor (the "Resale Registration Notice") stating that
the Investor has determined in good faith that a registration statement must be
filed to cover the Investor's resale of some or all of the shares of Common
Stock purchased by the Investor in the Offering or to be issued to the Investor
upon the exercise of the Investor Warrants, the Company shall promptly prepare
and file, by the Filing Date, a registration statement (the "Resale Registration
Statement") on Form SB-2 (or other suitable form, at the Company's discretion,
but subject to the reasonable approval of the Investor), covering the resale of
a number of shares of Common Stock as Registrable Securities as the Investor
shall reasonably determine and, to the extent allowed by applicable law, such
additional shares of Common Stock, if any, that may become registrable pursuant
to Rule 416 of the Act.
2.4 Registration Effective Date. The Company shall use its best efforts
to have any Resale Registration Statement declared effective by the SEC (the
date of such effectiveness is also referred to herein as the "Effective Date")
by the Due Date.
2.5 Intentionally Left Blank].
2.6 [Intentionally Left Blank].
2.7 Shelf Registration. The Initial Registration Statement, and/or any
Resale Registration Statement, shall be prepared as a "shelf" registration
statement under Rule 415, and shall be maintained effective until the earlier of
(i) the date that is one (1) year from the Termination Date, as defined in the
Investment Agreement (the "Registration Period") or (ii) the date that all
Registrable Securities are resold pursuant to such Registration Statement.
2.8 Eligibility for Form SB-2. The Company understands that in order to
file the Resale Registration Statement described herein on Form SB-2, it must be
eligible to file Form S-B2 for primary offerings. The Company represents that it
is presently eligible to effect any required resale registration contemplated
hereby on Form SB-2 and will use its best efforts to continue to take such
actions as are necessary to maintain such eligibility. The Company covenants to
use its best efforts to use Form SB-2 (or other suitable form, at the Company's
discretion, but subject to the reasonable approval of the Holders) for the
resale registration required by this Section during all applicable times
contemplated by this Agreement.
2.9 Supplemental Registration Statement. Anytime the Registration
Statement does not cover a sufficient number of shares of Common Stock to cover
all outstanding Registrable Securities, the Company shall promptly prepare and
file with the SEC such Supplemental Registration Statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
such Registrable Securities and shall use its best efforts to cause such
Supplemental Registration Statement to be declared effective as soon as
possible.
<PAGE>
3. Obligations of the Company. Whenever required under this Agreement
to effect registration of any Registrable Securities (whether the initial
Registration Statement or any Resale Registration Statement), the Company shall,
as expeditiously and reasonably possible:
(a) Prepare and file with the Securities and Exchange Commission
("SEC") the Registration Statement with respect to such Registrable Securities
and use its best efforts to cause such Registration Statement to become
effective and to remain effective during the Registration Period.
(b) Prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement ("Amended Registration Statement") or prepare and file
any additional registration statement ("Additional Registration Statement,"
together with the Amended Registration Statement, "Supplemental Registration
Statements") as may be necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such Supplemental
Registration Statements or such prior registration statement and to cover the
resale of all Registrable Securities.
(c) Furnish to the Holders such numbers of copies of a prospectus, including
a preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered by
such Registration Statement under such other securities or Blue Sky laws of the
jurisdictions in which the Holders are located and of such other jurisdictions
as shall be reasonably requested by the Holders of the Registrable Securities
covered by such Registration Statement, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) [Intentionally Omitted].
(f) As promptly as practicable after becoming aware of such event, notify
each Holder of Registrable Securities of the happening of any event of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and deliver a number of copies of such supplement or
amendment to each Holder as such Holder may reasonably request.
(g) Provide Holders with notice of the date that a Registration Statement or
any Supplemental Registration Statement registering the sale or resale of the
Registrable Securities is declared effective by the SEC, and the date or dates
when the Registration Statement is no longer effective.
<PAGE>
(h) Provide Holders and their representatives the opportunity and a
reasonable amount of time, based upon reasonable notice delivered by the
Company, to conduct a reasonable due diligence inquiry of Company's pertinent
financial and other records and make available its officers and directors for
questions regarding such information as it relates to information contained in
the Registration Statement.
(i) Provide Holders and their representatives the opportunity to review the
Registration Statement and all amendments or supplements thereto prior to their
filing with the SEC by giving the Holder at least five (5) business days advance
written notice prior to such filing.
(j) Provide each Holder with prompt notice of the issuance by the SEC or any
state securities commission or agency of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceeding
for such purpose. The Company shall use its best efforts to prevent the issuance
of any stop order and, if any is issued, to obtain the removal thereof at the
earliest possible date.
(k) Use its best efforts to list the Registrable Securities covered by the
Registration Statement with all securities exchanges or markets on which the
Common Stock is then listed and prepare and file any required filing with the
NASD and any other exchange or market on which the Common Stock is listed.
4. [Intentionally Left Blank].
5. [Intentionally Left Blank].
6. Dispute as to Registrable Securities. In the event the Company
believes that shares sought to be registered under Section 2 by Holders do not
constitute "Registrable Securities" by virtue of Section 2.1 of this Agreement,
and the status of those shares as Registrable Securities is disputed, the
Company shall provide, at its expense, an Opinion of Counsel, reasonably
acceptable to the Holders of the Securities at issue (and satisfactory to the
Company's transfer agent to permit the sale and transfer), that those securities
may be sold immediately, without volume limitation or other material
restrictions, without registration under the Act, by virtue of Rule 144 or
similar provisions.
7. Furnish Information. At the Company's request, each Holder shall
furnish to the Company such information regarding Holder, the Registrable
Securities held by it, and the intended method of disposition of such securities
to the extent required to effect the registration of its Registrable Securities
or to determine that registration is not required pursuant to Rule 144 or other
applicable provision of the Act. The Company shall include all information
provided by such Holder pursuant hereto in the Registration Statement,
substantially in the form supplied, except to the extent such information is not
permitted by law.
8. Expenses. All expenses, other than commissions and fees and
expenses of counsel to the selling Holders, incurred in connection with
registrations, filings or qualifications pursuant hereto, including (without
limitation) all registration, filing and qualification fees, printers' and
accounting fees, and fees and disbursements of counsel for the Company, shall be
borne by the Company.
<PAGE>
9. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers, directors, partners, legal counsel, and
accountants of each Holder, any underwriter (as defined in the Act, or as deemed
by the Securities Exchange Commission, or as indicated in a registration
statement) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of Section 15 of the Act the 1934 Act, against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements or
omissions: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, and the Company will reimburse each such Holder, officer
or director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, underwriter or
controlling person; provided however, that the above shall not relieve the
Company from any other liabilities which it might otherwise have.
<PAGE>
(b) Promptly after receipt by an indemnified party under this Section 9
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 9, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume,
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonably incurred fees and expenses of one such counsel to
be paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential conflicting interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 9.
(c) In the event that the indemnity provided in paragraph (a) of this
Section 9 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company and each Holder agree to contribute to the
aggregate claims, losses, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and one or more of the Holders may
be subject in such proportion as is appropriate to reflect the relative fault of
the Company and the Holders in connection with the statements or omissions which
resulted in such Losses. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information provided
by the Company or by the Holders. The Company and the Holders agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 10(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each person who controls a
Holder of Registrable Securities within the meaning of either the Securities Act
or the Exchange Act and each director, officer, partner, employee and agent of a
Holder shall have the same rights to contribution as such holder, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act and each director and officer of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (c).
(d) The obligations of the Company and Holders under this Section 9
shall survive the resale, if any, of the Common Stock, the completion of any
offering of Registrable Securities in a Registration Statement under this
Agreement, and otherwise.
10. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144; and
<PAGE>
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act.
11. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the written consent of each Holder affected
thereby. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder, each future Holder, and the Company.
12. Notices. All notices required or permitted under this Agreement
shall be made in writing signed by the party making the same, shall specify the
section under this Agreement pursuant to which it is given, and shall be
addressed if to (i) the Company at: Go Online Networks Corporation 5681 Beach
Boulevard, Suite 101/100, Buena Park, California 90621, Telephone No. (714)
736-9888, Facsimile No. (714) 736-9488 (or at such other location as directed by
the Company in writing) and (ii) the Holders at their respective last address as
the party as shown on the records of the Company. Any notice, except as
otherwise provided in this Agreement, shall be made by fax and shall be deemed
given at the time of transmission of the fax.
13. Termination. This Agreement shall terminate on the date all
Registrable Securities cease to exist (as that term is defined in Section 2.1
hereof); but without prejudice to (i) the parties' rights and obligations
arising from breaches of this Agreement occurring prior to such termination (ii)
other indemnification obligations under this Agreement.
14. Assignment. No assignment, transfer or delegation, whether by
operation of law or otherwise, of any rights or obligations under this Agreement
by the Company or any Holder, respectively, shall be made without the prior
written consent of the majority in interest of the Holders or the Company,
respectively; provided that the rights of a Holder may be transferred to a
subsequent holder of the Holder's Registrable Securities (provided such
transferee shall provide to the Company, together with or prior to such
transferee's request to have such Registrable Securities included in a
Registration, a writing executed by such transferee agreeing to be bound as a
Holder by the terms of this Agreement), and the Company hereby agrees to file an
amended or supplemented registration statement including such transferee as a
selling security holder thereunder; and provided further that the Company may
transfer its rights and obligations under this Agreement to a purchaser of all
or a substantial portion of its business if the obligations of the Company under
this Agreement are assumed in connection with such transfer, either by merger or
other operation of law (which may include without limitation a transaction
whereby the Registrable Securities are converted into securities of the
successor in interest) or by specific assumption executed by the transferee.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
in and wholly to be performed in that jurisdiction, except for matters arising
under the Act or the Securities Exchange Act of 1934, which matters shall be
construed and interpreted in accordance with such laws.
<PAGE>
16. Execution in Counterparts Permitted. This Agreement may be executed
in any number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one (1) instrument.
17. Specific Performance. The Holder shall be entitled to the remedy of
specific performance in the event of the Company's breach of this Agreement, the
parties agreeing that a remedy at law would be inadequate.
18. Indemnity. Each party shall indemnify each other party against any
and all claims, damages (including reasonable attorney's fees), and expenses
arising out of the first party's breach of any of the terms of this Agreement.
19. Entire Agreement; Written Amendments Required. This Agreement,
including the Exhibits attached hereto, the Investment Agreement, the Common
Stock certificates, and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein or therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of this
_____ day of _______________, 1999
GO ONLINE NETWORKS CORPORATION
By:
Joseph M. Naughton, Chief Executive Officer
Address: Go Online Networks Corporation
5681 Beach Boulevard, Suite 101/100
Buena Park, California 90621
Telephone No. (714) 736-9888
Facsimile No. (714)
INVESTOR:
TRITON PRIVATE EQUITIES FUND, L.P.
By:____________________________________
Address:
Telephone No.
Facsimile No.
GO ONLINE NETWORKS CORPORATION
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST
RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED. SEE THE RISK FACTORS SET FORTH UNDER THAT CERTAIN INVESTMENT AGREEMENT
BY AND BETWEEN GO ONLINE NETWORKS CORPORATION, A DELAWARE CORPORATION ("THE
COMPANY") AND THE INVESTOR REFERENCED THEREIN.
Warrant to Purchase shares
WARRANT TO PURCHASE COMMON STOCK
OF
GO ONLINE NETWORKS CORPORATION
THIS CERTIFIES that or any subsequent holder hereof
("Holder"), has the right to purchase from GO ONLINE NETWORKS CORPORATION., a
Delaware corporation (the "Company"), up to "N" fully paid and nonassessable
shares, wherein "N" is defined below, of the Company's common stock, $.001 par
value per share ("Common Stock"), subject to adjustment as provided herein, at a
price equal to the Exercise Price as defined in Section 3 below, at any time
beginning on the Date of Issuance (defined below) and ending at 5:00 p.m., New
York, New York time the date that is three (3) years after the Date of Issuance
(the "Exercise Period"); provided, that, with respect to each "Put," as that
term is defined in that certain Investment Agreement (the "Investment
Agreement") by and between the Holder and Company, "N" shall equal twelve
percent (12%) of the number of shares of Common Stock purchased by the Holder in
that Put.
Holder agrees with the Company that this Warrant to Purchase Common Stock
of the Company (this "Warrant") is issued and all rights hereunder shall be held
subject to all of the conditions, limitations and provisions set forth herein.
1. Date of Issuance and Term.
This Warrant shall be deemed to be issued on _____________, ______ ("Date
of Issuance"). The term of this Warrant is three (3) years from the Date of
Issuance.
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this Warrant may be
exercised as to all or any lesser number of full shares of Common Stock covered
hereby (the "Warrant Shares") upon surrender of this Warrant, with the Exercise
Form attached hereto as Exhibit A (the "Exercise Form") duly completed and
executed, together with the full Exercise Price (as defined below) for each
share of Common Stock as to which this Warrant is exercised, at the office of
the Company, Attention: Chief Executive Officer, Go Online Networks Corporation,
3681 Beach Boulevard, Suite 101/100 Buena Park, CA 90621, Telephone No.(714)
736-9888, Telecopy No. (714) , or at such other office or agency
as the Company may designate in writing, by overnight mail, with an advance copy
of the Exercise Form sent to the Company and its Transfer Agent by facsimile
(such surrender and payment of the Exercise Price hereinafter called the
"Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be defined
as the date that the advance copy of the completed and executed Exercise Form is
sent by facsimile to the Company, provided that the original Warrant and
Exercise Form are received by the Company as soon as practicable thereafter.
Alternatively, the Date of Exercise shall be defined as the date the original
Exercise Form is received by the Company, if Holder has not sent advance notice
by facsimile. The Company shall not be required to deliver the shares of Common
Stock to the Holder until the requirements of Section 2(a) above are satisfied.
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of Exercise,
Holder shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise of this Warrant, and if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the Holder of
record of such shares on the Date of Exercise of this Warrant, irrespective of
the date of delivery of the Common Stock purchased upon the Exercise of this
Warrant. Nothing in this Warrant shall be construed as conferring upon Holder
any rights as a stockholder of the Company.
3. Payment of Warrant Exercise Price.
The Exercise Price ("Exercise Price"), shall equal 100% of the Market Price
ending on the Pricing Period End Date (as both are defined in the Investment
Agreement).
Payment of the Exercise Price shall be made by cash, bank or cashiers check or
wire transfer.
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
completed and endorsed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and Holder shall be entitled to receive a new Warrant as to
the portion hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the exercise
of this Warrant constitutes "Registrable Securities" as such term is defined in
the Investment Agreement.
5. Anti-Dilution Adjustments.
(1) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then Holder, upon Exercise of this Warrant
after the record date for the determination of holders of Common Stock entitled
to receive such dividend, shall be entitled to receive upon Exercise of this
Warrant, in addition to the number of shares of Common Stock as to which this
Warrant is exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any
time effect a recapitalization, reclassification or other similar transaction of
such character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which Holder shall be
entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give Holder the same notice it provides to holders of Common Stock
of any transaction described in this Section 5(b).
<PAGE>
(c) Distributions. If the Company shall at any time distribute for no
consideration to holders of Common Stock cash, evidences of indebtedness or
other securities or assets (other than cash dividends or distributions payable
out of earned surplus or net profits for the current or preceding years) then,
in any such case, Holder shall be entitled to receive, upon Exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which Holder would have been entitled to receive with respect to each such share
of Common Stock as a result of the happening of such event had this Warrant been
exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board of Directors of the Company in its discretion) and the denominator of
which is such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities or other assets of the Company or another entity or there
is a sale of all or substantially all the Company's assets (a "Corporate
Change"), then this Warrant shall be exerciseable into such class and type of
securities or other assets as Holder would have received had Holder exercised
this Warrant immediately prior to such Corporate Change; provided, however, that
Company may not affect any Corporate Change unless it first shall have given
thirty (30) days notice to Holder hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in Section 3
of this Warrant, until the occurrence of an event stated in subsection (a), (b)
or (c) of this Section 5, and thereafter shall mean said price as adjusted from
time to time in accordance with the provisions of said subsection. No such
adjustment under this Section 5 shall be made unless such adjustment would
change the Exercise Price at the time by $.01 or more; provided, however, that
all adjustments not so made shall be deferred and made when the aggregate
thereof would change the Exercise Price at the time by $.01 or more. No
adjustment made pursuant to any provision of this Section 5 shall have the net
effect of increasing the Exercise Price in relation to the split adjusted and
distribution adjusted price of the Common Stock. The number of shares of Common
Stock subject hereto shall increase proportionately with each decrease in the
Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to this Section 5,
Holder shall, upon Exercise of this Warrant, become entitled to receive shares
and/or other securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares shall be
issuable upon the Exercise of this Warrant, but on Exercise of this Warrant,
Holder may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon exercise shall be the next higher number of shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such number of
authorized and unissued shares of Common Stock (or other securities substituted
therefor as herein above provided) as shall be sufficient for the Exercise of
this Warrant and payment of the Exercise Price. The Company covenants and agrees
that upon the Exercise of this Warrant, all shares of Common Stock issuable upon
such exercise shall be duly and validly issued, fully paid, nonassessable and
not subject to preemptive rights, rights of first refusal or similar rights of
any person or entity.
8. Assignment.
Holder may sell, transfer, assign, pledge or otherwise dispose of this
Warrant, in whole or in part. Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the person or persons to whom the Warrant shall be assigned and the
respective number of warrants to be assigned to each assignee. The Company
shall effect the assignment within ten (10) days, and shall deliver to the
assignee(s) designated by Holder a Warrant or Warrants of like tenor and terms
for the appropriate number of shares.
<PAGE>
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any person other
than the Company and Holder any legal or equitable right, remedy or claim under
this Warrant and this Warrant shall be for the sole and exclusive benefit of the
Company and Holder.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the State of California, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by Holder
to or on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Company, to the Attention: Chief
Executive Officer, Go Online Networks Corporation, 3681 Beach Boulevard, Suite
101/100 Buena Park, Ca 90621. (714) 736-9888; Telecopy No. (714)
.. Notices or demands pursuant to this Warrant to be given or made by the
Company to or on Holder shall be sufficiently given or made if sent by certified
or registered mail, return receipt requested, postage prepaid, and addressed, to
the address of Holder set forth in the Company's records, until another address
is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
______ day of ________________, 1999
GO ONLINE NETWORKS CORPORATION
By:
Joseph M. Naughton, Chief Executive Officer
<PAGE>
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: GO ONLINE NETWORKS CORPORATION
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of GO ONLINE
NETWORKS CORPORATION, a Delaware corporation (the "Company"), evidenced by the
attached warrant (the "Warrant"), and herewith makes payment of the exercise
price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
1. The undersigned requests that stock certificates for such shares be
issued free of any restrictive legend, if appropriate, and a warrant
representing any unexercised portion hereof be issued, pursuant to the Warrant
in the name of the undersigned and delivered to the undersigned at the address
set forth below:
Dated:
Signature
Print Name
Address
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase _______ shares of the Common Stock of GO ONLINE
NETWORKS CORPORATION, evidenced by the attached Warrant and does hereby
irrevocably constitute and appoint _______________________ attorney to transfer
the said Warrant on the books of the Company, with full power of substitution in
the premises.
Dated:______________________________
Signature
Fill in for new registration of Warrant:
Name
Address
Please print name and address of assignee
(including zip code number)
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
ADDENDUM TO
EMPLOYMENT AGREEMENT
This Addendum ("Addendum") to that certain Employment Agreement
("Agreement") by and between Jones Naughton Entertainment, Inc., a Colorado
corporation (now known as Go Online Networks Corporation, a Delaware
corporation) (the "Company") and James Cannon ("Employee") dated effective as of
April 12, 1999 is executed effective this 4th day of November, 1999.
Capitalized terms used herein shall have the same meaning as in the
Agreement.
1. Paragraph 3.1(d) of the Agreement is hereby restated in its entirety
to read as follows:
"In addition to the Salary, Bonus, and Third-Party Bonus set forth herein,
Employee shall be granted options to acquire "restricted" shares of Company
common stock as follows: (i) Options to acquire One Million (1,000,000) shares
of "restricted" Company common stock at a price of $0.20 per share, exercisable
for a period of two (2) years from the date of this Agreement; and (ii) Options
to acquire One Hundred Fifty Thousand (150,000) shares of "restricted" Company
common stock at a price of $0.24 per share, exercisable for a period of two (2)
years from the date of this Agreement."
The balance of the terms of the Agreement are hereby acknowledged and
agreed to and shall remain in full force and effect.
/s/ James Cannon
____________________________ Go Online Networks Corporation,
James Cannon
a Delaware corporation
/s/ Joseph M. Naughton
______________________________
By: Joseph M. Naughton
Its: Chief Executive Officer
[SCHUMACHER & ASSOCIATES LETTERHEAD]
March 27, 2000
Securities and Exchange Commission
450 West Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We hereby consent to the inclusion in their Form 10K-SB of our Report of
Independent Certified Public Accountants for Go Online Networks Corporation
dated August 27, 1999 for the year ended December 31, 1998.
/s/ Schumacher & Associates
SCHUMACHER & ASSOCIATES
[MILLER AND MCCOLLOM LETTERHEAD]
March 27, 2000
Securities and Exchange Commission
450 West Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We hereby consent to the inclusion of our Report of Independent Certified
Public Accountants for Go Online Networks Corporation dated February 25, 2000
as of December 31, 1999 and the year then ended.
/s/ Miller and McCollom
MILLER AND MCCOLOM
