UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g)
of the Securities Exchange Act of 1934
CAPITA RESEARCH GROUP, INC.
---------------------------
(Name of Small Business Issuer in its Charter)
Nevada 88-0072350
------ ----------
(State of other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
900 E. Eighth Avenue, Suite 300, King of Prussia, PA 19406
---------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's Telephone number: (610) 768-8070
--------------
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.001 Per Share
----------------------------------------
(Title of Class)
<PAGE>
PART I
- - --------------------------------------------------------------------------------
ITEM 1. DESCRIPTION OF BUSINESS
- - --------------------------------------------------------------------------------
Historical Overview of the Company
Capita Research Group, Inc. (the "Company" or the "Registrant" ) is a
Nevada corporation which was originally incorporated on December 20, 1957 under
the name of Industrial and Petroleum, Inc. The Company was originally
incorporated to engage in the mining and oil and gas business. The Company was
originally authorized to issue 5 million shares of common stock with a par value
of $1.00 per share. Of this amount, 500,000 shares were voting shares and
4,500,000 shares were non-voting shares. On or about April 15, 1958, the
Company's Articles of Incorporation were amended and all the 5 million shares of
the Company's common stock were designated as voting shares.
On July 15, 1961 the Company entered into a Merger Agreement with
Constant Minerals Separation Process, Inc., a Nevada corporation which was
organized on January 10, 1941. Industrial and Petroleum, Inc. served as the
surviving corporation and its authorized shares did not change. At this time,
the Company continued to engage in the mining and oil and gas business.
On July 27, 1987 the name of the Company was changed to Pershing Gold,
and on November 24, 1987, the Company's Articles of Incorporation were amended
to raise the number of authorized shares to 50,000,000 with a par value of $0.10
per share.
From 1960 to 1992 the Company's main asset was the Barrel Springs
properties, a group of mining properties located in Pershing County, Nevada. The
Company abandoned the Barrel Springs properties in 1993 and the Company ceased
operations at that time.
In 1995, the Company settled its debts by the issuance of 659,333
shares to ten (10) persons. The Company relied upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"). All stock certificates contain a legend setting forth
the exemption from registration. The transfer agent has "stop transfer"
instructions on these stock certificates. Investment Letter Agreements have been
executed by each such stockholder.
1
<PAGE>
On May 31, 1996, the Company attempted to reorganize its business. As a
result of the reorganization, its name was changed to Pershing Products, Inc.,
and the capitalization was increased to 100,000,000 shares of common stock with
a par value of $0.001 per share. The Company's outstanding shares also underwent
a reverse split of one (1) share for each seven (7) shares held of record. The
Company also issued 5,000,000 shares of its common stock in exchange for certain
patent applications filed in the United States, as well as internationally. The
5,000,000 shares were issued in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act. The stock certificates issued
contained a legend setting forth the exemption from registration. The new
stockholders also executed and delivered Investment Letter Agreements and the
transfer agent was given "stop transfer" instructions against the stock
certificates in question.
On January 28, 1997, the transaction of May 31, 1996 described in the
paragraph above was rescinded and terminated. Four million nine hundred thousand
(4,900,000) shares were returned to the Company. The Company's authorized shares
remained at 100,000,000 shares of common stock with a par value of $0.001 per
share.
As part of the Company's continued efforts to reorganize, on January
28, 1997, the Company's name was changed to Royal American Mining Properties,
Ltd. and a reverse split of the common stock was authorized on the basis of one
(1) share for each three (3) shares held of record. At that point, the Company
was not actively engaged in any line of business and its shares were not trading
on any exchange.
On January 27, 1998, the Company entered into an Exchange Agreement
under the terms of which the Company acquired all the issued and outstanding
shares of NextGen Systems, Inc., a Pennsylvania corporation, in exchange for
shares of the Company's common stock. Under the terms of this Exchange
Agreement, the Company's management and majority shareholders effected a two for
one forward split of the Company's common stock. Accordingly, the Company's
shareholders were entitled to two shares of the Company's common stock for every
one share they owned. The Company then issued 8,622,000 shares of common stock
to an Exchange Agent for the shareholders of NextGen Systems, Inc. and in return
received all the issued and outstanding shares of NextGen. At the time of the
issuance of these shares, the parties relied upon Section 4(2) of the Securities
Act and Rule 504 as the exemption from registration. The Company's name also was
changed to Capita Research Group, Inc. As a result, the Company is engaged in
the primary business operations of its wholly owned subsidiary, NextGen Systems,
Inc.
As of April 1, 1998, 11,152,000 shares of the Company's authorized
shares of common stock were issued and outstanding.
2
<PAGE>
To management's knowledge, the Company has not been subject to
bankruptcy, receivership or any similar proceedings.
Background of NextGen Systems, Inc.
- - -----------------------------------
NextGen Systems, Inc. ("NextGen") formerly was known as Media
Solutions, Inc. ("Media Solutions"). Media Solutions was incorporated in
Pennsylvania in June of 1994 for the purpose of developing and selling
MediaLink, a client/server software system used by the direct response
advertising industry.
In September of 1995, Media Solutions initiated discussions with the
National Aeronautics and Space Administration ("NASA") in Langley, Virginia
about licensing NASA's software technology known as the "CREW software". This
software measures a test respondent's EEG, or brain wave impulse, when subjected
to aural or visual stimuli. The CREW software then converts the raw brain wave
data into an index which indicates the respondent's level of interest, or
boredom, with the stimuli. In January of 1996, Media Solutions filed an
application with NASA for a license for the commercial application of the CREW
software with the intention to use it as a testing service in the media and
advertising industries.
In June of 1996, Media Solutions International, Inc. ("MSII") was
incorporated in Pennsylvania and licensed the rights from Media Solutions to
continue the development and selling of MediaLink.
In May of 1997, NASA approved Media Solutions' application for the CREW
software license and subsequently issued a license agreement in the name of
"NextGen Systems, Inc.", a fictitious name registered by Media Solutions in the
Commonwealth of Pennsylvania in September 1995. Under its license agreement with
NASA, NextGen has an exclusive five (5) year license commencing August 4, 1997.
In addition, NextGen has a five (5) year renewal option. The NASA license
agreement permits NextGen to offer testing services for all direct response
advertising applications, including television and print media and the Internet,
and package design. NASA officials have indicated that NextGen may use the CREW
software for all media and advertising applications and that such use will not
be considered an infringement of NASA's intellectual property rights in the CREW
software. However, final determination of this issue by NASA is pending. The
license agreement requires NextGen to pay NASA a royalty equal to 10% of
revenues, payable annually with a minimum guaranteed annual royalty of Fifteen
Thousand Dollars ($15,000) .
In June of 1997, Media Solutions formed Capita Systems, Inc.
("Capita"), a Delaware corporation and a wholly owned subsidiary of Media
Solutions, for the purpose of commercializing and marketing its advertising
testing services.
3
<PAGE>
On July 31, 1997, Media Solutions and MSII agreed to sell the MediaLink
asset and related business to Columbine JDS Systems, Inc. for a future payment
of $350,000, contingent upon defined levels of profitability. The transaction
was completed in October of 1997. In connection with the agreement, Randy
Shumpert, Media Solution's founder, relinquished his officer positions and stock
ownership in Media Solutions and MSII and became an employee in Columbine JDS
Systems, Inc. In August of 1997, David B. Hunter was elected President and CEO
of Media Solutions and Michael J. Kline became President of MSII. Michael Kline
had previously been named Chairman of the Board of Directors of MSII in May of
1997.
Since commencing operations in the name of Capita Systems, Inc., Media
Solutions has been engaged in significant additional software development.
Beginning in August of 1997, Media Solutions initiated developmental projects to
extensively modify and enhance the original NASA software to tailor its use to
the more specific demands of media and advertising clients. This included the
integration of video technology into the application. In addition, Media
Solutions has developed proprietary hardware, specifically an EEG measurement
headset, to facilitate high volume and convenience in the testing process. Media
Solutions has developed a completely "dry" headset and intends to apply for a US
patent on this hardware and related components.
In October of 1997, Media Solutions performed its first revenue test of
subjects' interest in television infomercials for consumer products. The Company
now is in various stages of negotiation with numerous prospects for its
advertising testing services, including major US marketing companies and
advertising agencies.
On December 30, 1997, Media Solutions changed its name to NextGen
Systems, Inc. ("NextGen").
On January 12, 1998, Next Gen merged with MSII. NextGen was the
surviving corporation. On January 30, 1998, NextGen became a wholly owned
subsidiary of the Company.
The Company currently employs five professionals and four contract
consultants. The Company maintains offices at 900 E. Eighth Avenue, King of
Prussia, Pennsylvania. The Company also uses temporary facilities at Holmdel,
N.J. to conduct all testing. The Company owns all of its equipment and software,
and has under development numerous software and hardware applications to enhance
its capabilities in advertising and media testing. The Company intends to obtain
patents and software copyrights to protect its intellectual property.
4
<PAGE>
Business of the Issuer
The Company is in the development stage. The Company is in the process
of developing, testing and obtaining patents for the evaluation methods
described above for testing subjects while viewing television commercials. The
Company also plans to develop and test print media advertising, package design,
Internet web sites and regular television entertainment programming. The Company
will market this testing service initially as a service bureau with particular
focus on the television advertising industry. The Company will provide to its
clients test results which determine whether the test subjects are mentally
engaged by a television commercial being viewed.
This type of testing is referred to as "copy testing" or "advertising
testing" research. In addition to general interviews about consumer preferences,
at present there are two principal methods of conducting such tests. The first
is the use of a meter, or dial, by which the test subject indicates his positive
(or negative) reaction associated with the test material. The second method of
testing is performed by companies specializing in focus group measurement,
whereby a group of demographically selected test subjects views a program and is
then asked a series of questions to determine interest or lack of interest. This
form of testing constitutes a well-established industry, although there is much
debate within the media industry about the reliability of these tests due to the
subjective nature of measuring viewer response and due to the tendency of some
test subjects to follow strong and vocal leaders.
The Company's method of advertising testing differs from standard
industry methods in that it monitors brain activity during subject testing and
converts the measured activity into an engagement index. The Company's testing
allows an advertiser to evaluate consumer engagement to its commercials on a
second-by-second- basis.
Based on early marketing results, the Company believes that it can
stimulate significant demand for its objective and passive form of test subject
measurement. Although other means of physiological measurement have been used to
create testing services, management believes that no method comparable to the
Company's EEG measurement exists in the marketplace.
The Company intends to market its testing services to: 1) the
established research industry, as a complement to that industry's existing
research methods; 2) the advertising agencies, as a tool to help refine creative
content and strategy; and 3) the advertising clients. The Company intends to
reach prospects through initial phone contact followed by person-to-person
5
<PAGE>
demonstration of testing methodology and results. In addition, the Company's
officers regularly attend industry trade shows to develop a network of prospects
and generate broader exposure. Finally, the Company intends to enter into a
cooperative arrangement with a regional advertising agency whereby the Company
will receive market and sales benefits from the agency's professional sales and
creative staff.
Competition
The Company faces well-established and well-funded competition. The
Company's principal competition consists of entities within the opinion research
industry which provide a third party testing service either to advertising
agencies or directly to the advertising client. Often, agencies own their own
dedicated research company. According to Advertising Age, in 1996, combined
revenue from research companies exceeded $4.0 billion in the US and $6.5 billion
worldwide. The top five companies in this group are:
1996 Revenue (Millions)
-----------------------
Company US Worldwide
------- -- ---------
Information Resources Inc. $344.6 $ 405.6
Nielsen Media Research 319.4 319.4
IMS 316.5 904.4
AC Nielsen Corp. 286.5 1,358.6
SRI International 280.7 326.0
The Company intends to compete against these established research
entities on the basis of technology differentiation, test reliability and
pricing. As mentioned above, management believes that the Company's technology
and testing methodology are incomparable as to the nature and composition of its
test results. Management further believes that measurements of engagement or
boredom, developed with scientific objectivity, will provide a competitive
advantage in an industry long dissatisfied with subjective results. Management
believes the Company's underlying technology allows it to compete aggressively
on pricing because of the relatively low variable testing costs associated with
the need for fewer test subjects comprising a statistically valid sample.
In addition to established competition, the Company also faces
uncertainty regarding acceptance of, and demand for, its method of advertising
testing. The Company's method represents a new development in an established
industry. Advertisers may be slow to accept the Company's method of testing, or
may reject it.
Management hopes to build a large base of customers for its services,
including advertising agencies, businesses actually purchasing advertising,
television production companies and television networks.
6
<PAGE>
Research and Development
During the last two years, the Company has devoted a majority of its
time to research and development. Approximately $118,241 was spent by the
Company on research and development in 1997, compared with approximately
$206,188 in 1996. The computer software used by the Company in connection with
the testing process has been improved to provide ease of use during testing and
easy viewing of test results.
Significantly, the hardware used to monitor brain activity has also
been improved. Ease of use and consistent input during testing have improved as
a result of the Company's efforts.
Production and Manufacturing
The Company's testing service currently is conducted at temporary
facilities at Holmdel, N.J. The Company owns all of its software and eighty
percent (80%) of its equipment. Twenty percent (20%) of its equipment is leased.
The Company has under development numerous software and hardware applications to
enhance its capabilities in advertising and media testing. The Company will
expand its facilities as the growth of its revenues allow. The Company also may
open facilities in different parts of the United States if such sites can
improve the Company's position in the market and remain profitable. However, the
Company's current revenues do not allow for immediate or rapid growth.
Marketing
Management believes that, in the foreseeable future, cash generated
from operations will be inadequate to support full marketing roll out and
ongoing product development, and that the Company will thus be forced to rely on
additional equity financing. Management is confident that it can identify
sources and obtain adequate amounts of such financing. The Company intends to
enter into a cooperative arrangement with a regional advertising agency whereby
the Company will receive marketing and sales benefits from the agency's
professional staff. The marketing will be done initially by telephone, followed
by person-to-person contact.
Governmental Approval, Regulation and Environmental Compliance
Other than general business licensing requirements, the Company is
unaware of any governmental approval necessary for the Company's operations in
the advertising testing industry. In addition, the Company is unaware of
existing or probable governmental regulations on the advertising testing
7
<PAGE>
industry. The Company anticipates that it will have no material costs associated
with compliance with either federal, state or local environmental law.
Risks Associated with Operations
The Company's long-term success is predicated on the strength of
obtaining the necessary patents and copyrights to protect its intellectual
property. The Company relies on trade secrets and unpatented proprietary
technology in its testing service.
The Company's principal competition consists of entities within the
opinion research industry which provide a third party testing service either to
advertising agencies or directly to the advertising client. Often, agencies own
their own dedicated research company. The Company intends to compete against
these well-established research entities on the basis of technology
differentiation, test reliability and pricing.
Another uncertainty is the dependence on key personnel familiar with
the Company's technology. The loss of any of the Company's key personnel could
have an adverse effect on the Company's continued product development and
business operations.
Employees
As of January 31, 1998, the Company had five (5) employees and four (4)
contract consultants. None of the Company's employees or independent contractors
is subject to a collective bargaining agreement and the Company believes its
relations with its employees and independent contractors are good.
- - --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION
- - --------------------------------------------------------------------------------
The discussion contained in this Item 2 is "forward looking," as that
term is identified in, or contemplated by, Section 27A of the Securities Act and
Section 21E of the Exchange Act. Accordingly, actual results may materially
differ from projections or anticipated trends or plans.
As indicated in Item 1 above, the Company has not operated in any
significant way since the abandonment of its mining properties in 1993. The
Company's new wholly owned subsidiary, NextGen (formerly Media Solutions), has
operated during the last two years and discussion in this Item 2 accordingly
8
<PAGE>
focuses on NextGen's operating history. Also, NextGen's plan of operation for
the next twelve months necessarily is the Company's plan of operation.
NextGen is a development stage company which was organized in June of
1994. Since inception, NextGen has been engaged principally in software product
design, development and marketing of advertising testing services. NextGen's
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered in the establishment of a new business in an emerging and
continually evolving industry characterized by an increasing number of market
entrants and intense competition, and the development and commercialization of
new products based on innovative technology. In addition, NextGen's independent
auditors have included an explanatory paragraph in their report stating that
NextGen's financial statements have been prepared assuming that NextGen will
continue as a going concern and that NextGen's recurring losses from operations
and deficit accumulated during the development stage raise substantial doubt
about its ability to continue as a going concern. As the notes to the financial
statements indicate, the Company does not have significant cash or other
material assets and it does not have an established source of revenue sufficient
to cover its operating costs to allow it to continue as a going concern.
Plan of Operation
During 1998, the Company plans to focus on efforts to increase revenue.
The Company has hired a sales staff to market the Company's services to
customers. At the time of the filing of this Form 10-SB, such sales staff
consisted of one full-time employee. Management has attended an industry trade
show in an effort to expose the Company's services to potential customers and
intends to devote substantial time during the next 12 months to customer
acquisitions. Also, the Company has worked with an advertising firm in Salt Lake
City, Utah to test the Company's advertising testing process and expose that
process to potential customers. Unless a client base is established, the Company
will be forced to rely on investment financing to meet its short and long term
cash requirements.
Immediate cash requirements will be met through investment financing
and through the Company's limited revenues from services. Unless such revenues
increase, the Company will not be able to meet its short-term or long-term cash
requirements. Current revenues and financing likely will be adequate through May
31, 1998. The Company will have to raise additional funds after that point.
Though management has successfully obtained such financing in the past, there is
no assurance that investment financing will be available in the future. And if
it is, additional investment financing will result in a dilution of current
shareholder equity.
The Company will continue to improve its advertising testing method
through its research and development efforts. The Company plans to protect its
9
<PAGE>
developments through appropriate patent applications. If the Company receives
the appropriate patent and copyright approvals, which is not certain, the
Company expects to be able to capitalize on the anticipated trend in the
industry for technologies the Company employs. In response to industry
inquiries, the Company also plans to explore demand for its product and services
in the audience measurement field. Additional development efforts and expansion
into new markets depend on the Company's ability to develop revenue streams.
The Company expects to obtain capital funds either from the issuance of
common stock or debt. It is expected that external sources will be available to
provide these funds, but there can be no guarantees of such funding.
Results of Operations During 1996 and 1997
In 1996, Media Solutions continued to develop and market a line of
corporate software known as "MediaLink" for the management of television direct
response advertising ("DRTV") campaigns. During the year, the Media Solutions
ongoing product development was funded through system sales totaling
approximately $360,000 and additional investments. In many cases, to obtain new
clients, Media Solutions offered pricing at below the fully allocated cost of
delivering and supporting each new system. Moreover, the Media Solutions
software, once installed at each client site, generally required
greater-than-anticipated technical support resources to maintain stability and
functionality. As a result of these facts and the inadequacy of investment
capital, the company experienced a chronic shortage in working capital, and
results from operations were consistently unprofitable.
In October of 1996, Media Solutions entered into a $100,000 bridge loan
agreement with one of its shareholders. Under the terms of the agreement, the
company utilized borrowed funds to satisfy near-term working capital
obligations. Management believed that repayment would come both from anticipated
system sales and from proceeds of an offering of equity securities to outside
investors.
During 1997, MSII, which had licensed the right to use and market
MediaLink, continued to experience strong demand for the product. However, in
addition to the factors mentioned above, operations were unprofitable because
of: 1) the heavy investment required to deploy a client/server application into
the media marketplace; 2) the lack of the required infrastructure to support the
product; 3) the lack of sufficient marketing resources; and 4) the inability to
obtain venture capital commitments necessary to finance the company's expansion.
Another major factor contributing to the lack of profits was the market's
inadequate perception of product value in relation to the cost of developing and
supporting a highly complex software application.
10
<PAGE>
In May of 1997, MSII had exhausted its sources of investment capital.
At that date, the company had raised approximately $540,000 in equity investment
and $330,000 in stockholder debt. Year to date, sales totaled approximately
$80,000 resulting in losses of approximately $690,000. Under these
circumstances, Media Solutions initiated discussions with interested parties
about acquiring MediaLink. In July of 1997, Media Solutions sold the MediaLink
asset to MSII and MSII signed a letter of intent to sell MediaLink to Columbine
JDS Systems, Inc., a leading media software company and a subsidiary of Big
Flower, Inc., a NYSE listed company. The purchase agreement was effective as of
August 1, 1997. MSII's receipt of proceeds from the sale, totaling $350,000, is
contingent upon certain profitability tests at Columbine. MSII has merged into
NextGen, so any proceeds received will be received by NextGen.
In July 1997, under new management, Media Solutions reorganized
existing investment and focused on the development and launch of a business
centered around a NASA licensing agreement for the CREW software. For the
remainder of the year, Media Solutions, operating under the name Capita Systems,
Inc., significantly modified and improved the NASA software and instrumentation
hardware and engaged in extensive benchmark testing and preliminary marketing,
performing its first revenue test in October. The cost of these activities was
borne by incremental equity investment obtained over the course of the year. In
the foreseeable future, it is expected that cash generated from operations will
be inadequate to support full marketing roll out and ongoing product development
and that the Company will thus be forced to rely on additional equity financing.
Management is confident that it can identify sources and obtain adequate amounts
of such financing.
The Company's success is dependent on its ability to raise additional
capital to effect all aspects of its operations. During 1997, MSII's liquidity
came primarily from external equity investment. No significant revenues were
generated in 1997 primarily due to management's decision to sell its
DRTV-tracking software known as MediaLink and thereafter to focus on the
development of its advertising testing system the Company now offers to the
advertising industry. As the Company's financial statements and pro forma
consolidated financial statements show, NextGen's cash requirements for 1997
were primarily met by capital investments in the Company.
Management believes that demand for its advertising testing services
will be high in the information-intensive advertising industry. Management is
aware of the fact that market research long has been an integral part of the
advertising industry and knows of no trends which will decrease the advertising
industry's demand for market and response research. However, management also is
unaware of any trends which indicate that the advertising industry and its
clients will accept the Company's method for measuring consumer response to
advertising media. Also, management does not know how seasonal events in the
11
<PAGE>
advertising industry will impact upon the Company's revenues for any given
period. The Company's experience in this regard simply is insufficient to allow
management to be aware of trends, events or uncertainties which may have an
impact upon net sales or revenues.
Substantially all of the material changes from period to period in one
or more line items in NextGen's financial statements and pro forma combined
financial statements are the result of Media Solutions' and MSII's change from
offering a line of corporate software for the management of television direct
response advertising campaigns to focusing on the development and marketing of
its advertising testing services. With this change, revenues from sales of the
former software product declined. Also, the fact that NextGen did not bring its
new advertising testing service to market resulted in no increased revenues from
that service. Accordingly, operations during 1997 were funded through equity
financing.
It also should be noted that at the time the Company's financial
statements were prepared, it was the Company's understanding that though the
NASA license agreement permits NextGen to offer testing services for all direct
response applications, including television and print media and the Internet and
package design, NASA had agreed that NextGen could use the CREW software for all
media and advertising applications and that such use would not be considered an
infringement of NASA's intellectual property rights in the CREW software. Since
the time the financial statements were finalized, the Company has learned that
while NASA officials have indicated that the Company's use of the CREW software
outside of all direct response advertising applications would not be considered
a violation of the NASA license agreement, NASA itself has not formally, and in
writing, agreed to that position. Accordingly, the footnotes to the financial
statements, specifically Footnote No. 1, should be read together with this
paragraph.
In the next twelve months, the Company has no plans to purchase or sell
any significant capital assets in the form of either plant or equipment, with
the exception of office equipment and furnishings to effect its administrative
activities.
- - --------------------------------------------------------------------------------
ITEM 3. DESCRIPTION OF PROPERTY
- - --------------------------------------------------------------------------------
The Company leases approximately 1,000 square feet of office space
located at 900 East Eighth Avenue, King of Prussia, Pennsylvania 19406,
telephone number (610) 768-8070. The Company believes that such facilities are
adequate for its present
needs.
The Company does not own any real estate, nor is the Company engaged in
the business of investing in real estate or real estate mortgages.
12
<PAGE>
- - --------------------------------------------------------------------------------
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
- - --------------------------------------------------------------------------------
(a) 5% Shareholders:
The following information sets forth certain information as of April 1,
1998 about each person who is known to the Company to be the beneficial owner of
more than five percent (5%) of the Company's Common Stock:
<TABLE>
<CAPTION>
(2)
(1) Name and Address (3) (4)
Title of Beneficial Amount and Nature of Percent of
of Class Owner Beneficial Ownership Class
- - -------- ----- -------------------- -----
<S> <C> <C>
Common David B. Hunter 1,494,727 13%
900 East Eighth Ave., Suite 300
King of Prussia, PA 19406
Ralph Anglin 1,353,6761 12%
900 East Eighth Ave., Suite 300
King of Prussia, PA 19406
The Meribeau Company 1,295,432 12%
International, Inc.2
900 East Eighth Ave., Suite 300
King of Prussia, PA 19406
Margaret W. Long 996,484 9%
900 East Eighth Ave., Suite 300
King of Prussia, PA 19406
William Winter 913,701 8%
110 Pacific Avenue
San Francisco, CA 94111
</TABLE>
- - --------
1 Of this amount, 140,000 shares are owned by the Robb Cape, Inc Profit
Sharing Plan. Mr. Anglin controls the Robb Cape, Inc. Profit Sharing Plan.
2 The Meribeau Company International, Inc. is owned and controlled by
Michael J. Kline, an officer and director of the Company.
13
<PAGE>
<TABLE>
<CAPTION>
(2)
(1) Name and Address (3) (4)
Title of Beneficial Amount and Nature of Percent of
of Class Owner Beneficial Ownership Class
- - -------- ----- -------------------- -----
<S> <C> <C>
Common J. Townshend Benjamin 747,363 7%
900 East Eighth Ave., Suite 300
King of Prussia, PA 19406
(b) Security Ownership of Management:
<CAPTION>
(2)
(1) Name and Address (3) (4)
Title of Beneficial Amount and Nature of Percent of
of Class Owner Beneficial Ownership Class
- - -------- ----- -------------------- -----
<S> <C> <C>
Common David B. Hunter 1,494,727 13%
900 East Eighth Ave., Suite 300
King of Prussia, PA 19406
Michael J. Kline 1,295,4323 12%
900 East Eighth Ave., Suite 300
King of Prussia, PA 19406
Millard E. Tydings II 49,824 Less than 1%
2705 Pocock Road
Monkton, MD 21111
All Directors and 2,839,983 25%
Officers as a Group
</TABLE>
(c) Changes in Control:
There is no arrangement which may result in a change in control.
- - --------
3 As identified in footnote 2 above, Mr. Kline beneficially owns these
shares through his ownership and control of The Meribeau Company International,
Inc.
14
<PAGE>
- - --------------------------------------------------------------------------------
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
- - --------------------------------------------------------------------------------
(a) Directors and Executive Officers
As of April 1, 1998, the directors and executive officers of the
Company, their ages, positions in the Company, the dates of their initial
election or appointment as director or executive officer, and the expiration of
the terms as directors are as follows:
Period Served As
Name Age Position Director*
- - ---- --- -------- ---------
David B. Hunter 43 President and June 1995 to present
Director
Michael J. Kline 51 Chief Financial June 1996 to present
Officer, Secretary
and Director
Millard E. Tydings II 39 Treasurer and Oct. 1996 to present
Director
*The Company's directors are elected at the annual meeting of stockholders and
hold office until their successors are elected and qualified. The Company's
officers are appointed annually by the Board of Directors and serve at the
pleasure of the Board.
(b) Business Experience:
David B. Hunter, age 43, is the President and a Director of Capita
Research Group, Inc. Mr. Hunter is a graduate of Temple University receiving a
Bachelors Degree in Business Administration in 1980. From October 1978 through
October 1980, he was an actuarial associate for Computerized Pension Services,
Inc. of Philadelphia, PA, a pension actuarial firm. From October 1980 through
December 1986, he was employed by the firm of Tucker, Anthony & R. I. Day, Inc.
of Philadelphia, PA, a stock brokerage firm, as a registered sales associate. He
was named vice president of that firm in 1983. From January 1987 through April
1988, he was employed by Piper Jaffray & Hopwood, Inc. of Des Moines, Iowa, a
stock brokerage firm, as vice president of sales. From April 1988 through August
1989, he was employed by W. H. Newbolds' Son & Co., Inc. of Philadelphia, PA, a
15
<PAGE>
stock brokerage firm, as vice president of sales. From August 1989 through
December 1997, he was an independent money manager operating as a sole
proprietorship in King of Prussia, PA. Beginning in July of 1995, Mr. Hunter
served as a Director of Media Solutions, Inc. From August of 1997 to January 12,
1998, he has served as President of Media Solutions, Inc., now NextGen Systems,
Inc., a predecessor of Capita Research Group, Inc. He currently serves as
Secretary of NextGen.
Michael J. Kline, age 51, is the Chief Financial Officer, Secretary and
a Director of Capita Research Group, Inc. Mr. Kline received a B.A. degree from
Washington & Lee University in 1969; a Fullbright Scholarship to Tuebingen
University, Germany in 1970; an M.A. degree in 1973 from Harvard University; and
an M.B.A. degree from Boston University in 1974. Mr. Kline was Senior Vice-
President and Chief Financial Officer of Planet Central TV, Inc. in Los Angeles,
California from 1992 through 1994. Mr. Kline joined Media Solutions
International, Inc., a predecessor of Capita Research Group, Inc., in 1996 as
its Secretary and a Director. In November of 1996, Mr. Kline became Vice
President and Chief Financial Officer of Media Solutions International, Inc. In
May of 1997, Mr. Kline became Chairman of the Board of Directors of Media
Solutions International, Inc. In August of 1997 he became President of Media
Solutions International, Inc. On January 12, 1998, Mr. Kline was elected
President of NextGen.
Millard E. Tydings II, age 39, is the Treasurer and a Director of the
Capita Research Group, Inc. Mr. Tydings received a B.A. degree from Johns
Hopkins University in 1992. Mr. Tydings worked with the United States Chamber of
Commerce as a marketing representative from 1992 until 1993 in Atlanta, Georgia.
Mr. Tydings was employed as the Mergers and Acquisitions Director in the
Southeastern United States for CliniCorp. in 1994. CliniCorp is no longer an
AMEX company. It has been delisted and went bankrupt. Since 1995, Mr. Tydings
has worked as a self-employed financial consultant in Bethesda, Maryland.
(c) Directors of Other Reporting Companies:
None of the directors are directors of other reporting companies.
(d) Employees:
The officers and directors who are identified above are significant
employees of the Company.
(e) Family Relationships:
There are no family relationships between the directors, executive
officers or any other person who may be selected as a director or executive
officer of the Company.
16
<PAGE>
(f) Involvement in Certain Legal Proceedings:
None of the officers and directors of the Company have been involved in
the past five (5) years in any of the following:
(1) Bankruptcy proceedings;
(2) Subject to criminal proceedings or convicted of a criminal act;
(3) Subject to any order, judgment or decree entered by any Court
for violating any laws relating to business, securities or
banking activities; or
(4) Subject to any order for violation of federal or state
securities laws or commodities laws.
17
<PAGE>
- - --------------------------------------------------------------------------------
ITEM 6. EXECUTIVE COMPENSATION
- - --------------------------------------------------------------------------------
The Company has not compensated its management in the last three years
due to the fact that the Company has not been engaged in business since 1993.
However, the following table sets forth information about compensation paid or
accrued by the Company's wholly-owned subsidiary, NextGen, during the years
ended December 31, 1997, 1996 and 1995 to the Company's officers and directors.
None of NextGen's Executive Officers earned more than $100,000 during the years
ended December 31, 1997, 1996 and 1995. Also, it should be noted that executives
have been issued shares of the Company's stock in 1998 as part of the provisions
of the Exchange Agreement by and between the Company and NextGen shareholders.
Such share ownership is reported under Item 4 of Part I.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
(e) (g)
Other (f) Securities (i)
(a) Annual Restricted Under- (h) Other
Name and (c) (d) Compen- Stock Lying LTIP Compen-
Principal (b) Salary Bonus sation Awards Options/ Payouts sation
Position Year $ ($) ($) ($) SARs(#) ($) ($)
- - -------- ---- ------- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David B. Hunter
President 1997 $ 2,200 $ None $ None $ None None None None
1996 $31,500 $ None $ None $ None None None None
1995 $24,000 $ None $ None $ None None None None
Michael J. Kline
Chief Finan- 1997 $ None $ None $ None $ None None None None
cial Officer, 1996 $18,000 $ None $ None $ none None None None
and Secretary 1995 $24,000 $ None $ None $ None None None None
</TABLE>
Millard E. Tydings II, Treasurer, has not been paid any compensation for the
years ended 1997, 1996 or 1995.
18
<PAGE>
- - --------------------------------------------------------------------------------
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - --------------------------------------------------------------------------------
During the past two (2) years, the Company has not entered into a
transaction with a value in excess of $60,000 with a director, officer or
beneficial owner of 5% or more of the Company's common stock, except as
disclosed in the following paragraph.
In October of 1996, Media Solutions entered into a $100,000 bridge loan
agreement with Margaret W. Long, one of its shareholders. Under the terms of the
agreement, the company utilized borrowed funds to satisfy near term working
capital obligations. Management believed that repayment would come both from
anticipated system sales and from proceeds of an offering of equity securities
to outside investors.
- - --------------------------------------------------------------------------------
ITEM 8. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED
- - --------------------------------------------------------------------------------
The Company is registering all of its authorized 100,000,000 shares of
common stock with a par value of One Mill ($0.001) per share.
Common Stock
Each of the holders of record of Common Stock is entitled to one (1)
vote per share thereof in the election of the Company's directors and all other
matters submitted to such holders for a vote of stockholders; to share ratably
in all dividends, when, as, and if declared by the Company's Board of Directors
from funds legally available therefor; and to share ratably in all assets
available for distribution to holders of record of capital stock upon
liquidation or dissolution. There are no cumulative voting rights with respect
to the election of the Company's directors, no pre-emptive rights to subscribe
for any of the Company's securities, and no conversion rights or sinking fund
provisions applicable to the common stock.
"Anti-Takeover" Provisions
Although the Board of Directors is not presently aware of any takeover
attempts, the Company's Certificate of Incorporation and By-laws contain certain
provisions which may be deemed to be "anti-takeover" in nature in that such
provisions may deter, discourage, or make more difficult the assumption of
19
<PAGE>
control of the Company by another corporation or person through a tender offer,
merger, proxy contest or similar transaction or series of transactions. These
provisions were adopted unanimously by the Board of Directors and approved by
the stockholders of the Company.
Authorized but Unissued Shares. The Company has authorized 100,000,000
shares of capital stock. These shares were authorized for the purpose of
providing the Board of Directors of the Company with as much flexibility as
possible to issue additional shares for proper corporate purposes including
equity financing, mergers, stock dividends, stock splits, stock options and
other purposes. The Company has no agreements, commitments or plans at this time
for the sale or use of the additional shares of capital stock except as
described herein. Through April 1, 1998, the Company had issued 11,152,000
shares of capital stock.
No Cumulative Voting. The Company's Certificate of Incorporation and
By-laws do not contain any provisions for cumulative voting. Cumulative voting
entitles stockholders to as many votes as equal the number of shares owned by
such holder multiplied by the number of directors to be elected. A stockholder
may cast all these votes for one candidate or distribute them among any two or
more candidates. Thus, cumulative voting for the election of directors allows a
stockholder or group of stockholders who hold less than fifty percent (50%) of
the outstanding shares voting to elect one or more members of a Board of
Directors. Without cumulative voting for the election of directors, the vote of
holders of a plurality of the shares voting is required to elect any member of a
Board of Directors and would be sufficient to elect all the members of the Board
of Directors being elected.
General Effect of Anti-Takeover Provisions. The overall effect of these
provisions may be to deter a future tender offer or other takeover attempt that
some stockholders might view to be in their best interest as the offer might
include a premium over the market price of the Company's capital stock at that
time. In addition, these provisions may have the effect of assisting the
Company's current management in retaining its position and place it in a better
position to resist changes which some stockholders may want to make if
dissatisfied with the conduct of the Company's business.
20
<PAGE>
PART II
- - --------------------------------------------------------------------------------
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S
COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
- - --------------------------------------------------------------------------------
Market Information:
The common stock of the Company currently is not trading on any
exchange. Management anticipates that the Company's shares will be qualified on
the system of the National Association of Securities Dealers, Inc. ("NASD")
known as the Bulletin Board.
There has been no market for the Company's stock in the last two years.
Accordingly, the Company has no range of high and low bid prices for the
Company's common stock to report.
Holders:
There were approximately 951 holders of record of the Company's common
stock as of March 10, 1998.
Dividends:
The Company has never paid cash dividends on its stock and does not
intend to do so in the foreseeable future. The Company currently intends to
retain its earnings for the operation and expansion of its business. The
Company's continued need to retain earnings for operations and expansion are
likely to limit the Company's ability to pay dividends in the future.
- - --------------------------------------------------------------------------------
ITEM 2. LEGAL PROCEEDINGS
- - --------------------------------------------------------------------------------
The Company is not party to, and none of the Company's property is
subject to, any pending or threatened legal, governmental, administrative or
judicial proceedings that will have a materially adverse effect upon the
Company's financial condition or operation.
21
<PAGE>
- - --------------------------------------------------------------------------------
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- - --------------------------------------------------------------------------------
On December 1, 1997, Media Solutions International, Inc. hired Rudolph,
Palitz LLP, Certified Public Accountants, to serve as its independent
accountants. There have been no disagreements between the Company and its
current or former accountants during the last two years over any accounting
policy or practice.
- - --------------------------------------------------------------------------------
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
- - --------------------------------------------------------------------------------
On July 7, 1995 the Company issued 100,000 shares of its common stock
to Amanda Walker and 435,833 shares to Nevada Agency & Trust Company, the
Company's transfer agent in consideration for corporate services rendered which
allowed the Company to remain viable during the time the Company did not
actively engage in business. The Company relied upon the exemption from
registration under Section 4(2) of the Securities Act in issuing these shares.
All of the stock certificates issued contain a legend imprinted thereon setting
forth the exemption from registration claimed. The transfer agent has placed
"stop transfer" instructions on each stock certificate with orders that such
stock cannot be transferred except in accordance with applicable securities
laws. Such shares were subject to subsequent forward and reverse splits of the
Company common stock.
On July 23, 1996 and August 20, 1996 the Company issued a total of
5,000,000 shares of its common stock as part of an effort to reorganize the
Company's business, One of the provisions for the reorganization was a seven (7)
to one (1) reverse split of the Company's stock previously outstanding. The
shares were issued in exchange for certain patent applications filed in the
United States, as well as internationally. The 5,000,000 shares were issued in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act. The stock certificates issued contained a legend setting forth
the exemption from registration. The new stockholders also executed and
delivered Investment Letter Agreements and the transfer agent was given "stop
transfer" instructions against the stock certificates in question. On January
28, 1997, the transaction of May 31, 1996 described above was rescinded and
terminated. Four million nine hundred thousand (4,900,000) shares were returned
to the Company. The remaining 100,000 shares had been issued to Alexander H.
Walker, Jr. in consideration of the services rendered to the Company in
22
<PAGE>
connection with the attempt to reorganize the Company's business. The Company's
authorized shares remained at 100,000,000 shares of common stock with a par
value of $0.001 per share.
On January 28, 1997, the Company changed its name to Royal American
Mining Properties, Ltd. A reverse split of three (3) for one (1) was adopted. No
stock was issued.
On January 27, 1998, the Company executed an Exchange Agreement with
David Hunter as exchange agent for all the stockholders of NextGen Systems,
Inc., a Pennsylvania corporation. The Exchange Agreement required a two (2) for
(1) forward split of the Company's stock and the issuance to the Exchange Agent
of 8,622,000 shares of the Company's stock. Subsequent to January 27, 1998, the
Company issued 1,532,000 shares to 19 individuals, groups and/or business
entities in consideration for a total of $141,740 and past and/or future
services rendered for the Company. The 8,662,000 and the 1,532,000 shares were
issued in accordance with the exemption from registration provided by Rule 504
of Regulation D of the Securities Act of 1933, as amended.
- - --------------------------------------------------------------------------------
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- - --------------------------------------------------------------------------------
Section 78.751 of the Nevada General Corporation Law allows the Company
to indemnify any person who was or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Company or is or was serving at the request of the Company as a director,
officer, employee or agent of any corporation, partnership, joint venture, trust
or other enterprise. The Company may advance expenses in connection with
defending any such proceeding, provided the indemnitee undertakes to pay any
such amounts if it is later determined that such person was not entitled to be
indemnified by the Company.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
23
<PAGE>
PART F/S
The following financial statements and pro forma information are filed
with this Form 10-SB:
24
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(DEVELOPMENT STAGE COMPANIES)
YEARS ENDED
DECEMBER 31, 1997 AND 1996
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
YEARS ENDED DECEMBER 31, 1997 AND 1996
TABLE OF CONTENTS
PAGE(s)
-------
INDEPENDENT AUDITORS' REPORT 1
COMBINED BALANCE SHEETS 2
COMBINED STATEMENTS OF OPERATIONS 3
COMBINED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY 4
COMBINED STATEMENTS OF CASH FLOWS 5
NOTES TO COMBINED FINANCIAL STATEMENTS 6 - 15
<PAGE>
INDEPENDENT AUDITORS' REPORT
Directors and Shareholders
NextGen Systems, Inc. and Subsidiary and Affiliate
(Development Stage Companies)
King of Prussia, Pennsylvania
We have audited the accompanying combined balance sheets of NextGen
Systems, Inc. and Subsidiary and Media Solutions International, Inc. (an
affiliate) (development stage companies) as of December 31, 1997 and 1996, and
the related combined statements of operations, changes in stockholders' equity,
and cash flows for each of the two years in the period ended December 31, 1997.
These combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the December 31, 1996 financial
statements of Media Solutions International, Inc., whose statements reflect
total assets and revenues constituting 37 percent and 5 percent, respectively,
of the related combined totals. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included in Media Solutions International, Inc., is based solely on
the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors,
the combined financial statements referred to above present fairly, in all
material respects, the financial position of NextGen Systems, Inc. and
Subsidiary and Affiliate (development stage companies), as of December 31, 1997
and 1996, and the results of their operations, and their cash flows for each of
the two years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
The accompanying combined financial statements have been prepared
assuming that the Companies will continue as a going concern. As discussed in
Note 9 to the financial statements, the Companies are development stage
companies with no significant operating results to date and have suffered
recurring losses which raise substantial doubt about their ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 9. The combined financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
RUDOLPH, PALITZ LLP
March 9, 1998
Plymouth Meeting, Pennsylvania
- 1 -
<PAGE>
<TABLE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
COMBINED BALANCE SHEETS
<CAPTION>
ASSETS
DECEMBER 31,
------------
1997 1996
----------- -----------
CURRENT ASSETS
<S> <C> <C>
Cash in banks $ 15,190 $ 639
Accounts receivable 2,000 28,201
----------- -----------
Total current assets 17,190 28,840
----------- -----------
EQUIPMENT - NET 85,083 78,113
----------- -----------
OTHER ASSETS
Organization costs - net 19,638 34,008
Deposits 4,929 3,803
----------- -----------
Total other assets 24,567 37,811
----------- -----------
$ 126,840 $ 144,764
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 82,576 $ 6,519
Accrued expenses 78,432 54,432
Notes payable 60,000 8,300
Due to stockholders 225,791 237,832
----------- -----------
Total current liabilities 446,799 307,083
----------- -----------
STOCKHOLDERS' DEFICIENCY Common stock, NextGen Systems, Inc.
$1.00 par value, 3,000,000 shares authorized;
issued and outstanding, 337,435 in 1997 and 500 in 1996 337,435 500
Common stock, Media Solutions International, Inc.
$.01 par value, 10,000,000 shares authorized;
issued and outstanding, 1,260,100 in 1997 and 1,926,750 in 1996 12,601 19,268
Additional paid-in capital 532,533 331,161
Deficit accumulated during development stage (1,202,528) (513,248)
----------- -----------
Total stockholders' deficiency (319,959) (162,319)
----------- -----------
$ 126,840 $ 144,764
=========== ===========
</TABLE>
See Notes to Combined Financial Statements.
- 2 -
<PAGE>
<TABLE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
REVENUE $ 81,894 $ 360,654
------------------ -----------------
EXPENSES
Research and development 118,241 206,188
Salaries and consulting fees 234,462 276,444
Advertising and promotion 9,916 26,430
General and administrative 389,103 248,854
------------------ -----------------
Total expenses 751,722 757,916
------------------ -----------------
OTHER INCOME (EXPENSE)
Gain on disposition of asset - 3,900
Interest expense (19,452) (5,613)
------------------ -----------------
Total other expense (19,452) (1,713)
------------------ -----------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (689,280) (398,975)
PROVISION FOR INCOME TAXES - -
------------------ -----------------
NET LOSS $ (689,280) $ (398,975)
================== =================
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.40) $ (0.39)
================== =================
WEIGHTED AVERAGE SHARES OUTSTANDING 1,736,458 1,034,658
================== =================
</TABLE>
See Notes to Combined Financial Statements.
- 3 -
<PAGE>
<TABLE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
DEFICIT
MEDIA SOLUTIONS ACCUMULATED
NEXTGEN SYSTEMS, INC. INTERNATIONAL INC. ADDITIONAL DURING
NUMBER OF DOLLAR NUMBER OF DOLLAR PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE PERIOD
------ ------ ------ ------ ------- ------------
Balance,
<S> <C> <C> <C> <C> <C> <C>
January 1, 1996 500 $ 500 - $ - $ 199,429 $ (114,273)
Issuance of stock
at inception - - 100,000 1,000 - -
Issuance of stock - - 1,826,750 18,268 131,732 -
Net loss - - - - - (398,975)
----------- --------------- -------------- ------------- ------------ ---------------
Balance,
December 31, 1996 500 500 1,926,750 19,268 331,161 (513,248)
Issuance of stock 337,350 337,350 - - - -
Issuance of stock - - 38,850 388 193,902 -
Stock redemption
and retirement - - (705,500) (7,055) 7,055 -
Stock redemption
and retirement (415) (415) - - 415
Net loss - - - - - (689,280)
----------- --------------- -------------- ------------- ------------ ---------------
Balance,
December 31, 1997 337,435 $ 337,435 1,260,100 $ 12,601 $ 532,533 $ (1,202,528)
=========== =============== ============== ============= ============ ===============
</TABLE>
See Notes to Combined Financial Statements.
- 4 -
<PAGE>
<TABLE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
COMBINED STATEMENTS OF CASH FLOWS
<CAPTION>
1997 1996
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (689,280) $ (398,975)
Adjustments to reconcile net loss to
net cash used in operating activities:
Gain on sale of asset - (3,900)
Depreciation 28,007 20,997
Amortization 14,370 4,875
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 26,201 47,908
Other assets (1,126) 197
(Increase) decrease in:
Accounts payable 76,057 (24,086)
Accrued expenses 24,000 36,127
------------------ -----------------
Net cash used in operating activities (521,771) (316,857)
------------------ -----------------
INVESTING ACTIVITIES
Purchase of equipment (34,977) (40,377)
Organization costs - (38,883)
------------------ -----------------
Net cash used in investing activities (34,977) (79,260)
------------------ -----------------
FINANCING ACTIVITIES
Proceeds from issuance of stock 531,640 151,000
Proceeds from note payable 60,000 -
Proceeds from stockholder loans - 237,832
Proceeds from other loans - 8,300
Repayment of loans (20,341) (1,000)
------------------ -----------------
Net cash provided by financing activities 571,299 396,132
------------------ -----------------
NET INCREASE IN CASH 14,551 15
CASH, BEGINNING 639 624
------------------ -----------------
CASH, ENDING $ 15,190 $ 639
================== =================
</TABLE>
See Notes to Combined Financial Statements.
- 5 -
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1. HISTORY AND NATURE OF THE BUSINESSES
History and Nature of the Businesses
NextGen Systems, Inc. and Subsidiary (the "Company" or
"NextGen") (formerly Media Solutions, Inc.) is in the
development stage of operations. Media Solutions, Inc.,
("Media Solutions" or "MSI") was incorporated in Pennsylvania
on June 6, 1994, for the purpose of developing and selling
MediaLink, a client/server software system used by the
direct-response advertising industry. From January 1, 1996
through December 31, 1997, the Company has been principally
devoted to research and development, organizational
activities, and raising capital. For the years ended December
31, 1997 and 1996, the Company had $81,894 and $360,654 of net
revenues, respectively. The ultimate recovery of investments
and costs is dependent on future profitable operations, which
presently cannot be determined.
In September of 1995, Media Solutions initiated
discussions with the National Aeronautics and Space
Administration ("NASA") in Langley, Virginia about licensing
NASA's software technology known as the "CREW software". This
software measures a test respondent's EEG, or brain wave
impulse, when subjected to aural or visual stimuli. The CREW
software then converts the raw brain wave data into an index
which indicates the respondent's level of interest in, or
boredom, with the stimuli. In January of 1996, Media Solutions
filed an application with NASA for a license for the
commercial application of the CREW software with the intention
to use it as a testing service in the media and advertising
industries.
In June of 1996, Media Solutions International, Inc,
("MSII") was incorporated in Pennsylvania and licensed the
rights from Media Solutions to continue the development and
selling of MediaLink.
- 6 -
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1. HISTORY AND NATURE OF THE BUSINESSES
History and Nature of the Businesses (Continued)
In May of 1997, NASA approved Media Solutions'
application for the CREW software license and issued a license
agreement in the name of "NextGen Systems, Inc.", a fictitious
name registered by Media Solutions in the Commonwealth of
Pennsylvania in September 1995. Under its license agreement
with NASA, NextGen has an exclusive five (5) year license
commencing August 4, 1997. In addition, NextGen has a five (5)
year renewal option. The NASA license agreement permits
NextGen to offer testing services for all direct response
advertising applications, including television and print media
and the Internet, and package design. NASA has agreed that
NextGen may use the CREW software for all media and
advertising applications and that such use will not be
considered an infringement of NASA's intellectual property
rights in the CREW software. The license agreement requires
NextGen to pay NASA a royalty equal to 10% of revenues,
payable annually, with a minimum guaranteed annual royalty of
fifteen thousand dollars ($15,000).
In June of 1997, Media Solutions formed Capita Systems,
Inc., a Delaware corporation and a wholly-owned subsidiary of
Media Solutions, for the purpose of commercializing and
marketing its advertising testing service.
On July 31, 1997, the Company and Media Solutions
International, Inc. agreed to sell the MediaLink asset and
related business to Columbine JDS Systems, Inc., for a future
payment of $350,000 contingent upon defined levels of
profitability. Through December 31, 1997, the Company has not
received any payments. The transaction was completed in
October 1997. In connection with the agreement, and for no
consideration, the Company's founder relinquished his
officer's position and stock ownership in the Company and
became an employee in Columbine JDS Systems, Inc.
Since commencing operations in June 1997, Capita
Systems, Inc., has been engaged in significant additional
software research and development. Beginning in August 1997,
the Company initiated development projects to extensively
modify and enhance the original NASA software to tailor its
use to the more specific demands of media and advertising
clients. This included the integration of video technology
into the application. In addition, the Company has developed
proprietary hardware, specifically the EEG measurement
headset, to facilitate high volume and convenience in the
testing process. The Company has developed a completely "dry
and noninvasive" headset and has applied for a US patent on
this hardware and related components.
- 7 -
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1. HISTORY AND NATURE OF THE BUSINESSES (Continued)
History and Nature of the Businesses (Continued)
As stated previously, the Company performed its first
test of the headset in October 1997, and is in various stages
of negotiation with numerous prospects, including major US
marketing companies and advertising agencies.
On December 30, 1997, MSI changed its legal name to
NextGen Systems, Inc. and increased the number of authorized
common shares to 3,000,000.
The Company currently employs five professionals and
three contract consultants. The Company maintains offices in
King of Prussia, Pennsylvania. The Company also uses, at no
charge, temporary facilities at Holmdel, New Jersey to conduct
all testing. The Company owns all of its equipment and
software, and has under development, numerous software and
hardware applications to enhance its capabilities in
advertising and media testing. The Company intends to obtain
patents and software copyrights as products are developed to
protect its intellectual property.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Combination
The combined financial statements include the accounts
of two entities which are under common management, NextGen
Systems, Inc. and Subsidiary ("formerly Media Solutions,
Inc.") and Media Solutions International Inc. The consolidated
financial statements of NextGen include the accounts of its
wholly-owned subsidiary, Capita Systems, Inc. As discussed in
Note 8, NextGen Systems, Inc. and its subsidiary merged with
MSII on January 12, 1998 with NextGen Systems, Inc. being the
surviving corporation. All significant intercompany
transactions have been eliminated.
Cash Equivalents
The Companies consider all highly liquid debt
instruments purchased with a maturity of three months or less
at the date of acquisition to be cash equivalents.
- 8 -
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
The Companies' financial instruments consist primarily
of cash, accounts receivable, accrued expenses and debt
instruments. The recorded values of cash, accounts receivable,
accounts payable and accrued expenses are considered to be
representative of their fair values. Based upon the terms of
the Companies debt instruments that are outstanding as of
December 31, 1997 and 1996, the carrying values are considered
to approximate their respective fair values.
Equipment
Equipment is stated at cost. Major improvements are
capitalized; minor replacements, maintenance and repairs are
charged to current operations. Depreciation is computed by
applying the straight-line method over the estimated useful
lives of the related assets for financial reporting purposes
and an accelerated method for income tax purposes.
Organization Costs
Expenses incurred in connection with the formation of
NextGen and MSII have been capitalized and are being amortized
over a period of five years using the straight-line method.
Long-Lived Assets
The Companies review for the impairment of long-lived
assets and certain identifiable intangibles whenever events or
changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be
recognized when estimated future cash flows expected to result
from the use of the asset and its eventual disposition are
less than its carrying amount. The Companies have not
identified any such impairment losses.
- 9 -
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Software Development Costs
Development costs incurred in the research and
development of new software products are expensed as incurred
until technological feasibility has been established. Software
development expenses incurred for product enhancements after
the product has reached technological feasibility have not
been material and, accordingly, also have been charged to
operations as incurred. As of December 31, 1997 and 1996, no
software development costs have been capitalized.
Advertising and Promotion Costs
Advertising and promotion costs are charged to current
operations when incurred. Advertising and promotion costs
expenses for 1997 and 1996 were $9,916 and $26,430,
respectively.
Income Taxes
The Companies account for income taxes in accordance
with Statement of Financial Accounting Standards No.109 ("SFAS
No. 109"), "Accounting for Income Taxes", which requires the
use of an asset and liability approach for financial
accounting and reporting for income taxes. Under this method,
deferred tax assets and liabilities are recognized based on
the expected future tax consequences of temporary differences
between the financial statement carrying amounts and tax bases
of assets and liabilities as measured by the enacted tax rates
that are expected to be in effect when taxes are paid or
recovered. Deferred tax expense is the result of changes in
deferred tax assets and liabilities.
Research and Development
Expenditures for research, development and engineering
of products and manufacturing processes are expensed as
incurred. Cost reimbursement under collaborative research
agreements are recorded as offsets to research and development
expenses. Research and development costs for 1997 and 1996
were $118,241 and $206,188, respectively.
- 10 -
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Common Share
In 1997, the Financial Accounting Standards Board
issued SFAS No. 128, "Earnings Per Share." SFAS No. 128
replaced the previously reported primary and fully-diluted
earnings per share with basic and diluted earnings per share,
respectively. Earnings per share amounts for all periods
presented have been calculated in accordance with the
requirements of SFAS No. 128.
Estimates
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, liabilities, revenues and
expenses, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
NOTE 3. STOCKHOLDER LOANS
The Companies were indebted to its stockholders in the
amount of $225,791 and $237,832 at December 31, 1997 and 1996,
respectively. The loans have an interest rate of prime plus
two percent and are payable on demand. Accrued interest on
stockholder loans at December 31, 1997 and 1996 was $25,103
and $5,651, respectively.
NOTE 4. EQUIPMENT
1997 1996
---- ----
Equipment $149,110 $114,133
Furniture and fixtures 12,034 12,034
--------- ---------
161,444 126,167
Less - accumulated depreciation (76,061) (48,054)
------- -------
$ 85,083 $ 78,113
========= =========
- 11 -
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE. 5 CONCENTRATION OF CREDIT RISK
The Companies maintain cash balances at a financial
institution located in the Northeast. The accounts are insured
by the Federal Deposit Insurance Corporation up to $100,000.
The Companies perform periodic evaluations of the relative
credit standing of the financial institutions with which it
deals. The Companies have not experienced any losses in such
accounts and believe they are not exposed to any significant
credit risk on cash balances.
NOTE 6. INCOME TAXES
A reconciliation of the differences between the
Companies' effective tax rates and the statutory Federal
income tax rate of 34% in 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Income tax benefit at statutory rate ($234,355) ($135,652)
Permanent differences 4,625 715
State income tax benefit,
net of Federal effect (44,709) (26,191)
Increase in valuation allowance 274,439 161,128
-------- -------
$ - $ -
=========== ===========
</TABLE>
The deferred tax assets at December 31, 1997 and 1996
of $443,000 and $168,000, respectively, have been offset by
valuation reserves of an equal amount because management
believes it is more likely than not that such assets will not
be realized.
Net operating loss carryforwards of approximately
$1,091,000 will generally expire between the years 2010 and
2012.
- 12 -
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 7. LEASE
Effective November 1, 1997, the Company entered into an
operating lease for its corporate office located in King of
Prussia, Pennsylvania. The lease agreement is for a term of
six months with a minimum monthly lease payment of $957. Rent
expense for 1997 amounted to approximately $2,400.
NOTE 8. SUBSEQUENT EVENTS
On January 1,1998, NextGen Systems, Inc. issued 13,500
shares of common stock for total consideration of $13,500.
On January 3, 1998, $25,000 of notes payable were
converted into 10,000 shares of Media Solutions International,
Inc. common stock.
On January 5, 1998, NextGen Systems, Inc. issued 25,000
shares of common stock for total consideration of $25,000.
On January 8, 1998, approximately 1,050,000 shares of
MSII were redeemed for no consideration.
On January 9, 1998, 85 shares of NextGen Systems, Inc.
were redeemed for no consideration.
On January 12, 1998, NextGen acquired Media Solutions
International, Inc. in exchange for stock, whereas NextGen was
the surviving corporation. As a result of the merger, each
share of MSII common stock was converted into five shares of
NextGen.
On January 13, 1998, $116,825 due to a stockholder was
converted into 183,385 shares of NextGen common stock.
On January 15, 1998, NextGen Systems, Inc. issued
37,000 of common stock for total consideration of $37,000.
On January 27, 1998, prior to the transaction between
NextGen Systems, Inc. and Royal American Mining Company,
$35,000 of notes payable were converted into $35,000 shares of
NextGen Systems, Inc.
- 13 -
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 8. SUBSEQUENT EVENTS (Continued)
On January 27, 1998, the Board of Directors of the
Company approved a transaction with Royal American Mining
Company ("Royal"), a Nevada corporation, whose only activity
had been filing fee expenses during its fiscal year. Royal has
had no significant revenue for the last three fiscal years. On
January 29, 1998, the Exchange was completed as the Company
obtained approval from 100% of its stockholders. On January
30, 1998, the Royal stockholders approved the transaction
between NextGen and Royal, whereby the stockholders of NextGen
exchanged 100% of the outstanding common stock of NextGen for
90% of the outstanding common stock of Royal (the "Exchange").
The Exchange was accounted for as a reverse acquisition
whereby NextGen, in substance, acquired Royal, allocating the
fair value of Royal shares exchanged over the assets and
liabilities of NextGen prior to the merger; therefore, no
goodwill was recognized. Accordingly, the historical financial
statements are those of the accounting acquirer, NextGen and
not the financial statements of the legal acquirer, Royal. No
value was ascribed to Royal's net operating loss carryforwards
as a result of potential decrease and/or limitations in these
carryforwards due to and subsequent to the change in control.
The costs of the Exchange, which are estimated to be $90,000
will be charged to expense.
In connection with the Exchange, Royal changed its name
to Capita Research Group, Inc. In addition, the Board of
Directors approved a 2 for 1 stock split whereby the present
stockholders will be entitled to two shares for each share
owned by them in Royal. Currently, Capita Research Group, Inc.
is in the process of filing Form 10-SB with the Securities and
Exchange Commission to register all of its 100,000,000 shares
of common stock with a par value of One Mill ($0.001) per
share.
- 14 -
<PAGE>
NEXTGEN SYSTEMS, INC. AND SUBSIDIARY AND AFFILIATE
(Development Stage Companies)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 9. GOING CONCERN
The Companies financial statements are prepared using
generally accepted accounting principles applicable to a going
concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
However, the Companies do not have significant cash or other
material assets nor do they have an established source of
revenues sufficient to cover their operating costs and to
allow them to continue as a going concern. It is the intent of
the Companies to generate revenue through the sales of its
software and hardware products. During the later part of the
Fiscal 1997, the Companies focused its energies on raising
capital to begin the manufacturing and marketing of its
products. Toward these ends, the Companies engaged a public
relations firm to aid in the raising of capital and to present
seminars on its technology. Management believes, with
successful completion of a financial package, that delivered
sales of the Companies' products will occur. In the opinion of
management, sales of the Companies' products, together with
the proceeds from the sale of their common stock, will be
sufficient for them to continue as a going concern.
NOTE 10. DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE
The deficit accumulated during the development stage
was $1,202,528, which includes a loss of $114,273 from the
inception of the combined companies through December 31, 1995.
There were no transactions which occurred from the inception
of the Companies through December 31, 1995 which were
qualitatively or quantitatively material to the 1997 or 1996
combined financial statements.
- 15 -
<PAGE>
CAPITA RESEARCH GROUP
PRO FORMA
CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1997
<PAGE>
CAPITA RESEARCH GROUP, INC.
PRO FORMA CONSOLIDATING FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma consolidating financial statements
give effect certain transactions, including a business combination, whereby
NextGen Systems, Inc. ("NextGen") exchanged 100% of its common stock for 90% of
the outstanding common stock of Royal American Mining Properties Ltd. ("Royal")
(which subsequently changed its name to Capita Research Group, Inc.) and a
forward split of two shares of Royal for each of its common shares existing
prior to the transaction with NextGen. The pro forma balance sheet gives effect
to all the transactions as if they occurred on December 31, 1997. The pro forma
balance sheet is presented for informational purposes only and does not purport
to be indicative of the financial condition that actually would have resulted if
the merger had been consummated at December 31, 1997. The pro forma statement of
operations for the year ended December 31, 1997, gives effect to all business
transactions as if they occurred on January 1, 1997. The pro forma statement of
operations is also presented for informational purposes only and does not
purport to be indicative of the results of operations that actually would have
been achieved if the merger had been consummated on January 1, 1997, nor is it
indicative of the combined companies future results. The pro forma adjustments
relate to various transactions which occurred subsequent to December 31, 1997
and which occurred prior to the merger. These pro forma financial statements
should be read in conjunction with the separate historical financial statements
of NextGen Systems, Inc. and Subsidiary and Affiliate and Royal American Mining
Properties Ltd., and the notes therein.
The pro forma consolidating statement of operations includes the results
of operations of NextGen and Media Solutions International, Inc. ("MSII") on a
pro forma basis as though their business combination occurred on January 1,
1997. On January 12, 1998, NextGen acquired MSII in exchange for stock. The
exchange will be accounted for as a corporate reorganization of entities under
common control, at historical cost, similar to pooling accounting. For a
description of the merger see the Notes to the Combined December 31, 1997
Financial Statements of NextGen Systems, Inc. and Subsidiary and Affiliate.
The pro forma consolidating statement of operations also includes the
results of operations of Royal on a pro forma basis as though the business
combination occurred on January 1, 1997. On January 27, 1998, NextGen merged
with Royal in transaction accounted for as a "reverse acquisition." NextGen in
substance acquired Royal, allocating the fair value of the Royal shares
exchanged over the relative fair values of assets and liabilities (assumed to
equal book value) of NextGen prior to the merger. Therefore no goodwill was
recognized. For a description of the merger see the Notes to the Combined
December 31, 1997 Financial Statements of NextGen Systems, Inc. and Subsidiary
and Affiliate.
In the opinion of management, all adjustments have been made that are
necessary to present fairly the pro forma data.
- 1 -
<PAGE>
<TABLE>
CAPITA RESEARCH GROUP
PRO FORMA CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
<CAPTION>
ASSETS
PRO FORMA PRO FORMA
1997 ADJUSTMENTS CONSOLIDATED
---- ----------- ------------
CURRENT
<S> <C> <C> <C>
Cash in banks $ 15,190 $ 75,500 (1) $ 90,690
Accounts receivable 2,000 - 2,000
---------------- -------------- ---------------
Total current assets 17,190 75,500 92,690
---------------- -------------- ---------------
EQUIPMENT - NET 85,083 - 85,083
---------------- -------------- ---------------
OTHER ASSETS
Organization costs - net 19,638 - 19,638
Deposits 4,929 - 4,929
---------------- -------------- ---------------
Total other assets 24,567 - 24,567
---------------- -------------- ---------------
$ 126,840 $ 75,500 $ 202,340
================ ============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 82,576 $ - $ 82,576
Accrued expenses 78,432 90,000 168,432
Notes payable 60,000 (60,000)(2)(3) -
Due to stockholders 225,791 (116,825)(2) 108,966
---------------- -------------- -------------
Total current liabilities 446,799 (86,825) 359,974
---------------- -------------- -------------
STOCKHOLDERS' DEFICIENCY Common stock, NextGen Systems, Inc.
$1.00 par value, 3,000,000 shares authorized;
issued and outstanding, 337,435 in 1997 and 500 in 1996 337,435 (337,435)(4) -
Common stock, Media Solutions International, Inc.
$.01 par value, 10,000,000 shares authorized;
issued and outstanding, 1,260,100 in 1997 and 1,926,750 in
1996 12,601 (12,601)(4) -
Common stock, Capita Research Group, Inc.
$0.001 par value, 100,000,000 shares authorized:
9,580,000 shares issued and outstanding - 9,580 (4) 9,580
Additional paid-in capital 532,533 659,341 (5) 1,191,874
Deficit accumulated during development stage (1,202,528) (156,560)(6)(7) (1,359,088)
---------------- -------------- --------------
Total stockholders' deficiency (319,959) 162,325 (157,634)
---------------- -------------- ---------------
$ 126,840 $ 75,500 $ 202,340
================ ============== ===============
</TABLE>
See Notes to Pro Forma Consolidating Balance Sheet.
- 2 -
<PAGE>
CAPITA RESEARCH GROUP
NOTES TO THE PRO FORMA CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
NOTE 1.
Adjustment to record $75,500 of proceeds from various
sales aggregating 75,500 shares of NextGen Systems, Inc.
common stock, all at $1 per share.
NOTE 2.
Adjustment to record the conversion of a $35,000 note
payable and $116,825 due to a shareholder, into 218,385 common
shares of NextGen Systems, Inc (see Note 4).
NOTE 3.
Adjustment to record the conversion of a $25,000 note
payable into 10,000 common shares of Media Solutions
International, Inc. (see Note 4).
NOTE 4.
Adjustments to record the effect of the following
equity transactions on common stock:
<TABLE>
<CAPTION>
NextGen MSII CAPITA
------- ---- ------
<S> <C> <C> <C>
Sale and issuance of 75,500 shares of NextGen
Systems, Inc. common stock $ 75,500 $ - $ -
Redemption of 85 shares of NextGen and 1,050,250 shares
of Media Solutions International, Inc. for no
consideration (85) (10,502) -
Merger of NextGen Systems, Inc. and Media Solutions
International; issuance of 1,099,250 shares of NextGen
Systems, Inc. in exchange for 219,850 shares of Media
Solutions International, Inc. 1,099,250 (2,199) -
Conversion of debt to equity (see Notes 2 and 3, above) 218,485 100 -
Merger of NextGen and Royal; exchange of 1,730,485 shares of
NextGen for 8,622,000 shares of Royal; forward 2:1 split of
existing 479 Royal shares; subsequent to the exchange Royal
had 9,580,000 shares outstanding (1,730,485) - 9,580
------------ ------------ -----------
Proforma adjustments to common stock $ (337,335) $ (12,601) $ 9,580
============ ============ ===========
</TABLE>
- 3 -
<PAGE>
CAPITA RESEARCH GROUP
PRO FORMA CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
NOTE 5.
Adjustments to record the effect of the following
equity transactions on additional paid-in capital:
<TABLE>
<CAPTION>
NextGen MSII Capita Total
------- ---- ------ -----
<S> <C> <C> <C> <C>
Adjustment to record the redemption and retirement of
common stock for no consideration $ 85 $10,502 $ - $10,587
Paid in capital resulting from the issuance of 10,000
shares of Media Solutions International, Inc. for the
conversion of a $25,000 note payable - 24,900 - 24,900
Redemption and retirement of 219,850 shares of Media
Solutions International, Inc. which were exchanged for
1,099,250 shares of NextGen - 2,199 - 2,199
Recapitalization resulting from the merger of NextGen
and Royal - - 621,655 621,655
------------ ----------- ------- -------
Proforma adjustments to additional paid in capital $ 85 $ 37,601 $621,655 $659,341
============ ========= ======== ========
</TABLE>
- 4 -
<PAGE>
<TABLE>
CAPITA RESEARCH GROUP
.
PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997
(UNAUDITED)
<CAPTION>
PRO FORMA
1997 ADJUSTMENTS CONSOLIDATED
---- ----------- ------------
<S> <C> <C> <C>
REVENUE $ 81,894 $ - $ 81,894
--------------- --------------- ---------------
EXPENSES
Research and development 118,241 - 118,241
Salaries and consulting fees 234,462 66,560 301,022
Advertising and promotion 9,916 - (6) 9,916
General and administrative 389,103 90,000 (7) 479,103
--------------- --------------- ---------------
Total expenses 751,722 156,560 908,282
--------------- --------------- ---------------
OTHER INCOME (EXPENSE)
Gain on disposition of asset - - -
Interest expense (19,452) - 19,452
--------------- --------------- ---------------
Total other expense (19,452) - 19,452
--------------- --------------- ---------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (689,280) - (845,840)
PROVISION FOR INCOME TAXES - - -
--------------- --------------- ---------------
NET LOSS $ (689,280) $ 156,560 $ (845,840)
=============== =============== ===============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.40) $ (0.09)
=============== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 1,736,458 9,580,000 (8)
--------------- ---------------
</TABLE>
See Notes to Pro Forma Consolidating Statement of Operations
- 5 -
<PAGE>
CAPITA RESEARCH GROUP
NOTES TO THE PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NOTE 6.
<S> <C>
Adjustment to record consulting fees recorded in
conjunction with the conversion of an amount due to a
shareholder, into equity $ 66,560
NOTE 7.
Adjustment to record the estimated costs of the exchange
between NextGen Systems, Inc. and Royal American Mining
Company 90,000
------
Pro forma adjustments to expenses $ 156,560
=========
</TABLE>
NOTE 8.
Weighted average shares are computed based upon the
weighted average shares actually outstanding after giving
effect to the exchange between NextGen and Royal which took
place on January 27, 1998.
- 6 -
PART III
- - --------------------------------------------------------------------------------
ITEM 1. INDEX TO EXHIBITS
- - --------------------------------------------------------------------------------
The following exhibits are filed with this Form 10-SB:
Assigned
Number Description
- - ------ -----------
3(i) Articles of Incorporation
3(ii) By-laws of the Company
10. Material Contracts:
(a) NASA License Agreement
(b) Exchange Agreement dated January 27, 1998 between David B.
Hunter, Exchange Agent for the stockholders of NextGen
Systems, Inc., and Royal American Mining Properties, Ltd.
27. Financial Data Schedule
- - --------------------------------------------------------------------------------
ITEM 2. DESCRIPTION OF EXHIBITS
- - --------------------------------------------------------------------------------
The documents required to be filed under Item 2 are listed in Item 1 of
this Part III above.
25
<PAGE>
- - --------------------------------------------------------------------------------
SIGNATURES
- - --------------------------------------------------------------------------------
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 3, 1998.
CAPITA RESEARCH GROUP, INC.
By: /s/David B. Hunter
---------------------------
David B. Hunter
President
By: /s/Michael J. Kline
----------------------------
Michael J. Kline
Secretary
26
ARTICLES OF INCORPORATION
OF
INDUSTRIAL AND PETROLEUM, INC.
FILED AT THE REQUEST OF
MAURICE CONSTANT
530 California Avenue
Reno, Nevada
December 20, 1997
(Date)
JOHN KOONTZ, Secretary of State
By /s/ John Koontz
Secretary of State
No. 1121-1957
Filing Fee $750.00
<PAGE>
ARTICLES OF INCORPORATION
OF
INDUSTRIAL AND PETROLEUM, INC.
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned,
hereby associate ourselves into a corporation under and pursuant to the
provisions and by virtue of the laws of the State of Nevada, as provided in the
Corporation Act of 1925, and all Acts amendatory and supplemental thereto, and
for that purpose do hereby make, subscribe, acknowledge, certify and set forth,
as follows:
FIRST: That the name of the corporation shall be:
INDUSTRIAL AND PETROLEUM, INC.
SECOND: The principal office or place of business of the
corporation shall be located in Reno, Washoe County, Nevada, at 530 California
Avenue, and the name of the resident agent therein and in charge of the
principal office is MAURICE CONSTANT, but the corporation may maintain offices,
agencies and places of business in any other state in the United States and in
foreign countries without restriction as to place; and the corporation may keep
such books, papers and records of the corporation as are not required by law to
be kept within the State of Nevada, and as the directors may find convenient, in
such offices, agencies and places of business.
THIRD: The nature of the business to be transacted and
the objects and purposes to be promoted and carried on by the
corporation shall be as follows:
(a) To mine, mill, stamp, reduce, smelt, purchase and sell
ores and minerals and oil and other products and to construct such buildings and
works as may be deemed proper therefor or for any of the purposes hereinafter
mentioned; to drill for gas and oil, build refineries, sell and export products
therefrom, to locate, purchase, hire, contract for or otherwise acquire, hold,
use, sell, lease or otherwise dispose of any mines, minerals, oil lands, mining
property, mill sites, tunnel sites, or interests in the same, and such other
1
<PAGE>
property as may be advantageous for the development of the same; to issue stock
to the amount of the value thereof in payment therefor; to manufacture,
purchase, acquire, erect, hold, use, sell and dispose of any mining or milling
or smelting machinery and tools and materials suitable for or applicable to any
such purposes, and to do and perform any and every act, work and labor necessary
or advisable for the due economical and skillful working of such mine or mines
and for the milling, smelting, reduction, extraction, transportation and sale of
such ores or minerals and oil.
(b) To import, export, manufacture, acquire, buy, sell,
exchange and deal at wholesale or retail, or both, and otherwise in and with
goods, wares and merchandise for general use.
(c) To maintain stores and offices for the acquisition and
sale, and to establish, erect, install, maintain, conduct and carry on
factories, works, mills, plants, shops and warehouses necessary for the
production and storage of all or any goods, wares and merchandise suitable or
required for the business of the corporation.
(d) To manufacture, purchase, sell and deal in, export and
import personal property of all kinds other than and in addition to goods, wares
and merchandise hereinbefore set forth and described and to pledge, hypothecate,
or otherwise encumber the same in any manner whatsoever, or to borrow thereon in
such ways and to such extent as may be prescribed or required by the laws of any
state of the United States or any other country.
(e) To mortgage, pledge, hypothecate and trade in all manner
of goods, wares, merchandise, commodities and products including machinery and
mechanical appliances of every description.
(f) To buy, sell, mortgage, own, hold, lease, develop and deal
2
<PAGE>
in and with real estate, and with any and all franchises, appurtenant,
easements, privileges and rights thereto pertaining, and any interest therein,
and to develop or improve the same in any manner deemed advantageous to the
corporation; and to build, purchase or lease, dispose of, sell and mortgage
buildings, houses and premises, plants factories, mills and structures of every
description, used in connection with, or incident to, or which may be
advantageous to the business of the corporation.
(g) To acquire by purchase, lease or otherwise, the good will,
business, property, assets, franchises and rights, in whole or in part of any
person, firm, association or corporation, and to assume all or any of the
liabilities thereof and to pay for the same in cash or with the stock of this
corporation or its debentures or bonds, or otherwise, and to hold, maintain,
operate and conduct, as well as in any manner to dispose of, the whole or any
part of the property so acquired, but always in accordance with, and subject to,
the laws of the State of Nevada.
(h) To borrow money and contract debts when necessary for the
transaction of the business of the corporation, for the exercise of its
corporate rights, privileges or franchises, or for any other purpose of its
incorporation; also to issue bonds, promissory notes, bills of exchange,
debentures and other obligations and also evidences of indebtedness, payable at
specified time or times, or payable upon the happening of a specified event or
events, and when necessary to secure the same or any part thereof, or any part
or parts of the same by mortgage, pledge or otherwise, for money borrowed or
goods purchased or for payment of property bought or acquired or for any other
lawful obligation; also to issue, sell and dispose of certificates of investment
or participation certificates, upon such terms and under such conditions as are
or may be prescribed by the laws of the State of Nevada, or by the By-Laws of
the corporation.
3
<PAGE>
(i) To loan the funds of the corporation upon notes, bonds,
mortgages, deeds of trust, debentures or other securities, or property, real,
personal or mixed, or otherwise.
(j) To receive, collect and dispose of principal and interest,
dividends income, increment and profits upon or from all or any notes, stocks,
bonds, deeds of trust, debentures, securities, obligations and other property
held, owned or possessed by the corporation or any other person, firm or
corporation as escrow or trustee or for the use and benefit of the corporation
and to exercise in respect of all such stocks, bonds, mortgages, deeds of trust,
notes, debentures, obligations, securities and all other property and any and
all bonds, any and all rights of individual ownership thereof.
(k) To guarantee the payment of dividends or interest on
shares of stock of this corporation or upon the contracts, stocks, bonds, or
other securities or agreements of this corporation or of any other person or
corporation, and also to become surety, guarantor or indemnitor in connection
with any of the foregoing purposes for the payment of money or for the
performance of other obligations.
(l) To purchase, acquire and to hold, use, operate, introduce,
sell, assign or otherwise dispose of, hire, let or license, any patents, patent
rights, licenses, trademarks, trade names, privileges, formulas, secret
processes, and any and all inventions, improvements and processes used in
connection with or secured under letters patent and grants of the United States
of America or any other country or government, and which may appear likely to be
advantageous or useful to the corporation, and to use, exercise, develop and
grant licenses in respect of and to turn to account, manufacture, build and
construct under such patents, licenses, processes and the like, inventions and
improvements with the view of working and developing the same and effectuating
the foregoing objects of any thereof.
4
<PAGE>
(m) To act as agent, attorney in fact, trustee, or in any
other representative capacity for other persons, firms or corporations.
(n) To guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of the shares of the capital stock, or of
any bonds, securities or evidence of indebtedness, created by any other
corporation or corporations of the State of Nevada, or of any other state or
government, and while owner of such stocks to exercise all the rights, powers
and privileges of ownership, including the right to vote thereon.
(o) To purchase, hold, sell, transfer and reissue shares of
its own capital stock, but always in accordance with, and as permitted by the
laws of the State of Nevada, and by the By-Laws of the corporation.
(p) To enter into, make and perform contracts of every kind
with any person, firm, association or corporation, public, private or municipal
or any body politic, and with any state or with the government of the United
States or any dependency thereof as well as any foreign government; and in
general to carry on and conduct and engaged in any business in connection with
the foregoing, either as manufacturer, dealer, principal, agent or otherwise
permitted to corporations organized under the laws of Nevada.
(q) To establish, maintain, operate, conduct and carry on in
the State of Nevada and in any or all of the several states, territories,
possessions and dependencies of the United Sates, the District of Columbia, and
in any foreign country, its business orany part or parts thereof and as many
other businesses, stores, plants, factories, mills, warehouses, offices, and
agencies as may be necessary or deemed expedient for the corporation and its
business as well as for the extension, expansion, and exploitation of the
affairs, operation and the benefit of the corporation.
(r) Any generally to do all and everything necessary,
suitable, convenient or proper for the accomplishment of any of the purposes or
5
<PAGE>
the attainment of any of the objects or the furtherance of any of the powers
hereinbefore set forth, either alone or in association with other corporations,
firms or individuals, and to do every other act or thing incidental or
pertaining to or growing out of the aforesaid purposes or powers, or any of
them, provided the same be not inconsistent with the laws of the State of
Nevada; and also to exercise any and all of the powers conferred upon
corporations by the laws of the State of Nevada which now exist or which may be
hereafter conferred upon or granted to corporations by the laws of the said
State of Nevada.
(s) In furtherance and not in limitation of the powers
conferred by the laws of the State of Nevada, the Board of Directors is
expressly authorized from time to time to determine whether and to what extent
and at what times and places and under what conditions and regulations the books
and accounts of this corporation, or any of them other than the stock ledger,
shall be open to inspection of the stockholders, and no stockholder shall have
the right to inspect any account or book or document of the corporation, except
as conferred by law or authorized by resolution of the directors or by the
majority of the voting stockholders.
FOURTH: The maximum number of shares that the corporation is
authorized to have outstanding at any time is FIVE MILLION (5,000,000) SHARES,
of the par value of ONE DOLLAR ($1.00) per share. FIVE HUNDRED THOUSAND
(500,000) SHARES of said stock shall be voting common stock and FOUR MILLION
FIVE HUNDRED THOUSAND (4,500,000) SHARES of said stock shall be non-voting
common stock, all of which, both voting-common and non-voting common shall be
fully paid and non-assessable.
FIFTH: The members of the governing board of the corporation
shall be styled "Directors" and the number of such directors shall be three (3)
and may be increased or decreased from time to time by resolution by the Board
of Directors; provided said number of directors shall not be less than three
(3).
6
<PAGE>
The names and postoffice address of the first Board of
Directors shall be as follows:
NAME ADDRESS
---- -------
Maurice Constant Box 1607, Reno, Nevada
Benjamin J. Constant Box 1607, Reno, Nevada
Elaine Constant Box 1607, Reno, Nevada
SIXTH: No paid up capital stock of the corporation and no
stock issued as fully paid shall ever be assessable or assessed, nor shall any
stockholder of the corporation be individually liable for the debts or
liabilities thereof, and the provisions contained in this paragraph shall not be
amended.
SEVENTH: The corporation is to have perpetual existence.
EIGHTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Nevada, the Board of Directors is
expressly authorized:
To make, alter and amend the By-Laws;
To set apart out of any of the funds of the
corporation available for dividends a reserve, and to authorize and cause to be
executed mortgages and liens upon the property and franchises of this
corporation;
To designate, by resolution passed by a majority of
the whole board, one or more committees, to the extent provided in such
resolution or in the By-Laws of the corporation, shall have an may exercise any
and/or all of the powers of the Board of Directors in the management of the
business and affairs of this corporation and have power to authorize the seal of
the corporation to be affixed to all papers which may require it; and
This corporation may, in its By-Laws confer powers
additional to the foregoing upon the directors, in addition to the powers and
authorities expressly conferred upon them by law.
7
<PAGE>
IN WITNESS WHEREOF, we have made, signed and executed the
foregoing Articles of Incorporation this 19th day of December, 1957.
/s/ Maurice Constant
----------------------------
/s/ Benjamin J. Constant
----------------------------
/s/ Elaine Constant
----------------------------
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 19th day of December, 1957, before me, a Notary Public
in and for said County and State, duly appointed, qualified and sworn,
personally appeared Maurice Constant, Benjamin J. Constant and Elaine Constant,
known to me to be the persons described in and who executed the foregoing
Articles of Incorporation, and who severally acknowledged to me that they made,
subscribed, acknowledged and executed the same freely and voluntarily and for
the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
Official Seal, at my office in the City of Reno, County of Washoe, State of
Nevada, the day and year first above written.
-----------------------------
Notary Public in and for the
County of Washoe, State of Nevada
My Commission Expires:
- - ----------------------
8
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
INDUSTRIAL AND PETROLEUM, INC.
FILED AT THE REQUEST OF
ERNEST S. BROWN
RENO, NEVADA
April 15, 1958
(Date)
JOHN KOONTZ, Secretary of State
By /s/ John Koontz
Secretary of State
No. 1121-1957
Filing Fee $20.00
<PAGE>
CERTIFICATE OF AMENDMENT
------------------------
of
ARTICLES OF INCORPORATION
-------------------------
of
INDUSTRIAL AND PETROLEUM, INC.
------------------------------
KNOW ALL MEN BY THESE PRESENTS, that pursuant to the
provisions of Section 78.380 NRS, we hereby declare:
(1) The undersigned do hereby declare that they are all of the
signers and original incorporators of Industrial and Petroleum, Inc.
(2) That the original Articles of Incorporation were filed
with the Secretary of State on December 20, 1957, and with the County Clerk of
Washoe County on the 18th day of February, 1958.
(3) That the undersigned hereby declare that to this date no
part of the capital of the corporation has been paid.
That in accordance with the law aforesaid, Article Fourth of
said original Articles of Incorporation of Industrial and Petroleum, Inc. is
hereby amended to read as follows:
FOURTH: The maximum number of shares that the corporation is
authorized to have outstanding at any time is FIVE MILLION (5,000,000) SHARES,
all of which shares shall be common stock of the par value of One Dollars
($1.00) each.
IN WITNESS WHEREOF, we have made, signed, sealed and executed
the foregoing Certificate of Amendment of Articles of Incorporation this 15th
day of April, 1958.
/s/ Maurice Constant
--------------------
/s/ Benjamin J. Constant
------------------------
/s/ Elaine Constant
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 15th day of April, 1958, before me, a Notary Public in
and for said County and State, duly appointed, qualified and sworn, personally
appeared Maurice Constant, Benjamin J. Constant and Elaine Constant, known to me
to be the persons described in and who executed the foregoing Certificate of
Amendment of Articles of Incorporation, and who severally acknowledged to me
that they made, subscribed, acknowledged and executed the same freely and
voluntarily and for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
Official Seal, at my office in the City of Reno, County of Washoe, State of
Nevada, the day and year first above written.
/s/ Ernest S. Brown
-------------------
Notary Public in and for the
County of Washoe, State of Nevada
My Commission Expires:____________
3
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUL 27 1987
FRANKIE SUE DEL PAPA SECRETARY OF STATE
/S/FRANKIE SUE DEL PAPA
No. 1121-57
-------
AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
INDUSTRIAL AND PETROLEUM, INC.
* * * * *
Pursuant to the provisions of Section 78.390 of the Nevada
Revised Statutes, INDUSTRIAL AND PETROLEUM, INC. adopts the following amendment
to its Articles of Incorporation:
1. The undersigned hereby certify that on Thursday, July 16,
1987, a Majority Meeting of the Board of Directors and Stockholders of
INDUSTRIAL AND PETROLEUM, INC. was duly held and convened in Reno, Nevada at
which time the following resolution was duly adopted:
To Amend Article One to change the name of the corporation to:
PERSHING GOLD
IN WITNESS WHEREOF, the undersigned, being the President
of INDUSTRIAL AND PETROLEUM, INC. hereunto affixes his signature
this 23rd day of July, 1987.
/s/ H. F. Anderson
------------------
H. F. ANDERSON
P. O. BOX 565
MEADOW VISTA, CA 95722
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF PLACER )
On this 23rd day of July, 1987, before me, the undersigned, a
Notary Public, personally appeared H. F. ANDERSON, known to be the person
described in and who executed the foregoing instrument, and who acknowledged to
me that he executed the same freely and voluntarily and for the uses and
purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
Official Seal the day and year first above written.
OFFICIAL SEAL /s/ Krista Brock Jones
KRISTINE BROCK-JONES ----------------------
NOTARY PUBLIC CALIFORNIA NOTARY PUBLIC
PLACER COUNTY
My Commission Expires:
8-25-89
-------
IN WITNESS WHEREOF, the undersigned, being the Secretary
of INDUSTRIAL AND PETROLEUM, INC. hereunto affixes his signature
this 23rd day of July, 1987.
/s/ Dan O. Barrus
-----------------
DAN O. BARRUS
P.O. BOX 1007
PORTOLA, CA 96122
STATE OF CALIFORNIA )
) ss.
COUNTY OF PLUMAS )
On this 24th day of July, 1987, before me, the undersigned, a
Notary Public, personally appeared DAN O. BARRUS, known to be the person
described in and who executed the foregoing instrument, and who acknowledged to
me that he executed the same freely and voluntarily and for the uses and
purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
Official Seal the day and year first above written.
/s/ Marci Trimlett
------------------
NOTARY PUBLIC
My Commission Expires:
11-25-88 OFFICIAL SEAL
-------- MARCI TRIMLETT
NOTARY PUBLIC CALIFORNIA
PLUMAS COUNTY
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
NOV 24 1987
FRANKIE SUE DEL PAPA SECRETARY OF STATE
/S/FRANKIE SUE DEL PAPA
No. 1121-57
-------
AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
PERSHING GOLD
* * * * *
Pursuant to the provisions of Section 78.385 of the Nevada
Revised Statutes, PERSHING GOLD adopts the following amendments to its Articles
of Incorporation:
1. The undersigned hereby certify that on the 25th day of
September, 1987, a Special Meeting of the Board of Directors was duly held and
convened at which time there was present a quorum of the Board of Directors
acting throughout all proceedings, and at which time the following resolution
was duly adopted by the Board of Directors:
BE IT RESOLVED: That the Secretary of the
corporation, Dan Burris, is hereby
authorized and directed to call a special
meeting of the stockholders to amend
Article Four of the Articles of
Incorporation to provide that the
corporation shall have the authority to
issue an aggregate of 50,000,000 shares of
capital stock, having a par value of $0.10
per share.
2. A Special Meeting of the Shareholders of Pershing Gold was
held on September 25, 1987, in Reno, Nevada, and with regard thereto, the
undersigned certify as follows:
a. Notice of the Special Meeting of Shareholders
was waived by a majority of the outstanding
stock.
b. The proposal to Amend the Articles of
Incorporation, which is set forth below, was
adopted by 2,850,000 shares which
constitutes a majority of the outstanding
stock.
1
<PAGE>
ARTICLE FOUR: [CAPITAL STOCK] The corporation shall have the
authority to issue an aggregate of FIFTY MILLION SHARES (50,000,000) of capital
stock with each share having a par value of TEN CENTS ($0.10) per share. All
stock when issued shall be fully paid and non-assessable. No holder of shares of
capital stock of the corporation shall be entitled, as such, to any pre-emptive
or preferential rights to subscribe to any unissued stock or any other
securities which the corporation may now or hereafter be authorized to issue.
Each share of capital stock shall be entitled to one vote at stockholders'
meetings, either in persons or by proxy. Cumulative voting for the election of
directors, whether at an annual or special meeting of stockholders, shall not be
permitted.
IN WITNESS WHEREOF, the undersigned hereunto affix their
signatures this 2nd day of November, 1987.
ATTEST: PERSHING GOLD
/s/ Dan O Barris By /s/ H. F. Anderson
---------------- -- ------------------
Secretary President
2
<PAGE>
STATE OF NEVADA )
: ss.
COUNTY OF WASHOE )
On this 2nd day of November, 1987, before me, the undersigned,
a Notary Public in and for the State of Nevada, personally appeared the duly
elected President, the duly elected Secretary of Pershing Gold, known to be the
persons described in and who executed the foregoing Amendment to the Articles of
Incorporation and who acknowledged to me that they executed the same freely and
voluntarily on behalf of and in their capacities as the President and Secretary,
respectively, of Pershing Gold. I have hereunto set my hand and affixed my
official seal the day and year first above written.
LINDA GILLESPIE
NOTARY PUBLIC - NEVADA /s/ Linda Gillespie
DOUGLAS COUNTY -------------------
Notary Public
My Commission Expires:
4-20-1990
---------
3
<PAGE>
AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
PERSHING GOLD
* * * * *
Pursuant to the provisions of the Nevada Revised Statutes,
PERSHING GOLD adopts the following amendments to its Articles of Incorporation:
1. The undersigned hereby certifies that on the 31st day of
May, 1996, a Special Meeting of the Board of Directors of Pershing Gold was duly
held and convened at which time there was present a quorum of the Board of
Directors acting throughout all proceedings, and at which time the following
resolution was duly adopted by the Board of Directors: BE IT RESOLVED: That the
Secretary of the corporation is hereby authorized and directed to obtain the
written consent of stockholders owning at least a majority of the voting power
of the outstanding stock of the corporation to call a Special Meeting of
Stockholders to be held on Friday, May 31, 1996, at 9:30 o'clock a.m., local
time, at 50 West Liberty Street, Suite 880, Reno, Nevada 89501 for the following
purposes:
(a) To consider and vote upon a proposal to amend the corporation's
Articles of Incorporation as follows:
(I) To change the name of the
corporation to: PERSHING PRODUCTS,
INC.
(II) To change the capitalization of the
corporation to authorize an increase
in the number of shares from
50,000,000 shares of capital stock,
par value $0.10 per share, to ONE
HUNDRED MILLION (100,000,000) shares
of stock, par value ONE MILL
($0.001) per share.
1
<PAGE>
(b) To consider and vote upon a proposal to effect a reverse split of the
stock of the corporation on a basis of seven (7) shares of the
presently outstanding stock being surrendered for one (1) share of the
newly authorized stock.
2. Pursuant to the provisions of the Nevada Revised Statutes,
a majority of the stockholders holding 3,600,000 shares of the 7,000,000 shares
outstanding of Pershing Gold gave their written consent that a Special Meeting
of the Shareholders be held on Friday, May 31, 1996, at 9:30 o'clock a.m., local
time, at 50 West Liberty Street, Suite 880, Reno, Nevada 89501, and with regard
thereto, the undersigned certify as follows:
a. The proposal to amend Article One which is
set forth below was adopted by 3,600,000
shares. There were no shares voting against
the proposal and no shares abstained from
voting.
b. The proposal to Amend Article Four of the
Articles of Incorporation, which is set
forth below, was adopted by 3,600,000
shares. There were no shares voting against
the proposal and no shares abstained from
voting.
ARTICLE ONE: [NAME] The name of the corporation is:
PERSHING PRODUCTS, INC.
ARTICLE FOUR: [CAPITAL STOCK] The corporation shall have
authority to issue an aggregate of ONE HUNDRED MILLION (100,000,000) shares of
Common Stock, Par Value $0.001 per share.
All common stock when issued shall be fully paid and
nonassessable. No holder of shares of common stock of the corporation shall be
entitled as such to any pre-emptive or preferential rights to subscribe to any
unissued stock, or any other securities which the corporation may now or
hereafter be authorized to issue.
The corporation's common stock may be issued and sold from
time to time for such consideration as may be fixed by the Board of Directors,
provided that the consideration so fixed is not less than par value.
2
<PAGE>
Holders of the corporation's Common Stock shall not possess
cumulative voting rights at any shareholders meetings called for the purpose of
electing a Board of Directors or on other matters brought before stockholders
meeting, whether they be annual or special.
c. The proposal to effect a reverse split of the common
stock of the corporation on the basis of the
surrender of seven (7) shares of the presently
outstanding stock for one (1) share of the newly
authorized Common Stock was adopted by 3,600,000
shares. There were no shares voting against the
proposal and no shares abstained from voting.
IN WITNESS WHEREOF, the undersigned being the President and
Secretary of Pershing Gold, a Nevada corporation, hereunto affix their
signatures this 31st day of May, 1996.
PERSHING GOLD
By /s/ Cecil Ann Walker
-- --------------------
President
By /s/ Amanda W. Cardinalli
---------------------------
Secretary
3
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUL 25 1997
DEAN HELLER SECRETARY OF STATE
/S/DEAN HELLER
No. C1121-57
--------
AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
PERSHING PRODUCTS, INC.
* * * * *
Pursuant to the provisions of the Nevada Revised Statutes,
PERSHING PRODUCTS, INC., a Nevada corporation, adopts the following amendments
to its Articles of Incorporation:
1. The undersigned hereby certifies that on the 24th day of
July, 1997, a Special Meeting of the Board of Directors of Pershing Products,
Inc. was duly held and convened at which time there was present a quorum of the
Board of Directors acting throughout all proceedings, and at which time the
following resolution was duly adopted by the Board of Directors:
BE IT RESOLVED: That the Secretary of the corporation is hereby authorized and
directed to obtain the written consent of stockholders owning at least a
majority of the voting power of the outstanding stock of the corporation to call
a Special Meeting of Stockholders to be held on Thursday, July 24, 1997, at 9:30
o'clock a.m., local time, at 50 West Liberty Street, Suite 880, Reno, Nevada
89501 for the following purposes:
(a) To consider and vote upon a proposal to amend the corporation's
Articles of Incorporation as follows:
(i) To change the name of the
corporation to:
ROYAL AMERICAN MINING PROPERTIES,
LTD.
(ii) To change the capitalization of the corporation with
authorized capitalization to remain at ONE HUNDRED MILLION
(100,000,000) shares of stock, par value ONE MILL ($0.001) per
share., and
(b) To consider and vote upon a proposal to effect a reverse split of the
stock of the corporation on a basis of three (3) shares of the
presently outstanding stock being surrendered for one (1) share of
Royal American Mining Properties, Ltd.
1
<PAGE>
2. Pursuant to the provisions of the Nevada Revised Statutes,
a majority of the stockholders holding 800,000 shares of the 1,437,000 shares
outstanding of Pershing Products, Inc. gave their written consent that a Special
Meeting of the Shareholders be held on Thursday, July 24, 1997, at 9:30 o'clock
a.m., local time, at 50 West Liberty Street, Suite 880, Reno, Nevada 89501, and
with regard thereto, the undersigned certify as follows:
a. The proposal to amend Article One which is
set forth below was adopted by 800,000
shares. There were no shares voting against
the proposal and no shares abstained from
voting.
b. The proposal to Amend Article Four of the
Articles of Incorporation, which is set
forth below, was adopted by 800,000 shares.
There were no shares voting against the
proposal and no shares abstained from
voting.
ARTICLE ONE: [NAME] The name of the corporation is:
ROYAL AMERICAN MINING PROPERTIES, INC.
ARTICLE FOUR: [CAPITAL STOCK] The corporation shall have
authority to issue an aggregate of ONE HUNDRED MILLION (100,000,000) shares of
Common Stock, Par Value $0.001 per share.
All common stock when issued shall be fully paid and
nonassessable. No holder of shares of common stock of the corporation shall be
entitled as such to any pre-emptive or preferential rights to subscribe to any
unissued stock, or any other securities which the corporation may now or
hereafter be authorized to issue.
The corporation's common stock may be issued and sold from
time to time for such consideration as may be fixed by the Board of Directors,
provided that the consideration so fixed is not less than par value.
Holders of the corporation's Common Stock shall not possess
cumulative voting rights at any shareholders meetings called for the purpose of
electing a Board of Directors or on other matters brought before stockholders
meeting, whether they be annual or special.
c. The proposal to effect a reverse split of the common
stock of the corporation on the basis of the
surrender of three (3) shares of the presently
outstanding stock for one (1) share of the capital
was adopted by 800,000 shares. There were no shares
voting against the proposal and no shares abstained
from voting.
IN WITNESS WHEREOF, the undersigned being the President and
Secretary of Pershing Products, Inc., a Nevada corporation, hereunto affix their
signatures this 24th day of July, 1997.
PERSHING GOLD
By /s/ Cecil Ann Walker
-- --------------------
President
By /s/ Amanda W. Cardinalli
---------------------------
Secretary
2
<PAGE>
STATE OF NEVADA )
: ss.
COUNTY OF WASHOE )
On the 24th day of July, 1997, before me, the undersigned, a
Notary Public in and for the State of Nevada, personally appeared CECIL ANN
WALKER, President and AMANDA W. CARDINALLI, Secretary of PERSHING PRODUCTS,
INC., A Nevada corporation, known to be the persons described in and who
executed the foregoing instrument, and who acknowledged to me that they executed
the same freely and voluntarily, in behalf of and in their capacities as the
President and Secretary respectively of Pershing Products, Inc. for the uses and
purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
/s/ Margaret Oliver
-------------------
Notary Public
Residing in Reno, Nevada
My Commission Expires:
October 10, 1998 MARGARET A. OLIVER
---------------- Notary Public - State of Nevada
Appointment Recorded in Washoe County
MY APPOINTMENT EXPIRES OCT. 10, 1998
3
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JAN 30 1998
DEAN HELLER SECRETARY OF STATE
/S/DEAN HELLER
No. C1121-57
--------
AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
ROYAL AMERICAN MINING PROPERTIES, LTD.
* * * * *
Pursuant to the provisions of the Nevada Revised Statutes,
ROYAL AMERICAN MINING PROPERTIES, LTD., a Nevada corporation, adopts the
following amendments to its Articles of Incorporation:
1. The undersigned hereby certifies that on the 30th day of
January, 1998, a Special Meeting of the Board of Directors of Royal American
Mining Properties, Ltd. was duly held and convened at which time there was
present a quorum of the Board of Directors acting throughout all proceedings,
and at which time the following resolution was duly adopted by the Board of
Directors:
BE IT RESOLVED: That the Secretary of the corporation is hereby authorized and
directed to obtain the written consent of stockholders owning at least a
majority of the voting power of the outstanding stock of the corporation to call
a Special Meeting of Stockholders to be held on Friday, January 30, 1998, at
9:30 o'clock a.m., local time, at 50 West Liberty Street, Suite 880, Reno,
Nevada 89501 for the following purposes:
(a) To consider and vote upon a proposal to amend the corporation's
Articles of Incorporation as follows:
(i) To change the name of the
corporation to:
CAPITA RESEARCH GROUP, INC.
(ii) To consider and vote upon a proposal to effect a forward split
of the stock of the corporation on a basis of one (1) share of
the presently outstanding stock being surrendered for two (2)
shares of Capita Research Group, Inc.
2. Pursuant to the provisions of the Nevada Revised Statutes,
a majority of the stockholders holding 265,631 shares of the 479,000 shares
1
<PAGE>
outstanding of Royal American Mining Properties, Ltd. gave their written consent
that a Special Meeting of the Shareholders be held on Friday, January 30, 1998,
at 9:30 o'clock a.m., local time, at 50 West Liberty Street, Suite 880, Reno,
Nevada 89501, and with regard thereto, the undersigned certify as follows:
(a) The proposal to amend Article One which is
set forth below was adopted by 265,631
shares. There were no shares voting against
the proposal and no shares abstained from
voting.
ARTICLE ONE: [NAME] The name of the corporation is:
CAPITA RESEARCH GROUP, INC.
(b) The proposal to effect a forward split of the common
stock of the corporation on the basis of the
surrender of one (1) share of the presently
outstanding stock for two (2) share of the capital
was adopted by 265,631 shares. There were no shares
voting against the proposal and no shares abstained
from voting.
IN WITNESS WHEREOF, the undersigned being the President and
Secretary of Royal American Mining Properties, Ltd., a Nevada corporation,
hereunto affix their signatures this 30th day of
January, 1998.
ROYAL AMERICAN MINING
PROPERTIES, LTD.
By /s/ Cecil Ann Walker
-- --------------------
President
By /s/ Alexander H. Walker, Jr.
-------------------------------
Secretary
2
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On the 30th day of January, 1998, before me, the undersigned,
a Notary Public in and for the State of Nevada, personally appeared CECIL ANN
WALKER, President and ALEXANDER H. WALKER, JR., Secretary of ROYAL AMERICAN
MINING PROPERTIES, LTD., A Nevada corporation, known to be the persons described
in and who executed the foregoing instrument, and who acknowledged to me that
they executed the same freely and voluntarily, in behalf of and in their
capacities as the President and Secretary respectively of Royal American Mining
Properties, Ltd. for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
/s/ Mark Miller
---------------
Notary Public
Residing in Reno, Nevada
My Commission Expires:
October 7, 1998
--------------- MARK MILLER
Notary Public - State of Nevada
Appointment Recorded in Washoe County
MY APPOINTMENT EXPIRES OCT. 7, 1998
3
BY-LAWS FOR THE REGULATION
EXCEPT AS OTHERWISE PROVIDED BY STATUTE
OR ITS ARTICLES OF INCORPORATION OF
PERSHING GOLD
* * * * * * *
ARTICLE I.
Offices
Section 1. PRINCIPAL OFFICE. The principal office for the
transaction of the business of the corporation is hereby fixed and located at 50
West Liberty Street, Suite 880, Reno, Nevada 89501, being the offices of Nevada
Agency and Trust Company. The Board of Directors is hereby granted full power
and authority to change said principal office from one location to another in
the State of Nevada.
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.
Meetings of Shareholders
Section 1. MEETING PLACE. All annual meetings of shareholders
and all other meetings of shareholders shall be held either at the principal
office or at any other place within or without the State of Nevada which may be
designated either by the Board of Directors, pursuant to authority hereinafter
granted to said Board, or by the written consent of all shareholders entitled to
vote thereat, given either before or after the meeting and filed with the
Secretary of the corporation.
1
<PAGE>
Section 2. ANNUAL MEETINGS. The annual meetings of
shareholders shall be held on the fourth Wednesday of May each year, at the hour
of 2:00 o'clock p.m. of said day, commencing with the year 1997, provided,
however, that should said day fall upon a legal holiday, then any such annual
meeting of shareholders shall be held at the same time and place on the next day
thereafter ensuing which is not a legal holiday.
Written notice of each annual meeting signed by the President
or a Vice President, or the Secretary, or an Assistant Secretary, or by such
other person or persons as the directors shall designate, shall be given to each
shareholder entitled to vote thereat, either personally or by mail or other
means of written communication, charges prepaid, addressed to such shareholder
at his address appearing on the books of the corporation or given by him to the
corporation for the purpose of notice. If a shareholder gives no address, notice
shall be deemed to have been given to him, if sent by mail or other means of
written communication addressed to the place where the principal office of the
corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each shareholder entitled thereto not less than ten
(10) nor more than sixty (60) days before each annual meeting, and shall specify
the place, the day and the hour of such meeting, and shall also state the
purpose or purposes for which the meeting is called.
2
<PAGE>
Section 3. SPECIAL MEETINGS. Special meetings of the
shareholders, for any purpose or purposes whatsoever, may be called at any time
by the President or by the Board of Directors, or by one or more shareholders
holding not less than 10% of the voting power of the corporation. Except in
special cases where other express provision is made by statute, notice of such
special meetings shall be given in the same manner as for annual meetings of
shareholders. Notices of any special meeting shall specify in addition to the
place, day and hour of such meeting, the purpose or purposes for which the
meeting is called.
Section 4. ADJOURNED MEETINGS 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 a majority of the shares, the
holders of which are either present in person or represented by proxy thereat,
but in the absence of a quorum, no other business may be transacted at any such
meeting.
When any shareholders' meeting, either annual or special, is
adjourned for thirty (30) days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. Save as aforesaid, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting, other than by announcement at the meeting at
which such adjournment is taken.
3
<PAGE>
Section 5. ENTRY OF NOTICE. Whenever any shareholder entitled
to vote has been absent from any meeting of shareholders, whether annual or
special, an entry in the minutes to the effect that notice has been duly given
shall be conclusive and incontrovertible evidence that due notice of such
meeting was given to such shareholders, as required by law and the By-laws of
the corporation.
Section 6. VOTING. At all annual and special meetings of
stockholders entitled to vote thereat, every holder of stock issued to a bona
fide purchaser of the same, represented by the holders thereof, either in person
or by proxy in writing, shall have one (1) vote for each share of stock so held
and represented at such meetings, unless the Articles of Incorporation of the
corporation shall otherwise provide, in which event the voting rights, powers
and privileges prescribed in the said Articles of Incorporation shall prevail.
Voting for directors and, upon demand of any stockholder, upon any question at
any meeting shall be by ballot.
Section 7. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting 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.
4
<PAGE>
Section 8. CONSENT OF ABSENTEES. The transactions of any
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though a meeting had been 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. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of this meeting.
Section 9. PROXIES. Every person entitled to vote or execute
consents shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation; provided that no such
proxy shall be valid after the expiration of eleven (11) months from the date of
its execution, unless the shareholder executing it specifies therein the length
of time for which such proxy is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution.
ARTICLE III.
Directors and Directors' Meetings
Section 1. POWERS. Subject to the limitations of the Articles
of Incorporation or the By-laws, and the provisions of the Nevada Revised
5
<PAGE>
Statutes as to action to be authorized or approved by the shareholders, and
subject to the duties of directors as prescribed by the By-laws, all corporate
powers shall be exercised by or under the authority of, and the business and
affairs of the corporation shall be controlled by the Board of Directors.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the Directors shall have the following
powers, to wit:
First - To select and remove all the other officers,
agents and employees of the corporation, prescribe such powers and
duties for them as may not be inconsistent with law, with the Articles
of Incorporation or the By-laws, fix their compensation and require
from them security for faithful service.
Second - To conduct, manage and control the affairs
and business of the corporation, and to make such rules and regulations
therefor not inconsistent with law, with the Articles of Incorporation
or the By-laws, as they may deem best.
Third - To change the principal office for the
transaction of the business of the corporation from one location to
another within the same county as provided in Article I, Section 1
hereof; to fix and locate from time to time one or more subsidiary
offices of the corporation within or without the State of Nevada, as
provided in Article I, Section 2 hereof; to designate any place within
6
<PAGE>
or without the State of Nevada for the holding of any shareholders'
meeting or meetings; and to adopt, make and use a corporate seal, and
to prescribe the forms of certificates of stock, and to alter the form
of such seal and of such certificates from time to time, as in their
judgment they may deem best, provided such seal and such certificates
shall at all times comply with the provisions of law.
Fourth - To authorize the issuance of shares of stock
of the corporation from time to time, upon such terms as may be lawful,
in consideration of money paid, labor done or services actually
rendered, debts or securities cancelled, or tangible or intangible
property actually received, or in the case of shares issued as a
dividend, against amounts transferred from surplus to stated capital.
Fifth - To borrow money and incur indebtedness for
the purposes of the corporation, and to cause to be executed and
delivered therefor, in the corporate name, promissory notes, bonds,
debentures, deeds of trust, mortgages, pledges, hypothecations or other
evidences of debt and securities therefor.
Sixth - To appoint an e xecutive committee and other
committees and to delegate to the executive committee any of the powers
and authority of the Board in management of the business and affairs of
the corporation, except the power to declare dividends and to adopt,
amend or repeal By-laws. The executive committee shall be composed of
one or more Directors.
7
<PAGE>
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of directors of the corporation shall be not less than one (1)
.
Section 3. ELECTION AND TERM OF OFFICE. The Directors shall be
elected at each annual meeting of shareholders, but if any such annual meeting
is not held or the Directors are not elected thereat, the Directors may be
elected at any special meeting of shareholders. All Directors shall hold office
until their respective successors are elected.
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, and each Director so elected shall hold office
until his successor is elected at an annual or a special meeting of the
shareholders.
A vacancy or vacancies in the Board of Directors shall be
deemed to exist in case of the death, resignation or removal of any Director, or
if the authorized number of Directors be increased, or if the shareholders fail
at any annual or special meeting of shareholders, at which any Director of
Directors are elected, to elect the full authorized number of Directors to be
voted for at that meeting.
The shareholders may elect a Director or Directors at any time
to fill any vacancy or vacancies not filled by the Directors.
8
<PAGE>
If the Board of Directors accepts the resignation of a Director tendered to take
effect at a future time, the Board, or the shareholders, shall have the power to
elect a successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have
the effect of removing any Director prior to the expiration of his term of
office.
Section 5. PLACE OF MEETING. Regular meetings of the Board of
Directors shall be held at any place within or without the state which has been
designated from time to time by resolution of the Board or by written consent of
all members of the Board. In the absence of such designation, regular meetings
shall be held at the principal office of the corporation. Special meetings of
the Board may be held either at a place so designated, or at the principal
office.
Section 6. ORGANIZATIONAL MEETING. Immediately following each
annual meeting of shareholders, the Board of Directors shall hold a regular
meeting for the purpose of organization, election of officers and the
transaction of other business. Notice of such meeting is hereby dispensed with.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of
the Board of Directors shall be held without call on the fourth Wednesday of
each month at the hour of 3:00 o'clock p.m. of said day; provided, however,
9
<PAGE>
should said day fall upon a legal holiday, then said meeting shall be held at
the same time on the next day thereafter ensuing which is not a legal holiday.
Notice of all such regular meetings of the Board of Directors is hereby
dispensed with.
Section 8. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose or purposes shall be called at any time by the
President, or, if absent or unable or refuses to act, by any Vice President or
by any two (2) Directors.
Written notice of the time and place of special meetings shall
be delivered personally to the Directors or sent to each Director by mail, or
other form of written communication, charges prepaid, addressed to him at his
address as it is shown upon the records of the corporation, or if it is not
shown on such records or is not readily ascertainable, at the place in which
meetings of the Directors are regularly held. In case such notice is mailed or
telegraphed, it shall be deposited in the United States mail or other
appropriate mail or facsimile facility, or delivered to the telegraph company in
the place in which the principal office of the corporation is located at least
forty-eight (48) hours prior to the time of the holding of the meeting. In case
such notice is delivered as above provided, it shall be so delivered at least
twenty-four (24) hours prior to the time of the holding of the meeting. Such
mailing, faxing, telegraphing or delivery as above provided shall be due, legal
and personal notice to such Director.
Section 9. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given to absent Directors, if the
time and place be fixed at the meeting adjourned.
Section 10. ENTRY OF NOTICE. Whenever any Director has been
absent from any special meeting of the Board of Directors, an entry in the
10
<PAGE>
minutes to the effect that notice has bene duly given shall be conclusive and
incontrovertible evidence that due notice of such special meeting was given to
such Director, as required by law and the By-laws of the corporation.
Section 11. WAIVER OF NOTICE. The transactions of any meeting
of the Board of Directors, however called and noticed or wherever held, shall be
as valid as though a meeting had been duly held after regular call and notice,
if a quorum be present, and if, either before or after the meeting, each of the
Directors not present sign a written Waiver of Notice or a Consent to holding
such meeting, or an approval of the minutes thereof. All such waivers, consents
or approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 12. QUORUM. A majority of the authorized number of
Directors shall be necessary to constitute a quorum for the transaction of
business, except to adjourn as hereinafter provided. Every act or decision done
or made by a majority of the Directors present at a meeting duly held at which a
quorum is present, shall be regarded as the act of the Board of Directors,
unless a greater number be required by law or by the Articles of Incorporation.
11
<PAGE>
Section 13. ADJOURNMENT. A quorum of the Directors may adjourn
any Directors' meeting to meet again at a stated day and hour; provided,
however, that in the absence of a quorum, a majority of the Directors present at
any Directors' meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the Board.
Section 14. FEES AND COMPENSATION. Directors shall not receive
any stated salary for their services as Directors, but by resolution of the
Board, a fixed fee, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent, employee or otherwise, and receiving compensation therefor.
ARTICLE IV
Officers
Section 1. OFFICERS. The officers of the corporation shall be
a President, a Vice-President, a Secretary and a 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. Officers, other than President
and Chairman of the Board, need not be Directors. Any person may hold two (2) or
more offices.
12
<PAGE>
Section 2. ELECTION. The 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 annually by the Board of
Directors, and each shall hold his office until he shall resign or shall be
removed or otherwise disqualified to serve, or his successor shall be qualified
and elected.
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 By-laws or as the Board of Directors may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be
removed, either with or without cause, by a majority of the Directors at the
time in office, at any regular or special meeting of the Board.
Any officer may resign at any time by giving written notice to
the Board of Directors or to the President, or to the Secretary of the
corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
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 By-laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board,
if there shall be such an officer, shall, if present, preside at all meetings of
the Board of Directors, and exercise and perform such other powers and duties as
may be from time to time assigned to him by the Board of Directors or prescribed
by the Bylaws.
13
<PAGE>
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, 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 officers of the corporation. He shall
preside at all meetings of the shareholders and in the absence of the Chairman
of the Board, at all meetings of the Board of Directors. He shall be ex-officio
a member of all the standing committees, including the executive committee, if
any, and 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 the By-laws.
Section 8. VICE PRESIDENT. In the absence or disability of the
President, the Vice Presidents, in order of their rank as fixed by the Board of
Directors, or if not ranked, the 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 from time to time may be prescribed for them respectively by the
Board of Directors or the By-laws.
14
<PAGE>
Section 9. SECRETARY. The Secretary shall keep, or cause to be
kept, a book of minutes at the principal office or such other place as the Board
of Directors may order, of all meetings of Directors and shareholders, with the
time and place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present at Directors'
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, a share register, or a duplicate share register, showing the names of
the shareholders and their addresses; the number and 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
the meetings of the shareholders and of the Board of Directors required by the
By-laws or by law to be given, and 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 the By-laws.
Section 10. TREASURER. The Treasurer shall keep and maintain,
or cause to be kept and maintained, adequate and correct accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
surplus and shares. Any surplus, including earned surplus, paid-in surplus and
15
<PAGE>
surplus arising from a reduction of stated capital, shall be classified
according to source and shown in a separate account. The books of account shall
at all times be open to inspection by any Director.
The Treasurer 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. He 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
transactions 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 the By-laws.
ARTICLE V.
Miscellaneous
Section 1. RECORD DATE AND CLOSING OF STOCK BOOKS. The Board
of Directors may fix a time, in the future, not exceeding fifteen (15) days
preceding the date of any meeting of shareholders, and not exceeding thirty (30)
days preceding the date fixed for the payment of any dividend or distribution,
or for the allotment of rights, or when any change or conversion or exchange of
shares shall go into effect, 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 such allotment of rights,
or to exercise the rights in respect to any such change, conversion or exchange
16
<PAGE>
of shares, and in such case, only shareholders of record on the date so fixed
shall be entitled to notice of and to vote at such meetings, or to receive such
dividend, distribution or allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
corporation after any record date fixed as aforesaid. The Board of Directors may
close the books of the corporation against transfers of shares during the whole,
or any part of any such period.
Section 2. INSPECTION OF CORPORATE RECORDS. The share register
or duplicate share register, the books of account and minutes of proceedings of
the shareholders and Directors shall be open to inspection upon the written
demand of any shareholder or the holder of a voting trust certificate, at any
reasonable time, and for the purpose reasonably related to his interests as a
shareholder, or as the holder of a voting trust certificate, and shall be
exhibited at any time when required by the demand of ten percent (10%) of the
shares represented at any shareholders' meeting. Such inspection may be made in
person or by an agent or attorney, and shall include the right to make extracts.
Demand of inspection other than at a shareholders' meeting shall be made in
writing upon the President, Secretary or Assistant Secretary of the corporation.
Section 3. CHECKS, DRAFTS, ETC. 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.
17
<PAGE>
Section 4. ANNUAL REPORT. The Board of Directors of the
corporation shall cause to be sent to the shareholders not later than one
hundred twenty (120) days after the close of the fiscal or calendar year an
annual report.
Section 5. CONTRACTS, ETC., HOW EXECUTED. The Board of
Directors, except as in the By-laws otherwise provided, may authorize any
officer or officers, agent or agents, to enter into any contract, deed or lease
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 by the Board of Directors, 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 to render it liable for any purpose or to any amount.
Section 6. CERTIFICATES OF STOCK. A certificate or
certificates for shares of the capital stock of the corporation shall be issued
to each shareholder when any such shares are fully paid up. All such
certificates shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signature of the President and Secretary or by a facsimile of the signature of
the President and the written signature of the Secretary or an Assistant
Secretary. Every certificate authenticated by a facsimile of a signature must be
countersigned by a transfer agent or transfer clerk.
18
<PAGE>
Certificates for shares may be issued prior to full payment
under such restrictions and for such purposes as the Board of Directors or the
By-laws may provide; provided, however, that any such certificate so issued
prior to full payment shall state the amount remaining unpaid and the terms of
payment thereof.
Section 7. REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS.
The President or any Vice President and the Secretary or Assistant Secretary of
this corporation are authorized to vote, represent and exercise on behalf of
this corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation. The
authority herein granted to said officers to vote or represent on behalf of this
corporation or corporations may be exercised either by such officers in person
or by any person authorized so to do by proxy or power of attorney duly executed
by said officers.
Section 8. INSPECTION OF BY-LAWS. The corporation shall keep
in its principal office for the transaction of business the original or a copy
of the By-laws, as amended or otherwise altered to date, certified by the
Secretary, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
ARTICLE VI.
Amendments
Section 1. POWER OF SHAREHOLDERS. New By-laws may be adopted
or these By-laws may be amended or repealed by the vote of shareholders entitled
19
<PAGE>
to exercise a majority of the voting power of the corporation or by the written
assent of such shareholders.
Section 2. POWER OF DIRECTORS. Subject to the right of the
shareholders as provided in Section 1 of this Article VI to adopt, amend or
repeal By-laws, By-laws other than a By-law or amendment thereof changing the
authorized number of Directors may be adopted, amended or repealed by the Board
of Directors.
Section 3. ACTION BY DIRECTORS THROUGH CONSENT IN LIEU OF
MEETING. Any action required or permitted to be taken at a meeting of the Board
of Directors or of any committee thereof, may be taken without a meeting, if a
written consent thereto is signed by all the members of the Board or of such
committee. Such written consent shall be filed with the minutes of proceedings
of the Board or committee.
-------------------------------------
Secretary
Alexander H. Walker, Jr.
20
<PAGE>
National Aeronautics and
Space Administration
Langley Research Center
Hampton, VA 23681-0001
Reply to Attn of: 212
AUG. 12 1997
NextGen Systems, Inc.
Attn: Mr. David B. Hunter
Vice President, Secretary Treasurer
1006 W. Ninth Avenue
King of Prussia, PA 19406
Subject: Exclusive Patent License Agreement No. DE-234 Between
NASA and NextGen Systems, Inc.
Enclosed is your original of the subject License Agreement.
The initial royalty of $15,000 was received on July 3, 1997. The
next minimum royalty payment and annual report are due on August
4, 1998, as specified in Sections 10.3 and 12.1 of the Agreement.
Please mail these to the following address:
NASA Langley Research Center
Attn: Laura L. Eure
Mail Stop 212
3 Langley Boulevard
Hampton, VA 23681-0001
Please feel free to call me at 757-864-3230 should you have any
questions.
Robin W. Edwards
Patent Attorney
Technology Applications Group
Enclosure
LICENSE AGREEMENT
UNITED STATES OF AMERICA
AND
NEXTGEN SYSTEMS, INCORPORATED
EXCLUSIVE LICENSE AGREEMENT DE - 234
LICENSE EFFECTIVE DATE: 8/4/97
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
------- ----
PREAMBLE 5
ARTICLE I GENERAL 5
ARTICLE II DEFINITIONS 6
ARTICLE III LICENSE GRANT10
ARTICLE IV TERM OF AGREEMENT 12
ARTICLE V COPYRIGHT 13
ARTICLE VI DELIVERY OF PROGRAM 14
ARTICLE VII PROGRAM OPERATING PROVISIONS 14
ARTICLE VIII PRACTICAL APPLICATION 14
ARTICLE IX UNITED STATES MANUFACTURE 15
ARTICLE X PATENT ROYALTY AND PAYMENT 15
ARTICLE XI COPYRIGHT CONSIDERATION 17
ARTICLE XII ANNUALREPORT 18
ARTICLE XIII BOOKS, RECORDS AND EXAMINATION 20
ARTICLE XIV SUBLICENSES 20
ARTICLE XV PATENT AND COPYRIGHT MARKETING & ADVERTISEMENT 21
ARTICLE XVI NONTRANSFERABILITY 22
ARTICLE XVII DISPUTES 23
ARTICLE XVIII MODIFICATION OR TERMINATION BY NASA 23
ARTICLE XIX TERMINATION BY NEXTGEN SYSTEMS 26
ARTICLE XX EFFECT OF TERMINATION 26
ARTICLE XXI RESERVATION OF RIGHTS 26
ARTICLE XXII REPRESENTATIONS AND WARRANTIES 27
ARTICLE XXIII INFRINGEMENT 30
ARTICLE XXIV OFFICIALS NOT TO BENEFIT 31
ARTICLE XXV NONWAIVER 32
ARTICLE XXVI MERGER AND INTEGRATION 32
ARTICLE XXVII APPLICABLE LAW 32
2
<PAGE>
ARTICLE PAGE
------- ----
ARTICLE XXVIII ADDRESSES 32
ARTICLE XXIX NONASSERTION 33
ARTICLE XXX SEVERABILITY 33
ARTICLE XXXI ACCEPTANCE 33
APPENDICES
APPENDIX A PRACTICAL APPLICATION MILESTONES 34
APPENDIX B DESCRIPTION OF PROGRAM 36
3
<PAGE>
EXCLUSIVE LICENSE AGREEMENT
---------------------------
LICENSOR The United States of America, represented
by the National Aeronautics and Space
Administration (NASA)
LICENSEE NextGen Systems, Incorporated
U. S. Patent Application No. 08/641,041
Title METHOD FOR VISUALLY INTEGRATING
MULTIPLE DATA ACQUISITION
TECHNOLOGIES FOR REAL TIME &
RETROSPECTIVE ANALYSIS
(ALSO KNOWN AS CREW RESPONSE
EVALUATION WINDOW (CREW))
Filing Date April 3, 1996
NASA Case No. LAR 15367-1
Title of Copyrighted Work METHOD FOR VISUALLY INTEGRATING
MULTIPLE DATA ACQUISITION
TECHNOLOGIES FOR REAL TIME &
RETROSPECTIVE ANALYSIS
(ALSO KNOWN AS CREW RESPONSE
EVALUATIO@ WINDOW (CREW))
U. S. Copyright Registration Date: May 9, 1996
U. S. Copyright Registration No. TXU743936
NASA Case No. LAR 15367-CPY
4
<PAGE>
PREAMBLE
--------
This Agreement is entered into between the licensor, the United States
of America, represented by the National Aeronautics and Space Administration,
hereinafter referred to as NASA, and the licensee, NextGen Systems, Inc., a
corporation of the State of Pennsylvania having a principal place of business at
1006 W. Ninth Avenue, King Of Prussia, PA 19406 and an EIN of 23-2764613,
hereinafter referred to as NEXTGEN SYSTEMS.
The Parties hereto agree as follows:
ARTICLE I -Gen6eral
-------------------
1.1 Patent Licensing Regulations, 37 C.F.R. ss.404 et seq., specify the
terms and conditions upon which licenses will be granted for NASA-owned
inventions and, to the extent applicable and appropriate, specify the terms and
conditions upon which licenses will be granted for NASA-owned copyrighted
software. This Agreement is controlled under these Licensing Regulations.
1.2 NASA is the owner of United States Patent Application 08/641,041
entitled, "Method For Visually Integrating Multiple Data Acquisition
Technologies For Real Time & Retrospective Analysis" which was filed on April 3,
1996.
1.3 NEXTGEN SYSTEMS, in consideration of the grant of a license to the
invention, is willing to pay a royalty, make a substantial capital investment
and use its best efforts to achieve early practical application of the
invention.
1.4 NASA is the owner of the United States Copyright (COPYRIGHT, as
later defined herein) in the computer software described as "Method For Visually
Integrating Multiple Data Acquisition Technologies For Real Time & Retrospective
Analysis (Also Known As Crew Response Evaluation Window (CREW))" (PROGRAM, as
later defined herein), for which United States Copyright Registration was
obtained on May 9, 1996.
1.5 NASA desires to have the PROGRAM further developed and
commercialized to benefit the public and is willing to grant a license
thereunder.
1.6 NEXTGEN SYSTEMS desires to obtain a license to the PROGRAM upon the
terms and conditions hereinafter set forth.
5
1.7 NEXTGEN SYSTEMS, in consideration of the grant of a license to
COPYRIGHT, is willing to provide consideration to NASA, as described in Article
XI, to make a substantial capital investment and to use its best efforts to
achieve early development and commercialization of the PROGRAM.
1.8 NASA has determined that the granting of a license to NEXTGEN
SYSTEMS to practice the invention and the PROGRAM will provide the necessary
incentive for NEXTGEN SYSTEMS to achieve the desired early practical application
and the granting of a license to NEXTGEN SYSTEMS will therefor be in the public
interest.
ARTICLE 11 - Definitions
------------------------
2.1 "ARCHIVAL PURPOSES" means for backup purposes but for no other
purposes.
2.2 "COMMERCIAL PRODUCT (S)" means the PROGRAM and/or any and all
DERIVATIVES, including documentation, which are commercially released, sold,
licensed, or leased by NEXTGEN SYSTEMS or a SUBLICENSEE (as later defined
herein); COMMERCIAL PRODUCTS may be incorporated within LICENSED PRODUCTS (as
later defined herein).
2.3 "COPY" means a material object, including a phonorecord, in which a
work such as the PROGRAM is fixed by any method now known or later developed,
and from which the work can be communicated, either directly or with the aid of
a machine or device. The term "COPY" includes the material object, including a
phonorecord, in which a work is first fixed.
2.4 "COPYRIGHT" means NASA's copyright in the PROGRAM.
2.5 "DERIVATIVE (S)" means NEXTGEN SYSTEMS-created computer code,
programs, documentation, and software developed at NEXTGEN SYSTEMS' own expense,
regardless if accomplished during the same period as when NEXTGEN SYSTEMS is
developing software under government funding, which shall include, or be based
in whole or in part of, the PROGRAM, including, but not limited to, translations
of the PROGRAM to other foreign or computer languages, adaptations of the
PROGRAM to other hardware platforms, abridgments, condensations, revisions
6
<PAGE>
and software incorporating all or any part of the PROORAM which may also include
NEXTGEN SYSTEMS-created modifications or enhancements or other NEXTGEN SYSTEMS
or third Party software. NEXTGEN SYSTEMS shall be the sole and exclusive owner
of, and be entitled to establish all proprietary rights for itself in, the
intellectual property represented by DERIVATIVES, whether in the nature of trade
secrets, copyrights, patents or other rights, subject to COPYRIGHT (as defined
herein) and LICENSED INVENTION. Any copyright registration by NEXTGEN SYSTEMS
for DERIVATIVES shall give full attribution to NASA's COPYRIGHT.
2.6 "DEVELOPMENT COPY" means a COPY of the PROGRAM which will be used by
NEXTGEN SYSTEMS for the purpose of developing commercial versions of the
PROGRAM.
2.7 "DIRECT RESPONSE" means any promotional advertisement that requires
the viewer to initiate a purchase from the advertising organization.
2.8 "END-USER" means a customer authorized to use the COMMERCIAL PRODUCT
for internal purposes only and not for further distribution, and shall include
customers granted site-wide rights to use.
2.9 "FIELD OF USE" means DIRECT RESPONSE product or services promotion
limited to DIRECT RESPONSE advertising to include package design and ON-PRODUCT
advertising for use in television, print and Internet.
2.10 "GROSS SALES" means the dollar value sum of all sales of ROYALTY-
BASE PRODUCTS during each year of this Agreement.
2.11 "INTELLECTUALPROPERTYRIGHT(S)"means any and all rights to exclude
others, existing from time to time in a specified jurisdiction, under Patent
Law, Copyright Law, Moral Rights Law, Trade-Secret Law, Semiconductor Chip
Protection Law, Trademark Law, Unfair Competition Law or similar rights.
2.12 "LICENSABLE ACTIVITY" means an activity encompassed by one or more
INTELLECTUAL PROPERTY RIGHTS, i.e., an activity which, absent a license, would
give rise to liability for infringement (or inducement of infringement or
contributory infringement) of the INTELLECTUAL PROPERTY RIGHT(S).
<PAGE>
7
2.13 "LICENSE" means the license granted Py this Agreement, comprising
one or more license rights.
2.14 "LICENSED INVENTION" means the invention described and claimed in
United States Patent Application 08/641,041 entitled, "Method For Visually
Integrating Multiple Data Acquisition Technologies For Real Time & Retrospective
Analysis" the LICENSED PATENT and any continuation, divisional, reissue or
reexamination thereof.
2.15 "LICENSED PATENT" means the United States Patent that issues from
United States Patent Application 08/641,041 entitled, "Method For Visually
Integrating Multiple Data Acquisition Technologies For Real Time & Retrospective
Analysis" and any corresponding continuation, divisional, reissue patent or
reexamination certificate resulting therefrom.
2.16 "LICENSED PATENT APPLICATION" means United States Patent Application
08/641,041 entitled, "Method For Visually Integrating Multiple Data Acquisition
Technologies For Real Time & Retrospective Analysis" which was filed on April 3,
1996.
2.17 "LICENSED PRODUCTS" means all products, the use of which, but for
the license granted hereunder would infringe the COPYRIGHT or claims of the
LICENSED INVENTION.
2.18 "MULTIPLE SUBJECT TESTING" means testing multiple subjects
simultaneously.
2.19 "NET SALES" means, in the case of a sale to a third Party at arm's
length for monetary consideration, the gross invoice price of the ROYALTY-BASE
PRODUCTS less allowances for returns and less (to the extent separately stated
on the invoices): (1) cash and other trade discounts, (2) shipping, customs, and
insurance charges, and (3) sales, use, value added and similar taxes. In the
case of a sale or other disposition of the ROYALTY-BASE PRODUCTS which are
transferred to a purchaser who does not deal at arm's length, or transferred or
otherwise disposed for other monetary consideration (including allocations to
NEXTGEN SYSTEMS' own beneficial use), NET SALES shall be calculated based upon
8
<PAGE>
the price at which NEXTGEN SYSTEMS sells comparable quantities of the
ROYALTY-BASE PRODUCTS at substantially the same time to purchasers dealing at
arm's length.
2.20 "ON-PRODUCT' means any promotional advertisement that is part of the
final article for sale that requires an interactive response from the viewer to
initiate a purchase from the advertising organization.
2.21 "PRACTICAL APPLICATION" means to manufacture in the case of a
composition or product, to practice in the case of a process or method, or to
operate in the case of a machine or system; and, in each case, under such
conditions as to establish that the invention is being utilized and that its
benefits are to the extent permitted by law or Government regulations available
to the public on reasonable terms. Included is the use of the invention to
provide consulting or other services.
2.22 "PROGRAM" means the computer software in both source and executable
forms entitled, "Method For Visually Integrating Multiple Data Acquisition
Technologies For Real Time & Retrospective Analysis (Also Known As Crew Response
Evaluation Window (CREW))" and documentation relating to the use of "Method For
Visually Integrating Multiple Data Acquisition Technologies For Real Time &
Retrospective Analysis (Also Known As Crew Response Evaluation Window (CREW))",
if. any, described in Appendix B.
2.23 "ROYALTY-BASE PRODUCTS" means any LICENSED INVENTION sold, used or
otherwise disposed of by NEXTGEN SYSTEMS or its SUBLICENSEES, including use of
the LICENSED INVENTION by NEXTGEN SYSTEMS or its SUBLICENSEES to provide
consulting or other services, and covered by the claims of United States Patent
Application 08/641,041 entitled, "Method For Visually Integrating Multiple Data
Acquisition Technologies For Real Time & Retrospective Analysis" or the LICENSED
PATENT, including any continuation, divisional, reissue or reexamination
thereof.
2.24 "SUBLICENSEE" means any person who has the right, granted by NEXTGEN
SYSTEMS to make, use, or sell the LICENSED INVENTION and any person granted
rights by NEXTGEN SYSTEMS under Article XIV, including the right to enter into
9
<PAGE>
direct leases or to enter into sublicenses with END-USERS for the COMMERCIAL
PRODUCTS. An END-USER who purchases a COMMERCIAL PRODUCT under a shrink-wrap
license, or an END-USER who purchases a site or user license is not a
SUBLICENSEE.
ARTICLE III - License Grant
---------------------------
3.1 NASA hereby grants to NEXTGEN SYSTEMS and its wholly-owned
subsidiaries, a terminable, royalty-bearing, exclusive license in the FIELD OF
USE, including the right of sublicensing, except for a right in the United
States Government as set forth in Article XXI, to make or have made ROYALTY-BASE
PRODUCTS, or use, sell or offer for sale ROYALTY-BASE PRODUCTS in the United
States, its territories and possessions. No license is granted or implied with
respect to activities of NEXTGEN SYSTEMS outside the FIELD OF USE.
3.2 NASA hereby grants to NEXTGEN SYSTEMS and its wholly-owned
subsidiaries, a terminable, consideration-bearing, exclusive license in the
FIELD OF USE, including the right of sublicensing, except for a right in the
United States . Government and others acting on its behalf, as set forth in
Article XXI, to reproduce, distribute, prepare derivative works of, and perform
publicly or display publicly by or on behalf of the United States Government the
PROGRAM in both source and executable forms, to:
(a) Use the PROGRAM;
(b) Make sufficient copies of the PROGRAM for use as DEVELOPMENT
COPIES for the purpose of developing commercial versions of the
PROGRAM;
(c) Make one copy of the PROGRAM for ARCHIVAL PURPOSES for each
DEVELOPMENT COPY made;
(d) Copy any user documentation supplied by NASA with the PROGRAM;
(e) Create DERIVATIVES;
(f) Distribute or otherwise transfer the PROGRAM, excluding source
code, and/or DERIVATIVES, excluding source code, in the United
States, its territories and possessions to END-USERS, and
10
<PAGE>
(g) Display the PROGRAM, excluding source code, and/or DERIVATIVES,
excluding source code, publicly on a standard computer display in
the United States, its territories and possessions; wherein this
license is subject to LICENSED INVENTION.
3.3 Apart from the rights enumerated in this Agreement, the LICENSE does
not include a grant to NEXTGEN SYSTEMS of any right to engage in any LICENSABLE
ACTIVITY, nor any ownership right, title, or interest, nor any security interest
or other interest, in any INTELLECTUAL PROPERTY RIGHTS relating to the
INVENTION, the PROGRAM nor in any COPY of any part of the PROGRAM.
3.4 NASA hereby agrees to use reasonable efforts to grant NEXTGEN SYSTEMS
an identical worldwide license under the same conditions agreed to herein to
practice any inventions and additional patents assigned to NASA which relate to
the METHOD FOR VISUALLY INTEGRATING MULTIPLE DATA ACQUISITION TECHNOLOGIES FOR
REAL-TIME AND RETROSPECTIVE ANALYSIS but which inventions or additional patents,
if practiced, would result in infringement of the claims of the LICENSED PATENT.
NEXTGEN SYSTEMS shall have ninety (90) days from the date NASA notifies NEXTGEN
SYSTEMS of the issuance of a patent covering such an invention to apply for a
license to such patent. Additional licenses under this Section shall not require
redundant or additional royalties for products or components of products covered
under this Agreement. If NEXTGEN SYSTEMS decides not to license such inventions
or additional patents, NASA shall be free to license such inventions or
additional patents to third Party licensees and such third Party licensees shall
not be considered to infringe the LICENSED PATENT.
3.5 The license granted in Section 3.1 is subject to the provisions of
Article X - Patent Royalty and Payment and Article XIV - Sublicenses.
3.6 NASA hereby agrees to use reasonable efforts to grant NEXTGEN SYSTEMS
an identical worldwide license, subject to 37 C.F.R. ss. 404 et seq., under the
same conditions agreed to herein to practice any copyrights assigned to NASA
which relate to the PROGRAM but which copyrights, if practiced, would result in
11
<PAGE>
infringement of the licensed COPYRIGHT. NEXTGEN SYSTEMS shall have ninety (90)
days from the date NASA notifies NEXTGEN SY$TEMS of such copyright to apply for
a license to such copyright. Additional licenses under this Section 3.6 shall
not require redundant or additional compensation or consideration for products
or components of products covered under this Agreement. If NEXTGEN SYSTEMS
decides not to license such copyright, NASA shall be free to license such
copyright to third party licensees and such third Party licensees shall not be
considered to infringe the licensed COPYRIGHT.
3.7 NASA hereby agrees to use reasonable efforts to grant a worldwide
license, subject to 37 C.F.R. ss. 404 et seq., to practice any patents or
inventions assigned to NASA which relate to the PROGRAM but which patents or
inventions, if practiced, would result in infringement of the COPYRIGHT. NEXTGEN
SYSTEMS shall have ninety (90) days from the date NASA notifies NEXTGEN SYSTEMS
of the issuance of a patent covering such an invention to apply for a license to
such patent. Additional licenses under this Section shall not require redundant
or additional compensation or consideration for products or components of
products covered under this Agreement. If NEXTGEN SYSTEMS decides not to license
such inventions or additional patents, NASA shall be free to license such
inventions or additional patents to third party licensees and such third party
licensees shall not be considered to infringe the licensed COPYRIGHT.
3.8 The license granted in Section 3.2 is subject to the provisions of
Article XI - Copyright Consideration and Article XIV - Sublicenses.
3.9 The license granted in Sections 3.1 and 3.2 is subject to any
outstanding licenses or other rights in third parties under agreements executed
by NASA prior to the effective date of this Agreement.
ARTICLE IV - Term of Agreement
------------------------------
4.1 This license shall commence as of the date this Agreement is executed
by the last Party to do so and shall continue for a period of five (5) years
from execution unless revoked or terminated in accordance with other provisions
of this Agreement. Prior to expiration of the five (5) year period, LICENSEE may
request that this Agreement be modified to extend the term. Such request shall
12
<PAGE>
not be unreasonably denied if NEXTGEN SYSTEMS has successfully achieved all
milestones specified in Appendix A, paid all royalties as specified in Article X
and provided all consideration as specified in Article Xi. The Parties shall
negotiate the license terms, including the period of term extension, royalties
and payments, and copyright consideration. If the LICENSED PATENT expires prior
to five (5) years after execution, the Parties agree to negotiate for a license
on the COPYRIGHT.
4.2 This license shall terminate if all of the claims of the pending
patent application are ultimately rejected or if the last remaining claim of the
LICENSED PATENT, and any continuation, divisional, reissue or reexamination
thereof, is found
to be invalid by a competent court or by the United States Patent and Trademark
Office in a reexamination proceeding, and NASA, in its discretion, has exhausted
all available appeals. Upon such occurrence, the Parties agree to negotiate for
a license on the COPYRIGHT.
4.3 This License shall terminate if registration of the COPYRIGHT is
found to be invalid by a competent court or by the United States, and NASA, in
its discretion,. has exhausted all available appeals. Upon such occurrence, the
Parties agree to negotiate for a license on the LICENSED INVENTION.
4.4 For purposes of royalty payments, copyright consideration, annual
reports and practical application, each year of this Agreement shall begin on
the anniversary of the effective date of this Agreement.
Article V - Copyright
---------------------
5.1 NEXTGEN SYSTEMS acknowledges that title to the COPYRIGHT shall
remain with NASA and that any full or partial copy of the PROGRAM and related
documentation made by NEXTGEN SYSTEMS or its SUBLICENSEES hereunder, shall
include a NASA copyright notice thereon in either of the following forms: (1)
"Copyright 199-, National Aeronautics and Space Administration. All Rights
Reserved." or (2) "@ 199 -, NASA. All Rights Reserved." The year of publication
shall appropriately be inserted into the notice by NEXTGEN SYSTEMS. The notice
shall be affixed to all copies or portions thereof in such manner and location
as to give reasonable notice of NASA's claim of copyright. NEXTGEN SYSTEMS shall
13
<PAGE>
at all times hereafter protect the COPYRIGHT, and all related technical
information, data and materials supplied by NASA, if any, from transfer using
measures at least as strong as those used by NEXTGEN SYSTEMS in protecting its
own proprietary or intellectual property. Article XV provides additional marking
requirements.
Article VI - Delivery of Program
--------------------------------
6.1 NASA will deliver one (1) copy of the PROGRAM, via electronic
transfer or disk, to NEXTGEN SYSTEMS within ten (10) days of the date this
Agreement is executed by the last Party to do so. NEXTGEN SYSTEMS will pay any
shipping and handling charges associated with delivery of the PROGRAM.
6.2 NEXTGEN SYSTEMS accepts the above materials on an "as is" basis.
Accordingly, NASA shall not be required to load the PROGRAM onto NEXTGEN
SYSTEMS' machines, test for proper operation, perform any debugging, make any
corrections, provide maintenance, provide any updates, enhanced capabilities, or
new features, or assist in the understanding or use of the PROGRAM at any time.
NASA may,, in its sole discretion, at the request of NEXTGEN SYSTEMS, provide
on-site installation assistance so long as NEXTGEN SYSTEMS shall bear the cost
of all of NASA's related expenses.
Article VIl - Program Operating Provisions
------------------------------------------
7.1 All use of the PROGRAM by NEXTGEN SYSTEMS will be in accordance with
the terms of this Agreement by NEXTGEN SYSTEMS personnel or independent
contractors at NEXTGEN SYSTEMS' principal place of business, at customer sites
or demonstration/promotional events.
7.2 NEXTGEN SYSTEMS shall not publish or otherwise disclose a NASA
address or phone number as a source of support for the PROGRAM.
ARTICLE VIll - Practical Application
------------------------------------
8.1 NEXTGEN SYSTEMS shall achieve PRACTICAL APPLICATION of the LICENSED
INVENTION within one (1) year after the effective date of this Agreement.
14
<PAGE>
8.2 NEXTGEN SYSTEMS shall adhere to the milestones outlined in Appendix
A.
8.3 After achieving PRACTICAL APPLICATION, NEXTGEN SYSTEMS further
agrees to maintain PRACTICAL APPLICATION of the LICENSED INVENTION by
manufacturing and selling the LICENSED INVENTION, or by using the LICENSED
INVENTION to provide a service, in the United States during the term of this
Agreement.
8.4 NEXTGEN SYSTEMS agrees to use its best efforts to have the LICENSED
INVENTION certified as necessary during the period specified in Section
8.5 NEXTGEN SYSTEMS shall promptly report to NASA its discontinuance of
making the benefits of the LICENSED INVENTION available to the public.
8.6 Failure to comply with the terms of this Article shall be cause for
unilateral modification or termination of this Agreement in accordance with
Article XVIII.
ARTICLE IX - United States Manufacture
--------------------------------------
9.1 NEXTGEN SYSTEMS further agrees that any products embodying the
LICENSED INVENTION or COPYRIGHT, or produced through the use of the LICENSED
INVENTION or COPYRIGHT will be manufactured substantially in the United States,
as required by 37 C.F.R. ss.404.5(a)(2).
ARTICLE X - Patent Royalty and Payment
--------------------------------------
10.1 In consideration of the license granted under this Agreement,
NEXTGEN SYSTEMS agrees to pay NASA an initial royalty of FIFTEEN THOUSAND
DOLLARS ($15,000.00) payable upon execution of this Agreement. This initial
royalty is nonrefundable and will not be credited against any royalties which
become due and payable under this Agreement.
10.2 NEXTGEN SYSTEMS agrees to pay NASA a running royalty of TEN
PERCENT (10%) of NET SALES of ROYALTY-BASE PRODUCTS. Said running royalty shall
be paid annually.
15
<PAGE>
10.3 NEXTGEN SYSTEMS agrees to annually pay NASA a minimum guaranteed
royalty of FIVE THOUSAND DOLLARS ($5,000.00) starting at the end of the first
(lst) year of this Agreement and continuing until PRACTICAL APPLICATION is
achieved.
10.4 NEXTGEN SYSTEMS agrees to annually pay NASA a minimum guaranteed
royalty of FIFTEEN THOUSAND DOLLARS ($15,000-00) starting at the end of the year
in which PRACTICAL APPLICATION is achieved and continuing throughout the term of
this Agreement.
10.5 The minimum royalty payments specified in Sections 10.3 and 10.4
shall be creditable against the running royalty due NASA for the same period.
10.6 NEXTGEN SYSTEMS further agrees that in the event any ROYALTYBASE
PRODUCTS are sold or otherwise transferred for resale either (1) to a legal
entity or individual which controls NEXTGEN SYSTEMS by stock or ownership or
otherwise, or (2) to a legal entity which NEXTGEN SYSTEMS or its owners control
by stock ownership or otherwise, the royalties to be paid to NASA with respect
to such ROYALTY-BASE PRODUCTS shall be computed upon the NET SALES of the
purchaser for resale rather than upon the NET SALES of NEXTGEN SYSTEMS.
10.7 For the purposes of Sections 10.2 and 10.6 sales shall be
considered to be made when invoiced, shipped or paid, whichever occurs first.
10.8 NEXTGEN SYSTEMS agrees that it shall annually pay to NASA the TEN
PERCENT (1 0%) royalty of Section 10.2 above for any ROYALTY-BASE PRODUCTS of
any and all SUBLICENSEE of NEXTGEN SYSTEMS. In addition to the running royalties
of Section 7.2, NEXTGEN SYSTEMS agrees to pay NASA FIFTY PERCENT (50%) of any
consideration, including, but not limited to, sublicense issue fees, received
from SUBLICENSEE in consideration for any sublicense granted for the LICENSED
INVENTION.
10.9 The sale or transfer by NEXTGEN SYSTEMS or any of its SUBLICENSEES
of ROYALTY-BASE PRODUCTS for use by or on behalf of the United States
Government, Non-Profit or Charitable Organizations shall be exempt from any
16
<PAGE>
royalty to the extent that NEXTGEN SYSTEMS can show that the entityreceived a
discount equivalent to or greater than the amount of any such royalty that would
otherwise have been due.
10.10 Royalties shall be paid annually by check, denominated in United
States dollars and made payable to the National Aeronautics and Space
Administration. The check shall be mailed to NASA at the address set out in
ARTICLE XXVIII of this Agreement. Royalty payments for royalties accrued in each
year of this Agreement are due no later than thirty (30) days after the end of
the year in which the royalties accrued. NASA's acceptance of any royalty
payment does not eliminate the right to contest the accuracy of such payment in
the future.
10.11 Royalty payments not sent to NASA within thirty (30) days after
the due date shall be subject to interest charges. Interest charges shall be
assessed in accordance with the Federal Claims Collections Standards, 4 C.F.R.
ss.ss. 100-105. In addition to interest charges, NASA is authorized to collect
the costs of collection and any associated fees.
Article Xi - Copyright Consideration
------------------------------------
11.1 In consideration of the license granted under this Agreement,
NEXTGEN SYSTEMS agrees to provide to NASA, at no cost to NASA, all COMMERCIAL
PRODUCTS, in both source and executable forms. NASA, and others acting on its
behalf, shall have the right to use, reproduce, prepare derivative works of and
perform publicly or display publicly the COMMERCIAL PRODUCTS by or on behalf of
the United States Government. Both PC platform and Macintosh platform versions
of the software shall be provided, if such platforms are available in COMMERCIAL
PRODUCTS.
11.2 NEXTGEN SYSTEMS shall verify that the provided COMMERCIAL PRODUCTS
are running properly on at least one machine at NASA Langley. Such machine shall
be designated by the NASA Langley point of contact. Dr. Alan Pope (Building
1168, Room 104, Mail Stop 152, Telephone 757-864-6642) shall be the point of
contact. NEXTGEN SYSTEMS will be notified in writing if the point of contact
changes.
17
<PAGE>
11.3 NPXTGEN SYSTEMS shall provide copies of all publications and
promotional materials to the NASA Langley point of contact. NASA, and others
acting on its behalf, shall have the right to use, reproduce, and display
publicly the publications and promotional materials by or on behalf of the
United States Government.
11.4 Consideration not provided to NASA Langley within thirty (30) days
after the due date, where NASA Langley is not at fault, shall be subject to
interest charges. Interest charges shall be assessed according to the value of
the consideration and in accordance with the Federal Claims Collections
Standards, 4 C.F.R. ss.ss. 100-105. In addition to interest charges, NASA is
authorized to collect the costs of collection and any associated fees.
ARTICLE XII - Annual Report
---------------------------
12.1 NEXTGEN SYSTEMS agrees to submit an annual report to NASA at the
address set out in ARTICLE XXVIII of this Agreement, in writing no later than 30
days after the end of each year of this Agreement which shall include:
(a) A narrative description of the steps being taken to reduce the
LICENSED INVENTION to practice, to create a market demand for
the LICENSED INVENTION, to commercialize the LICENSED
INVENTION and to meet market demand for the LICENSED
INVENTION;
(b) A narrative description of the ROYALTY-BASE PRODUCTS currently
being offered for sale by NEXTGEN SYSTEMS and its
SUBLICENSEES, and services requiring the use of ROYALTY-BASE
PRODUCTS. Copies of current sales brochures, promotional
materials, and price lists shall be included with this
description;
(c) A list of the geographic locations at which the LICENSED
INVENTION is being manufactured;
(d) NEXTGEN SYSTEMS'GROSS SALES of ROYALTY-BASE PRODUCTS for the
preceding year;
(e) NEXTGEN SYSTEMS'NET SALES of ROYALTY-BASE PRODUCTS for
18
<PAGE>
the preceding year;
(f) The number of ROYALTY-BASE PRODUCTS and services requiring the
use of ROYALTY-BASE PRODUCTS, distributed to a marketplace by
NEXTGEN SYSTEMS for the preceding year;
(g) The number of ROYALTY-BASE PRODUCTS manufactured and used by
NEXTGEN SYSTEMS in its business during the preceding year,
excluding however, ROYALTY-BASE PRODUCTS manufactured during
the preceding year for use by NEXTGEN SYSTEMS for the purpose
of research and development activities with respect to the
LICENSED INVENTION;
(h) The dollar amount of the running royalty due to NASA for the
preceding year;
(i) The dollar amount of sublicensing royalties due to NASA for
the preceding year;
(j) The total amount of royalties due to NASA for the preceding
year;
(k) GROSS SALES for the preceding year of ROYALTY-BASE PRODUCTS
sold by NEXTGEN SYSTEMS and all SUBLICENSEES for use by or on
behalf of the United States Government, including
identification of the government agency and how the benefit of
the royalty-free sale was passed onto the government;
(1) The dollar amount of investment spent to commercialize the
ROYALTYBASE PRODUCTS in the preceding year;
(m) The total number of full-time equivalent employees hired to
commercialize the ROYALTY-BASE PRODUCTS in the preceding year;
(n) A statement specifying COMMERCIAL PRODUCTS and what COMMERCIAL
PRODUCTS were provided to NASA Langley;
(o) The dollar amount of investment spent to further develop the
PROGRAM in the preceding year;
(p) The total number of full-time equivalent employees hired to
commercialize the PROGRAM in the preceding year, and
19
<PAGE>
(q) Copies of all publications including prom, otional materials.
12.2 The report required under this Article shall also be made within
three (3) months after termination of this Agreement.
12.3 All reports submitted in response to the reporting requirement of
this Article shall be treated by NASA, to the extent permitted by law, as
commercial and financial information, which is privileged and confidential and
not subject to disclosure under Section 552 of Title 5 of the United States Code
(Freedom of Information Act).
ARTICLE XIII - Books, Records and Examination
---------------------------------------------
13.1 NEXTGEN SYSTEMS shall keep and shall require that all SUBLICENSEES
keep full and accurate books of account containing all particulars which may be
necessary for the purpose of showing the amount payable to NASA by way of
royalty or consideration, as aforesaid. The books of account and the supporting
data will be open during normal business hours for the duration of this
Agreement and for two (2) calendar years following the termination of this
Agreement, for inspection and photocopying by an authorized representative of
NASA for the purpose of verifying NEXTGEN SYSTEMS' royalty reports; however,
such inspection shall occur no more than once per calendar year. Adjustment
shall be made by NEXTGEN SYSTEMS to compensate for any errors or omissions
disclosed by such examination within thirty (30) days of such disclosure. Should
such inspection lead to the discovery of a greater than ten percent (10%)
discrepancy in reporting to NASA's detriment, NEXTGEN SYSTEMS agrees to pay the
full cost of such inspection. A prior audit and a corresponding payment by
NEXTGEN SYSTEMS towards an adjustment does not bar NASA from contesting that
same royalty period at a later date. Failure to audit is not a waiver of
objection.
ARTICLE XIV - Sublicenses
-------------------------
14.1 NEXTGEN SYSTEMS may grant written sublicenses under its right to
make, use, or sell ROYALTY-BASE PRODUCTS as described in Article 3.1 and its
rights to use, copy, create derivatives, distribute and display COPYRIGHT as
described in Article 3.2, upon terms that NEXTGEN SYSTEMS may arrange, provided
that:
20
<PAGE>
(a) Each sublicense shall refer to this Agreqment and shall
include the rights reserved by the NASA under ARTICLE XXI -
Reservation of Rights;
(b) Each sublicense shall include the condition that the
sublicense shall automatically terminate upon the termination
of this Agreement, but such SUBLICENSEES may then apply for
its own license from NASA;
(c) NEXTGEN SYSTEMS agrees to incorporate Articles 3, 12, 13, 14,
15, 17, 18, 22, 23, 25, 26, 27 and 30 into its sublicense
agreements, so that these Articles shall be binding upon such
SUBLICENSEE as if they were Parties to this Agreement;
(d) NEXTGEN SYSTEMS shall submit a written request for approval of
such sublicense or of any modification to a sublicense in
advance, which approval shall not be unreasonably withheld.
(e) Within thirty (30) days after a sublicense grant or
modification, MEDIA SOLUTIONS shall furnish NASA with an
executed copy of the sublicense or modification, and
(f) The granting of any sublicenses by NEXTGEN SYSTEMS shall in no
way relieve NEXTGEN SYSTEMS from any of the requirements of
this license.
ARTICLE XV - Patent and Copyright Marketing and Advertisement
-------------------------------------------------------------
15.1 NEXTGEN SYSTEMS shall mark all LICENSED PRODUCTS in accordance
with the statutes of the United States relating to the marking of patented
articles (35 U.S.C. 287) and copyrighted works (17 U.S.C. 401). Such marking
shall include the notation "Licensed from the National Aeronautics and Space
Administration under United States Patent Application Number 08/641,041" or
other appropriate reference to the license and patent number. Such marking shall
also include the notation "Licensed from the National Aeronautics and Space
Administration under United States Copyright Registration Number TXU743936."
15.2 NEXTGEN SYSTEMS may state in advertisements and/or on the LICENSED
PRODUCTS that such LICENSED PRODUCTS are made under a patent license from NASA.
21
<PAGE>
The letters "N A S A" (1) must be used in their normal typed or printed form,
(2) must be the same size, style, color ar)d intensity as the rest of the words
in the sentence, and (3) must not be used in their stylized version as they
appear in the NASA logotype insignia. Uses other than those expressly provided
for in this Section 15.2 shall require the express written approval of NASA.
Approval by the NASA shall be based on applicable law (e.g., 42 U.S.C. ss.ss.
2459(b), 2472(a), and 2473(c)(1); and 14 C.F.R. ss. 1221.1 00 et seq.) and
policy governing the use of the words "National Aeronautics and Space
Administration" and the letters "N A S A."
15.3 NEXTGEN SYSTEMS may state in advertisements and/or on the LICENSED
PRODUCTS that such LICENSED PRODUCTS are made under a copyright license from the
National Aeronautics and Space Administration or NASA. The letters "N A S A" (1)
must be used in their normal typed or printed form, (2) must be the same size,
style, color and intensity as the rest of the words in the sentence, and (3)
must not be used in their stylized version as they appear in the NASA logotype
insignia. Uses other than those expressly provided for in this Section 15.2
shall require the express written approval of NASA. Approval by NASA shall be
based on applicable law (e.g., 42 U.S.C. ss.ss. 2459b, 2472(a), and 2473(c)(1);
and 14 C.F.R. ss. 1221.100 et seq.) and policy governing the use of the words
"National Aeronautics and Space Administration" and the letters "N A S A."
15.4 Except as required in Section 15.1 or permitted by Sections 15.2
and 15.3, NEXTGEN SYSTEMS and all SUBLICENSEES shall not use the name of NASA,
nor any adaptation thereof, in any advertising, promotional, or sales literature
without prior written consent obtained from NASA. This consent shall not be
unreasonably withheld.
ARTICLE XVI- Nontransferability
-------------------------------
16.1 The rights and licenses granted by NASA in this Agreement are
personal to NEXTGEN SYSTEMS and may not be assigned or otherwise transferred
without the written consent of NASA. Any attempted assignment or transfer
without such consent shall be void and shall automatically terminate all rights
of NEXTGEN SYSTEMS under this Agreement.
22
<PAGE>
ARTICLE XVII - Disputes
-----------------------
17.1 All disputes concerning the interpretation or application of this
Agreement shall be discussed mutually between NASA and NEXTGEN SYSTEMS.
Any disputes which are not disposed of by mutual agreement shall be
decided by the Associate General Counsel (intellectual Property), NASA
Headquarters, Washington, D.C., 20546, who shall reduce his decision to writing
and mail or otherwise furnish a copy thereof to NEXTGEN SYSTEMS and to all
SUBLICENSEES of record. His decision shall be final and conclusive, unless
within thirty (30) days from the date of receipt of such decision, NEXTGEN
SYSTEMS mails or otherwise furnishes a written appeal addressed to the
Administrator, National Aeronautics and Space Administration, Washington, D.C.,
20546. NEXTGEN SYSTEMS shall be afforded an opportunity to be heard and to offer
evidence in support of their appeal. The decision on the appeal shall be made by
the NASA Administrator or designee. There is no further right of administrative
appeal from the decision of the NASA Administrator or designee.
ARTICLE XVIII - Modification or Termination by NASA
---------------------------------------------------
18.1 Before modifying or terminating the license herein granted for any
cause, there will be furnished to NEXTGEN SYSTEMS and to all SUBLICENSEES of
record a written notice stating NASA's intention to modify or terminate the
license and the reasons therefor. NEXTGEN SYSTEMS and all SUBLICENSEE of record
will be allowed thirty (30) days after receipt of such notice to remedy any
breach of the license or show cause why the license should not be modified or
terminated. A response to such notice should be addressed to the General
Counsel, National Aeronautics and Space Administration, Washington, D.C., 20546.
18.2 NEXTGEN SYSTEMS may directly appeal in writing, within thirty (30)
days of receipt of the notice stating NASA's intention to modify or terminate
the license, to the Administrator of NASA on the question of whether the license
or sublicense should be modified or terminated. If reconsideration of the
intention to modify or terminate the license has been requested under Section 1
B. 1, then N EXTG EN SYSTEMS may appeal to the NASA Administrator within thirty
23
<PAGE>
(30) days after receiving notice of an adverse decision or determination from
the NASA General Counsel. The notice of appeal and all supporting documentation
should be addressed to the Administrator, National Aerona6tics and Space
Administration, Washington, D.C., 20546. NEXTGEN SYSTEMS shall be afforded an
opportunity to be heard and to offer evidence in support of their appeal. The
decision on the appeal shall be made by the NASA Administrator or designee.
There is no further right of administrative appeal from the decision of the NASA
Administrator or designee.
18.3 If no action is taken under Sections 18.1 and 18.2, then the
decision to modify or terminate the license shall become final.
18.4 All royalties and copyright consideration due up to and including
the date of termination of this Agreement are due within thirty (30) days of
such date.
18.5 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination; and Articles 1, 14.1, 15, 17,
18.1, 26, 27 and 30 shall survive any such termination.
18.6 The license granted pursuant to Article III of this Agreement
maybe unilaterally modified or terminated by NASA:
(a) If NASA determines that NEXTGEN SYSTEMS is not taking
affirmative steps toward executing the plan submitted with its
request for a license and NEXTGEN SYSTEMS cannot otherwise
demonstrate to the satisfaction of NASA that it has or can be
expected to take effective steps within a reasonable time to
achieve PRACTICAL APPLICATION of the LICENSED INVENTION and
development and commercialization of the PROGRAM within the
time periods set forth in Article Vill;
(b) If NEXTGEN SYSTEMS fails to maintain PRACTICAL APPLICATION;
(c) If NASA determines that such action is necessary to meet
requirements for public use specified by Federal regulations
issued after the date of the license and such requirements are
not reasonably satisfied by MEDIA SOLUTIONS;
(d) If NEXTGEN SYSTEMS defaults in making payment of royalties in
24
<PAGE>
accordance with Article X of this Agreement.
(e) If NEXTGEN SYSTEMS defaults in providing consideration in
accordance with Article XI of this Agreement;
(f) If NEXTGEN SYSTEMS has willfully made a false statement of or
willfully omitted a material fact in the license application
or in any report required by this Agreement;
(g) If NEXTGEN SYSTEMS has defaulted in making any report required
by this Agreement;
(h) If NEXTGEN SYSTEMS commits a substantial breach of a covenant
or agreement contained in this Agreement, or ( i) If, starting
at the end of the fifth (5th) year of this Agreement, MEDIA
SOLUTIONS' sales of LICENSED PRODUCTS result in no more than
minimum royalties due to NASA for three (3) consecutive years
under Section 10.4.
18.7 The license granted pursuant to Article III of this Agreement may
be, terminated by NASA if NEXTGEN SYSTEMS becomes INSOLVENT. The term
"INSOLVENT" means that NEXTGEN SYSTEMS has either ceased to pay its debts
(including royalty payments under this Agreement) in the ordinary course of
business or cannot pay its debts as they fall due or is insolvent within the
meaning of the Federal Bankruptcy Code (1 1 U.S.C. ss. 101 (31)). NEXTGEN
SYSTEMS must notify NASA if it becomes INSOLVENT within thirty (30) days of
becoming INSOLVENT. NEXTGEN SYSTEMS' failure to conform to this requirement
shall be deemed a material, incurable breach.
18.8 NEXTGEN SYSTEMS must inform NASA of its intention to file a
voluntary petition in bankruptcy or of another's intention to file an
involuntary petition in bankruptcy to be received at least thirty (30) days
prior to filing such a petition. NEXTGEN SYSTEMS' filing without conforming to
this requirement shall be deemed a material, pre-petition incurable breach.
25
<PAGE>
ARTICLE XIX- Termination By NEXTGEN SYSTEM
------------------------------------------
19.1 This license may be terminated at any time at the option of
NEXTGEN SYSTEMS upon ninety (90) days written notification to NASA of intent to
terminate. All outstanding royalties and copyright consideration become due upon
termination of this Agreement.
ARTICLE XX- Effect of Termination
---------------------------------
20.1 The word 'Termination" and cognate words, such as "term" and
"terminate," used in this Agreement are to be read, except where the contrary is
specifically indicated, as omitting from their effect the following rights and
obligations, all of which survive any termination to the degree necessary to
permit their complete fulfillment or discharge:
(a) N EXTG EN SYSTEMS' obligation to supply a terminal report as
specified in Section 12.2 of Article XII of this Agreement;
(b) NASA's right to receive or recover and NEXTGEN SYSTEMS'
obligation to pay royalties and provide consideration accrued or
accruable for payment at the time of any termination;
(c) NEXTGEN SYSTEMS' obligation to maintain records and NASA's right
to conduct a final audit in accordance with Section 13.1 of
Article Xill of this Agreement,
(d) Any cause of action or claim of either Party accrued or to
accrue, because of any breach or default by the other Party, and
(e) Licenses, releases, and agreements of nonassertion running in
favor of customers or transferees of NEXTGEN SYSTEMS in respect
to products sold or transferred by NEXTGEN SYSTEMS prior to any
termination and on which royalties shall have been paid as
provided in Article X of this Agreement.
ARTICLE XXI - Reservation of Rights
-----------------------------------
21.1 NASA reserves an irrevocable royalty-free right to practice and
have practiced the LICENSED INVENTION and COPYRIGHT throughout the world for all
26
<PAGE>
governmental purposes (as distinguished from commercial purposes) by or on
behalf of the Government of the United States and on behalf of any foreign
government pursuant to any existing or future treaty or agreement with the
United States.
ARTICLE XXII- Representations and Warranties
--------------------------------------------
22.1 Nothing in this Agreement shall be construed as:
(a) A warranty or representation by NASA as to the validity or
scope of the LICENSED PATENT, including any reissue or
reexamination thereof;
(b) A warranty or representation by NASA as to the validity or
scope of the COPYRIGHT;
(c) A requirement that NASA shall file any copyright registration
or patent application, secure any copyright or patent, or
maintain any patent in force;
(d) An obligation to bring or prosecute actions or suits against
third Parties for infringement;
(e) An obligation to furnish any manufacturing or technical
information;
(f) Conferring a right to use in advertising, publicity or
otherwise the name of any inventor of the LICENSED INVENTION
or author of the PROGRAM, or the NASA name, seal, insignia,
logotype insignia or any other adaptation without the prior
written consent of NASA (except as otherwise provided in
Article XV, Sections 15.2 and 15.3);
(g) Precluding the export or sale for export from the United
States of LICENSED PRODUCTS on which royalties or
consideration shall have been paid as provided in Articles X
and XI;
(h) Granting by implication, estoppel, or otherwise, any licenses
or rights under any patent, copyright or trademark of NASA or
any other person in any foreign country;
(i) Granting by implication, estoppel, or otherwise, any licenses
or rights under patent applications, patents, copyrights or
trademarks of NASA
27
<PAGE>
other than the LICENSED PATENT and QOPYRIGHT, regardless of
whether such other patent applications or patents are
dominant, subordinate, or an improvement to the LICENSED
PATENT, or
(j) Conferring upon any person (1) any immunity from or defenses
under the antitrust laws, (2) any immunity from a charge of
patent or copyright misuse, or (3) any immunity from the
operation of state or Federal law.
12.2 NASA makes no representations, extends no warranties of any kind,
either express or implied, and assumes no responsibility whatever with respect
to use, sale, or other disposition by NEXTGEN SYSTEMS or its vendees or other
transferees of products incorporating or made by the use of (1) inventions
licensed under this Agreement, (2) copyrights licensed under this Agreement, or
(3) information, if any, furnished under this Agreement.
22.3 NEXTGEN SYSTEMS will hold NASA harmless against all liabilities,
demands, damages, expenses, or losses arising (1) out of the use by NEXTGEN
SYSTEMS or its transferees of inventions or software licensed or information
furnished under this Agreement, or (2) out of any use, sale, or other
disposition by NEXTGEN SYSTEMS or its transferees of products made by use of
such inventions, software or information.
22.4 NEXTGEN SYSTEMS is hereby put on notice that export of any goods
or technical data from the United States may require some form of license from
the United States Government. Failure to obtain necessary export licenses may
result in criminal liability of NEXTGEN SYSTEMS under United States laws. NASA
neither represents that a license shall not be required nor that, if required,
it shall be issued.
22.5 If, in any proceeding in which the validity, infringement, or
priority of invention of any claim of the LICENSED PATENT is in issue, a
judgment or decree is entered which becomes not further reviewable through the
exhaustion of all permissible applications for rehearing or review by a superior
tribunal, or through the expiration of time permitted for such applications
28
(below referred to as an "irrevocable judgment"), the construction placed upon
any such claim by such irrevocable judgment shall thereafter be followed, not
only as to such claim but as to all claims to which such construction applies,
with respect to acts subsequently occurring. If such irrevocable judgment holds
any claim invalid or is adverse to the patent as to inventorship, NEXTGEN
SYSTEMS shall be relieved prospectively (1) from including in its reports
ROYALTY-BASE PRODUCTS sold or otherwise disposed of covered only by such claim
or any broader claim to which such irrevocable judgment is applicable, and (2)
from the performance of those other acts which may be required by this Agreement
only because of any such claim. However, if there are two (2) or more
conflicting irrevocable judgments with respect to the same claim, the decision
of the higher tribunal shall be followed, but if the tribunals be of equal
dignity, then the decision more favorable to the claim shall be followed until
the less favorable decision has been followed by the irrevocable judgment of
another tribunal of at least equal dignity. In the event of conflicting
irrevocable judgments of the Supreme Court of the United States, the latest
shall control.
22.6 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NASA
MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, WHETHER EXPRESS,
IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR, ANY WARRANTY THAT THE PROGRAM WILL
CONFORM TO SPECIFICATIONS, ANY WARRANTY THAT THE DOCUMENTATION WILL CONFORM TO
THE PROGRAM, ANY WARRANTY THAT THE PROGRAM WILL BE ERROR-FREE, WHETHER OR NOT
THE ERROR IS DISCOVERABLE, ANY WARRANTY OF THE VALIDITY OF COPYRIGHT, ANY
WARRANTY OF THE VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING, AND ANY
WARRANTY OF THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE.
NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR
29
<PAGE>
WARRANTY GIVEN BY NASA THAT THE PRACTICE BY NEXTGEN SYSTEMS OF THE LICENSE
GRANTED HEREUNDER SHALL NOT INFRINGE THE COPYRIGHT OR PATENT RIGHTS OF ANY THIRD
PARTY. IN NO EVENT SHALL NASA BE LIABLE FOR ANY DAMAGES, INCLUDING BUT NOT
LIMITED TO DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES, ARISING OUT OF,
RESULTING FROM, OR IN ANY WAY CONNECTED WITH THE USE OF THE PROGRAM OR LICENSED
INVENTION, WHETHER OR NOT BASED UPON WARRANTY, CONTRACT, TORT, OR OTHERWISE,
WHETHER OR NOT INJURY WAS ECONOMIC OR LOST PROFITS OR SUSTAINED BY PERSONS OR
PROPERTY OR OTHERWISE, WHETHER OR NOT DAMAGES ARE BASED ON A THIRD PARTY CLAIM,
WHETHER OR NOT LOSS WAS SUSTAINED FROM, OR AROSE OUT OF, THE RESULTS OR USE OF
THE PROGRAM, AND REGARDLESS OF WHETHER NASA SHALL BE ADVISED, SHALL HAVE OTHER
REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.
ARTICLE XXIII - lnfringement
----------------------------
23.1 If NEXTGEN SYSTEMS becomes aware of an infringement or has
reasonable cause to believe that there has been an infringement of the COPYRIGHT
or LICENSED PATENT or any reissue or reexamination thereof, or any additional
patent or copyright under which it has been granted a license according to this
Agreement, NEXTGEN SYSTEMS shall notify NASA in writing concerning NEXTGEN
SYSTEMS' knowledge of any infringement or the reasonable cause for belief of
infringement. Upon receipt of such notification, NASA may volunteer its opinion
as to whether reasonable cause exists to believe that there has been an
infringement. In any event, NEXTGEN SYSTEMS is authorized under the provisions
of Chapter 29 of Title 35, United States Code, or other statutes, (1) to bring
suit in its own name at its own expense and on its own behalf for infringement
of the COPYRIGHT or LICENSED PATENT and any reissue or reexamination thereof,
(2) in any such suit to enjoin infringement and to collect for its use damages,
profits and awards of whatever nature recoverable from such infringement, and
30
<PAGE>
(3) to settle any claim or suit for infringement of the COPYRIGHT or LICENSED
PATENT and any reissue pr reexamination thereof, as by granting a sublicense
under this Agreement. This power, however, is subject to the continuing right of
NASA and other United States Government Agencies to bring suit itself or to
intervene in NEXTGEN SYSTEMS' suit. NEXTGEN SYSTEMS shall indemnify NASA against
any order for costs that may be made against NASA in such proceedings.
23.2 If NEXTGEN SYSTEMS does not exercise its right to enforce under
Section 23.1 within twelve (12) months of NASA's receipt of NEXTGEN SYSTEMS'
notification that an infringement has occurred, and if NASA has determined that
the infringement is substantial, then NASA may take appropriate steps to notify
the United States Attorney General, or designee, that an infringement has
occurred or that reasonable cause exists to believe that there has been an
infringement. The United States Attorney General, or designee, shall then
determine what action should be taken, and the United States Government shall be
entitled to any recovery which results from action taken by the United States
Attorney General, or designee.
23.3 Each Party to this Agreement shall provide the other with all
reasonable cooperation to assist the other in the prosecution of any action to
enforce the COPYRIGHT or LICENSED PATENT and any reissue or reexamination
thereof, and during the pendency of any such action brought by a party, that
party shall inform the other of all significant developments during the course
of such action.
ARTICLE XXIV - Officials Not to Benefit
---------------------------------------
24.1 No member of, or delegate, to Congress, or resident commissioner,
shall be admitted to any share or part of this Agreement or to any benefit that
may arise therefrom, but this provision shall not be considered to extend to
this Agreement if made with a corporation for its general benefit.
31
<PAGE>
ARTICLE XXV - Nonwaiver
-----------------------
25.1 Forbearance by either Party in enforcing any of the provisions of
this Agreement shall not be construed as a continuing waiver by such Party of
its rights to enforce such provisions, or in any way affect the validity of this
Agreement.
ARTICLE XXVI - Mercier and Integration
--------------------------------------
26.1 This Agreement (1) sets forth the entire agreement between the
Parties hereto and any Parties who have in the past or who are now representing
either of the Parties hereto and merges all discussions between them, (2) annuls
and replaces every other agreement which may have existed between NASA and
NEXTGEN SYSTEMS with respect to the LICENSED INVENTION or PROGRAM, and (3) is
separate and distinct from any other agreement which may have existed in the
past or may now exist.
ARTICLE XXVII - Applicable Law
------------------------------
27.1 This -Agreement shall be construed, and the legal relations
between the parties hereto, shall be determined in accordance with United States
Federal Law.
ARTICLE XXVIII - Addresses
--------------------------
28.1 Any communications including reports, payments, and notices to be
given hereunder shall be sufficiently made or given on the date of mailing if
sent by certified first class mail, return receipt requested, postage prepaid,
addressed to the receiving Party at the address below:
<PAGE>
Patent Counsel Team Mr. David B. Hunter
Mail Stop 212 Vice President, Secretary Treasurer
3 Langley Boulevard NextGen Systems, Inc.
NASA Langley Research Center 1006 W. Ninth Avenue
Hampton, VA 23681-0001 King of Prussia, PA 19406
Consideration, consisting of no-cost COMMERCIAL PRODUCTS, shall be sufficiently
made or given upon written notice by NEXTGEN SYSTEMS stating that the COMMERCIAL
32
<PAGE>
PRODUCT has been provided to @ASA and is running properly. The provisions of
Section 28.1 shall apply.
ARTICLE XXIX - Nonassertion
---------------------------
29.1 NASA agrees not to assert any of its rights under any others of
its copyrights, patents or patent applications in any country of the world,
against NEXTGEN SYSTEMS, its SUBLICENSEES, vendors or customers which rights are
necessary to or incidental to the practice of the rights granted to NEXTGEN
SYSTEMS under this Agreement.
ARTICLE XXX - Severability
--------------------------
30.1 The provisions of this Agreement are severable, and in the event
that any provisions of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of the law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
ARTICLE XXXI - Acceptance
-------------------------
31.1 In witness whereof, each Party has caused this Agreement to be
executed by its duly authorized representative:
NextGen Systems, Inc. National Aeronautics and Space
Administration
By: /s/David B. Hunter By: /s/Edward A. Frankle
--------------------- ------------------------
David B. Hunter Edward A. Frankle
Vice President, Secretary Treasurer NASA General Counsel
Date: 7/3/97 Date: 7/3/97
-------- ---------
cc:
Patent Counsel Team
NASA Langley Research Center
33
<PAGE>
APPENDIX A - Practical Application Milestones
---------------------------------------------
Written Procedure Development and Training Program Development for session
leader/facilitators.
Time Frame: Within 30 days of effective date.
Assembly of apparatus necessary for 2-5 session "Centers" where Direct Response
commercial analysis will be conducted.
Time Frame: Within 30 days of effective date.
DRTV Marketing Plan Finalization and implementation.
Time Frame: Within 30 days of effective date.
Video Press Release - Filming, Editing and Distribution to appropriate TV news
outlets including CNN, CNBC and technology oriented programs including Beyond
2000, NextStep, Invention. Appropriate credit to NASA Langley will be given in
accordance to Article XV.
Time Frame: Within 30 days of effective date.
Initial Press Release(s) on NEXTGEN SYSTEMS Acquisition of Cognitive Engagement
Technology. Video Press Release Scripting in accordance to Article XV.
Time Frame: Within 30 days of effective date.
Begin "Baseline" studies on existing DRTV commercials, 1/2Hour "Infomercials"
and short-form ads.
Time Frame: Within 60 days of effective date
Survey of primary areas of demand to determine a priority ranking areas for
commercialization in traditional consumer products advertising industry limited
to the FIELD OF USE.
Time Frame: Within 60 days of effective date.
Refine the Prototype to suit the immediate needs of the Direct Response TV
(DRTV) commercial producers and managers.
Time Frame: Within 60 days of effective date.
Full Scale Commercial Sales to DRTV industry of Commercial Engagement Index
(CEI) measurement services for infomercial and short-form advertising.
Time Frame: I st Q98
Refinement of the CEI user interface for traditional advertising purposes.
Time Frame: I st Q98
34
<PAGE>
APPENDIX A - Practical Application Milestones (Cont'd)
------------------------------------------------------
Display of Commercial Engagement Index at North American Direct Marketing
Association Show (DMA) to expand sales of the CEI to the larger Direct Response
Community Direct.
Time Frame: Spring '98
Display of Commercial Engagement Index at National Association of Television
Producers Exhibition (NATPE)
Time Frame: Spring '98
Followed by Full Scale Commercial Sales to Entertainment Industry of CEI
measurement services.
Time Frame: Spring '98
Display of Commercial Engagement Index at NIMA - Direct Response TV Show.
Time Frame: Spring '98
35
<PAGE>
APPENDIX B
----------
DESCRIPTION OF PROGRAM
- - ----------------------
Title: Method for Visually Integrating Multiple Data Acquisition Technologies
for Real Time & Retrospective Analysis
A system for display on a single video display terminal of multiple
physiological measurements is provided. A subject is monitored by a plurality of
instruments which feed data to a computer programmed to receive data, calculate
data products such as index of engagement and heart rate, and display the data
in a graphical format simultaneously on a single video display terminal. In
addition, live video representing the view of the subject and the experimental
setup may also be integrated into the single data display. The display may be
recorded on a standard video tape recorder for retrospective analysis.
The software functions to receive signals from the environment, to process
the data streams, and to create an integrated display. The signals from the
environment can be (1) physiological signals from one or more experimental
subjects, (2) signals from the experiment and/or the experimenter indicating
physical values, equipment status, experiment status, etc., (3) signals from
other measuring systems such as an oculometer, (4) computer-generated date and
time, or (5) operator-entered identification information. The software processes
these data streams in such a way as to produce meaningful displays and/or data
records. This can include calibration in which digital and analog voltages are
converted to representations in real physical units (heart rate in beats per
minute). It also includes data fusion in which several data streams are combined
in such a way as to produce unique data products (blood pressure derived from
cardiac pulse transit time). The software combines raw data streams, processed
data, and data products with multiple sources of audio and video to produce an
integrated multimedia display that is available for on-line video recording. The
display is modular and display elements can be added, removed, or re-sized as
needed. The software is modular in nature and modules can be added and removed
as required by the type and number of sources that are to be received, processed
and displayed.
36
EXCHANGE AGREEMENT
------------------
THIS EXCHANGE AGREEMENT made and entered into this 26th day of
January, 1998, by and between David B. Hunter, (hereinafter "Hunter") the
Exchange Agent for the Stockholders of NextGen Systems, Inc. a Pennsylavania
corporation (hereinafter "NextGen"), and Royal American Mining Properties, Ltd.,
a Nevada corporation, (hereinafter "Royal").
WITNESSETH:
WHEREAS, Hunter as Exchange Agent represents that Stockholders
are the owners of all the outstanding stock of NextGen whose unaudited balance
sheet and financial statement for the period ended December 31, 1997 is attached
hereto as Exhibit "A" and incorporated herein by the reference; and
WHEREAS, the authorized capital stock of Royal consists of
100,000,000 shares of common stock, par value $0.001 per share, of which 479,000
shares are issued and outstanding; and
WHEREAS, Hunter and Royal agree that it would be to their
mutual benefit for Royal to acquire all of the outstanding stock of NextGen in
exchange for shares of Royal stock.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto hereby agree as follows:
1. [REPRESENTATIONS OF THE EXCHANGE AGENT HUNTER FOR THE
STOCKHOLDERS OF NEXTGEN] Hunter hereby represents to Royal that to the best of
his knowledge:
(a) NextGen owns on the date hereof, and on the
Closing Date hereinafter provided will own, free and clear of all liens, charges
1
<PAGE>
and encumbrances, all of the assets set forth on Exhibit "A".
(b) Hunter has heretofore furnished to Royal copies
of the balance sheet of NextGen which is attached hereto and marked Exhibit "A".
Said balance sheet accurately sets forth the financial condition of NextGen as
of said date, prepared in conformity with generally accepted accounting
principles consistently applied.
(c) NextGen has good and marketable title to all of
their property and assets (except property and assets disposed of since such
date in the usual and ordinary course of business), subject to no mortgage,
pledge, lien or other encumbrance except as disclosed in such financial
statements.
(d) NextGen has no obligations, liabilities or
commitments, contingent or otherwise, of a material nature which were not
provided for, except as set forth in Exhibit "A".
(e) NextGen is not a party to any employment
contract, or to any lease, agreement or other commitment not in the usual and
ordinary course of business, nor to any operation, insurance, profit-sharing or
bonus plan, except as disclosed in Exhibit "A".
(f) NextGen is not a defendant, nor a plaintiff
against whom a counterclaim has been asserted, in any litigation, pending or
threatened, nor has any material claim been made or asserted against NextGen,
nor are there any proceedings threatened or pending before any federal, state or
municipal government, or any department, board, body or agency thereof,
involving NextGen except as disclosed in Exhibit "A".
(g) NextGen is not in default under any agreement to
which it is a party nor in the payment of any of its obligations.
(h) Between the date of the balance sheet referred to
2
<PAGE>
in subparagraph "c" hereof and the Closing, NextGen will not (i) mortgage or
pledge or subject to any lien, charge or other encumbrance any of their assets,
tangible or intangible, except in the usual and ordinary or (ii) sold, leased,
or transferred or contracted to sell, lease or transfer any assets, tangible or
intangible, or entered into any other transactions, except in the usual and
ordinary course of business, or (iii) made any material change in any existing
employment agreement or increased the compensation payable or made any
arrangement for the payment of any bonus to any officer, director, employee or
agent, except as set forth in Exhibit "A" hereof.
(i) This Exchange Agreement has been duly executed by
Hunter as the Exchange Agent for the stockholders of NextGen and the execution
and performance of this Exchange Agreement will not violate, or result in a
breach of, or constitute a default in any agreement, instrument, judgment, order
or decree to which NextGen is a party or to which NextGen is subject nor will
such execution and performance constitute a violation of or conflict with any
fiduciary to which NextGen is subject, to the best of NextGen's knowledge.
(j) NextGen has timely filed or obtained the
necessary extensions with the appropriate governmental authorities, all tax and
other returns required to be filed by it. Such returns are true and complete and
all taxes shown thereon to be due have been paid. All material, federal, state,
local, county, franchise, sales, use, excise and other taxes assessed or due
have been duly paid or reserves for unpaid taxes have been set up as required on
the basis of the facts and in accordance with generally accepted accounting
principles.
(k) NextGen is not in default with respect to any
order, writ, injunction , or decree of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
3
<PAGE>
instrumentality, and there are no actions, suits, claims, proceedings or
investigations pending or, to the knowledge of NextGen threatened against or
affecting NextGen, at law or in equity, or before or by any federal, state,
municipal or other governmental court, department commission, board, bureau,
agency or instrumentality, domestic or foreign. NextGen has complied in all
material respects with all laws, regulations and orders applicable to its
business.
(l) No representation in this section, nor statement
in any document, certificate or schedule furnished or to be furnished pursuant
to this Exchange Agreement by NextGen, or in connection with the transactions
contemplated hereby, contains or contained any untrue statement of material
fact, nor does or will omit to state a material fact necessary to make any
statement of fact contained herein or therein not misleading.
2. [REPRESENTATIONS OF ROYAL] Royal represents to Hunter that:
(a) Royal is a corporation duly organized and validly
existing and in good standing under the laws of the State of Nevada; is not
qualified to transact business in any other state; and has an authorized
capitalization of 100,000,000 shares of which there are issued and outstanding
479,000 shares of common stock, par value $0.001 per share.
(b) Royal has delivered to Hunter its balance sheet,
financial statement for the period ended December 31, 1997, which is attached
hereto and marked Exhibit "B". This financial statement accurately set forth the
financial condition of Royal as of the date specified, prepared in conformity
with generally accepted accounting principles consistently applied.
(c) Royal has good and marketable title to all of its
property and assets (except property and assets disposed of since such date in
the usual and ordinary course of business), subject to no mortgage, pledge, lien
or other encumbrance except as disclosed in such balance sheet or in Exhibit "B"
annexed hereto and made a part hereof.
4
<PAGE>
(d) Royal has no obligations, liabilities or
commitments, contingent or otherwise, of a material nature which were not
provided for, except as set forth in such balance sheet or in Exhibit "B".
(e) There has been no change in the nature of the
business of Royal, nor in its financial condition or property, other than
changes in the usual and ordinary course of business, none of which has been
materially adverse, and Royal has incurred no obligations or liabilities or made
any commitments other than in the usual and ordinary course of business except
as disclosed in Exhibit "B".
(f) Royal is not a party to any employment contract
with any officer, director, or stockholder, or to any lease, agreement or other
commitment not in the usual and ordinary course of business, nor to any pension,
insurance, profit-sharing or bonus plan, except as disclosed in Exhibit "B".
(g) Royal is not defendant, nor a plaintiff against
whom a counterclaim has been asserted, in any litigation, pending or threatened,
nor has any material claim been made or asserted against Royal, nor are there
any proceedings threatened or pending before any federal, state or municipal
government, or any department, board, body or agency thereof, involving Royal,
except as disclosed in Exhibit "B".
(h) Royal is not in default under any agreement to
which it is a party nor in the payment of any of its obligations.
(i) Between the date of the balance sheet referred to
in subparagraph "b" hereof and the Closing, Royal will not have (i) paid or
declared any dividends on or made any disbursements in respect of, or issued,
5
<PAGE>
purchased or redeemed, any of the outstanding shares of its capital stock, or
(ii) made or authorized any changes in its Articles of Incorporation or in any
amendment thereto or in its By-Laws, or (iii) made any commitments or
disbursements or incurred any obligations or liabilities of a substantial nature
and which are not in the usual and ordinary course of business, or (iv)
mortgaged or pledged or subjected to any lien, charge or other encumbrance any
of their assets, tangible or intangible, except in the usual and ordinary course
of its business, or (v) sold, leased, or transferred or contracted to sell,
lease or transfer any assets, tangible or intangible, or entered into any other
transactions, except in the usual and ordinary course of business, or (vi) made
any loan or advance to any stockholder of Royal, or to any other person, firm,
or corporation except in the usual and ordinary course of business, or (vii)
made any material change in any existing employment agreement or increased the
compensation payable or made any arrangement for the payment of any bonus to any
officer, director, employee or agent, except as set forth in Exhibit "B" hereof.
(j) This Exchange Agreement has been duly executed by
Royal and the execution and performance of this Exchange Agreement will not
violate, or result in a breach of, or constitute a default in any agreement,
instrument, judgment, order or decree to which it is a party or to which it is
subject nor will such execution and performance constitute a violation of or
conflict with any fiduciary to which it is subject.
(k) Royal has filed with the appropriate governmental
authorities, all tax and other returns required to be filed. Such returns are
true and complete and all taxes shown thereon to be due have been paid. All
material, federal, state, local, county, franchise, sales, use, excise and other
taxes assessed or due have been duly paid and no reserves for unpaid taxes have
been set up or are required on the basis of the facts and in accordance with
6
<PAGE>
generally accepted accounting principles.
(l) Royal is not in default with respect to any
order, writ, injunction, or decree of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, and there are no actions, suits, claims, proceedings or
investigations pending or, to the knowledge of Royal threatened against or
affecting Royal, at law or in equity, or before or by any federal, state,
municipal, or other governmental court, department, commission, board, bureau,
agency or instrumentality, domestic or foreign. Royal has complied in all
material respects with all laws, regulations and orders applicable to its
business.
(m) No representation in this section, nor statement
in any document, certificate or schedule furnished or to be furnished pursuant
to this Exchange Agreement by Royal, or in connection with the transactions
contemplated hereby, contains or contained any untrue statement of a material
fact, nor does or will omit to state a material fact necessary to make any
statement of fact contained herein or therein not misleading.
3. [DATE AND TIME OF CLOSING] The closing shall be held on
Wednesday, January 28, 1998, at 10 a.m., local time, at 50 West Liberty Street,
Suite 880, Reno, Nevada, or at such other time and place as may be mutually
agreed upon between the parties in writing (hereinafter "the Closing").
4. [EXCHANGE OF SHARES OF STOCK] The mode of carrying into
effect the exchange provided for in this Agreement shall be as follows:
(a) Royal shall call a special directors' meeting to
be held on Wednesday, January, 28, 1997, at 9:00 a.m., local time, at 50 West
Liberty Street, Suite 880, Reno, Nevada, for the following purposes:
7
<PAGE>
(1) To ratify, approve and carry out the
terms of this Exchange Agreement.
(2) To call a special stockholders meeting
to amend the Articles of Incorporation to change the
corporate name to Capita Research Group, Inc.
(3) To call a special stockholders meeting
to authorize a forward split of 2 to 1 whereby the
present stockholders will be entitled to 2 shares for
each share owned by them in Royal.
(b) Royal shall call and convene a special
stockholders meeting at 9:30 a.m. on Wednesday, January 28, 1998 to change the
corporate name to Capita Research Group, Inc. and the forward split of 2 for 1
set forth in 4(a)(3) above. It shall file an Amendment to the Articles of
Incorporation with the Secretary of State of Nevada on Wednesday, January 28,
1998 to reflect these changes.
(c) Royal shall call and convene a special directors
meeting at 10:00 a.m. for the following purposes:
(1) To effect delivery by the officers of
Royal to David Hunter, Exchange Agent for the
shareholders stock certificates representing
8,622,000 shares of common stock of Capita Reasearch
Group, Inc. in exchange for the delivery of all the
stock certificates of the outstanding stock of
NextGen.
8
<PAGE>
(2) To deliver a check for $40,000 payable
to Nevada Agency & Trust Company as the fee for this
corporate reorganization. The total fee being $50,000
of which $10,000 has been paid.
(3) To elect three (3) nominees designated
by Hunter to comprise the entire Board of Directors,
being David B. Hunter, Michael J. Kline and Millard
E. Tydings, II.
5. [CONDITIONS TO CLOSING] Royal and Hunter's obligations to
complete the transactions provided for herein shall be subject to the
performance by them of all their respective agreements to be performed hereunder
on or before the Closing, to the material truth and accuracy of the respective
representations of Royal and Hunter contained herein, and to the further
conditions that:
(a) All representations of Hunter and Royal contained
in this Exchange Agreement are true and correct on and as of the Closing with
the same effect as if made on and as of said date.
(b) As of the Closing, there shall have been no
material adverse change in the affairs, business, property or financial
condition of NextGen and Royal.
(c) All of the agreements and covenants contained in
this Exchange Agreement that are to be complied with, satisfied and performed by
each of the parties hereto on or before the Closing, shall, in all material
respects, have been complied with, satisfied and performed.
6. [FINDER'S FEE] Each party represents to the other that
9
<PAGE>
it has not employed any other broker or agent or entered into any other
agreement for the payment of any finder's fees or compensation to any other
person, firm or corporation in connection with this transaction.
10
<PAGE>
7. [NOTICES] Any notice under this Agreement shall be deemed
to have been sufficiently given if sent by Federal Express, registered or
certified mail, postage prepaid, addressed as follows:
If to the Stockholder:
David B. Hunter, Exchange Agent
900 East Eighth Ave.
Suite 300
King of Prussia, PA 19406
with a required copy to:
Patricia H. Basye, Esq.
Gordon, Fournaris & Mammarella, P.A.
1220 North Market Street, Suite 700
Wilmington, DE 19899-1355
If to Royal, to:
Royal American Mining Properties, Ltd.
50 West Liberty Street, Suite 880
Reno, Nevada 89501
Attention: Cecil Ann Walker
or to any other address which may hereafter be designated by either party by
notice given in such manner. Al notices shall be deemed to have been given as of
the date of receipt.
8. [COUNTERPARTS] This Exchange Agreement may be executed in
any number of counterparts, each of which when executed and delivered shall be
an original, but all such counterparts shall constitute one and the same
instrument.
9. [MERGER CLAUSE] This Exchange Agreement supersedes all
prior agreements and understandings between the parties and may not be changed
or terminated orally, and no attempted change, termination or waiver of any of
11
<PAGE>
the provisions hereof shall be binding unless in writing and signed by the
parties hereto.
10. [GOVERNING LAW] This Agreement shall be governed by and
construed according to the laws of the State of Nevada with regard to Royal
American being its corporate domicile and Pennsylvania with regard to NextGen
Systems, Inc., being its corporate domicile.
IN WITNESS WHEREOF, the parties hereto have caused
this Exchange Agreement to be executed the day and year first above written.
ROYAL AMERICAN MINING PROPERTIES, LTD.
A Nevada Corporation
By /s/Cecil Ann Walker
----------------------
Cecil Ann Walker
President
(Hereunto duly authorized)
For purposes of Section 2 hereof:
By /s/Cecil Ann Waliker
-----------------------
Cecil Ann Walker
By /s/Alexander H. Walker
-------------------------
Alexander H. Walker
EXCHANGE AGENT FOR SHAREHOLDERS OF
NEXTGEN SYSTEMS, INC.
By /s/ David B. Hunter
----------------------
David B. Hunter
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 15190
<SECURITIES> 0
<RECEIVABLES> 2000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17190
<PP&E> 161444
<DEPRECIATION> 76061
<TOTAL-ASSETS> 126840
<CURRENT-LIABILITIES> 446799
<BONDS> 0
0
0
<COMMON> 350036
<OTHER-SE> (669995)
<TOTAL-LIABILITY-AND-EQUITY> 126840
<SALES> 0
<TOTAL-REVENUES> 81894
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 751722
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19452
<INCOME-PRETAX> (689280)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (689280)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
