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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
/x/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27509
GO CALL, INC.
(Name of Small Business Issue as specified in its charter)
DELAWARE 65-0794980
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation)
OFICENTRO EJECUTIVO LA SABANA, TORRE 6, PISA 2 (OFICINA LOBONEGRO), SAN JOSE,
COSTA RICA
(Address of Principal Executive Offices) (Zip Code)
(506) 290-7587
Registrant's Telephone Number, including Area Code
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001
Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes // No /x/
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosures will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10KSB_.
The Registrant generated revenues of $680,171 for the fiscal year ended
December 31, 1999.
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The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 21, 2000, was $20,199,458. For purposes of this
computation, it has been assumed that the shares beneficially held by directors
and officers of the Registrant were "held by affiliates." This assumption is not
to be deemed to be an admission by such persons that they are affiliates of the
Registrant.
As of March 21, 2000, the Registrant had outstanding 25,801,393 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format: Yes / / No /x/
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Go Call, Inc., a Delaware corporation (the "Company"), together with
its wholly-owned subsidiaries, Go Cash, Inc., a Turks and Caicos corporation,
and Go Call Canada, Inc., an Ontario (Canada) corporation, (collectively, the
"Company") is principally a provider of services to businesses engaged in
electronic commerce on the Internet ("E-commerce"). Such services include
research and development of E-commerce technology, management, marketing and
long-range planning.
Go Call Canada, Inc., an Ontario corporation ("Go Call Canada"), is a
wholly-owned subsidiary of the Company which is principally a provider of
services to businesses engaged in "E-commerce, including services to online
casinos. Such services include research and development of E-commerce
technology, management, marketing and long-range planning.
Go Cash, Inc., a Turks and Caicos corporation ("Go Cash") located in
Costa Rica, is a wholly-owned subsidiary of the Company which performs all of
the functions of the Company's business of providing turnkey management services
to electronic casinos. These services are performed outside the United States.
Go Cash's services include ongoing marketing of the casino's business and
performing calculations, preparing the website graphical interface with the
customer, managing secure electronic transfer of funds, administration of
customer support service, continuous update of website and addition of new
games. Certain specific services, such as processing of credit card
transactions, are outsourced to unrelated third parties.
HISTORY OF THE COMPANY
The Company was incorporated on March 1, 1994, as Omni Advantage, Inc.,
a Louisiana corporation. The Company formed a Delaware subsidiary, Go Call, Inc.
("Go Call"), and merged into such subsidiary on February 17, 1998. Go Phone
Inc., an Ontario (Canada) corporation ("Go Phone"), was formed on August 10,
1995 and engaged in telecommunications business, including sale of long distance
time, sale of prepaid telephone cards and operation of an Internet service
provider for the Ontario market. Pursuant to an agreement effective February 24,
1998, the Company acquired all of the issued and outstanding shares of common
stock of Go Phone in which the Go Phone shareholders received 5,906,175 shares
of Go Call, which represented approximately seventy-two percent (72%) of the
Company's issued and outstanding shares of Common Stock.
Pursuant to a Stock Acquisition Agreement dated as of March 11, 1999,
the Company acquired approximately 92% of the issued and outstanding common
stock of Country Star Restaurants ("Country Star"), a Delaware corporation, from
the three principal shareholders of Country Star in exchange for 4,552,751
shares of the Company's Common Stock, which represented twenty-three percent
(23%) of all of the Company's issued and outstanding Common Stock. The Company
announced its intention to the remaining shareholders of Country Star to merge
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Country Star into the Company in exchange for shares of the Company's Common
Stock. After assuming control of Country Star's operations, the Company advanced
approximately $435,554 to Country Star in exchange for a promissory note secured
by all of Country Star's assets. Management of the Company subsequently
determined that the Company had not received complete disclosure of Country
Star's operations and, pursuant to a repurchase agreement dated as of August 5,
1999, redeemed the 4,552,751 shares of its Common Stock for a cash payment of
$728,440. The value of $728,440 or 16 cents per share was the payment negotiated
between two non-arm's length parties. Mr. Rubin's party offered the price of
$728,440 and the Company agreed. The Company paid the agreed amount and
certificate number 3100/2 for 4,552,751 shares of the Company common stock was
returned to the transfer agent, Interwest Transfer, and cancelled. As of August
19, 1999, Country Star and the Company agreed to terminate plans to merge the
two companies and the Company announced its intention to dispose of its interest
in Country Star. On December 23, 1999, the Company sold their 92% interest in
Country Star Restaurants to Star Liquidation Company LLC, and received in return
a note of $728,000, bearing interest at the rate of 5% per annum due in full in
December 2004.
Subsequent to the Calendar year end, the purchaser of Country Star
Restaurants, Inc., Star Liquidation Company LLC filed a petition for bankruptcy
of Country Star Restaurants, Inc. The note receivable from Star Liquidations
bears prepayment rights that allows the Company an amount equal to 50% of the
net proceeds of any asset sale involving any Star Liquidation asset, subject to
Country Star Restaurant bankruptcy proceedings and/or the rights of creditors.
There is no direct security for the principal amount of the note. Prior to the
sale of Country Star Restaurant, Inc., the Company registered a general security
agreement against all of the monetary and non-monetary assets of Country Star
Restaurants as security for the advances made.
In November 1999, Go Call Canada, Inc., the Canadian Subsidiary of the
Company, sold all the assets of the Internet cafes including equipment and
inventory. The Company received $40,000 in cash (Canadian) for assets with a net
book value of $153,208(Canadian).
In December 1999, the Company entered into an agreement to acquire an
80% interest in Sevada Holdings, Ltd IV, a limited partnership formed for the
purpose of developing and selling real estate. As consideration for the
investment, the Company contributed the hotel's real estate and furnishings in
the Dominican Republic held by Go Call Canada, Inc. The assets contributed by
the Company have been placed into escrow granting the Company the right to
approve or disapprove of the sale of the property by the partnership. As of the
date of this Annual Report on Form 10-KSB, the partnership has not begun
developing the real estate.
On December 23, 1999, the Company entered into an agreement with
Hartcourt Companies, Inc. to issue 1,000,000 shares of its Preferred Stock (par
value $5.00), convertible into 10 common shares for each preferred share, in
exchange for specified share certificates in unrelated companies held by
Hartcourt. As of the date of this Annual Report on Form 10-KSB, the share
certificates have not been exchanged and the investment has not been valued and
recorded.
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In March, 1999, the Company entered into an agreement with PageMaster
Corporation ("PageMaster") under which PageMaster and the Company are engaging
in a mutual promotion of their respective businesses. PageMaster provides pagers
to the Company without cost as long as such pagers are marketed by the Company
to persons who sign up for at least one year's pager service. The Company will
distribute the pagers free of charge and will be entitled to run "string"
advertisements on the pagers indefinitely. Such string ads will include
information on odds on major sporting events, which are designed to stimulate
interest in wagering on the Sports Book serviced by the Company. The decision
was made by management during the 12/31/99 audit to cancel this contract and
write off the deposit paid to PageMaster Corporation.
BUSINESS OF THE COMPANY
BUSINESS PLAN
As of February, 1998, the principal business of the Company was the
marketing of telecommunications services, a business which had been carried out
by Go Phone. During the remainder of 1998, management of the Company explored a
number of new business possibilities pursuant to its goal of exploiting its
technological and marketing experience to expand into a variety of E-commerce
businesses. Thus, while the Company intends to draw on its skills to provide
services to a number of different companies engaged in E-commerce, there is no
specifically targeted industry or business segment for such potential customers
and co-venturers. The Company recognizes that to carry out its goal it will be
necessary to enter into a number of E-commerce ventures long before they are
proven to be successful and, therefore, that an essential element of its
business plan involves entering into of a number of new businesses and,
inevitably, the shelving of those which do not meet the Company's expectations.
In addition, because of the need to act quickly, the Company will require a
significant amount of outside financing to carry out its business plan. Only a
small number of the E-commerce ventures entered into by the Company have shown
enough revenue or promises of revenue for the Company to continue developing
them. See "Description of Business - Competition."
As of the date of this Annual Report on Form 10-KSB, the Company has
two principal businesses, one active business and one in development. Its
principal active business is providing services to unrelated Internet gaming
businesses. Its principal business in development is Indexus, a sophisticated,
constantly updated E-commerce "yellow pages" and a new e-commerce website being
launched. In addition, the Company operates another business, which generates no
significant revenue: Go Internet Kiosks, which are stand-alone,
Internet-connected computers available to the public for a fee and which are
intended to be located, among other locations, in convenience stores. In
addition, the Company is operating GoBannerAd.com, which provides services to
prepare and market Internet "banner" advertisements. This unit was scheduled to
be sold, but management of the Company could not come to terms with the proposed
buyer. As of the date of this Annual Report on Form 10-KSB the GoBannerAd.com
business is pending a decision by management to seek another buyer, close the
operation or pursue the business when sufficient capitalization is attained. As
of the date of this Annual Report
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on Form 10-KSB, the gaming service business provides almost all of the Company's
revenue; the technology for Go.Indexus is still in the development stage; and
the Company has placed the Internet Kiosks and the Banner.Ad businesses on hold,
pending entering into arrangements with joint venture partners to share the
development and marketing responsibilities. The Company estimates that the
Go.Indexus technology may require financing of approximately $1,225,000 and six
months of development time to bring the technology to the point where it can be
commercially marketable, of which no assurance can be given. No assurance can be
given that any of the businesses other than that providing services to gaming
companies will generate revenue to the Company or that the amount of revenue
received by the Company from the provision of services to the gaming industry
will be adequate to sustain operations.
BACKGROUND OF INTERNET BUSINESS
The Internet has become an important medium for communication, news,
entertainment and commerce. As a result, it is experiencing rapidly increasing
public awareness, substantial growth and acceptance on a global scale. A 1998
report issued by the United States Department of Commerce estimated that the
number of Internet users worldwide is expected to increase from approximately
100 million at year end 1997 to over 320 million by the year 2002. The same
report projects even higher growth rates for traffic and electronic commerce.
E-commerce is expected to increase from an estimated $8.6 billion in 1998 to
approximately $23.3 billion in 2001. In addition, this growth is being driven by
rapid technological advances such as the installation of more secure networks,
the introduction of better and higher performance Internet access options and
the improvement of PCs, as well as the increased penetration of PCs in both the
home and the workplace.
One of the basic growth factors of the Internet is its ability to
deliver information in ways that are not possible using traditional media
sources such as broadcast or print media. Unlike these traditional sources the
Internet is capable of combining textual, graphical, streamed audio and streamed
video formats in a dynamic, interactive and real-time environment. This has
created new programming and content delivery opportunities that are not only
capturing the interest of the general public but also shifting user preferences
away from traditional news and entertainment sources.
A second growth factor of the Internet is the fact that it is rapidly
becoming a powerful and credible new commerce channel. The Internet has already
had a significant impact on consumer and business transactions in a broad range
of industries, including financial services, particularly online securities
trading, and numerous consumer product sectors. Individuals are showing
increasingly strong preferences to consummate transactions online rather than
via traditional means such as over the phone or in person.
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The Company believes that because of the Internet we will see a
profound difference in the way both businesses and individuals engage in trade,
and consumers will use various applications of E-commerce trading in their
everyday activities, from grocery shopping to stock trading, booking travel,
obtaining home loans, buying a new car, from telephone calls to interactive
videoconferencing in their own homes.
Most E-commerce businesses exploit the interactive nature and the
instantaneous communications of the Internet to bypass the relative
inefficiencies of existing marketing methods. Thus, for example, a resident of
the United Kingdom can engage in online gaming from the privacy of his home,
without the necessity of traveling to the site of a casino. At present, there
may be thousands of businesses seeking means to market their products and
services over the Internet. It is the Company's goal to identify a handful of
E-commerce businesses, either in the planning or start-up stage, which it
perceives have a reasonable chance for success and which can benefit from some
of the skills and assets which the Company has to offer.
THE COMPANY'S SERVICE BUSINESS TO OFFSHORE GAMING BUSINESSES
The Company does not own any casinos and does not accept or place any
wagers; rather, Go Cash provides services to online casinos owned by unrelated
third parties which are located and incorporated outside the United States. The
casino service business commenced in the last four months of 1998. For the
calendar year of 1999, the Company processed approximately $62 million in gross
wagers, which generated approximately $1.5 million in gross revenue to the
Company. The Company provides these services on an ongoing basis to three
unrelated foreign companies which own and operate online gaming businesses. The
Company services the gaming operations owned by GoCasino.com and
ImperialDragonCasino.com, including purchasing or leasing the necessary software
to manage the business. The Company's services include ongoing marketing of the
casino's business, performing calculations and determining odds, preparing the
website graphical interface with the customer, managing secure electronic
transfer of funds, administration of customer support service, continuous update
of website and addition of new games. The processing of the wagering
transactions for GoCasino.com and Imperial Dragon Casino.com is performed
outside the United States by its subsidiary Go Cash. Certain specific services,
such as processing of credit card transactions, are outsourced to unrelated
third parties.
The Company began its casino service operation in September, 1998, with
GoCasino.com, an Antigua corporation. In August, 1999, the Company began
providing services to ImperialDragonCasino.com, an Antigua corporation, which
intends to exploit markets in Asia.
At the beginning of November, 1999, the Company launched its business
of providing services to an unaffiliated third party sports wagering company
("Sports Book") in which customers can place bets on major sports events and can
designate a charitable organization to receive an amount equal to 10% of such
customer's losses. Although the Company's experience in servicing its existing
casino customers should be a significant advantage in servicing the sports book,
there are important differences. In general, casino games involve a long-term
percentage which works against the player and generates steady profits from
operations for the casino. With rare exceptions, this advantage should provide a
stable and predictable profit to the casino. In sports betting, there is a
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theoretical percentage which represents the advantage a bookmaker would have if
the odds guaranteed a constant commission regardless of the outcome. Thus, a
player might wager $11 to win $10. While the profit margin may be greater in
sports wagering than in casino games, no assurance can be given that any sports
book, including one which has contracted with the Company, will generate gross
profits from operations, and, if not, the Company would receive no revenue for
its services.
INDEXUS
The Company is developing software for an Internet "yellow pages" which
enables companies to provide instantly updated information on their services and
products prices to potential customers. Current search-engine based directories
are incapable of such instantaneous updating and, in the opinion of management,
are far less useful to companies and consumers alike. The Company intends to
charge participating companies a flat annual fee for listing in the searchable
directory. In addition, the Company intends to sell banner advertisements on the
search engine website. The Company estimates that the development and marketing
of Indexus will require approximately five months more work and an expenditure
of approximately $1,225,000. No assurance can be given that the development will
result in a commercially viable system or that, if it does, the Company will
receive revenue from exploitation of Indexus.
In March 2000, Indexus launched its new e-commerce web site,
www.eslmaster.com, that will market a complete line of English language
instruction products. The site will allow users to download MP3 files, for a
small fee, to their PC's and then transfer them to their MP3 players. Once
downloaded, these captioned audio files will display text simultaneously with
the audio play-back, without the need for a PC and without having to log onto
the Internet. The technology was developed by Korea Media and licensed on a
worldwide basis to Indexus. There can be no assurance that any revenues will be
generated by this web site or that it will be profitable.
CARIBBEAN RESORT
On November 30, 1997, the Company acquired a hotel property ("Resort
Property") in the Dominican Republic for 3,360,000 shares of Common Stock of Go
Phone, which constituted approximately 18% of the issued and outstanding Common
Stock of Go Phone. This hotel property, named Margaritta Villas, has twenty-one
rooms, a swimming pool, a lounge with satellite television, two bars, and a
restaurant. All required government permits and approvals that are required to
operate the resort were obtained. As previously discussed in the History of the
Company, in 1999 the Company contributed the Resort Property to Sevada Holdings,
Ltd. IV, a limited partnership. As consideration the Company received 80% of the
interest of the limited partnership. The Company does however retain the
approval authority on all expenditures over $1000.00, so the transaction was
treated as a general partnership and consolidated in the records at 12/31/99.
The hotel operations were not generating positive cash flows for the Company. As
of December 31, 1999, the Company had reported a loss from the hotel totaling
$8,322.
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OTHER OPERATIONS
The following two businesses, which involve little activity and
virtually no revenue to the Company, are either being phased out or have been
placed on hold pending a decision by management whether or not to expend
resources to develop them or sell.
INTERNET KIOSKS
Internet Kiosks are stand-alone computer stations, much like public
telephones, where a consumer can log on to the Internet and send and receive
e-mail. These are intended to be placed in high traffic areas, such as
convenience stores and airports. The Company is beta testing these kiosks and is
considering different methods of marketing them.
INTERNET BANNER SWAP ADVERTISEMENTS
The Company engages in swap advertising on the Internet, wherein the
Company provides free banner advertising on the websites marketed by the Company
in exchange for free banner ads on websites operated by third parties. As
disclosed in the exhibits , this division was sold under a contract dated August
16, 1999 to an unaffiliated third party, but this sale did not close. The
purchaser demanded delivery of the division and closing of the transaction, but
later signed an agreement terminating the sales agreement. The Company continues
to own the banner ad business.
YEAR 2000
The Year 2000 ("Y2K") risk is the result of computer programs being
written using two digits rather than four digits to define the applicable year.
Computer programs that have sensitive software may recognize a date using "00"
as the year 1900 rather than the Y2K. As a result, computer systems and/or
software used by many companies and governmental agencies may need to be
upgraded to comply with Y2K requirements or risk system failure or
miscalculations causing disruptions of normal business activities.
Based on an internal assessment, the Company believes that its software
programs, either leased or purchased from outside vendors, are Y2K compliant.
The Company began assessing its state of Y2K readiness during late 1998. This
included reviewing the Y2K compliance of third-party software vendors and of
those companies which perform critical services for the Company, including
credit card processing of wagering transactions. As of the date of this filing,
the Company has not experienced nor anticipates any complications related to
Y2K.
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As of the date of this Registration Statement, the Company has incurred
minimal costs in identifying and evaluating Y2K compliance issues. Most of the
Company's expenses have related to the operating costs associated with time
spent by employees in the evaluation of Y2K compliance matters.
INTELLECTUAL PROPERTY
In developing credit card transaction logistics for GoCasino.com and
ImperialDragonCasino.com, both Antigua corporations, Go Cash purchased or leased
publicly available software technologies from unrelated third parties and then
combined such software into systems of its own design. Management of the Company
believes that its application of such software provides the Company with a
competitive advantage over other companies in the same business. For example,
winners of wagers on GoCasino.com and ImperialDragonCasino.com receive credits
to their account automatically and instantaneously for their winnings. Many
other casino systems require some human intervention before such winnings are
credited. Although the Company has no proprietary interest in the component
elements of the Company's technology, the method of combining such software does
constitute a valuable trade secret which could take time for a competitor to
replicate. If a well-financed competitor were able to reproduce the Company
software application system, it could have an adverse effect on the Company's
competitive position in the short run.
SALES AND MARKETING
The marketing goals of the Company are to expand the already created
and operating business of servicing online wagering businesses and to seek other
opportunities for new E-commerce businesses. The Company has focused on
identifying existing and potential owners of online wagering businesses, that
may not be in a position to handle all of the service and funds transfer
problems of these businesses and want to outsource their operations and not
assume the significant overhead associated with such business.
Because the Company is experienced in all aspects of servicing online
wagering operations, management intends to concentrate its marketing on groups
of individuals and companies who wish to expand or to enter the Internet
wagering industry but who do not have sufficient experience or technological
resources for such steps. Management believes that its current strategy of
concentration on: (i) the exploitation of this niche market consisting of small
to medium-sized wagering businesses that have not achieved adequate economy of
scale to operate their own in-house programs and systems; and (ii) the provision
of personalized customer-service will fuel its expansion in this growing
industry. However, no assurance to this effect can be given.
COMPETITION
The E-commerce industry in which the Company's business operates is
highly competitive. A great many companies are actively exploiting the perceived
opportunities in Internet-based businesses, including the businesses in which
the company is engaged. Some of the companies with which the Company competes
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are substantially larger, have more substantial histories, backgrounds,
experience and records of successful operations, greater financial, technical,
marketing and other resources, more employees and more extensive facilities than
the Company has or will have in the foreseeable future. The Company's ability to
compete effectively may also depend on the availability of capital. Many of the
Company's competitors have access to significantly greater capital and
management resources then does the Company.
The Company believes that the key to establishing and maintaining a
competitive position in the E-commerce business will be the ability to identify
new E-commerce businesses which have a good chance of success, to apply the
Company's skills in software applications for managing and servicing such
businesses and in marketing such businesses and to do all of this before other
companies perceive the same business opportunity. Thus, the key to the company's
competitive position may be its ability to act quickly. This, in turn, will
require capital resources to enable the Company to seize opportunities before
its competitors. The Company will have to obtain outside financing for such
resources, for which no assurance can be given. See "Business - Capital
Requirements."
EMPLOYEES
As of March 14, 2000 the Company had 3 full-time employees, consisting
of 2 management persons and 1 staff person. The staff person works principally
at the Company's Costa Rica operation. Except for the chief executive officer,
the Company relies on outside consultants to perform substantially all the
administrative and management functions of the Company; at present the Company
has 7 outside consultants for these purposes. The Company considers its employee
relationships to be satisfactory. None of the Company's employees is a member of
any labor union and the Company has never experienced any business interruption
as a result of any labor disputes.
REGULATION OF INTERNET WAGERING
Although the Company provides services to GoCasino.com and
ImperialDragonCasino.com, it does not own any gaming establishments. The
headquarters and service operations of Go Cash are all located and carried out
outside the United States. Gaming activities carried out by other companies
which either are or are perceived to be located in the United States are subject
to extensive statutory and regulatory control by both state and federal
authorities, and are likely to be significantly affected by any changes in the
political climate and economic and regulatory policies. Such changes may have a
material adverse impact on the business of the casinos with which the Company
does business and, therefore, with the business of the Company itself.
Management of the Company believes that the Company's activities
conform to those gaming laws and regulations as currently applied, although no
assurance can be given to that effect, especially since there is very little
clear statutory and case law authority. Like other companies involved with
gaming business, the Company may face the risk of either civil or criminal
proceedings brought by governmental or private litigants who disagree with the
Company's interpretation of the applicable laws. Because there is little guiding
authority, there is a risk that the Company could lose such lawsuits or actions
and be subject to significant damages or civil or criminal penalties.
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The Company intends to comply with all applicable laws and regulations,
including the proposed Kyl bill, if enacted, and will monitor proposed
regulations and legislation that would affect its business. The Kyl bill is a
potential amendment to the interstate wire act of 1961, that expands prohibition
of sports betting over phone lines to all types of gambling and electronic
communications, with only a few narrow exceptions. The bill focus is to penalize
gambling operators, not players nor internet service providers. As stated on
March 9, 2000, by Bartlett D. Cleland , Director of the Center for Technology
Freedom, in his testimony at the House Judiciary Committee hearing on the bill,
"the justice department will not be able to reach sites operating in foreign
countries-especially those operating with the blessing of foreign governments
that license their activities." Cleland also noted, "nearly fifty countries now
license and regulate internet gaming."
International expansion of the Go Cash's business, including in
particular the Asian market serviced by ImperialDragonCasino.com may be subject
to regulation in those countries in which it is made available. The Company
believes that the casinos set up and serviced by the Company can operate, or
license technology, in numerous jurisdictions that allow telephone and account
wagering, such as Canada, Mexico, the United Kingdom, Australia, and Hong Kong.
However, the Company may not be able to obtain the approvals necessary to market
its services in such jurisdictions. At the present time, management is having
legal counsel review the necessity for the Company obtaining any government
approvals. Management does not believe such approvals are necessary, since the
Company is not actually a casino. However, if such licenses are determined to be
necessary, the Company will do everything it can to comply with such
requirements.
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RISK FACTORS
THE SECURITIES ISSUED BY THE COMPANY ARE HIGHLY SPECULATIVE AND INVOLVE
A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION. AN INVESTMENT IN THESE
SECURITIES SHOULD BE MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. IN ADDITION TO THE FACTORS SET FORTH ELSEWHERE IN THIS ANNUAL
REPORT ON FORM 10-KSB, PROSPECTIVE INVESTORS SHOULD GIVE CAREFUL CONSIDERATION
TO THE FOLLOWING RISK FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING ANY SUCH SECURITIES.
THIS ANNUAL REPORT ON FORM 10-KSB MAY BE DEEMED TO CONTAIN
FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT ON
FORM 10-KSB OR HEREAFTER INCLUDED IN OTHER PUBLICLY AVAILABLE DOCUMENTS FILED
WITH THE COMMISSION, REPORTS TO THE COMPANY'S STOCKHOLDERS AND OTHER PUBLICLY
AVAILABLE STATEMENTS ISSUED OR RELEASED BY THE COMPANY INVOLVE KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE THE COMPANY'S ACTUAL
RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS TO DIFFER FROM THE
FUTURE RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FUTURE RESULTS ARE BASED
UPON MANAGEMENT'S BEST ESTIMATES BASED UPON CURRENT CONDITIONS AND THE MOST
RECENT RESULTS OF OPERATIONS. THESE RISKS INCLUDE, BUT ARE NOT LIMITED TO, RISKS
SET FORTH HEREIN, EACH OF WHICH COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS
AND THE ACCURACY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
HIGH-RISK BUSINESS. The Company's business involves identifying and
exploiting E-commerce business opportunities in a manner that is more efficient
and more timely than its competitors. Thus, the success of the Company depends
in significant part on the ability of its management to make critical judgments
as to which potential E-commerce businesses have the potential to be successful
and present an opportunity for the Company to employ its skills and assets to
participate therein. Such judgments are difficult and involve taking significant
risks. Even where an E-commerce business proves initially to be successful, the
Company must make additional critical judgments to maintain market position in
an extremely competitive environment. Since February, 1998, the Company has
engaged in a number of different potential businesses, only one, the gaming
service, has generated significant revenue to the Company and many of the other
businesses are dormant or closed. Although the revenue generated from Go Cash's
gaming service business has increased revenue since September, 1998, management
has had to make constant changes and new capital investments to maintain that
growth. As of the date of this Annual Report on Form 10-KSB, management intends
to expand its credit card logistics service business to other businesses,
including bingo and wagering on sports events. No assurance can be given that
the Company's decisions will prove correct often enough to maintain and build
its E-commerce business. See "Description of Business - Business of the Company
- - Business Plan."
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LACK OF PROFITABILITY AND HISTORY OF LOSSES; GOING CONCERN
QUALIFICATION. The Company incurred losses of $3,609,715, $859,464 and $991,259
for the fiscal years ended December 31, 1999, 1998 and 1997. In The auditor's
report for the fiscal year ended December 31,1999, the report states that, "the
company has suffered recurring losses from operations that raises substantial
doubt about its ability to continue as a going concern.". The Company expects to
continue to incur operating losses over at least the next twelve months as it
continues to devote significant financial resources to development activities
and as the Company expands its operations generally. In 1997, 1998 and 1999, the
Company has been financing its cash flow needs through the sale of its Common
Stock, and no assurance can be given that the Company will be able to continue.
In order to achieve profitability, the Company will have to identify and exploit
E-commerce ventures which are accepted on a commercial basis, and no assurance
can be given that the Company will be able to accomplish this goal or, even if
it does, that the Company will operate profitably in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Description of Business" and "Financial Statements."
NEED TO ENGAGE IN A NUMBER OF VENTURES. The Company's business assets
consist of its technological and marketing skills as applied to E-commerce
operations. In order to exploit these assets pursuant to the Company's business
plan, the Company will have to enter into a number of different E-commerce
ventures long before such ventures are proven to be successful. Inevitably, a
number of such ventures will not be successful and will have to be shelved by
the Company. No assurance can be given that the Company will be able to enter
into enough successful ventures to offset the losses on the unsuccessful
ventures. See "Description of Business - Business Plan."
NEED FOR ADDITIONAL FINANCING. The Company's business plan requires it
to expand its business operations continuously to exploit new E-commerce
opportunities before competitors can do so, which will require significant
financing. To carry out the Company's business plan, it will require
approximately $5,000,000, including $1,225,000 for the Indexus project alone,
over the next twelve months, which will have to come from outside sources. There
can be no assurance that the Company will be able to obtain such outside
financing on terms acceptable to the Company, or at all. Failure to obtain such
financing could have a material adverse effect on the Company's operations. See
"Management's Discussion and Analysis or Plan of Operation."
COMPETITION. The Company faces competition from a wide variety of
businesses engaged in E-commerce ventures. Some of the companies with which the
Company competes are substantially larger, have more substantial histories,
backgrounds, experience and records of successful operations, greater financial,
technical, marketing and other resources, more employees and more extensive
facilities than the Company has or will have in the foreseeable future. Many of
the Company's competitors have access to significantly greater capital and
management resources than the Company. In addition, the advantages of
E-commerce, from the Company's point of view, also present serious competitive
challenges. Competitors can arise in any part of the world and may be able to
take advantage of lower costs and fees to operate their businesses. There can be
no assurance that the Company will be competitive with larger or more efficient
E-commerce service companies in the future. See "Description of
Business--Competition."
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DIFFICULTY OF MAINTAINING TECHNOLOGICAL POSITION The Company's
performance depends on its ability to develop, license or acquire new
technologies to enhance its existing services in a time effective manner. The
Company may not be able to maintain its competitive technological position
against current and potential competitors, especially those with greater
financial resources. The Company relies on its application of software
technology to give it a competitive advantage. Such software is not currently
protected by patents or copyrights. The Company's main technological advantage
over potential competitors is its software lead-time in the market and the
Company's experience in operating a wagering business. Therefore, if competitors
introduce new products and services which are based on the Company's application
of software, the Company may have little recourse and its business could be
adversely affected. See "Description of Business - Intellectual Property" and
"Description of Business -Competition."
RELIANCE ON CONSULTANTS FOR THE COMPANY'S SERVICES. As of March 14,
2000 the Company had 3 full-time employees, consisting of 2 management persons
and 1 staff person. The staff person works principally at the Company's Costa
Rica operation. Except for the chief executive officer, the Company relies on
outside consultants to perform substantially all the administrative and
management functions of the Company. Management intends to rely on such
consultants in the future. None of these consultants has a long-term agreement
with the Company, and no assurance can be given that such consultants will
continue working with the Company. See "Description of Business-Employees."
RISKS OF CASINO GAMING - GOVERNMENT REGULATION. Even though Go Cash's
service business does not operate in the United States, various federal and
state statutes and regulations could have a direct and material adverse effect
on the Company's business and indirectly could have a material adverse effect on
the public's demand for the Company's services. Gaming activities are subject to
extensive statutory and regulatory regulation by both state and federal
authorities, and are likely to be significantly affected by any changes in the
political climate and changes in economic and regulatory policies. One example
is a claim by a credit card holder of nonresponsibility for credit card
obligations under a theory that such obligations are gambling debts and the
cardholder is resident in a jurisdiction where such debts may not be legally
collected. Management of the Company believes that the legal position of such a
claim is without merit. However, no assurance can be given to that effect. In
the event that such claims result in a widespread refusal of credit card issuers
to process online wagering transactions, there could be a contraction in the
market for online wagering, which could have a material adverse effect on the
Company's business. The policy of the Company is not to contest such
chargebacks, but based on its experience, the matter is financially immaterial.
See "Description of Business - Regulation of Internet Wagering."
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NO INDEPENDENT DIRECTORS. The Board of Directors consists of two
directors, neither of whom is independent. Although all directors are required
to act in the best interests of the Company and its stockholders, directors not
employed by the Company may be able to more independently assess certain key
areas, such as compensation of management as it relates to operations and
progress of the Company, and reviewing accounting issues, including the scope
and adequacy of internal control procedures, and recommending independent
auditors to serve the Company. The Company has no compensation committee.
Independent directors also aid in avoiding conflicts of interest that exist by
virtue of affiliation with the Company. Management has undertaken to appoint
independent directors to the Board at such time as qualified candidates are
available. There can be no assurance that such candidates will be available. See
"Directors, Executive Officers, Promoters and Control Persons; Compliance With
Section 16(a) of the Exchange Act."
LIMITED PUBLIC MARKET FOR COMMON STOCK. There is currently a limited
public market for the Common Stock. Holders of the Company's Common Stock may,
therefore, have difficulty selling their Common Stock, should they decide to do
so. In addition, there can be no assurances that such markets will continue or
that any shares of Common Stock which may be purchased may be sold without
incurring a loss. Any such market price of the Common Stock may not necessarily
bear any relationship to the Company's book value, assets, past operating
results, financial condition or any other established criteria of value, and may
not be indicative of the market price for the Common Stock in the future.
Further, the market price for the Common Stock may be volatile depending on a
number of factors, including business performance, industry dynamics, news
announcements or changes in general economic conditions. See "Market for Common
Equity and Related Stockholder Matters."
DISCLOSURE RELATING TO LOW-PRICED STOCKS. The Company's Common Stock is
currently listed for trading in the over-the-counter market on the National
Quotation Bureau in the what are commonly known as the "pink sheets," which is
generally considered to be less efficient than markets such as NASDAQ or other
national exchanges, and which may cause difficulty in conducting trades and
difficulty in obtaining future financing. Further, the Company's securities are
subject to the "penny stock rules" adopted pursuant to Section 15 (g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The penny
stock rules apply to non-NASDAQ companies whose common stock trades at less than
$5.00 per share or which have tangible net worth of less than $5,000,000
($2,000,000 if the company has been operating for three or more years). Such
rules require, among other things, that brokers who trade "penny stock" to
persons other than "established customers" complete certain documentation, make
suitability inquiries of investors and provide investors with certain
information concerning trading in the security, including a risk disclosure
document and quote information under certain circumstances. Many brokers have
decided not to trade "penny stock" because of the requirements of the penny
stock rules and, as a result, the number of broker-dealers willing to act as
market makers in such securities is limited. In the event that the Company
remains subject to the "penny stock rules" for any significant period, there may
develop an adverse impact on the market, if any, for the Company's securities.
See "Market for Common Equity and Related Shareholder Matters."
16
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POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS. The
Company's Certificate of Incorporation includes certain provisions which are
intended to protect the Company's stockholders by rendering it more difficult
for a person or persons to obtain control of the Company without cooperation of
the Company's management. These provisions include certain super-majority
requirements for the amendment of the Company's Certificate of Incorporation and
Bylaws. Such provisions are often referred to as "anti-takeover" provisions. The
inclusion of such "anti-takeover" provisions in the Certificate of Incorporation
may delay, deter or prevent a takeover of the Company which the stockholders may
consider to be in their best interests, thereby possibly depriving holders of
the Company's securities of certain opportunities to sell or otherwise dispose
of their securities at above-market prices, or limit the ability of stockholders
to remove incumbent directors as readily as the stockholders may consider to be
in their best interests. See "Market for Common Equity and Related Stockholder
Matters."
FUTURE ISSUANCES OF PREFERRED STOCK. The Company's Certificate of
Incorporation, as amended, authorizes the issuance of preferred stock with such
designation, rights and preferences as may be determined from time to time by
the Board of Directors, without stockholder approval. In the event of the
issuance of additional series of preferred stock, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. See "Market for Common Equity and
Related Stockholder Matters."
LACK OF DIVIDENDS ON COMMON STOCK. As of the date of this Annual Report
on Form 10-KSB, the Company has paid no dividends on its Common Stock to date
and there are no plans for paying dividends on the Common Stock in the
foreseeable future. The Company intends to retain earnings, if any, to provide
funds for the expansion of the Company's business. See "Market for Common Equity
and Related Stockholder Matters."
ITEM 2. DESCRIPTION OF PROPERTY.
The Company has recently moved its principal administrative, data and
marketing facilities to offices in San Jose, Costa Rica, for which the Company
is paying rent of approximately US $1,500 with the lease to expire on December
31, 2000. The Company's lease in Cambridge has been assumed by a new tenant, an
unrelated third party. The assumption has been consented to by the landlord. The
Company has been released by the landlord from any further obligations under
such lease. The Company owns and operates a resort hotel in the Dominican
Republic which is debt-free.
ITEM 3. LEGAL PROCEEDINGS.
Harvey Productions, Inc. vs. Michael Ruge and Go Call, Inc., Los
Angeles County Superior Court Case No. Sc 054315. Harvey Productions approached
GoCall, Inc. regarding Harvey producing a video for GoCall to be shown on cable
television to promote awareness of the Company. Harvey never delivered the
video, so GoCall, Inc. did not pay Harvey Productions' invoice. A Complaint was
filed against the Company and Michael Ruge, Chief Executive Officer of the
Company on or about September 23, 1998, claiming $75,000 in damages with respect
to an alleged contract for television production services and distribution of a
syndicated television program. The Complaint alleges breach of contract, fraud
and deceit, common count, open book account and account stated. The Complaint
includes a prayer for special damages according to proof, general damages
17
<PAGE>
according to proof, attorney's fees according to proof, costs of suit, punitive
damages and interest. The Complaint also alleges that the Company is the alter
ego of Mr. Ruge. The Company and Ruge have filed an Answer denying liability and
raising affirmative defenses. The Company and Mr. Ruge deny liability to
Plaintiff and contend that Plaintiff breached its obligations to the Company and
failed to deliver the program to the Company on a timely basis as agreed. The
Company contends it suffered damages as a result thereof. The Company intends to
defend this matter vigorously. The trial and other related court dates have been
rescheduled or continued several times by both parties. On the last trial date
of November 30, 1999, Harvey's representative convinced the court to reschedule
the trial to April 3, 2000.
Except as set forth above, the Company knows of no material legal
actions, pending or threatened, or judgment entered against the Company or any
executive officer or director of the Company, in his capacity as such.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Registrant did not submit any matter during the fourth quarter of
the fiscal year covered by this report to a vote of security holders, through
the solicitation of proxies or otherwise.
PART 11
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of December 31, 1999, the authorized capital stock of the Company
consisted of 100,000,000 shares of common stock, par value $0.001 per share (the
"Common Stock") and 2,000,000 shares of preferred stock, par value $0.001 per
share (the "Preferred Stock"). As of December 31, 1999, there were issued and
outstanding 22,741,909 shares of Common Stock and options to purchase 17,228,311
shares of Common Stock.
The Company's Common Stock is listed for trading in the
over-the-counter market and was quoted on the NASD Bulletin Board under the
symbol "GOCA." As the result of the late filing of the Form 10-SB, on December
2, 1999, the stock was moved to the National Quotation Bureau, in what are
commonly known as the "pink sheets." The Company's Common Stock has a very
limited trading history and has been quoted on the Bulletin Board only during
the period from April 19, 1999 to December 1, 1999. The following table sets
forth quotations for the bid and asked prices for the Common Stock for the
periods indicated below, based upon quotations between dealers, without
adjustments for stock splits, dividends, retail mark-ups, mark-downs or
commissions, and therefore, may not represent actual transactions:
18
<PAGE>
CLOSING BID CLOSING ASKED
----------- -------------
HIGH LOW HIGH LOW
---- --- ---- ---
Year Ended December 31, 1998
1st Quarter (1) 1.125 0.25 3.125 1
2nd Quarter 1.0625 0.21875 2 0.28125
3rd Quarter 0.50 0.14 0.5625 0.23
4th Quarter 0.9375 0.3125 1 0.46875
Year Ending December 31, 1999
1st Quarter 2.375 0.46 2.50 0.53125
2nd Quarter 2.40625 1.4375 2.5625 1.50
3rd Quarter 1.875 0.71875 2 0.8125
4th Quarter 1.03125 .31 1.09375 .375
- --------------------
1. From February 10, 1998 through March 31, 1998.
The closing bid and asked sales prices of the Common Stock, as traded
in the over-the-counter market, on March 27, 2000, were approximately $.85 and
$.89, respectively.
No dividend has been declared or paid by the Company since inception.
The Company does not anticipate that any dividends will be declared or paid in
the future.
The transfer agent for the Company is Interwest Transfer Company, 1981
East South, #100, Salt Lake City, Utah 84117, telephone 801-272-9294.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This Annual Report on Form 10-KSB, including the disclosures below,
contains certain forward-looking statements that involve substantial risks and
uncertainties. When used herein, the terms "anticipates," "expects,"
"estimates," "believes" and similar expressions, as they relate to the Company
or its management, are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements may differ materially from
those expressed or implied by such forward-looking statements. Factors that
could cause or contribute to such material differences include the factors
disclosed in the "Risk Factors" section of this Annual Report on Form 10-KSB,
which readers of this Annual Report should consider carefully.
OVERVIEW OF PRESENTATION. The Company entered into an Agreement with Go
Phone Inc., an Ontario (Canada) corporation ("Go Phone"), dated as of February
23, 1998 (the "Reorganization Agreement"), pursuant to which the Company issued
5,906,175 shares of Common Stock to the former stockholders of Go Phone in
exchange for 100% of the issued and outstanding capital stock of Go Phone. In
connection with the Reorganization Agreement, Go Phone merged into a
wholly-owned subsidiary of the Company, known as Omni Advantage Canada Limited,
an Ontario (Canada) corporation, which subsequently changed its name to Go Call
Canada, Inc. ("Go Call Canada").
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Go Call Canada, Inc., an Ontario corporation ("Go Call Canada"), is a
wholly-owned subsidiary of the Company which is principally a provider of
services to businesses engaged in electronic commerce ("E-commerce") on the
Internet, including services to online casinos. Such services include research
and development of E-commerce technology, management, marketing and long-range
planning.
Go Cash, Inc., a Turks and Caicos corporation ("Go Cash"), is a
wholly-owned subsidiary of the Company which performs all of the functions of
the Company's business of providing turnkey management services to electronic
casinos. These services are performed outside the United States. Go Cash's
services include ongoing marketing of the casino's business and performing
calculations, preparing the website graphical interface with the customer,
managing secure electronic transfer of funds, administration of customer support
service, continuous update of website and addition of new games. Certain
specific services, such as processing of credit card transactions, are
outsourced to unrelated third parties.
Country Star Restaurants, Inc., a Delaware corporation ("Country Star")
operated a country music theme restaurant in Southern California. Pursuant to a
Stock Acquisition Agreement dated as of March 11, 1999, the Company acquired
approximately 92% of the issued and outstanding common stock of Country Star
from the three principal shareholders of Country Star in exchange for 4,552,751
shares of the Company's Common Stock, which represented twenty-three percent
(23%) of all of the Company's issued and outstanding Common Stock. After the
Company assumed control of Country Star's operations, the Company advanced
approximately $435,554 to Country Star in exchange for a promissory note secured
by all of Country Star's assets. Management of the Company subsequently
determined that the Company had not received complete disclosure of Country
Star's operations and, pursuant to a Repurchase Agreement, dated as of August 5,
1999, redeemed the 4,552,751 shares of its Common Stock for a cash payment of
$728,440. The value of $728,440 or 16 cents per share was the payment negotiated
between two non-arm's length parties. Mr. Rubin's party offered the price of
$728,440 and the Company agreed. The Company paid the agreed amount and
certificate number 3100/2 for 4,552,751 shares of the Company common stock was
returned to the transfer agent, Interwest Transfer, and cancelled. As of August
19, 1999, Country Star and the Company agreed to terminate plans to merge the
two companies and the Company announced its intention to dispose of its interest
in Country Star. On December 23, 1999, the Company sold their 92% interest in
Country Star Restaurants to Star Liquidation Company LLC, and received in return
a note of $728,000, bearing interest at the rate of 5% per annum due in full in
December 2004.
Subsequent to the Calendar year end, the purchaser of Country Star
Restaurants, Inc., Star Liquidation Company LLC filed a petition for bankruptcy
of Country Star Restaurants, Inc. The note receivable from Star Liquidations
bears prepayment rights that allows the Company an amount equal to 50% of the
net proceeds of any asset sale involving any Star Liquidation asset, subject to
Country Star Restaurant bankruptcy proceedings and/or the rights of creditors.
There is no direct security for the principal amount of the note. Prior to the
sale of Country Star Restaurant, Inc., the Company registered a general security
agreement against all of the monetary and non-monetary assets of Country Star
Restaurants as security for the advances made.
20
<PAGE>
On February 1, 1998, the Company's stockholders approved a reverse
split of the issued and outstanding shares of Common Stock, in connection with
the transactions contemplated by the Reorganization Agreement with Go Phone,
which resulted in the decrease of the issued and outstanding shares from
11,812,350 to 5,906,175 shares, as of such date.
The consolidated financial statements of the Company, included
elsewhere in this Annual Report on Form 10-KSB, have been presented, for
accounting purposes, as a recapitalization of Go Call Canada, with Go Call
Canada as the acquirer. Further, the consolidated financial statements reflect
the operations of Go Cash, commencing from its inception on July 1, 1999. For
purposes of clarity in this section, the term "Company" reflects the financial
condition and results of operations of Go Call Canada and the combined
operations of the parent holding company, Go Call Inc., a Delaware corporation,
and Go Call Canada following the completion of the Reorganization Agreement, and
of Go Cash following July 1, 1999. See "Liquidity and Capital Resources." The
Company incurred losses of $3,609,715, $859,464 and $991,259 for the fiscal
years ended December 31, 1999, 1998 and 1997. In The auditor's report for the
fiscal year ended December 31,1999, the report states that, "the company has
suffered recurring losses from operations that raises substantial doubt about
its ability to continue as a going concern." The Company expects to continue to
incur operating losses over at least the next twelve months as it continues to
devote significant financial resources to development activities and as the
Company expands its operations generally. In 1997, 1998 and 1999, the Company
has been financing its cash flow needs through the sale of its Common Stock, and
no assurance can be given that the Company will be able to continue. In order to
achieve profitability, the Company will have to identify and exploit E-commerce
ventures which are accepted on a commercial basis, and no assurance can be given
that the Company will be able to accomplish this goal or, even if it does, that
the Company will operate profitably in the future.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 .
Total revenues for the year ended December 31, 1999 decreased approximately 26%
to 680,171 from $914,805 for the year ended December 31, 1998. Total revenues
principally include: (i) revenues generated from wagers processed, net of
payouts, from the Company's E-commerce casino gaming processing business
operations, and (ii) revenues related to the Company's telecommunications
products and services.
E-commerce gaming processing revenues during the year ended December
31, 1999 increased to $613,830 from $81,677 from year ended December 31, 1998.
This increase primarily related to the continued development and marketing of
the Company's E-commerce gaming processing business since September, 1998.
Revenues related to the Company's telecommunications products and
services during the year ended December 31, 1998 increased 115% to $833,128 from
$387,318 during the year ended December 31, 1997. This increase primarily
related to increased revenues from the Company's phone card business prior to
the sale of that business segment by the Company in October, 1998. The Company
sold their telecommunications business during the calendar year ended December
31, 1999.
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<PAGE>
Total operating expenses during the year ended December 31, 1999
increased 141% from December 31, 1998. Total operating expenses principally
include: (i) direct expenses, (ii) interest expense, (iii) general and
administrative expenses, and (iv) amortization expenses, as follows:
Direct expenses during the year ended December 31, 1999 decreased 57%
to $247,910 from $578,489 at December 31, 1998. This 1999 decrease primarily
resulted from the closure of the telecommunication and internet cafe operations.
Interest expenses during the year ended December 31, 1999 decreased to
a negligible amount from December 31, 1998. This decrease primarily relates to
the conversion of the shareholder debt to preferred stock. See "Liquidity and
Capital Resources."
General and administrative expenses during the year ended December 31,
1999 increased 249% to $3,856,284 from $1,103,817 at December 31, 1998 This
increase related to increases in costs of advertising, internal software
development, travel and vehicle expenses, commissions and wages, dues and
license fees, and professional and consulting fees.
In addition, amortization and depreciation expenses during the year
ended December 31, 1999 increased 118% to $175,784 from $80,789 at December 31,
1998. The increase related to the amortization of certain computer software
acquired by the company in 1999 and written off in compliance with the company's
restated accounting policies to be in accordance with generally accepted
accounting principals.
As a result of the foregoing, the Company generated a net loss of
$859,464 during the year ended December 31, 1998. The Company generated a net
loss of $3,609,715 during the year ended December 31, 1999. See "Liquidity and
Capital Resources."
LIQUIDITY AND CAPITAL RESOURCES. At December 31, 1998, the ratio of
current assets to current liabilities was .77 to 1 as compared to 0.21 to 1 at
December 31, 1997. At December 31, 1999, the ratio of current assets to current
liabilities was .55 to 1.
22
<PAGE>
The Company's cash flow needs for the years ended December 31, 1999,
1998 and 1997, were primarily provided from operations, stockholder loans and
financings related to sales of the Company's securities.
In 1998, the Company received gross proceeds of $653,919 from the sale
of an aggregate of 2,127,167 shares of Common Stock. During the twelve (12)
months ended December 31, 1999, the Company received gross proceeds of
$1,514,634 from the sale of an aggregate of 2,993,953 shares of Common Stock.
Cash and cash equivalents were $42,962, as of December 31, 1998. Cash
and cash equivalents were $79,424, as of December 31, 1999. The increase from
December 31, 1998 was primarily attributable to the sale of $1,514,634 of the
Company's securities.
As of December 31, 1999 the Company had $94,456 of long term borrowings
which represented non-interest bearing advances received from employees, without
specific terms of repayment. As of December 31, 1998, the Company had long-term
borrowings of $228,791 from management and shareholders.
As of December 31, 1998, the Company had short-term borrowings in the
aggregate amount of $190,759. As of December 31, 1999, the Company had
short-term borrowings in the aggregate amount of $1,139,020, consisting
principally of payables to vendors and obligations to stockholders. The
increase/decrease in short-term borrowings from December 31, 1998 was primarily
attributable to additional payables to vendors, increased player deposits, and
advances received from employees.
At December 31, 1999, the Company had loans payable to Kevin Gilbert,
an ex-employee of the Company, in the amount of $233,611, and $94,456 loans from
other employees that are non-interest bearing. As of December 31, 1999, the
Company was owed $356,681 in subscription receivable, $125,000 is due from ACS
Financial Inc., $125,000 is due from Madison Holding, Inc., $55,597 from Penner,
and $51,084 from Eldon Richardson.
Net cash used in operating activities was $1,263,617 and $765,177 for
the years ended December 31, 1999 and 1998, respectively. Net Cash used in
operations during the year ended December 31, 1999 primarily consisted of net
loss from operations, increase in deposit receivable, services paid by the
issuance of Common Stock and increase in accounts payable. Net cash used in
operations during the year ended December 31, 1998 primarily consisted of net
loss from operations and increases in accounts receivable, prepaid expenses and
inventory, offset by amortization, services paid by the issuance of Common Stock
and increases in accounts payable and accrued charges.
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<PAGE>
Net cash used in investing activities was $806,633 and $104,022 for the
years ended December 31, 1999, and 1998, respectively. In the year ended
December 31, 1999, the Company utilized $728,440 to purchase Country Star
Restaurants, Inc. and $78,193 was utilized to purchase certain assets, including
Computers and software. As of December 31, 1999 the Company had advanced to
Country Star Restaurant, Inc. $435,554 as part of a signed security and pledge
agreement in support of a credit line agreement and secured promissory note,
which has been duly registered. The agreement provides that the Company will
make available a line of credit to Country Star Restaurant for working capital.
All advances made to Country Star Restaurants by the Company are secured and
were due on December 31, 1999. In the year ended December 31, 1998, the Company
utilized $97,355 to purchase certain capital assets, including computer
equipment, furniture and restaurant equipment for the hotel, and to make
renovations to the hotel property, and utilized $6,667 to purchase certain
intangible assets, including software and distribution rights.
Net cash provided by financing activities was $2,109,426 and $1,007,157
for the years ended December 31, 1999 and 1998, respectively. In the year ended
December 31, 1999, the Company received $1,030,346 from shareholders loans and
$1,514,634 from the issuance of Common Stock; $435,554 of this net cash was
advanced to Country Star Restaurants, Inc. In the year ended December 31, 1998,
the Company received proceeds of $614,319 from the issuance of Common Stock,
$250,000 from the issuance of convertible debt securities, $142,838 from the
proceeds of loans from stockholders of the Company, including $88,000 from
Michael Ruge, and $58,000 from Donald Fultz, and was owed $42,000 related to a
Common Stock subscription receivable.
THE COMPANY HAS HISTORICALLY FINANCED ITS OPERATIONS THROUGH WORKING
CAPITAL PROVIDED BY OPERATIONS, LOANS AND THE PRIVATE PLACEMENT OF EQUITY AND
DEBT SECURITIES. THE COMPANY'S BUSINESS PLAN CONTEMPLATES CONTINUED EXPANSION OF
OPERATIONS. THE COMPANY'S ABILITY TO MAINTAIN AND EXPAND OPERATIONS IS CURRENTLY
DEPENDENT ON FINANCING FROM EXTERNAL SOURCES. THERE CAN BE NO ASSURANCES THAT
ADDITIONAL CAPITAL WILL BE AVAILABLE ON TERMS FAVORABLE TO THE COMPANY OR AT
ALL, THAT THE COMPANY WILL BE ABLE TO GENERATE BUSINESS SOURCES TO GENERATE
SUFFICIENT POSITIVE CASH FLOW IN ORDER TO MAINTAIN OPERATIONS OR TO CONTINUE THE
COMPANY'S BUSINESS PLAN OF GROWTH AND EXPANSION. TO THE EXTENT THAT ADDITIONAL
CAPITAL IS RAISED THROUGH THE SALE OF ADDITIONAL EQUITY OR DEBT SECURITIES , THE
ISSUANCE OF SUCH SECURITIES COULD RESULT IN ADDITIONAL DILUTION TO THE COMPANY'S
STOCKHOLDERS. MOREOVER, THE COMPANY'S CASH REQUIREMENTS MAY VARY MATERIALLY FROM
THOSE NOW PLANNED BECAUSE OF CHANGES IN THE COMPANY'S BUSINESS PLAN OR THE LEVEL
OF WORKING CAPITAL REQUIRED TO SUSTAIN THE COMPANY'S PLANNED GROWTH, LITIGATION,
OPERATING RESULTS, INCLUDING THE EXTENT AND DURATION OF OPERATING LOSSES, AND
OTHER FACTORS. IN THE EVENT THAT THE COMPANY EXPERIENCES THE NEED FOR ADDITIONAL
CAPITAL, AND IS NOT ABLE TO GENERATE CAPITAL FROM FINANCING SOURCES OR FROM
FUTURE OPERATIONS, MANAGEMENT MAY BE REQUIRED TO MODIFY, SUSPEND OR DISCONTINUE
THE OPERATIONS AND BUSINESS PLAN OF THE COMPANY.
24
<PAGE>
FOREIGN CURRENCY TRANSLATION. Foreign currency assets and liabilities
of the Company have been translated in the Company's financial statements from
Canadian dollar values into United States dollar values, at the rate of exchange
prevailing at the balance sheet date. Foreign currency revenues and expenses are
translated at average exchange rates for the period reported.
The Company financial statements include an explanatory footnote which
states to the effect that the Company has determined that its Canadian
operations are self-sustaining and, accordingly, the local Canadian currency is
the functional currency for reporting in the Company's financial statements. The
resulting net foreign exchange adjustments on the translation of the Company's
financial statements from Canadian to United States currency has been deferred,
and included as a separate component of stockholders' equity.
The statement of cash flows in the Company's financial statements
reflect an effect of exchange rate changes on cash in the following amounts for
the following periods: ($100,909) and ($2,714) during the years ended December
31, 1999 and 1998, respectively.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS. The Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 131, "Disclosure About Segments of an Enterprise and Related
Information" during 1998, which requires disclosures about products and
services, geographic areas and major customers. The adoption of SFAS 131 did not
affect results of operations or the financial position of the Company. The
Company has provided comparable information for prior periods.
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. SFAS 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging securities. Currently,
as the company has no derivative instruments, the adoption of SFAS 133 will not
have an impact on the company's financial position or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. The Company
is not currently exposed to market risks due to changes in interest rates and
foreign currency rates, and therefore, the Company does not use derivative
financial instruments to address risk management issues in connection with
changes in interest rates and foreign currency rates.
25
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
GO CALL INC.
AUDITORS' REPORT
AND CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
26
<PAGE>
AUDITORS' REPORT
To the Shareholders of
Go Call Inc.
We have audited the consolidated balance sheet of Go Call Inc., as at December
31, 1999 and 1998 and the consolidated statements of operations, changes in
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts 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.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1999
and 1998 and the results of operations, changes in shareholders' equity and cash
flows for the years ended December 31, 1999 and 1998 in accordance with
generally accepted accounting principles in the United States.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 2 to the
financial statements, the company has suffered recurring losses from operations
that raises substantial doubt about its ability to continue as a going concern.
Management is in the process of drafting a business plan to address the cash
flows and other needs of the business to generate profitable operations for the
company. The financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might result from the outcome of these uncertainties.
Chatham, Ontario, Canada /s/ Collins Barrow
March 14, 2000 Chartered Accountants
27
<PAGE>
GO CALL INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Consolidated balance sheet F-1
Consolidated statement of operations F-2
Consolidated statement of changes in shareholders' equity F-3
Consolidated statement of cash flows F-4
Notes to consolidated financial statements F-5 - F-22
28
<PAGE>
GO CALL INC.
Page 1
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31
ASSETS 1999 1998
---- ----
CURRENT ASSETS
Cash $ 79,424 $ 42,962
Deposits receivable 502,264 56,467
Other receivables 15,342 nil
Inventories nil 5,233
Other assets 28,886 42,126
------------ ------------
625,916 146,788
LONG -TERM ASSETS
Notes receivable (notes 3 and 4) 1,163,554 nil
Investment in Global Indexus Inc. (note 3) 188,366 nil
Fixed assets at cost, net (note 5) 2,139,938 2,237,529
Intangible assets (note 6) nil 2,139
------------ ------------
$ 4,117,774 $ 2,386,456
============ ============
LIABILITIES
CURRENT LIABILITIES
Player deposits $ 300,420 $ nil
Accounts payable and accrued charges 604,989 180,759
Foreign taxes payable nil 10,000
Due to related parties (note 7) 233,611 nil
------------ ------------
1,139,020 190,759
LONG -TERM LIABILITIES
Due to related parties (note 7) 94,456 228,791
------------ ------------
1,233,476 419,550
------------ ------------
SHAREHOLDERS' EQUITY (note 8)
Preferred stock, $0.001 par value 186 nil
Common stock, $0.001 par value 22,741 13,466
Additional paid -in capital 9,090,728 4,383,587
Subscriptions receivable for
Common stock (356,681) (169,900)
Accumulated deficit (5,717,655) (2,107,940)
Accumulated other comprehensive loss (155,021) (152,307)
------------ ------------
2,884,298 1,966,906
------------ ------------
$ 4,117,774 $ 2,386,456
============ ============
F-1
<PAGE>
GO CALL INC.
Page 2
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31
1999 1998
---- ----
REVENUE
Wagering revenues, net of payouts $ 613,830 $ 81,677
Other revenues 66,341 833,128
------------ ------------
680,171 914,805
DIRECT EXPENSES 247,910 578,489
------------ ------------
GROSS PROFIT 432,261 336,316
------------ ------------
EXPENSES
Amortization and depreciation 175,784 80,789
Bank charges and interest 9,908 11,174
General and administrative 3,856,284 1,103,817
------------ ------------
4,041,976 1,195,780
------------ ------------
NET LOSS $ 3,609,715 $ 859,464
============ ============
Net loss per common share $ 0.21 $ 0.09
============ ============
Weighted average shares outstanding 17,198,454 9,351,425
============ ============
F-2
<PAGE>
<TABLE>
GO CALL INC.
Page 3
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31
<CAPTION>
Subscriptions
Additional received for
Preferred Stock Common Stock Paid-in Common Convertible
Shares Amount Shares Amount Capital Stock Debt
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997 $ 11,812,350 $ 11,812 $3,302,922 $ $
Cancellation of stock
following 1:2 split (5,906,175) (5,906) 5,906
Acquisition on business
combination 2,250,000 2,250 (2,250)
Comprehensive income:
Net loss
Foreign currency translation
adjustment
Issuance of convertible debt 100,000
Issuance of stock for cash 2,127,167 2,127 651,792
Issuance of convertible debt 150,000
Issuance of stock for
products or services 450,000 450 175,550
Issuance of stock to Ruge
Family Trust 2,400,000 2,400
Conversion of debt into
stock 333,333 333 249,667 (250,000)
Advances received for
stock (169,900)
--------------------------------------------------------------------------------------------------
December 31, 1998 13,466,675 $ 13,466 $4,383,587 $ (169,900) nil
Comprehensive income:
Net loss
Foreign currency translation
adjustment
Issuance of stock to clear
loans 185,439 186 930,884
Issuance of stock for cash 2,993,953 2,994 1,469,640 42,000
Issuance of stock for
products or services 6,281,281 6,281 2,067,357 127,900
Fair market value of options
issued during the year
pursuant to FAS 123 239,260
Notes received for stock (356,681)
--------------------------------------------------------------------------------------------------
December 31, 1999 185,439 $ 186 22,741,909 $ 22,741 $9,090,728 $ (356,681) nil
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated Comprehensive Shareholders'
Deficit Income (loss) Equity
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1997 $ (1,248,476) $ (51,398) $ 2,014,860
Cancellation of stock
following 1:2 split nil
Acquisition on business
combination nil
Comprehensive income:
Net loss (859,464) (859,464)
Foreign currency translation
adjustment (100,909) (100,909)
Issuance of convertible debt 100,000
Issuance of stock for cash 653,919
Issuance of convertible debt 150,000
Issuance of stock for
products or services 176,000
Issuance of stock to Ruge
Family Trust 2,400
Conversion of debt into
stock nil
Advances received for
stock (169,900)
-----------------------------------------------------------------
December 31, 1998 $ (2,107,940) $ (152,307) $ 1,966,906
Comprehensive income:
Net loss (3,609,715) (3,609,715)
Foreign currency translation
adjustment (2,714) (2,714)
Issuance of stock to clear
loans 931,070
Issuance of stock for cash 1,514,634
Issuance of stock for
products or services 2,201,538
Fair market value of options
issued during the year
pursuant to FAS 123 239,260
Notes received for stock (356,681)
-----------------------------------------------------------------
December 31, 1999 $ (5,717,655) $ (155,021) $ 2,884,298
=================================================================
Authorized Capital Stock
100,000,000 common shares, par value $0.001
2,000,000 preferred shares, par value $0.001
</TABLE>
F-3
<PAGE>
<TABLE>
GO CALL INC.
Page 4
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31
<CAPTION>
1999 1998
---- ----
CASH PROVIDED BY (USED IN)
<S> <C> <C>
OPERATIONS
Net loss $ (3,609,715) $ (859,464)
Items not requiring cash:
Amortization and depreciation 175,784 80,789
Write down intangible assets 2,139 nil
Services paid with common shares 1,656,931 74,000
Services paid with options 239,260 nil
------------- -------------
(1,535,601) (704,675)
Net change in non-cash working
capital items affecting operations 271,984 (60,502)
------------- -------------
(1,263,617) (765,177)
------------- -------------
INVESTING
Purchase of intangible assets nil (6,667)
Purchase of fixed assets (78,193) (97,355)
Purchase of Country Star Restaurants, Inc. (728,440) nil
------------- -------------
(806,633) (104,022)
------------- -------------
FINANCING
Due to related parties 1,030,346 142,838
Advances to Country Star Restaurants, Inc. (435,554) nil
Convertible debt issued nil 250,000
Issue of common shares 1,514,634 614,319
------------- -------------
2,109,426 1,007,157
Effect of exchange rate changes
on cash (2,714) (100,909)
------------- -------------
Increase in cash 36,462 37,049
Cash, beginning 42,962 5,913
------------- -------------
Cash, ending $ 79,424 $ 42,962
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION
Investment in Global Indexus Inc. acquired for capital stock $ 188,366 $ nil
Debt extinguished for preferred stock $ 931,070 $ nil
Convertible debt extinguished for capital stock $ nil $ 250,000
</TABLE>
F-4
<PAGE>
GO CALL INC.
Page 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
NATURE OF ACTIVITIES
The company was incorporated in the State of Louisiana on March 1, 1994, as Omni
Advantage Inc. Effective February 12, 1998, the company formed a subsidiary
company, Go Call Inc, in the State of Delaware. Pursuant to a Certificate of
Merger, February 17, 1998 the company has merged with the subsidiary company and
continues operations as Go Call Inc. The resulting company resides in the City
of Wilmington in the State of Delaware.
The company holds a 100% interest in a Canadian subsidiary corporation which
provides telecommunication and Internet products and services. Effective July 3,
1999, the company formed Go Cash Inc., a 100% owned subsidiary located in Costa
Rica to process all e-commerce activity related to the company's casino
business.
In an attempt to focus the activity of the company in its core business,
Internet, the company has begun to liquidate all of its telecommunication
services and other non-Internet related businesses during the year and has begun
investment into Go Indexus, a sophisticated search engine.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements are presented in United States dollars and
are presented on the basis of accounting principles that are generally accepted
in the United States.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the company and
its 100% owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
REVENUE RECOGNITION
Net revenues from e-commerce activities is extrapolated from player losses based
on revenue sharing formulas in the agreements with licensors (note 11).
F-5
<PAGE>
GO CALL INC.
Page 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (continued)
- --------------------------------------------------------------------------------
USE OF ESTIMATES
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and as such, include estimates and
assumptions of management that affect the amounts reported in the consolidated
financial statements. Actual results could differ from these estimates.
CASH
Cash may consist of cash on deposit
FIXED ASSETS
Fixed assets are stated at cost less accumulated depreciation. Computer
software, other than proprietary and gaming related, is expensed in the year of
purchase. Depreciation of fixed assets other than leasehold improvements is
calculated using the diminishing balance method at the following rates:
Buildings 5%
Equipment 20%
Furniture and fixtures 20%
Vehicles 30%
Computer 30%
Computer software 33.3%
Half of the full rates are used in the year of acquisition.
NON-CASH SECURITIES ISSUANCE
Shares of common stock issued for other than cash have been assigned amounts by
management equivalent to the fair value of the services or products received in
exchange.
F-6
<PAGE>
GO CALL INC.
Page 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (continued)
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION
Foreign currency assets and liabilities have been translated into United States
dollar values at the rate of exchange prevailing at the balance sheet date.
Foreign currency revenues and expenses are translated at average exchange rates
for the period reported.
The company has determined that its Canadian operations are self-sustaining and
accordingly the net foreign exchange adjustment on the translation of their
financial statements from Canadian to United States currency has been deferred
and included as a separated component of shareholders' equity.
DEFERRED INCOME TAXES
The company uses the liability approach to accounting for income taxes. The
differences between the financial statement and tax basis of assets and
liabilities is determined annually. Deferred income tax assets and liabilities
are computed for those differences that have future tax consequences using the
currently enacted tax laws and rates that apply to the periods in which they are
expected to affect taxable income. Valuation allowances are established, if
necessary, to reduce deferred tax asset accounts to the amounts that will more
likely than not be realized. Income tax expense is the current tax payable or
refundable for the period, plus or minus the net change in the deferred tax
asset or liability accounts.
STOCK COMPENSATION
The company accounts for its stock option plans under SFAS No. 123 "Accounting
for Stock-Based Compensation". The company uses the Black-Scholes option-pricing
model to determine the fair value of the stock options granted.
F-7
<PAGE>
GO CALL INC.
Page 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (continued)
- --------------------------------------------------------------------------------
INCOME (LOSS) PER SHARE
The computation of income (loss) per share of common stock is based on the
weighted average number of shares and common share equivalents outstanding
during the periods presented.
All stock options, warrants and convertible preferred stock have been excluded
from the computation of diluted loss per share as their effect would be
antidilutive and accordingly, there is no reconciliation between basic and
diluted loss per share for each of the periods presented.
SEGMENT REPORTING
The company adopted SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information", during 1998 which requires disclosures about products
and services, geographic areas and major customers. The adoption of SFAS No. 131
did not affect results of operations or financial position. The company has
provided comparable information for prior periods.
- --------------------------------------------------------------------------------
2. GOING CONCERN
- --------------------------------------------------------------------------------
The company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The company incurred net losses
of $4,469,000 for the period from March 1, 1998 to December 31, 1999. This
factor, among others, raises substantial doubt as to the company's ability to
obtain long-term debt or equity financing and achieve profitable operations. The
company's ability to continue as a going concern is dependent upon its ability
to generate positive cash flows from operations. These financial statements do
not include any adjustments related to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the company be unable to continue in existence. In the
interim period, management is still seeking additional investment capital to
support its business ventures and provide the capital considered necessary to
support operations.
F-8
<PAGE>
GO CALL INC.
Page 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
3. ACQUISITIONS AND DISPOSITIONS OF INVESTMENTS
- --------------------------------------------------------------------------------
BUSINESS COMBINATION
In February 1998, the company issued 5,906,175 common shares in exchange for all
of the issued and outstanding shares of Go Phone Inc., which was then
amalgamated with an inoperative subsidiary of the company, Omni Advantage Canada
Limited and is now operating as Go Call Canada Inc. The resulting transaction
was accounted for as a reverse takeover by the purchase method. The results of
operations of Go Phone Inc., have been included in the consolidated statement of
operations since the date of acquisition.
INVESTMENT IN COUNTRY STAR RESTAURANTS, INC.
In March 1999, the company issued 4,552,752 common shares in exchange for
650,393 common shares of Country Star Restaurants, Inc.("CSR") representing 92%
of the issued shares of CSR. Subsequently, the holders of the 4,552,752 shares
of Go Call Inc., offered to sell back the shares of the company for net proceeds
of $728,440. The company repurchased and cancelled the share certificate. The
company retained controlling interest in CSR.
In December 1999, the company agreed to sell its controlling interest in CSR in
exchange for a note payable in the amount of $728,000 bearing interest at the
rate of 5% per annum due in full December 2004. Since the company's investment
in CSR was held for less than one year, the transactions have been accounted for
as an acquisition and disposition of a short-term investment. Subsequent to year
end, the purchaser has filed bankruptcy on behalf of CSR (note 11).
INVESTMENT IN INDEXUS, INC.
Pursuant to an agreement signed April 17, 1999, the company has agreed to
acquire a 49% interest in "Global Indexus Inc.", a joint venture company between
Go Call Inc. and Irving Moon, a director of the company. In exchange for its 49%
interest in Indexus, the company is obligated to issue to Indexus or sell on
behalf of Indexus, $1,225,000 worth of common shares of Go Call Inc. As of
December 31, 1999, the company has sold $188,366 worth of shares which have been
specified to relate to Indexus. This transaction has been recorded as an
Investment. As additional shares are sold related to Indexus, the company's
investment in Indexus will increase, until the company's commitment to fund
$1,225,000 worth of common shares has been fulfilled.
F-9
<PAGE>
GO CALL INC.
Page 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
3. ACQUISITIONS AND DISPOSITIONS OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
DISPOSAL OF INTERNET CAFES
In November 1999, Go Call Canada, Inc., the Canadian subsidiary of the company,
sold all the assets of the internet cafes including equipment and inventory.
Cash in the amount of $40,000 CDN was received for assets with a net book value
of $153,208 CDN.
INVESTMENT IN SEVADA HOLDINGS, LTD. IV
In December 1999, the company entered into an agreement to acquire an 80%
interest in Sevada Holdings, Ltd. IV, a limited partnership formed for the
purpose of developing and selling real estate. As consideration for the
investment, the company contributed the hotel real estate and furnishings in the
Dominican Republic held by Go Call Canada Inc. The assets contributed by the
company have been placed into escrow granting the company the right to approve
or disapprove of the sale of the property by the partnership. As of the date of
these financial statements, the partnership has not actively begun developing
the real estate. The hotel real estate and furnishings have remained
consolidated in the records of the company, with a net book value of $1,978,973.
ACQUISITION OF LIQUID TRADE CERTIFICATES
On December 23, 1999, the company entered into an agreement with Hartcourt
Companies Inc., to issue 1,000,000 shares of its preferred stock (par value
$5.00), convertible into 10 common shares for each preferred share, in exchange
for specified share certificates in unrelated companies held by Hartcourt. As of
the date of issue of these financial statements, the share certificates have not
been exchanged. As a result, the investment has not been valued and recorded in
the assets or liabilities of the company as of December 31, 1999.
F-10
<PAGE>
GO CALL INC.
Page 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
4. NOTES RECEIVABLE 1999 1998
- --------------------------------------------------------------------------------
Note receivable on sale of investment $ 728,000 $ nil
Additional advances to Country Star
Restaurants, Inc. 435,554 nil
------------ ---------
$ 1,163,554 $ nil
============ =========
The company purchased a 92% share of Country Star Restaurants, Inc. ("CSR") in
March 1999 (note 3). During the year, the company made advances to CSR to meet
operating obligations totalling $435,554. In December 1999, the company sold its
interest in CSR. in exchange for a note with a face value of $728,000. The
principal amount of the note is due in full December 23, 2004. Interest at the
rate of 5% per annum is payable at maturity.
<TABLE>
- -----------------------------------------------------------------------------------------------
5. FIXED ASSETS at cost, net 1999 1998
- -----------------------------------------------------------------------------------------------
<CAPTION>
Accumulated
Cost Amortization Net Net
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Land $ 70,000 $ nil $ 70,000 $ 70,000
Hotel 1,992,351 102,220 1,890,131 1,914,337
Equipment 11,659 1,506 10,153 28,004
Furniture and fixtures 64,697 12,723 51,974 90,994
Vehicles nil nil nil 32,906
Computer 225,685 120,236 105,449 49,500
Computer software 26,613 14,382 12,231 4,648
Leasehold improvements 7,602 7,602 nil 26,638
Telephone equipment 57,644 57,644 nil 20,502
------------ ------------ ------------ ------------
$ 2,456,251 $ 316,313 $ 2,139,938 $ 2,237,529
============ ============ ============ ============
</TABLE>
Included in the fixed assets of the company are hotel real estate and
furnishings, with at net book value of $1,978,973, that has been contributed to
the company's investment in Sevada Holdings, Ltd. IV (note 3).
F-11
<PAGE>
GO CALL INC.
Page 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
6. INTANGIBLE ASSETS 1999 1998
- --------------------------------------------------------------------------------
Software and distribution rights, at cost $ 108,667 $ 108,667
Less share consideration not issued at year end nil (102,000)
Change in estimate of useful life (108,667) nil
Accumulated amortization nil (4,528)
------------- -------------
$ nil $ 2,139
============= =============
Pursuant to purchase agreements with 866621 Ontario Inc., dated between November
16 and December 8, 1998, the company issued 170,000 common shares valued at
$0.60 per share plus cash in the amount of $6,667 as consideration for assets of
the company related to specialized software and distribution rights, including
the International Programmers Guild, LasVegas Palace, Internet Advertising Group
and the related facilities and support services.
Management's original estimate of the useful life of these rights was 24 months.
During the year ended December 31, 1999, management has reviewed the future
usefulness of this software and has determined that it will not continue to have
benefit to the company. As a result, the software distribution rights have been
written off in full as of December 31, 1999.
F-12
<PAGE>
GO CALL INC.
Page 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
7. DUE TO RELATED PARTIES 1999 1998
- --------------------------------------------------------------------------------
Unsecured advances from a shareholder, bearing
interest at the rate of 1% per month with no
specified due date $ nil $ 66,667
Unsecured advances from a member of
management who is a shareholder, interest
free with no specified terms of repayment nil 104,141
Unsecured advances from a shareholder, interest
free with no specified terms of repayment nil 57,983
Loan from an employee, bearing interest
at an effective rate of 22.7% per annum
repayable in monthly instalments of $60,000
principal and interest beginning January 1, 2000
due in full April 1, 2000 233,611 nil
Non-interest bearing advances received from
employees, without specific terms of repayment 94,456 nil
---------- ----------
328,067 228,791
Current portion 233,611 nil
---------- ----------
$ 94,456 $ 228,791
========== ==========
In December 1999, shareholder advances totaling $931,070 were extinguished in
full by the issuance of 185,439 shares of Series B Convertible Preferred Stock.
F-13
<PAGE>
GO CALL INC.
Page 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
8. STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
INCREASE IN AUTHORIZED CAPITAL
Pursuant to a Restated Certificate of Incorporation filed September 27, 1999 and
approved by the shareholders August 31, 1999, the company has increased its
authorized common stock to 100 million shares of common Stock, par value $.001
per share and 2 million shares of preferred stock, par value $.001 per share .
PREFERRED STOCK
In December 1999, the company issued 185,439 shares of Series B Convertible
Preferred Stock at a price of $5.00 per share, to offset loans due to
shareholders. The preferred stock is convertible at the option of the holder, at
the rate of 15 common shares for each preferred share.
Effective December 29, 1999, the company is obligated to issue to The Hartcourt
Companies Inc., 1,000,000 shares of preferred stock, par value $5.00,
convertible at the option of the holder at the rate of 10 common shares for each
preferred share redeemed. Those common shares will be restricted under Rule 144
for a minimum of 24 months. As of the date of issue of these financial
statements, these preferred certificates have not been issued and no value has
been attached to this transaction.
COMMON STOCK
On February 1, 1998, at a Special meeting of Shareholders, the Company's
shareholders approved the amalgamation of Go Phone Inc. with Omni Advantage
Canada Limited, including a share split of two Go Phone Inc. shares for one Omni
Advantage Canada Limited share. As a result, the number of shares issued and
outstanding decreased from 11,812,350 shares to 5,906,175 shares.
Pursuant to a Special Resolution of the Board of Directors. in March 1998, the
company granted 2,400,000 shares of common stock at par value to Ruge Family
Trust.
In March 1999, the company issued 4,552,751 common shares in exchange for
650,393 common shares of Country Star Restaurants, Inc. In August 1999, the
share certificate #3100/2 for 4,552,751 common shares was sold back to the
company by the holder of the certificate, for $728,440 and the share certificate
was cancelled by the transfer agent.
During the year, 2,993,953 shares of common stock were issued out of treasury
for total proceeds of $1,514,634.
F-14
<PAGE>
GO CALL INC.
Page 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
8. STOCKHOLDERS' EQUITY (continued)
- --------------------------------------------------------------------------------
STOCK OPTION PLANS
Prior to the adoption of the 1999 Stock Option Plan, described below, management
had issued stock options of the company in exchange for assets acquired by or
services provide to the company during the year.
In April 1999, the Company's Board of Directors approved a 1999 Stock Option
Plan, which was approved by the shareholders on August 31, 1999. 1,500,000
shares of common stock have been reserved to be issued under this plan Options
are to be awarded to the employees and consultants of the Company, at the
discretion of management, for compensation for services rendered. The Company
has elected to account for activity issued under the stock option plan according
to the requirements of SFAS No.123, "Accounting for Stock-Based Compensation."
Options are granted by the Company's Board of Directors are at exercise price
determined by the board. The exercise price of INCENTIVE STOCK OPTIONS
("ISO's"), must be no less than 100% of the fair market value of the company's
common stock, at the date of grant (110% for Ten Percent Stockholders). The
exercise price of NON-QUALIFIED STOCK OPTIONS, must be no less than 85% of the
fair market value of the company's common stock at the date of grant. The
exercise period for each option granted will be determined at the time such
option is granted but will not exceed ten years (five years for ISO's granted to
Ten Percent Stockholders). Options granted under the plan become exerciseable
immediately.
STOCK OPTION ACTIVITY
Weighted-Average
Number of shares Exercise Price
---------------- ----------------
Balance January 1, 1998 nil nil
Options granted and assumed 1,923,311 $1.80
------------
Balance December 31, 1998 1,923,311
Options granted and assumed 15,305,000 $0.53
------------
Balance December 31, 1999 17,228,311 $0.64
============
F-15
<PAGE>
GO CALL INC.
Page 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
8. STOCKHOLDERS' EQUITY (continued)
- --------------------------------------------------------------------------------
STOCK OPTION ACTIVITY (continued)
Weighted-Average
Number of shares Exercise Price
---------------- ----------------
Warrants outstanding nil
Balance at January 1, 1998
Granted during 1998 500,000 $3.00
------------
Balance December 31, 1998 & 1999 500,000 $3.00
============
As of December 31, 1999, no options or warrants were exercised.
OPTIONS OUTSTANDING
Options Outstanding Exercise Price Exerciseable Date Expiry Date
- --------------------------------------------------------------------------------
50,000 15% discount immediately
50,000 $1.00 immediately March 2000
2,000,000 $0.50 immediately September 2000
150,000 $1.00 immediately November 2001
50,000 $0.50 immediately March 2002
500,000 $0.75 immediately September 2002
32,000 $1.00 immediately June 2003
500,000 $1.00 immediately July 2003
40,000 $1.00 immediately October 2003
15,000 $1.00 immediately March 2004
1,311 $1.00 immediately April 2004
3,820,000 $0.32 immediately December 2004
100,000 $0.75 January 2000 January 2001
100,000 $1.00 January 2000 January 2001
100,000 $4.00 January 2000 January 2001
150,000 $2.00 November 2000 November 2002
2,000,000 $0.50 September 2000 September 2001
200,000 $5.00 November 2000 November 2004
2,000,000 $0.50 September 2001 September 2002
F-16
<PAGE>
GO CALL INC.
Page 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
8. STOCKHOLDERS' EQUITY (continued)
- --------------------------------------------------------------------------------
OPTIONS OUTSTANDING (continued)
Options Outstanding Exercise Price Exerciseable Date Expiry Date
- --------------------------------------------------------------------------------
150,000 $2.00 November 2001 November 2003
2,000,000 $0.50 September 2002 September 2003
150,000 $2.00 November 2002 November 2004
2,000,000 $0.50 September 20023 September 2004
120,000 $1.00 date of registration
on small cap exchange 2 years
50,000 $1.00 date of registration
on small cap exchange 3 years
100,000 $1.50 date of registration on
small cap exchange 3 years
200,000 $1.50 date of registration on
small cap exchange 2 years
600,000 $1.00 market value of stock
exceeds $2.00 December 2002
The fair value for each option granted, was estimated at the date of grant using
a Black-Scholes option pricing model, assuming no expected dividends and the
following weighted-average assumptions:
Average risk-free interest rates 5.2%
Average expected life (in years) 1 - 5
Volatility 28% - 48%
The stock prices used in the model, included a 60% discount from market to
reflect reduced value, inherently brought about by the Rule 144 restrictions
placed on trading of any shares purchased, and by the reduced trading market of
the company due to the company currently not being fully listed.
F-17
<PAGE>
GO CALL INC.
Page 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
9. INCOME TAXES 1999 1998
- --------------------------------------------------------------------------------
DEFERRED INCOME TAXES
Deferred tax assets consist of the following:
Gross deferred tax assets:
Net operating losses $ 905,563 $ 677,063
Amortization 73,226 344,847
------------ ------------
Net deferred tax assets 978,789 1,021,910
Valuation allowance (978,789) (1,021,910)
------------ ------------
$ nil $ nil
============ ============
The company has provided a valuation allowance for net deferred tax assets of
its operations since realization of these benefits cannot be reasonable assured.
INCOME TAX RATE
The company did not recognize any current income tax expense or benefit for the
years ended December 31, 1999 or 1998 and no cash was paid for income taxes in
December 31, 1999 or 1998. There are no reconciling items between the effective
rate of income tax assessed against the company's loss from operations and the
Canadian statutory rate of income tax of 44.62%.
FUTURE INCOME TAX BENEFITS
The company and its Canadian subsidiary have not generated taxable income since
inception. As a result, no provision for income taxes has been made.
Income tax returns for the Canadian subsidiary have not yet been assessed by
Revenue Canada. For the operating period February 28, 1998 to July 3, 1999 the
company's active operations have been in Canada and as such, the company is
subject only to Canadian income tax on operations.
The U.S. company has not filed Federal income tax returns since its inception.
Due to operating losses carried forward, the company will neither owe tax or be
subject to penalties or interest. The company has filed it's December 1999
information statement and has paid all applicable income taxes and is in good
standing in the state of Delaware.
F-18
<PAGE>
GO CALL INC.
Page 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
<TABLE>
- --------------------------------------------------------------------------------------
10. INDUSTRY SEGMENT AND GEOGRAPHIC
INFORMATION 1999 1998
- --------------------------------------------------------------------------------------
<CAPTION>
In accordance with statutory requirements, the Board of Directors has determined
that the company and its subsidiary are engaged in one principal industry
segment, as a provider of Internet gaming and other telecommunication and
Internet products and services as follows:
<S> <C> <C>
Revenue:
Internet gaming $ 613,830 $ 81,677
Other telecommunication products and services 66,341 833,128
------------ ------------
$ 680,171 $ 914,805
============ ============
Loss from operations:
Internet gaming $ 40,707 $ 33,253
Other telecommunication products and services 3,569,008 826,211
------------ ------------
$ 3,609,715 $ 859,464
============ ============
Identifiable assets are located in as follows:
Canada $ 361,000 $ 386,786
United States 1,163,554 nil
Cost Rica 614,247 nil
Dominion Republic 1,978,973 1,999,670
------------ ------------
$ 4,117,774 $ 2,386,456
============ ============
</TABLE>
F-19
<PAGE>
GO CALL INC.
Page 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
11. MEASUREMENT UNCERTAINTIES
- --------------------------------------------------------------------------------
FAIR MARKET VALUE OF CERTAIN LIABILITIES
The company has recorded in its accounts payable certain accounts which are in
dispute but for which the company is being pursued for payment in the courts.
These liabilities have been recorded in the books for the full amount of the
claims. The company may be able to successfully negotiate settlements for an
amount less than the full claim. Any changes in the conditions and circumstances
resulting in a change in the settlement amount of the liabilities, which could
be material, will be booked in the period of change.
NOTES RECEIVABLE
As noted in notes 3 and 4 to the financial statements, the company has sold its
investment in Country Star Restaurants, Inc. ("CSR") in December 1999.
Subsequent to the year end, the purchaser of CSR, Star Liquidation Company LLC
("Star"), has filed a petition for bankruptcy of CSR. The note receivable from
Star bears prepayment rights that allows the company an amount equal to 50% of
the net proceeds of any asset sale involving any CSR assets, subject to Star's
bankruptcy proceedings and/or the rights of creditors. There is no direct
security for the principal amount of the note. Prior to the sale of CSR to Star,
the company registered a general security agreement against all of the monetary
and non-monetary assets of CSR as security for the advances made to the CSR.
It is unclear at the date of issue of these financial statements how Star's
petition for bankruptcy of CSR, will affect the company's ability to realize on
the full value of the note and advances related to CSR. The company has not
recognized any allowance for doubtful collection of these amounts as of December
31, 1999. Any changes which would result in the company not being able to
collect the full value of these amounts will be booked in the period of change.
WAGERING REVENUES AND PLAYER DEPOSITS LIABILITY
The company stopped receiving reports of gaming activity from the owner of the
gaming license in October 1999, which calculate the amount of player losses. As
a result, the company has estimated the amount of player deposit liability and
net wagering revenue earned by the company, for the period November and December
1999. Any changes in these amounts, which may result when the actual invoices
are received, which could be material, will be booked in the period of change.
F-20
<PAGE>
GO CALL INC.
Page 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
12. FINANCIAL INSTRUMENTS AND CREDIT RISK
- --------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
The company's financial instruments consist of cash, deposits receivable, other
receivables, notes receivable, player deposits, accounts payable and amounts due
to related parties. Unless otherwise noted, it is management's opinion that the
company is not exposed to significant interest, currency or credit risks arising
from these financial instruments. The fair values of these financial instruments
approximate their carrying values, unless otherwise noted.
FOREIGN EXCHANGE RISK MANAGEMENT
The company does not use forward exchange contracts or other hedging instruments
to manage exposures, resulting from foreign exchange fluctuations in the
ordinary course of business. Unless otherwise disclosed in the notes to the
financial statements, the estimated fair value of foreign denominated assets and
liabilities approximates carrying value, translated at the prevailing exchange
rates at year end.
CONCENTRATION OF CREDIT RISK
Of the deposits receivable outstanding at year end, $491,263 relates to player
deposits and gaming reserve related to internet gaming activities, held by the
management organization contracted to process client bids and pay outs. The
company monitors the activity of the gaming operations and deposits from the
management organization on a regular basis.
F-21
<PAGE>
GO CALL INC.
Page 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
13. COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
COMMITMENTS
In connection with a Bingo and Scratch Ticket software purchase agreement, the
company is committed to a final payment of $20,000 upon acceptance of the final
software.
In connection with the sale of the company's investment in Country Star
Restaurants, Inc., the company is committed to fund $65,000 to STAR Trust and
provide specified assistance related to the close of the restaurant and related
administrative duties, as directed by STAR. Subsequent to the year end, the
company has paid this amount in full.
In August 1999, the company entered into a two year service contract with Web
Wonders to provide technical and administrative support for Go Cash Inc. and Go
Call Inc. Subsequent to the year end, the Company negotiated an early
termination of this contract, with no obligations beyond September 2000.
CONTINGENCIES
The company and/or its subsidiaries and/or former officers, have been named as a
defendant in a lawsuit seeking damages amounting to $75,000 for breach of
contract. It is not possible at this time to determine the amount, if any, of
awards that may be made against the company. Any amounts awarded as a result of
these actions will be reflected in the year incurred as prior year adjustments.
- --------------------------------------------------------------------------------
14. COMPARATIVE FIGURES
- --------------------------------------------------------------------------------
The presentation of certain accounts of the previous period, has been changed to
conform with the presentation adopted for the current period.
F-22
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
The directors of the Company currently have terms which will end at the
next annual meeting of the stockholders of the Company or when their successors
are elected and qualify, subject to their prior death, resignation or removal.
Officers serve at the discretion of the Board of Directors. There are no family
relationships among any of the Company's directors and executive officers.
The following reflects certain biographical information on the current
directors and executive officers of the Company:
NAME POSITION AGE
- ---- -------- ---
James G. Hammer Director 49
Irving Insik Moon Director and Chief Executive Officer 61
Irving Insik Moon, a director and Chief Executive Officer of the
Company, has been, since August, 1982, the General Manager of I. Moon Associates
Ltd., an international business consulting firm located in Ontario, Canada. Mr.
Moon was awarded a B.A. in mechanical engineering from Hanyang University in
Seoul, Korea.
James G. Hammer, a director of the Company, has been since December
1999, the manager of GOCASH, Inc. in Costa Rica. Prior to 1999 Mr. Hammer was a
consultant in the field of physical therapy and has owned and operated three
service industry companies.
Michael Ruge, prior to his resignation on December 29, 1999,was the
Chief Executive Officer and a director of the Company, and the President of Go
Phone, Inc., a telecommunications company, from June, 1995 until its merger into
the Company in February, 1998. From 1991 to May, 1994, Mr. Ruge managed the
Hotel Jardin del Sol in Sosua, Dominican Republic. Mr. Ruge founded Premium
Spring Water and Juice Company, Inc. in 1987 and took that company public in
1990.
LIMITATIONS ON DIRECTOR LIABILITY. The Company's Certificate of
Incorporation provides, as permitted by governing Delaware law, that a director
of the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, with certain
exceptions. These provisions may discourage stockholders from bringing suit
against a director for breach of fiduciary duty and may reduce the likelihood of
derivative litigation brought by stockholders on behalf of the Company against a
director.
29
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation and Bylaws designate the
relative duties and responsibilities of the Company's officers, establish
procedures for actions by directors and stockholders and other items. The
Company's Certificate of Incorporation and Bylaws also contain extensive
indemnification provisions which will permit the Company to indemnify its
officers and directors to the maximum extent provided by Delaware law.
A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or other
enterprise, against expenses, including amounts paid in settlement and
attorney's fees actually and reasonably incurred by him or her in connection
with the defense or settlement of the action or suit if he or she acted in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter as to which such a person has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement to the
corporation unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim, issue
or matter therein, he or she must be indemnified by the corporation against
expenses, including attorney's fees, actually and reasonably incurred by him in
connection with the defense. Any indemnification under this section, unless
ordered by a court or advanced pursuant to this section, must be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made: (a) by the stockholders; (b) by
the board of directors by majority vote of a quorum consisting of directors who
were not parties to the action, suit or proceeding; (c) if a majority vote of a
quorum consisting of directors who were not parties to the action, suit or
proceeding so orders, by independent legal counsel in a written opinion; or (d)
if a quorum consisting of directors who were not parties to the action, suit or
proceeding cannot be obtained, by independent legal counsel in a written
opinion.
The certificate of incorporation, the bylaws or an agreement made by
the corporation may provide that the expenses of officers and directors incurred
in defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he or she is not entitled to be indemnified
by the corporation. The provisions of this section do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
30
<PAGE>
The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section: (a) does not exclude any other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under the certificate of incorporation or any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, for either an action in
his or her official capacity or an action in another capacity while holding his
or her office, except that indemnification, unless ordered by a court pursuant
to this section or for the advancement of any director or officer if a final
adjudication establishes that his or her acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action; and (b) continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
On April 12 1999, the stockholders of the Company approved a form of
indemnification agreement ("Indemnification Agreement") to be entered into with
each of the Company's directors. All current officers and directors of the
Company and its subsidiaries have executed Indemnification Agreements with the
Company. These agreements include the following provisions:
First, in the event an action is instituted by the person who is
indemnified under the Indemnification Agreement ("Indemnitee") to enforce or
interpret any of the terms therein, Indemnitee shall be entitled to be paid all
costs and expenses, including reasonable attorneys' fees, incurred by the
Indemnitee with respect to such action, unless as a part or such action, a court
of competent jurisdiction determines that each of the material assertions made
by the Indemnitee were not made in good faith or were frivolous. In the event of
an action instituted by or in the name of the Company under the Indemnification
Agreement or to enforce or interpret any of the terms therein, the Indemnitee
shall be entitled to be paid all costs and expenses, including reasonable
attorneys' fees, incurred by the Indemnitee in the defense of such action,
unless as a part of such action the court determines that each of the
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
Second, the Indemnification Agreements explicitly provide for partial
indemnification of costs and expenses in the event that an Indemnitee is not
entitled to full indemnification under the terms of the Indemnification
Agreements.
Third, in the event the Company shall be obligated to pay the expenses
of any proceeding against the Indemnitee, the Company shall be entitled to
assume the defense of such proceeding, with counsel approved by the indemnified
party, which approval shall not be unreasonably withheld, upon the delivery to
the Indemnitee of written notice of its election to do so. The Company shall
have the right to conduct such defense as it sees fit in its sole discretion,
including the right to settle any claim against Indemnitee without the consent
of the Indemnitee.
31
<PAGE>
Fourth, indemnification provided by the Indemnification Agreements is
not exclusive of any rights to which the Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, or otherwise. The indemnification
provided under the Indemnification Agreements continues for any action taken or
not taken while serving in an indemnified capacity even though the Indemnitee
may have ceased to serve in such capacity at the time of the action, suit or
other covered proceeding.
Finally, the Indemnification Agreements provide for certain exceptions
to indemnification which include the following: (a) indemnification for
liabilities where the law prohibits indemnification; (b) indemnification or
advancement of expenses with respect to proceedings or claims initiated or
brought voluntarily by an Indemnitee and not by way of defense, except with
respect to proceedings brought to establish or enforce a right to
indemnification under the Indemnification Agreements or any statute or law or
otherwise as required under Delaware law; and (c) indemnification for expenses
in the payment of profits arising from the purchase and sale by the Indemnitee
of securities in violation of Section 16(b) of the Exchange Act or any similar
or successor statute.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company filed a registration statement on Form 10SB under the
Exchange Act with the Securities and Exchange Commission on October 1, 1999.
Under the Exchange Act, a Form 10SB is effective 60 days after filing
with the Securities and Exchange Commission. On November 30, 1999, the Company
became subject to the reporting requirements of the Exchange Act. Ten days after
a person becomes a director, officer or 10% shareholder of a reporting company,
they are required to file a Form 3 to report that status and their ownership of
securities in the company. However, a reporting person of an issuer that is
registering securities for the first time under Section 12 of the Exchange Act
must file the Form 3 no later than the effective date of the registration
statement. Thereafter, they are required to file changes in information on Form
4 within ten days after the end of the month in which the change occurred.
Irving Insik Moon, Michael Ruge and James Hammer have been delinquent
in timely filing initial insider reports on Form 3. In the cases of Messrs. Moon
and Ruge, such report was due on the date of effectiveness of the Company's
registration statement on Form 10SB. In the case of Mr. Hammer, the Form 3 was
due ten days after he became a director on December 31, 1999.
ITEM 10. EXECUTIVE COMPENSATION.
No executive officer of the Company received total compensation of at
least $100,000, for the fiscal year ended December 31, 1998 or December 31,
1999. Information related to the fiscal year ended December 31, 1997 has been
omitted from this filing since this relates to the company operating as Omni
Advantage, prior to the re-organization of the company and operation as Go Call
Inc.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Restricted Securities
Name and Annual Stock Underlying LTIP All Other
Principal Salary Bonus Compensation Awards Options/ Payouts Compensation
Position Year ($) ($) ($) ($) SAR's (#) ($) ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ian Smith
President (1) 1999 41,900 nil 4,574 (2) nil 120,000 nil 7,500 (3)
Michael Ruge
CEO (4) 1999 1,875 nil 250,000 (5) nil 500,000 nil nil
</TABLE>
(1) Ian Smith's serviced as President and Director, terminated in August 1999.
(2) Other Annual Compensation includes payments for certain lodging and
benefits.
(3) All Other Compensation includes commissions for capital raised by the
individual during the year.
(4) Michael Ruge's serviced as CEO and Director, terminated in December 1999.
The following table sets forth certain information relating to options which are
outstanding under the 1999 Stock Option Plans as of December 31, 1999
<TABLE>
<CAPTION>
Date of Date of Exercise Number of Market value
Name Grant Expiry Price Shares on Date of Grant
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Irving Moon Dec 20, 1999 Dec 20, 2004 $0.32 200,000 $ 64,000
Hershey Moss Dec 20, 1999 Dec 20, 2004 $0.32 200,000 $ 64,000
Looey Tremblay Dec 20, 1999 Dec 20, 2004 $0.32 200,000 $ 64,000
Ruge Family Trust Dec 20, 1999 Dec 20, 2004 $0.32 200,000 $ 64,000
Bernd G. Wolf
(in trust) Dec 20, 1999 Dec 20, 2004 $0.32 700,000 $224,000
</TABLE>
No options have been exercised as of the date of this filing.
COMPENSATION OF DIRECTORS.
The Company pays no cash compensation to its directors for services as
directors. During the fiscal year ended December 31, 1999, James Hammer received
500 Common Shares of the Company valued at $100 on his appointment as Director.
DIRECTORS AND OFFICERS LIABILITY INSURANCE.
The Company does not have directors' and officers' liability insurance.
32
<PAGE>
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS.
The Company has no compensatory plans or an arrangements which relate
to the resignation, retirement or any other termination of an executive officer
or key employee of the Company.
1999 STOCK OPTION PLAN
As of April 12, 1999, the Company's Board of Directors approved a 1999
Stock Option Plan (the "Stock Option Plan"), and was approved by the
shareholders on August 31, 1999. The Company has reserved for issuance
thereunder an aggregate of 1,500,000 shares of Common Stock. The Stock Option
Plan provides for the grant to employees of the Company of incentive stock
options within the meaning of Section 422 of the Code, and for the grant to
employees and consultants of nonstatutory stock options. The description of the
1999 Stock Option Plan is intended to be a summary of the material provisions of
the Stock Option Plan and does not purport to be complete.
GENERAL. The general purposes of the Stock Option Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to employees and consultants of
the Company and to promote the success of the Company's business. It is intended
that these purposes will be effected through the granting of stock options,
which may be either "incentive stock options" as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory stock
options.
The Stock Option Plan provides that options may be granted to the
employees (including officers and directors who are employees) and consultants
of the Company, or of any parent or subsidiary of the Company. Incentive stock
options may be granted only to employees. An employee or consultant who has been
granted an option may, if otherwise eligible, be granted additional options.
ADMINISTRATION OF AND ELIGIBILITY UNDER STOCK OPTION PLAN. The Stock
Option Plan, as adopted, provides for the issuance of options to purchase shares
of Common Stock to officers, directors, employees, independent contractors and
consultants of the Company and its subsidiaries as an incentive to remain in the
employ of or to provide services to the Company and its subsidiaries. The Stock
Option Plan authorizes the issuance of incentive stock options ("ISOs"),
non-qualified stock options ("NSOs") and stock appreciation rights ("SARs") to
be granted by a committee (the "Committee") to be established by the Board of
Directors to administer the Stock Option Plan, which will consist of at least
two (2) outside directors of the Company.
Subject to the terms and conditions of the Stock Option Plan, the
Committee will have the sole authority to determine: (a) the persons
("optionees") to whom options to purchase shares of Common Stock and SARs will
be granted, (b) the number of options and SARs to be granted to each such
optionee, (c) the price to be paid for each share of Common Stock upon the
33
<PAGE>
exercise of each option, (d) the period within which each option and SAR will be
exercised and any extensions thereof, and (e) the terms and conditions of each
such stock option agreement and SAR agreement which may be entered into between
the Company and any such optionee.
All officers, directors and employees of the Company and its
subsidiaries and certain consultants and other persons providing significant
services to the Company and its subsidiaries will be eligible to receive grants
of options and SARs under the Stock Option Plan. However, only employees of the
Company and its subsidiaries are eligible to be granted ISOs.
STOCK OPTION AGREEMENTS. All options granted under the Stock Option
Plan will be evidenced by an option agreement or SAR agreement between the
Company and the optionee receiving such option or SAR. Provisions of such
agreements entered into under the Stock Option Plan need not be identical and
may include any term or condition which is not inconsistent with the Stock
Option Plan and which the Committee deems appropriate for inclusion.
INCENTIVE STOCK OPTIONS. Except for ISOs granted to stockholders
possessing more than ten percent (10%) of the total combined voting power of all
classes of the securities of the Company or its subsidiaries to whom such
ownership is attributed on the date of grant ("Ten Percent Stockholders"), the
exercise price of each ISO must be at least one hundred percent (100%) of the
fair market value of the Company's Common Stock as determined on the date of
grant. ISOs granted to Ten Percent Stockholders must be at an exercise price of
not less than one hundred ten percent (110%) of such fair market value.
Each ISO must be exercised, if at all, within ten (10) years from the
date of grant, but within five (5) years of the date of grant in the case of
ISO's granted to Ten Percent Stockholders. An optionee of an ISO may not
exercise an ISO granted under the Stock Option Plan so long as such person holds
a previously granted and unexercised ISO. The aggregate fair market value
(determined at time of the grant of the ISO) of the Common Stock with respect to
which the ISOs are exercisable for the first time by the optionee during any
calendar year shall not exceed $100,000.
As of the date of this Registration Statement, no ISO's have been
granted under the Stock Option Plan.
NON-QUALIFIED STOCK OPTIONS. The exercise price of each NSO will be
determined by the Committee on the date of grant. The Company hereby undertakes
not to grant any non-qualified stock options under the Stock Option Plan at an
exercise price less than eighty five percent (85%) of the fair market value of
the Common Stock on the date of grant of any non-qualified stock option under
the Stock Option Plan. The exercise period for each NSO will be determined by
the Committee at the time such option is granted, but in no event will such
exercise period exceed ten (10) years from the date of grant. As of the date of
this Registration Statement 1,500,000 NSO's have been granted under the Stock
Option Plan as follows:
Irving Moon 200,000
Hershey Moss 200,000
Looey Tremblay 200,000
Ruge Family Trust 200,000
Bernd G. Wolf (in trust) 700,000
The options were issued at an exercise price of $32 per share and
expire December 20, 2004. At the date the options were issued, the Company's
common stock traded at $.516.
34
<PAGE>
STOCK APPRECIATION RIGHTS. Each SAR granted under the Stock Option Plan
will entitle the holder thereof, upon the exercise of the SAR, to receive from
the Company, in exchange therefor, an amount equal in value to the excess of the
fair market value of the Common Stock on the date of exercise of one share of
Common Stock over its fair market value on the date of exercise of one share of
Common Stock over its fair market value on the date of grant (or in the case of
an SAR granted in connection with an option, the excess of the fair market of
one share of Common Stock at the time of exercise over the option exercise price
per share under the option to which the SAR relates), multiplied by the number
of shares of Common Stock covered by the SAR or the option, or portion thereof,
that is surrendered.
SARs will be exercisable only at the time or times established by the
Committee. If an SAR is granted in connection with an option, the SAR will be
exercisable only to the extent and on the same conditions that the related
option could be exercised. The Committee may withdraw any SAR granted under the
Stock Option Plan at any time and may impose any conditions upon the exercise of
an SAR or adopt rules and regulations from time to time affecting the rights of
holders of SARs. As of the date of this Registration Statement, no SAR's have
been granted.
TERMINATION OF OPTION AND TRANSFERABILITY. In general, any unexpired
options and SARs granted under the Stock Option Plan will terminate: (a) in the
event of death or disability, pursuant to the terms of the option agreement or
SAR agreement, but not less than six (6) months or more than twelve (12) months
after the applicable date of such event, (b) in the event of retirement,
pursuant to the terms of the option agreement or SAR agreement, but no less than
thirty (30) days or more than three (3) months after such retirement date, or
(c) in the event of termination of such person other than for death, disability
or retirement, until thirty (30) days after the date of such termination.
However, the Committee may in its sole discretion accelerate the exercisability
of any or all options or SARs upon termination of employment or cessation of
services. The options and SARs granted under the Stock Option Plan generally
will be non-transferable, except by will or the laws of descent and
distribution.
ADJUSTMENTS RESULTING FROM CHANGES IN CAPITALIZATION. The number of
shares of Common Stock reserved under the Stock Option Plan and the number and
price of shares of Common Stock covered by each outstanding option or SAR under
the Stock Option Plan will be proportionately adjusted by the Committee for any
increase or decrease in the number of issued and outstanding shares of Common
Stock resulting from any stock dividends, split-ups, consolidations,
recapitalizations, reorganizations or like event.
AMENDMENT OR DISCONTINUANCE OF STOCK OPTION PLAN. The Board of
Directors has the right to amend, suspend or terminate the Stock Option Plan at
any time. Unless sooner terminated by the Board of Directors, the Stock Option
Plan will terminate on the tenth anniversary date of the effectiveness of the
Stock Option Plan.
35
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of March 21, 2000, the Company had issued and outstanding 25,801,393 shares
of Common Stock. The following table reflects, as of March 21, 2000, the
beneficial Common Stock ownership of: (a) each director of the Company, (b) each
executive officer named in the Summary Compensation Table, (c) person known by
the Company to be a beneficial owner of five percent (5%) or more of its Common
Stock and (d) all executive officers and directors of the Company as a group:
Name and Address of Number
Beneficial Owner of Shares Percent
- ---------------- --------- -------
Michael Ruge, (1)(2) 6,128,140 21.9%
Irving Insik Moon, Director (2)(3) 1,820,000 6.9%
Donald Fultz (4)(5) 2,965,944 10.8%
Connoisseur Club, Inc. (6) 1,865,000 7.7%
James Hammer (2) 500 less than 1%
All Directors and Officers as a Group
(3 persons) (7) 7,948,640 28.2%
- ---------------------
# Pursuant to applicable securities rules and regulations, shares of
Common Stock which an individual or group has a right to acquire within 60 days
pursuant to the exercise of options, warrants or convertible securities are
deemed to be outstanding for the purpose of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person shown in the
table.
1 Includes (i) 1,960,000 shares and 500,000 options to purchase
Common Shares owned directly, (ii) 207,916 shares owned by his
wife Elspeth Ruge, and (iii) 1,813,519 shares, 500,000 options
to purchase Common Shares, and 76,447 Series B Preferred
Shares convertible into 1,146,705 Common Shares owned by the
Ruge Family Trust.
2. The address for Messrs Ruge, Moon and Hammer is Oficentro
Ejecutivo La Sabana, Torre 6 Piso 2, (Oficina Lobo Negro), San
Jose, Costa Rica SA.
3. Includes 200,000 options to purchase Common Shares owned
directly by Mr. Moon.
4. Includes 108,992 Series B Convertible Preferred Shares
convertible into 1,634,880 Common Shares.
5. The address for Mr. Fultz is 5770 Spring Garden, Halifax, Nova
Scotia, Canada.
6. The address for Connoisseur Club, Inc. is 2 Caribbean Place,
Providenciales, Turks & Caicos.
7 Includes an aggregate of 750,000 options to purchase Common
Shares owned by Messrs. Ruge, Moon and Richardson, and 76,447
Series B Convertible Preferred Shares convertible into
1,146,705 Common Shares owned by the Ruge Family Trust.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On August 11, 1997, the Company borrowed $70,092 at 12% interest PER
ANNUM, from Irving Moon, a director of the Company. As of the date of this
Annual Report on Form 10-KSB, all of the principal and accumulated interest have
been repaid.
36
<PAGE>
Michael Ruge, an officer, director and principal shareholder of the
Company, made interest-free advances totaling $15,862 during fiscal 1997, which
amount increased to $104,141 during fiscal 1998. As of the date of this Annual
Report on Form 10-KSB, all of such advances have been repaid.
During fiscal 1998, Donald Fultz, who is a shareholder and employee of
the Company, advanced a total of $57,983, interest-free., As of the date of this
Annual Report on Form 10-KSB, all of such advances have been repaid.
During fiscal 1999, Donald Fultz and Michael Ruge advanced a total of
$670,247, interest-free, all of which has been converted to preferred stock as
of the date of this Annual Report on Form 10-KSB.
During the year ended on December 31, 1999, from Connoisseur Club,
Inc., a principal stockholder of the Company, made an interest-free loan of
$200,000 to the Company. As of the date of this Annual Report on Form 10-KSB,
all of such advances have been repaid.
In March, 1998, the Company issued 300,000 shares of Common Stock to
Susan Knight, a consultant of the Company, at a price per share ranging from
$0.50 to $2.50.
In August 1998 the Company sold 2,400,000 shares of Common Stock to the
Ruge Family Trust, at a price of $.001 per share, which is par value.
In May, 1999, the Company issued 7,137 shares of Common Stock to Eldon
Richardson, an employee of the Company, at a price per share of $1.50, in
respect of services rendered to the Company.
In August 1999, the Company issued 120,000 options to Ian Smith, a
former director of the Company, in respect of services rendered to the Company.
The options are exercisable at $1.00 per share for a period of 2 years from the
date of registration as a fully reporting company. A value of nil has been
assessed to these options. The Company's Common Stock traded at $1.313 on the
grant date.
In August, 1999, the Company issued 2,715 shares of Common Stock to
Eldon Richardson an employee of the Company, at a price per share of $1.00, in
respect of services rendered to the Company.
In August 1999, the Company issued 1,460,000 shares of Common Stock to
Connoisseur Club, Inc., a principal stockholder of the Company, at a price per
share of $1.33.
In September 1999 the Company issued 100,000 options to Jacob Canceli,
a consultant to the Company, in respect of services rendered to the Company. The
options are exercisable at $.50 per share for a period of 1 year from the grant
date. A value of $40,000 has been assessed to these options. The Company's
Common Stock traded at $1.344 at the grant date.
37
<PAGE>
On August 30, 1999, the Company issued 150,000 options to Michael
Avatar, a consultant to the Company, in respect of services rendered to the
Company. The options are exercisable at prices ranging from $1.00 to $1.50 for a
period of 3 years from the date of registration of the Company on the Small
Capital Exchange. A value of nil has been assessed to these options on the grant
date. The Company's Common Stock traded at $1.3125 at the grant date.
In October, 1999, the Company issued 500,000 shares of Common Stock to
Michael Ruge, at a price per share of $0.32, in respect of services rendered to
the Company. In addition, 500,000 options were granted at an exercise price of
$.50 per share to expire September 2000. The options are exercisable at $.50 per
share for a period of 1 year from the grant date. A value of $40,000 has been
assessed to these options. The Company's Common Stock traded at $1.344 at the
grant date. Under the terms of the same contract, additional options are to be
granted annually, expiring September 2003 at the rate of 500,000 per year,
bearing an exercise price of $.50 per share and expiring one year after the
grant date.
In October, 1999, the Company issued 500,000 shares of Common Stock to
Michael Avatar, at a price per share of $0.32, in respect of services rendered
to the Company. In addition, 500,000 options were granted at an exercise price
of $.50 per share to expire September 2000. The options are exercisable at $.50
per share for a period of 1 year from the grant date. A value of $40,000 has
been assessed to these options. The Company's Common Stock traded at $1.344 at
the grant date. Under the terms of the same contract, additional options are to
be granted annually, expiring September 2003 at the rate of 500,000 per year,
bearing an exercise price of $.50 per share and expiring one year after the
grant date.
In October, 1999, the Company issued 500,000 shares of Common Stock to
Jacob Canceli, at a price per share of $0.32, in respect of services rendered to
the Company. In addition, 500,000 options were granted at an exercise price of
$.50 per share to expire September 2000. The options are exercisable at $.50 per
share for a period of 1 year from the grant date. A value of $40,000 has been
assessed to these options. The Company's Common Stock traded at $1.344 at the
grant date. Under the terms of the same contract, additional options are to be
granted annually, expiring September 2003 at the rate of 500,000 per year,
bearing an exercise price of $.50 per share and expiring one year after the
grant date.
In October, 1999, the Company issued 500,000 shares of Common Stock to
Consoisseur Club, Inc. at a price per share of $0.32, in respect of services
rendered to the Company. In addition, 500,000 options were granted at an
exercise price of $.50 per share to expire September 2000. The options are
exercisable at $.50 per share for a period of 1 year from the grant date. A
value of $40,000 has been assessed to these options. The Company's Common Stock
traded at $1.344 at the grant date. Under the terms of the same contract,
additional options are to be granted annually, expiring September 2003 at the
rate of 500,000 per year, bearing an exercise price of $.50 per share and
expiring one year after the grant date.
In August 1999, the Company issued 500,000 shares of Common Stock to
Michael Avatar, at a price per share of $0.32, in respect of services rendered
to the Company. On that date, the Company's Common Stock traded at $1.313.
38
<PAGE>
In December 1999, the Company issued 50,000 options to Eldon
Richardson, an employee of the Company, in respect of services rendered to the
Company. The options are exercisable at $.32 per share for a period of 3 years
from the grant date. A value of $1,100 has been assessed to these options. The
Company's Common Stock traded at $.531 at the grant date.
In December 1999, the Company issued 150,000 shares of Common Stock to
Susan Knight, a consultant of the Company, at a price per share of $.20, in
respect of services rendered to the Company.
In December 1999, the Company issued 112,500 shares of Common Stock to
Mark Giannopoulos, a consultant of the Company, at a price per share of $.20, in
respect of services rendered to the Company.
In December 1999, the Company issued 300,000 shares of Common Stock to
Christopher Nugent, a consultant of the Company, at a price per share of $.20,
in respect of services rendered to the Company.
In December 1999, the Company issued 300,000 options to Wall Street
Marketing Group, Inc, a consultant to the Company, in respect of services
rendered to the Company. The options are exercisable at prices ranging from $.75
to $4.00 per share for a period of 1 year from January 2000. A value of nil has
been assessed to these options. The Company's Common Stock traded at $.375 at
the grant date.
In December 1999, the Company issued 1,500,000 shares of Common Stock
to Irving Moon, CEO and Director of the Company, at a price per share of $.20 in
respect of services rendered to the Company.
On December 21, 1999, the Company issued 500,000 options to Ruge Family
Trust; 100,000 options to Elspeth Ruge, 90,000 options Looey Tremblay, a
consultant to the Company and 75,000 options to Susan Knight, a consultant to
the Company. The options are exercisable at $.32 per share for a period of 5
years from the grant date. A total value of $19,125 has been assessed to these
options. The Company's Common Stock traded at $0.453 at the grant date
It is the practice of management that transactions between the Company
and its officers, directors, employees or stockholders or persons or entities
affiliated with officers, directors, employees or stockholders be on terms no
less favorable to the Company than it could reasonably obtain in arm's-length
transactions with independent third parties. No assurance can be given that all
such agreements will be on such terms.
39
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------
2.1 Agreement of Reorganization with Go Phone, dated February 24, 1998.*
3.1 Revised and Restated Certification of Incorporation. *
3.2 Bylaws. *
4.1 Certificate of Determination of Series A Convertible Preferred Stock
4.2 Certificate of Determination of Series B Convertible Preferred Stock
4.3 Option Agreement with Kipling Finance Co., dated December 23, 1999 in
connection with Fee Agreement (exhibit 10.22)
9.1 The Star Trust Agreement, as Amended December 23, 1999 with Promissory
Note for $728,000
9.2 The Margarita Villas Real Estate Trust Agreement, effective December
27, 1999
10.1 Form of Indemnification Agreement. *
10.2 Stock Option Plan. *
10.3 Asset Sale Agreement, dated August 16, 1999 for sale of Banner.ad.*
10.4 Agreement of Purchase and Sale, dated November 30, 1997, for purchase
of hotel property known as Margarita Villas between Donald Patrick
Fultz and Go Phone Inc.
10.5(i) Stock Acquisition Agreement - Proposed Business Combination with
Country Star Restaurants, Inc. dated March 5, 1999
10.5(ii) Stock Acquisition Agreement between Go Call Inc. and Dan J. Rubin, Roy
B. Rubin MD PC, Money Purchase Pension Plan and Daniela Nourani, dated
March 11, 1999
10.6 Agreement for the Repurchase and Sale of Stock and Release and
Indemnification dated August 5, 1999 with respect to the Stock
Acquisition Agreement dated March 11, 1999, exhibit 10.5
10.7 Promotion Agreement between PageMaster Corporation and Go Call, Inc.,
dated March 12, 1999
10.8 Security and Pledge Agreement dated March 18, 1999 with Country Star
Restaurants, Inc. with Secured Promissory note for $500,000
10.9 Indexus Agreement with Irving Insik Moon, dated April 17, 1999.
10.10 Loan Agreement between Kevin Gilbert and Go Cash Inc. dated May 15,
1999
10.11 Consultant Agreement with Connoisseur Club, Inc. dated July 1, 1999
10.12 Agreement with MPACT IMMEDIA TRANSACTION SERVICES LTD. dated July 29,
1998
10.13 Contract between Web Wonders and Go Cash Inc./Go Call Inc. for services
dated August 29, 1999
10.14 Consultant Agreement with Jake Canceli dated September 1, 1999
10.15 Consultant Agreement with Michael Ruge dated September 1, 1999
10.16 Consultant Agreement with Michael Avatar dated September 1, 1999
10.17 Internet Accounts for Sale/Asset Purchase Contract and Receipt with
Path Finder Property Corporation and its registered operating division
"SmokeSignal", dated October 29, 1999.
10.18 Consulting Agreement with Melissa Blake, dated November 21, 1999.
10.19 Agreement of Purchase and Sale between Go Call Inc. and 1246665
Ontario, Inc., dated November 27, 1999 for sale of Go Internet Cafes.
10.20 Agreement for Purchase and Sale of Real Property and Escrow
Instructions, dated December 14, 1999 for sale of Margarita Villas
10.21 Agreement between Go Cash Inc. and Sid Diamond for consulting services,
dated December 22, 1999
10.22 Fee Agreement for Introduction Services with Kipling Finance Co., dated
December 23, 1999
10.23 Investment Stock Purchase Agreement dated December 23, 1999 with
Madison Holdings Inc., including Promissory note for $125,000 from ACS
Financial, Inc. and Promissory note for $125,000 from Madison
Holdings, Inc.
10.24 Amended Note for Common Stock Exchange Agreement, dated December 23,
1999 for sale of Country Star Restaurants, Inc. to Star Liquidation
Company, LLC
10.25 Exchange Agreement dated December 23, 1999 with The Hartcourt Companies
Inc.
10.26 Public Relations and Consulting Agreement with Wall Street Marketing
Group Inc., dated December 27, 1999
10.27 Agreement of Limited Partnership, Sevada Holdings Ltd., IV, effective
December 1999.
10.28 Letter from Tide Lines, LLC dated January 18, 2000 terminating the sale
agreement dated August 16, 1999 for sale of Banner.ad
17.1(i) Resignation of Michael Ruge as Director, Chief Executive Officer and
President of the Corporation, dated December 29, 1999
17.1(ii) Consent to Act as Director and Officer of the Corporation of James
Hammer, dated December 22, 1999
17.1(iii)Consent to Act as Chief Executive Officer of the Corporation and
continue as a Director of the Corporation of Irving Moon, dated
December 29, 1999
27.1 Financial Data Schedule
- -----------------
* Indicates previously filed documents.
(a) REPORTS ON FORM 8-K
None.
40
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
GoCall, Inc
--------------------------
(Registrant)
By /s/ Irving Moon
--------------------------
Irving Moon, Chief Executive
Officer
Date March 27, 2000
--------------------------
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
By /s/ Irving Moon
--------------------------
Irving Moon, Chief Executive
Officer and Director
Date March 27, 2000
--------------------------
By /s/ James Hammer
--------------------------
James Hammer, Director
Date March 27, 2000
--------------------------
GO CALL INC.
CERTIFICATE OF DETERMINATION OF
SERIES A CONVERTIBLE PREFERRED STOCK
Michael Ruge hereby certifies that:
1. He is the Chief Executive Officer of Go Call Inc, a Delaware
corporation (the "Corporation"); and
2. Pursuant to the authority granted under Article Four of the
Corporation's Certificate of Incorporation, and in accordance with the
General Corporation Law of the State of Delaware, as of December 23,
1999, the Board of Directors of the Corporation has duly adopted the
following resolutions:
WHEREAS, this Corporation is authorized by its Certificate of
Incorporation to issue TWO MILLION (2,000,000) shares of preferred stock, par
value $0.001 per share (the "Preferred Stock");
WHEREAS, the Board of Directors of this Corporation is authorized, as
to the Preferred Stock, within the limitations and restrictions stated in the
Certificate of Incorporation, to fix by resolution or resolutions the number of
series into which shares of the Preferred Stock may be divided, to determine the
rights, preferences, privileges and restrictions granted to or imposed upon the
Preferred Stock or any series thereof or any holders thereof, to determine and
alter the rights, preferences, privileges and restrictions granted to or imposed
upon any wholly unissued series of Preferred Stock or the holders thereof, to
fix the number of shares constituting any series prior to the issuance of shares
of that series and to increase or decrease, within the limits stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series ( but not below the number of shares of such
series then outstanding), the number of shares of any such series subsequent to
the issue of that series;
WHEREAS, the Board of Directors of this Corporation desires, pursuant
to its authority granted under the Certificate of Incorporation, to determine
and fix the rights, preferences, privileges and restrictions relating to a
series of Preferred Stock to be designated as "Series A Convertible Preferred
Stock" (the "Series A Convertible Preferred Stock"), and to fix the number of
shares constituting and the designation of such series; and
WHEREAS, the Board of Directors of the Corporation has authorized the
issuance of up to 1,000,000 shares of Series A Convertible Preferred Stock on
the terms and with the provisions set forth in this Certificate of Determination
(the "Certificate")'
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized the
Series A Convertible Preferred Stock on the terms and with the provisions herein
set forth:
1. DEFINITIONS. For purposes of this Article, the following
definitions shall apply:
<PAGE>
- " Common Stock" shall mean the common stock, par value $0.001
per share, of the Corporation.
- "Preferred Stock" shall mean the preferred stock, par value
$0.001 per share, of the Corporation.
- " Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor act.
- "Series A Convertible Preferred Stock" shall mean the series of
Preferred Stock designated as the Series A Convertible Preferred
Stock by the Corporation's Board of Directors.
2. DETERMINATION OF PREFERENCES OF SERIES A CONVERTIBLE PREFERRED
STOCK. The rights, preferences, privileges, restrictions and
other matters related to the Series A Convertible Preferred Stock
in the Article are as follows:
a) Dividend Provisions. The Series A Convertible Preferred
Stock shall bear no dividends, and the holders of the Series
A Convertible Preferred Stock shall not be entitled to
received dividends on the Series A convertible Preferred
Stock.
b) Liquidation Preference.
(1) Preference. In the event of any voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Corporation, after payment or
provision for payment of the debts and other
liabilities of the Corporation, each holder of the
Series A Convertible Preferred Stock shall be entitled
to receive, out of the remaining net assets of the
Corporation legally available for distribution to its
shareholders, distributions on the same proportionate
basis as and on a pro rate basis with the holders of
the Common Stock: provided, however, that each share of
Series A Convertible Preferred Stock shall be entitled
to distributions based on the number of shares of
Common Stock into which the Series A Convertible Stock
may be converted in accordance with Section 2(c)(2) of
this Article.
(2) Reorganization. For the purposes of this Article, a
liquidation, dissolution or winding up of the affairs
of the Corporation shall not be deemed to be occasioned
by or to include the sale of all or substantially all
of the assets of the Corporation or the acquisition of
the Corporation by another entity by means of a merger,
consolidation, or other reorganization.
C) CONVERSION RIGHTS. The holders of the Series A Convertible
Preferred Stock shall have conversion rights (the
"Conversion Rights"), as follows:
(1) Optional Conversion.
(A) Each share of Series A Convertible Preferred shall
be convertible, at the option of the holder
thereof at any time subsequent to December 31,
1999, in accordance with Section 2(c)(2) of this
Article.
(B) In order to convert shares of the Series A
Convertible Preferred Stock into shares of Common
Stock, the holder thereof shall surrender the
certificate or certificates thereof, duly
endorsed, at the office of the Corporation or its
transfer agent, together with written notice (the
"Conversion Notice") to the Corporation stating
that it elects to convert the same and setting
forth the name or names in which it wishes the
certificate or certificates for Common Stock to be
issued, and the number of shares of Series A
Convertible Preferred Stock being converted.
<PAGE>
(C) The Corporation shall, as soon as practicable
after the surrender of the certificate or
certificates evidencing shares of Series A
Convertible Preferred Stock for conversion, issue
to the holder of such shares a certificate or
certificates evidencing the number of shares of
Common Stock (and any other securities and
property) to which it shall be entitled and, in
the event that only a part of the shares evidenced
by such certificate or certificates are converted,
a certificate evidencing the number of shares of
Series A Convertible Preferred Stock, as the case
may be, which are not converted. For purposes of
determining the date of conversion (the
"Conversion Date") of the Series A Convertible
Preferred Stock in connection with Section
2(c)(2)(A) of this Article, the Conversion Date
shall be deemed to be the date set forth in the
Conversion Notice, provided that an advance copy
of the Conversion Notice shall be faxed to the
Company prior to midnight, EST on the Conversion
Date, and the original Conversion Notice and the
Certificates for the shares of Series A
Convertible Preferred Stock shall be delivered to
the Company within two (2) business days following
the date set forth in the Conversion Notice, or
otherwise, the Conversion Date shall be deemed to
be the date on which the Conversion Notice and the
certificates for the shares of Series A
Convertible Preferred Stock to be converted shall
be delivered to the Company. The person or persons
entitle to receive the shares of Common Stock
issuable upon such conversion shall be treated for
all purposes as the record holder or holders of
such shares of Common Stock at such date and
shall, with respect to such shares, thereafter
have only the rights of a holder of Common Stock;
provided, however, that if, at the date of such
notice and surrender, the transfer books for the
Common Stock or other class of stock purchaseable
upon the exercise of such conversion rights shall
be closed, the certificate or certificates for the
shares of Common Stock in respect of which such
conversion rights are then exercised shall be
issuable as of the date on which such books shall
next be opened, and until such date the
Corporation shall be under no duty to deliver any
certificate for such shares of Common Stock; and
provided, further, that the transfer books of
record, unless otherwise required by law, shall
not be closed at any one time for a period longer
than twenty (20) days. The rights of purchase
represented by the foregoing conversion rights
shall be exercisable, at the election of the
holder, either in full or from time to time in
part.
(D) With respect to the issue of shares of Common
Stock upon conversion of the Series A Convertible
Preferred Stock and the transfer of such shares of
Common Stock:
<PAGE>
(i) The holder and any transferee of the shares
of Common Stock issuable upon the exercise of
the foregoing conversion rights agree that
notwithstanding anything in this Certificate
tot the contrary, during such period as may
be required by the securities laws of any
applicable jurisdiction, no public
distribution of such Common Stock will be
made in a manner or on terms different from
those set forth in, or without delivery of, a
prospectus or other document then meeting the
requirements of such laws. The holder and any
such transferee further agree that if any
distribution of any of such Common Stock is
proposed to be made to them or by them
otherwise than by deliver of such a
prospectus or other document meeting the
requirements of the securities laws of all
applicable jurisdictions, such action shall
be taken only after submission to the
Corporation of an opinion of counsel,
reasonably satisfactory in from and substance
to the Corporation's counsel, to the effect
that the proposed distribution will no be in
violation of such securities laws.
(ii) It shall be a condition to the transfer of
such Common stock that any transferee of such
Common Stock deliver to the Corporation his
or its written agreement to accept and be
bound by all of the terms and conditions of
this Certificate.
(2) NUMBER OF SHARES.
(A) Each share of Series A Convertible Preferred Stock
shall be convertible, subject to adjustment from
time to time in connection with any stock split,
reverse stock split or reclassification of the
Series A Convertible Preferred Stock, TEN (10)
shares of duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock,
calculated as to each conversion to the greatest
number of full shares of Common Stock,
disregarding fractions, with a cash adjustment for
fractional shares as hereinafter provided, at any
time subsequent to December 31, 1999 (the
"Conversion Period"); provided, however, that
holder shall be entitled to convert the aggregate
of any eligible shares of Series A Convertible
Preferred Stock, previously not so elected to be
converted, during the Conversion Period; provided,
further, that the number of shares of Common Stock
issuable upon conversions of Series A Convertible
Preferred stock shall be subject to adjustment
from time to time in connection with any stock
split, reverse stock split or reclassification of
the Common Stock; and provided, further, that such
right of conversion shall only be exercisable at
such time as the exercise of such right of
conversion and the delivery of such shares of
Common Stock are lawful under federal securities
laws and the securities laws of the jurisdiction
of residence of all persons to whom such shares of
Common Stock are otherwise deliverable.
(B) No fractional shares of Common Stock or scrip
shall be issued upon conversion of the Series A
Convertible Preferred Stock. If more than one
share of Series A Convertible Preferred Stock
shall be surrendered for conversion at any one
time by the same holder, the number of full shares
of Common Stock issuable upon
<PAGE>
conversion thereof shall be computed on the basis
of the aggregate number of shares of Series A
Convertible Preferred Stock so surrendered. If the
computation for determining the number of shares
of Common Stock issuable upon conversion of Series
A Convertible Preferred Stock, shall result in
other than a whole number, the Corporation shall
issue to such shareholder, in respect of the
aggregate number of shares of Series A Convertible
Preferred Stock held by any shareholder, one share
of Common Stock in respect of any fractional
shares Common Stock otherwise issuable to each
such shareholder.
(3) CERTAIN DISTRIBUTIONS. In the event the Corporation at
any time, or from time to time, shall make or issue, of
fix a record date for the determination of holders of
Common Stock entitled to receive a dividend or other
distribution payable in securities of the Corporation
other than shares of Common Stock or securities
convertible into or exchangeable for Common Stock, then
and in each such event, provision shall be made so that
the holders of the Series A Convertible Preferred Stock
shall receive upon conversion thereof, in addition to
the number of shares of Common Stock receivable
thereupon, the amount of securities of the Corporation
which they would have received had their Series A
Convertible Preferred Stock Corporation which they
would have received had their Series A Convertible
Preferred Stock been converted into Common Stock on the
date of such event and had thereafter, during the
period from the date of such event to and including the
date of conversion, retained such securities receivable
by them as aforesaid during such period, giving
application to all adjustments called for during such
period under this Section 2(c)(3) of this Article with
respect to the rights of the holders of Series A
Convertible Preferred Stock.
(4) CERTAIN REORGANIZATIONS. In the event of any capital
reorganization, any reclassification of the Common
Stock (other than a change in par value or as a result
of a stock dividend, subdivision, split-up or
combination of shares), the consolidation or merger of
the Corporation with or into another person, or the
sale or other disposition of all or substantially all
of the properties of the Corporation as an entirety to
another person (collectively referred to hereinafter as
a "Reorganization"), the holders of the Series A
Convertible Preferred Stock shall thereafter be entitle
to receive, and provision shall be made therefore in
any agreement relating to a Reorganization, upon
conversion of the Series A Convertible Preferred Stock,
the kind and number of shares of Common Stock or other
securities or property (including cash) of the
Corporation, or the other corporation resulting from
such consolidation or surviving such merger, which the
Series A Convertible Preferred Stock entitle the holder
thereof to convert to immediately prior to such
Reorganization; and in any such case appropriate
adjustment shall be made in the application of the
provisions herein set forth with respect to the rights
and interests thereafter of the holders of the Series A
Convertible Preferred Stock to the end that the
provisions set forth herein shall thereafter be
applicable, as nearly as reasonably may be, in relation
to any shares, to such other securities or property
thereafter receivable upon conversion of the Series A
Convertible Preferred Stock. The provisions of this
Section 2(c)(4) of this Article shall similarly apply
to successive Reorganizations.
<PAGE>
(5) NOTICE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the number of shares of Common Stock or
other securities issuable upon conversion of the Series
A Convertible Preferred Stock, the Corporation, at its
expense, shall prepare a certificate showing such
adjustment or readjustment, and shall mail such
certificate, by first-class mail, postage prepaid, to
each holder of the Series A Convertible Preferred Stock
which is the subject of adjustment. The certificate
shall set forth such adjustment or readjustment,
showing in detail the facts upon which such adjustment
or readjustment is based, including a statement of the
number of shares of Common Stock and the type and
amount, if any, of other property which at the time
would be received upon conversion of such Series A
Convertible Preferred Stock.
(6) RESERVATION OF SHARES. The Corporation shall at all
times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the
purpose of effecting the conversion or the issuance of
dividends in respect of the shares of Series A
Convertible Preferred Stock, such number of the shares
of Common Stock as shall be from time to time
sufficient to effect the conversion or the issuance of
dividends in respect of all then outstanding shares of
the Series A Convertible Preferred Stock, the
Corporation shall promptly seek such corporate action
as may in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient
for such purpose. In the event of the consolidation or
merger of the Corporation with another corporation,
effective provision shall be made in the certificate or
articles of incorporation, documents of merger or
consolidation, or otherwise, of the surviving
corporation so that such corporation will at all times
reserve and keep available a sufficient number of
shares of Common Stock or other securities or property
to provide for the conversion or issuance of dividends
in respect of the Series A Convertible Preferred Stock
accordance with the provisions of this Section 2(c) of
this Article.
(7) TAXES. The Corporation shall pay all taxes and other
governmental charges (other than any income or other
taxes imposed upon the profits realized by the
recipient) that may be imposed in respect of the issue
or delivery of shares of Common Stock or other
securities or property upon conversion or issuance of
dividends in respect of shares of Series A Convertible
Preferred Stock, including without limitation, any tax
or other charge (other than any transfer tax) imposed
in connection with the issue and delivery of shares of
Common Stock or other securities at the time of such
conversion or issuance of dividends in a name other
than that in which the shares of Series A Convertible
Preferred Stock so converted or otherwise held were
registered.
<PAGE>
(8) CANCELLATION OF CERTIFICATES. All certificates
representing Series A Convertible Preferred Stock
surrendered for conversion or redemption shall be
appropriately canceled on the books, and the shares so
converted or redeemed represented by such certificates
shall be restored to the status of authorized but
unissued shares of undesignated Preferred Stock, but
may not be reissued as part of the Series A Convertible
Preferred Stock.
(9) NO AVOIDANCE. The Corporation shall not amend the
Corporation's Articles of Incorporation or participate
in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the
purpose of avoiding or attempting to avoid the
observance or performance of any of the terms to be
observed or performed hereunder by the Corporation.
(d) VOTING RIGHTS. The holders of the Series A Convertible Preferred
Stock shall have no voting rights.
(e) INTEREST. The holders of the Series A Convertible Preferred Stock
are not entitled to any interest on the value of the Series A
Convertible Preferred stock.
(f) ADDITIONAL SERIES OF PREFERRED STOCK. Except for the Series A
Convertible Preferred Stock, the Board of Directors of the Corporation
is authorized to fix the number of shares of any additional series of
Preferred Stock and to determine the designation of any such series.
The Board of Directors is also authorized to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed
upon any wholly unissued series of Preferred Stock and, within the
limits and restrictions stated in any resolution or resolutions of the
Board of Directors originally fixing the number of shares constituting
any series, to increase or decrease (but not below the number of shares
of any such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series. The Corporation
expressly reserves the right to issue additional series of Preferred
Stock from time to time which may rank on a parity with the Series A
Convertible Preferred Stock with respect to any distributions upon
dissolution, liquidation or winding up, or of dividends pursuant to
Sections 2(a) and 2(b) of this Article, respectively, without the prior
authorization of the holders of the Series A Convertible Preferred
Stock.
(g) MISCELLANEOUS.
(1) Notices. All notices, requests, consents and other
communications required hereunder shall be in writing
and by overnight, registered or certified mail,
postage prepaid, return receipt requested, and shall
be deemed to have been duly made when deposited in
the mails upon mailing or by overnight, registered or
certified mail, postage prepaid, return receipt
requested: if addressed to the holder at the last
address of such holder on the books of the
Corporation; if addressed to the Corporation, at or
such other address as the Corporation may designate
in writing.
<PAGE>
(2) Holders. For purposes of this Article, the "holder"
of any share of Common Stock or Series A Convertible
Preferred Stock shall be the holder of record of such
treat the holder as the owner of such securities for
all purposes.
(3) Authorized Number of Shares of Series A Convertible
Preferred Stock. The authorized number of shares of
Preferred Stock of this Corporation is 2,000,000
shares and the authorized number of shares
constituting the Series A Convertible Preferred Stock
is 1,000,000 shares.
IN WITNESS WHEREOF, Go Call Inc., has caused this Certificate of
Determination to be executed by its Chief Executive Officer as of December 23,
1999.
GO CALL INC.
By: /S/ Michael Ruge
-------------------------------------
Michael Ruge, Chief Executive Officer
GO CALL INC.
CERTIFICATE OF DETERMINATION OF
SERIES B CONVERTIBLE PREFERRED STOCK
Michael Ruge hereby certifies that:
1. He is the Chief Executive Officer of Go Call Inc, a Delaware corporation
(the "Corporation"); and
2. Pursuant to the authority granted under Article Four of the Corporation's
Certificate of Incorporation, and in accordance with the General
Corporation Law of the State of Delaware, as of December 23, 1999, the
Board of Directors of the Corporation has duly adopted the following
resolutions:
WHEREAS, this Corporation is authorized by its Certificate of Incorporation
to issue TWO MILLION (2,000,000) shares of preferred stock, par value $0.001 per
share (the "Preferred Stock");
WHEREAS, the Board of Directors of this Corporation is authorized, as to
the Preferred Stock, within the limitations and restrictions stated in the
Certificate of Incorporation, to fix by resolution or resolutions the number of
series into which shares of the Preferred Stock may be divided, to determine the
rights, preferences, privileges and restrictions granted to or imposed upon the
Preferred Stock or any series thereof or any holders thereof, to determine and
alter the rights, preferences, privileges and restrictions granted to or imposed
upon any wholly unissued series of Preferred Stock or the holders thereof, to
fix the number of shares constituting any series prior to the issuance of shares
of that series and to increase or decrease, within the limits stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series (but not below the number of shares of such
series then outstanding), the number of shares of any such series subsequent to
the issue of that series;
WHEREAS, the Board of Directors of this Corporation desires, pursuant to
its authority granted under the Certificate of Incorporation, to determine and
fix the rights, preferences, privileges and restrictions relating to a series of
Preferred Stock to be designated as "Series B Convertible Preferred Stock" (the
"Series B Convertible Preferred Stock"), and to fix the number of shares
constituting and the designation of such series; and
WHEREAS, the Board of Directors of the Corporation has authorized the
issuance of up to 1,000,000 shares of Series B Convertible Preferred Stock on
the terms and with the provisions set forth in this Certificate of Determination
(the "Certificate")'
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized the Series
B Convertible Preferred Stock on the terms and with the provisions herein set
forth:
<PAGE>
1. DEFINITIONS. For purposes of this Article, the following definitions
shall apply:
- " Common Stock" shall mean the common stock, par value $0.001 per
share, of the Corporation.
- "Preferred Stock" shall mean the preferred stock, par value $0.001
per share, of the Corporation.
- " Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor act.
- "Series B Convertible Preferred Stock" shall mean the series of
Preferred Stock designated as the Series B Convertible Preferred Stock
by the Corporation's Board of Directors.
2. DETERMINATION OF PREFERENCES OF SERIES B CONVERTIBLE PREFERRED STOCK.
The rights, preferences, privileges, restrictions and other matters
related to the Series B Convertible Preferred Stock in the Article are
as follows:
a) Dividend Provisions. The Series B Convertible Preferred Stock
shall bear no dividends, and the holders of the Series B
Convertible Preferred Stock shall not be entitled to received
dividends on the Series B convertible Preferred Stock.
b) Liquidation Preference.
(1) Preference. In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Corporation, after payment or provision for payment of the
debts and other liabilities of the Corporation, each holder
of the Series B Convertible Preferred Stock shall be
entitled to receive, out of the remaining net assets of the
Corporation legally available for distribution to its
shareholders, distributions on the same proportionate basis
as and on a pro rate basis with the holders of the Common
Stock: provided, however, that each share of Series B
Convertible Preferred Stock shall be entitled to
distributions based on the number of shares of Common Stock
into which the Series B Convertible Stock may be converted
in accordance with Section 2(c)(2) of this Article.
(2) Reorganization. For the purposes of this Article, a
liquidation, dissolution or winding up of the affairs of the
Corporation shall not be deemed to be occasioned by or to
include the sale of all or substantially all of the assets
of the Corporation or the acquisition of the Corporation by
another entity by means of a merger, consolidation, or other
reorganization.
C) CONVERSION RIGHTS. The holders of the Series B Convertible
Preferred Stock shall have conversion rights (the "Conversion
Rights"), as follows:
(1) Optional Conversion.
(A) Each share of Series B Convertible Preferred shall be
convertible, at the option of the holder thereof at any
time subsequent to December 31, 1999, in accordance
with Section 2(c)(2) of this Article.
(B) In order to convert shares of the Series B Convertible
Preferred Stock into shares of Common Stock, the holder
thereof shall surrender the certificate or certificates
thereof, duly endorsed, at the office of the
Corporation or its transfer agent, together with
written notice (the "Conversion Notice") to the
Corporation stating that it elects to convert the same
and setting forth the name or names in which it wishes
the certificate or certificates for Common Stock to be
issued, and the number of shares of Series B
Convertible Preferred Stock being converted.
<PAGE>
(C) The Corporation shall, as soon as practicable after the
surrender of the certificate or certificates evidencing
shares of Series B Convertible Preferred Stock for
conversion, issue to the holder of such shares a
certificate or certificates evidencing the number of
shares of Common Stock (and any other securities and
property) to which it shall be entitled and, in the
event that only a part of the shares evidenced by such
certificate or certificates are converted, a
certificate evidencing the number of shares of Series B
Convertible Preferred Stock, as the case may be, which
are not converted. For purposes of determining the date
of conversion (the "Conversion Date") of the Series B
Convertible Preferred Stock in connection with Section
2(c)(2)(A) of this Article, the Conversion Date shall
be deemed to be the date set forth in the Conversion
Notice, provided that an advance copy of the Conversion
Notice shall be faxed to the Company prior to midnight,
EST on the Conversion Date, and the original Conversion
Notice and the Certificates for the shares of Series B
Convertible Preferred Stock shall be delivered to the
Company within two (2) business days following the date
set forth in the Conversion Notice, or otherwise, the
Conversion Date shall be deemed to be the date on which
the Conversion Notice and the certificates for the
shares of Series B Convertible Preferred Stock to be
converted shall be delivered to the Company. The person
or persons entitle to receive the shares of Common
Stock issuable upon such conversion shall be treated
for all purposes as the record holder or holders of
such shares of Common Stock at such date and shall,
with respect to such shares, thereafter have only the
rights of a holder of Common Stock; provided, however,
that if, at the date of such notice and surrender, the
transfer books for the Common Stock or other class of
stock purchaseable upon the exercise of such conversion
rights shall be closed, the certificate or certificates
for the shares of Common Stock in respect of which such
conversion rights are then exercised shall be issuable
as of the date on which such books shall next be
opened, and until such date the Corporation shall be
under no duty to deliver any certificate for such
shares of Common Stock; and provided, further, that the
transfer books of record, unless otherwise required by
law, shall not be closed at any one time for a period
longer than twenty (20) days. The rights of purchase
represented by the foregoing conversion rights shall be
exercisable, at the election of the holder, either in
full or from time to time in part.
(D) With respect to the issue of shares of Common Stock
upon conversion of the Series B Convertible Preferred
Stock and the transfer of such shares of Common Stock:
(i) The holder and any transferee of the shares of
Common Stock issuable upon the exercise of the
foregoing conversion rights agree that
notwithstanding anything in this Certificate to
<PAGE>
the contrary, during such period as may be
required by the securities laws of any applicable
jurisdiction, no public distribution of such
Common Stock will be made in a manner or on terms
different from those set forth in, or without
delivery of, a prospectus or other document then
meeting the requirements of such laws. The holder
and any such transferee further agree that if any
distribution of any of such Common Stock is
proposed to be made to them or by them otherwise
than by deliver of such a prospectus or other
document meeting the requirements of the
securities laws of all applicable jurisdictions,
such action shall be taken only after submission
to the Corporation of an opinion of counsel,
reasonably satisfactory in from and substance to
the Corporation's counsel, to the effect that the
proposed distribution will no be in violation of
such securities laws.
(ii) It shall be a condition to the transfer of such
Common stock that any transferee of such Common
Stock deliver to the Corporation his or its
written agreement to accept and be bound by all of
the terms and conditions of this Certificate.
(2) NUMBER OF SHARES.
(A) Each share of Series B Convertible Preferred Stock
shall be convertible, subject to adjustment from time
to time in connection with any stock split, reverse
stock split or reclassification of the Series B
Convertible Preferred Stock, FIFTEEN (15) shares of
duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock, calculated as to
each conversion to the greatest number of full shares
of Common Stock, disregarding fractions, with a cash
adjustment for fractional shares as hereinafter
provided, at any time subsequent to December 31, 1999
(the "Conversion Period"); provided, however, that
holder shall be entitled to convert the aggregate of
any eligible shares of Series B Convertible Preferred
Stock, previously not so elected to be converted,
during the Conversion Period; provided, further, that
the number of shares of Common Stock issuable upon
conversions of Series B Convertible Preferred stock
shall be subject to adjustment from time to time in
connection with any stock split, reverse stock split or
reclassification of the Common Stock; and provided,
further, that such right of conversion shall only be
exercisable at such time as the exercise of such right
of conversion and the delivery of such shares of Common
Stock are lawful under federal securities laws and the
securities laws of the jurisdiction of residence of all
persons to whom such shares of Common Stock are
otherwise deliverable.
(B) No fractional shares of Common Stock or scrip shall be
issued upon conversion of the Series B Convertible
Preferred Stock. If more than one share of Series B
Convertible Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the
number of full shares of Common Stock issuable upon
<PAGE>
conversion thereof shall be computed on the basis of
the aggregate number of shares of Series B Convertible
Preferred Stock so surrendered. If the computation for
determining the number of shares of Common Stock
issuable upon conversion of Series B Convertible
Preferred Stock, shall result in other than a whole
number, the Corporation shall issue to such
shareholder, in respect of the aggregate number of
shares of Series B Convertible Preferred Stock held by
any shareholder, one share of Common Stock in respect
of any fractional shares Common Stock otherwise
issuable to each such shareholder.
(3) CERTAIN DISTRIBUTIONS. In the event the Corporation at any
time, or from time to time, shall make or issue, of fix a
record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable
in securities of the Corporation other than shares of Common
Stock or securities convertible into or exchangeable for
Common Stock, then and in each such event, provision shall
be made so that the holders of the Series B Convertible
Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Corporation which
they would have received had their Series B Convertible
Preferred Stock Corporation which they would have received
had their Series B Convertible Preferred Stock been
converted into Common Stock on the date of such event and
had thereafter, during the period from the date of such
event to and including the date of conversion, retained such
securities receivable by them as aforesaid during such
period, giving application to all adjustments called for
during such period under this Section 2(c)(3) of this
Article with respect to the rights of the holders of Series
B Convertible Preferred Stock.
(4) CERTAIN REORGANIZATIONS. In the event of any capital
reorganization, any reclassification of the Common Stock
(other than a change in par value or as a result of a stock
dividend, subdivision, split-up or combination of shares),
the consolidation or merger of the Corporation with or into
another person, or the sale or other disposition of all or
substantially all of the properties of the Corporation as an
entirety to another person (collectively referred to
hereinafter as a "Reorganization"), the holders of the
Series B Convertible Preferred Stock shall thereafter be
entitle to receive, and provision shall be made therefore in
any agreement relating to a Reorganization, upon conversion
of the Series B Convertible Preferred Stock, the kind and
number of shares of Common Stock or other securities or
property (including cash) of the Corporation, or the other
corporation resulting from such consolidation or surviving
such merger, which the Series B Convertible Preferred Stock
entitle the holder thereof to convert to immediately prior
to such Reorganization; and in any such case appropriate
adjustment shall be made in the application of the
provisions herein set forth with respect to the rights and
interests thereafter of the holders of the Series B
Convertible Preferred Stock to the end that the provisions
set forth herein shall thereafter be applicable, as nearly
as reasonably may be, in relation to any shares, to such
other securities or property thereafter receivable upon
conversion of the Series B Convertible Preferred Stock. The
provisions of this Section 2(c)(4) of this Article shall
similarly apply to successive Reorganizations.
<PAGE>
(5) NOTICE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the number of shares of Common Stock or
other securities issuable upon conversion of the Series B
Convertible Preferred Stock, the Corporation, at its
expense, shall prepare a certificate showing such adjustment
or readjustment, and shall mail such certificate, by
first-class mail, postage prepaid, to each holder of the
Series B Convertible Preferred Stock which is the subject of
adjustment. The certificate shall set forth such adjustment
or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement
of the number of shares of Common Stock and the type and
amount, if any, of other property which at the time would be
received upon conversion of such Series B Convertible
Preferred Stock.
(6) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of
effecting the conversion or the issuance of dividends in
respect of the shares of Series B Convertible Preferred
Stock, such number of the shares of Common Stock as shall be
from time to time sufficient to effect the conversion or the
issuance of dividends in respect of all then outstanding
shares of the Series B Convertible Preferred Stock, the
Corporation shall promptly seek such corporate action as may
in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose. In
the event of the consolidation or merger of the Corporation
with another corporation, effective provision shall be made
in the certificate or articles of incorporation, documents
of merger or consolidation, or otherwise, of the surviving
corporation so that such corporation will at all times
reserve and keep available a sufficient number of shares of
Common Stock or other securities or property to provide for
the conversion or issuance of dividends in respect of the
Series B Convertible Preferred Stock accordance with the
provisions of this Section 2(c) of this Article.
(7) TAXES. The Corporation shall pay all taxes and other
governmental charges (other than any income or other taxes
imposed upon the profits realized by the recipient) that may
be imposed in respect of the issue or delivery of shares of
Common Stock or other securities or property upon conversion
or issuance of dividends in respect of shares of Series B
Convertible Preferred Stock, including without limitation,
any tax or other charge (other than any transfer tax)
imposed in connection with the issue and delivery of shares
of Common Stock or other securities at the time of such
conversion or issuance of dividends in a name other than
that in which the shares of Series B Convertible Preferred
Stock so converted or otherwise held were registered.
<PAGE>
(8) CANCELLATION OF CERTIFICATES. All certificates representing
Series B Convertible Preferred Stock surrendered for
conversion or redemption shall be appropriately canceled on
the books, and the shares so converted or redeemed
represented by such certificates shall be restored to the
status of authorized but unissued shares of undesignated
Preferred Stock, but may not be reissued as part of the
Series B Convertible Preferred Stock.
(9) NO AVOIDANCE. The Corporation shall not amend the
Corporation's Articles of Incorporation or participate in
any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or
attempting to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
Corporation.
(d) VOTING RIGHTS. The holders of the Series B Convertible Preferred
Stock shall have no voting rights.
(e) INTEREST. The holders of the Series B Convertible Preferred Stock
are not entitled to any interest on the value of the Series B
Convertible Preferred stock.
(f) ADDITIONAL SERIES OF PREFERRED STOCK. Except for the Series B
Convertible Preferred Stock, the Board of Directors of the Corporation
is authorized to fix the number of shares of any additional series of
Preferred Stock and to determine the designation of any such series.
The Board of Directors is also authorized to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed
upon any wholly unissued series of Preferred Stock and, within the
limits and restrictions stated in any resolution or resolutions of the
Board of Directors originally fixing the number of shares constituting
any series, to increase or decrease (but not below the number of shares
of any such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series. The Corporation
expressly reserves the right to issue additional series of Preferred
Stock from time to time which may rank on a parity with the Series B
Convertible Preferred Stock with respect to any distributions upon
dissolution, liquidation or winding up, or of dividends pursuant to
Sections 2(a) and 2(b) of this Article, respectively, without the prior
authorization of the holders of the Series B Convertible Preferred
Stock.
(g) MISCELLANEOUS.
(1) Notices. All notices, requests, consents and other
communications required hereunder shall be in writing and by
overnight, registered or certified mail, postage prepaid,
return receipt requested, and shall be deemed to have been
duly made when deposited in the mails upon mailing or by
overnight, registered or certified mail, postage prepaid,
return receipt requested: if addressed to the holder at the
last address of such holder on the books of the Corporation;
if addressed to the Corporation, at or such other address as
the Corporation may designate in writing.
<PAGE>
(2) Holders. For purposes of this Article, the "holder" of any
share of Common Stock or Series B Convertible Preferred
Stock shall be the holder of record of such treat the holder
as the owner of such securities for all purposes.
(3) Authorized Number of Shares of Series B Convertible
Preferred Stock. The authorized number of shares of
Preferred Stock of this Corporation is 2,000,000 shares and
the authorized number of shares constituting the Series B
Convertible Preferred Stock is 1,000,000 shares.
IN WITNESS WHEREOF, Go Call Inc., has caused this Certificate of
Determination to be executed by its Chief Executive Officer as of December 23,
1999.
GO CALL INC.
By: /S/ Michael Ruge
-------------------------------------
Michael Ruge, Chief Executive Officer
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is entered into effective the 23rd
day of December 1999, by and between GoCall, Inc. a Delaware Corporation with
principal offices located at 15 Queen St/ E/. Cambridge, Ontario, Canada, N3C
2A7 ("Company"), and Kipling Finance Co., a BVI corporation (the "Holder"), its
successors or assigns.
WHEREAS, the Company proposes to issue to Kipling options to purchase
shares of its common stock (the "Common Stock") in connection with the Company's
engagement of Kipling pursuant to the Fee Agreement of even date between the
Company and Kipling, incorporated by reference herein (the "Fee Agreement");
and,
WHEREAS, to induce Kipling to execute the First Amendment to the Fee
Agreement the Company hereby grants Kipling an option to purchase shares of the
Company's Common Stock subject to the terms and conditions set forth below,
NOW, THEREFORE, for and in consideration of the mutual promises
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the terms and
conditions set forth below, Kipling and the Company agree as follows:
1. THE OPTION
The Company hereby grants to Kipling (hereinafter "Holder"), its
successors or assigns an option (the "Option") to acquire Ten Million
(l0,000,000) shares of the Company's Common Stock, with the right to
"piggy-back" on any registration, which is hereinafter referred to as
the "Option Shares"), at a purchase price of Fifty Cents ($0.50) per
share ("Option Price").
2. TERM AND EXERCISE OF OPTION
A. Term of Option. Subject to the terms of this Agreement,
Holder or assignee shall have the right to exercise the
Option in whole or in part, commencing the date hereof
through the close of business on December 23, 2001. The
Company acknowledges that Kipling's talents and services are
of a special, unique, unusual and extraordinary character
and are of particular and peculiar benefit and importance to
the Company for the purposes of locating potential
acquisition targets, mergers, introduction to entities with
capital, etc. However if Kipling shall fail to introduce to
Company an acceptable acquisition target (or reverse),
strategic partner or assets that have an asset value of Ten
Million ($10,000,000) Dollars(US$), within six (six) months
from the date hereof, then and in that event this agreement
shall be cancelled and deemed null, void and of no legal
efficacy.
/S/
1
<PAGE>
B. EXERCISE OF THE OPTION. The Option may be exercised upon
written notice to the Company at its principal office
setting out the number of Option Shares to be purchased,
together with payment of the Option Price.
C. ISSUANCE OF OPTION SHARES. Upon such notice of exercise and
payment of the Option Price, the Company shall issue and
cause to be delivered within five (5) business days
following the written order of Holder, or its successor as
provided for herein, and in such name or names as the Holder
may designate, a certificate or certificates for the number
of Option Shares so purchased. The rights of purchase
represented by the Option shall be exercisable, at the
election of the Holder thereof, either in full or from time
to time in part, and in the event the Option is exercised in
respect of less than all of the Option Shares purchasable on
such exercise at any time prior to the date of expiration
hereof, the remaining Option Shares shall continue to be
subject to adjustment as set forth in paragraph 4 hereof.
The Company irrevocably agrees to reconstitute the Option
Shares as provided herein.
3. RESERVATION OF OPTION SHARES
The Company shall at all times keep reserved and available, out of its
authorized Common Stock, such number of shares of Common Stock as
shall be sufficient to provide for the exercise of the rights
represented by this Agreement. The transfer agent for the Common Stock
and any successor transfer agent for any shares of the Company's
capital stock issuable upon the exercise of any of such rights of
purchase, will be irrevocably authorized and directed at all times to
reserve such number of shares as shall be requisite for such purpose.
The Company will cause a copy of this Agreement to be kept on file
with the transfer agent or its successors.
4. ADJUSTMENT OF OPTION SHARES
The number of Option Shares purchasable pursuant to this Agreement
shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
A. ADJUSTMENT FOR RECAPITALIZATION. Subject to paragraph 4.B
below, in the event the Company shall (a) subdivide its
outstanding shares of Common Stock, or (b) issue or convert
by a reclassification or recapitalization of its shares of
Common Stock into, for, or with other securities (a
"Recapitalization"), the number of Option Shares purchasable
hereunder immediately following such Recapitalization shall
be adjusted so that the Holder shall be entitled to receive
the kind and number of Option Shares or other securities of
the Company measured as a percentage of the total issued and
outstanding shares of the Company's Common Stock as of the
hereof which it would have been entitled to receive
immediately preceding such Recapitalization, had such Option
been exercised immediately prior to the happening of such
event or any record date with respect thereto. An adjustment
made pursuant to this paragraph shall be calculated and
effected taking into account the formula set forth in
paragraph 4.B below and shall become effective immediately
after the effective date of such event retroactive to the
effective date.
/S/
2
<PAGE>
B. ADJUSTMENT OF THE EXERCISE PRICE AND NUMBER OF OPTION
SHARES. In the event of any change in the Company's Common
Stock by reason of a reverse stock split, the number and the
Option Price of the shares subject to this Option shall be
changed or be adjusted pro rata to such change.
C. PRESERVATION OF PURCHASE RIGHTS UNDER CONSOLIDATION. Subject
to paragraph 4.B above, in case of any Recapitalization or
any other consolidation of the Company with or merger of the
Company into another corporation, or in case of any sale or
conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, the
Company shall prior to the closing of such transaction,
cause such successor or purchasing corporation, as the case
may be, to acknowledge and accept responsibility for the
Company's obligations hereunder and to grant the Holder the
right thereafter upon payment of the Option Price to
purchase the kind and amount of shares and other securities
and property which he would have owned or have been entitled
to receive after the happening of such consolidation,
merger, sale or conveyance. The provisions of this paragraph
shall similarly apply to successive consolidations, mergers,
sales or conveyances.
D. NOTICE OF ADJUSTMENT. Whenever the number of Option Shares
purchasable hereunder is adjusted, as herein provided, the
Company shall mail by first class mail, postage prepaid, to
the Holder notice of such adjustment or adjustments, and
shall deliver to Holder setting forth the adjusted number of
Option Shares purchasable and a brief statement of the facts
requiring such adjustment, including the computation by
which such adjustment was made.
5. FAILURE TO DELIVER OPTION SHARES CONSTITUTES BREACH UNDER FEE
AGREEMENT
Failure by the Company, for any reason, to deliver the certificates
representing any shares purchased pursuant to this Option within the
five (5) business day period set forth in paragraph 2 above, or the
placement of a Stop Transfer order by the Company on any Option Shares
once issued, shall constitute a "Breach" under the Fee Agreement and,
for the purpose of determining the terms of this Agreement, shall
automatically toll the expiration of this Agreement for a period of
time equal to the delay in delivering the subject shares or term of
the Stop Transfer order.
6. ASSIGNMENT
The Option represented by this Agreement may be assigned or
transferred by Kipling to an affiliate or subsidiary, associated or
unrelated person or entity, or as the result of a corporate
reorganization or recapitalization. For the purpose of this Option the
term "Affiliate" shall be defined as a person or enterprise that
directly, or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with the Company
otherwise, this Agreement and the rights hereunder shall not be
assigned by either party hereto.
7. COUNTERPARTS
A facsimile, telecopy or other reproduction of this instrument may be
executed by one or more parties hereto and such executed copy may
delivered by facsimile or similar instantaneous electronic
/S/
3
<PAGE>
transmission device pursuant to which the signature of or on behalf of
such party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At the
request of any party hereto, all parties agree to execute an original
of this instrument as well as any facsimile, telecopy or other
reproduction hereof.
8. FURTHER DOCUMENTATION
Each party hereto agrees to execute such additional instruments and
take such action as may be reasonably requested by the other party to
effect the transaction, or otherwise to carry out the intent and
purposes of this Agreement.
9. NOTICES
All notices and other communications hereunder shall be in writing and
shall be sent by prepaid first class mail to the parties at the
following addresses, as amended by the parties with written notice to
the other:
To Kipling Kipling Finance Co.
Unit 4, 5/Fl, Block A, Tonic Ind. Centre
26 Kai Cheung Rd., Kowloon Bay
Kowloon, Hong Kong
Telephone: (852) 2707-9096
Facsimile: (852) 2707-9177
To the Company: GoCall, Inc.
15 Queen St., E.
Cambridge, Ontario, Canada N3C 2A7
Telephone: (519) 651-2121
Facsimile: (519) 651-0457
10. COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11. GOVERNING LAW
This Agreement was negotiated, and shall be governed by the laws of
California notwithstanding any conflict-of-law provision to the
contrary.
12. ENTIRE AGREEMENT
This Agreement sets forth the entire understanding between the parties
hereto and no other prior written or oral statement or agreement shall
be recognized or enforced.
/S/
4
<PAGE>
13. SEVERABILITY
If a court of competent jurisdiction determines that any clause or
provision of this Agreement is invalid, illegal or unenforceable, the
other clauses and provisions of the Agreement shall remain in full
force and effect and the clauses and provision which are determined to
be void, illegal or unenforceable shall be limited so that they shall
remain in effect to the extent permissible by law.
14. AMENDMENT OR WAIVER
Every right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in
equity, and may be enforced concurrently herewith, and no waiver by
any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then,
theretofore, or thereafter occurring or existing. At any time prior to
Closing, this Agreement may be amended by a writing signed by all
parties hereto.
15. HEADINGS
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement written above.
Kipling Finance Co.
By: /s/ Jansen Y.S. Wong
----------------------
Jansen Y.S. Wong, Chairman
GoCall, Inc.
15 Queen St. E.
Cambridge, Ontario, Canada N37 2A7
By: /S/ Michael Ruge
-------------------------------
Michael Ruge, CEO
5
THE STAR TRUST
--------------
TRUST AGREEMENT
---------------
AS AMENDED
----------
This Star Trust, Trust Agreement, as amended (TRUST AGREEMENT) is
entered into as of the Effective Date (as hereinafter defined), and with
reference to the following facts:
WHEREAS, the Grantors (as hereinafter defined) has determined to
establish an irrevocable trust for the benefit of the Beneficiaries (as
hereinafter defined), and to transfer to such trust property, initially
consisting of approximately 651,000 shares of the common stock of COUNTRY STAR
RESTAURANTS, INC., (STAR) which about 92% of all of said common stock, more
fully described in Exhibit A hereto. (Star shares)
WHEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.
------------
As used herein, the following terms shall have the meanings set forth
below:
1.1 AGREEMENT. "Agreement" shall mean this Trust Agreement, as
hereinafter amended.
<PAGE>
1.2 ASSETS. "Assets" shall mean the Star shares, and all other assets
of any nature or description, now or hereafter contributed to the
Trust by the Grantors, or acquired by the Trust from any other
source.
1.3 BENEFICIARIES. "Beneficiaries" shall mean the parties described
on Exhibit B hereto.
1.4 EFFECTIVE DATE. "Effective Data" shall mean December 23, 1999.
1.5 INTEREST. "Interest" shall mean the interest of any of the
Beneficiaries in the Trust, which Interest shall be as stated on
Exhibit B hereto.
1.6 GRANTORS. "Grantors" shall mean GO-CALL INC., a Delaware
Corporation.
1.7 TRANSFER. "Transfer" shall mean to give, assign, transfer, convey
or grant a security interest in.
1.8 TRUST. "Trust" shall mean the Trust formed pursuant to this
Agreement.
1.9 TRUSTEE. "Trustee" shall mean Bruce Altschuld, Esq. as trustee,
or his successor (s).
2. CREATION OF TRUST; APPOINTMENT OF TRUSTEE.
------------------------------------------
2.1 CREATION OF TRUST. Grantors hereby create and establish a trust,
and appoint and authorize the Trustee as trustee of such Trust.
pursuant to the terms and provisions of this Agreement. Grantors
hereby expressly agree, acknowledge and covenant that the
<PAGE>
creation and establishment of this Trust is and shall be
irrevocable. The Trustee hereby accepts such appointment, and
agrees to administer the Trust in accordance with the terms and
provisions of this Agreement, unless and until replaced by
successor trustees as hereinafter provided.
2.2 PURPOSE OF THE TRUST. The purpose of the Trust will be to
receive, hold, convey, transfer and otherwise deal with the
Assets of the Trust as the same may be constituted from time to
time hereafter and to hold such Assets solely for the benefit of
the Beneficiaries, pursuant to the terms of this Trust Agreement.
It is the mission of the Trustee to either reorganize STAR for
the benefit of the creditors and shareholders of STAR, or to
liquidate STAR for the benefit of STAR's creditors and
shareholders. Grantors and the Trustee, and each of them,
expressly agree and acknowledge, by their execution of this
Agreement, that they are familiar with all of the terms and
provisions of this Agreement, and that they hereby agree and
acknowledge that this Trust is created and established, and shall
be administered, solely on such terms and for such purposes.
3. DEPOSIT OF ASSETS.
------------------
<PAGE>
3.1 DEPOSIT OF ASSETS. The Grantors, concurrently with the execution
of this Agreement, have deposited with the Trustee, subject to
the terms of this Agreement and for the sole benefit of the
Beneficiaries, certain property, consisting of all of Grantors
right, title and interest in and to, and has delivered to the
Trustee Star shares.
3.2 DESIGNATION OF BENEFICIARIES. The Grantors hereby irrevocably
designate the entities listen on Exhibit B hereto as the
Beneficiary or of the Trust. The Trustee shall treat the
Beneficiaries so designated as the sole and exclusive
beneficiaries of this Trust for any and all purposes whatsoever,
and the Trustee shall not be bound by any attempted or purported
designation of any new, additional or alternate beneficiaries.
3.3 PROOF OF BENEFICIAL INTEREST. The Trustee shall, promptly upon
any written request therefore from the Beneficiaries, deliver to
the Beneficiaries a letter, duly executed by the Trustee,
certifying that (i) the Beneficiary is the sole beneficiary of
the Trust, and (ii) that the Assets of the Trust consist of the
items listed on a schedule attached to such letter.
4. TRANSFER OF INTEREST.
---------------------
<PAGE>
The Beneficiaries shall have no right, power or authority to Transfer
all or any portion of the Beneficiaries interest, or any right or
interest therein, during the term of this Trust.
5. TRUSTEE.
--------
5.1 NUMBER AND TERM OF TRUSTEE. There shall initially be one Trustee
of this Trust. The initial Trustee shall be Bruce Altschuld, Esq.
In the absence of the death of the Trustee, the Trustee shall
serve in such capacity for the entire term of this Trust.
5.2 DEATH OF TRUSTEE. All rights, powers and duties granted to or
reposed in the Trustee pursuant to this Agreement are personal.
The rights and duties of the Trustee shall terminate upon the
Trustee's death and none of the rights, powers or duties of the
Trustee hereunder may be transferred or assigned, either
voluntarily or by operation of law.
5.3 OWNERSHIP OF TRUST ASSETS. The Trustee expressly acknowledges and
agrees that he is holding the Trust Assets solely for the purpose
of carrying out his duties hereunder, and expressly subject to
all of the terms and conditions of this Agreement. The Trustee
shall have the obligation and duty to transfer such Assets to any
successor Trustee(s), as necessary.
<PAGE>
5.4 REPLACEMENT OF TRUSTEE. If at any time, the initial Trustee, is
unable to serve as Trustee by reason of death, incapacity,
resignation, or otherwise, may appoint an acceptable replacement
Trustee.
6. POWERS OF TRUSTEE: ACTION BY TRUSTEE.
-------------------------------------
6.1 MANAGEMENT. Subject to the provisions of Section 6.4 below, the
Trustee shall have the full, exclusive and complete authority in
the management and control of the Trust and the Trust Assets for
the purposes stated herein.
6.2 LITIGATION. Trustee shall have the right to commence, defend,
settle, or compromise litigation, arbitration or other legal
disputes.
6.3 TIME: OTHER ACTIVITIES. The Trustee shall devote such time to the
Trust as he shall deem reasonable necessary to carry out the
Trustee's responsibilities as herein provided. It is acknowledged
by the Grantors and the Beneficiaries and it is hereby agreed,
that the Trustee intends to, and will, devote a substantial
amount of time and effort to the business, affairs and operations
of other businesses and that his services to the Trust will be of
a limited part time nature.
6.4 PROHIBITED ACTS. Notwithstanding any other provisions of this
Agreement, the Trustee shall have no authority to:
<PAGE>
(a) CONTRAVENTION. Do any act in contravention of this
Agreement;
(b) DEBT. To incur any debt or obligation on behalf of the
Trust or encumbering any of the Trust Assets.
(c) IMPOSSIBILITY. Do any act which would make it
impossible to carry out the purpose of the Trust.
(d) CONFESSION OF JUDGMENT. Confess a judgment against the
Trust or any of the Trust Assets;
(e) POSSESSION. Possess any Trust Assets or assign the
rights of the Trust in any Trust Assets for other than
the Trust purpose; or
(f) ADMIT A TRUSTEE. Admit another person or persons as an
additional or substitute trustee of the Trust.
6.5 INDEMNIFICATION. The Trust shall indemnify and defend the Trustee
(with counsel reasonable acceptable to the Trustee) and hold them
harmless from and against any and all loss, damage, liability and
expense, including settlement costs, court or other costs and
reasonable attorneys' fees, to which any of them may be put or
which any of them may incur by reason of or in connection with
any act performed by the Trustee, or any omission or failure to
act, if the performance of such act or such omission or failure
to act is done in good faith, in the exercise of Trustee's
<PAGE>
reasonable judgment, and is within the scope of the authority
conferred upon the Trustee by this Agreement or by law.
6.6 RELIANCE ON POWER AND AUTHORITY OF TRUSTEE. Any person not a
party to this Agreement who shall deal with the Trust shall be
entitled to rely conclusively upon the power and authority of the
Trustee as set forth herein, and shall have no obligation to
inquire further as to the extent or nature of such power or
authority with respect to any action by the Trustee on behalf of
the Trust.
6.7 REIMBURSEMENT. The Trust shall reimburse the Trustee promptly for
all reasonable expenses actually incurred by the Trustee which
were approved by the Grantor prior to being incurred, including
legal and accounting fees and costs, incurred by them in good
faith in connection with the operation and maintenance of the
Trust, in dealing with the Trust Assets, and in carrying out the
purpose of the Trust.
6.8 COMPENSATION TO TRUSTEE. The Trustee shall be compensated at an
annual rate of $1,000 for his efforts plus compensation and
reimbursement for services. In the event that any successor
Trustees are appointed and agree to act, the Grantors agrees and
covenants to pay the customary fees charged by such Trustees
directly to such successor Trustees.
7. RECORDS AND REPORTS.
--------------------
<PAGE>
7.1 BANK ACCOUNTS. All funds of the Trust, and all distributions
received by the Trustee in respect of the Assets deposited
pursuant hereto, will be deposited in the name of the Trust.
7.2 BOOK OF ACCOUNTS. The Trustee shall maintain a book of accounts
which shall show all sums of money received by the Trustee, all
disbursements made by the Trustee, and all obligations incurred
by the Trustee which are unpaid.
7.3 INSPECTION OF RECORDS. The books and records of the Trust shall
be open to inspection by any of the parties to this Agreement or
the Beneficiaries or their successors at any reasonable time. The
right of inspection shall include the right to make copies of the
books and records, at such requesting party's costs, upon
reasonable notice first given to the Trustee.
7.4 INFORMATION. The Trustee shall obtain and forward to the
Beneficiaries any and all financial statements, reports, notices
or other information received by the Trustee with respect to any
securities constituting Assets of the Trust, or provided or made
available by any company issuing any such securities to the
holders thereof.
8. TERM AND TERMINATION OF TRUST.
------------------------------
<PAGE>
8.1 TERM. The term of this Agreement shall continue through the sale
or other disposition of the Star Shares.
8.2 PROCEDURE AFTER TERMINATION.
(a) As soon as practicable after the termination of this
Agreement, the Trustee shall distributor to the
Beneficiaries all remaining Assets of the Trust.
9. MISCELLANEOUS.
--------------
9.1 NOTICES. All notices which are to be given by any party to any
other party hereunder shall be in writing, sent by registered or
certified mail, postage prepaid, return receipt requested, or
through a means of electronic communications followed by a
confirmation letter sent by registered or certified mail, postage
prepaid, return receipt requested, or delivered by hand or
messenger service, with the charges therefor prepaid, addressed
to the Trustee at the offices of the Trust, and addressed to the
Beneficiaries at the addresses shown on the records of the Trust,
or such other address as shall be notified in accordance with
this Section. Notices sent in accordance with this Section shall
be effective on the date of dispatch.
9.2 SURVIVAL OF AGREEMENT PROVISIONS. All covenants, agreements,
representations and warranties made herein and in the certificate
<PAGE>
delivered pursuant hereto shall survive the expiration or other
termination of this Agreement or the Trust.
9.3 SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be found to be invalid,
illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby, and this
Agreement shall be interpreted and construed as if such
provision, to the extent the same shall have been held invalid,
illegal, or unenforceable, had never been contained herein.
9.4 HEADINGS. The headings of the articles and sections contained in
this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
9.5 APPLICABLE LAW: VENUE. This Agreement is entered into, and is to
be wholly performed, in the State of California and shall be
governed by, construed and enforced in accordance with the
internal laws of the State of California, applied to contracts
made in California by California domiciliaries to be wholly
performed in California. Any legal action to enforce or interpret
this Agreement shall be commenced in a court or competent
jurisdiction within the County of Los Angeles, the State of
California.
9.6 ATTORNEYS' FEES. In the event that any party to this Agreement
shall commence any suit, action, arbitration or other proceeding
<PAGE>
to enforce any right or obligation created hereby, the prevailing
party in such action shall recover, in addition to any and all
other amounts awarded to such party, all of such party's costs
and expenses incurred in connection therewith, including
attorneys' fees and costs of appeal, in any (collectively,
"costs"), and any court or panel of arbitrators determining any
such suit, action, arbitration or other proceeding shall make an
express determination that one party therein is the prevailing
party and shall make an award of expenses to such party pursuant
to this Section 9.6.
9.7 EXECUTION AND COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and
delivered shall be deemed an original, and such counterparts
together shall constitute only one instrument. Each party hereto
shall receive a duplicate original of the counterpart copy or
copies executed by such parties.
9.8 COVENANT OF FURTHER ASSURANCES. All parties to this Agreement
shall perform any and all acts as well as execute and deliver any
and all certificates, instruments and other documents that may be
necessary or appropriate to fully carry out the provisions and
the intent of this Agreement.
9.9 BINDING EFFECT. Subject to the restrictions in Article 4
respecting transfers, this Agreement shall inure to the benefit
<PAGE>
of and be binding upon all of the parties hereto and their
respective executors, administrators, successors and permitted
assignees.
9.10 COMPLIANCE WITH LAWS. Nothing contained in this Agreement shall
be construed to require the commission of any act contrary to
law, and whenever there is a conflict between any provision of
this Agreement and any present or future statute, law, ordinance
or regulation contrary to which the parties have no legal right
to contract, the latter shall prevail, but in such event the
provision of this Agreement affected shall be curtailed and
limited only to the extent necessary to bring it within the
requirement of the law.
9.11 GENDER. As used in this Agreement, the masculine, feminine, or
neuter gender, and the singular or plural number, shall be deemed
to include the others whenever the context so indicates.
9.12 NO THIRD PARTY BENEFIT. Nothing contained in this Agreement shall
be deemed to confer any right or benefit on any person who is not
a party to this Agreement.
9.13 NATURE OF RELATIONSHIP. The Trust created by this Agreement is
not intended to be, and shall not be deemed to be, and shall not
be treated as a general partnership, limited partnership, joint
venture, corporation, or joint stock company or association. The
relationship of the Beneficiaries to the Trustee shall be solely
that of beneficiaries of the Trust created by this Agreement and
their rights shall be limited to those conferred upon them by
this Agreement.
<PAGE>
9.14 AMENDMENT OF AGREEMENT. This Agreement may only be amended by
writing executed by all of the parties hereto.
9.15 ADVICE OF COUNSEL. Each of the parties agrees and represents that
he was not under an incapacity at the time of executing this
Agreement, that he has been represented by his own counsel with
regard to the execution of this Agreement or that, if acting
without counsel, he has had adequate opportunity and has been
encouraged to take the advice of his own counsel prior to the
execution of this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the Effective Date.
Date: 1/29700 By: /s/ Bruce Altschuld
---------------------- --------------------------------------
Bruce Altschuld, Esq., Trustee
GRANTOR:
GO CALL INC.,
A Delaware Corporation
Date: 12/23/99 By: /s/ Michael Ruge
---------------------- --------------------------------------
Michael Ruge, CEO
An Authorized Signatory
<PAGE>
BENEFICIARY:
The Star Liquidation Company. SLC
A California limited Liability Corporation
Date: By:
---------------------- --------------------------------------
Its Managing Member
<PAGE>
PROMISSORY NOTE
$728,000.00
FOR VALUE RECEIVED, the undersigned, Star Liquidation Corp. LLC, a
California Corporation ("Payor"), promises to pay to Go-Call, Inc. ("Payee") the
aggregate principal sum of Seven Hundred and Twenty Eight Thousand Dollars
($728,000), payable 5 years from the date hereof.
This note shall bear interest at a rate of 5% per annum payable and
interest is payable at maturity in lawful money of the United States of America.
This note may be prepaid at any time in whole or from time to time in
part prior to its maturity without fee or penalty, pursuant to that separate
agreement between Payee and Payor.
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived. This note shall be governed by and construed in
accordance with the laws of the state of California, and enforced therein.
Effective Date:
December 22, 1999
Star Liquidation Corp. LLC
a California Limited
Liability Corporation
By: /s/ signature
--------------------------------------
Managing Member
Date: 12/23/99
--------------------------------------
THE MARGARITA VILLAS REAL ESTATE
TRUST AGREEMENT
This Margarita Villas Real Estate Trust Agreement (TRUST AGREEMENT) is
entered into as of the Effective Date (as hereinafter defined), and with
reference to the following facts:
WHEREAS, the Grantors (as hereinafter defined) has determined to establish
an irrevocable trust for the benefit of the Beneficiaries (as hereinafter
defined), and to transfer to such trust real property, initially consisting of
The Margarita Villas in SoSua, Dominican Republic, more fully described in
Exhibit A hereto. (Hotel) WHEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.
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As used herein, the following terms shall have the meanings set forth
below:
1.1 AGREEMENT. "Agreement" shall mean this Trust Agreement, as hereinafter
amended.
1.2 ASSETS. "Assets" shall mean the Hotel and all other assets of any
nature or description, now or hereafter contributed to the Trust by
the Grantors, or acquired by the Trust from any other source.
1.3 BENEFICIARIES. "Beneficiaries" shall mean the parties described on
Exhibit B hereto.
1.4 EFFECTIVE DATE. "Effective Date" shall mean December 27, 1999.
1.5 INTEREST. "Interest" shall mean the interest of any of the
Beneficiaries in the Trust, which Interest shall be as stated on
Exhibit B hereto.
1.6 GRANTORS. "Grantors" shall mean GO-CALL INC. as to 80% of the
Ownership, ITASCA HOLDING LTD. as to 10% of the Ownership and ACS
FINANCIAL INC. RETIREMENT TRUST as to the remaining 10%.
1.7 TRANSFER. "Transfer" shall mean to give, assign, transfer, convey, or
grant a security interest in.
1.8 TRUST. "Trust" shall mean the Trust formed pursuant to this Agreement.
1.9 TRUSTEE. "Trustee" shall mean Bruce Altschuld, Esq. as trustee, or his
successor(s).
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2. CREATION OF TRUST: APPOINTMENT OF TRUSTEE.
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2.1 CREATION OF TRUST. Grantors hereby create and establish a trust, and
appoint and authorize the Trustee as trustee of such Trust, pursuant
to the terms and provisions of this Agreement. Grantors hereby
expressly agree, acknowledge and covenant that the creation and
establishment of this Trust is and shall be irrevocable. The Trustee
hereby accepts such appointment, and agrees to administer the Trust in
accordance with the terms and provisions of this Agreement, unless and
until replaced by successor trustees as hereinafter provided.
2.2 PURPOSE OF THE TRUST. The purpose of the Trust will be to receive,
hold, convey, transfer and otherwise deal with the Assets of the
Trust, as the same may be constituted from time to time hereafter, and
to hold such Assets solely for the benefit of the Beneficiaries,
pursuant to the terms of this Trust Agreement. Grantors and the
Trustee, and each of them, expressly agree and acknowledge, by their
execution of this Agreement, that they are familiar with all of the
terms and provisions of this Agreement, and that they hereby agree and
acknowledge that this Trust is created and established, and shall be
administered, solely on such terms and for such purposes.
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3. DEPOSIT OF ASSETS.
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3.1 DEPOSIT OF ASSETS. The Grantors, concurrently with the execution of
this Agreement, have deposited with the Trustee, subject to the terms
of this Agreement and for the sole benefit of the Beneficiaries,
certain property, consisting of all of Grantors right, title and
interest in and to, and has delivered to the Trustee the Ownership
Documents to the Margarita Villas.
3.2 DESIGNATION OF BENEFICIARY. The Grantors hereby irrevocably designate
the entities listed on Exhibit B hereto as the Beneficiaries of the
Trust. The Trustee shall treat the Beneficiaries so designated as the
sole and exclusive beneficiaries of this Trust for any and all
purposes whatsoever, and the Trustee shall not be bound by any
attempted or purported designation of any new, additional or alternate
Beneficiaries.
3.3 PROOF OF BENEFICIAL INTEREST. The Trustee shall, promptly upon any
written request therefore from the Beneficiaries, deliver to the
Beneficiaries a letter, duly executed by the Trustee, certifying that
(i) the Beneficiary is the sole beneficiary of the Trust, and (ii)
that the Assets of the Trust consist of the items listed on a schedule
attached to such letter.
4. TRANSFER OF INTEREST.
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The Beneficiaries shall have no right, power or authority to Transfer all
or any portion of the Beneficiaries interest, or any right or interest
therein, during the term of this Trust.
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5. TRUSTEE.
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5.1 NUMBER AND TERM OF TRUSTEE. There shall initially be one Trustee of
this Trust. The initial Trustee shall be Bruce Altschuld, Esq. In the
absence of the death of the Trustee, the Trustee shall serve in such
capacity for the entire term of this Trust.
5.2 DEATH OF TRUSTEE. All rights, powers and duties granted to or reposed
in the Trustee pursuant to this Agreement are personal. The rights and
duties of the Trustee shall terminate upon the Trustee's death and
none of the rights, powers or duties of the Trustee hereunder may be
transferred or assigned, either voluntarily or by operation of law.
5.3 OWNERSHIP OF TRUST ASSETS. The Trustee expressly acknowledges and
agrees that he is holding the Trust Assets solely for the purpose of
carrying out his duties hereunder, and expressly subject to all of the
terms and conditions of this Agreement. The Trustee shall have the
obligation and duty to transfer such Assets to any successor
Trustee(s), as necessary.
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5.4 REPLACEMENT OF TRUSTEE. If at any time, the initial Trustee, is unable
to serve as Trustee by reason of death, incapacity, resignation, or
otherwise, City National Bank shall be the successor Trustee. In the
event City National Bank refuses to serve as Trustee, Grantors may
appoint an acceptable replacement Trustee. For the purposes of this
Section 5.4, acceptable replacement trustee shall consist of the trust
department of a major bank or financial institution, with a net worth
of not less that $500,000.000, having trust powers, with which neither
the Grantor nor the Beneficiaries is affiliated.
6. POWERS OF TRUSTEE; ACTION BY TRUSTEE.
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6.1 POWERS. Subject to the provisions of Section 6.4 below, the Trustee
shall have the full, exclusive and complete authority in the
management and control of the Trust and the Trust Assets for the
purposes stated herein.
6.2 LITIGATION. Trustee shall have no right to commence, defend, settle,
or compromise litigation, arbitration or other legal disputes.
6.3 TIME; OTHER ACTIVITIES. The Trustee shall devote such time to the
Trust as he shall deem reasonably necessary to carry out the Trustee's
responsibilities as herein provided. It is acknowledged by the
Grantors and the Beneficiaries and it is hereby agreed, that the
Trustee intends to, and will, devote a substantial amount of time and
effort to the business, affairs and operations of other businesses and
that his services to the Trust will be of a limited part time nature.
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6.4 PROHIBITED ACTS. Notwithstanding any other provisions of this
Agreement, the Trustee shall have no authority to:
(a) CONTRAVENTION. Do any act in contravention of this Agreement;
(b) DEBT. To incur any debt or obligation on behalf of the Trust or
encumbering any of the Trust Assets.
(c) IMPOSSIBILITY. Do any act which would make it impossible to carry
out the purpose of the Trust.
(d) CONFESSION OF JUDGMENT. Confess a judgment against the Trust or
any of the Trust Assets;
(e) POSSESSION. Possess any Trust Assets or assign the rights of the
Trust in any Trust Assets for other than the Trust purpose; or
(f) ADMIT A TRUSTEE. Admit another person or persons as an additional
or substitute trustee of the Trust.
6.5 INDEMNIFICATION. The Trust shall indemnify and defend the Trustee
(with counsel reasonably acceptable to the Trustee) and hold them
harmless from and against any and all loss, damage, liability and
expense, including settlement costs, court or other costs and
reasonable attorneys' fees, to which any of them may be put or which
any of them may incur by reason of or in connection with any act
performed by the Trustee, or any omission or failure to act, if the
performance of such act or such omission or failure to act is done in
good faith, in the exercise of Trustee's reasonable judgment, and is
within the scope of the authority conferred upon the Trustee by this
Agreement or by law.
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6.6 RELIANCE ON POWER AND AUTHORITY OF TRUSTEES. Any person not a party to
this Agreement who shall deal with the Trust shall be entitled to rely
conclusively upon the power and authority of the Trustee as set forth
herein, and shall have no obligation to inquire further as to the
extent or nature of such power or authority with respect to any action
by the Trustee on behalf of the Trust.
6.7 REIMBURSEMENT. The Trust shall reimburse the Trustee promptly for all
reasonable expenses actually incurred by the Trustee which were
approved by the Grantor prior to being incurred, including legal and
accounting fees and costs, incurred by them in good faith in
connection with the operation and maintenance of the Trust, in dealing
with the Trust Assets, and in carrying out the purpose of the Trust.
6.8 COMPENSATION TO TRUSTEE. The Trustee shall be compensated at an annual
rate of $____ for his efforts. In the event that any successor
Trustees are appointed and agree to act, the Grantors agrees and
covenants to pay the customary fees charged by such Trustees directly
to such successor Trustees.
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7. RECORDS AND REPORTS.
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7.1 BANK ACCOUNTS. All funds of the Trust, and all distributions received
by the Trustee in respect of the Assets deposited pursuant hereto,
will be deposited in the name of the Trust.
7.2 BOOK OF ACCOUNTS. The Trustee shall maintain a book of accounts which
shall show all sums of money received by the Trustee, all
disbursements made by the Trustee, and all obligations incurred by the
Trustee which are unpaid.
7.3 INSPECTION OF RECORDS. The books and records of the Trust shall be
open to inspection by any of the parties to this Agreement or the
Beneficiaries or their successors at any reasonable time. The right of
inspection shall include the right to make copies of the books and
records, at such requesting party's costs, upon reasonable notice
first given to the Trustee.
7.4 INFORMATION. The Trustee shall obtain and forward to the Beneficiaries
any and all financial statements, reports, notices or other
information received by the Trustee with respect to any securities
constituting Assets of the Trust, or provided or made available by any
company issuing any such securities to the holders thereof.
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8. TERM AND TERMINATION OF TRUST.
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8.1 TERM. The term of this Agreement shall continue through the sale or
other disposition of the Margarita Villas, in accordance with the
terms of the Partnership Agreement of SEVADA HOLDINGS, LTD. IV.
8.2 PROCEDURE AFTER TERMINATION.
(a) As soon as practicable after the termination of this Agreement,
the Trustee shall return to the Grantors all remaining Assets of
the Trust.
9. MISCELLANEOUS.
9.1 NOTICES. All notices which are to be given by any party to any
other party hereunder shall be in writing, sent by registered or
certified mail1 postage prepaid, return receipt requested, or
through a means of electronic communications followed by a
confirmation letter sent by registered or certified mail, postage
prepaid, return receipt requested, or delivered by hand or
messenger service, with the charges therefor prepaid, addressed to
the Trustee at the offices of the Trust, and addressed to the
Beneficiaries at the addresses shown on the records of the Trust,
or such other address as shall be notified in accordance with this
Section. Notices sent in accordance with this Section shall be
effective on the date of dispatch.
9.2 SURVIVAL OF AGREEMENT PROVISIONS. All covenants, agreements,
representations and warranties made herein and in the certificate
delivered pursuant hereto shall survive the expiration or other
termination of this Agreement or the Trust.
9.3 SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be found to be invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby, and this Agreement
shall be interpreted and construed as if such provision, to the
extent the same shall have been held invalid, illegal, or
unenforceable, had never been contained herein.
9.4 HEADINGS. The headings of the articles and sections contained in
this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
9.5 APPLICABLE LAW: VENUE. This Agreement is entered into, and is to be
wholly performed, in the State of California and shall be governed
by, construed and enforced in accordance with the internal laws of
the State of California, applied to contracts made in California by
California domiciliaries to be wholly performed in California. Any
legal action to enforce or interpret this Agreement shall be
commenced in a court or competent jurisdiction within the County of
Los Angeles, the State of California.
9.6 ATTORNEYS' FEES. In the event that any party to this Agreement
shall commence any suit, action, arbitration or other proceeding to
enforce any right or obligation created hereby, the prevailing
party in such action shall recover, in addition to any and all
other amounts awarded to such party, all of such party's costs and
expenses incurred in connection therewith, including attorneys'
fees and costs of appeal, in any (collectively, "costs"), and any
court or panel of arbitrators determining any such suit, action,
arbitration or other proceeding shall make an express determination
that one party therein is the prevailing party and shall make an
award of expenses to such party pursuant to this Section 9.6.
9.7 EXECUTION AND COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and
delivered shall be deemed an original, and such counterparts
together shall constitute only one instrument. Each party hereto
shall receive a duplicate original of the counterpart copy or
copies executed by such parties.
9.8 COVENANT OF FURTHER ASSURANCES. All parties to this Agreement shall
perform any and all acts as well as execute and deliver any and all
certificates, instruments and other documents that may be necessary
or appropriate to fully carry out the provisions and the intent of
this Agreement.
9.9 BINDING EFFECT. Subject to the restrictions in Article 4 respecting
transfers, this Agreement shall inure to the benefit of and be
binding upon all of the parties hereto and their respective
executors, administrators, successors and permitted assignees.
9.10 COMPLIANCE WITH LAWS. Nothing contained in this Agreement shall be
construed to require the commission of any act contrary to law, and
whenever there is a conflict between any provision of this
Agreement and any present or future statute, law, ordinance or
regulation contrary to which the parties have no legal right to
contract, the latter shall prevail, but in such event the provision
of this Agreement affected shall be curtailed and limited only to
the extent necessary to bring it within the requirement of the law.
9.11 GENDER. As used in this Agreement, the masculine, feminine, or
neuter gender, and the singular or plural number, shall be deemed
to include the others whenever the context so indicates.
9.12 NO THIRD PARTY BENEFIT. Nothing contained in this Agreement shall
be deemed to confer any right or benefit on any person who is not a
party to this Agreement.
9.13 NATURE OF RELATIONSHIP. The Trust created by this Agreement is not
intended to be, and shall not be deemed to be, and shall not be
treated as a general partnership, limited partnership, joint
venture, corporation, or joint stock company or association. The
relationship of the Beneficiaries to the Trustee shall be solely
that of beneficiaries of the Trust created by this Agreement and
their rights shall be limited to those conferred upon them by this
Agreement.
9.14 AMENDMENT OF AGREEMENT. This Agreement may only be amended by
writing executed by all of the parties hereto.
9.15 ADVICE OF COUNSEL. Each of the parties agrees and represents that
he was not under an incapacity at the time of executing this
Agreement, that he has been represented by his own counsel with
regard to the execution of this Agreement or that, if acting
without counsel, he has had adequate opportunity and has been
encouraged to take the advice of his own counsel prior to the
execution of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the Effective Date.
TRUSTEE:
By: /S/ Bruce Altschuld
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Bruce Altschuld, Esq.
GRANTOR:
GO CALL INC.,
A Delaware Corporation
By: /S/ Michael Ruge
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Michael Ruge, CEO
And Authorized Signatory
AGREEMENT OF PURCHASE AND SALE
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Purchaser: Go Phone Inc.
Vendor: Donald Patrick Fultz
REAL PROPERTY: Located at 300 Pedro Clisante fronting on the north side of Pedro
Clisante in the City of Sosua in the province of Puerto Plata, Dominican
Republic, having an approximate area of 1949 square meters legally described as:
"No 2/8 en la primera planta dos dormitorios con dos cuartos de bano y closet de
ropa blanca segeu plano No 3/8 en la segunda planta"
PURCHASE PRICE: Two million five hundred thousand dollars ($2,500,000.00) US
Purchaser agrees to issue three million three hundred and sixty thousand
(3,360,000) shares in Go Phone Inc. and transfer said shares to Donald Patrick
Fultz or his nominee on closing date.
It is understood and agreed that the Purchaser is buying the physical assets on
an "as is" basis including all chattels and inventory on closing date.
The Purchaser has inspected title to this property and hereby accepts title.
Closing date for this transaction shall be on or before November 30, 1997.
The transfer/deed shall be prepared at the expense of the Vendor in registerable
form and Purchaser agrees to pay any additional legal and transfer fees.
Any tender of documents may be made upon the Vendor or Purchaser or their
respective lawyers.
The heirs, executors, administrators, successors and assigns of the undersigned
are bound by the terms herein.
Dated at Cambridge this 30th day of November 1997.
WITNESS /s/ signature
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Purchaser
/s/ signature
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Vendor
Go Call, Inc.
15 Queen Street East
Cambridge. Ontario, Canada N3C2A7
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March 5, 1999
Country Star Restaurants, Inc.
4929 Wilshire Boulevard
Suite 428
Los Angeles, California 90010
Attn.: Dan J. Rubin, President
Re: Proposed Business Combination
Gentlemen:
This letter sets forth our intentions with respect to the principal
terms and conditions of the proposed business combination transaction (the
"Business Combination") involving Go Call Inc., a Delaware corporation ("GCI")
and Country Star Restaurants, Inc., a Delaware corporation ("CSR").
The basic terms and conditions of the Business Combination are as
follows:
1. TRANSACTION TERMS.
a. MAJORITY CONTROL. On the terms and subject to the
conditions to be set forth in the Definitive Agreement as defined in Section 2
hereof, GCI will acquire an aggregate of 652,973 issued and outstanding shares
of CSR's Common Stock, $.01 par value per share (the "CSR Majority Shares") from
the 2 individual owners thereof (the "CSR Majority Shareholders") solely in
exchange for 4,570,811 heretofore authorized but unissued shares of GCI's Common
Stock, $.01 par value per share (the "GCI Stock"). The CSR Majority Shares
represent approximately 92% of the 709,335 shares of CSR's Common Stock, $.01
par value per share, issued and outstanding as of the date of this letter of
intent (the "L0I"). The GCI Stock will be issued to CSR's shareholders on a pro
rata basis at which time CSR will become a 92% owned subsidiary of GCI. The
foregoing is hereinafter referred to as the "Acquisition of Control".
b. SHORT FORM MERGER. As soon as practicable after the closing
of the Acquisition of Control, but in no event later than 10 days after the
closing, GCI and CSR shall consummate a statutory short from merger of
subsidiary into parent under Section 253 of the Delaware General Corporations
Law.
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2. DEFINITIVE AGREEMENT. The Business Combination is subject to the
execution and delivery of a definitive Business Combination agreement (the
"Definitive Agreement") between CSR and the CSR Majority Shareholders the basic
terms and conditions set forth herein together with such other representations,
warranties, covenants, terms, indemnities, and conditions as would be usual and
customary for a transaction of this nature and which are mutually agreeable to
the parties, including, without limitation, the making of all necessary filings
and the obtaining of all necessary approvals or consents from third parties
required to consummate the proposed transaction. The execution and delivery of
the Definitive Agreement by CSR shall be subject to the approval of the CSR's
Board of Directors. In addition, the parties' obligations to proceed with
Closing of the Definitive Agreement shall be subject to the satisfaction of the
conditions in Section 11 hereof
3. CLOSING DATE. The closing of the Business Combination (the
"Closing") will occur within three business days after the satisfaction of all
conditions to closing stated in the Definitive Agreement. The date on which the
Closing occurs is referred to in this letter as the "Closing Date".
4. BEST EFFORTS. GCI and CSR shall negotiate in good faith and use
their best efforts to arrive at a mutually acceptable Definitive Agreement for
approval, execution and delivery at the earliest reasonably practical date. GCI
and CSR will thereupon use their best efforts to effect the Closing and to
proceed with the transactions contemplated by the Definitive Agreement as
promptly as is reasonably practicable.
5. TERMINATION. This LOI may be terminated by CSR if the Definitive
Agreement has not been negotiated, executed and delivered on or before March 30,
1999. Once executed, the Definitive Agreement shall supersede this letter of
intent in its entirety.
6. ACCESS TO RECORDS. For so long as negotiations with respect to the
proposed Business Combination are pending and have not been terminated by either
party, each party shall have access to the other party's books and records for
purposes of evaluating the other party's assets, liabilities, financial
condition and prospects and the validity of the representations and warranties
made by the other party and their respective shareholders in the Definitive
Agreement.
7. CONFIDENTIALITY. GCI and its shareholders, on the one hand, and CSR
and its shareholders, on the other hand, will keep confidential all information
and materials regarding the other party reasonably designated by such party as
confidential. The provisions of this Section 7 shall not apply to any
information which is or shall become part of the public domain through no fault
of the party subject to the obligation from a third party with a right to
disclose such information free of obligation of confidentiality. GCI and CSR
agree that no public disclosure will be made by either party of the existence of
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this Letter of Intent or any of its terms without first advising the other party
and obtaining its consent to the proposed disclosure, unless such disclosure is
required by law, regulation or stock exchange rule.
8. STANDSTILL AGREEMENT. For the greater of fifteen (15) days from the
date hereof or so long as this letter remains in effect as provided in Section 5
above, neither GCI nor GCI's shareholders will (i) make or encourage any offer
or enter into any understanding or agreement for the purchase, merger or other
acquisition of any capital stock or assets of an operating company (other than
CSR); (ii) entertain or pursue any unsolicited offer for any such transaction;
or (iii) furnish to any person or entity (other than CSR, and its authorized
agents and representatives) any nonpublic information concerning GCI or its
business, financial affairs or prospects for the purpose or with the intent of
permitting such person or entity to evaluate a possible transaction of the type
that GCI is contemplating pursuant to this letter of intent, without consent of
CSR, which consent shall not be unreasonably withheld.
9. EXPENSES. Except as otherwise set forth herein or in the Definitive
Agreement, each party shall bear their own expenses incident to the transactions
contemplated herein up until and including the Closing of the Definitive
Agreement.
10. LETTER OF INTENT. It is understood that this letter is not a
contract, but merely an intent of the parties to engage into the Definitive and
no commitment is other implied, except for the provisions set forth in Sections
2 through 9 hereof. Except as stated in the immediately preceding sentence, no
binding agreement shall exist unless and until the Definitive Agreement has been
executed and delivered by the parties, and then only as and to the extent stated
therein.
11. CONDITIONS. The Closing of the Business Combination will be subject
to the following conditions:
A. Conditions to be Satisfied in order for CSR to proceed:
1. Complete and satisfactory due diligence review of GCI by CSR.
2. Approval of the shareholders and Board of Directors of GCI.
3. GCI shall deliver audited financial statements and notes thereto
covering the two fiscal years ended December 31,1998, including
income statements, balance sheets and statements of cash flow and
stockholders equity (the "GCI Financial Statements"), such
statements to include an unqualified audit report issued by a firm
of independent certified public accountants.
4. There shall have been no material adverse changes in GCI,
financial or otherwise, from the information provided in the GCI
Financial Statements.
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5. Immediately prior to the Closing of the Business Combination,
GCI shall have a positive tangible net worth of at least $2,000,000,
as determined in accordance with generally accepted accounting
principles.
6. The capitalization of GCI shall consist of 20 million shares of
authorized common stock, $.01 par value per share, of which not more
than 15,000,000 shares shall be issued and outstanding immediately
prior to the Business Combination. There shall be at least 500
record holders of common stock of GCI.
7. There shall be no GCI Common Stock Equivalents outstanding
immediately before the Business Combination. For purposes of the
foregoing, "GCI Common Stock Equivalents" shall mean any
subscriptions, warrants, options or other rights or commitments of
any character to subscribe for or purchase from the GCI, or
obligating GCI to issue, any shares of any class of the capital
stock of GCI or any securities convertible into or exchangeable for
such shares.
8. GCI shall be the surviving corporation in the Business
Combination from a corporate law perspective and the Business
Combination shall be accounted for as a pooling of interests for
accounting and financial statement purposes.
9. Any necessary third-party consents shall be obtained prior to
Closing, including but not limited to consents necessary from GCI's
lenders, creditors, vendors, lessors.
B. Conditions to be Satisfied in order for GCI to proceed:
1. Complete and satisfactory due diligence review of CSR by GCI.
2. Approval of the Board of Directors of CSR.
3. Any necessary third-party consents shall be obtained prior to
Closing, including but not limited to consents necessary from CSR's
lenders, creditors, vendors, lessors.
4. CSR shall deliver audited financial statements and notes thereto
covering the two fiscal years ended December 31,1998, including
income statements, balance sheets and statements of cash flow and
stockholders equity (the "CSR Financial Statements"), such
statements to include an unqualified audit report issued by a firm
of independent certified public accountants.
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5. There shall have been no material adverse changes in CSR,
financial or otherwise, from the information provided in the CSR
Financial Statements.
6. Immediately prior to the Closing of the Business Combination, CSR
shall have a positive tangible net worth of at least $4,000,000,
as determined in accordance with generally accepted accounting
principles.
7. The capitalization of CSR shall consist of (i) 250,000,000
million shares of authorized common stock, $.01 par value per share,
of which not more than 709,335 shares shall be issued and
outstanding immediately prior to the Business Combination. There
shall be at least 7,000 record holders of common stock of CSR.
8. There shall be no CSR Common Stock Equivalents outstanding
immediately before the Business Combination. For purposes of the
foregoing, "CSR Common Stock Equivalents" shall mean any
subscriptions, warrants, options or other rights or commitments of
any character to subscribe for or purchase from the CSR, or
obligating CSR to issue, any shares of any class of the capital
stock of CSR or any securities convertible into or exchangeable for
such shares.
9. The executive officer and directors of CSR shall have submitted
their resignations for personal reasons.
If this letter accurately sets forth your understanding of the proposed
transaction with respect to the matters discussed above, please so indicate by
executing a copy of this letter below and returning the executed copy to the
undersigned.
Very truly yours,
Go Call, Inc.
By: /s/ Michael Ruge
--------------------------
Michael Ruge, CEO
AGREED TO AND ACCEPTED:
this 5th day of March, 1999
Country Star Restaurants, Inc.
By: /s/ Dan J. Rubin
---------------------------
Dan J. Rubin, CEO
STOCK ACQUISITION AGREEMENT
BETWEEN
GO CALL INC.
AND
DAN J. RUBIN, ROY B. RUBIN MD PC, MONEY PURCHASE
PENSION PLAN AND DANIEL NOURANI
MARCH 11, 1999
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TABLE OF CONTENTS
1. Plan of Exchange....................................................5
2. Exchange of Shares..................................................5
3. Closing.............................................................5
4. The GCI Shares......................................................5
5. Representations and Warranties of the CSR Shareholders..............5
6. Representations and Warranties of GCI..............................10
7. Covenants of the CSR Shareholders..................................15
8. Covenants of GCI...................................................16
9. Conditions Precedent to Closing....................................17
10. Indemnification....................................................19
11. CSR Shareholder's Investment Intent................................19
12. Conduct of GCI's and CSR's Business Prior to the Closing Date......20
13. Registration and Registration Rights...............................21
14. Access and Information.............................................22
15. Expenses...........................................................23
16. Termination........................................................23
17. Effect on Termination..............................................24
18. Meaning of "Material"..............................................24
19. Amendment..........................................................24
20. Waiver.............................................................24
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21. Broker and Investment Banking Fees.................................24
22. Binding Effect.....................................................24
23. Entire Agreement...................................................25
24. Governing Law......................................................25
25. Arbitration........................................................25
26. Originals..........................................................25
27. Addresses of the Parties...........................................25
28. Notices............................................................26
29. Release of Information.............................................27
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STOCK ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION, dated this 11th day of
March (the "Agreement"), among Go Call, Inc., a corporation organized under and
pursuant to the laws of the State of Delaware with principal offices at 15 Queen
Street East, Cambridge, Ontario, Canada N3C2A7 ("GCI"), Dan Rubin resides at
1825 South Beverly Glen Boulevard, Apartment 405, Los Angeles, California 90025
("DR"), Roy B. Rubin MD PC Money Purchase Pension Plan having an office at 1825
South Beverly Glen Boulevard, Apt. 405, Los Angeles, California 90025 (the
"Plan") and Daniel Nourani residing at 16422 Underhill Lane, Huntington Beach
California 92647 Avenue of the Stars, Suite 2530, Los Angeles, California (the
"DN"). DR, the Plan and DN are hereinafter collectively referred to as the "CSR
Shareholders".
WITNESSETH:
WHEREAS, DR is the record and beneficial owner of an aggregate of 166,283 issued
and outstanding shares of common stock, $.01 par value per share (the "DR
Shares"), of Country Star Restaurants, Inc., a Delaware corporation with
principal offices at 4929 Wilshire Boulevard, Suite 428, Los Angeles, California
90010 ("CSR"); the Plan is the record and beneficial owner of an aggregate of
259,110 issued and outstanding shares of common stock, $.01 par value per share,
of CSR (the "Plan Shares"); and the DN is the record and beneficial owner of an
aggregate of 225,000 issued and outstanding shares of common stock, $.01 par
value per share, of CSR (the "DN Shares"); and
WHEREAS, the DR Shares, the Plan Shares and the DN Shares are
hereinafter collectively referred to as the "CSR Control Shares"; and
WHEREAS, GCI desires, pursuant to this Agreement, to exchange an
aggregate of 4,552,751 heretofore authorized but unissued shares of its Common
Stock, $.01 par value per share (the "GCI Shares") solely for all of the CSR
Control Shares; and
WHEREAS, the CSR Shareholders desire, pursuant to this Agreement, to
exchange all of the CSR Control Shares solely for the GCI Shares upon the terms
and conditions hereinafter set forth; and
WHEREAS, in order to carry out the foregoing intents, GCI ,the CSR
Shareholders and CSR desire to enter into and adopt this Agreement.
NOW, THEREFORE, in consideration for the exchange of securities herein
enumerated and other good and valuable consideration, the receipt and adequacy
of which is hereby jointly and severally acknowledged and accepted, the parties
hereby agree as follows:
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1. PLAN OF EXCHANGE. The CSR Shareholders own all of the CSR Control
Shares. It is the express written intention of the parties that all of the CSR
Control Shares shall be acquired by GCI solely in exchange for 4,552,751 GCI
Shares.
2. EXCHANGE OF SHARES. By virtue of their respective execution of this
Agreement, GCI and the CSR Shareholders agree and consent that on the Closing
Date (as hereinafter defined) all of the CSR Shares shall be exchanged with GCI
solely in consideration for the GCI Shares. The GCI Shares shall be delivered
via certificates registered in the names of the CSR Shareholders on the basis of
7 GCI Shares for each CSR Control Share owned by the CSR Shareholders. All
certificates representing the CSR Control Shares, shall be delivered to GCI or,
if so indicated by GCI in writing, to its transfer agent, Interwest Transfer
Company, 1981 East Murray Holladay Road, Salt Lake City, Utah 84117, duly
endorsed in blank with signature guaranteed or with executed stock power
attached thereto with Medallion signature guaranteed by a bank or brokerage firm
and in transferable form with any required documentary or transfer tax stamps
affixed at CSR Control Shareholder's sole and exclusive expense so as to make
GCI the sole owner thereof free and clear of any and all liens, claims and
encumbrances, of any nature whether accrued, absolute, contingent or otherwise.
No fractional shares shall be issued by GCI. Accordingly, all GCI Shares shall
be rounded up to the nearest whole share.
3. CLOSING. The closing of the exchange of the CSR Control Shares for
the GCI Shares (the "Closing") shall take place at 10:00 A.M. Eastern time on
the 18th day of March, 1999, at the offices of Spinelli & Associates, 120 Wall
Street, 28th Floor, New York, New York 10005 or such other time and place upon
which the parties may agree. The day on which the Closing actually occurs is
herein sometimes referred to as the "Closing Date". In the event the Closing
does not occur on or before March 28, 1999, and unless extended by mutual
consent in writing or unless such failure to close is by reason of a material
breach by a party of its obligations under this Agreement, then GCI and the CSR
Shareholders shall return all information and documentation exchanged or
delivered hereunder to the party or parties furnishing the same and thereafter
this Agreement shall be deemed to be null and void and of no further force or
effect. In the event the failure to close is caused by the material breach by a
party of its obligations under this Agreement, then the non-breaching party or
parties may enforce its rights under this Agreement including the right to seek
specific performance and/or damages as provided in Section 17 of this Agreement.
4. THE GCI SHARES. The GCI Shares originally issued and delivered to
the CSR Shareholders at the Closing shall be voting securities of GCI.
5. REPRESENTATIONS AND WARRANTIES OF THE CSR SHAREHOLDERS. By virtue of
their respective execution of this Agreement, and except for information set
forth on any and all schedules or exhibits annexed to this Agreement and
incorporated herein by reference (any information on one shall be deemed to be
included on all), the CSR Shareholders hereby jointly and severally (except as
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to Sections 5(a), (b) and (d), which are several, not joint representations and
warranties) represent and warrant to GCI as follows:
(a) They each are the sole record and beneficial owner of the number
of CSR Control Shares set forth above, have the sole and undisputed power, right
and authority to sell, transfer, option, pledge or hypothecate the same and own
said CSR Control Shares free and clear of any and all liens, suits, proceedings,
claims and encumbrances of any kind, nature or description whether accrued,
absolute, contingent or otherwise;
(b) They each have the power, right and authority to execute and
perform this Agreement and the execution, delivery and performance of this
Agreement, in the time and manner herein specified, will not conflict with,
result in a breach of, or constitute a default under any provisions of law,
trust or any existing agreement, indenture or other instrument to which they are
a party or by which the CSR Control Shares owned by them may be bound or
affected
(c) The CSR Control Shares are duly and validly issued, fully paid
and non-assessable;
(d) The information given and every representation, warranty and
statement made or furnished by the CSR Shareholders herein is true, correct and
does not contain a misstatement of a material fact or omit to state any material
fact required in order to make the statements and representations, in light of
the circumstances under which they were made, not misleading;
(e) The CSR Shareholders have no knowledge of any material fact or
facts other than disclosed herein or in the exhibits or schedules annexed hereto
which will adversely affect the business or financial condition of CSR or the
title of GCI to the CSR Control Shares to be exchanged with GCI hereunder, and
each of the CSR Shareholders agrees that they will notify GCI of any such facts
if they acquire knowledge of the same prior to the Closing Date;
(f) They have read and understand both this Agreement and the nature
and parameters of the transaction underlying the same; accept and agree to the
consummation of the transaction enumerated herein; and accept the original
issuance of the GCI Shares to them as the sole and exclusive consideration for
the transfer and delivery of the CSR Control Shares to GCI;
(g) Neither they nor any other person, firm or entity has any right
of appraisal or similar right to dissent from the transaction made the subject
of this Agreement and/or to demand payment for the CSR Control Shares. In the
event such right does, in fact, exist, the CSR Shareholders either have or will,
prior to the Closing Date, irrevocably waive such right;
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<PAGE>
(h) Prior to the Closing Date, the CSR Shareholders will not vote
for or authorize the reorganization, re-capitalization, merger, consolidation,
stock split or other similar corporate action on behalf of CSR except as may be
required to effectuate the terms and conditions of this Agreement;
(i) Prior to the Closing Date, the CSR Shareholders will not vote
for or authorize the creation of any other class of equity or debt security of
CSR;
(j) Prior to the Closing Date, and except for advances by CSR to
fund operations or the incurring of debt to finance ongoing business activities
which shall be disclosed to GCI in writing prior to expenditure, the CSR
Shareholders will not, without the prior written consent of GCI, cause or
authorize CSR to:
(i) create or incur any indebtedness, whether funded or not,
except unsecured current liabilities incurred in the ordinary course of
business; or assume, guarantee, endorse or otherwise become responsible for the
obligation of any other person, entity, firm or corporation;
(ii) create or incur any mortgage, lien, charge or encumbrance of
any kind, nature or description with respect to any of CSRs properties or
assets, except in the ordinary course of business;
(iii) make or become a party to any contract or commitment, or
renew, extend, amend, terminate or modify any contract or commitment, except in
the ordinary course of business;
(iv) make any capital expenditure or capital addition or
betterment except as may be involved in ordinary repairs, maintenance and
replacements and minor plant and equipment additions;
(v) sell or otherwise dispose of any of its assets except sales
in the ordinary course of business;
(vi) declare or pay any dividend on, or make any other
distribution upon or in respect of, or purchase, retire or redeem any shares of
its capital stock;
(vii) issue or sell any additional shares of capital stock,
whether or not such shares have been previously authorized for issuance, or
acquire any stock of any corporation or any interest in any business enterprise;
(viii) grant any option or make any commitment relating to the
authorized or issued capital stock of CSR;
(ix) pay or agree to pay, conditionally or otherwise, any pension
or severance pay to any director, officer, agent or employee, or make any
7
<PAGE>
advances to or increase the compensation of, any officers or employees;
(x) use any CSR assets or properties, except for proper corporate
purposes in the ordinary course of business'
(xi) make any change in CSR's Certificate of Incorporation or
By-Laws; or
(xii) change any of CSR's banking or safe deposit arrangements or
open any new bank accounts or safe deposit boxes, other than in the normal
course of business.
(k) Each of the representations in this Section 5 shall be true and
correct at the Closing Date.
(l) The CSR Control Shares will be transferred free and clear of any
and all liens, claims, encumbrances, options, contracts, calls, commitments or
demands of any character;
(m) CSR is, and at all times through and including the Closing Date,
will be a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and authorized to do business in such
states in the United States where such qualification is necessary, with full
power and authority to conduct its business as the same is presently being
conducted;
(n) The execution and performance of this Agreement in the time and
manner contemplated will not conflict with, result in a breach of or constitute
a default under any provision of law, the Certificate of Incorporation or
By-Laws of CSR or of any existing agreement, indenture or other instrument to
which CSR is a party or to which any of its business or its assets may be bound
or affected;
(o) Other than as set forth on Schedule 5(o) annexed to this
Agreement, there are not, and will not be at any time prior to the Closing Date,
any outstanding options, warrants, rights, contracts, calls, demands or
commitments of any type, kind or character relating to the CSR Control Shares;
(p) The capitalization of CSR immediately prior to the Closing will
be as follows:
Authorized Type of Security Issued and Outstanding
- ---------- ---------------- ----------------------
250,000,000 Shares Voting Common Stock, 709,335 Shares
$.O1 par value per share
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<PAGE>
(q) There is no litigation or governmental proceeding or
investigation pending or, to the knowledge of the CSR Shareholders, threatened
or in prospect against CSR, any of its officers, directors or sole shareholder
or their properties or relating to its capital stock, except as set forth in
CSR's 10-K. The CSR Shareholders will notify GCI promptly of any such initiated
or threatened proceedings or litigation which may arise or be instituted at any
time prior to the Closing Date;
(r) The audited balance sheet, statement of cash flows, statement of
changes in stockholders equity (deficiency) of CSR and the notes thereto for the
fiscal year ended December 31, 1998 (the "CSR Audited Financial Statements") and
unaudited financial statements for the two (2) two months ended February 28,
1999 and the notes thereto (the "CSR Unaudited Financial Statements"), attached
hereto as Schedule 5(r), present the financial condition and the results of
operations of CSR as of the dates thereof and were prepared in accordance with
generally accepted accounting principles consistently applied. The CSR Audited
and Unaudited Financial Statements are hereinafter collectively referred to as
the "CSR Financial Statements". There are no material liabilities, either fixed
or contingent, not reflected in the CSR Financial Statements, and the CSR
Financial Statements are true and correct in all material aspects, and do not
omit to state any material fact required or necessary to make such statements,
in light of the circumstances in which they are made, not misleading;
(s) To the best knowledge and belief of the CSR Shareholders, since
February 28, 1999 (the date of latest CSR Unaudited Financial Statements) there
has been no material adverse change in the financial condition of CSR nor has
there been any material or substantial loss or damage to the properties or
business of CSR (whether or not covered by insurance) and no event or condition
of any character has occurred which adversely affect CSR's business;
(t) To the best knowledge and belief of the CSR Shareholders, and
except as set forth on Schedule 5(t) annexed hereto, any and all taxes accrued
or asserted against CSR have been paid, or CSR has established adequate reserves
therefor. All tax returns for CSR required to be filed have been or will be
filed for all periods ending on or up to the Closing Date; no extensions of the
applicable statutes of limitations have been, or will be, prior to the Closing
Date, applied for by CSR. Any and all additional taxes arising from the
operation of CSR for any period up to and including the Closing Date and not
provided for on the books and records of CSR are and shall be the sole liability
of GCI. Copies of all applicable tax returns shall be furnished to GCI and its
counsel prior to the Closing Date;
(u) Except as set forth on Schedule 5(u) annexed hereto, CSR has
clear and unencumbered title to all of the assets and property owned by it as
reflected in the CSR Financial Statements and CSR has no assets that are not
reflected in the CSR Financial Statements;
(v) To the best knowledge and belief of the CSR Shareholders, CSR is
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<PAGE>
not in material default under any material contract or obligation and all third
parties with whom CSR has contractual arrangements are in material compliance
therewith and are not in material default thereunder;
(w) Except as set forth on Schedule 5(w) annexed hereto, CSR has not
adopted, and, without written consent of GCI, will not prior to the Closing Date
adopt, any employment or collective bargaining agreements;
(x) There are no material liabilities, either fixed or contingent,
not reflected in the CSR Financial Statements or on Schedule 5(x) annexed
hereto, except that there may be contracts or obligations incurred in the usual
course of business not reflected therein which, if disclosed, would not
materially adversely affect the financial condition of CSR as reflected in the
CSR Financial Statements;
(y) No representation or warranty made by the CSR Shareholders in
this Agreement and any schedule or exhibit attached hereto and furnished or to
be furnished to GCI pursuant to this Agreement, contains or will contain any
untrue statement of a material fact, or omits, or will omit, to state a material
fact required or necessary to make the statements and representations herein or
therein made, in light of the circumstances under which they were made, not
misleading;
(z) Other than as set forth on Schedule 5(z) annexed hereto, CSR has
not executed or delivered or issued any notes, bonds or mortgages and has not
entered into any leases, contracts or commitments not disclosed in the CSR
Financial Statements;
(aa) Except as otherwise disclosed on Schedule 5(aa), CSR has no
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) which are required to be reflected or reserved against on its balance
sheets in accordance with generally accepted accounting principles consistently
applied, except for liabilities and obligations fully reflected or reserved
against in the CSR Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the date of the CSR Financial
Statements;
(bb) By virtue of their respective execution of this Agreement, the
CSR Shareholders hereby acknowledge and accept that they each have been
furnished with all information concerning the business and financial condition
and corporate status of GCI which they deemed necessary to their decision to
proceed with the transactions as described herein'
(cc) Other than as set forth on Schedule 5(cc) annexed hereto, CSR
has not made any patent or trademark filings in the United States;
(ff) All of the assets and property used by CSR in the operation of
its business are owned by CSR and to the extent any of such assets and property
are not so owned, CSR will arrange to have such asset and/or property
transferred to it prior to the Closing Date;
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<PAGE>
(hh) Each of the representations in this Section 5 shall be true and
correct at the Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF GCI. By virtue of its execution of
this Agreement and except as expressly modified by the information set forth on
any and all schedules or exhibits annexed to this Agreement and incorporated
herein by reference, GCI hereby represents and warrants to the CSR Shareholders
as follows:
(a) The GCI Shares to be transferred to the CSR Shareholders on the
Closing Date will be duly and validly issued, fully paid and non-assessable with
no personal liability attaching to the ownership thereof. The GCI Shares will be
transferred free and clear of any and all liens, claims, encumbrances, options,
contracts, calls, commitments or demands of any character. As of the Closing
Date, GCI shall have full corporate power and authority to carry on its business
as the same shall be conducted between the date hereof and the Closing Date;
(b) GCI is, and at all times through and including the Closing Date,
will be a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and authorized to do business in such
states in the United States where such qualification is necessary, with full
power and authority to conduct its business as the same is presently being
conducted;
(c) The execution and performance of this Agreement in the time and
manner contemplated will not conflict with, result in a breach of or constitute
a default under any provision of law, the Certificate of Incorporation or
By-Laws of GCI or of any existing agreement, indenture or other instrument to
which GCI is a party or to which any of its businesses or the assets may be
bound or affected;
(d) There will not be at any time prior to the Closing Date, any new
outstanding options, warrants, rights, contracts, calls, demands or commitments
of any type, kind or character relating to the GCI Common Shares except as they
exist at the time of this Agreement;
(e) The capitalization of GCI immediately prior to the Closing will
be as follows:
Authorized Type of Security Issued and Outstanding
- ---------- ---------------- ----------------------
20,000,000 Shares Voting Common Stock, 14,901,258 Shares
$.01 par value per share
(f) Prior to the Closing Date, and except for the original issuance
of any shares of its common stock comprising the 20,000,000 shares referenced in
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Section 6(e) above, GCI will not cause the original issuance of any of its
authorized but unissued shares of common stock without the express written
consent of the CSR Shareholders;
(g) On the Closing Date, the issued and outstanding GCI Common
Shares will not be owned beneficially or of record by not less than 500
shareholders;
(h) All corporate action required of GCI will have been taken prior
to the Closing Date. GCI has complied in all material respects, and at all times
until the Closing Date will comply in all material respects with all applicable
state, federal and local laws regulations and ordinances. GCI has not been
notified, as of the date of this Agreement, that it has failed to so comply with
any such requirements;
(i) There is no litigation or governmental proceeding or
investigation pending or, to the knowledge of GCI, threatened or in prospect
against GCI, any of its officers, directors or sole shareholder or their
properties or relating to its capital stock. GCI will notify the CSR
Shareholders promptly of any such initiated or threatened proceedings or
litigation which may arise or be instituted at any time prior to the Closing
Date;
(j) The audited balance sheet, statement of cash flows, statement of
changes in stockholders equity (deficiency) of GCI and the notes thereto for the
fiscal year ended December 31, 1998 (the "GCI Audited Financial Statements") and
unaudited financial statements for the two months ending February 28, 1999 (the
"GCI Unaudited Financial Statements") and the notes thereto, attached hereto as
Schedule 6(j), present the financial condition and the results of operations of
GCI as of the dates thereof and were prepared in accordance with generally
accepted accounting principles consistently applied. The GCI Audited and
Unaudited Financial Statements are hereinafter collectively referred to as the
"GCI Financial Statements". There are no material liabilities, either fixed or
contingent, not reflected in the GCI Financial Statements, and the GCI Financial
Statements are true and correct in all material aspects, and do not omit to
state any material fact required or necessary to make such statements, in light
of the circumstances in which they are made, not misleading;
(k) To the best knowledge and belief of GCI, since February 28, 1999
(date of latest GCI Unaudited Financial Statements) there has been no material
adverse change in the financial condition of GCI nor has there been any material
or substantial loss or damage to the properties or business of GCI (whether or
not covered by insurance) and no event or condition of any character has
occurred which adversely affect GCI's business;
(l) From the date of the latest GCI Unaudited Financial Statement
(February 28, 1999) through and including the date of this Agreement and
subsequent Closing Date, GCI has not and will not incur any liability or made
any payments other than in the regular and normal course of its business and
between the date of this Agreement and the Closing Date, GCI has not transferred
any property for less than a fair and adequate consideration;
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(m) GCI has not declared or paid since the date of the latest GCI
Unaudited Financial Statement (February 28,1999); and will not declare or pay
prior to the Closing Date, any dividends or make any distribution, directly or
indirectly, to its shareholders, officers or directors, nor has it made, since
the said date, nor will it make, prior to the Closing Date, any loans or
advances to any shareholders, officers or directors;
(n) To the best knowledge and belief of GCI and except as set forth
on Schedule 6(n) annexed hereto, any and all taxes accrued or asserted against
GCI have been paid, or GCI has established adequate reserves therefor. All tax
returns for GCI required to be filed have been or will be filed for all periods
ending on or up to the Closing Date; no extensions of the applicable statutes of
limitations have been, or will be, prior to the Closing Date, applied for by
GCI. Any and all additional taxes arising from the operation of GCI for any
period up to and including the Closing Date and not provided for on the books
and records of GCI are and shall be the sole liability of GCI. Copies of all
applicable tax returns shall be furnished to the CSR Shareholders and its
counsel prior to the Closing Date;
(o) GCI has clear and unencumbered title to all of the assets and
property owned by it as reflected in the GCI Financial Statements and GCI has no
assets that are not reflected in the GCI Financial Statements;
(p) To the best knowledge and belief of GCI, GCI is not in material
default under any material contract or obligation and all third parties with
whom GCI has contractual arrangements are in material compliance therewith and
are not in material default thereunder;
(q) GCI has not adopted, and, without written consent of the CSR
Shareholders, will not prior to the Closing Date adopt, any employment or
collective bargaining agreements;
(r) There are no material liabilities, either fixed or contingent,
not reflected in the GCI Financial Statements except that there may be contracts
or obligations incurred in the usual course of business not reflected therein
which, if disclosed, would not materially adversely affect the financial
condition of GCI as reflected in the GCI Financial Statements;
(s) No representation or warranty made by GCI in this Agreement and
any schedule or exhibit attached hereto and furnished or to be furnished to the
CSR Shareholders pursuant to this Agreement, contains or will contain any untrue
statement of a material fact, or omits, or will omit, to state a material fact
required or necessary to make the statements and representations herein or
therein made, in light of the circumstances under which they were made, not
misleading;
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(t) On the Closing Date, GCI shall have authorized, issued and
outstanding the securities set forth in clause (f) of this Section 6; and all
GCI Common Shares indicated as being issued and outstanding on the Closing Date
shall be duly and validly issued and outstanding, fully paid and non-assessable
with no personal liability attached to the ownership thereof;
(u) From the date of the latest GCI Unaudited Financial Statements
(February 28, 1999), GCI has not executed or delivered or issued any notes,
bonds or mortgages and has not entered into any leases, contracts or commitments
not disclosed in the GCI Financial Statements;
(v) There are no outstanding rights to subscribe shares of stock of
GCI and none will be so authorized subsequent to the execution of this Agreement
without the prior written consent of the CSR Shareholders;
(w) No GCI shareholder has any right of appraisal or similar right
to dissent from the transaction made the subject of this Agreement and/or to
demand payment for its GCI Common Shares. In the event such right does, in fact,
exist, GCI will cause such shareholder to waive such right prior to the Closing
Date;
(x) GCI has no unpaid dividends;
(y) Prior to the Closing Date, GCI will not, without the prior
written consent of CSR, which consent shall not unreasonably be withheld,
authorize a reorganization, re-capitalization, merger, consolidation, stock
split or take other similar corporate action except as may be required to
effectuate the terms and conditions of this Agreement;
(z) GCI has no liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) which are required to be reflected or reserved
against on its balance sheets in accordance with generally accepted accounting
principles consistently applied, except for liabilities and obligations fully
reflected or reserved against in the GCI Financial Statements or incurred in the
ordinary course of business and consistent with past practice since the date of
the GCI Financial Statements;
(aa) GCI has the power to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been or will be prior
to Closing Date duly authorized by GCI's Board of Directors and shareholders in
accordance with Delaware law, and GCI shall furnish the CSR Shareholders with
true copies of any and all documentation evidencing such action. GCI is not
subject to or obligated under any contract provision or any license, franchise
or permit or subject to any order or decree, which would be breached or violated
by its execution and performance of this Agreement in the time and manner
contemplated herein. Except as required by applicable securities laws or as set
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<PAGE>
forth on Schedule 6(aa), no filing or registration with, or authorization
consent or approval of any public body or authority is necessary to execute or
perform this Agreement and the consummation by GCI of the transactions
contemplated hereby;
(bb) By virtue of its execution of this Agreement, GCI hereby
acknowledges and accepts that it has been furnished with all information
concerning the business and financial condition and corporate status of the CSR
Shareholders which GCI's management deemed necessary to its decision to proceed
with the transactions as described herein;
(cc) Each of the representations in this Section 6 shall be true and
correct at the Closing Date.
7. COVENANTS OF THE CSR SHAREHOLDERS. By virtue of their respective
execution of this Agreement, the CSR Shareholders hereby jointly and severally
covenant and agree with GCI as follows:
(a) On the Closing Date, each CSR Shareholder who will receive GCI
Shares will deliver an executed investment letter to GCI in the form annexed
hereto as Schedule 7(a) (the "CSR Investment Letter");
(b) CSR agrees and covenants to execute the certificates identified
in Section 9(a)(ii)and (vi) below;
(c) On the Closing Date, the CSR Shareholders will furnish GCI with
an opinion of securities counsel in form and substance reasonably acceptable to
GCI and GCI's securities counsel;
(d) At all times prior to the Closing Date, GCI through its duly
authorized representatives, may inspect, copy and reproduce any tax returns,
accounting and other records of the CSR Shareholders relating to the property,
assets or business of CSR. The CSR Shareholders will afford to the officers and
authorized representatives of GCI access to the properties, books and records of
CSR and will furnish such information as GCI and its counsel may from time to
time reasonably request;
(e) If requested by GCI, the CSR Shareholders will deliver to GCI an
accurate and complete list and brief description of all policies of fire,
liability, errors and omissions and other insurance carried by CSR as of the
date of this Agreement. The CSR Shareholders will take all steps necessary to
keep such policies in full force and effect through the Closing Date and will
inform GCI of any changes in coverage or additional policies prior to the
entering into such policies;
(f) Copies of CSR's Certificate of Incorporation, all amendments
thereto, By-Laws, and all minutes of CSR are contained in the minute books which
will be furnished to GCI and its counsel prior to the Closing Date; and all
additional minutes and other corporate documents of CSR adopted or executed
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subsequent to this Agreement, but prior to the Closing Date (none of which will
diminish or dilute the rights of GCI hereunder), will be furnished to GCI and
its counsel prior to the Closing Date;
(g) As soon as practicable following the execution of this
Agreement, the CSR Shareholders will provide GCI with the CSR Audited and
Unaudited Financial Statements;
(h) All of the representations, warranties and covenants of the CSR
Shareholders made in this Agreement shall survive the Closing Date for a period
of twelve months; and
(i) As soon as practicable following the execution of this
Agreement, but no later than ten (10) days prior to the Closing Date, the CSR
Shareholders will furnish to GCI copies of any and all proposed forms of
employment agreement (the "CSR Employment Agreements"). The terms of such CSR
Employment Agreements shall be satisfactory to GCI. Any and all such CSR
Employment Agreements shall be duly executed on the Closing Date.
8. COVENANTS OF GCI. By virtue of its execution of this Agreement, GCI
hereby covenants and agrees with the CSR Shareholders as follows:
(a) GCI agrees and covenants to execute the certificates identified
in Section 9(b)(ii), (iii) and (viii) below;
(b) On the Closing Date, GCI will furnish the CSR Shareholders with
an opinion of securities counsel in form and substance reasonably acceptable to
the CSR Shareholders and CSRs securities counsel;
(c) At all times prior to the Closing Date, the CSR Shareholders
through their duly authorized representatives, may inspect, copy and reproduce
any tax returns, accounting and other records of GCI relating to its property,
assets or business. GCI will afford to the officers and authorized
representatives of the CSR Shareholders access to the properties, books and
records of GCI and will furnish such information as the CSR Shareholders and
their counsel may from time to time reasonably request;
(d) Copies of CGI's Certificate of Incorporation, all amendments
thereto By-Laws, and all minutes of GCI are contained in the minute books which
will be furnished to the CSR Shareholders and their counsel prior to the Closing
Date; and all additional minutes and other corporate documents of GCI adopted or
executed subsequent to this Agreement, but prior to the Closing Date (none of
which will diminish or dilute the rights of the CSR Shareholders hereunder),
will be furnished to the CSR Shareholders and their counsel prior to the Closing
Date;
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(e) As soon as practicable following the execution of this Agreement
GCI will provide the CSR Shareholders with the GCI Audited and Unaudited
Financial Statements; and
(f) All of the representations, warranties and covenants of GCI made
in this Agreement shall survive the Closing Date for a period of twelve months.
9. CONDITIONS PRECEDENT TO CLOSING.
(a) All of the obligations of GCI under and pursuant to this
Agreement are and shall be subject to the representations and warranties of the
CSR Shareholders being true and correct in all material respects on the Closing
Date except for such representation and warranties that are expressly given as
of a specific date or as of the date hereof and the delivery to GCI, prior to or
on the Closing Date of each of the following:
(i) a certificate or certificates representing all of the CSR
Control Shares in proper transferable form, endorsed in blank, with signatures
guaranteed and with all necessary documentary transfer tax stamps affixed;
(ii) a certificate signed by each of the CSR Shareholders to
effect that all of the representations and warranties of the CSR Shareholders
set forth in Section 5 hereof, and elsewhere in this Agreement are true and
correct in all material respects except for such representations and warranties
that are expressly given as of a specific date or as of the date hereof;
(iii) the CSR Audited Financial Statements containing an
unqualified opinion of CSRs independent certified public accountants, together
with the CSR Unaudited Financial Statements (which shall contain no material
change in the financial condition of CSR since the date of the last CSR's
Audited Financial Statements (December 31,1995) other than expenditures
authorized by this Agreement, and reviewed by such firm;
(iv) a Certificate of Good Standing of CSR from the
appropriate authority in the State of Delaware dated prior to the Closing Date
or, in lieu of, a covenant that the same will be provided within thirty (30)
days of the Closing Date;
(v) a certificate from the appropriate authority in the State
of Delaware dated prior to the Closing Date evidencing payment by CSR of all
outstanding taxes due to the State of Delaware or, in lieu of a covenant that
the same will be provided within thirty (30) days of the Closing Date;
(vi) an executed copy of the CSR Shareholders Investment
Letters from each holder of the CSR Control Shares
17
<PAGE>
(vii) an opinion of corporate and securities counsel to the
CSR Shareholders, in form and substance reasonably satisfactory to GCI and its
counsel; and
(viii) duly executed copies of any CSR Employment Agreements.
(b) All of the obligations of the CSR Shareholders under and
pursuant to this Agreement are and shall be subject to the representations and
warranties of GCI being true and correct at the Closing Date except for such
representations and warranties that are expressly given as of a specific date or
as of the date hereof and the fulfillment prior to or on the Closing Date of
each of the following:
(i) certificates for the GCI Stock in such names and in such
denominations as the CSR Shareholders shall have indicated to GCI in writing at
least ten days prior to the Closing Date;
(ii) a certificate signed by the President and Secretary of
GCI, dated the Closing Date, to effect that all of the representations and
warranties of GCI set forth in Section 6 hereof, and elsewhere in this Agreement
are true and correct in all material respects except for such representations
and warranties that are expressly given as of a specific date or as of the date
hereof
(iii) a certified copy of the resolution of GCI's Board of
Directors authorizing the execution, delivery and performance of this Agreement;
(iv) the GCI Audited Financial Statements containing an
unqualified opinion of GCI's independent certified public accountants, together
with the GCI Unaudited Financial Statements (which shall contain no material
change in the financial condition of GCI since the date of the last GCI's
Audited Financial Statements (December 31,1998) other than expenditures
authorized by this Agreement, and reviewed by such firm;
(v) a Certificate of Good Standing of GCI from the appropriate
authority in the State of Delaware dated prior to the Closing Date or, in lieu
of a covenant that the same will be provided within thirty (30) days of the
Closing Date;
(vi) a certificate from the appropriate authority in the State
of Delaware dated prior to the Closing Date evidencing payment by GCI of all
outstanding taxes due to the State of Delaware or, in lieu of, a covenant that
the same will be provided within thirty (30) days of the Closing Date;
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(vii) an opinion of corporate and securities counsel to GCI,
in form and substance reasonably satisfactory to the CSR Shareholders and their
securities counsel; and
(viii) a certificate of the President and Corporate Secretary
of GCI certifying that, effective as of the Closing, all other covenants of GCI
to be satisfied on or before the Closing, as contained in Section 8 above have
been satisfied.
10. INDEMNIFICATION.
(a) CSR and the CSR Shareholders hereby agree to hold GCI harmless
from any and all loss, cost, expense, liability or damage, including reasonable
attorney's fees, resulting from any inaccurate representation made by the CSR
Shareholders, breach of any warranty herein made and breach or default in the
CSR Shareholder's performance of any of the covenants which the CSR Shareholders
are to perform hereunder; provided, however, no claim may be made under this
Agreement for breach of warranty or covenant or seek any indemnification with
regard thereto until such time as there has been an aggregate of Ten Thousand
Dollars ($10,000) damages incurred by GCI. All claims made hereunder must be
made within eighteen (18) months of the Closing hereunder or they shall be
deemed waived.
(b) GCI hereby agrees to hold the CSR Shareholders harmless from any
and all loss, cost, expense, liability or damage, including reasonable
attorney's fees, resulting from any inaccurate representation made by GCI,
breach of any warranty herein made and breach or default in GCI's performance of
any of the covenants which it is to perform hereunder; provided, however, no
claim may be made under this Agreement for breach of warranty or covenant, or
seek any indemnification with regard thereto until such time as there has been
an aggregate of Ten Thousand Dollars ($10,000) damages incurred by the CSR
Shareholders. All claims made hereunder must be made within eighteen (18) months
of the Closing hereunder or they shall be deemed waived.
11. THE CSR SHAREHOLDERS' INVESTMENT INTENT. The CSR Shareholders have
been advised, and by the execution of this Agreement, hereby agree, accept and
acknowledge:
(a) That none of the GCI Shares to be delivered hereunder shall have
been registered under the Securities Act or under state securities law, and that
both GCI and its present management are relying upon an exemption from
registration based upon the investment and other representations of the CSR
Shareholders. In this regard, the CSR Shareholders hereby represent, covenant
and warrant that:
(i) the CSR Shareholders are acquiring the GCI Shares issuable
hereunder for investment purposes and without any view to the transfer or resale
thereof and that such shares shall not be sold, transferred, assigned, pledged
or hypothecated in any violation of the Securities Act, or the applicable
securities laws of any state;
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(ii) The certificates representing all of the GCI Shares to be
delivered pursuant to this Agreement, shall bear a restrictive legend in
substantially the following form:
"The Shares represented by this certificate have not been
registered under the Securities Act of 1933 as amended. They
may not be sold, assigned or transferred in the absence of an
effective registration statement for the Shares under the
said Securities Act, receipt of a `no action' letter from the
Securities and Exchange Commission or an opinion of counsel
satisfactory to the Corporation that registration is not
required under said Securities Act."
(iii) The GCI Shares will be the subject of standard stop
transfer orders on the books and records of GCI's transfer agent.
12. CONDUCT OF GCI'S AND CSR'S BUSINESS PRIOR TO THE CLOSING DATE.
>From the date hereof and prior to the Closing Date, unless the other party
hereto shall otherwise agree in writing:
(a) The business of GCI and CSR shall be conducted only in the
ordinary and usual course and there shall be no material adverse changes in the
nature and extent of its respective properties, the conduct of its respective
operations;
(b) Neither GCI nor CSR shall encumber by lien, encumbrance,
security interest or otherwise any of its respective assets or properties or
authorize the reorganization, re-capitalization, merger, consolidation or other
similar action on behalf of GCI or CSR except any that may be permitted by or
required to effectuate the terms and conditions of this Agreement or as
otherwise mutually agreed upon in writing;
(c) Except as permitted by this Agreement, neither GCI nor CSR
shall dispose of any material amount of assets other than in the ordinary course
of business; incur a material amount of additional indebtedness or other
material liabilities, other than liabilities for borrowed money or enter into
any contract, agreement, commitment or arrangement with respect to any of the
foregoing;
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(d) Neither GCI nor CSR shall enter into any employment or
similar contract with any shareholder or employee or make any changes in its
respective management or executive assignments or compensation, except for
changes in its management or executive assignments or compensation which occur
in the ordinary course of business or as otherwise permitted by this Agreement;
and
(e) GCI and CSR shall use their respective best efforts to
preserve intact its business organization, to keep available the services of its
present key employees, and to preserve the good will of those having business
relationships with them.
13. REGISTRATION AND REGISTRATION RIGHTS. The following provisions
shall be applicable:
a. REGISTRATION. Within six (6) months from the closing date
of the Agreement, GCI hereby covenants and agrees to prepare and file a
registration statement (a "Registration Statement") with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "Securities Act"), in which the holder GCI Shares are registered for sale,
whether public or otherwise~
b. PIGGY BACK REGISTRATION RIGHTS. If at any time during the two
year period following the date of this Agreement, GCI proposes to register for
sale in any offering1 whether to the public or otherwise of any equity or debt
securities pursuant to a Registration Statement with the SEC under the
Securities Act, and/or under any state statute, it will at such time give
written notice of its intention to do so (the "Registration Notice") to the
registered holders of the GCI Shares at their address appearing on the books and
records of GCI's transfer agent. CGI's obligation to furnish the Registration
Notice to the holders of the GCI Shares shall arise within three days from GCI's
execution of a written letter of intent with any broker-dealer registered with
the National Association of Securities Dealers, Inc. ("NASD") or of CGI's
engagement of securities counsel to prepare a Registration Statement for filing
with the SEC, whichever shall sooner occur. Within 15 days after the receipt of
the Registration Notice, any holder of the GCI Shares may request the inclusion
of such holder's GCI Shares in any Registration Statement which GCI intends to
file with the SEC (the "Covered Share Notice"). The Covered Share Notice shall:
(i) specify the number of GCI Shares intended to be offered and sold by the
holder thereof (the "Covered Shares"); (ii) express the holder's present intent
to offer such Covered Shares for distribution; and (iii) undertake to provide
all such information and materials and to take all such action as may be
required in order to permit GCI to comply with all applicable requirements of
the SEC and/or applicable state regulatory body, as the case may be, and to
obtain acceleration of the effective date of the Registration Statement
therefor. Upon receipt of the Covered Share Notice, GCI shall use its best
efforts to cause the offering of the Covered Shares so specified in the Covered
Share Notice to be registered under the Act as soon as reasonably practicable
(but in any event not later than 75 days from the date of the Covered Share
Notice) so as to permit the sale or other distribution by the holder of the
Covered Shares specified in the Covered Share Notice;
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<PAGE>
c. REGISTRATION EXPENSES. GCI shall bear the costs and expenses
incurred in connection with the registration of the sale or other distribution
of the Covered Shares pursuant to the terms of this Agreement (except that the
holder shall pay any underwriting fees, discounts or commissions attributable to
sales of Covered Shares by the holder and any "out of pocket" expenses of the
holder, including the holders counsel's fees and expenses). The costs and
expenses payable by GCI shall include without limitation, (i) all filing fees
with the SEC and the NASD; (ii) fees and expenses of compliance with securities
or blue sky laws (including fees and disbursements of counsel in connection with
blue sky qualifications of the Covered Shares); (iii) printing expenses; (iv)
the fees and expenses incurred in connection with the listing of the Covered
Shares; and (v) fees and expenses of counsel and independent certified public
accountants for GCI (including the expenses of any comfort letters).
d. PUBLIC OFFERING INDEMNITIES. In the event of any registered
offering of the Covered Shares, pursuant to Section 15 hereof, the holders of
the GCI Shares will provide standard Unites States indemnification to any
underwriter against losses, damages, claims or liabilities arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or the prospectus included therein,
as amended or supplemented, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading, made by the holders of the GCI Shares.
14. ACCESS AND INFORMATION. Each party hereto shall afford to other
party's accountants, counsel and other duly authorized representatives access,
during normal business hours and on reasonable advance notice, during the period
after execution of this Agreement and prior to the Closing Date, the right to
make copies of all properties, books, contracts, commitments and records
(including but not limited to tax returns). In addition, each party shall
furnish promptly to the other party: ([) a copy of each report, schedule and
other document file received by it pursuant to the requirements of Federal or
state securities laws; (ii) a copy of any summons, complaint, petition, notice
of hearing or notice of the commencement of any governmental or administrative
investigation; and (iii) all other information concerning its business,
properties and personnel as may reasonably be requested; provided, however, that
no investigation pursuant to this Section 15 shall affect any representations or
warranties or the conditions to the obligations of the parties to consummate a
transaction referenced herein, In the event of a termination of this Agreement
whether in accordance with the provisions of Section 16 or otherwise, each party
shall return to the party furnishing information all documents, work papers and
22
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other material obtained by or on its behalf as a result of this Agreement or in
connection herewith whether obtained before or after the execution hereof, and
the party receiving such information from the party furnishing same shall hold
such information in confidence until such time as such information is otherwise
publicly available. Notwithstanding the foregoing and until the Closing Date,
CSR shall be under no obligation to disclose to GCI and GCI shall be under no
obligation to disclose to CSR any proprietary or secret or confidential
information concerning its respective operations.
15. EXPENSES. Regardless of whether or not the transaction contemplated
herein is consummated, each party shall promptly pay, shall be responsible for,
and account for on its respective financial statements all costs and expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby.
16. TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date: (i) by mutual consent of the Boards of Directors of GCI and
the CSR Shareholders; (ii) by failure to close as provided in Section 3; or
(iii) as a result of the occurrence, prior to the Closing Date, of any of the
following events with respect to or by either CSR or GCI: (aa) The making of a
general assignment for the benefit of creditors; (bb) The filing of any petition
or the commencement of any proceeding by or against either corporation for any
relief under any bankruptcy, or insolvency laws or any laws related to the
relief of debtors, readjustment of indebtedness, reorganizations, compositions
or extensions; (cc) The appointment of a receiver of or the issuance of making
of a writ or order of attachment or garnishment against, a majority of the
property or assets of either corporation; (dd) The filing of a tax lien or
warrant or judgment against either corporation in favor of the United States of
America or the State of Delaware in an amount in excess of Twenty Five Thousand
($25,000) Dollars where said lien or judgment is not satisfied and discharged
within thirty (30) days from the date of such filing; or (ee) A judgment is
rendered against either corporation on an uninsured claim of $50,000 or more and
either corporation fails to commence an appeal of such judgment within the
applicable appeal period.
17. EFFECT ON TERMINATION. In the event of termination of this
Agreement as provided in Section 16, this Agreement shall forthwith become null
and void and there shall be no further liability on the part of GCI or the CSR
Shareholders. Termination of this Agreement by either GCI or the CSR
Shareholders as a result of the breach of the terms and conditions hereof by the
other shall not relieve any party of any liability for a breach at or for any
misrepresentation under this Agreement, or be deemed to constitute a waiver of
any available remedy (including specific performance if available) for any such
breach 23 411)!. or misrepresentation.
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18. MEANING OF "MATERIAL." As used herein, the term "material" shall be
construed in its generally accepted United States Federal securities law
context.
19. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
20. WAIVER. At any time prior to the Closing Date, GCI by action taken
by its Boards of Directors and the CSR Shareholders by unanimous consent, and
accepted in writing by the other parties, may: (i) extend the time for the
performance of any party; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto; and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party and accepted in writing by the other parties. The failure of any
party to insist upon strict performance of any of the provisions of this
Agreement shall not be construed as a waiver of any subsequent default of the
same or similar nature or of any of provision, term, condition, warranty,
representation or guaranty contained herein.
21. BROKER AND INVESTMENT BANKING FEES. GCI and the CSR Shareholders
represent and warrant that they have not engaged the services of any broker,
finder, or other person of similar kind who might be due compensation as a
result of the transactions contemplated herein. GCI and the CSR Shareholders
agree to hold and indemnify each other harmless from and against claims by any
third party due compensation as a broker, finder, or other person of similar
kind who might be due compensation as a result of the transactions contemplated
herein.
22. BINDING EFFECT. All of the terms and provisions of the Agreement
shall be binding upon and inure to the benefit of and be enforceable by and
against the parties hereto and their respective successors. This Agreement shall
not be assignable under any circumstances.
23. ENTIRE AGREEMENT. Each of the parties hereto, covenants that this
Agreement is intended to and does contain and embody herein all of the
understandings and agreements, both written and oral, of the parties hereby with
respect to the subject matter of this Agreement and that there exists no oral
agreement or understanding express or implied, whereby the absolute, final and
unconditional character and nature of this Agreement shall be in any way
invalidated, impaired or affected.
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24. GOVERNING LAW. This Agreement shall be governed by and interpreted
under and construed in all respects in accordance with the laws of the State of
New York, a neutral forum, irrespective of the place of domicile or residence of
any party.
25. ARBITRATION. The parties agree that in the event of a controversy
arising out of the interpretation, construction, performance or breach of the
Agreement, any and all claims arising out of or relating to this Agreement shall
be settled by arbitration according to the Commercial Arbitration Rules of the
American Arbitration Association located in New York City before a single
arbitrator, except as provided below. The decision of the arbitrator(s) will be
enforceable in any court of competent jurisdiction. The parties hereby agree and
consent that service of process by mail in any such arbitration proceeding
outside the City of New York shall be tantamount to service in person within New
York New York and shall confer personal jurisdiction on the American Arbitration
Association. In any dispute where a party seeks Fifty Thousand Dollars
($50,000.00) or more in damages, three (3) arbitrators will be employed. In
resolving all disputes between the parties, the arbitrators will apply the law
of the State of New York, except as may be modified by this Agreement. The
arbitrators are, by this Agreement, directed to conduct the arbitration hearing
no later than three (3) months from the service of the statement of claim and
demand for arbitration unless good cause is shown establishing that the hearing
cannot fairly and practically be so convened. The arbitrators will resolve any
discovery disputes by such pre-hearing conferences as may be needed. All parties
agree that the arbitrators and any counsel of record to the proceeding will have
the power of subpoena process as provided by law. Notwithstanding the foregoing
if a dispute arises out of or related to this Agreement, or the breach thereof,
before resorting to arbitration the parties agree first to try in good faith to
settle the dispute by mediation under the Commercial Mediation Rules of the
American Arbitration Association.
26. ORIGINALS. This Agreement may be executed in counterparts, in
original or by facsimile, each of which so executed shall be deemed an original
and constitute one and the same agreement.
27. ADDRESSES OF THE PARTIES. Each party shall at all times keep the
other party informed of its principal place of business if different from that
stated herein, and promptly notify the other of any change, giving the address
of the new principal place of business.
28. NOTICES. Any notice required or contemplated by this Agreement
shall be deemed sufficiently given when delivered in person, transmitted by
facsimile (if followed by a copy by mail within three (3) business days) or sent
by registered or certified mail or priority overnight package delivery service
to the principal office of the party entitled to notice or at such other address
as the same may designate in a notice for that purpose. All notices shall be
deemed to have been made upon receipt, in the case of mail, personal delivery or
facsimile, or on the next business day, in the case of priority overnight
package delivery service. Such notices shall be addressed and sent or delivered
to the following:
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If to Go Call, Inc.:
15 Queen Street East,
Cambridge, Ontario, Canada N3C2A7
Attn: Ian Smith, President
With a copy to:
Charles J. Spinelli, Esq.
Spinelli & Associates
120 Wall St., 28th Floor
New York, NY 10005
If to the CSR Shareholders:
4929 Wilshire Boulevard
Los Angeles, CA 90010
Attn: Dan J. Rubin
With a copy to:
Robert Davidson, Esq.
Wolf, Haldenstein, Adler, Freeman & Herz, LLP
270 Madison Avenue
New York, NY 10016
or to such other address of which a party may notify the other parties as
provided above.
29. RELEASE OF INFORMATION. In light of the nature and extent of the
conditions precedent to CSR `s and GCI's obligations hereunder, the parties
hereby agree that any and all releases of public information concerning this
transaction shall be made only with the mutual consent in writing of both the
CSR Shareholders and GCI as to form, content and kind.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
Go Call Inc.
By: /s/ Ian Smith
---------------------------
Ian Smith, President
/s/ Dan J. Rubin
---------------------------
Dan J. Rubin
/s/ Dan Nourani
---------------------------
Daniel Nourani
Roy B. Rubin MD, PC, MPPP
By: /s/ Roy B. Rubin
---------------------------
Roy B. Rubin, Trustee
27
AGREEMENT FOR THE REPURCHASE AND SALE OF STOCK AND
--------------------------------------------------
RELEASE AND INDEMNIFICATION
---------------------------
This Agreement for the Repurchase and Sale of Stock is made this 5th
day of August, 1999, by and between Go Call, Inc. ("GCI") and Dan J. Rubin, Roy
B. Rubin, individually and as Trustee for Roy B. Rubin, M.D., PC Money Purchase
Pension Plan, Sima Rubin, individually and as Trustee for Roy B. Rubin, M.D., PC
Money Purchase Pension Plan and Daniel Nourani (collectively, the "Rubin Group")
with respect to the Stock Acquisition Agreement dated March 11, 1999
("Agreement"). The parties hereby agree as follows:
WITNESSETH
1. WHEREAS, GCI and the RUBIN GROUP have entered into a Stock
Acquisition Agreement dated March 11,1999, whereby GCI acquired 92% of all
issued and outstanding shares of common stack of Country Star Restaurants, Inc.
("CSR") from the RUBIN GROUP, individually and collectively, for an aggregate
total of 4,552,751 shares of GCI; and
WHEREAS, for reasons agreed to by the parties, GCI desires to
repurchase, and the RUBIN GROUP desires to offer to GCI, the shares of GCI
currently owned by the RUBIN GROUP in accordance with the terms herein;
NOW THEREFORE, in consideration of the terms, representations, promises
and covenants hereinafter set forth, and mutual benefits to be derived herefrom,
the existence, receipt and adequacy of which are hereby acknowledged and
accepted, the PARTIES agree as follows:
1. Contemporaneously herewith, GCI has paid, and the Rubin Group
Acknowledges receipt at the sum total aggregate sum of $728,440. 16 by way of
certified funds made payable to the trust account of the Law Offices of Arthur
<PAGE>
H. Barens, counsel for the Rubin Group, in exchange for, the receipt of which is
acknowledged by GCI, the repurchase of 4,552,751 shares of the common stock of
GCI ("Stock") which represents a repurchase price at $0.16 per share, received
by the Rubin Group in connection with the Agreement (of said shares, Dan J.
Rubin owns 1,163,981 shares and Roy B. Rubin, M.D., PC Money Purchase Pension
Plan owns 3,388,770 shares). The Rubin Group has also delivered to GCI signature
guaranteed stock powers with respect to the Stock, and further agrees to execute
any further documents reasonably necessary to accomplish the transfer or
cancellation of the Stock. The Rubin Group, individually and collectively,
represents and warrants that is the equitable and legal owner of and has good
title to, the Stock, free and clear of all pledges, liens, encumbrances,
security interest, equities, options, claims, charges, limitation on voting
rights or rights to receive dividends, or other restriction of any kind (other
than any generally imposed by federal, corporation or state securities laws) and
has the right to transfer the Stock as provided herein.
2. PRIOR AGREEMENTS. The PARTIES mutually agree to terminate and cancel
any and all prior agreements, business arrangements and joint ventures among the
PARTIES so that upon execution of this RELEASE all prior agreements, business
arrangements and joint ventures shall be void and without effect. The PARTIES
also agree that the terms of this RELEASE will govern the cancellation despite
any terms contained in the said prior agreements or any other understanding or
agreement heretofore entered into by the PARTIES.
3. In consideration of the terms and conditions hereof, GCI (including
Michael Ruge, individually), on the one hand, and the Rubin Group, individually
and collectively, an the other hand, and on behalf of their partners, directors,
shareholders, officers employees, agents, successors, assigns, heirs, legatees
2
<PAGE>
and representation, and except as specifically provided for herein, each hereby
fully and forever generally release and discharge the other, including its
partners, directors, shareholders, officers, employees, agents, successors,
assigns, heirs, legatees and representatives, and each of them, of and from all
manner of actions, causes of action, claims, demands, costs, damages,
liabilities, losses, obligations, expenses and compensation of any nature
whatsoever in law or in equity, known and unknown, with respect to any and all
claims, including but not limited to those relating to the Stock Purchase
Agreement and Plan of Merger.
4. The mutual general release set forth in paragraph 3 hereof, is and
shall be a release of all claims, whether known or unknown, and the parties
hereby release all rights reserved to the them by ss.1542 of the Civil Code of
the State of California, which reads as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
In waiving the provision of ss.1542 of the Civil Code, the parties
acknowledge that they may hereafter discover facts in addition to or difference
from those which they now believe to be true with respect to the subject matter
of the release, but agree that the release herein given shall be and remain in
effect as a full and complete general release notwithstanding the discovery or
existence of any such additional or different facts, of which they expressly
assume the risk.
5. (a) In consideration of the terms and conditions hereof GCI
agrees to indemnify, defend and hold harmless the Rubin
Group and affiliates (i.e. Bayview Trading), individually
and collectively, from and against all Losses, claims,
3
<PAGE>
damages, liabilities, judgments, fines, penalties,
assessments and costs and expenses incurred (including,
without limitation, reasonable attorneys' fees and
accounting fees and disbursements) with respect to claims of
shareholders of Country Star Restaurants, Inc. ("CSR"),
other than the Rubin Group, relating to the Agreement and/or
an Agreement and Plan of Merger between GCI and CSR dated
April 19, 1999, notwithstanding the foregoing, the Rubin
Group shall not be entitled to indemnification pursuant to
this paragraph if a court of competent jurisdiction
determines that, in connection with any matter giving rise
to indemnification, the Rubin Group acted fraudulently or
dishonestly.
(b) GCI represents that the shares issued to the Rubin Group
pursuant to the Agreement were appropriately authorized and
issued by GCI, and, to the best knowledge of GCI, were
issued with a restrictive legend in accordance with United
States Securities Laws.
(c) The parties hereto have thoroughly investigated the facts
relating to the aforementioned transaction. The parties
hereto warrant that they freely enter into this Release and
Indemnity Agreement and are not entering into this Agreement
because of any duress or fear. The parties further warrant
that they have read the Release and Indemnity Agreement and
have consulted with their attorneys, and understand and
agree to the provisions herein.
4
<PAGE>
6. GCI may issue a press release with respect to this transaction. Said
press release shall state nothing of a negative or disparaging nature concerning
the Rubin Group or any of its members and said statement shall be subject to the
approval of the Rubin Group which shall not be unreasonably withheld.
7. This Agreement may be executed in one or more counterparts, each of
which shall constitute one and the same instrument and be binding and
enforceable as if all parties had executed the same copy hereof. It may also be
executed by facsimile, and a facsimile signature by a party shall have the same
force and effect as an original signature.
8. DRAFTING. The PARTIES hereto agree that this RELEASE has been
negotiated and drafted jointly, that the order of the paragraphs have no
significance, and that the language hereof shall be construed as a whole
according to its fair meaning and interpretation.
9. SURVIVAL. Notwithstanding anything to the contrary herein, all
rights and obligations, representations and warranties created under or pursuant
to this RELEASE shall survive the execution and delivery of this RELEASE.
10. ENTIRE AGREEMENT. This RELEASE and the documents incorporated
herein or concurrently executed herewith, if any, shall constitute the entire
agreement between the PARTIES hereto with respect to the subject matter hereof,
and shall supersede all prior agreements, understandings, warranties,
representations, and negotiations of any party herein concerning the subject
matter hereof.
11. BINDING EFFECT. All covenants, promise, obligations,
representations, and warranties set forth herein shall be binding on all heirs,
successors, assigns, licensees, agents, and representatives of each of the
PARTIES hereto as shall all of the benefits herein.
5
<PAGE>
12. AMENDMENTS. This RELEASE may not be released, amended, or modified
in any manner whatsoever except in writing signed by each of the PARTIES hereto.
13. CONFIDENTIALITY. The PARTIES agree to treat all facts,
conversations and communications relative to this RELEASE or any business
dealings with, among or between the PARTIES as confidential.
14. AUTHORITY. Each of the PARTIES hereto hereby represent and warrant
that it has the power, authority and capacity to enter into and perform this
RELEASE and the person signing on behalf of such party represents and warrants
that he is duly authorized to so act.
15. If a dispute arises over the terms of enforcement of the settlement
of this Agreement and as a result litigation is instituted, the prevailing party
shall be entitled to receive from the other his or her reasonable attorney's
fees and costs.
16. This Agreement is made and entered into in the State of California
and shall be interpreted and enforced pursuant to The laws of the State of
California. The parties consent to the jurisdiction of the California courts in
any action brought to enforce the terms of this Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Agreement on the date
affixed by signature.
Dated: 8/5/99 /S/ Dan J. Rubin
----------------- ----------------------------------------
Dan J. Rubin
Dated: 8/5/99 /S/ Roy B. Rubin
----------------- ----------------------------------------
Roy B. Rubin, M.D., P.C. Money Purchase
Pension Plan
6
<PAGE>
Dated: August 5, 1999 /S/ Roy B. Rubin
-------------- -----------------------------------
Roy B. Rubin, individually and as
Trustee for Roy B. Rubin, M.D.,
PC Money Purchase Pension Plan
Dated: August 5, 1999 /S/ Daniel Nourani
-------------- -----------------------------------
Daniel Nourani
Dated: August 5, 1999 /S/ Michael Ruge
-------------- -----------------------------------
Michael Ruge, Chief Executive
Officer, Go Call, Inc.
Dated: August 5, 1999 /S/ Sima Rubin
-------------- -----------------------------------
Sima Rubin P.C. Money Purchase
Pension Plan
Dated: August 5, 1999 /S/ Sima Rubin
-------------- -----------------------------------
Sima Rubin, individually and as
Trustee for Roy B. Rubin, M.D.,
P.C. Money Purchase Pension Plan
Approved as to form and content:
Dated: August 5, 1999 /S/ Arthur H. Barens
-------------- -----------------------------------
Arthur H. Barens, Counsel for
The Rubin Group
Dated: August 5, 1999 /S/ Michael Mattias
-------------- -----------------------------------
Michael Mattias, Counsel for
Go Call, Inc.
7
<PAGE>
ADDENDUM TO AGREEMENT FOR THE REPURCHASE AND
--------------------------------------------
SALE OF STOCK AND RELEASE AND INDEMNIFICATION
---------------------------------------------
17. Michael Ruge and Dan Rubin further agree that at closing, Michael
Ruge will deliver a certain Ferrari automobile to Dan Rubin, in exchange for
which Dan Rubin will deliver to Michael Ruge or his nominee two (2) certain
Harley Davidson motorcycles. Michael will provide a written statement
guaranteeing the title to the Ferrari automobile in favor of Dan Rubin or his
nominee, as well as the written agreement of Michael Ruge that he will execute
such further documentation as may be necessary and appropriate to guarantee and
secure title of the Ferrari automobile to Dan Rubin or his nominee. In the event
Michael Ruge fails to execute any documents confirming title of the Ferrari
automobile to Dan Rubin or his nominee, Michael Ruge agrees and authorizes the
Law Offices of Arthur H. Barens to execute any and all documents on behalf of
Michael Ruge confirming the title of Dan Rubin or his nominee to the ownership
of the Ferrari automobile.
18. Dan Rubin represents and warrantees that to the best of his
knowledge title to the two (2) Harley Davidson motorcycles presently stands in
the name of Country Star Restaurants, Inc. Rubin further covenants and agrees
that in the event additional documentation is required to confirm the title to
said motorcycles in favor of Country Star Restaurant or nominee he will execute
same and in the event he fails to do so he will authorize Law Offices of
Matthias & Berg to execute any and all documents on behalf of himself confirming
the title of the motorcycles to CSR or nominee, their nominee.
8
<PAGE>
19. Closing date of this transaction shall be August 5,1999 at the
Law Offices of Arthur H. Barens located at 10209 Santa Monica Boulevard Los
Angeles, California 90067
D.J.R. /S/ D.J.R.
R.B.R /S/ R.B.R.
R.B.R /S/ R.B.R
D.N /S/ D.N.
M.E.R /S/ M.E.R.
S.R. /S/ S.R.
S.R. /S/ S.R.
A.H.B /S/ A.H.B.
M.M. /S/ M.M.
Promotion Agreement Between
PageMaster Corporation and Go Call, Inc.
AGREEMENT
---------
This Promotion Agreement (herein "Agreement") dated March 12,1999, by
and between Go Call, Inc. (herein "Go Call") located at 15 Queen Street East,
Cambridge Ontario, Canada N3C2A7 and PageMaster Corporation located at 100 E.
Thousand Oaks Blvd. Suite 297, Thousand Oaks, CA 91360, shall set forth the
Terms and conditions pursuant to which Go Call and PageMaster Corporation shall
create a promotion as more fully described below.
WHEREAS, Go Call seeks to increase its sales and website activity; and
WHEREAS. PageMaster Corporation seeks to promote the contracting of
paging service to clients;
NOW THEREFORE, Go Call and PageMaster Corporation in consideration of
the mutual obligations set forth herein and other good and valuable
consideration, the receipt and sufficiency of which the parties
acknowledge, hereby agree as follows:
1. Description of the Promotion
----------------------------
PageMaster Corporation in conjunction with Go Call, shall offer free new
Motorola "Wordline Alphanumeric" (or equal) pagers with no activation fee to all
customers responding to this promotion who purchase twelve (12) months of
numeric paging and airtime products and services from PageMaster Corporation
("Purchase Customers").
2. Consumer Cost Description
-------------------------
Each Purchase Customer will be required to purchase twelve months of
local numeric airtime at a rate of $10.33 per month through a designated
nationwide airtime provider, prepaid in advance. The purchased airtime shall be
non-refundable to the consumer. Additionally, Purchase Customers will be
required to pay for shipping and handling costs and applicable sales taxes based
on their locations.
3. Term
----
This promotion shall begin on June 1,1999 and shall terminate June 1,
2000 (herein "Term") This term shall be extended for a 1 year period provided
3000 pagers per month are distributed to Purchase customers.
4. Responsibilities of PageMaster Corporation
------------------------------------------
PageMaster Corporation shall be responsible for providing the following:
a. For Purchase Customers to participate in the promotion,
PageMaster Corporation shall establish and maintain a toll-free
telephone number for this promotion beginning June 1,1999 and
continuing until September 1, 2000 unless otherwise requested by
Go Call and agreed upon by PageMaster Corporation.
b. PageMaster Corporation shall provide a minimum of 100,000 up to
500,000 pagers for the fulfillment of this promotion to all
Purchase Customers who prepay their annual airtime.
c. PageMaster Corporation shall be responsible for all fulfillment
obligations of this promotion relating to paging services,
including, but not limited to, timely delivery of pagers, paging
services, defective goods handling, subcontracting, deadlines,
and handling of consumer and regulatory inquiries and complaints.
<PAGE>
d. PageMaster Corporation will contract with a nationwide airtime
service provider to fulfill and to ship Purchasing Customer
orders direct to the Purchase Customers to fulfill this promotion
in a timely manner. PageMaster Corporation has chosen for the
purpose of this promotion, MetroCall Inc. to provide pager and
airtime services where the nationwide airtime service provider
has the facilities and the requisite governmental authority to
provide such services. All Purchase Customers shall become
customers of the nationwide airtime service provider. The
nationwide airtime service provider shall be allowed to market
additional pagers arid enhanced services to all Purchase
Customers, and to charge for over-calls with respect to any
account with a Purchase Customer. The nationwide airtime service
provider shall be able to discontinue or terminate service to any
Purchase Customer in accordance with the terms of the contract
between the nationwide airtime service provider and the Purchase
Customer. Notwithstanding the foregoing, PageMaster Corporation
shall remain solely responsible for the fulfillment of all
services and obligations set forth in this Agreement.
e. PageMaster Corporation shall not engage in the same or similar
promotion with any other On-Line Casinos from June 1, 1999
through June 1, 2000.
f. PageMaster Corporation will provide at no charge programming
software that will allow Go Call to broadcast any and all
messages of 125 characters or less to all Go Call consumers who
have redeemed pagers on this promotion.
5. Responsibilities of Go Call
---------------------------
a. Go Call shall prepare and distribute at its own expense, all
advertising materials to be used for this promotion.
b. Go Call, shall submit in advance, all artwork and advertising to
PageMaster Corporation for approval as provided in Paragraph 8.
c. Go Call shall not engage in the same or similar promotions during
the Term of this Agreement with any other entity providing paging
services, equipment or other related products and services.
6. Payment Made As Deposit On Pagers
---------------------------------
Upon the execution of this Agreement, Go Call shall forward to
PageMaster Corporation a deposit in the sum of $100,000.00 to secure the
availability of 100,000 pagers to all Purchase Customers who prepay their annual
airtime for this promotion. The deposit is non-refundable except as follows:
a. PageMaster Corporation shall refund to Go Call, $1.00 per pager
on all pagers delivered to Purchase Customers pursuant to this
promotion (net return) up to the maximum refund of $100,000.00.
b. On the last day of each month, the refund of Go Call's portion of
the deposit shall be calculated by PageMaster Corporation for the
prior month and will be forwarded to Go Call by check, along with
an extended accounting of all pagers and customers until
September 1, 2000, unless otherwise instructed by Go Call. Go
Call, upon ten (10) days written notice, shall have the right to
examine the books and records of PageMaster Corporation to verify
the sales resulting from this promotion. Such examination shall
be made at the regular place of business of PageMaster
Corporation where such books and records are maintained during
normal business hours and shall be conducted at Go Call's expense
by a certified public accountant or other Go Call executive so
designated by Go Call.
<PAGE>
7. Co-Op Marketing Funds
---------------------
PageMaster Corporation shall pay to Go Call, Co-Op Marketing funds for
the promotion. PageMaster Corporation will pay Go Call $3.00 per pager
(beginning with pager # 1) and 5% of all airtime renewal revenue for each pager
redeemed for this promotion consistent with the terms of paragraph 6b of this
Agreement.
8. Representation and Warranties
-----------------------------
PageMaster Corporation warrants and represents that it has a license to
advertise and use the trademarks, logos, etc. of Motorola, Inc., PageMaster
Promotions and such other third parties as may be necessary to advertise this
promotion. At least sixty (60) days prior to the commencement of the promotion,
PageMaster Corporation in its sole discretion shall have the unconditional right
to approve the accuracy of the description of the pager promotion and use of
corporate logos and photographs and descriptions of products and services
provided by designated airtime carriers or any third parties participating in
the promotion; in the event of disapproval, Go Call shall not proceed with the
promotion until the revised artwork or presentation is subsequently approved by
PageMaster Corporation in writing. Upon termination or expiration of this
Agreement, Go Call agrees not to use or advertise any trademarks, logos or other
property rights of PageMaster Corporation or any third parties participating in
the promotion. Any advertising, artwork, presentation, or other promotional
activities (collectively "Advertising") concerning the pager Promotion not
pre-approved in writing by PageMaster Corporation shall be deemed to be
unauthorized by PageMaster Corporation and shall constitute a breach of this
Agreement. In addition to the duty to indemnify PageMaster Corporation as
provided in Paragraph 9 hereof, Go Call shall also have the duty to indemnify
Motorola, Inc. or any affiliated entity from and against any and all claims,
expense, suits or demands arising from such unauthorized Advertising by Go Call,
or its agent, affiliate, licensee, franchisee or any other third party.
9. Indemnity
---------
Each party shall indemnify and hold harmless the other from any loss or
damages, including reasonable attorneys' fees incurred by the other because of
claims, suits or demands based on personal injury, death or property damage or
third party claims, suits or demands of any kind to the extent such loss or
damage is caused by or results from the negligent or willful acts or omissions
of the other or its employees or agents, including but not limited to the
unauthorized use of the trademark, logos, or other property of third parties
without the consent and approval of PageMaster Corporation. PageMaster
Corporation's participation in the promotion does not constitute an endorsement
of the products or services of Go Call nor does Go Call's participation in the
promotion constitute an endorsement of PageMaster Corporations or any third
party's products or services.
10. Force Majeure
-------------
Neither party will be responsible for any delay or failure in
performance of any part of this Agreement to the extent that such delay or
failure is caused by any event beyond its control, which may include, but not be
limited to, fire, flood, explosion, war, strike, embargo, government
requirement, civil or military authority, and acts of God ("Conditions"). If any
such Condition occurs, the party delayed or unable to perform shall promptly
give notice to the other party and, if such Condition remains at the end of
thirty (30) days thereafter, the party affected by the other party's delay or
inability to perform may elect to terminate or suspend this Agreement or part
thereof, and resume performance of this Agreement once the Condition ceases,
with an option for the affected party to extend the period of this Agreement up
to the length of time the Condition endured. PageMaster Corporation make no
warranties, either express or implied, concerning the pagers or the transmission
of pages by the airtime service provider, including warranties of
merchantability or fitness for particular purpose. The parties agree that
<PAGE>
PageMaster Corporation shall not be liable for service interruptions in the
telecommunications industry, capacity constraints or related problems, or for
any act or omission of any other entity furnishing products or services to
PageMaster Corporation. PageMaster Corporations' liability shall in no event
exceed an amount equivalent to the amounts received by PageMaster Corporation
hereunder.
11. Choice Of Law
-------------
This Agreement will be governed by and construed in accordance with the
laws of the State of California, exclusive of conflicts of law principles, and
will, to the maximum extent practicable, be deemed to call for performance in
Los Angeles County, California. Los Angeles County, California shall be the sole
and exclusive venue for any litigation or dispute resolution relating to or
arising out of the Agreement. To seek or receive indemnification hereunder (i)
the party seeking indemnification must have properly notified the other party of
any claim or litigation of which it is aware to which the indemnification
relates; and the party seeking indemnification must have afforded the other the
opportunity to participate in any compromise, settlement, litigation or other
resolution or disposition of such claim or litigation.
12. Dispute Resolution
------------------
a. The parties desire to resolve disputes arising out of this
Agreement without litigation. Accordingly, except for an action
seeking a temporary restraining order or injunction related to
the purposes of this Agreement, or a suit to compel compliance
with this dispute resolution process, the parties agree to use
the following alternative dispute resolution procedure as their
sole remedy with respect to any controversy or claim arising out
of or relating to this Agreement or its breach.
b. At the written request of a party, each party shall appoint a
knowledgeable, responsible representative to meet and negotiate
in good faith to resolve any dispute arising under this
Agreement. The parties intend that these negotiations be
conducted by non-lawyer, business representatives. The
discussions shall be left to the discretion of the
representatives. Upon agreement, the representatives may utilize
other alternative dispute resolution procedures such as mediation
to assist in the negotiations. Discussions and correspondence
among the representatives for purposes of these negotiations
shall be treated as confidential information developed for
purposes of settlement, exempt from discovery and production,
which shall not be admissible in the arbitration described below
or in any lawsuit without the concurrence of all parties.
Documents identified in or provided with such communications,
which are not prepared for purposes of the negotiations, are not
so exempted and may, if otherwise admissible, be admitted in
evidence in the arbitration or lawsuit.
c. If the negotiations do not resolve the dispute within sixty (60)
days of the initial written request, the dispute shall be
submitted to binding arbitration by a single arbitrator pursuant
to the Commercial Arbitration Rules of the American Arbitration
Association. A party may demand such arbitration in accordance
with the procedures set out in those rules. Discovery shall be
controlled by the arbitrator and shall be permitted to the extent
set out in this Section. Each party may submit in writing to a
party, and that party shall so respond, to a maximum of any
combination of thirty-five (35) (none of which may have subparts)
of the following: interrogatories, demands to produce documents
and requests for admission. Each party is also entitled to take
the oral deposition of one (1) individual of another party.
Additional discovery may be permitted upon mutual agreement of
the parties. The arbitration hearing shall be commenced within
sixty (60) days of the demand for arbitration and the arbitration
shall be held in Los Angeles, CA. The arbitrator shall control
the scheduling so as to process the matter expeditiously. The
<PAGE>
parties may submit written briefs. The arbitrator shall rule on
the dispute by issuing a written opinion within thirty (30) days
after the close of hearings. The times specified in this
paragraph may be extended upon mutual agreement of the parties or
by the arbitrator upon a showing of good cause. Judgment upon the
award rendered by the arbitrator may be entered in any court
having jurisdiction.
d. Each party shall bear its own cost of these procedures. A party
seeking discovery shall reimburse the responding party the cost
of production of the documents (to include search time and
reproduction time costs). The parties shall equally share the
fees of the arbitration and the arbitrator.
13. Notices
-------
Any notice or demand given to either party under the Terms of this
Agreement or pursuant to statute shall be in writing and shall be given or made
by telegram, facsimile transmission, certified or registered mail, express mail
or other overnight delivery service or hand delivery, proper postage or other
charges prepaid and addressed or directed to the respective parties as follows:
PAGEMASTER CORPORATION
100 E. Thousand Oaks Blvd. Suite 297
Thousand Oaks, CA 91360
ATTN: Marc Resnick, CEO
GO CALL, INC.
15 Queen Street East
Cambridge Ontario, Canada N3C2A7
ATTN: Ian Smith, President
Such notice or demand shall be deemed to have been given or made when
actually received or seventy-two (72) hours after being sent, whichever occurs
first. The address for notice set out above may be changed at any time by giving
thirty (30) days prior written notice in the manner above.
14. Agreement Expiration
--------------------
Unless this Agreement is signed by an authorized representative of Go
Call and a signed copy delivered in person by mail or facsimile and personally
received by an authorized representative of PageMaster Corporation by 12:01 p.m.
PST, on or before March 26, 1999, this Agreement shall be deemed terminated and
shall be of no further force or effect and the parties shall have no liability
to one another. At PageMaster Corporation's option, an additional agreement(s)
may be prepared to further negotiate this or similar promotions with Go Call.
15. Entire Agreement
----------------
This Agreement represents the entire agreement and understanding of the
parties hereto with respect to its subject matter hereof, and supersedes all
previous representations, understandings or agreements between the parties
hereto. No waiver, modification or cancellation of any term or condition of this
Agreement shall be effective unless executed in writing by the party charged
therewith.
16. Nonwaiver
---------
Either parties failure to enforce any of the provisions of this
Agreement shall in no way be deemed to affect the validity of this Agreement.
17. Counterparts
------------
<PAGE>
This Agreement may be executed in duplicate counterparts, all of which
together shall constitute a single instrument, and each of which shall be deemed
an original of this Agreement for all purposes.
18. Successors and Assigns
----------------------
This Agreement shall be binding upon, and shall inure to the benefit of
the successors, heirs, administrators, trustees and assigns of the parties.
19. Confidentiality
---------------
The parties acknowledge that preparation for and execution of the
promotion necessitates the exchange of confidential and proprietary information
relating and belonging to the parties to this Agreement, as well as to other
third parties integral to the promotion, including, without limitation, the
pager manufacturer and the airtime supplier (herein "Information"). Each party
agrees (1) to review, examine, inspect, obtain or utilize the information only
for the purpose of this promotion, (2) to otherwise hold such Information
strictly confidential, (3) to prevent the disclosure of such Information to
nonessential third parties without a "need to know", and (4) to insure that
each party's employees, agents and representatives and those of any integral
third party understand and are bound by the confidentiality obligations of this
Agreement. Each party shall indemnify the other party with respect to any loss
or damage arising from the unauthorized disclosure or use of the Information by
their respective employees, agents and representatives, or by those of any third
party to whom such Information was disclosed. The agreements contained in this
Paragraph shall survive the expiration, or termination of this Agreement. The
panics hereby agree that subsequent to the expiration or termination of this
Agreement, each party consents to the other party's use of its name only in
connection with advertising to their respective trade or industry.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth below.
GO CALL, Inc.
Dated: 3/13/99 By: /s/ Michael Ruge
------------------- ----------------------------
Michael Ruge
PAGEMASTER CORPORATION
Dated: 3/13/99 By: /s/ Marc B. Resnick
------------------- ----------------------------
Marc B. Resnick
CE0
SECURITY AND PLEDGE AGREEMENT
THIS SECURITY AND PLEDGE AGREEMENT (the "Agreement") is entered into as
of March 18, 1999, by and between Country Star Restaurants, Inc. a Delaware
corporation, (the "Debtor") and Go Call, Inc., a Delaware corporation ("Secured
Party").
RECITALS
--------
WHEREAS, pursuant to the terms of that certain Credit Line Agreement,
dated as of March 18, 1999 (the "Credit Line Agreement") expired December 31,
1999, by and among Debtor and Secured Party, Debtor has delivered to Secured
Party a Secured Promissory Note, expired December 31, 1999 (the "Note"), dated
as of March 18, 1999; and
WHEREAS, as a material inducement to Secured Party to execute the
Credit Line Agreement, Debtor has agreed to pledge, as security for the payment
of the obligations under the Credit Line Agreement and the Note, the Collateral
described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
AGREEMENT
---------
1. CREATION OF SECURITY INTEREST AND DESCRIPTION OF COLLATERAL.
a. Debtor hereby grants, assigns and pledges as security and
conveys to Secured Party, a security interest in all of the following personal
property of Debtor, now owned or hereafter acquired (the "Collateral"):
(1) all present and future rights of Debtor to
payment of money, whether due or to become due, including, without
limitation, any right to payment for goods sold or leased, or to be
sold or leased, or for services rendered, or to be rendered, no matter
how evidenced and whether or not earned by performance, any account,
accounts receivable, instruments and chattel paper.
(2) all present and fixture contract rights, general
intangibles, including, but not limited to, tax and duty refunds,
registered and unregistered patents, inventions, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade
secrets, goodwill, processes, drawings, blueprints, customer lists,
franchises, permits, customer lists, licenses, whether as licensor or
licensee, choses in action and other claims and existing and future
1
<PAGE>
leasehold interests in equipment, real estate and fixtures, chattel
papa, documents, instruments, securities, investment property, letters
of credit, proceeds of letters of credit, bankers' acceptances,
guarantees, royalties, commissions, general and limited partnership
interests, whether partnership assets constitute real or personal
property, and proceeds from such interests.
(3) all present and future monies, securities,
credit balances, deposits, deposit accounts and other property of
Debtor now or hereafter held or received by or in transit to the Debtor
or its affiliates or at any other depository or other institution from
or for the account of Debtor, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all present and future
liens, security interests, rights, remedies, title and interest in, to
and in respect of accounts and other collateral, including, without
limitation, rights and remedies under or relating to guarantees,
contracts of suretyship, letters of credit and other insurance related
to the collateral, rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party, goods described in invoices,
documents, contracts or accounts or other collateral, including,
without limitation, returned, repossessed and reclaimed goods, and
deposits by and property of account debtors or other persons securing
the obligations of account debtors.
(4) all of Debtor's now owned and hereafter existing
or acquired inventory, raw materials, work in process, finished or
unfinished goods, merchandise, other tangible personal property held
for sale or lease or furnished or to be furnished under contracts of
service or used or consumed in Debtor's business, and all other
inventory of whatsoever kind or nature, wherever located.
(5) all of Debtor's now owned and hereafter acquired
equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto
or used in connection therewith, and component parts, additions,
substitutions and replacements thereof, wherever located.
(6) all of Debtor's present and fixture books of
account of every kind or nature, purchase and sale agreements,
invoices, ledger cards, bills of lading and other shipping evidence,
statements, correspondence, memoranda, credit files and other data
relating to the collateral or any account debtor, together with the
tapes, disks, diskettes and other data and software storage media and
devices, file cabinets or containers in or on which the foregoing are
stored (including any rights of Debtor with respect to the foregoing
maintained with or by any other person).
(7) all securities owned by Debtor and all new,
substituted and additional securities issued with respect thereto;
together with all voting or other rights now or hereafter exercisable
and all cash and noncash dividends and all other property now or
hereafter receivable with respect to any of the foregoing ("Pledged
Securities").
2
<PAGE>
(8) all products and proceeds of the foregoing, in
any form, including, without limitation, insurance proceeds and any
claims against third parties for loss or damage to or destruction of
any or all of the foregoing.
(9) all other tangible personal property of the
Debtor.
b. The Collateral shall include and this Agreement shall cover
any and all of the proceeds, increases, accretions, and products of all of the
personal property which is, or hereafter becomes, subject to this Agreement and
any property which the Debtor may receive upon the sale, exchange, collection or
other disposition of any portion of the Collateral or proceeds thereof,
including without limitation, insurance proceeds.
2. SECURED OBLIGATIONS. The security interest granted herein shall
secure the payment and performance of each of the following obligations
("Obligations") now or hereafter existing:
a. All payments due under the terms of the Credit Line
Agreement and the Note and all loans, advances, extensions of credit and other
obligations of Debtor to Secured Party, direct or indirect, absolute or
contingent, joint or several, whether or not otherwise secured;
b. Debtor's obligations to pay all amounts advanced,
expended or incurred by Secured Party resulting from Debtor's failure to perform
any term, covenant or condition of this Agreement or resulting from Debtor's
breach of any representation or warranty made by Debtor to Secured Party under
this Agreement or otherwise; and
c. Debtor's obligation to pay all amounts advanced, expended
or incurred by Secured Party under the terms of this Agreement or for the
maintenance or preservation of the Collateral.
3. COVENANTS OF DEBTOR. Debtor represents, warrants and covenants to
Secured Party, as follows:
a. Debtor shall maintain complete and accurate books and
records with respect to the Collateral at its principal place of business in a
form and substance satisfactory to Secured Party. Secured Party shall at all
times be afforded access to Debtor's books and records and may inspect, audit
and make copies of any and all part of such books and records and any data
relating to the Collateral, and Secured Party shall have free access to and the
right to obtain and copy any computer information held by Debtor or third
parties pertaining to the Collateral. At Secured Party's request Debtor shall
provide to Secured Party balance sheets, earnings statements and other financial
data reasonably requested by Secured Party.
3
<PAGE>
b. Debtor shall pay and perform all obligations when due,
including without limitation, all obligations under this Agreement.
c. Debtor shall appear in and defend any and all lawsuits and
proceedings of any type which, in Secured Party's opinion, may affect the
Collateral. Debtor shall pay all costs and expenses, including reasonable
attorneys' fees in appearing and defending such lawsuits and proceedings.
d. At Secured Party's request, Debtor shall deliver to Secured
Party any and all instruments and other documents as Secured Party may request
relating to all or any part of the Collateral.
e. Debtor shall make any and all notations in Debtor's books
and records requested by Secured Party relating to all or any part of the
Collateral.
f. Debtor shall execute any and all documents and instruments,
including any specified by Secured Party, to evidence, effectuate, perfect,
maintain, preserve and protect Secured Party's security interest in the
Collateral.
g. Debtor shall post such notices as Secured Party may
designate upon the Collateral or in or about the areas where the Collateral may
be located.
h. Debtor shall affix to all items of tangible Collateral such
plate or sticker as Secured Party may, at any time, designate.
i. Debtor shall notify Secured Party immediately of any theft,
loss, destruction of, or damage to any or all of the Collateral and shall
immediately notify Secured Party of any condition or event which may tend to
impair the value of any or all of the Collateral.
j. Debtor shall promptly pay any and all expenses incurred in
the purchase, delivery, repair or use of the Collateral.
k. Debtor shall segregate all cash or other liquid proceeds of
any portion of the Collateral in a separate and segregated account in a bank or
other financial institution approved by Secured Party. Debtor shall, and Secured
Party may, notify such bank or financial institution with whom such deposit
account is maintained that such deposit account is pledged as Collateral
security under the terms of this Agreement.
l. Debtor shall give Secured Party prompt notice of all
claims, actions and proceedings instituted or threatened against Debtor or
affecting all or any part of the Collateral.
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m. Without Secured Party's prior written consent, Debtor shall
not sell, transfer, pledge, hypothecate, lease or otherwise dispose of or
abandon all or any part of the Collateral, other than inventory in the ordinary
course of business.
n. Debtor shall at all times provide and maintain at Debtors
cost, insurance coverage of the Collateral against loss or damage by fire,
earthquake and other risks normally covered by extended insurance coverage,
including without limitation, theft, burglary and other risks customarily
insured against by companies engaged in businesses similar to that of Debtor.
Each policy shall be in an amount, and upon such terms and conditions and with
such company as is reasonably satisfactory to Secured Party. Such insurance
coverage shall be payable to both Secured Party and Debtor as their interests
may appear.
o. Debtor shall not undertake any acts which will modify the
terms of any of the accounts, instruments or general intangibles which
constitute a part of the Collateral without the prior written consent of Secured
Party.
p. Debtor assumes all risk and liability arising from the use
and operation of the Collateral, either by negligence or otherwise, and hereby
indemnifies and holds Secured Party harmless from and against any and all
claims, costs, damages, losses, and expenses, including but not limited to,
attorneys' fees, arising out of or related to the Collateral, any loss or damage
of any kind to any person or property caused by the Collateral, or its use and
operation, or Debtor's performance under this Agreement.
q. Debtor shall hold all proceeds of the Collateral in trust
for Secured Party and shall not commingle such proceeds with any other property.
r. Debtor shall comply with all statutes, regulations and
ordinances pertaining to the Collateral and the conduct of Debtor's activities
and business; and if any suit or proceeding is initiated by or against Secured
Party in connection with this Agreement, Debtor shall make all of Debtor's
personnel available to Secured Party and shall in all ways cooperate with
Secured Party in the defense or prosecution of such suit or proceeding.
4. FURTHER AGREEMENTS OF THE PARTIES. In connection with Secured
Party's rights to the Collateral, Debtor represents, warrants and agrees that:
a. Debtor owns all right, title and interest in an to the
Collateral and has not pledged, granted a security interest in or hypothecated
any of the Collateral;
b. Secured Party is authorized to receive, retain and apply as
additional security hereunder, any proceeds, distributions, substitutions and
other receipts hereafter accruing to the Collateral and to notify any third
party, including any party to a contract or other document which is part of the
Collateral, of Secured Party's interest hereunder and to make any and all
distributions or performances with respect to the Collateral directly to Secured
Party. Debtor hereby expressly authorizes and instructs any such third party to
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<PAGE>
act in accordance with the foregoing terms of this paragraph until it shall have
received further written notice from Debtor and from Secured Party and Debtor
hereby indemnities and holds harmless any such third party for acts taken
hereunder prior to the receipt of such written notice; and
c. At its option, Secured Party may discharge any liens,
security interests, or other claims levied or made against the Collateral, may
pay for the maintenance and preservation of the Collateral and, should Debtor
fail or refuse to make any payment or perform any covenant or obligation or
condition required by the terms of any obligation secured by the Credit Line
Agreement, the Note and this Agreement or hereunder, Secured Party may, in its
sole discretion, and without notice to Debtor, perform or satisfy such covenant,
condition or claim in such manner and to such extent as Secured Party may deem
necessary to protect the Collateral and the security of this Agreement, the
Credit Line Agreement and the Note. In addition, Secured Party may extend the
time for performance, waive performance, or otherwise modify the performance of
the Obligations. In the event Secured Party shall take any action pursuant to
this paragraph, then such action shall not in any respect release Debtor from
any of the terms or conditions hereof or from performance of the Obligations
secured hereby strictly in accordance with their terms, and Debtor shall, upon
demand, reimburse Secured Party for any payment made or any expense incurred by
Secured Party in performance pursuant to this paragraph together with interest
thereon at the lesser of ten percent (10%) per annum or the highest lawful rate
from the date any such payment or expense is incurred. The amount of any
obligation of Debtor resulting from the terms of this paragraph shall be added
to and shall be secured by this Agreement and the security interest created
hereby.
5. DELIVERY OF PLEDGED SECURITIES. All certificates representing the
Pledged Securities shall be delivered to Secured Party by Debtor pursuant hereto
endorsed in suitable form for transfer by endorsement and delivery by Secured
Party, and accompanied by any required transfer tax stamps, all in form and
substance satisfactory to Secured Party. In the event that Debtor receives any
additional securities or non-cash distributions, with respect to Pledged
Securities or substitute Collateral, Debtor shall immediately pledge to Secured
Party and deposit with Secured Party certificates representing all such
securities. All such securities constitute Collateral and are subject to all
provisions of this Agreement. Debtor shall instruct the issuer of any securities
pledged pursuant to this Agreement that all non-cash distributions with respect
to those securities shall be delivered to Secured Party.
6. ADMINISTRATION OF SECURITIES COLLATERAL. The following provisions
shall govern the administration of any securities pledged:
a. Subject to the limitations of subsection 6(b), Debtor
irrevocably constitutes and appoints Secured Party, whether or not the
securities have been transferred into the name of Secured Party, as Debtor's
proxy with full power, in the same manner, to the same extent and with the same
effect as if Debtor were to do the same, to exercise any and all voting and
other consensual rights pertaining to the securities and to do all things that
Debtor can do or could do as stockholder, giving Secured Party full power of
substitution and revocation. This irrevocable proxy shall terminate at such time
6
<PAGE>
as this Agreement is no longer in full force and effect and all Obligations are
paid in full. The foregoing proxy is coupled with an interest sufficient in law
to support an irrevocable power. Debtor hereby revokes any proxy or proxies
heretofore given to any person or persons and agrees not to give any other
proxies in derogation hereof until such time as this Agreement is no longer in
full force and effect.
b. The forgoing irrevocable proxy shall be exercisable by
Secured Party only upon: (1) the occurrence and continuance of an Event of
Default under this Agreement, the Credit Line Agreement or the Note, and (ii)
the giving of written notice of the occurrence thereof to Debtor, and until such
time:
(1) Debtor shall be entitled to exercise any and all
voting and other rights pertaining to the securities or any
part thereof for any purpose not inconsistent with the terms
of this Agreement, the Credit Line Agreement or the Note, or
any document or instrument delivered or to be delivered
pursuant to or in connection herewith or therewith; and
(2) Secured Party shall execute and deliver (or
cause to be executed and delivered) to Debtor all such
proxies and other instruments as Debtor may reasonably
request for the purpose of enabling it to exercise the
voting and other rights which it is entitled to exercise
pursuant to paragraph (1) above.
c. Debtor covenants to promptly cause any of the Pledged
Securities which are unregistered to become registered with the Securities and
Exchange Commission pursuant to any applicable registration rights agreements.
Upon such registration, Debtor hereby agrees to cause, subject to the applicable
consent provisions herein, such Pledged Securities to be sold as quickly as is
reasonable prudent. Debtor acknowledges that proceeds of such sale shall be used
to partially prepay the Obligations underlying this Agreement, the Credit Line
Agreement or the Note as provided therein.
d. If Secured Party consents to a sale of any of the Pledged
Securities, then upon consummation of the sale, Debtor shall promptly notify
Secured Party of such sale and the amount of proceeds received. Debtor shall
segregate all cash or other proceeds in an account, including a brokerage
account, at an institution approved by Secured Party. Debtor shall notify such
institution that such account is pledged hereunder. Pursuant to the terms of
this Agreement, the Credit Line Agreement and the Note, such proceeds shall be
paid directly to Secured Party in partial satisfaction of the Obligations
underlying this Agreement, the Credit Line Agreement or the Note.
7. EVENTS OF DEFAULT. Debtor shall be in default under the terms of
this Agreement and the obligations secured by this Agreement upon the happening
of any of the following events or conditions:
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a. Upon default in the payment or performance of any
Obligation secured hereby or of any covenant or condition in this Agreement, the
Credit Line Agreement or the Note;
b. If any material part of the Collateral is lost, stolen,
damaged or destroyed, or any levy, lien, seizure or attachment, including
without limitation, any federal or state tax lien, is made thereof or thereon
and such loss, theft, damage or destruction is not replaced or repaired, or such
levy, seizure or attachment is not removed within five (5) days after the date
thereof; and
c. If Debtor shall make any assignment for the benefit of
creditors; if a receiver shall at any time be appointed for any of the assets
of' Debtor; or if a petition is filed by or against Debtor, either voluntarily
or involuntarily, under any bankruptcy or insolvency laws.
8. RIGHTS UPON DEFAULT. Upon such default and at any time thereafter,
Secured Party shall have, and may take in any order and without waiving its
right to subsequent election or any alternative remedy:
a. All of the remedies of a Secured Party under the Uniform
Commercial Code as adopted in the State of California, as now or hereafter in
effect;
b. All remedies provided to it under any of the terms of any
Obligation secured hereby;
c. All other remedies afforded by applicable law;
d. Secured Party may assemble the Collateral, but shall give
Debtor reasonable notice of the time and place of any public sale thereof or of
the time after which any private sale or any other intended disposition thereof
is to be made. The requirements of reasonable notice shall be met if such notice
is mailed, postage prepaid, to the address of Debtor shown herein below at least
five days before the time of the sale or disposition. Secured Party may be a
purchaser at any such sale. Expenses of retaking, holding, preparing for sale,
selling or the like shall include Secured Party's reasonable attorneys' fees and
legal expenses;
e. Without breach of the peace and without notice to Debtor,
Secured Party may enter any premises of Debtor to search for, take and store any
of the Collateral or any records thereof or to maintain and store the Collateral
or any records thereof at the Debtor's premises without cost or expense to
Secured Party;
f. Secured Party may withhold, retain and apply in offset any
monies owed to Debtor against the total amounts due to Secured Party hereunder
and secured by this Agreement; and
g. All of the foregoing rights may be exercised concurrently
or in such order as Secured Party may determine. Failure of Secured Party to
exercise any rights it may have upon the Debtor's default hereunder or under the
terms of any Obligation secured hereby shall not be deemed a waiver of its
8
<PAGE>
rights thereupon or to be a release of Debtor from any Obligation hereunder or
under the terms of said Obligations secured hereby unless such waiver or release
is given in writing by Secured Party, and in the event thereof, no such waiver
shall be deemed to constitute a waiver of any succeeding default.
9. PRIVATE SALE. Secured Party shall incur no liability as a result of
the sale of the Collateral, or any part thereof, at any private sale pursuant to
Section 8 hereof conducted in a commercially reasonable manner. Debtor hereby
waives any claims against Secured Party arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale or was less than
the aggregate amount of the Obligations, even if Debtor accepts the first offer
received and does not offer the Collateral to more than one offeree.
10. DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 8 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Obligations, Debtor shall remain liable for any deficiency.
11. APPLICATION OF PROCEEDS. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other part of the Collateral
pursuant hereto, and any other cash at the time held by or on behalf of Secured
Party under this Agreement, shall be applied by Secured Party:
FIRST, to the payment of the costs and expenses of such collection,
sale or other realization (if any) and the costs, fees, expenses and other
amounts owing to Secured Party under Section 8 hereof;
NEXT, to the payment in full of the Obligations, in each case,
equally and ratably in accordance with the amounts then due and owing; and
FINALLY, after payment in full of the foregoing, the payment to
Debtor, or its successors or assigns, or as a court of competent jurisdiction
may direct, of any Collateral surplus then remaining.
As used in Sections 10 or 11, "proceeds" of Collateral shall mean cash
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of Debtor.
12. INDEMNITY AND EXPENSES.
a. Debtor agrees to indemnify Secured Party from and against
any and all claims, losses, liabilities and expenses arising out of or resulting
from: (i) this Agreement (including, without limitation, enforcement of this
Agreement), or (ii) any refund or adjustment of any amount paid or payable to
Secured Party under or in respect of this Agreement, or any interest therein,
that may be ordered or otherwise required by any person.
9
<PAGE>
b. Debtor will, on demand, pay to Secured Party the amount of
all expenses (including the fees and expenses of counsel and of experts and
agents) of, or incident to, the enforcement of any of the provisions of this
Agreement, or performance by Secured Party of any Obligations of Debtor in
respect of the Collateral which Debtor has failed or refused to perform, or any
actual or attempted sale, or any exchange, enforcement, collection, compromise
or settlement in respect of all of the Collateral or any part thereof and for
the care of the Collateral and defending or asserting rights and claims of
Secured Party in respect thereof, by litigation or otherwise, and all such
expenses shall be Obligations.
13. FURTHER ASSURANCES. Debtor agrees that, from time to time upon the
written request of Secured Party, Debtor shall execute and deliver such further
documents and do such other acts and things as Secured Party may reasonably
request in order fully to effectuate the purposes of this Agreement.
14. GENERAL PROVISIONS.
a. Debtor hereby waives insofar as legally possible any and
all rights to notice, demand or other action of Secured Party precedent to the
institution of legal action upon Obligations hereof.
b. Upon delivery of reasonable written or telephonic notice,
Secured Party shall be entitled to enter the place of business of Debtor during
normal business hours to inspect the Collateral.
c. In the event that now or at any time hereafter there are
more debtors or successors in interest to Debtor in the Collateral, they shall
be jointly and severally liable hereunder. Unless otherwise defined herein,
words used have the meanings given them in the Uniform Commercial Code as
adopted in the State of California. All exhibits to this Agreement are
incorporated by reference. In this Agreement whenever and whereafter the context
so requires, the singular shall include the plural, and the masculine, the
feminine or neuter gender, or vice versa. In the event of any action or
proceeding arising out of or related to this Agreement, the prevailing party
shall be entitled to recover from the losing party all costs of such proceeding,
including, without limitation, reasonable attorneys' and expert witnesses' fees
whether or not such proceeding is prosecuted to judgment. All agreements,
covenants, conditions and provisions of this Agreement shall apply to and bind
the heirs, executors, administrators and assigns of all parties hereto, and all
the successors in, interest of Debtor in the Collateral.
d. This Agreement may be executed in counterparts; each
executed counterpart hereof shall constitute an original; all shall constitute
but one and the same Agreement which shall become effective when it is signed
and delivered by Debtor.
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e. Except as otherwise expressly provided in this Agreement or
by law, any and all notices or other communications required or permitted by
this Agreement or by law to be served on, given to or delivered to any party
hereto by any other party to this Agreement shall be in writing and shall be
deemed duly served, given, delivered and received when: (1) if personally
delivered to the party to whom directed, on the date of such hand delivery, (ii)
if sent by telecopier and followed by first class mail, the later of the date
sent by telecopier or deposited in the mails, or (iii) if by overnight courier,
the date of delivery by the overnight courier, addressed as follows
if to Debtor, to:
Country Star Restaurants, Inc.
1000 Universal Center Drive
Unit 195
Universal City, CA 91608
Telecopier No. 818-622-6422
if to Secured
Party, to: Go Call, Inc.
15 Queen Street East
Cambridge, Ontario
Canada N3C 2A7
Telecopier No. (519)651-0457
Any party may change its address for the purpose of this paragraph by giving
written notice of such change to the other parties in the manner provided in
this paragraph.
f. This Agreement shall be construed and interpreted in
accordance with the laws (including all applicable choice of laws rules) of the
State of California. Any dispute arising under this Agreement, whether during
the term of this Agreement or at any subsequent time, shall be resolved
exclusively in the courts of the State of California. All terms not defined
herein are used as set forth in the California Commercial Code.
g. Secured Party shall not have any duty of care with respect
to the Collateral, except to exercise reasonable care with respect to the
Collateral in its custody, but shall be deemed to have exercised reasonable care
if it exercises the same degree of care and skill with respect to the Collateral
as a prudent person would in the conduct of his or her own affairs, or if
Secured Party takes such action with respect to the Collateral as the Debtor
requests in writing, but neither failure to comply with any such request nor any
omission to do any such act requested by Debtor shall be deemed a failure to
exercise reasonable care.
h. The rights and remedies of Secured Party hereunder, the
security interests created hereby and the Obligations of Debtor hereunder
(commencing on the date hereof and until the termination of this Agreement) are
absolute, irrevocable and unconditional, irrespective of:
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(1) any amendment to, waiver of consent to or
departure from, or failure to exercise any right, remedy,
power or privilege under or in respect of, any of the
Obligations, or any other agreement or instrument relating
thereto;
(2) the acceleration of the maturity of any of the
Obligations or any other modification of the time of payment
thereof;
(3) any substitution, release or exchange of any
other security for or guarantee of any of the Obligations or
the failure to create, preserve, validate, perfect or protect
any other security interest granted to, or purported to be
granted to, or in favor of, Secured Party; or
(4) any other event or Circumstance whatsoever which
might otherwise constitute a legal or equitable discharge of a
surety or a guarantor, it being the intent of this Section
14(h) that the Obligations of Debtor hereunder shall be
absolute, irrevocable and unconditional under any and all
circumstances.
i. This Agreement, the Obligations and the security interests
created hereunder shall automatically be reinstated, if any, to the extent that
for any reason any payment by or on behalf of Debtor in respect of the
Obligations is rescinded or must otherwise be restored or repaid by Secured
Party or any holder of the Obligations, whether as a result of any proceedings
in bankruptcy or reorganization or otherwise, and Debtor shall indemnify Secured
Party on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by Secured Party in connection with such
rescission or restoration.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written at Los Angeles, California.
("Secured Party')
GO CALL, INC.
By: /S/ signature
----------------------
("Debtor")
COUNTRY STAR RESTAURANTS, INC.
By: /S/ signature
----------------------
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SECURED PROMISSORY NOTE
$500,000 March 18, 1999
Cambridge, Ontario
At the times hereinafter stated, for value received, Country Star
Restaurants, Inc., a Delaware corporation ("Obligor"), promises to pay to Go
Call, Inc., a Delaware corporation, or order ("Obligee"), at such place as may
be designated in writing, the principal sum of up to $500,000 in lawful money of
the United States of America, with interest from the date hereof on unpaid
principal at the rate of seven percent (7%) per annum. The "principal sum" shall
be equal to that amount which has been advanced by Obligee to Obligor and
remains outstanding under that certain Credit Line Agreement between Obligee and
Obligor, dated as of March 18, 1999, and shall be payable in one installment,
together with all accrued and unpaid interest thereon, on December 31, 1999.
Obligor may prepay the outstanding principal and accrued interest in
whole or in part at any time without penalty. All payments under this Promissory
Note shall be first attributed to accrued and unpaid interest owing hereunder,
and thereafter to the principal amount of the obligation on this Promissory
Note.
The obligation underlying this Promissory Note is secured pursuant to
the terms of that certain Security and Pledge Agreement (the "Pledge
Agreement"), of even date herewith, executed by Obligor and Obligee.
If the holder of this Promissory Note refers it to an attorney for
collection or seeks legal advice following a default under this Promissory Note,
or if an action is instituted on this Promissory Note, or any other judicial or
non-judicial action is instituted by the holder hereof or any other person and
an attorney is employed by the holder to appear in such action or proceeding,
Obligor and every endorser and guarantor hereof, and every person who assumes
the obligations evidenced by this Promissory Note, jointly and severally,
promise to pay reasonable attorneys' fees for services performed by the holders
attorney, and all costs and expenses incurred incident to such employment.
Obligor and every endorser and guarantor hereof waive diligence, demand,
presentment for payment, notice of non-payment, protest and notice of protest,
notice of dishonor of this Promissory Note, and expressly agree that at the
option of the holder, this Promissory Note or any payment hereunder may be
extended from time to time and further consent to the acceptance of security for
1
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this Promissory Note, all without in any manner affecting the liability of the
Obligor, and any endorsers or guarantors hereof.
This Promissory Note shall be construed and interpreted in accordance
with the laws (including all applicable choice of laws rules) of the State of
California. Any dispute arising under this Promissory Note, whether dining the
term of this Promissory Note or at any subsequent time, shall be resolved
exclusively in the courts of the State of California.
The undersigned Obligor has executed this Promissory Note as of the
date first written above at Los Angeles, California.
"Obligor"
COUNTRY STAR RESTAURANTS, INC.
By: /S/ signature
---------------------
President
2
IRVING INSIK MOON
48 Steele Valley Road
Thornhill, Ontario, L3T 1M4
Tel: 905-881-0606 Fax: 905-881-8170
Michael Ruge, CEO April I7, 1999
Go Call Inc.
15 Queen Street, East,
Cambridge, Ontario N3C 2A7
Re: Indexus Inc.
----------------
Dear Mr. Ruge:
This will confirm our agreement made between Irving Insik Moon ("Moon") and
Go Call Inc., relating to the creation of a new joint venture company to be
known as Indexus Inc. (or some variation thereof) upon the following terms and
conditions:
1. NAME OF COMPANY - Indexus Inc. (or some variation thereof) ("Newco")
Go Call Inc. which is the owner of the registered "Indexus" would consent
to our use of that name and would grant Newco a royalty free license for
unlimited time to use such word in Newco's Corporate name and related marketing.
2. NATURE OF BUSINESS - The Business of Newco is to create and operate an
internet comparison shopping services, internet yellow page services, other
related businesses such as banner advertisement and IPG (International
Programmers Guild) ("program")
3. DIRECTORS - Newco's sole director and officer would be:
Irving Insik Moon - Director and President
4. COMPANY'S CAPITAL -Newco requires US$1,250,000.00 to pursue the aforesaid
program.
5. PROPOSED SHARE STRUCTURE - Newco would issue the following common shares and
preferred shares.
Irving I. Moon - 510,000 Common Shares for a subscription price of US$0.05 per
share (or his nominee)
Go Call Inc. - 490,000 Preferred Shares for a subscription price of US$2.50 per
share which are to be convertib1e into common shares (1 for 1) at Go Call's
discretion. No additional shares will be issued by Newco without Go Call's
permission, but Go Call shall not withhold its permission unreasonably.
6. PAYMENT OF SUBSCRIPTION PRICE - Go Call's obligation of the 490,000 preferred
shares in the amount of US$1,225,000.00 shall be satisfied by:
The issuance, allotment and delivery to Newco by Go Call Inc. of US$1,225,000.00
worth of shares in the capital of Go Call Inc., which will be subject to
restriction of one (l) year on resale to be valued at the lower of (i) average
closing price for its shares during the month preceding the acceptance hereof,
or (ii) UD$1.30 per share. The aforesaid shares shall be transferred for the
purpose of the aforesaid "Program" through private placement (selling) by living
Moon.
<PAGE>
7. LENDING OF EQUIPMENT, ETC. - Go Call Inc. agrees to lend to Newco some
equipments such as computers, softwares and desks as designated by Go Call Inc.
8. PURCHASE AGREEMENT - In the event Newco completes the creation of the
required software for the program to Go Call's Satisfaction and achieve the
listing of a minimum of 30,000 items and / or businesses on the program
(collectively the "precondition"), then Irving Moon has an option by written
notice to Go Call Inc. to require Go Call Inc. to purchase from Irving Moon his
510,000 shares (for 51% minimum in any case) in the capital of Newco for a
purchase price of US$5,000,000.00 to be payable by the issuance by Go Call of
its shares, listed on U.S. Stock Exchange (which shares will be subject to no
restriction on transfer or sale except those required by security law) which
shares will be valued at the average closing price for its shares during the
month preceding the exercise by Irving Moon of its option aforesaid. Such option
shall be wxercised by Irving Moon by written notice to Go Call to be given
within 180 days of Newco Achieving the preconditions and the closing of the
transaction shall take place within 60 days of the giving of such notice.
If the foregoing accurately reflects the terms and provisions of our mutual
agreement, please sign and return the duplicate copy of this letter and retain
the original for your files.
Yours truly,
/s/ Irving Insik Moon
Irving Insik Moon
We confirm our agreement with the foregoing terms and provisions and agree to
perform and discharge our obligations contained therein, this 21st day of April,
1999
Go Call Inc.
per /s/ Michael Ruge
- --------------------------- -----------------------------
Witness Michael Ruge - CEO
I have authority to bind the
corporation
LOAN AGREEMENT
Between:
Kevin Gilbert (herein under referred to as "Gilbert")
and
Go Cash Inc. (herein under referred to as "GO"}
Kevin Gilbert hereby agrees to loan Go Cash Inc. a sum of TWO HUNDRED
THOUSAND DOLLARS ($200,000) US.
Repayment Terms:
- ----------------
Go reserves the right to repay the loan in full at any point. The loan will be
non-interest bearing for a period of THREE MONTHS from date of signing. If the
loan is not repaid within the THREE MONTH period, Go agrees to pay Gilbert FOUR
MONTHLY payments of SIXTY THOUSAND DOLLARS ($60,000) US each. These payments
consist of FIFTY THOUSAND DOLLARS ($50000) US principal and TEN THOUSAND DOLLARS
($10,000) US interest. These payments will commence no later than JANUARY 1,
2000.
Additional Terms:
- -----------------
To secure the payment of this note and of each and every other obligation,
whether direct or indirect, due or to become due which Go may now or at any time
hereafter owe to Gilbert, Go hereby grants Gilbert a security interest in Go's
deposit accounts and other rights Go may have to the payment of money from
Gilbert.
If Gilbert does not receive any payment required herein on or before the date
due, or if Gilbert, at any time and in good faith, has reason to believe that
the prospect of receiving any payment required under this agreement is impaired,
then he may, at his option, declare all sums then owing herein to be immediately
due and payable, without demand or notice, both of which Go hereby waive.
Gilbert agrees to give Go notice of such action as soon thereafter as is
reasonably practical. Gilbert may, at his option, exercise the remedies
available to him under the law.
<PAGE>
Go agrees to pay all costs, including reasonable attorney's fees, which Gilbert
may incur in enforcing this agreement, and Go waives diligence, demand, protest,
presentment, notice of protest, and notice on non-payment.
Both parties may assign any rights herein.
Gilbert may change any of the terms and provisions hereof, including the payment
schedule, by giving such notice to Go as may be required by Law.
May 15, 1999 /s/ Kevin Gilbert
- -------------------------- --------------------------
Date KEVIN GILBERT
May 15, 1999 /s/ signature
- -------------------------- --------------------------
Date GO CASH INC.
CONSULTANT AGREEMENT
This Consultant Agreement (herein the "Agreement") is entered into by and Go
Call, Inc., a Delaware corporation (herein "CLIENT"); on the one part and
Connoisseur Club, Inc., (herein "CONSULTANT"); on the other part.
CLIENT is a publicly traded company and is seeking the services of CONSULTANT to
obtain new business to generate growth in CLIENT's stock price.
The parties hereto, by executing this Agreement, do hereby agree to be bound to
the terms and conditions hereunder.
TERMS AND CONDITIONS:
---------------------
1. SERVICE TO BE TENDERED: CLIENT hereby engages CONSULTANT as the CLIENT's
consultant for the purposes regarding corporate posturing, current
shareholders and debt/equity financing. The consultant's services would
include, but not be limited to: (i) a review of the CLIENT's operations and
capital structure, valuation of the CLIENT's business units, pending and
executory contracts and recommendation of the actions to be taken to
maximize shareholder value and earnings, (ii) the rendering of advice and
assistance, where possible, for the private placement of additional
financing and (iii) assistance (where possible) to the CLIENT in the
exercise of any of the CLIENT's warrants to purchase shares of the CLIENT.
CONSULTANT'S role as consultant shall continue until the termination of
this Agreement pursuant to Paragraph 4 below.
1.1 Further, CONSULTANT agrees to keep and maintain all material
non-public information, which CONSULTANT received or developed
concerning the CLIENT, confidential, and to disclose that
information only as contemplated by this Agreement or as required
by law. Notwithstanding the foregoing, CONSULTANT is free to
utilize independent agents to provide services contemplated herein
provided such agents, employees, CONSULTANT, investors and lenders
agree to be bound by the confidentiality provisions of this
Agreement.
1.2 Review the CLIENT's operations specifically for cash flow purposes
and advise the CLIENT regarding the CLIENT's capital structure and
valuation of its business units and contracts.
1.3 Advise the CLIENT in negotiations to obtain price and terms of
financing short term or otherwise.
1.4 Advise the CLIENT in negotiations for the purpose of completing
mergers or acquisitions and the effect or effects of such on the
CLIENT, its cash flow and profitability.
1.5 CONSULTANT shall obtain written approval prior to disclosing any
material non-public information and utilizing any printed or
reprinted material of CLIENT.
2. Except as required by law, any advice rendered by CONSULTANT pursuant to
this Agreement shall be treated as confidential by the CLIENT and by any
party to whom the CLIENT discloses such advice and shall not be disclosed
publicly in any manner without the prior written consent of CONSULTANT.
Without prior consultation with CONSULTANT, the CLIENT shall not make any
legally required disclosure of such advice nor make any public
announcements or filings in which CONSULTANT's name appears.
3. The CLIENT agrees to make available all information concerning the
business, assets, operations and financial condition of the CLIENT which
CONSULTANT reasonably requests in connection with the performance of its
obligations hereunder. CONSULTANT is entitled to rely upon the accuracy and
completeness of such information without independent verification.
1
<PAGE>
4. This Agreement shall naturally terminate upon the fifth anniversary from
the date of execution hereof.
a. Either party may terminate this Agreement for any reason prior to its
natural termination providing 30 day written notice be given to the
non-terminating party.
5. For the services provided herein, The CLIENT shall tender to CONSULTANT:
a. Upon execution hereof, CLIENT shall tender to CONSULTANT 500,000 shares
of restricted stock of Go Call, Inc. (the "Shares") and 500,000 options
of Go Call, Inc. stock at $0.50 per share.
1. The 500,000 shares of restricted stock shall be free tading within
one year of issuance by one of the following manners.
a. The restriction shall expire on the year anniversary
date of the issuance of the 500,000 shares of stock to
CONSULTANT; or
b. Should the CLIENT become a fully compliant bulletin
board company during the Shares' one year
restriction, CLIENT shall register CONSULTANT'S
Shares no later than three months after becoming
compliant.
2. In addition, CONSULTANT shall also receive an additional
2,000,000 options (the "Options") of Go Call, Inc. at a price of
$0.50 per share which shall be deemed vested in CONSULTANT upon
execution hereof, however, CONSULTANT will allow CLIENT to make
the Options available in 500,000 share blocks on the each
anniversary date of the execution hereof for the remainder of
the natural life of this Agreement.
a. In the event of an early termination pursuant to
Section 4 above, the remaining Options under Section 5
(2) shall be made immediately available to CONSULTANT
at which time CONSULTANT shall have no less than thirty
(30) days and no more than ninety (90) days to tender
to CLIENT the Option price due and payable to the
CLIENT.
3. CLIENT agrees that CONSULTANT shall be entitled to ten (10%)
percent of all monies directly raised by CONSULTANT through
private placements, however, CLIENT and CONSULTANT shall be
entitled to re-negotiate this percentage on a case by case
basis without impacting the agreed to percentage enumerated
above.
6. Should CLIENT sell, merge or be acquired by any third party which is
publicly traded, CLIENT shall have the third party acquirer executed a
valid assignment of this Agreement to avoid any ambiguities as it relates
to CONSULTANT'S rights hereunder and to ensure remuneration.
REPRESENTATIONS AND WARRANTIES OF THE CLIENT
--------------------------------------------
7. The CLIENT represents and warrants to CONSULTANT as follows:
7.1 DUE INCORPORATION AND QUALIFICATION: The CLIENT has been duly
incorporated, is validly existing and is in good standing under
the laws of its state of incorporation and is duly qualified as a
foreign corporation (except where the failure to so qualify would
not have a material adverse effect on the business of the CLIENT)
for the transaction of business and is in good standing in each
jurisdiction in which the ownership or leasing of its properties
or the conduct of its business requires such qualification. The
CLIENT has all requisite corporate power and authority necessary
to own or hold its properties and conduct its business as put
forth to CONSULTANT by the CLIENT.
2
<PAGE>
7.2 AUTHORIZED CAPITAL: The CLIENT will have an authorized and
outstanding capitalization, and all of the then issued and
outstanding shares of Common Stock will have been duly and validly
authorized and issued and will be fully paid and nonassessable.
None of the holders of such outstanding shares of Common Stock is
subject to personal liability solely by reason of being such a
holder.
7.3 FINANCIAL STATEMENTS: The financial statements of the CLIENT
fairly present the financial position and results of operations of
the CLIENT at the dates thereof and for the periods in conformity
with generally accepted principles, consistently applied
throughout the periods involved.
7.4 NO MATERIAL ADVERSE CHANGES: (i) There has not been any changes in
the condition, financial or otherwise, of the CLIENT, as put forth
to CONSULTANT by the CLIENT, which would have materially adversely
affected its ability to conduct its operations; and (ii) the
CLIENT has not incurred any material liabilities or obligations,
direct or contingent, not in the ordinary course of business.
7.5 TAXES: The CLIENT has filed all Federal tax returns and all state
and municipal and local tax returns (whether relating to income,
sales, franchise, real or personal property or other types of
taxes) required to be filed under the laws of the United States
and other applicable countries and/or jurisdictions, and has paid
in full all taxes which have become due pursuant to such returns
or claimed to be due by any taxing authority or otherwise due and
owing, provided, the CLIENT has not paid any tax, assessment,
charge, levy or license fee that it contests in good faith and by
proper proceedings and adequate reserves for the accrual of same
are maintained if required by generally accepted accounting
principles. Each of the tax returns heretofore filed by the CLIENT
correctly and accurately reflects the amount of its tax liability
thereunder. The CLIENT has withheld, collected and paid all other
levies, assessments, license fees and taxes to the extent required
and with respect to payments, to the extent that the same have
become due and payable.
7.6 NO PENDING ACTIONS: There are no actions, suits, proceedings,
claims or hearings of any kind or nature or, to the best of the
knowledge of the CLIENT, any investigations or inquiries, before
or by any court, governmental authority, tribunal or
instrumentality, pending or threatened against the CLIENT, or
involving the properties of the CLIENT which could have resulted
in any material adverse change in the business, properties,
financial position or results of operations of the CLIENT, or
which could have materially adversely affected the transaction or
other acts then contemplated by this Agreement or the validity or
enforceability of this Agreement.
7.7 DUE AUTHORIZATION: The CLIENT has full right, power and authority
to enter into this Agreement and to perform all of its obligations
hereunder. This Agreement was duly authorized, executed and
delivered by the CLIENT. No issuance of shares of the CLIENT's
capital stock shall be required as a condition to this execution,
validity or enforceability hereof. This Agreement constitutes,
upon execution and delivery, a valid and binding obligation of the
CLIENT, enforceable in accordance with its respective terms
(except (i) as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization. moratorium or other
similar laws affecting creditor's rights generally or by general
principles of equity; and (ii) that the enforceability of the
indemnification and contribution provisions of this Agreement may
be limited by the Federal securities laws and public policy), and
no consent, approval, authorization, order of, or filing with, any
court or governmental authority or any other third party is
required to consummate the transactions contemplated by this
Agreement.
3
<PAGE>
7.8 NON-DEFAULT: NONCONTRAVENTION: During the operative period, the
CLIENT is not in violation of its articles or certificate of
incorporation or by-laws or, in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any material contract, lease or other
instrument to which it is a party, and the CLIENT's execution and
delivery of this Agreement, and the incurrence of the obligations
herein and therein set forth, and the consummation of the
transactions contemplated do not (i) conflict with, or constitute
breach of. or a default under the articles or certification of
incorporation or by-laws of the CLIENT, or any material contract,
lease or other material agreement or instrument to which the
CLIENT is a party or in which the CLIENT has a beneficial interest
or by which the CLIENT is bound; (ii) violates any existing
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the CLIENT or any of its properties or business;
or (iii) has or has had any material adverse effect on any permit,
certification, registration, approval, consent, license or
franchise necessary for the CLIENT to own or lease and operate any
of its properties and to conduct its business or the ability of
the CLIENT to make use thereof.
7.9 NO REGULATORY PROBLEMS: The CLIENT warrants that there exists
no regulatory problems by any governmental agency, court or
jurisdiction, foreign or domestic and that the CLIENT is not now,
or threatened to be. under any investigation by any governmental
agency, court, or jurisdiction foreign or domestic.
7.10 NO VIOLATIONS: The CLIENT is not in violation of any material
franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any governmental agency or court, foreign or
domestic, having jurisdiction over the CLIENT or any of its
properties or business other than any violation which individually
or in the aggregate would not have a material adverse effect on
the CLIENT's business, properties or operations.
7.11 CONDUCT OF BUSINESS: The CLIENT has all necessary authorizations,
approvals, orders, licenses, certificates and permits
(collectively, the "Approvals") of and from all governmental
regulatory officials and bodies, to own or lease its properties
and conduct its business and the CLIENT has been doing business in
compliance with all such material Approvals, and all Federal,
state and local laws rules and regulations, other than any such
Approvals, laws, rules and regulations, the failure to comply with
which would not have material adverse effect on the CLIENT, its
business, properties or operations. All licenses and findings of
suitability required to be obtained by any affiliate of the CLIENT
have been obtained and are in full force and effect.
7.12 TITLE TO PROPERTY, INSURANCE: The CLIENT has good title to, or
valid and enforceable leasehold estates in, all items of real
property owned or leased by it, and continues to have good title
to, or valid and enforceable leases or subleases with respect to,
all items of personal property (tangible and intangible), free and
clear of all liens, encumbrances, claims, security interests,
defects of title, and restrictions of any material nature
whatsoever, and liens for real estate taxes not yet due and
payable. No default or notice of default exists or has been
declared by the landlord or sublessor under any of such leases or
subleases. The CLIENT has adequately insured its tangible and/or
real properties against loss or damage by fire or other casualty
(other than earthquake and flood) and at all relevant times
maintained such insurance in adequate amounts, on terms generally
offered by reputable insurance carriers.
7.13 INTANGIBLES: The CLIENT owns or possesses the requisite licenses
or rights to use all trademarks, service marks, service names,
trade names and other rights (collectively, the "Intangibles")
described as owned or used by it. There are no proceeding or
action by any
4
<PAGE>
person pertaining to, or proceeding or claim pending or, to the
best knowledge of the CLIENT, threatened and the CLIENT has not
received any notice of conflict with the asserted rights of others
which challenge the exclusive right of the CLIENT with respect to
any Intangibles used in the conduct of the CLIENT's business. To
the best knowledge of the CLIENT, the Intangibles and the CLIENT's
operations do not infringe on any Intangibles held by any third
party.
7.14 HOLD HARMLESS: The CLIENT agrees to indemnify and otherwise hold
CONSULTANT, its directors, employees, agents and controlling
persons harmless from and against any and all losses, claims,
damages, liabilities and expenses joint and several (including all
reasonable fees of counsel, whether or not resulting in
liability), caused by or resulting out of CONSULTANT acting for
the CLIENT pursuant to this Agreement; providing that said loss,
claim, damage, liability or expense is found to have not resulted
primarily from CONSULTANT's gross negligence or bad faith in
performing the services described above.
7.15 HOLD HARMLESS: The CLIENT agrees to indemnify and hold CONSULTANT,
its directors, employees, agents and controlling persons harmless
from and against any an all losses, claims, damages, liabilities
and expenses joint and several (including all reasonable fees of
counsel, whether or not resulting in liability), caused by any
material adverse changes in CLIENT not known to CONSULTANT at the
time of the execution of this Agreement.
REPRESENTATIONS AND WARRANTIES OF CONSULTANT
--------------------------------------------
8. The CLIENT represents and warrants to CONSULTANT as follows:
8.1 DUE INCORPORATION AND QUALIFICATION: The CONSULTANT, if a
corporation, has been duly incorporated, is validly existing and
is in good standing under the laws of its state of incorporation
and is duly qualified as a foreign corporation (except where the
failure to so qualify would not have a material adverse effect on
the business of the CONSULTANT) for the transaction of business
and is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its
business requires such qualification. The CONSULTANT has all
requisite corporate power and authority necessary to own or hold
its properties and conduct its business as put forth to CLIENT by
the CONSULTANT.
8.2 AUTHORIZED CAPITAL: The CONSULTANT, if a corporation, will have an
authorized and outstanding capitalization, and all of the then
issued and outstanding shares of Common Stock will have been duly
and validly authorized and issued and will be fully paid and
nonassessable. None of the holders of such outstanding shares of
Common Stock is subject to personal liability solely by reason of
being such a holder.
8.3 NO MATERIAL ADVERSE CHANGES: (i) There has not been any changes in
the condition, financial or otherwise, of the CONSULTANT, as put
forth to CLIENT by the CONSULTANT, which would have materially
adversely affected its ability to conduct its operations; and (ii)
the CONSULTANT has not incurred any material liabilities or
obligations, direct or contingent, not in the ordinary course of
business.
8.4 NO PENDING ACTIONS: There are no actions, suits, proceedings,
claims or hearings of any kind or nature or, to the best of the
knowledge of the CONSULTANT, any investigations or inquiries,
before or by any court, governmental authority, tribunal or
instrumentality, pending or threatened against the CONSULTANT, or
involving the properties of the CONSULTANT which could have
resulted in any material adverse change in the business,
properties, financial position or results of operations of the
CONSULTANT, or which could have materially adversely affected the
transaction or other acts then contemplated by this Agreement or
the validity or enforceability of this Agreement.
5
<PAGE>
8.5 DUE AUTHORIZATION: The CLIENT, whether an individual or a
corporation, has full right, power and authority to enter into
this Agreement and to perform all of its obligations hereunder.
This Agreement was duly authorized, executed and delivered by the
CONSULTANT. No issuance of shares of the CONSULTANT's capital
stock shall be required as a condition to this execution, validity
or enforceability hereof. This Agreement constitutes, upon
execution and delivery, a valid and binding obligation of the
CONSULTANT, enforceable in accordance with its respective terms
(except (i) as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditor's rights generally or by general
principles of equity; and (ii) that the enforceability of the
indemnification and contribution provisions of this Agreement may
be limited by the Federal securities laws and public policy), and
no consent, approval, authorization, order of, or filing with, any
court or governmental authority or any other third party is
required to consummate the transactions contemplated by this
Agreement.
8.6 NON-DEFAULT: NONCONTRAVENTION: During the operative period, the
CONSULTANT is not in violation of its articles or certificate of
incorporation or by-laws or, in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any material contract, lease or other
instrument to which it is a party, and the CONSULTANT's execution
and delivery of this Agreement, and the incurrence of the
obligations herein and therein set forth, and the consummation of
the transactions contemplated do not (i) conflict with, or
constitute breach of, or a default under the articles or
certification of incorporation or by-laws of the CONSULTANT, or
any material contract, lease or other material agreement or
instrument to which the CONSULTANT is a party or in which the
CONSULTANT has a beneficial interest or by which the CONSULTANT is
bound: (ii) violates any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency
or court, domestic or foreign, having jurisdiction over the
CONSULTANT or any of its properties or business; or (iii) has or
has had any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise necessary
for the CONSULTANT to own or lease and operate any of its
properties and to conduct its business or the ability of the
CONSULTANT to make use thereof.
8.7 NO REGULATORY PROBLEMS: The CLIENT warrants that there exists no
regulatory problems by any governmental agency, court or
jurisdiction, foreign or domestic and that the CONSULTANT is not
now, or threatened to be, under any investigation by any
governmental agency, court, or jurisdiction foreign or domestic.
8.10 NO VIOLATIONS: The CONSULTANT is not in violation of any material
franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any governmental agency or court, foreign or
domestic, having jurisdiction over the CONSULTANT or any of its
properties or business other than any violation which individually
or in the aggregate would not have a material adverse effect on
the CONSULTANT's business, properties or operations.
8.11 CONDUCT OF BUSINESS: The CONSULTANT has all necessary
authorizations, approvals, orders, licenses, certificates and
permits (collectively, the "Approvals") of and from all
governmental regulatory officials and bodies, to own or lease its
properties and conduct its business and the CONSULTANT has been
doing business in compliance with all such material Approvals, and
all Federal, state and local laws rules and regulations, other
than any such Approvals, laws, rules and regulations, the failure
to comply with which would not have material adverse effect on the
CONSULTANT, its business, properties or operations. All licenses
and findings of suitability required to be obtained by any
affiliate of the CONSULTANT have been obtained and are in full
force and effect.
8.l2 HOLD HARMLESS: The CONSULTANT agrees to indemnify and
otherwise hold CLIENT, its directors, employees, agents and
controlling persons harmless from and against any and all
6
<PAGE>
losses, claims, damages. liabilities and expenses joint and
several (including all reasonable fees of counsel, whether or not
resulting in liability), caused by or resulting out of CLIENT
acting for the CONSULTANT pursuant to this Agreement; providing
that said loss, claim, damage, liability or expense is found to
have not resulted primarily from CLIENT's gross negligence or bad
faith in performing the services described above.
8.l3 HOLD HARMLESS: The CONSULTANT agrees to indemnify and hold CLIENT,
its directors, employees, agents and controlling persons harmless
from and against any an all losses, claims, damages, liabilities
and expenses joint and several (including all reasonable fees of
counsel, whether or not resulting in liability), caused by any
material adverse changes in CONSULTANT not known to CLIENT at the
time of the execution of this Agreement.
9. If a transaction is completed pursuant to this Agreement, CONSULTANT,
at its own expense and with the CLIENT's approval (which approval shall
not be unreasonably withheld or delayed) is entitled to place an
announcement in such newspapers and periodicals as it may choose
stating that CONSULTANT has acted as the consultant / public relations
agent for the CLIENT in such transaction.
10. CONSULTANT understands and the CLIENT agrees that no individuals have acted
as finders.
11. CLIENT AND CONSULTANT agree that no other privileges or benefits shall
inure to the benefit of CONSULTANT other than the remuneration provided
for under Section 5 above.
12. In the event a transaction occurs during the pendency of this Agreement
and the CLIENT is not the surviving entity in such a transaction as a
merger or acquisition or otherwise, or in the event that all or
substantially all of the CLIENT's assets has been sold during such
period, the CLIENT agrees to cause the acquirer or acquirers to assume
and honor the obligations and liabilities of the CLIENT hereunder.
13. This Agreement shall be construed in accordance with the laws of the State
of California.
14. This Agreement represents the entire understanding between the parties,
and shall supersede all prior discussions. All and negotiations are
deemed merged into the Agreement and no parole evidence shall be
allowed to contradict it.
15. All Notices to either party shall be in writing and delivered via US Mail
to the following persons and addresses:
CLIENT CONSULTANT
------ ----------
GO CALL, INC. CONNOISSEUR CLUB, INC.
MICHAEL RUGE, CEO PMB2 Caribbean Place
15 QUEEN STREET EAST Providenciales
CAMBRIDGE, ONTARIO, CANADA Turks and Caicos Islands
90068
16. This Agreement can be executed in counterparts which separately and/or
collectively result in a validly executed agreement.
7
<PAGE>
CONSULTANT AGREEMENT SIGNATURE PAGE
THIS CONSULTANT SERVICE AGREEMENT HAS BEEN EXECUTED THIS FIRST DAY OF
JULY, 1999.
CLIENT: CONSULTANT
/s/ Michael Ruge /s/ signature
--------------------------- ---------------------------
GO CALL, INC. CONNOISSEUR CLUB, INC.
BY: Michael Ruge, CEO BY:
/s/ For and on behalf of
Avatar Corporation Limited,
Director
8
AGREEMENT dated this 29 day of July, 1998
BY AND BETWEEN: MPACT IMMEDIA TRANSACTION SERVICES LTD., a legal person having
a place of business at Clarendon House, Church Street,
Hamilton, Bermuda, herein represented by Mr. Joel Leonoff,
duly authorised as he so declares,
(hereinafter referred to as "MPACT")
AND: Go Call Inc, a legal person having a place of business at 15
Queen St. East, Cambridge, Ontario, herein represented by
Michael Ruge, duly authorised as he so declares,
(hereinafter referred to as the "Client")
SECTION 1- PREAMBLE
1.1 WHEREAS the Client is desirous of engaging the services of MPACT to
process, verify, settle, confirm, report and perform value added
services on certain transactions relating to the business operations
of Client (the "Processing Services");
1.2 WHEREAS MPACT is desirous of providing the Processing Services to the
Client subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION II - PROCESSING SERVICES
2.1 Subject to the terms and conditions set forth in this Agreement, MPACT
hereby agrees to provide the Processing Services to the Client.
Specifically, the Processing Services shall include the following:
2.1.1 real-time online authentication and approval of the credit
card information (namely, the card number and expiration
date) for each credit card transaction processed by the
Processing Services (the "Credit Card Transactions");
2.1.2 real-time online confirmation and approval that the relevant
card number accounts have sufficient credit available to
cover the amounts of the Credit Card Transactions;
2.1.3 settlements of the Credit Card Transactions that have been
approved based on positive credit card information, positive
credit availability and positive electronic mail verification
to the extent that same are used;
<PAGE>
2
2.1.4 the use of MPACT's electronic mail verification system and of
an address verification system for the purposes hereof and
the issuance of approvals based upon the electronic mail
response;
2.1.5 crediting back customers' cards upon electronic instructions
from the Client;
2.1.6 monthly written confirmations (on a calendar basis) to the
Client regarding the status of the Credit Card Transactions
including the total credit card deposits, returns,
Charge-Backs pending and Charge-Backs processed; and
2.1.7 daily reporting with respect to deposits and returns for the
preceding twenty-four (24) hours.
2.2 Nothing herein grants the Client any rights whatsoever in any of
MPACTs transaction or other software, and any use thereof by the
Client beyond the requirements of the Processing Services shall be
subject to separate agreement.
2.3 Each Friday of each calendar week, MPACT shall remit to the Client
the amount collected by MPACT in respect of Credit Card
Transactions processed, net of the credits identified in
subsection 2.1.5 above (the "Remittances"), subject to the
deductions, and reserves set forth in section III below.
SECTION III - FEES AND RESERVES
3.1 In consideration for Processing Services, the Client agrees to pay to
MPACT the following non-refundable fees:
3.1.1 six and three quarter percent (6.75%) of all approved and
settled Credit Card Transactions, subject to a minimum
monthly fee of four thousand dollars ($4,000);
3.1.2 Client shall pay an initial setup fee in the amount of two
thousand five hundred dollars ($2,500.00) upon execution of
this Agreement;
3.1.3 Client shall reimburse MPACT for all approved and settled
Credit Card Transactions which are at any time refused,
debited or charged back by the relevant bank or credit card
company for any reason whatsoever ("Charge-Backs");
3.1.4 Client shall pay a fee in the amount of ten dollars ($10.00)
plus any incremental fees and expenses charged or debited by
the banks or credit card companies for each Charge-Back; and
<PAGE>
3
3.2 Client hereby authorizes MPACT to deduct from the Remittances the
amounts owing under subsection 3.1 above. In the event that the
Remittances are insufficient to pay the amounts owing by the Client to
MPACT, the Client shall pay the balance thereof within seven (7)
business days following receipt of MPACTs written invoice for such
amount.
3.3 Client hereby further authorizes MPACT to deduct from the Remittances
and establish a reserve account (the "Reserve Account") to ensure
MPACTs recovery of any liabilities owed it or reasonably anticipated
to be owed to it by the Client pursuant to this Agreement including,
without limitation, all liabilities in respect of actual and/or
potential post-termination Charge-Backs, post-termination fees, and
charges, indemnifications and expenses due or anticipated to be due to
MPACT from Client. The Reserve Account shall be funded and/or
replenished by MPACTs withholding from the Remittances. The amount of
the Reserve Account shall be maintained in amounts consistent with the
provisions set forth in subsection 3.6 below.
3.4 As additional security for the payment of the obligations by the
Client, the Client agrees to provide MPACT with a security deposit
(the "Security Deposit") in the amount of fifty thousand dollars
($50,000.00). The Security Deposit shall be maintained at this amount
throughout the term of this Agreement and for a period of seven (7)
months thereafter, and the Client agrees to pay any deficiency into
the Security Deposit upon notice of such deficiency from MPACT. The
Security Deposit shall be made by the Client to MPACT upon the
execution of this Agreement.
3.5 As continuing and collateral security for the due and punctual payment
of any and all amounts now owing or which may hereafter become owing
to MPACT by the Client under this Agreement (the "Obligations"), as
same may be amended, renewed, extended or supplemented, the Client
hereby charges and hypothecates in favour of MPACT, with effect as of
and from this date, all right, title and interest of the Client in and
to the Remittances, Security Deposit and Reserve Account and all funds
therein comprised. The Client undertakes not to grant to any other
person any hypothecary or other security interest of equal or superior
rank to MPACT's in the Remittances, Security Deposit or Reserve
Account. The Client further undertakes, upon notice by MPACT and at
its expense, to execute and register such documents as may be
necessary or desirable to perfect MPACT's first-ranking security
interest therein.
3.6 During the initial six (6) month period of the term of this Agreement,
MPACT shall deduct fifteen percent (15%) from the Remittances to fund
the Reserve Account. Thereafter, MPACT shall continue to retain within
the Reserve Account the aggregate amount of fifteen percent (15%) of
the Remittances for the six (6) most recent months of the term of this
Agreement.
3.7 MPACT shall have the right to withdraw from the Reserve Account any
and all amounts owed to it hereunder upon one day's notice. MPACT
shall have the
<PAGE>
4
additional right to withdraw from the Security Deposit any and all
amounts owed to it hereunder should the Client fail to pay such
amounts within five business days of written default of payment notice
to the Client MPACT's rights to sums owed to it by Client pursuant to
this Agreement shall in no way be limited by the balance or existence
of the Reserve Account or the Security Deposit. MPACTs rights with
respect to the Reserve Account and the Security Deposit shall survive
the termination of this Agreement. It is understood that all interest
which may accrue with regards to the Reserve Account shall be for the
sole account of MPACT
3.8 All interest which may accrue in respect of the Security Deposit shall
be for the sole account of MPACT. Notwithstanding the forgoing, in the
event that MPACT terminates this Agreement without cause pursuant to
subsection 5.2 below, MPACT agrees that, as and from the date of such
termination, all interest which may accrue in respect of Security
Deposit shall be for the sole account of MPACT.
3.9 As amounts become payable to either party under this Agreement, and
unless otherwise agreed in writing, the party making the payment shall
do so by facilitating a wire transfer to a pre-designated account
stipulated by the other party. Payments shall be deemed to be made
upon the date of transfer from the transferor's bank.
3.10 The Client shall be responsible for the payment of any and all
applicable sales or other taxes due upon the Credit Card Transactions.
SECFION IV - INDEMNIFICATION AND LIMITATION OF LIABILITY
4.1 The Client shall jointly and severally defend and hold harmless MPACT
against and in respect to any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries, and
deficiencies, including interest, penalties and reasonable attorney
fees that MPACT shall incur or suffer, that arise, result from, or
relate to any breach of or failure by the Client to perform any of its
representations, warranties, covenants or agreements in this Agreement
or in any schedule, supplemental agreement, appendix or other
instrument furnished or to be furnished to Client under this
Agreement.
4.2 MPACTs liability to Client with respect to any Credit Card Transaction
shall not exceed the amount represented by the transaction record in
connection with such Credit Card Transaction, less the applicable fees
payable to MPACT hereunder.
4.3 ALL WARRANTIES EXPRESSED OR IMPLIED INCLUDING, BUT NOT LIMITED TO,
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR
PURPOSE OF THE PROCESSING SERVICES OR OF ANY OTHER SERVICES PROVIDED
BY MPACT HEREUNDER ARE HEREBY DISCLAIMED BY MPACT, ITS AFFILIATES,
AGENTS AND LICENSORS. IN ADDITION, MPACT, ITS AFFILIATES, AGENTS AND
LICENSORS SHALL NOT BE LIABLE FOR ANY INCIDENTAL, CONSEQUENTIAL, OR
OTHER DAMAGES, LOSSES OR CLAIMS IN ANY WAY CONNECTED WITH OR ARISING
OUT OF THE USE OF THE PROCESSING SERVICES OR ANY OTHER SERVICES
PROVIDED BY MPACT HEREUNDER.
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5
4.4 MPACT, its affiliates, agents or licensors shall not be liable for any
loss resulting from erroneous statements or errors in transmission,
nor for any loss resulting from any delay, interruption or failure to
perform hereunder due to any circumstances beyond MPACTs reasonable
control including without limitation, acts of god, fire, explosion,
earthquake, riot, war, sabotage, accident, embargo, storms, strikes,
lockouts, any interruption, failure or defects in Internet, telephone,
or other interconnect services or in electronic or mechanical
equipment. MPACT's obligations hereunder shall be suspended during any
of the foregoing circumstances, which suspension shall not be a cause
for termination of this agreement by the Client.
SECTION V - TERM AND TERMINATION
5.1 This Agreement shall be effective commencing on the date first
mentioned above (the "Effective Date") until the first anniversary of
the Effective Date, and thereafter shall be renewed automatically for
additional consecutive three (3) month periods, unless earlier
terminated in accordance with the terms of subsections 5.2, 5.3 or 5.4
hereof.
5.2 Notwithstanding subsection 5.1, MPACT shall have the right to
terminate this Agreement immediately: (i) in the event of breach by
the Client of its representation, warranties or obligations under this
Agreement, or (ii) in the event that the Client is delinquent in any
payment hereunder ten (10) days after the same has become due. MPACT
may also terminate this Agreement with or without cause upon twenty
(20) business days' written notice to Client.
5.3 Notwithstanding subsection 5.1, Client may terminate this Agreement,
with or without cause, upon fifteen (15) business days written notice
to MPACT. Client's use of MPACT's services hereunder are completely at
will and non-exclusive.
5.4 Notwithstanding subsection 5.1, the parties agree that either of them
may, by notice to the other party, initiate negotiations on amendments
to this Agreement where such amendments would take effect on as of the
six (6) month anniversary of the Effective Date. In the event that
notice to negotiate has been given by a party hereunder, but the
parties have failed to reach agreement on amendments by such six (6)
month anniversary, this Agreement shall terminate on such six (6)
month anniversary.
5.5 Upon any termination of this Agreement, the Client shall immediately
discontinue the use of all of the Processing Services. All provisions
regarding indemnification, warranty, liability and limits thereon, and
confidentiality and/or protection of proprietary rights and trade
secrets shall survive indefinitely or until the expiration of any time
period specified elsewhere in this Agreement with respect to the
provision in question, and termination of this Agreement shall not
relieve the Client of its obligations to pay accrued fees.
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6
5.6 Upon any termination of this Agreement, MPACT shall be entitled to
retain as security for the payment of the Obligations each of the
Security Deposit and the Reserve Account for a period of seven (7)
months thereafter, save that the Reserve Account shall be reduced by
fifteen percent (15%) at the end of each month following termination,
and such amount shall be remitted to the Client net of any deductions
properly made hereunder during such month, until the whole of the
Reserve Account is Exhausted.
SECTION VI - REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CLIENT
6.1 The Client hereby agrees to abide by the following good business
practices:
6.1.1 to offer for sale through its Web Site only products and
services that are available for delivery in the normal course
of the Client's business, based upon the type of product or
service being offered; and
6.1.2 to offer products or services for sale only if the Client has
legitimate rights to market and sell such products or
services.
6.2 The Client hereby represents and warrants to MPACT that throughout
the term of this Agreement:
6.2.1 it will maintain the value and reputation of MPACT to the
best of its reasonable ability;
6.2.2 it will conduct its business affairs in an ethical manner and
in accordance with the terms and intent of this Agreement,
and in compliance with all applicable government regulations;
6.2.3 it shall not use the Processing Services in connection with
any illegal or fraudulent business activities; and
6.2.4 it shall not permit or authorize any other person to use the
Processing Services.
6.3 The Client acknowledges to MPACT that they are independent contractors
and that nothing herein shall be construed as creating a joint venture
or partnership between them. For greater certainty, the Client
acknowledges that MPACT is not involved in the Client's business.
6.4 The Client agrees that at any time and from time to time during the
term of this Agreement, MPACT shall have the right to post a banner of
its design on the application/deposit page of website(s) incorporating
Processing Services, without any charge whatsoever to MPACT and in
addition to any other rights it may have hereunder.
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7
SECTION VII - GUARANTORS
7.1 As a primary inducement to MPACT to enter into this Agreement, (the
"Guarantors"), unconditionally and irrevocably, guarantee the
continuing full and faithful performance and payment by Client of each
of its duties and obligations to MPACT pursuant to this Agreement,
whether before or after termination or expiration and whether or not
any of the Guarantors has received notice of any amendment. If Client
breaches this Agreement, MPACT may proceed directly against any or all
of the Guarantors or any other persons or entity responsible for the
performance of this Agreement, without first exhausting its remedies
against any other person or entity responsible therefor to it or any
security held by MPACT.
SECTION VIII - AMENDMENTS
8.1 MPACT may amend this Agreement at any time by mailing written notice
to Client of any amendment at least thirty (30) days prior to the
effective date of the amendment, which amendment shall not (without
Client's written consent) modify or retroactively affect or apply to
fees, reserves or transactions occurring prior to the effective date
of the amendment. The amendment shall become effective on the date
specified by MPACT unless MPACT receives Client's notice of
termination of this Agreement before such effective date.
SECTION IX - NOTICES
9.1 Any notice, demand, request or other communication required or
permitted to be given under this Agreement shall be faxed (to MPACT
at____________ and to Client at ________________) delivered
personally, or sent to the other party by prepaid registered mail,
return receipt requested, at the addresses first hereinabove set out
or to such other address as either party may have previously indicated
to the other in writing in accordance with the foregoing. Any such
notice, request, demand or communication shall be deemed to have been
received on the day it was delivered personally, on the fifth (5th)
day following mailing, unless there is a disruption of any kind of
postal service in Canada, in which event all deliveries shall be made
personally or by fax, or on the business day after the date of a faxed
notice.
SECTION X - MISCELLANEOUS
10.1 This Agreement together with supplemental agreements, appendixes and
schedules constitutes the entire agreement between the parties
pertaining to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations and
understandings of the parties. No waiver of any of the provisions in
this Agreement shall be deemed or shall constitute, a waiver of any
other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
<PAGE>
8
10.2 The Client may not assign this Agreement or any rights hereunder,
directly or by operation of law, without the prior written consent of
MPACT which consent may be withheld for any reason in MPACT's sole
discretion. For purposes of this Agreement assignment shall include,
but not be limited to, transfer of control of the Client and any
ownership change which results in a new majority owner.
10.3 The Client shall be liable for and shall indemnify and reimburse MPACT
for any and all attorneys' fees and other costs and expenses paid or
incurred by MPACT in the enforcement of this Agreement, or in
collecting any amounts due from the Client hereunder, or resulting
from any breach of any of the terms or conditions of this Agreement.
10.4 All remedies of either party hereunder are cumulative and may be
exercised concurrently or separately. The exercise of any one remedy
shall not be deemed to be an election of such remedy and shall not
preclude the exercise of any other remedy. No failure on the part of
either party to exercise and no delay in exercising any right or
remedy hereunder shall operate as a waiver of such right or remedy.
10.5 If any provision of this Agreement is held invalid or unenforceable by
any court of final jurisdiction, it is the intent of the parties that
all other provisions of this Agreement be construed to remain fully
valid, enforceable and binding on the parties.
10.6 The subject headings of the paragraphs and subparagraphs of this
Agreement are included for convenience only and shall not affect the
construction or interpretation of any of its provisions.
10.7 References to "this Agreement" include any supplementary agreements,
addendum, appendixes and amendments and any other agreements,
schedules appendixes and amendments promulgated by MPACT and furnished
to the Client from time to time.
10.8 All dollar amounts referred to in this Agreement are in United States
funds.
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9
IN WITNESS WHEREOF, the parties have signed as of the date first hereinabove
mentioned.
MPACT IMMEDIA TRANSACTION SERVICES LTD. Go Call Inc.
per: /s/ Joel Leonoff per: /s/
- ------------------------- -------------------------
Mr. Joel Leonoff
per: /s/
-------------------------
Guarantors:
per: /s/ per: /s/
- ------------------------- -------------------------
Go Call Inc. Go Call Inc.
CONTRACT
BETWEEN
WEB WONDERS
AND
GO CASH INC./GO CALL INC.
Web Wonders and Go Cash Inc/Go Call Inc. hereby agree to form a service contract
for a TWO (2) year period with the following terms and conditions:
1. Web Wonders agrees to perform the following services for Go Cash Inc./Go Call
Inc.
- - Assume all leases including those for office equipment and office space at
15 Queen St., Cambridge Ontario Canada
- - Handle day to day administrative duties including, but not limited to, the
following:
- - answer phones
- - respond to customer and investor relations inquiries
- - Web design
- - Web marketing
2. Web Wonders also agrees to:
- - Assume responsibility for existing technical and administrative consultants
to Go Cash Inc/Go Call Inc such as project management and compensation. All
existing Go Cash lnc./Go Ccli Inc. will become Web Wonders' consultants.
- - Assume responsibility for contracting further consultants to perform the
services listed in this contract if necessary
3. Go Cash Inc./Go Call Inc. agrees to pay Web Wonders a. monthly fee of $30,000
US for performing the aforementioned services. Web Wonders will invoice Go Cash
Inc./Go Call Inc. for an additional amount if the cost of carrying out this
contract exceeds $30,000 for any given month.
Dated at (unreadable) this 29 day of August 1999 .
/s/ signature
- -------------------------
Web Wonders
/s/ signature
- -------------------------
Go Call Inc.
/s/ signature
- -------------------------
Go Cash Inc.
CONSULTANT AGREEMENT
This Consultant Agreement (herein the "Agreement") is entered into by and Go
Call, Inc., a Delaware corporation (herein "CLIENT"); on the one part and
Jake Canceli and/or his nominee (herein "CONSULTANT"); on the other part.
CLIENT is a publicly traded company and is seeking the services of CONSULTANT to
obtain new business to generate growth in CLIENT's stock price.
The parties hereto, by executing this Agreement, do hereby agree to be bound to
the terms and conditions hereunder.
TERMS AND CONDITIONS:
---------------------
1. SERVICE TO BE TENDERED: CLIENT hereby engages CONSULTANT as the CLIENT's
consultant for the purposes regarding corporate posturing, current
shareholders and debt/equity financing. The consultant's services would
include, but not be limited to: (i) a review of the CLIENT's operations and
capital structure, valuation of the CLIENT's business units, pending and
executory contracts and recommendation of the actions to be taken to
maximize shareholder value and earnings, (ii) the rendering of advice and
assistance, where possible, for the private placement of additional
financing and (iii) assistance (where possible) to the CLIENT in the
exercise of any of the CLIENT's warrants to purchase shares of the CLIENT.
CONSULTANT'S role as consultant shall continue until the termination of
this Agreement pursuant to Paragraph 4 below.
1.1 Further, CONSULTANT agrees to keep and maintain all material
non-public information, which CONSULTANT received or developed
concerning the CLIENT, confidential, and to disclose that
information only as contemplated by this Agreement or as required
by law. Notwithstanding the foregoing, CONSULTANT is free to
utilize independent agents to provide services contemplated herein
provided such agents, employees, CONSULTANT, investors and lenders
agree to be bound by the confidentiality provisions of this
Agreement.
1.2 Review the CLIENT's operations specifically for cash flow purposes
and advise the CLIENT regarding the CLIENT's capital structure and
valuation of its business units and contracts.
1.3 Advise the CLIENT in negotiations to obtain price and terms of
financing short term or otherwise.
1.4 Advise the CLIENT in negotiations for the purpose of completing
mergers or acquisitions and the effect or effects of such on the
CLIENT, its cash flow and profitability.
1.5 CONSULTANT shall obtain written approval prior to disclosing any
material non-public information and utilizing any printed or
reprinted material of CLIENT.
2. Except as required by law, any advice rendered by CONSULTANT pursuant to
this Agreement shall be treated as confidential by the CLIENT and by any
party to whom the CLIENT discloses such advice and shall not be disclosed
publicly in any manner without the prior written consent of CONSULTANT.
Without prior consultation with CONSULTANT, the CLIENT shall not make any
legally required disclosure of such advice nor make any public
announcements or filings in which CONSULTANT's name appears.
3. The CLIENT agrees to make available all information concerning the
business, assets, operations and financial condition of the CLIENT which
CONSULTANT reasonably requests in connection with the performance of its
obligations hereunder. CONSULTANT is entitled to rely upon the accuracy and
completeness of such information without independent verification.
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<PAGE>
4. This Agreement shall naturally terminate upon the fifth anniversary from
the date of execution hereof.
a. Either party may terminate this Agreement for any reason prior to its
natural termination providing 30 day written notice be given to the
non-terminating party.
5. For the services provided herein, The CLIENT shall tender to CONSULTANT:
a. Upon execution hereof, CLIENT shall tender to CONSULTANT 500,000 shares
of restricted stock of Go Call, Inc. (the "Shares") and 500,000 options
of Go Call, Inc. stock at $0.50 per share.
1. The 500,000 shares of restricted stock shall be free tading within
one year of issuance by one of the following manners.
a. The restriction shall expire on the year anniversary
date of the issuance of the 500,000 shares of stock to
CONSULTANT; or
b. Should the CLIENT become a fully compliant bulletin
board company during the Shares' one year
restriction, CLIENT shall register CONSULTANT'S
Shares no later than three months after becoming
compliant.
2. In addition, CONSULTANT shall also receive an additional
2,000,000 options (the "Options") of Go Call, Inc. at a price of
$0.50 per share which shall be deemed vested in CONSULTANT upon
execution hereof, however, CONSULTANT will allow CLIENT to make
the Options available in 500,000 share blocks on the each
anniversary date of the execution hereof for the remainder of
the natural life of this Agreement.
a. In the event of an early termination pursuant to
Section 4 above, the remaining Options under Section 5
(2) shall be made immediately available to CONSULTANT
at which time CONSULTANT shall have no less than thirty
(30) days and no more than ninety (90) days to tender
to CLIENT the Option price due and payable to the
CLIENT.
3. CLIENT agrees that CONSULTANT shall be entitled to ten (10%)
percent of all monies directly raised by CONSULTANT through
private placements, however, CLIENT and CONSULTANT shall be
entitled to re-negotiate this percentage on a case by case
basis without impacting the agreed to percentage enumerated
above.
6. Should CLIENT sell, merge or be acquired by any third party which is
publicly traded, CLIENT shall have the third party acquirer executed a
valid assignment of this Agreement to avoid any ambiguities as it relates
to CONSULTANT'S rights hereunder and to ensure remuneration.
REPRESENTATIONS AND WARRANTIES OF THE CLIENT
--------------------------------------------
7. The CLIENT represents and warrants to CONSULTANT as follows:
7.1 DUE INCORPORATION AND QUALIFICATION: The CLIENT has been duly
incorporated, is validly existing and is in good standing under
the laws of its state of incorporation and is duly qualified as a
foreign corporation (except where the failure to so qualify would
not have a material adverse effect on the business of the CLIENT)
for the transaction of business and is in good standing in each
jurisdiction in which the ownership or leasing of its properties
or the conduct of its business requires such qualification. The
CLIENT has all requisite corporate power and authority necessary
to own or hold its properties and conduct its business as put
forth to CONSULTANT by the CLIENT.
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<PAGE>
7.2 AUTHORIZED CAPITAL: The CLIENT will have an authorized and
outstanding capitalization, and all of the then issued and
outstanding shares of Common Stock will have been duly and validly
authorized and issued and will be fully paid and nonassessable.
None of the holders of such outstanding shares of Common Stock is
subject to personal liability solely by reason of being such a
holder.
7.3 FINANCIAL STATEMENTS: The financial statements of the CLIENT
fairly present the financial position and results of operations of
the CLIENT at the dates thereof and for the periods in conformity
with generally accepted principles, consistently applied
throughout the periods involved.
7.4 NO MATERIAL ADVERSE CHANGES: (i) There has not been any changes in
the condition, financial or otherwise, of the CLIENT, as put forth
to CONSULTANT by the CLIENT, which would have materially adversely
affected its ability to conduct its operations; and (ii) the
CLIENT has not incurred any material liabilities or obligations,
direct or contingent, not in the ordinary course of business.
7.5 TAXES: The CLIENT has filed all Federal tax returns and all state
and municipal and local tax returns (whether relating to income,
sales, franchise, real or personal property or other types of
taxes) required to be filed under the laws of the United States
and other applicable countries and/or jurisdictions, and has paid
in full all taxes which have become due pursuant to such returns
or claimed to be due by any taxing authority or otherwise due and
owing, provided, the CLIENT has not paid any tax, assessment,
charge, levy or license fee that it contests in good faith and by
proper proceedings and adequate reserves for the accrual of same
are maintained if required by generally accepted accounting
principles. Each of the tax returns heretofore filed by the CLIENT
correctly and accurately reflects the amount of its tax liability
thereunder. The CLIENT has withheld, collected and paid all other
levies, assessments, license fees and taxes to the extent required
and with respect to payments, to the extent that the same have
become due and payable.
7.6 NO PENDING ACTIONS: There are no actions, suits, proceedings,
claims or hearings of any kind or nature or, to the best of the
knowledge of the CLIENT, any investigations or inquiries, before
or by any court, governmental authority, tribunal or
instrumentality, pending or threatened against the CLIENT, or
involving the properties of the CLIENT which could have resulted
in any material adverse change in the business, properties,
financial position or results of operations of the CLIENT, or
which could have materially adversely affected the transaction or
other acts then contemplated by this Agreement or the validity or
enforceability of this Agreement.
7.7 DUE AUTHORIZATION: The CLIENT has full right, power and authority
to enter into this Agreement and to perform all of its obligations
hereunder. This Agreement was duly authorized, executed and
delivered by the CLIENT. No issuance of shares of the CLIENT's
capital stock shall be required as a condition to this execution,
validity or enforceability hereof. This Agreement constitutes,
upon execution and delivery, a valid and binding obligation of the
CLIENT, enforceable in accordance with its respective terms
(except (i) as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization. moratorium or other
similar laws affecting creditor's rights generally or by general
principles of equity; and (ii) that the enforceability of the
indemnification and contribution provisions of this Agreement may
be limited by the Federal securities laws and public policy), and
no consent, approval, authorization, order of, or filing with, any
court or governmental authority or any other third party is
required to consummate the transactions contemplated by this
Agreement.
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7.8 NON-DEFAULT: NONCONTRAVENTION: During the operative period, the
CLIENT is not in violation of its articles or certificate of
incorporation or by-laws or, in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any material contract, lease or other
instrument to which it is a party, and the CLIENT's execution and
delivery of this Agreement, and the incurrence of the obligations
herein and therein set forth, and the consummation of the
transactions contemplated do not (i) conflict with, or constitute
breach of. or a default under the articles or certification of
incorporation or by-laws of the CLIENT, or any material contract,
lease or other material agreement or instrument to which the
CLIENT is a party or in which the CLIENT has a beneficial interest
or by which the CLIENT is bound; (ii) violates any existing
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the CLIENT or any of its properties or business;
or (iii) has or has had any material adverse effect on any permit,
certification, registration, approval, consent, license or
franchise necessary for the CLIENT to own or lease and operate any
of its properties and to conduct its business or the ability of
the CLIENT to make use thereof.
7.9 NO REGULATORY PROBLEMS: The CLIENT warrants that there exists
no regulatory problems by any governmental agency, court or
jurisdiction, foreign or domestic and that the CLIENT is not now,
or threatened to be. under any investigation by any governmental
agency, court, or jurisdiction foreign or domestic.
7.10 NO VIOLATIONS: The CLIENT is not in violation of any material
franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any governmental agency or court, foreign or
domestic, having jurisdiction over the CLIENT or any of its
properties or business other than any violation which individually
or in the aggregate would not have a material adverse effect on
the CLIENT's business, properties or operations.
7.11 CONDUCT OF BUSINESS: The CLIENT has all necessary authorizations,
approvals, orders, licenses, certificates and permits
(collectively, the "Approvals") of and from all governmental
regulatory officials and bodies, to own or lease its properties
and conduct its business and the CLIENT has been doing business in
compliance with all such material Approvals, and all Federal,
state and local laws rules and regulations, other than any such
Approvals, laws, rules and regulations, the failure to comply with
which would not have material adverse effect on the CLIENT, its
business, properties or operations. All licenses and findings of
suitability required to be obtained by any affiliate of the CLIENT
have been obtained and are in full force and effect.
7.12 TITLE TO PROPERTY, INSURANCE: The CLIENT has good title to, or
valid and enforceable leasehold estates in, all items of real
property owned or leased by it, and continues to have good title
to, or valid and enforceable leases or subleases with respect to,
all items of personal property (tangible and intangible), free and
clear of all liens, encumbrances, claims, security interests,
defects of title, and restrictions of any material nature
whatsoever, and liens for real estate taxes not yet due and
payable. No default or notice of default exists or has been
declared by the landlord or sublessor under any of such leases or
subleases. The CLIENT has adequately insured its tangible and/or
real properties against loss or damage by fire or other casualty
(other than earthquake and flood) and at all relevant times
maintained such insurance in adequate amounts, on terms generally
offered by reputable insurance carriers.
7.13 INTANGIBLES: The CLIENT owns or possesses the requisite licenses
or rights to use all trademarks, service marks, service names,
trade names and other rights (collectively, the "Intangibles")
described as owned or used by it. There are no proceeding or
action by any
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<PAGE>
person pertaining to, or proceeding or claim pending or, to the
best knowledge of the CLIENT, threatened and the CLIENT has not
received any notice of conflict with the asserted rights of others
which challenge the exclusive right of the CLIENT with respect to
any Intangibles used in the conduct of the CLIENT's business. To
the best knowledge of the CLIENT, the Intangibles and the CLIENT's
operations do not infringe on any Intangibles held by any third
party.
7.14 HOLD HARMLESS: The CLIENT agrees to indemnify and otherwise hold
CONSULTANT, its directors, employees, agents and controlling
persons harmless from and against any and all losses, claims,
damages, liabilities and expenses joint and several (including all
reasonable fees of counsel, whether or not resulting in
liability), caused by or resulting out of CONSULTANT acting for
the CLIENT pursuant to this Agreement; providing that said loss,
claim, damage, liability or expense is found to have not resulted
primarily from CONSULTANT's gross negligence or bad faith in
performing the services described above.
7.15 HOLD HARMLESS: The CLIENT agrees to indemnify and hold CONSULTANT,
its directors, employees, agents and controlling persons harmless
from and against any an all losses, claims, damages, liabilities
and expenses joint and several (including all reasonable fees of
counsel, whether or not resulting in liability), caused by any
material adverse changes in CLIENT not known to CONSULTANT at the
time of the execution of this Agreement.
REPRESENTATIONS AND WARRANTIES OF CONSULTANT
--------------------------------------------
8. The CLIENT represents and warrants to CONSULTANT as follows:
8.1 DUE INCORPORATION AND QUALIFICATION: The CONSULTANT, if a
corporation, has been duly incorporated, is validly existing and
is in good standing under the laws of its state of incorporation
and is duly qualified as a foreign corporation (except where the
failure to so qualify would not have a material adverse effect on
the business of the CONSULTANT) for the transaction of business
and is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its
business requires such qualification. The CONSULTANT has all
requisite corporate power and authority necessary to own or hold
its properties and conduct its business as put forth to CLIENT by
the CONSULTANT.
8.2 AUTHORIZED CAPITAL: The CONSULTANT, if a corporation, will have an
authorized and outstanding capitalization, and all of the then
issued and outstanding shares of Common Stock will have been duly
and validly authorized and issued and will be fully paid and
nonassessable. None of the holders of such outstanding shares of
Common Stock is subject to personal liability solely by reason of
being such a holder.
8.3 NO MATERIAL ADVERSE CHANGES: (i) There has not been any changes in
the condition, financial or otherwise, of the CONSULTANT, as put
forth to CLIENT by the CONSULTANT, which would have materially
adversely affected its ability to conduct its operations; and (ii)
the CONSULTANT has not incurred any material liabilities or
obligations, direct or contingent, not in the ordinary course of
business.
8.4 NO PENDING ACTIONS: There are no actions, suits, proceedings,
claims or hearings of any kind or nature or, to the best of the
knowledge of the CONSULTANT, any investigations or inquiries,
before or by any court, governmental authority, tribunal or
instrumentality, pending or threatened against the CONSULTANT, or
involving the properties of the CONSULTANT which could have
resulted in any material adverse change in the business,
properties, financial position or results of operations of the
CONSULTANT, or which could have materially adversely affected the
transaction or other acts then contemplated by this Agreement or
the validity or enforceability of this Agreement.
5
<PAGE>
8.5 DUE AUTHORIZATION: The CLIENT, whether an individual or a
corporation, has full right, power and authority to enter into
this Agreement and to perform all of its obligations hereunder.
This Agreement was duly authorized, executed and delivered by the
CONSULTANT. No issuance of shares of the CONSULTANT's capital
stock shall be required as a condition to this execution, validity
or enforceability hereof. This Agreement constitutes, upon
execution and delivery, a valid and binding obligation of the
CONSULTANT, enforceable in accordance with its respective terms
(except (i) as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditor's rights generally or by general
principles of equity; and (ii) that the enforceability of the
indemnification and contribution provisions of this Agreement may
be limited by the Federal securities laws and public policy), and
no consent, approval, authorization, order of, or filing with, any
court or governmental authority or any other third party is
required to consummate the transactions contemplated by this
Agreement.
8.6 NON-DEFAULT: NONCONTRAVENTION: During the operative period, the
CONSULTANT is not in violation of its articles or certificate of
incorporation or by-laws or, in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any material contract, lease or other
instrument to which it is a party, and the CONSULTANT's execution
and delivery of this Agreement, and the incurrence of the
obligations herein and therein set forth, and the consummation of
the transactions contemplated do not (i) conflict with, or
constitute breach of, or a default under the articles or
certification of incorporation or by-laws of the CONSULTANT, or
any material contract, lease or other material agreement or
instrument to which the CONSULTANT is a party or in which the
CONSULTANT has a beneficial interest or by which the CONSULTANT is
bound: (ii) violates any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency
or court, domestic or foreign, having jurisdiction over the
CONSULTANT or any of its properties or business; or (iii) has or
has had any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise necessary
for the CONSULTANT to own or lease and operate any of its
properties and to conduct its business or the ability of the
CONSULTANT to make use thereof.
8.7 NO REGULATORY PROBLEMS: The CLIENT warrants that there exists no
regulatory problems by any governmental agency, court or
jurisdiction, foreign or domestic and that the CONSULTANT is not
now, or threatened to be, under any investigation by any
governmental agency, court, or jurisdiction foreign or domestic.
8.10 NO VIOLATIONS: The CONSULTANT is not in violation of any material
franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any governmental agency or court, foreign or
domestic, having jurisdiction over the CONSULTANT or any of its
properties or business other than any violation which individually
or in the aggregate would not have a material adverse effect on
the CONSULTANT's business, properties or operations.
8.11 CONDUCT OF BUSINESS: The CONSULTANT has all necessary
authorizations, approvals, orders, licenses, certificates and
permits (collectively, the "Approvals") of and from all
governmental regulatory officials and bodies, to own or lease its
properties and conduct its business and the CONSULTANT has been
doing business in compliance with all such material Approvals, and
all Federal, state and local laws rules and regulations, other
than any such Approvals, laws, rules and regulations, the failure
to comply with which would not have material adverse effect on the
CONSULTANT, its business, properties or operations. All licenses
and findings of suitability required to be obtained by any
affiliate of the CONSULTANT have been obtained and are in full
force and effect.
8.l2 HOLD HARMLESS: The CONSULTANT agrees to indemnify and
otherwise hold CLIENT, its directors, employees, agents and
controlling persons harmless from and against any and all
6
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losses, claims, damages. liabilities and expenses joint and
several (including all reasonable fees of counsel, whether or not
resulting in liability), caused by or resulting out of CLIENT
acting for the CONSULTANT pursuant to this Agreement; providing
that said loss, claim, damage, liability or expense is found to
have not resulted primarily from CLIENT's gross negligence or bad
faith in performing the services described above.
8.l3 HOLD HARMLESS: The CONSULTANT agrees to indemnify and hold CLIENT,
its directors, employees, agents and controlling persons harmless
from and against any an all losses, claims, damages, liabilities
and expenses joint and several (including all reasonable fees of
counsel, whether or not resulting in liability), caused by any
material adverse changes in CONSULTANT not known to CLIENT at the
time of the execution of this Agreement.
9. If a transaction is completed pursuant to this Agreement, CONSULTANT,
at its own expense and with the CLIENT's approval (which approval shall
not be unreasonably withheld or delayed) is entitled to place an
announcement in such newspapers and periodicals as it may choose
stating that CONSULTANT has acted as the consultant / public relations
agent for the CLIENT in such transaction.
10. CONSULTANT understands and the CLIENT agrees that no individuals have acted
as finders.
11. CLIENT AND CONSULTANT agree that no other privileges or benefits shall
inure to the benefit of CONSULTANT other than the remuneration provided
for under Section 5 above.
12. In the event a transaction occurs during the pendency of this Agreement
and the CLIENT is not the surviving entity in such a transaction as a
merger or acquisition or otherwise, or in the event that all or
substantially all of the CLIENT's assets has been sold during such
period, the CLIENT agrees to cause the acquirer or acquirers to assume
and honor the obligations and liabilities of the CLIENT hereunder.
13. This Agreement shall be construed in accordance with the laws of the State
of California.
14. This Agreement represents the entire understanding between the parties,
and shall supersede all prior discussions. All and negotiations are
deemed merged into the Agreement and no parole evidence shall be
allowed to contradict it.
15. All Notices to either party shall be in writing and delivered via US Mail
to the following persons and addresses:
CLIENT CONSULTANT
------ ----------
GO CALL, INC. JAKE CANELI AND/OR
MICHAEL RUGE, CEO HIS NOMINEE
15 QUEEN STREET EAST 37 SEABIRD COURT
CAMBRIDGE, ONTARIO, CANADA NEWPORT BEACH, CALIF
90068 92663
16. This Agreement can be executed in counterparts which separately and/or
collectively result in a validly executed agreement.
7
<PAGE>
CONSULTANT AGREEMENT SIGNATURE PAGE
THIS CONSULTANT SERVICE AGREEMENT HAS BEEN EXECUTED THIS FIRST DAY OF
SEPTEMBER, 1999.
CLIENT: CONSULTANT
/s/ Michael Ruge /s/ Jake Canceli
--------------------------- ---------------------------
GO CALL, INC. JAKE CANCELI AND/OR HIS NOMINEE
BY: Michael Ruge, CEO
8
CONSULTANT AGREEMENT
This Consultant Agreement (herein the "Agreement") is entered into by and Go
Call, Inc., a Delaware corporation (herein "CLIENT"); on the one part and
Michael Ruge, (herein "CONSULTANT"); on the other part.
CLIENT is a publicly traded company and is seeking the services of CONSULTANT to
obtain new business to generate growth in CLIENT's stock price.
The parties hereto, by executing this Agreement, do hereby agree to be bound to
the terms and conditions hereunder.
TERMS AND CONDITIONS:
---------------------
1. SERVICE TO BE TENDERED: CLIENT hereby engages CONSULTANT as the CLIENT's
consultant for the purposes regarding corporate posturing, current
shareholders and debt/equity financing. The consultant's services would
include, but not be limited to: (i) a review of the CLIENT's operations and
capital structure, valuation of the CLIENT's business units, pending and
executory contracts and recommendation of the actions to be taken to
maximize shareholder value and earnings, (ii) the rendering of advice and
assistance, where possible, for the private placement of additional
financing and (iii) assistance (where possible) to the CLIENT in the
exercise of any of the CLIENT's warrants to purchase shares of the CLIENT.
CONSULTANT'S role as consultant shall continue until the termination of
this Agreement pursuant to Paragraph 4 below.
1.1 Further, CONSULTANT agrees to keep and maintain all material
non-public information, which CONSULTANT received or developed
concerning the CLIENT, confidential, and to disclose that
information only as contemplated by this Agreement or as required
by law. Notwithstanding the foregoing, CONSULTANT is free to
utilize independent agents to provide services contemplated herein
provided such agents, employees, CONSULTANT, investors and lenders
agree to be bound by the confidentiality provisions of this
Agreement.
1.2 Review the CLIENT's operations specifically for cash flow purposes
and advise the CLIENT regarding the CLIENT's capital structure and
valuation of its business units and contracts.
1.3 Advise the CLIENT in negotiations to obtain price and terms of
financing short term or otherwise.
1.4 Advise the CLIENT in negotiations for the purpose of completing
mergers or acquisitions and the effect or effects of such on the
CLIENT, its cash flow and profitability.
1.5 CONSULTANT shall obtain written approval prior to disclosing any
material non-public information and utilizing any printed or
reprinted material of CLIENT.
2. Except as required by law, any advice rendered by CONSULTANT pursuant to
this Agreement shall be treated as confidential by the CLIENT and by any
party to whom the CLIENT discloses such advice and shall not be disclosed
publicly in any manner without the prior written consent of CONSULTANT.
Without prior consultation with CONSULTANT, the CLIENT shall not make any
legally required disclosure of such advice nor make any public
announcements or filings in which CONSULTANT's name appears.
3. The CLIENT agrees to make available all information concerning the
business, assets, operations and financial condition of the CLIENT which
CONSULTANT reasonably requests in connection with the performance of its
obligations hereunder. CONSULTANT is entitled to rely upon the accuracy and
completeness of such information without independent verification.
1
<PAGE>
4. This Agreement shall naturally terminate upon the fifth anniversary from
the date of execution hereof.
a. Either party may terminate this Agreement for any reason prior to its
natural termination providing 30 day written notice be given to the
non-terminating party.
5. For the services provided herein, The CLIENT shall tender to CONSULTANT:
a. Upon execution hereof, CLIENT shall tender to CONSULTANT 500,000 shares
of restricted stock of Go Call, Inc. (the "Shares") and 500,000 options
of Go Call, Inc. stock at $0.50 per share.
1. The 500,000 shares of restricted stock shall be free tading within
one year of issuance by one of the following manners.
a. The restriction shall expire on the year anniversary
date of the issuance of the 500,000 shares of stock to
CONSULTANT; or
b. Should the CLIENT become a fully compliant bulletin
board company during the Shares' one year
restriction, CLIENT shall register CONSULTANT'S
Shares no later than three months after becoming
compliant.
2. In addition, CONSULTANT shall also receive an additional
2,000,000 options (the "Options") of Go Call, Inc. at a price of
$0.50 per share which shall be deemed vested in CONSULTANT upon
execution hereof, however, CONSULTANT will allow CLIENT to make
the Options available in 500,000 share blocks on the each
anniversary date of the execution hereof for the remainder of
the natural life of this Agreement.
a. In the event of an early termination pursuant to
Section 4 above, the remaining Options under Section 5
(2) shall be made immediately available to CONSULTANT
at which time CONSULTANT shall have no less than thirty
(30) days and no more than ninety (90) days to tender
to CLIENT the Option price due and payable to the
CLIENT.
3. CLIENT agrees that CONSULTANT shall be entitled to ten (10%)
percent of all monies directly raised by CONSULTANT through
private placements, however, CLIENT and CONSULTANT shall be
entitled to re-negotiate this percentage on a case by case
basis without impacting the agreed to percentage enumerated
above.
6. Should CLIENT sell, merge or be acquired by any third party which is
publicly traded, CLIENT shall have the third party acquirer executed a
valid assignment of this Agreement to avoid any ambiguities as it relates
to CONSULTANT'S rights hereunder and to ensure remuneration.
REPRESENTATIONS AND WARRANTIES OF THE CLIENT
--------------------------------------------
7. The CLIENT represents and warrants to CONSULTANT as follows:
7.1 DUE INCORPORATION AND QUALIFICATION: The CLIENT has been duly
incorporated, is validly existing and is in good standing under
the laws of its state of incorporation and is duly qualified as a
foreign corporation (except where the failure to so qualify would
not have a material adverse effect on the business of the CLIENT)
for the transaction of business and is in good standing in each
jurisdiction in which the ownership or leasing of its properties
or the conduct of its business requires such qualification. The
CLIENT has all requisite corporate power and authority necessary
to own or hold its properties and conduct its business as put
forth to CONSULTANT by the CLIENT.
2
<PAGE>
7.2 AUTHORIZED CAPITAL: The CLIENT will have an authorized and
outstanding capitalization, and all of the then issued and
outstanding shares of Common Stock will have been duly and validly
authorized and issued and will be fully paid and nonassessable.
None of the holders of such outstanding shares of Common Stock is
subject to personal liability solely by reason of being such a
holder.
7.3 FINANCIAL STATEMENTS: The financial statements of the CLIENT
fairly present the financial position and results of operations of
the CLIENT at the dates thereof and for the periods in conformity
with generally accepted principles, consistently applied
throughout the periods involved.
7.4 NO MATERIAL ADVERSE CHANGES: (i) There has not been any changes in
the condition, financial or otherwise, of the CLIENT, as put forth
to CONSULTANT by the CLIENT, which would have materially adversely
affected its ability to conduct its operations; and (ii) the
CLIENT has not incurred any material liabilities or obligations,
direct or contingent, not in the ordinary course of business.
7.5 TAXES: The CLIENT has filed all Federal tax returns and all state
and municipal and local tax returns (whether relating to income,
sales, franchise, real or personal property or other types of
taxes) required to be filed under the laws of the United States
and other applicable countries and/or jurisdictions, and has paid
in full all taxes which have become due pursuant to such returns
or claimed to be due by any taxing authority or otherwise due and
owing, provided, the CLIENT has not paid any tax, assessment,
charge, levy or license fee that it contests in good faith and by
proper proceedings and adequate reserves for the accrual of same
are maintained if required by generally accepted accounting
principles. Each of the tax returns heretofore filed by the CLIENT
correctly and accurately reflects the amount of its tax liability
thereunder. The CLIENT has withheld, collected and paid all other
levies, assessments, license fees and taxes to the extent required
and with respect to payments, to the extent that the same have
become due and payable.
7.6 NO PENDING ACTIONS: There are no actions, suits, proceedings,
claims or hearings of any kind or nature or, to the best of the
knowledge of the CLIENT, any investigations or inquiries, before
or by any court, governmental authority, tribunal or
instrumentality, pending or threatened against the CLIENT, or
involving the properties of the CLIENT which could have resulted
in any material adverse change in the business, properties,
financial position or results of operations of the CLIENT, or
which could have materially adversely affected the transaction or
other acts then contemplated by this Agreement or the validity or
enforceability of this Agreement.
7.7 DUE AUTHORIZATION: The CLIENT has full right, power and authority
to enter into this Agreement and to perform all of its obligations
hereunder. This Agreement was duly authorized, executed and
delivered by the CLIENT. No issuance of shares of the CLIENT's
capital stock shall be required as a condition to this execution,
validity or enforceability hereof. This Agreement constitutes,
upon execution and delivery, a valid and binding obligation of the
CLIENT, enforceable in accordance with its respective terms
(except (i) as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization. moratorium or other
similar laws affecting creditor's rights generally or by general
principles of equity; and (ii) that the enforceability of the
indemnification and contribution provisions of this Agreement may
be limited by the Federal securities laws and public policy), and
no consent, approval, authorization, order of, or filing with, any
court or governmental authority or any other third party is
required to consummate the transactions contemplated by this
Agreement.
3
<PAGE>
7.8 NON-DEFAULT: NONCONTRAVENTION: During the operative period, the
CLIENT is not in violation of its articles or certificate of
incorporation or by-laws or, in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any material contract, lease or other
instrument to which it is a party, and the CLIENT's execution and
delivery of this Agreement, and the incurrence of the obligations
herein and therein set forth, and the consummation of the
transactions contemplated do not (i) conflict with, or constitute
breach of. or a default under the articles or certification of
incorporation or by-laws of the CLIENT, or any material contract,
lease or other material agreement or instrument to which the
CLIENT is a party or in which the CLIENT has a beneficial interest
or by which the CLIENT is bound; (ii) violates any existing
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the CLIENT or any of its properties or business;
or (iii) has or has had any material adverse effect on any permit,
certification, registration, approval, consent, license or
franchise necessary for the CLIENT to own or lease and operate any
of its properties and to conduct its business or the ability of
the CLIENT to make use thereof.
7.9 NO REGULATORY PROBLEMS: The CLIENT warrants that there exists
no regulatory problems by any governmental agency, court or
jurisdiction, foreign or domestic and that the CLIENT is not now,
or threatened to be. under any investigation by any governmental
agency, court, or jurisdiction foreign or domestic.
7.10 NO VIOLATIONS: The CLIENT is not in violation of any material
franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any governmental agency or court, foreign or
domestic, having jurisdiction over the CLIENT or any of its
properties or business other than any violation which individually
or in the aggregate would not have a material adverse effect on
the CLIENT's business, properties or operations.
7.11 CONDUCT OF BUSINESS: The CLIENT has all necessary authorizations,
approvals, orders, licenses, certificates and permits
(collectively, the "Approvals") of and from all governmental
regulatory officials and bodies, to own or lease its properties
and conduct its business and the CLIENT has been doing business in
compliance with all such material Approvals, and all Federal,
state and local laws rules and regulations, other than any such
Approvals, laws, rules and regulations, the failure to comply with
which would not have material adverse effect on the CLIENT, its
business, properties or operations. All licenses and findings of
suitability required to be obtained by any affiliate of the CLIENT
have been obtained and are in full force and effect.
7.12 TITLE TO PROPERTY, INSURANCE: The CLIENT has good title to, or
valid and enforceable leasehold estates in, all items of real
property owned or leased by it, and continues to have good title
to, or valid and enforceable leases or subleases with respect to,
all items of personal property (tangible and intangible), free and
clear of all liens, encumbrances, claims, security interests,
defects of title, and restrictions of any material nature
whatsoever, and liens for real estate taxes not yet due and
payable. No default or notice of default exists or has been
declared by the landlord or sublessor under any of such leases or
subleases. The CLIENT has adequately insured its tangible and/or
real properties against loss or damage by fire or other casualty
(other than earthquake and flood) and at all relevant times
maintained such insurance in adequate amounts, on terms generally
offered by reputable insurance carriers.
7.13 INTANGIBLES: The CLIENT owns or possesses the requisite licenses
or rights to use all trademarks, service marks, service names,
trade names and other rights (collectively, the "Intangibles")
described as owned or used by it. There are no proceeding or
action by any
4
<PAGE>
person pertaining to, or proceeding or claim pending or, to the
best knowledge of the CLIENT, threatened and the CLIENT has not
received any notice of conflict with the asserted rights of others
which challenge the exclusive right of the CLIENT with respect to
any Intangibles used in the conduct of the CLIENT's business. To
the best knowledge of the CLIENT, the Intangibles and the CLIENT's
operations do not infringe on any Intangibles held by any third
party.
7.14 HOLD HARMLESS: The CLIENT agrees to indemnify and otherwise hold
CONSULTANT, its directors, employees, agents and controlling
persons harmless from and against any and all losses, claims,
damages, liabilities and expenses joint and several (including all
reasonable fees of counsel, whether or not resulting in
liability), caused by or resulting out of CONSULTANT acting for
the CLIENT pursuant to this Agreement; providing that said loss,
claim, damage, liability or expense is found to have not resulted
primarily from CONSULTANT's gross negligence or bad faith in
performing the services described above.
7.15 HOLD HARMLESS: The CLIENT agrees to indemnify and hold CONSULTANT,
its directors, employees, agents and controlling persons harmless
from and against any an all losses, claims, damages, liabilities
and expenses joint and several (including all reasonable fees of
counsel, whether or not resulting in liability), caused by any
material adverse changes in CLIENT not known to CONSULTANT at the
time of the execution of this Agreement.
REPRESENTATIONS AND WARRANTIES OF CONSULTANT
--------------------------------------------
8. The CLIENT represents and warrants to CONSULTANT as follows:
8.1 DUE INCORPORATION AND QUALIFICATION: The CONSULTANT, if a
corporation, has been duly incorporated, is validly existing and
is in good standing under the laws of its state of incorporation
and is duly qualified as a foreign corporation (except where the
failure to so qualify would not have a material adverse effect on
the business of the CONSULTANT) for the transaction of business
and is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its
business requires such qualification. The CONSULTANT has all
requisite corporate power and authority necessary to own or hold
its properties and conduct its business as put forth to CLIENT by
the CONSULTANT.
8.2 AUTHORIZED CAPITAL: The CONSULTANT, if a corporation, will have an
authorized and outstanding capitalization, and all of the then
issued and outstanding shares of Common Stock will have been duly
and validly authorized and issued and will be fully paid and
nonassessable. None of the holders of such outstanding shares of
Common Stock is subject to personal liability solely by reason of
being such a holder.
8.3 NO MATERIAL ADVERSE CHANGES: (i) There has not been any changes in
the condition, financial or otherwise, of the CONSULTANT, as put
forth to CLIENT by the CONSULTANT, which would have materially
adversely affected its ability to conduct its operations; and (ii)
the CONSULTANT has not incurred any material liabilities or
obligations, direct or contingent, not in the ordinary course of
business.
8.4 NO PENDING ACTIONS: There are no actions, suits, proceedings,
claims or hearings of any kind or nature or, to the best of the
knowledge of the CONSULTANT, any investigations or inquiries,
before or by any court, governmental authority, tribunal or
instrumentality, pending or threatened against the CONSULTANT, or
involving the properties of the CONSULTANT which could have
resulted in any material adverse change in the business,
properties, financial position or results of operations of the
CONSULTANT, or which could have materially adversely affected the
transaction or other acts then contemplated by this Agreement or
the validity or enforceability of this Agreement.
5
<PAGE>
8.5 DUE AUTHORIZATION: The CLIENT, whether an individual or a
corporation, has full right, power and authority to enter into
this Agreement and to perform all of its obligations hereunder.
This Agreement was duly authorized, executed and delivered by the
CONSULTANT. No issuance of shares of the CONSULTANT's capital
stock shall be required as a condition to this execution, validity
or enforceability hereof. This Agreement constitutes, upon
execution and delivery, a valid and binding obligation of the
CONSULTANT, enforceable in accordance with its respective terms
(except (i) as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditor's rights generally or by general
principles of equity; and (ii) that the enforceability of the
indemnification and contribution provisions of this Agreement may
be limited by the Federal securities laws and public policy), and
no consent, approval, authorization, order of, or filing with, any
court or governmental authority or any other third party is
required to consummate the transactions contemplated by this
Agreement.
8.6 NON-DEFAULT: NONCONTRAVENTION: During the operative period, the
CONSULTANT is not in violation of its articles or certificate of
incorporation or by-laws or, in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any material contract, lease or other
instrument to which it is a party, and the CONSULTANT's execution
and delivery of this Agreement, and the incurrence of the
obligations herein and therein set forth, and the consummation of
the transactions contemplated do not (i) conflict with, or
constitute breach of, or a default under the articles or
certification of incorporation or by-laws of the CONSULTANT, or
any material contract, lease or other material agreement or
instrument to which the CONSULTANT is a party or in which the
CONSULTANT has a beneficial interest or by which the CONSULTANT is
bound: (ii) violates any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency
or court, domestic or foreign, having jurisdiction over the
CONSULTANT or any of its properties or business; or (iii) has or
has had any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise necessary
for the CONSULTANT to own or lease and operate any of its
properties and to conduct its business or the ability of the
CONSULTANT to make use thereof.
8.7 NO REGULATORY PROBLEMS: The CLIENT warrants that there exists no
regulatory problems by any governmental agency, court or
jurisdiction, foreign or domestic and that the CONSULTANT is not
now, or threatened to be, under any investigation by any
governmental agency, court, or jurisdiction foreign or domestic.
8.10 NO VIOLATIONS: The CONSULTANT is not in violation of any material
franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any governmental agency or court, foreign or
domestic, having jurisdiction over the CONSULTANT or any of its
properties or business other than any violation which individually
or in the aggregate would not have a material adverse effect on
the CONSULTANT's business, properties or operations.
8.11 CONDUCT OF BUSINESS: The CONSULTANT has all necessary
authorizations, approvals, orders, licenses, certificates and
permits (collectively, the "Approvals") of and from all
governmental regulatory officials and bodies, to own or lease its
properties and conduct its business and the CONSULTANT has been
doing business in compliance with all such material Approvals, and
all Federal, state and local laws rules and regulations, other
than any such Approvals, laws, rules and regulations, the failure
to comply with which would not have material adverse effect on the
CONSULTANT, its business, properties or operations. All licenses
and findings of suitability required to be obtained by any
affiliate of the CONSULTANT have been obtained and are in full
force and effect.
8.l2 HOLD HARMLESS: The CONSULTANT agrees to indemnify and
otherwise hold CLIENT, its directors, employees, agents and
controlling persons harmless from and against any and all
6
<PAGE>
losses, claims, damages. liabilities and expenses joint and
several (including all reasonable fees of counsel, whether or not
resulting in liability), caused by or resulting out of CLIENT
acting for the CONSULTANT pursuant to this Agreement; providing
that said loss, claim, damage, liability or expense is found to
have not resulted primarily from CLIENT's gross negligence or bad
faith in performing the services described above.
8.l3 HOLD HARMLESS: The CONSULTANT agrees to indemnify and hold CLIENT,
its directors, employees, agents and controlling persons harmless
from and against any an all losses, claims, damages, liabilities
and expenses joint and several (including all reasonable fees of
counsel, whether or not resulting in liability), caused by any
material adverse changes in CONSULTANT not known to CLIENT at the
time of the execution of this Agreement.
9. If a transaction is completed pursuant to this Agreement, CONSULTANT,
at its own expense and with the CLIENT's approval (which approval shall
not be unreasonably withheld or delayed) is entitled to place an
announcement in such newspapers and periodicals as it may choose
stating that CONSULTANT has acted as the consultant / public relations
agent for the CLIENT in such transaction.
10. CONSULTANT understands and the CLIENT agrees that no individuals have acted
as finders.
11. CLIENT AND CONSULTANT agree that no other privileges or benefits shall
inure to the benefit of CONSULTANT other than the remuneration provided
for under Section 5 above.
12. In the event a transaction occurs during the pendency of this Agreement
and the CLIENT is not the surviving entity in such a transaction as a
merger or acquisition or otherwise, or in the event that all or
substantially all of the CLIENT's assets has been sold during such
period, the CLIENT agrees to cause the acquirer or acquirers to assume
and honor the obligations and liabilities of the CLIENT hereunder.
13. This Agreement shall be construed in accordance with the laws of the State
of California.
14. This Agreement represents the entire understanding between the parties,
and shall supersede all prior discussions. All and negotiations are
deemed merged into the Agreement and no parole evidence shall be
allowed to contradict it.
15. All Notices to either party shall be in writing and delivered via US Mail
to the following persons and addresses:
CLIENT CONSULTANT
------ ----------
GO CALL, INC. MICHAEL RUGE
MICHAEL RUGE, CEO 46 ALBERT STREET
15 QUEEN STREET EAST WATERLOO
CAMBRIDGE, ONTARIO, CANADA ONTARIO, CANADA
90068 N2L3T6
16. This Agreement can be executed in counterparts which separately and/or
collectively result in a validly executed agreement.
7
<PAGE>
CONSULTANT AGREEMENT SIGNATURE PAGE
THIS CONSULTANT SERVICE AGREEMENT HAS BEEN EXECUTED THIS FIRST DAY OF
SEPTEMBER, 1999.
CLIENT: CONSULTANT
/s/ Michael Ruge /s/ Michael Ruge
--------------------------- ---------------------------
GO CALL, INC. MICHAEL RUGE
BY: Michael Ruge, CEO
8
CONSULTANT AGREEMENT
This Consultant Agreement (herein the "Agreement") is entered into by and Go
Call, Inc., a Delaware corporation (herein "CLIENT"); on the one part and
Michael Avatar and/or his nominee, (herein "CONSULTANT"); on the other part.
CLIENT is a publicly traded company and is seeking the services of CONSULTANT to
obtain new business to generate growth in CLIENT's stock price.
The parties hereto, by executing this Agreement, do hereby agree to be bound to
the terms and conditions hereunder.
TERMS AND CONDITIONS:
---------------------
1. SERVICE TO BE TENDERED: CLIENT hereby engages CONSULTANT as the CLIENT's
consultant for the purposes regarding corporate posturing, current
shareholders and debt/equity financing. The consultant's services would
include, but not be limited to: (i) a review of the CLIENT's operations and
capital structure, valuation of the CLIENT's business units, pending and
executory contracts and recommendation of the actions to be taken to
maximize shareholder value and earnings, (ii) the rendering of advice and
assistance, where possible, for the private placement of additional
financing and (iii) assistance (where possible) to the CLIENT in the
exercise of any of the CLIENT's warrants to purchase shares of the CLIENT.
CONSULTANT'S role as consultant shall continue until the termination of
this Agreement pursuant to Paragraph 4 below.
1.1 Further, CONSULTANT agrees to keep and maintain all material
non-public information, which CONSULTANT received or developed
concerning the CLIENT, confidential, and to disclose that
information only as contemplated by this Agreement or as required
by law. Notwithstanding the foregoing, CONSULTANT is free to
utilize independent agents to provide services contemplated herein
provided such agents, employees, CONSULTANT, investors and lenders
agree to be bound by the confidentiality provisions of this
Agreement.
1.2 Review the CLIENT's operations specifically for cash flow purposes
and advise the CLIENT regarding the CLIENT's capital structure and
valuation of its business units and contracts.
1.3 Advise the CLIENT in negotiations to obtain price and terms of
financing short term or otherwise.
1.4 Advise the CLIENT in negotiations for the purpose of completing
mergers or acquisitions and the effect or effects of such on the
CLIENT, its cash flow and profitability.
1.5 CONSULTANT shall obtain written approval prior to disclosing any
material non-public information and utilizing any printed or
reprinted material of CLIENT.
2. Except as required by law, any advice rendered by CONSULTANT pursuant to
this Agreement shall be treated as confidential by the CLIENT and by any
party to whom the CLIENT discloses such advice and shall not be disclosed
publicly in any manner without the prior written consent of CONSULTANT.
Without prior consultation with CONSULTANT, the CLIENT shall not make any
legally required disclosure of such advice nor make any public
announcements or filings in which CONSULTANT's name appears.
3. The CLIENT agrees to make available all information concerning the
business, assets, operations and financial condition of the CLIENT which
CONSULTANT reasonably requests in connection with the performance of its
obligations hereunder. CONSULTANT is entitled to rely upon the accuracy and
completeness of such information without independent verification.
1
<PAGE>
4. This Agreement shall naturally terminate upon the fifth anniversary from
the date of execution hereof.
a. Either party may terminate this Agreement for any reason prior to its
natural termination providing 30 day written notice be given to the
non-terminating party.
5. For the services provided herein, The CLIENT shall tender to CONSULTANT:
a. Upon execution hereof, CLIENT shall tender to CONSULTANT 500,000 shares
of restricted stock of Go Call, Inc. (the "Shares") and 500,000 options
of Go Call, Inc. stock at $0.50 per share.
1. The 500,000 shares of restricted stock shall be free tading within
one year of issuance by one of the following manners.
a. The restriction shall expire on the year anniversary
date of the issuance of the 500,000 shares of stock to
CONSULTANT; or
b. Should the CLIENT become a fully compliant bulletin
board company during the Shares' one year
restriction, CLIENT shall register CONSULTANT'S
Shares no later than three months after becoming
compliant.
2. In addition, CONSULTANT shall also receive an additional
2,000,000 options (the "Options") of Go Call, Inc. at a price of
$0.50 per share which shall be deemed vested in CONSULTANT upon
execution hereof, however, CONSULTANT will allow CLIENT to make
the Options available in 500,000 share blocks on the each
anniversary date of the execution hereof for the remainder of
the natural life of this Agreement.
a. In the event of an early termination pursuant to
Section 4 above, the remaining Options under Section 5
(2) shall be made immediately available to CONSULTANT
at which time CONSULTANT shall have no less than thirty
(30) days and no more than ninety (90) days to tender
to CLIENT the Option price due and payable to the
CLIENT.
3. CLIENT agrees that CONSULTANT shall be entitled to ten (10%)
percent of all monies directly raised by CONSULTANT through
private placements, however, CLIENT and CONSULTANT shall be
entitled to re-negotiate this percentage on a case by case
basis without impacting the agreed to percentage enumerated
above.
6. Should CLIENT sell, merge or be acquired by any third party which is
publicly traded, CLIENT shall have the third party acquirer executed a
valid assignment of this Agreement to avoid any ambiguities as it relates
to CONSULTANT'S rights hereunder and to ensure remuneration.
REPRESENTATIONS AND WARRANTIES OF THE CLIENT
--------------------------------------------
7. The CLIENT represents and warrants to CONSULTANT as follows:
7.1 DUE INCORPORATION AND QUALIFICATION: The CLIENT has been duly
incorporated, is validly existing and is in good standing under
the laws of its state of incorporation and is duly qualified as a
foreign corporation (except where the failure to so qualify would
not have a material adverse effect on the business of the CLIENT)
for the transaction of business and is in good standing in each
jurisdiction in which the ownership or leasing of its properties
or the conduct of its business requires such qualification. The
CLIENT has all requisite corporate power and authority necessary
to own or hold its properties and conduct its business as put
forth to CONSULTANT by the CLIENT.
2
<PAGE>
7.2 AUTHORIZED CAPITAL: The CLIENT will have an authorized and
outstanding capitalization, and all of the then issued and
outstanding shares of Common Stock will have been duly and validly
authorized and issued and will be fully paid and nonassessable.
None of the holders of such outstanding shares of Common Stock is
subject to personal liability solely by reason of being such a
holder.
7.3 FINANCIAL STATEMENTS: The financial statements of the CLIENT
fairly present the financial position and results of operations of
the CLIENT at the dates thereof and for the periods in conformity
with generally accepted principles, consistently applied
throughout the periods involved.
7.4 NO MATERIAL ADVERSE CHANGES: (i) There has not been any changes in
the condition, financial or otherwise, of the CLIENT, as put forth
to CONSULTANT by the CLIENT, which would have materially adversely
affected its ability to conduct its operations; and (ii) the
CLIENT has not incurred any material liabilities or obligations,
direct or contingent, not in the ordinary course of business.
7.5 TAXES: The CLIENT has filed all Federal tax returns and all state
and municipal and local tax returns (whether relating to income,
sales, franchise, real or personal property or other types of
taxes) required to be filed under the laws of the United States
and other applicable countries and/or jurisdictions, and has paid
in full all taxes which have become due pursuant to such returns
or claimed to be due by any taxing authority or otherwise due and
owing, provided, the CLIENT has not paid any tax, assessment,
charge, levy or license fee that it contests in good faith and by
proper proceedings and adequate reserves for the accrual of same
are maintained if required by generally accepted accounting
principles. Each of the tax returns heretofore filed by the CLIENT
correctly and accurately reflects the amount of its tax liability
thereunder. The CLIENT has withheld, collected and paid all other
levies, assessments, license fees and taxes to the extent required
and with respect to payments, to the extent that the same have
become due and payable.
7.6 NO PENDING ACTIONS: There are no actions, suits, proceedings,
claims or hearings of any kind or nature or, to the best of the
knowledge of the CLIENT, any investigations or inquiries, before
or by any court, governmental authority, tribunal or
instrumentality, pending or threatened against the CLIENT, or
involving the properties of the CLIENT which could have resulted
in any material adverse change in the business, properties,
financial position or results of operations of the CLIENT, or
which could have materially adversely affected the transaction or
other acts then contemplated by this Agreement or the validity or
enforceability of this Agreement.
7.7 DUE AUTHORIZATION: The CLIENT has full right, power and authority
to enter into this Agreement and to perform all of its obligations
hereunder. This Agreement was duly authorized, executed and
delivered by the CLIENT. No issuance of shares of the CLIENT's
capital stock shall be required as a condition to this execution,
validity or enforceability hereof. This Agreement constitutes,
upon execution and delivery, a valid and binding obligation of the
CLIENT, enforceable in accordance with its respective terms
(except (i) as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization. moratorium or other
similar laws affecting creditor's rights generally or by general
principles of equity; and (ii) that the enforceability of the
indemnification and contribution provisions of this Agreement may
be limited by the Federal securities laws and public policy), and
no consent, approval, authorization, order of, or filing with, any
court or governmental authority or any other third party is
required to consummate the transactions contemplated by this
Agreement.
3
<PAGE>
7.8 NON-DEFAULT: NONCONTRAVENTION: During the operative period, the
CLIENT is not in violation of its articles or certificate of
incorporation or by-laws or, in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any material contract, lease or other
instrument to which it is a party, and the CLIENT's execution and
delivery of this Agreement, and the incurrence of the obligations
herein and therein set forth, and the consummation of the
transactions contemplated do not (i) conflict with, or constitute
breach of. or a default under the articles or certification of
incorporation or by-laws of the CLIENT, or any material contract,
lease or other material agreement or instrument to which the
CLIENT is a party or in which the CLIENT has a beneficial interest
or by which the CLIENT is bound; (ii) violates any existing
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the CLIENT or any of its properties or business;
or (iii) has or has had any material adverse effect on any permit,
certification, registration, approval, consent, license or
franchise necessary for the CLIENT to own or lease and operate any
of its properties and to conduct its business or the ability of
the CLIENT to make use thereof.
7.9 NO REGULATORY PROBLEMS: The CLIENT warrants that there exists
no regulatory problems by any governmental agency, court or
jurisdiction, foreign or domestic and that the CLIENT is not now,
or threatened to be. under any investigation by any governmental
agency, court, or jurisdiction foreign or domestic.
7.10 NO VIOLATIONS: The CLIENT is not in violation of any material
franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any governmental agency or court, foreign or
domestic, having jurisdiction over the CLIENT or any of its
properties or business other than any violation which individually
or in the aggregate would not have a material adverse effect on
the CLIENT's business, properties or operations.
7.11 CONDUCT OF BUSINESS: The CLIENT has all necessary authorizations,
approvals, orders, licenses, certificates and permits
(collectively, the "Approvals") of and from all governmental
regulatory officials and bodies, to own or lease its properties
and conduct its business and the CLIENT has been doing business in
compliance with all such material Approvals, and all Federal,
state and local laws rules and regulations, other than any such
Approvals, laws, rules and regulations, the failure to comply with
which would not have material adverse effect on the CLIENT, its
business, properties or operations. All licenses and findings of
suitability required to be obtained by any affiliate of the CLIENT
have been obtained and are in full force and effect.
7.12 TITLE TO PROPERTY, INSURANCE: The CLIENT has good title to, or
valid and enforceable leasehold estates in, all items of real
property owned or leased by it, and continues to have good title
to, or valid and enforceable leases or subleases with respect to,
all items of personal property (tangible and intangible), free and
clear of all liens, encumbrances, claims, security interests,
defects of title, and restrictions of any material nature
whatsoever, and liens for real estate taxes not yet due and
payable. No default or notice of default exists or has been
declared by the landlord or sublessor under any of such leases or
subleases. The CLIENT has adequately insured its tangible and/or
real properties against loss or damage by fire or other casualty
(other than earthquake and flood) and at all relevant times
maintained such insurance in adequate amounts, on terms generally
offered by reputable insurance carriers.
7.13 INTANGIBLES: The CLIENT owns or possesses the requisite licenses
or rights to use all trademarks, service marks, service names,
trade names and other rights (collectively, the "Intangibles")
described as owned or used by it. There are no proceeding or
action by any
4
<PAGE>
person pertaining to, or proceeding or claim pending or, to the
best knowledge of the CLIENT, threatened and the CLIENT has not
received any notice of conflict with the asserted rights of others
which challenge the exclusive right of the CLIENT with respect to
any Intangibles used in the conduct of the CLIENT's business. To
the best knowledge of the CLIENT, the Intangibles and the CLIENT's
operations do not infringe on any Intangibles held by any third
party.
7.14 HOLD HARMLESS: The CLIENT agrees to indemnify and otherwise hold
CONSULTANT, its directors, employees, agents and controlling
persons harmless from and against any and all losses, claims,
damages, liabilities and expenses joint and several (including all
reasonable fees of counsel, whether or not resulting in
liability), caused by or resulting out of CONSULTANT acting for
the CLIENT pursuant to this Agreement; providing that said loss,
claim, damage, liability or expense is found to have not resulted
primarily from CONSULTANT's gross negligence or bad faith in
performing the services described above.
7.15 HOLD HARMLESS: The CLIENT agrees to indemnify and hold CONSULTANT,
its directors, employees, agents and controlling persons harmless
from and against any an all losses, claims, damages, liabilities
and expenses joint and several (including all reasonable fees of
counsel, whether or not resulting in liability), caused by any
material adverse changes in CLIENT not known to CONSULTANT at the
time of the execution of this Agreement.
REPRESENTATIONS AND WARRANTIES OF CONSULTANT
--------------------------------------------
8. The CLIENT represents and warrants to CONSULTANT as follows:
8.1 DUE INCORPORATION AND QUALIFICATION: The CONSULTANT, if a
corporation, has been duly incorporated, is validly existing and
is in good standing under the laws of its state of incorporation
and is duly qualified as a foreign corporation (except where the
failure to so qualify would not have a material adverse effect on
the business of the CONSULTANT) for the transaction of business
and is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its
business requires such qualification. The CONSULTANT has all
requisite corporate power and authority necessary to own or hold
its properties and conduct its business as put forth to CLIENT by
the CONSULTANT.
8.2 AUTHORIZED CAPITAL: The CONSULTANT, if a corporation, will have an
authorized and outstanding capitalization, and all of the then
issued and outstanding shares of Common Stock will have been duly
and validly authorized and issued and will be fully paid and
nonassessable. None of the holders of such outstanding shares of
Common Stock is subject to personal liability solely by reason of
being such a holder.
8.3 NO MATERIAL ADVERSE CHANGES: (i) There has not been any changes in
the condition, financial or otherwise, of the CONSULTANT, as put
forth to CLIENT by the CONSULTANT, which would have materially
adversely affected its ability to conduct its operations; and (ii)
the CONSULTANT has not incurred any material liabilities or
obligations, direct or contingent, not in the ordinary course of
business.
8.4 NO PENDING ACTIONS: There are no actions, suits, proceedings,
claims or hearings of any kind or nature or, to the best of the
knowledge of the CONSULTANT, any investigations or inquiries,
before or by any court, governmental authority, tribunal or
instrumentality, pending or threatened against the CONSULTANT, or
involving the properties of the CONSULTANT which could have
resulted in any material adverse change in the business,
properties, financial position or results of operations of the
CONSULTANT, or which could have materially adversely affected the
transaction or other acts then contemplated by this Agreement or
the validity or enforceability of this Agreement.
5
<PAGE>
8.5 DUE AUTHORIZATION: The CLIENT, whether an individual or a
corporation, has full right, power and authority to enter into
this Agreement and to perform all of its obligations hereunder.
This Agreement was duly authorized, executed and delivered by the
CONSULTANT. No issuance of shares of the CONSULTANT's capital
stock shall be required as a condition to this execution, validity
or enforceability hereof. This Agreement constitutes, upon
execution and delivery, a valid and binding obligation of the
CONSULTANT, enforceable in accordance with its respective terms
(except (i) as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditor's rights generally or by general
principles of equity; and (ii) that the enforceability of the
indemnification and contribution provisions of this Agreement may
be limited by the Federal securities laws and public policy), and
no consent, approval, authorization, order of, or filing with, any
court or governmental authority or any other third party is
required to consummate the transactions contemplated by this
Agreement.
8.6 NON-DEFAULT: NONCONTRAVENTION: During the operative period, the
CONSULTANT is not in violation of its articles or certificate of
incorporation or by-laws or, in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any material contract, lease or other
instrument to which it is a party, and the CONSULTANT's execution
and delivery of this Agreement, and the incurrence of the
obligations herein and therein set forth, and the consummation of
the transactions contemplated do not (i) conflict with, or
constitute breach of, or a default under the articles or
certification of incorporation or by-laws of the CONSULTANT, or
any material contract, lease or other material agreement or
instrument to which the CONSULTANT is a party or in which the
CONSULTANT has a beneficial interest or by which the CONSULTANT is
bound: (ii) violates any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency
or court, domestic or foreign, having jurisdiction over the
CONSULTANT or any of its properties or business; or (iii) has or
has had any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise necessary
for the CONSULTANT to own or lease and operate any of its
properties and to conduct its business or the ability of the
CONSULTANT to make use thereof.
8.7 NO REGULATORY PROBLEMS: The CLIENT warrants that there exists no
regulatory problems by any governmental agency, court or
jurisdiction, foreign or domestic and that the CONSULTANT is not
now, or threatened to be, under any investigation by any
governmental agency, court, or jurisdiction foreign or domestic.
8.10 NO VIOLATIONS: The CONSULTANT is not in violation of any material
franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any governmental agency or court, foreign or
domestic, having jurisdiction over the CONSULTANT or any of its
properties or business other than any violation which individually
or in the aggregate would not have a material adverse effect on
the CONSULTANT's business, properties or operations.
8.11 CONDUCT OF BUSINESS: The CONSULTANT has all necessary
authorizations, approvals, orders, licenses, certificates and
permits (collectively, the "Approvals") of and from all
governmental regulatory officials and bodies, to own or lease its
properties and conduct its business and the CONSULTANT has been
doing business in compliance with all such material Approvals, and
all Federal, state and local laws rules and regulations, other
than any such Approvals, laws, rules and regulations, the failure
to comply with which would not have material adverse effect on the
CONSULTANT, its business, properties or operations. All licenses
and findings of suitability required to be obtained by any
affiliate of the CONSULTANT have been obtained and are in full
force and effect.
8.l2 HOLD HARMLESS: The CONSULTANT agrees to indemnify and
otherwise hold CLIENT, its directors, employees, agents and
controlling persons harmless from and against any and all
6
<PAGE>
losses, claims, damages. liabilities and expenses joint and
several (including all reasonable fees of counsel, whether or not
resulting in liability), caused by or resulting out of CLIENT
acting for the CONSULTANT pursuant to this Agreement; providing
that said loss, claim, damage, liability or expense is found to
have not resulted primarily from CLIENT's gross negligence or bad
faith in performing the services described above.
8.l3 HOLD HARMLESS: The CONSULTANT agrees to indemnify and hold CLIENT,
its directors, employees, agents and controlling persons harmless
from and against any an all losses, claims, damages, liabilities
and expenses joint and several (including all reasonable fees of
counsel, whether or not resulting in liability), caused by any
material adverse changes in CONSULTANT not known to CLIENT at the
time of the execution of this Agreement.
9. If a transaction is completed pursuant to this Agreement, CONSULTANT,
at its own expense and with the CLIENT's approval (which approval shall
not be unreasonably withheld or delayed) is entitled to place an
announcement in such newspapers and periodicals as it may choose
stating that CONSULTANT has acted as the consultant / public relations
agent for the CLIENT in such transaction.
10. CONSULTANT understands and the CLIENT agrees that no individuals have acted
as finders.
11. CLIENT AND CONSULTANT agree that no other privileges or benefits shall
inure to the benefit of CONSULTANT other than the remuneration provided
for under Section 5 above.
12. In the event a transaction occurs during the pendency of this Agreement
and the CLIENT is not the surviving entity in such a transaction as a
merger or acquisition or otherwise, or in the event that all or
substantially all of the CLIENT's assets has been sold during such
period, the CLIENT agrees to cause the acquirer or acquirers to assume
and honor the obligations and liabilities of the CLIENT hereunder.
13. This Agreement shall be construed in accordance with the laws of the State
of California.
14. This Agreement represents the entire understanding between the parties,
and shall supersede all prior discussions. All and negotiations are
deemed merged into the Agreement and no parole evidence shall be
allowed to contradict it.
15. All Notices to either party shall be in writing and delivered via US Mail
to the following persons and addresses:
CLIENT CONSULTANT
------ ----------
GO CALL, INC. MICHAEL AVATAR
MICHAEL RUGE, CEO AND/OR HIS NOMINEE
15 QUEEN STREET EAST 29500 HEATHERCLIFF RD #189
CAMBRIDGE, ONTARIO, CANADA MALIBU CA
90068 90265
16. This Agreement can be executed in counterparts which separately and/or
collectively result in a validly executed agreement.
7
<PAGE>
CONSULTANT AGREEMENT SIGNATURE PAGE
THIS CONSULTANT SERVICE AGREEMENT HAS BEEN EXECUTED THIS FIRST DAY OF
SEPTEMBER, 1999.
CLIENT: CONSULTANT
/s/ Michael Ruge /s/ Michael Avatar
--------------------------- ---------------------------
GO CALL, INC. MICHAEL AVATAR AND/OR HIS NOMINEE
BY: Michael Ruge, CEO
8
INTERNET ACCOUNTS FOR SALE
ASSET PURCHASE CONTRACT AND RECEIPT
-----------------------------------
PATHFINDER PROPERTY CORPORATION and it's registered operating division
"SMOKESIGNAL", a duly incorporated and registered Ontario, Canada corporation
(herein referred to as "Buyer"), hereby offers and agrees to purchase upon the
terms and conditions hereinafter set forth from the "Seller", GO CALL CANADA
INC., a duly incorporated and registered Ontario, Canada corporation (herein
referred together as the "Seller");
- - All the Business Internet Accounts as identified and set-out on Schedule "A",
attached hereto, together with all accounts receivable funds generated from said
Accounts as of November 1, 1999;
AND
- - All goodwill, general intangibles, rights, all benefits and gross income
amount associated to those Accounts for the timely transfer to the Buyer from
the Seller.
NOW THEREFORE, for the consideration of the initial purchase sum of $7,000.00,
heretofore received and paid upon closing, and for the receipt of a Demand
Secured Promissory Note, as described, in the amount of $3,000.00, and attached
hereto as Schedule "B", it is mutually agreed that the purchase price shall be
for the total sum of $10,000.00 and payable as follows:
$ 7,000.00 by earnest money deposit received herewith in the form of a
cheque payable from the corporate account of the Buyer and tendered herewith;
$ 3,000.00 as an additional deposit, upon acceptance of the offer by
Seller, to be received in the form of an executed Demand Secured Promissory Note
upon the signing of this agreement.
$ 10,000.00 TOTAL PURCHASE PRICE
IT IS HEREBY AGREED THAT:
1. ACCEPTANCE: Buyer offers and Seller accepts this agreement.
2. CLOSING DATE: The undersigned hereby agree to execute any and all
documents necessary to close this transaction. The Closing Date for this sale
shall be on October 29, 1999.
3. TIME: Time is of the essence.
<PAGE>
2
4. AUTHORITY: The undersigned have the full authority to enter into
this Contract and to conclude the transaction described herein. No agreement to
which either Buyer or Seller is a party prevents either party from concluding
this transaction, nor is the consent of any third party required. Each party is
authorized to bind their respective corporations.
5. WARRANTY: Seller warrants that all Business Internet Accounts, as
set-out in Schedule "A", are true accounts and generate gross income as
described, and that Buyer shall receive possession of the Business Internet
Accounts free and clear of any encumbrances. The Seller will transfer all.
6. INDEMNIFICATION AND RIGHT OF SET-OFF: Seller indemnifies Buyer and
shall hold Buyer harmless from all debts, claims, actions, losses, damages and
attorney's fees, existing or that may arise from or be related to Seller's past
operation and ownership of the Business Internet Accounts.
7. SECURITY AGREEMENT: At the time of Closing, Buyer shall execute, in
favor of the Seller, a Promissory Note secured by the buyer setting up a trust
Bank account with dual signing authority for the parties of this agreement. Said
Bank account shall hold a deposit amount of $3,000.00 paid into it by the Buyer.
No amounts within the account can be withdrawn without the dual signatures on
the cheque. Upon a transfer of all purchased accounts from the Seller to the
Buyer's system, the $3000.00 will be payable to the Seller and the Promissory
Note shall be satisfied in full. The Note shall bear no interest. The Seller
agrees to offset any amount against the $3,000.00 payable under the Promissory
Note if the account is deemed by the Buyer to be un-collectable or the account
is not transferred to the Buyer. The amount to be offset shall equal no more
than 2 months of gross income per account and as described on Schedule "A". The
Buyer will undertake to complete the transfer of the accounts to it's Internet
system by December 1, 1999. Any extension of this deadline shall be mutually
agreed upon. The objective, however, is to complete a successful transfer with
the full co-operation of each party. Upon the successful transfer of the
accounts and payment of the Promissory Note, the Seller shall be removed as a
signing authority on the trust Bank account.
8. BILL OF SALE: This agreement shall represent an Absolute Bill of
Sale as per the Account List attached hereto as per SCHEDULE "A" and by
reference incorporated herein, for which Seller warrants that it has good and
marketable title, free and clear of all liens and encumbrances, except any liens
or encumbrances disclosed herein.
9. BUSINESS RECORDS: At the Closing of this sale, Seller shall deliver
to Buyer copies of all customer accounts and complete records, and any other
documents pertinent to the operation of the Internet Business which Seller has
in it's possession. Such records shall include copies of those documents
necessary to conduct business and to collect account revenue from the
pre-authorized PAP system and the pre-authorized credit card system. The Seller
shall deliver to the Buyer a cheque in the amount of $901.80 which represents
the November 1/99 PAP amount collected by the Seller. The Seller shall
irrevocably direct it's PAP account Bank to re-direct all future customer
payments to the Buyer's PAP account.
<PAGE>
3
10. FINANCIAL INFORMATION: Seller warrants that the financial
information supplied to Buyer by Seller is true and correct and is a fair and
accurate presentation of the financial condition and results of operation of the
Business Internet Accounts.
11. BUSINESS TRADE NAME: Seller hereby agrees to let the Business
Internet Account customers use their e mail name presently assigned to them
during the month of November, 1999 and during any time prior to the completion
and transfer of the account to the Buyer's system.
12. GOVERNING LAW: This Contract shall be governed by the laws of the
Province of Ontario, Canada.
13. SURVIVABILITY OF CONTRACT: The parties hereto acknowledge that this
contract shall survive the Closing of this transaction as to the terms and
conditions herein.
14. BINDING EFFECT: This contract shall bind and inure to the
benefit of the successors, assigns, personal representatives, heirs and legatees
of the parties hereto. The parties hereto acknowledge that this contract,
including all covenants, representations, warranties and agreements, shall
survive the Closing of this transaction.
DATED and RECEIVED THIS 29th day of October, 1999.
Pathfinder Property Corporation and it's division SmokeSignal
Per: /s/ Ronald Mason
-------------------------
Ronald Mason, President
I have authority to bind the corporation and it's operating division.
SELLER'S ACCEPTANCE
I (or) we accept the foregoing offer and agree to sell the above-described
business Internet Account Assets on the terms and conditions of the foregoing
contract. Seller acknowledges receipt of a true copy of this document.
DATED and ACCEPTED on this 29th day of October, 1999.
Go Call Canada Inc.
Per: /s/ Susan Knight
-------------------------
Susan Knight
I have authority to bind the corporations
Attachments:
Schedule "A" List of Business Internet Accounts
Schedule "B" Promissory Note
AGREEMENT
AGREEMENT made as of the 21st day of November, 1999 by and between GO
CALL, INC., a Delaware corporation with offices at 15 Queen Street East,
Cambridge, ON N3C2A7 (GO) and Melissa Blake, residing at 741 North Vista Street,
Los Angeles, California ("Consultant")
In consideration of their mutual covenants and undertakings hereunder,
the parties agree as follows:
1. CONSULTING. GO hereby contracts with Consultant and Consultant hereby
contracts with GO, subject to the terms and conditions of this agreement.
2. TERM. This agreement shall be on a month to month basis.
3. DUTIES. Consultant shall perform the duties of the controller of GO, and
shall perform the typical duties of a controller during the term hereof.
Consultant shall devote substantially all of her business time and energy
to the affairs of the Employer and shall at all times use her best efforts
to further the interests of GO. Consultant shall perform her duties in Los
Angeles, California, except for a reasonable number of business trips in
connection with the performance of her duties.
4. STOCK. Consultant shall accrue 5,000 shares 144 restricted common stock of
GO per month. This stock will be accrued for each month that runs from the
22nd of a month through the 21st of the following month. How and when this
stock is issued will be addressed in an addendum to this agreement.
5. COMPENSATION. During the term of this agreement, Consultant shall receive
$5,000 per month, with each month running from the 22nd of a month through
the 21st of the following month. Her compensation shall be subject to
review at 90-day intervals over the term of this agreement.
6. TERMINATION PROVISIONS. In the event that Consultant or GO exercises its
right of termination, two weeks notice is required by either party. If
termination occurs mid month, the proportional amount of stock and earnings
are due.
7. HOLIDAYS. Holidays are paid. These holidays will include, but are not
limited to Thanksgiving weekend, Christmas, New Years, Memorial Day, Fourth
of July, Labor Day.
8. CONFIDENTIALITY. During the term of this contract, Consultant will be
exposed to information regarding GO's technology and business strategy
which is highly confidential, and the dissemination of such confidential
information would be extremely detrimental to the interests of GO.
Accordingly, Consultant covenants and agrees, that, except as required in
the performance of her duties, not to reveal to anyone outside of GO's
officers and directors any information regarding GO's financial condition,
its technology or its business strategy, either during the term of her
contract, or thereafter, for a period of five years following the term
hereof.
<PAGE>
9. ENTIRE AGREEMENT. This agreement of even date, represents the entire
agreement of the parties with respect to its subject matter. Neither party
has made any representations, warranties or agreements with the other,
except as set forth herein.
10. NOTICES. All notices hereunder shall be sent be facsimile or e-mail to the
parties at their addresses indicated below: To GO: facsimile: ###-##-####;
e-mail:[email protected]. To Melissa Blake: facsimile: 323-658-6112; e-mail:
pmichkin@ earthlink.net. Either party, by like notice similarly sent, may
specify a new notice address for such party.
11. MISCELLANEOUS. This agreement may not be modified except in a writing
signed by both parties. This agreement is binding upon the parties and
their heirs, successors and assigns; provided that the parties may not
assign this agreement without mutual written consent, except that
contractor may assign this agreement to her wholly-owned personal service
corporation, provided that such corporation furnishes the personal services
of contractor as contemplated hereby.
12. EXPENSES. Consultant shall be reimbursed for out-of-pocket expenses such as
long-distance telephone calls, overnight delivery services, duplicating
services, etc. incurred by her on behalf of GO, provided that she shall
obtain prior written approval for any item over $500.
IN WITNESS WHEREOF, the parties have executed this agreement as of the date
first above written.
Go Call, Inc.
/S/ Michael Ruge
------------------------
BY: Michael Ruge, CEO of Go Call, Inc.
/S/ Melissa Blake
-----------------------------
By: MELISSA BLAKE
Page 1 of 2
AGREEMENT OF PURCHASE AND SALE
Between
GoCall Inc., a delaware Corporation
(hereinafter referred to as "seller")
And
Ontario, Inc.
(hereinafter referred to as "purchaser")
Whereas seller has assets (see schedule "A") located at 1 Queen St. and 10 King
St. East Kitchener, Ontario, Canada, and part of an operation known as "Go
Internet Cafe".
Whereas the seller has agreed to sell all their assets, goodwill, and interest
in his leases of "Go Internet Cafe" to the purchaser for $40,000 Cdn. Funds.
Whereas the purchaser has agreed to purchase the assets from the seller for
$40,000 subject to certain terms and conditions.
Terms & Conditions;
1. All assets to be sold pursuant to the "Bulk Sales Act".
2. Purchase Price to be $40,000. Appropriation of costs to be
Goodwill $35,000
Inventory $5,000; equipment per attached.
3. Terms of Payment: $25,000 down
$15,000 payable by Dec 31/99
An additional bonus of $10,000 will be due the seller
in the event payment is not rec'd by Dec 3 1/99 with
interest accruing @ a rate of 2%/month on any unpaid
balance.
4. All chattels to be included are listed as per Schedule "A"
5. It is acknowledged by the purchaser that the water softener and the Coca
Cola cooler are leased and they will assume such leases.
6. Seller will assign all rights and outstanding legal claims for interest in
their lease at 1 Queen St./10 King St. Kitchener.
<PAGE>
Page 2 of 2
The parties hereby agree to the aforementioned terms and conditions this
27th day of November, 1999.
/s/ signature /s/ signature
- ------------------------- -------------------------
Purchaser Seller
SCHEDULE "A"
Tosiba 32" TV
Sony 20" TV
17 Computers
printer
cash register
telephone system
refridgerators
freezers
stereo system
satellite tv system
9 tables
40 chairs
3 couches
dishwasher
microwave
all kitchen supplies
expresso machine
washer/dryer
office supplies
Liquor/wine/beer inventory
Filing cabinet
desk
AGREEMENT FOR PURCHASE AND SALE OF
REAL PROPERTY AND ESCROW INSTRUCTIONS
This Agreement for Purchase and Sale of Real Property ("Agreement") is
entered into this 14th day of December 1999 by and between Go Call Inc., a
Delaware corporation ("Seller") and Sevada Holdings, Ltd. IV, a California
limited partnership ("Buyer") at Los Angeles, California.
RECITALS
A. Seller is the owner of the real property commonly know as Margarita
Villas and as more fully described in Exhibit "A" attached hereto and
incorporated herein by this reference. The Property is a 21 room hotel in Sosua,
Dominican Republic.
B. The legal descriptions of the real property described in Exhibit "A" is
set forth in Exhibit "B" attached hereto and incorporated herein by this
reference.
C. Buyer desires to purchase the property hereinabove described
("Property") from Seller and Seller desires to sell its Property described
hereinabove to Buyer pursuant to the terms and conditions set forth herein.
Now, therefore, in consideration of the mutual covenants and conditions as
set forth herein, the parties agree as follows:
1. PURCHASE PRICE. Seller agrees to sell and Buyer agrees to purchase all
of Seller's right, title and interest in and to the Property for an aggregate
purchase price of Two Million Dollars ($2,000,000.00). The purchase price is
payable in the form of an 80% limited partnership interest in Buyer as described
in Exhibit C hereto.
2. PROPERTY DEFINED. The term "Property" shall include all easements and
appurtenances thereto and improvements situated thereon; any and all fixtures,
furniture, equipment, appliances, tools, building materials, supplies, and other
tangible and intangible property and property rights owned by Seller and located
on the Property or relating to the operation of the improvements thereon; all of
the right, title and interest of Seller in and to any and all leases and other
agreements with respect to the occupancy of any of the Property together with
all rights, title and interest in and to any deposits, prepaid rentals, cleaning
deposits and other such deposits or prepaid amounts with respect thereto; all of
Seller's right, title and interest in and to any and all contracts and
agreements with respect to the management, leasing, service or maintenance of
the Property, in whole or in part. or the equipment located thereon; and all of
Seller's right, title and interest in and to any and all warranties, guarantees,
permits and licenses relating to the Property in whole or in part.
1
<PAGE>
3. PAYMENT OF CONSIDERATION. Buyer agrees to pay Seller the purchase price
in the form of an 80% interest in Buyer. Seller's said 80% ownership shall
entitle Seller to approve or disapprove the sale of the Property by the
partnership. Any expenditures in excess of $1,000 shall be approved in advance
by the limited partners.
4. TITLE. Seller and Buyer agree to close escrow without title insurance
policies. Seller hereby represents that Seller has good and marketable title to
the Property and the Property is totally without liens or encumbrances. Any
monetary liens or encumbrances shall be the obligation of Seller ("Seller's
Obligations"). All deeds and any other documents reflecting title to and
ownership of the property shall be held by Bruce Altschuld Esq. As Trustee for
both Buyer and Seller.
5. SELLER'S WARRANTIES AND REPRESENTATIONS. Seller hereby makes the
following warranties and representations upon which Buyer is relying upon
entering into this Agreement:
5.1 Seller is the owner of the Property.
5.2 To the best of Seller's knowledge, there is no litigation,
action, suit, proceeding, investigation, citation or violation
pending or threatened against Seller affecting the Property or
against the Property.
5.3 To the best of Seller's knowledge, there are no liens,
encumbrances or claims against the Property being purchased
hereunder or Seller's ownership thereof other than those liens,
encumbrances and/or claims of record set forth in the preliminary
title report or trustee's sale guarantees referred to above, or
as expressly disclosed herein, and, in the case of existing first
trust deeds, the notes secured thereby are current.
5.4 All personal property being transferred to Buyer hereunder shall
be transferred free and clear of any claims, liens and
encumbrances, and Seller has the full right to so convey all such
personal property.
5.5 To the best of Seller's knowledge, there are no pending or
contemplated condemnation actions or special assessments against
the Property or any part thereof
5.6 The service contracts to be delivered by Seller to Buyer
hereunder shall be full and complete evidence of all contracts in
existence which affect the Properties being purchased hereunder
and shall be set forth all terms and conditions of any
obligations of the landlord or owner of the Property to the
persons or entities who are parties to such contracts; and Seller
has the full right and title to assign each such service contract
and no defaults exist with respect hereto.
2
<PAGE>
5.7 The records to be made available by Seller to Buyer as provided
above shall be full and complete records and represent all
financial operations and records with respect to the Property and
operation thereof, and shall be full and complete as of the dates
thereof; and there does not exist any event or condition, whether
or not arising after the date of said records, which would make
any of the information contained in such books and records
misleading or inaccurate with respect to the operation of the
Property.
5.8 Seller shall maintain the Property being purchased hereunder in
good condition and state of repair through the date of the sale
of the Property by Buyer; and Seller shall further perform all of
its obligations under all leases, service contracts and any other
agreement affecting the Property being purchased hereunder
through the closing date hereof.
6. CLOSING
6.1 The parties hereby agree to retain Bruce Altschuld Esq. as
Trustee, at 16255 Ventura Blvd. Encino, Ca. 91436-2363.
6.2 The parties agree to execute any and all documents necessary to
effect the closing which documents shall be attached to and made
an exhibit this Agreement and the terms and conditions thereof
shall be incorporated herein by this reference. If there are any
inconsistencies between this Agreement and said documents the
terms and conditions of this Agreement shall prevail unless
otherwise agreed to by the parties in writing.
6.3 Time is expressly made the essence of this Agreement and each and
every provision hereof of which time of performance is a factor.
6.4 The transaction described hereinabove shall be closed on or
before December 30, 1999.
6.5 All real estate taxes and assessments, personal property taxes,
casualty and other insurance (which coverage will be retained and
maintained by Buyer) service contract payments, rents and other
periodic payments under any leases or with respect to leases
being transferred hereunder, utility charges and other periodic
income and charges attributable to the operation of the Property
shall not be prorated. Buyer and Seller agree that any and all
expenses incurred and accrued prior to the close of escrow shall
be Seller's responsibility and the parties will attempt to
ascertain the amount of those expenses as soon as practicable
after the close of escrow.
3
<PAGE>
6.6 Possession of the Property shall be delivered to Buyer at the
close of escrow but Seller will continue to fund any negative
cash flow until the Property is resold by the partnership, but no
longer than March 1, 2000 at which time Buyer shall become
responsible for the expenses of the Property not to exceed $5,000
in any month. All expenses accrued at and prior to March 1, 2000
shall to the sole responsibility of the Seller.
6.7 Trustee is hereby instructed not to transfer title outside of the
partnership without the prior written approval of the limited
partners.
7. RELATIONSHIP BETWEEN PARTIES. Nothing contained in this Agreement
shall be construed to create the relationship of principal and agent,
partnership, joint venture or any other relationship between the parties hereto
other than the relationship of Seller and Buyer.
8. SECTION HEADINGS. The section headings to each section are inserted
only as a matter of convenience and reference and in no way define, limit or
describe the scope or intent of this Agreement, nor do they in any way affect
this Agreement.
9. INTERPRETATION. The language in all parts of this Agreement shall
be construed under the laws of the State of California according to its normal
and usual meaning and not strictly for or against either Buyer or Seller.
10. ENTIRE AGREEMENT. This Agreement contains all agreements of the
parties hereto with respect to matters contained herein, and no prior agreements
or understandings written or oral, pertaining to any such matters may be
effective for any purpose. No other agreement, statement or promise by any other
party, employee, officer or agent of any party or to any employee, officer or
agent of any party that is not in writing signed by all the parties shall be
binding. Any agreement thereafter made shall be ineffective to change, modify,
waive or discharge this Agreement or any part thereof, in whole or in part,
unless such agreement is in writing and signed by the party against whom
enforcement of the change, modification, waiver or discharge is sought.
11. SUCCESSORS IN INTEREST. The terms, covenants and conditions of
this Agreement shall be binding upon and shall inure to the benefit of the
heirs, executors, administrators and assigns of the respective parties hereto.
12. NOTICES. Any notices, requests, demands, offers, claims or other
communications required or permitted under this Agreement shall be in writing
and shall not be effective for any purpose unless the same shall be given or
served by hand delivery evidenced by a written acknowledgment of receipt
thereof, or by mailing the same to the party to whom such notice, request,
demand, offer, claim or communications is directed, by registered or certified
mail, postage prepaid, return receipt requested, to the parties at the following
addresses:
SELLER: GO CALL INC.
Attn: Michael Ruge
4
<PAGE>
BUYER: SEVADA HOLDINGS, LTD IV
1925 Century Park East, Suite 1150
Los Angeles, CA 90067
Attn: Kurt Von Hofmann
Or such other addresses as the parties may from time to time direct. The address
to which any such communications shall be sent may be changed from time to time
by notice sent in the same manner as set forth above. All notices shall be
deemed delivered two days after the date deposited into the United States mail
or when personally delivered.
13. ATTORNEY'S FEES. If any actions or proceedings are instituted by
any party to enforce any of the provisions of this Agreement, the prevailing
party in any such action or proceeding shall be entitled to recover reasonable
attorney's fees incurred in connection therewith.
14. EXECUTION OF DOCUMENTS. Each of the parties hereto shall sign any
and all documents necessary to carry out the purpose of this Agreement.
In witness whereof, the parties hereto have executed this Agreement the day and
year first written above.
SELLER: BUYER:
GO CALL INC. SEVADA HOLDINGS, LTD. IV
A Delaware Corporation A California Limited Partnership
By Itasca Holdings,
its general partner
By: /S/ Michael Ruge By: /S/ Kurt Von Hoffmann
- --------------------------------- --------------------------------
Michael Ruge, CEO Kurt Von Hofmann, President
5
AGREEMENT
BETWEEN
GO CASH INC ( THE COMPANY)
(Oficentro Ejecutivo La Sabana, Torre 6 Piso 2 San Jose, Costa Rica)
AND
SID DIAMOND (THE CONSULTANT)
Sid Diamond agrees to act as an advisor to Go Cash Inc. to assist with its
gaming division under the following terms and conditions:
Terms:
This agreement shall be in effect for an initial three month trial period
starting at the date of signing. Both the Company and the Consultant will
evaluate the status of the relationship at the end of this time period to
determine whether this agreement should be renewed for an additional 2 years.
Specifically, both parties will assess the Consultants ability to generate
revenue for the Company. This agreement will continue to be in effect unless
both parties notify each other in writing with their decision to terminate this
agreement.
Compensation:
1. The Company will pay the Consultant $5,000 US for each of the first three
months which make up the "Trial Period"
2. The Company will provide the Consultant with 3,000 shares of Go Call Inc.
"144 restricted" stock (to be valued at the average sale price of said
stock during the same three months) for each of the first three months
which make up the "Trial Period"
3. After the Trial Period, should the contract be continued, the Company will
pay the Consultant $8,000 US plus bonuses (to be determined at a later
date) for the remainder of the contract.
Dated this 22 day of December, 1999.
/S/ James Hammer /S/ Sid Diamond
- ------------------------- --------------------------
Go Cash Sid Diamond
FEE AGREEMENT FOR INTRODUCTION SERVICES
This FEE AGREEMENT FOR INTRODUCTION SERVICES (the "Agreement") is
between The GoCall, Inc., a Delaware Corporation (the "Company") and Kipling
Finance Co., a BVI Corporation (the "Introducer").
WHEREAS, the Company acknowledges that Introducer's talents and
services are of a special, unique, unusual and extraordinary character and are
of particular and peculiar benefit and importance to the Company; and,
WHEREAS, Introducer has agreed to provide services to the Company with
respect to the Company's desire to identify and acquire Internet-related
businesses; and,
WHEREAS, this Agreement is made to set out the compensation,
conditions and guidelines that will govern the relationship between the parties.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which is expressly acknowledged
by the parties hereto, the parties agree as follows:
1. The Services
Effective the date below, and for the term of this Agreement,
Introducer will use its best efforts to search for, identify and make
known to the Company, Internet-related businesses and Assets
("Opportunities") which qualify as potential acquisitions or strategic
alliances by the Company. Such efforts by Introducer shall hereinafter
be referred to as the "Services".
2. Term of Agreement
Unless otherwise terminated as provided hereunder, the Services shall
be provided to the Company from the Effective Date (as defined below)
through December 23, 2000.
3. Costs and Expenses
The Company understands that, in the course of Introducer's efforts to
identify suitable acquisitions, strategic partners or assets for the
Company to purchase, it may be necessary for Introducer to incur
certain costs or expenses. The Company will reimburse Introducer for
its costs or expenses actually incurred and reasonably necessary for
Introducer to provide the Services to the Company, as long as
Introducer's costs and expenses are reasonable and related to
evaluations carried out for the Company's exclusive use. Subject to
the foregoing, and the Company's prior written approval, the Company
will reimburse Introducer for reasonable travel expenses including
lodging and the cost of a rental car, copy and filing fees, and
retrieval costs incurred in researching prospective Opportunities.
/S/
<PAGE>
4. Payment for Services/Stock Option
The Company agrees to satisfy Introducers' time and expense incurred,
up to and including the first acquisition by the Company of an
Opportunity introduced or arranged by Introducer (the "Initial
Acquisition") by way of an Option Agreement. The Company hereby grants
to Introducer the option to purchase up to Ten Million (10,000,000)
shares of the Company's no par value common stock (the "Option
Shares") at a price of Fifty ($0.50) Cents per share (the "Exercise
Price") pursuant to the Option Agreement, a copy of which is attached
hereto as Exhibit "A." The Option is transferable and will expire
unless exercised on or before the second anniversary of the execution
date hereof. Introducer has not been engaged to perform, nor will
Introducer agree to perform any services in connection with capital
raising transactions. It is mutually understood and agreed that any
fees for services provided by Introducer on behalf of or which results
in some benefit for the Company in connection with a capital raising
transaction shall be negotiated separately from this Agreement and
paid by the Company in cash.
As further consideration to Introducer, Company agrees to issue
500,000 Restricted Common Shares (Rule 144, 12 month) to Introducer.
5. Involvement of the Company
The Company expects to be kept informed on the progress of
Introducer's services and, in this regard, Introducer agrees to keep
the Company apprised of all material developments in writing at least
monthly.
There may be times when Introducer will need to obtain information
from the Company. All requests for access to documents, employees, or
other information of the Company shall be granted without unreasonable
delay.
6. Termination
Either party may terminate this Agreement upon thirty (30) days notice
by registered or certified mail, return receipt requested, addressed
to the other party. If this Agreement is terminated by either party,
the Company shall only be liable for payment of fees earned by
Introducer as a result of work prior to the effective date of the
termination. The thirty (30) days notice shall be measured from the
date the notice is mailed. This Agreement shall terminate should
Introducer fail to produce a viable target whose asset value exceeds
Ten Million($10,000,000) Dollars within Six (6) months from
commencement of this agreement.
7. Assignment
Notwithstanding contained herein to the contrary, the rights to the
shares underlying the Option, and the obligation to provide the
Services set forth in this Agreement, may be assigned or transferred
by Introducer to an Affiliate or subsidiary, associated or unrelated
person or entity, or as the result of a corporate reorganization or
recapitalization of Introducer. For the purpose of this Agreement the
term "Affiliate" shall be defined as a person or enterprise that
directly, or indirectly, through one or more intermediaries, controls
or is controlled by, or is under common control with Introducer.
/S/
<PAGE>
9. Counterparts
A facsimile, telecopy or other reproduction of this instrument may be
executed by one or more parties hereto and such executed copy may be
delivered by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of
such party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At the
request of any party hereto, all parties agree to execute an original
of this instrument as well as any facsimile, telecopy or other
reproduction hereof.
10. Further Documentation
Each party hereto agrees to execute such additional instruments and
take such action as may be reasonably requested by the other party to
effect the transaction, or otherwise to carry out the intent and
purposes of this Agreement.
11. Notices
All notices and other communications hereunder shall be in writing and
shall be sent by prepaid first class mail to the parties at the
following addresses, as amended by the parties with written notice to
the other:
To Introducer: Kipling Finance Co.
Unit 4, 5th Fl. Block A,
Tonic Ind. Centre
26 Kai Cheung Rd., Kowloon Bay
Kowloon, Hong Kong
To the Company: GoCall, Inc.
15 Queen St. F.
Cambridge, Ontario Canada N3C 2A7
Telephone: (519) 651-2121
Facsimile: (519) 651-0457
With copy to: The Hartcourt Companies, Inc.
1196 E. Willow St.
Long Beach, CA 90806
Telephone: (562) 426-9796
Facsimile: (562) 426-8896
12. Governing Law
This Agreement was negotiated, and shall be governed by the laws of
California notwithstanding any conflict-of-law provision to the
contrary.
13. Entire Agreement
This Agreement sets forth the entire understanding between the parties
hereto and no other prior written or oral statement or agreement shall
be recognized or enforced.
/S/
<PAGE>
14. Severability
If a court of competent jurisdiction determines that any clause or
provision of this Agreement is invalid, illegal or unenforceable, the
other clauses and provisions of the Agreement shall remain in full
force and effect and the clauses and provision which are determined to
be void, illegal or unenforceable shall be limited so that they shall
remain in effect to the extent permissible by law.
15. Amendment or Waiver
Every right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in
equity, and may be enforced concurrently herewith, and no waiver by
any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then,
theretofore, or thereafter occurring or existing. At any time prior to
a closing of the Initial Acquisition, this Agreement may be amended by
a writing signed by all parties hereto.
16. Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the latter
of the dates written below. The "Company" GoCall, Inc. Dated: December 23, 1999
The "Company"
GoCall, Inc.
Dated December 23, 1999 By: Michael Ruge
---------------------
Michael Ruge, CFO
"Introducer"
Kipling Finance Co.
Dated December 23, 1999 By: /S/ Jansen Y.S. Wong
---------------------
Jansen Y.S.Wong, Chairman
INVESTMENT STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (Agreement) dated to be effective
December 23, 1999 between Go Call Inc. (GO), and Madison Holdings, Inc., a
Nevada Corporation (Madison). The parties acknowledge that this Agreement is
irrevocable and all matters requiring additional documentation are for the
benefit of Madison.
RECITALS
--------
The following recitals are an integral and inseparable part of this
Agreement.
A. Go wishes to sell to Madison 500,000 shares of GO stock for
two Notes in the amounts of $125,000 each. (Exhibit A)
B. Madison wishes to acquire said shares.
C. Madison will simultaneously transfer 250,000 shares
immediately to liquidate certain obligation of an affiliate
of Madison. (Exhibit B)
Therefore, for the mutual agreement and other valuable consideration
the sufficiency and receipt of which are hereby acknowledged the parties agree
as follows:
A. Note for Common Stock.
----------------------
Madison hereby agrees to provide GO with two promissory notes
in the amount of $125,000 in exchange for 500,000 shares of GO stock.
B. Transfer of GO Stock.
---------------------
The parties have agreed that 250,000 shares of the GO stock
have been transferred pursuant to Exhibit B. Other than the above
transfer, Madison agrees not to sell, transfer or otherwise
hypothecate its GO stock until and unless the Notes at Exhibit A are
paid in full.
C. Miscellaneous Provisions.
-------------------------
1. PARAGRAPH HEADINGS: The paragraph headings used herein are
only for ease of reference and do not control the meaning or
effect of any provisions of this Agreement.
2. JURISDICTION: This Agreement shall be governed, interpreted
and enforced under the laws of the State of California.
1
<PAGE>
3. SEVERABILITY: If any provision(s) of this Agreement shall
be invalid or unenforceable as a matter of law, the other
provisions hereof shall continue in full force and effect.
4. ARBITRATION: Any dispute arising from or relating to this
Agreement that cannot be resolved by the parties themselves
shall be submitted for binding arbitration by a panel under
the auspices of the American Arbitration Association in Los
Angeles, California. It is expressly agreed that punitive
damages shall not be awarded to either party. The prevailing
party shall be entitled to recover its attorney's fees and
other costs from the other party. The outcome of any such
arbitration may be entered as a final judgment in any court of
competent jurisdiction.
5. CONFIDENTIALITY. The existence and contents of the
Agreement shall be held in the strictest confidence by the
parties until and unless approved in writing by a duly
authorized officer of each party or as otherwise required by
law.
6. ENTIRE AGREEMENT: Upon full execution of this Agreement,
the resulting agreement shall be the one and only agreement
between the parties, and may only be modified by written
amendment(s) executed by duly authorized officers of the
parties. This Agreement supersedes any and all other
agreements previously entered into by the parties concerning
the subject matter containing herein.
7. ASSIGNMENT: neither party may assign this Agreement with
the prior written approval of the other.
8. REVIEW BY LEGAL COUNSEL: Each party represents it has had
the opportunity to consult with legal counsel of its own
choosing and has consulted with said legal counsel prior to
executing this Agreement.
By MADISON HOLDINGS, INC.
A Nevada Corporation
By: /s/ signature /s/ 12/23/99
- ------------------------- -------------------------
President Date
GO CALL, INC.
A Delaware Corporation
By: /s/ Michael Ruge /s/ 12/23/99
- ------------------------- -------------------------
Michael Ruge Date
Chief Executive Office
2
<PAGE>
PROMISSORY NOTE
$125,000.00
FOR VALUE RECEIVED, the undersigned, ACS Financial, Inc., a
California Corporation ("Payor"), promises to pay to Go-Call, Inc. ("Payee") the
amount of One Hundred and Twenty Five Thousand Dollars ($125,000), payable 60
months from the date hereof.
This note shall bear interest at a rate of 5% per annum payable in
lawfull money of the United States of America at such address as may be
designated by payee, payable upon the due date of this note.
This note may be prepaid at any time in whole or from time to time in
part prior to its maturity without fee or penalty.
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived. This note shall be governed by and construed in
accordance with the laws of the state of California, and enforced therein.
Effective Date:
December 23, 1999
ACS Financial, Inc.
a California Corporation
By: /s/ signature
-------------------------
President
Date: 12/23/99
-------------------------
<PAGE>
PROMISSORY NOTE
$125,000.00
FOR VALUE RECEIVED, the undersigned, Madison Holdings. Inc., a
California Corporation ("Payor"), promises to pay to Go-Call, Inc. ("Payee")
the amount of One Hundred and Twenty Five Thousand Dollars ($125,000),
payable 60 months from the date.
This note shall bear interest at a rate of 5% per annum payable in
lawful money of the United States of America at such address as may be
designated by payee, payable upon the due date of this note.
This note may be prepaid at any time in whole or from time to time
in part prior to its maturity without fee or penalty.
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived. This note shall be governed by and construed in
accordance with the laws of the state of California, and enforced therein.
Effective Date:
December 23, 1999
Madison Holdings, Inc.
a Nevada Corporation
By: /s/ signature
-------------------------
President
Date: 12/23/99
-------------------------
AMENDED
NOTE FOR COMMON STOCK EXCHANGE AGREEMENT
THIS NOTE FOR COMMON STOCK EXCHANGE AGREEMENTS is made to be effective as of
23rd day of December 1999 by and between STAR LIQUIDATION COMPANY, LLC, a
California Limited Liability Corporation (SLC) and GO CALL INC., a Delaware
Corporation (GO). This Agreement supersedes and replaces an agreement of a date
even with The Telephone Company, LLC, a California Limited Liability Corporation
which agreement has been canceled. (Exhibit A)
THE PARTIES AGREE AS FOLLOWS:
1 The Exchange
------------
1.1 Subject to the terms and conditions of this Agreement, SLC agrees at
the closing to acquire the approximate six hundred fifty one thousand
(651,000) shares of COUNTRY STAR RESTAURANTS INC. (STAR), owned by GO,
which represents about 92% of the presently issued and outstanding
shares of STAR, in exchange for a note in the amount of seven hundred
and twenty-eight thousand dollars ($728,000) shown at Exhibit B.
(Note). The Parties agree the shares of STAR will be contributed
simultaneously to the STAR Trust. (Exhibit C)
1.2 The above exchange is based on STAR having no more than 750,000 shares
of Common stock outstanding at the time of the closing as defined in
paragraph 1.3 below.
1.3 The Closing shall be effective as of December 31, 1999 or at such time
and place as the Parties mutually agree upon in writing (which time and
place are designated as the "Closing Date"). At the Closing, SLC shall
deliver to GO, the Note. GO shall deliver to Bruce Alschuld, Esq., as
trustee for the Star Trust (Trustee), the 651,000 shares of STAR common
stock, which represents 92% of all of the common stock of STAR on a
fully diluted basis prior to the close of the transaction.
1.4 STAR owns a single Restaurant, which is subject 40% a Profit
Participation Agreement with Big L Holdings, Inc. (Exhibit D). GO
believes and has advised SLC that Big L is in violation of said
agreement.
1.5 This Agreement has been approved by the respective Boards of Directors
of GO and the SLC.
1.6 GO agrees to fund $65,000 of cash to the STAR Trust (care of Bruce
Altschuld, Esq., Trustee) to defray certain costs and expenses of STAR
pursuant to the budget attached hereto as Exhibit E. Failure of GO to
fund any or all of said $65,000 to Trustee by wire, within five
business days of any written request by Trustee, delivered to GO
through any of GO's representative, shall constitute a breach under
<PAGE>
this agreement. GO hereby agrees to deliver the first $20,000 of the
aforesaid $65,000 prior to the execution of this Agreement and an
additional $20,000 on or before January 21, 2000 and the balance on or
before February 11, 2000. The funding of these payments is a
significant inducement for SLC to enter into this agreement.
GO desires to dispose of STAR as part of a corporate mission to focus solely on
Internet related businesses.
1.7 GO has agreed to retain certain responsibilities for STAR beyond
December 31, 1999. GO agrees, without limitation, as follows:
a. To complete GO's plan to close the restaurant owned by
STAR.
b. To terminate all STAR employees, pursuant to GO's own
plan. And make all necessary payments to employees
required the law upon termination.
c. To assist SLC, as requested by SLC, in the liquidation or
reorganization of STAR.
d. To provide GO staff and facilitate for SLC and its
representatives any reasonably requested information or
assistance requires by SEC.
e. To deliver immediately all assets, including all books,
records and documents of STAR to SEC or Trustee.
1.8 GO acknowledges that it may be necessary to cause STAR to seek Chapter
11 Bankruptcy protection for the benefit of all of STAR'S creditors and
shareholders.
1.10 GO acknowledges that SEC and others have advised GO that if STAR does
become involved in a bankruptcy proceeding, there may be certain
adverse consequence to GO and/or its officers and directors. By way of
example without limitation;
a. Monies advanced by GO to STAR since March 1999 may not be
repaid in full to GO or may not be repaid at all.
b. Certain assets removed by GO or its officers and directors
from STAR may be ordered returned to STAR by the
Bankruptcy Court.
1.11 GO has advised SLC of certain Securities and Exchange Commission (SEC)
inquiries involving a former STAR shareholder. GO will assist SLC to
the extent required in responding to and fully cooperating with any SEC
inquiry and all regulatory inquiries of any type.
<PAGE>
1.12 SLC may, upon the advice of legal counsel, seek the approval of the
Bankruptcy Court of the transaction described herein. The parties
hereby agree to abide by any ruling of the Bankruptcy Court in this
regard.
2. Representations and Warranties GO
---------------------------------
Except as expressly set forth in any Schedule of Exceptions (Exhibit F)
furnished to SLC with respect to the subparagraphs hereof, GO hereby
represents and warrants to SLC the following:
2.1 Organization: Good standing and Qualification; STAR is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted. STAR is duly
qualified to transact business and is in good standing in each
jurisdiction in which the failures to qualify would have material
adverse effect on its business or properties.
2.2 Capitalization: The authorized capita] of STAR Consists of 250,000,000
shares authorized of Common Stock, par value $.01 per share and
2,000,000 shares of Preferred Stock, par value $.001 of which not in
excess of the following will be issued and outstanding on or prior to
the closing; (1) 750,000 shares of Common Stock; (2) No Preferred Stock
prior to the consummation of this transaction.
2.3 Subsidiaries: STAR currently has no subsidiaries.
2.4 Authorization: All corporate action on the part of GO necessary for the
authorization, execution and delivery of this Agreement, and the
performance or all obligations of GO hereunder has been taken or will
be taken prior to the Closing, and this Agreement constitutes a valid
and legally binding obligation of GO enforceable in accordance with its
terms,
2.5 Valid Issuance of Common Stock:
(i) The Common Stock of STAR, which is being exchanged by GO for the Note
hereunder, when delivered in accordance with the terms hereof for the
consideration expressed herein, will be issued in compliance with all
applicable federal and state laws.
(ii) The outstanding shares of Common Stock of STAR are duly and validly
authorized and issued fully paid and non-assessable.
2.6 Governmental Consents: No consent, approval order or authorization or
registration, qualification, designation, declaration or filing with
any federal, state, local or provincial governmental authority on the
part of GO or STAR is required in connection with the consummation of
the transactions contemplated by this Agreement.
<PAGE>
2.7 Litigation: There is no action, suit proceeding or investigation
currently being threatened against STAR or GO which questions the
validity of this Agreement or the right of STAR and GO to enter into
it, or to consummate the transactions contemplated hereby, or which
might result in the aggregate in any material adverse changes in the
assets, condition, affairs or prospects of STAR. STAR is not a party or
subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. Any
present litigation or threatened litigation against STAR known to GO,
STAR or their respective officers, directors or legal counsel which are
not are disclosed at Exhibit F.
2.8 Disclosure: GO has filly provided SLC with all the information
necessary for deciding whether to exchange the Common Stock of STAR for
a Note from SLC.
2.9 Corporate Documents: The Articles of Incorporation and Bylaws of STAR
and the Certificate of Determination for the Common Stock are attached
hereto, as Exhibit G.
2.10 Title of Property and Assets: STAR owns its property and assets free
and clear of all mortgages, liens, loans and encumbrances, except such
encumbrances and liens which arise in the ordinary course of business
and which are disclosed at Exhibit F hereto, and which do not
materially impair STAR's ownership or use of such property or assets
except as reflected on the financial statements described in Section
2.11 below.
2.11.1 Financial Statements: STAR shall deliver to SLC the nine months ended
draft financial statements at September 30, 1999 (Exhibit H) and any
interim financial data (Exhibit H) (the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the periods indicated and fairly present the financial condition and
operating results of STAR as of the dates and for the periods indicated
therein, subject to the normal periodic audit adjustments.
2.12 Changes
GO shall inform SLC in the event there are any material changes to the
financial statements of STAR at the rime of the Closing.
2.13 Insurance: STAR has maintained any insurance as of the date of this
Agreement as shown at Exhibit 1 hereto.
2.14 Labor Agreements and Actions: STAR is not bound by or subject to (and
none of its assets or properties is bound by or subject to) any
written oral contracts, commitment of arrangement with any labor
union, and no labor union has requested or, to the knowledge of GO, has
sought to represent any of the employees, representatives or agents of
STAR.
<PAGE>
2.15.1 Good Title: GO is the owner of the shares of Common Stock pursuant
hereto and shall transfer said shares free and clear of any liens,
claims, or encumbrances of any type whatsoever.
2.16 Absence of Undisclosed Liabilities: STAR has no material liabilities or
obligations, either accrued or unaccrued, fixed or contingent, which
have not been reflected in the Financial Statements or on Exhibit F.
2.17 Tax Returns and Audits: STAR has filed, or shall have filed by the
Closing date, all income, franchise and other tax returns and reports
of every nature required to be filed by accurately reflecting any and
all net operating losses, tax credit carryovers and carrybacks, and
taxes owing to the United States or any other government or any
subdivision thereof, domestic or foreign, state or local, or any other
taxing authority, and has paid in fill all taxes shown on said returns
to be due and owing. There are and will hereafter be no tax
deficiencies (including penalties and interest) of any kind assessed
against STAR, with respect to any taxable periods ending on or before
the Closing, other than tax deficiencies relating solely to an election
(or deemed election.) pursuant to Section 338 of Internal Revenue Code
of 186, as amended with respect to the exchange of assets for shares of
stock of STAR or other transfer of ownership of STAR occurring on or
prior to the closing which SLC hereto agrees shall not be treated as a
liability of STAR or a breach of or a misstatement in any
representation or warranty of GO made herein.
3 Representations and Warranties of SLC
-------------------------------------
3.1 Organization: Good standing and Qualification; SLC is a Limited
Liability Corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all
requisite corporate power and authority to carry on its business as now
conducted. SLC is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to qualify would
have material adverse effect on its business or properties.
3.2 Authorization: All corporate action on the part of SLC necessary for
the authorization, execution and delivery of this Agreement, and the
performance or all obligations of SLC hereunder has been taken or will
be taken prior to the Closing, and this Agreement constitutes a valid
and legally binding obligation of SLC enforceable in accordance with
its terms.
3.3 Governmental Consents: No consent, approval order or authorization or
registration, qualification, designation, declaration or filing with
any federal, state, local or provincial, governmental authority on the
part of SLC is required in connection with the consummation of the
transactions contemplated by this Agreement.
3.4 Litigation: There is no action, suit proceeding or investigation
currently threatened against SLC which questions the validity of this
Agreement or the right of SLC to enter into it, or to consummate the
transactions contemplated hereby, or which might result in the
<PAGE>
aggregate in any material adverse changes in the assets, condition,
affairs or prospects of SLC. SLC is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any
court of government agency or instrumentality.
3.5 Disclosure: SLC has fully provided GO with all the information, which
GO has requested. for deciding whether to exchange the Common Stock for
the SLC Note.
4 Conditions of the Obligations of GO at Closing.
-----------------------------------------------
The obligations of GO under this Agreement are subject to the
fulfillment on or before the Closing of each of the following
conditions:
4.1 Representations and Warranties of SLC: The representations and
warranties of SLC contained in Section 3 hereof shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
4.2 Performance by SLC: SLC shall have conformed with all agreements,
obligations and conditions contained in the Agreement to which it is
subject on or before Closing.
5 Conditions of the Obligations of SLC at Closing.
------------------------------------------------
The obligations of SLC under this Agreement are subject to the
fulfillment on or before the Closing of each of the following
conditions:
5.1 Representations and Warranties of GO: The representations and
warranties of GO contained in Section 3 hereof shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
5.2 Performance by GO: GO shall have conformed with all agreements,
obligations and conditions contained in the Agreement to which it is
subject on or before Closing.
6 Survival of Representations and Warranties and Indemnification
--------------------------------------------------------------
6.1 Survival of Representations and Warranties: Notwithstanding the Closing
of this Agreement, the representations and warranties of SLC and GO
contained in this Agreement shall survive the Closing until the date
one (1) year after the date of the Closing, provided however that as
to any breach, or misstatement in. any misrepresentation or warranty as
to which GO has given notice to SLC or SLC has given notice to GO on or
prior to the expiration or such (1) year period, the same shall
continue to survive beyond said period, but only as to the matters
contained in such notice.
6.2 Indemnification by SLC: SLC covenants and agrees to hold GO harmless
from any and all costs, expenses, losses, damages and liabilities
incurred or suffered directly or indirectly by GO (including reasonable
legal ties and costs) proximately resulting from or attributable to the
<PAGE>
material breach of a material misstatement in, any one or more of the
representations or warranties of SLC made in or pursuant to this
Agreement.
6.3 Indemnification by GO: GO covenants and agrees to hold SLC harmless
from any and all costs, expenses, losses, damages and liabilities
incurred or suffered directly or indirectly by SLC (including
reasonable legal fees and costs) proximately resulting from or
attributable to the material breach of, a material misstatement in, any
one or more of the representations or warranties made in or pursuant to
this Agreement.
6.4 Defense Against Asserted Claims: If any claim or assertion or liability
is made by a third party against a party indemnified pursuant to this
Section 6 (the "Indemnified Party") based on any liability or absence
of right which if established, would constitute a matter for which the
Indemnified Party would be entitled to indemnification by another party
hereto (the "Indemnifying Party") the indemnified party shall with
reasonable promptness give to the Indemnifying Party written notice of
the claim or assertion of liability and request the Indemnifying Party
to defend same. The Indemnifying Party shall have the right to defense
against such liability or assertion, in which event the indemnifying
Party shall give written notice to the Indemnified Party of the
acceptance of defense of such claim and the identity of counsel
selected by the Indemnifying Party with respect to such matters. The
Indemnified Party shall be entitled to participate with the
Indemnifying Party in such defense and also shall be entitled at its
option to employ separate counsel for such defense at the expense of
the Indemnified Party. In the event the Indemnifying Party does not
accept the defense of the matter as provided above or in the event that
the indemnifying Party or its counsel fail to use reasonable care in
maintaining such defense, the Indemnified Party shall have the full
right to employ counsel for such defense at the expense of the
Indemnifying Party. All parties hereto will cooperate with each other
in the defense of any such action and the relevant records of each
shall be available to the other with respect to such defense.
7. Prepayment of the Note
----------------------
The SLC note shall be prepaid to GO by SLC upon the sale of any STAR
assets (other than the normal course of business.) SLC shall pay to GO
an amount equal to 50% of the net proceeds of any asset sale involving
any STAR assets, including without limit tax benefits. GO acknowledges
that the proceeds of the sale of any assets of STAR may be subject to
STAR'S bankruptcy proceedings and/or the rights of creditors and
others.
8. Miscellaneous
-------------
8.1. Successors and Assigns: The terms and conditions of this Agreement
shall inure to the benefit and be binding upon the respective
successors and assigns of SLC and GO respectively. Nothing in this
Agreement, express or implied, is intended to confer upon any party
<PAGE>
other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement except as expressly provided in the Agreement.
8.2 Governing Law: The laws of the State of California shall govern the
rights and liabilities of the parties to this Agreement and the
validity construction and interpretation thereof and any litigation
shall be brought in the County of Los Angeles.
8.3 Counterparts: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
8.4 Titles and Subtitles: The titles and subtitles used in this Agreement
are used for convenience only are not to be considered in construing or
interpreting this Agreement.
8.5 Notices: Any notice required or permitted under this Agreement shall be
given in writing and shall be deemed effectively given upon personal
delivery to the party to be notified or upon deposit with the United
States Post Office, by registered or certified mail postage prepaid and
addressed to the party to be notified at the address indicated for such
party in this Agreement which is incorporated herein by reference, or
at such other address as such party may designate by ten (10) days
advance written notice to the other parties.
8.6 Expense: Each party shall pay its or his respective costs and expenses
incurred with respect to the negotiation, execution, delivery and
performance of this Agreement.
8.7 Joint and Several Liability: Whenever any party undertakes any joint
and several covenant, agreement, representation, warranty, waiver
and/or other obligation under this agreement, the breach by any party
to the joint and several undertaking shall be deemed to be breach by
all parties to the undertaking any party aggrieved by any such breach
may proceed at its sole and absolute discretion against any one or more
or all of the parties bound by that joint and several undertaking.
8.8 Amendments and Waivers: Any term of this Agreement may be amended and
the observance of any terms of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the parties hereto.
8.9 Severability: If one or more provisions of this Agreement are held to
be unenforceable under applicable law such provision shall be excluded
from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.
8.10 Review by Independent Counsel: Each party, by its signature below, has
had the opportunity to have this Agreement reviewed by their own
<PAGE>
counsel with any comments, recommendations or proposed changes by
counsel either incorporated herein or waived.
STAR LIQUIDATION COMPANY
A CALIFORNIA LIMITED LIABILITY CORPORATION
By: /s/ signature Date: 12/23/99
---------------------- ----------------------
ITS MANAGING MEMBER
GO CALL INC.
A DELAWARE CORPORATION
By: /s/ Michael Ruge, CEO Date: 12/23/99
---------------------- ----------------------
Michael Ruge, CEO
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made this 23rd day of
December, 1999 by and between The Hartcourt Companies Inc., a Utah corporation
("Hartcourt") and GoCall Inc., a Delaware corporation ("GoCall")
WHEREAS, GoCall and Hartcourt wish to form a strategic alliance for
the development of certain common interests of the two corporations, including
but not limited to the development of GoCall's internet related
development-stage businesses and software; and
WHEREAS, Hartcourt and GoCall wish to effect the proposed strategic
alliance by exchanging shares of the two respective corporations' common stock.
IN CONSIDERATION of the mutual promises contained herein, the benefits
to be derived by each party hereunder and other good and valuable consideration,
the receipt and sufficiency of which are hereby expressly acknowledged,
Hartcourt and GoCall agree as follows:
1. EXCHANGE
On the basis of the representations and warranties herein contained,
subject to the terms and conditions set forth herein, GoCall agrees to
exchange One Million (l,000,000) shares of its Convertible Preferred
Stock (par value @ $5.00) stock (the GoCall Shares") exercisable to 10
shares of GoCall Common Stock (Restricted under Rule 144 for 12 months)
for each share of Convertible Preferred Shares so exchanged for all of
the shares as set forth in Schedule "A" attached hereto and made a part
hereof ("Hartcourt Shares").
2. CLOSING
A. CLOSING DATE. The closing of the exchange contemplated by this
Agreement (the "Closing") shall occur upon the transfer of the
GoCall Shares to Hartcourt (the Transfer Date"), on December 29,
1999 at 4:00 PM of that day at the offices of Hartcourt. At the
Closing, Hartcourt shall deliver its consideration to GoCall and
GoCall shall deliver its consideration to Hartcourt in a
simultaneous transaction. Notwithstanding the date of Closing, the
Effective Date shall be December 29, 1999.
3. REPRESENTATIONS AND WARRANTIES OF GOCALL
GoCall hereby represents and warrants to Hartcourt that:
A. ORGANIZATION. GoCall is a corporation validly existing and in
good standing under the laws of Delaware with the power and
authority to carry on its business as now being conducted. The
execution and delivery of this Agreement and the consummation of
1
<PAGE>
laws of Delaware. with the power and authority to carry on its
business as now being conducted. The execution and delivery of this
Agreement and the consummation of the transaction contemplated in
this Agreement have been, or will be prior to Closing, duly
authorized by all requisite corporate action on the part of GoCall,
including but not limited to Board of Director Resolutions
ratifying this transaction and that this Agreement has been duly
executed and delivered by GoCall and constitutes a binding and
enforceable obligation of GoCall. On Closing, a single five (5)
member Board of Directors shall be formed having three (3) members
appointed by Hartcourt and two (2) members appointed by GoCall.
B. THIRD PARTY CONSENT. No authorization, consent, or approval of,
or registration or filing with, any governmental authority or any
other person is required to be obtained or made by GoCall in
connection with the execution, delivery or performance of this
Agreement, or if required, GoCall has or will obtain same prior to
Closing;
C. LITIGATION. GoCall is not a defendant or a plaintiff against
whom a claim has been made or reduced to judgement in any
litigation or proceedings before any local, state or U.S. foreign
government, or any department, board, body or agency thereof, which
could result in a claim against the GoCall Shares or any of
GoCall's assets;
D. STATUS OF GOCALL SHARES. The GoCall Shares will be validly
issued by GoCall and it shall deliver same to Hartcourt at Closing,
as well as resolutions of GoCall's Board of Directors wherein
GoCall agrees not to issue or demand a "stop transfer" be put into
effect or against any of the GoCall Shares, or otherwise attempt to
restrict the transfer or exchange of the GoCall Shares issued to
Hartcourt hereunder. Further. GoCall represents that it has not
created any option, security interest or encumbrance upon the
GoCall Shares that would give rise to any claims by third parties
or otherwise conflict with or preclude the exchange as contemplated
herein; and
E. AUTHORITY. This Agreement has been duly executed by GoCall, and
the execution and performance of this Agreement will not violate,
or result in a breach of, or constitute a default in any agreement,
instrument, judgement, order or decree to which GoCall is a party
or to which the GoCall Shares may be subject.
4. REPRESENTATIONS AND WARRANTIES OF HARTCOURT
Hartcourt hereby represents and warrants to GoCall that:
A. ORGANIZATION. Hartcourt is a corporation validly existing and in
good standing under the laws of Utah with the power and authority
to carry on its business now being conducted. The execution and
delivery of this Agreement and the consummation of the transaction
contemplated in this Agreement have been, or will be prior to
Closing, duly authorized by all requisite corporate action on the
part of Hartcourt. This Agreement has been duly executed and
delivered by Hartcourt and constitutes a binding, and enforceable
obligation of Hartcourt;
B. THIRD PARTY CONSENT. No authorization, consent, or approval of,
or registration or filing with, any governmental authority or any
other person is required to be obtained or made by Hartcourt in
connection with the execution, delivery or performance of this
Agreement, or if required, GoCall has or will obtain same prior to
Closing;
2
<PAGE>
C. LITIGATION. Hartcourt is not a defendant or a plaintiff against
whom a counterclaim has been made or reduced to judgement in any
litigation or proceedings before any local, state U.S. or foreign
government, or any department, board, body or agency thereof, which
could result in a claim against Hartcourt enacting this
transaction.
D. STATUS OF HARTCOURT OWNED SHARES. The Shares constituting
Hartcourt's consideration Schedule "A" annexed hereto and
incorporated herein by reference will be validly endorsed by
Hartcourt or released to GoCall by written authorization duly
executed by Hartcourt which it shall deliver to GoCall at Closing.
Further, Hartcourt represents that it has not created any option,
security interest or encumbrance upon the Shares that would give
rise to any claims by third parties or otherwise conflict with or
preclude the exchange as contemplated herein; and Hartcourt has
never been an affiliate of any of the companies in Schedule "A."
E. AUTHORITY. This Agreement has been duly executed by Hartcourt,
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in any
agreement, instrument, judgement, order or decree to which
Hartcourt is a party or to which the Hartcourt Shares may be
subject.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF HARTCOURT AND GOCALL
All obligations of Hartcourt and GoCall under this Agreement are
subject to the fulfillment, prior to or as of the Closing Date, of
each of the following conditions:
A. TRANSFER AND DELIVERY OF THE SECURITIES. Hartcourt shall have
endorsed or assigned or delivered the Shares to GoCall and GoCall
shall have issued and delivered the GoCall Shares to Hartcourt
pursuant to this Agreement.
B. ACCEPTANCE OF DOCUMENTS. All instruments and documents delivered
to the parties hereto, pursuant to the provisions of this
Agreement, and the terms and conditions of the agreement(s) shall
be satisfactory to Hartcourt and GoCall.
6. AVAILABILITY OF INFORMATION
Hartcourt and GoCall each represent that, by virtue of their
respective business activities and economic bargaining power or
otherwise, they have been able to conduct their own due diligence and
have had access to or have been furnished with, prior to or
concurrently with the execution hereof, the information which they
consider to be adequate to make a decision to exchange the GoCall
Shares for the Hartcourt owned Shares.
7. PRIVATE TRANSACTION
A. PRIVATE OFFERING. GoCall and Hartcourt each understand that the
exchange contemplated herein constitutes a private, arms-length
transaction between the parties without the use or reliance upon a
distribution or securities underwriter.
3
<PAGE>
B. PURCHASE FOR OWN ACCOUNT. Neither GoCall nor Hartcourt are
underwriters of, or dealers in, the respective securities to be
exchanged hereunder, and neither party is acting as such or
participating pursuant to a contractual agreement, in the
distribution of such securities.
C. INVESTMENT RISK. Hartcourt and GoCall acknowledge the exchange
contemplated by this Agreement may involve a high degree of
financial risk, including the risk that one or both parties may
lose its entire investment.
D. ACCESS TO INFORMATION. GoCall and Hartcourt and their advisors
each have been afforded the opportunity to discuss the transaction
contemplated herein with legal and accounting professionals, and to
examine and evaluate the financial impact of such exchange.
E. This Agreement has been duly executed by Hartcourt, and the
execution and performance of this Agreement will not violate, or
result in a breach of, or constitute a default in any agreement,
instrument, judgement, order or decree to which Hartcourt is a
party or to which the Hartcourt Shares may be subject.
8. TERMINATION
This Agreement may be terminated at anytime prior to the date of
Closing by either party if (a) there shall be any actual or threatened
action or proceeding by or before any court or any other governmental
body which shall seek to restrain, prohibit, or invalidate the
transaction contemplated by this Agreement, and which, in the judgment
of such party giving notice to terminate and based upon the advice of
legal counsel, makes it inadvisable to proceed with the transaction
contemplated by this Agreement.
9. MISCELLANEOUS
A. AUTHORITY. The officers of Hartcourt and GoCalI executing this
Agreement are duly authorized to do so and each party has taken all
action required by law or otherwise to properly and legally execute
this Agreement.
B. NOTICES. Any notice under this Agreement shall be deemed to have
been sufficiently given if sent by registered or certified mail,
postage prepaid, addressed as follows:
To GoCall Inc. GoCall Inc.
15 Queen Street East
Cambridge, Ontario, Canada N3C 2A7
Telephone: (519) 651-2121
Facsimile: (519) 651-0457
4
<PAGE>
To Hartcourt: The Hartcourt Companies Inc.
1196 E. Willow St.
Long Beach, CA 90806
Telephone: (562) 426-9796
Facsimile: (562) 426-8896
or to any other address which may hereafter be designated by
either party by notice given in such manner. All notices
shall be deemed to have been given as of the date of receipt.
C. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties hereto and no other prior written
or oral statement or agreement shall be recognized or enforced.
D. SEVERABILITY. If a court of competent jurisdiction determines
that any clause or provision of this Agreement is invalid, illegal
or unenforceable, the other clauses and provisions of the Agreement
shall remain in full force and effect and the clauses and
provisions which are determined to be void, illegal or
unenforceable shall be limited so that they shall remain in effect
to the extent permissible by law.
E. None of the parties hereto may assign this Agreement without the
express written consent of the other parties and any approved
assignment shall be binding on and inure to the benefit of such
successor or, in the event of death or incapacity on assignor s
heirs, executors, administrators and successors.
F. APPLICABLE LAW. This Agreement bas been negotiated and is being
contracted for in the State of California, and it shall be governed
by the laws of California, County of Los Angeles, notwithstanding
any conflict-of-law provision to the contrary.
G. LITIGATION. If any legal action or other preceding
(non-exclusively including arbitration) is brought for the
enforcement of or to declare any right or obligation under this
Agreement or as a result of a breach, default or misrepresentation
in connection with any of the provisions of this Agreement, or
otherwise because of a dispute among the parties hereto, the
prevailing party will be entitled to recover actual attorney's fees
(including for appeals and collection) and other expenses incurred
in such action or proceeding, in addition to any other relief to
which such party may be entitled.
H. NO THIRD PARTY BENEFICIARY. Nothing in this Agreement, expressed
or implied, is intended to confer upon any person, other than the
parties hereto and their successors, any rights or remedies under
or by reason of this Agreement, unless this Agreement specifically
states such intent.
I. It is understood and agreed that this Agreement may be executed
in any number of identical counterparts, each of which may be
deemed an original for all purposes.
J. FURTHER ASSURANCES. At any time, and from time to time after the
Closing, each party hereto will execute such additional instruments
and take such action as may be reasonably requested by the other
party to confirm or perfect title to the securities being exchanged
pursuant to this Agreement, or otherwise to carry out the intent
and purposes of this Agreement.
5
<PAGE>
K. BROKER'S OR FINDER'S FEE: EXPENSES. GoCall and Hartcourt each
warrant that they have not incurred any liability, contingent or
otherwise, for brokers' or finders fees or commissions relating to
this Agreement for which the other party shall have responsibility.
Except as otherwise provided herein, all fees, costs and expenses
incurred by either party relating to this Agreement shall be paid
by the party incurring same.
L. AMENDMENT OR WAIVER. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether
conferred herein, at law, or in equity, and may be enforced
concurrently herewith, and no waiver by any party of the
performance of any obligation by the other shall be construed as a
waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to Closing,
this Agreement may be amended by a writing signed by all parties
hereto.
M. HEADINGS. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
N. FACSIMILE. A facsimile, telecopy or other reproduction of this
instrument may be executed by one or more parties hereto and such
executed copy may be delivered by facsimile or similar
instantaneous electronic transmission device pursuant to which the
signature of or on behalf of such party can be seen, and such
execution and delivery shall be considered valid, binding and
effective for all purposes. At the request of any party hereto, all
parties agree to execute an original of this instrument as well as
any facsimile, telecopy or other reproduction hereof.
O. ANNOUNCEMENTS. Except as required by law, no announcements shall
be made by either party with respect to the receipt or acceptance
of this agreement, or the transaction proposed herein without the
prior written permission of the other.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed the day and year first above written.
"GoCall" "Hartcourt"
GoCall, Inc. The Hartcourt Companies, Inc.
By: By:
/s/ Michael Ruge /s/ Alan V. Phan
- ------------------------- -------------------------
Michael Ruge, CEO Alan V. Phan, Chairman
6
<PAGE>
SCHEDULE "A"
1. 2,850,000 Common Stock Shares in Dega Technology, Inc.,
symbol: DEGA 500000 Restricted, Balance without legend
2. 2,400,000 Preferred Shares in NuOasis Resorts, Inc.
symbol: NUOA Without legend
3. 1,500,000 Common Stock Shares in Oasis Resorts International Inc.
symbol: OAIS Without legend
4. 192,000 Common Stock Shares in Electronic Components & Systems, Inc
symbol: ECSX Without legend
AS TO ALL OF THE ABOVE SHARES, HARTCOURT REPRESENTS AND WARRANTS THAT IT IS
RELYING UPON THE REPRESENTATIONS OF ITS PREDECESSOR IN TITLE CONCERNING
"LEGENDS" AND IT CANNOT ITSELF CONFIRM THIS INFORMATION NOR IS IT HEREIN
REPRESENTING AS TO THE TRUTH OR VALIDITY OF SUCH CLAIMS.
WALL STREET MARKETING GROUP INC.
PUBLIC RELATIONS & CONSULTING AGREEMENT
This AGREEMENT made this 27th of December, 1999 and between GO CALL INC..
(hereinafter "Client") and WALL STREET MARKETING GROUP INC. (hereinafter
"Consultant").
WITNESSETH
In consideration of the mutual promises hereinafter made by each to the other,
Client and Consultant agree as follows:
1. CONTRACT SERVICES
Client hereby retains Consultant to represent, advise, counsel, and assist
Client in public relations, public appearances and the marketing of client's
company. Client additionally hereby retains Consultant to disseminate
information from Client to licensed members of the securities industry. Services
performed by Consultant do not relate to NASD activities or financing.
2. COMPENSATION FOR SERVICES
Client agrees to pay Consultant one hundred thousand restricted (1 year) shares
and grant Consultant options on GOCA non-restricted stock to be exercised by
January 1, 2001:
1) 100,000 shares priced at $.75 per share;
2) 100,000 shares priced at $1.00 per share;
3) 100,000 shares priced at $4.00 per share;
3. PAYMENT OF CONSULTANT'S FEE
Consultant shall receive the restricted shares upon engagement.
4. DISCLAIMER OF LIABILITY
Consultant makes no guarantees to any results including but not limited to
trading activity, volume, or stock price with respect to the timing, place,
manner or fashion in which public relations and consulting services are to be
conducted.
<PAGE>
5. NOTICES
All notices hereunder shall be effective if sent by certified mail, postage
prepaid to the following addresses.
If to the Consultant: WALL STREET MARKETING GROUP INC.
2375 F. Tropicana Suite 757
Las Vegas, NV 89119
If to Client: Go Call Inc.
15 Queen St. E
Cambridge, Ont. N3C-2A7
6. ENTIRE AGREEMENT
This Agreement, sets forth the entire agreement between the parties hereto and
cannot be amended, modified or changed orally.
7. FILING
This contract is signed in duplicate. Consultant agrees to deliver one (1) copy
to the Client within five (5) days of its execution; and retain one (1) copy for
their files.
8. TERM
The term of this Agreement is for six months and shall begin on the date hereof
and shall continue until June 27th, 2000.
9. LAW
This agreement is governed and construed under the laws of the state of Nevada
and any action brought by either party to enforce or interpret this agreement
shall be brought in an appropriate court in the state of Nevada.
IN WITNESS WHEREOF, the parties hereto have hereunder signed their names as
hereinafter set forth.
By: /s/ Mark Taggatz By: /s/ Michael Ruge
------------------------------ ----------------------------
Mark Taggatz/ President Michael Ruge/CEO
Wall Street Marketing Group Inc. Go Call Inc.
12/27/99 Dec 29/99
------------------------------ ----------------------------
(Date) (Date)
AGREEMENT OF LIMITED PARTNERSHIP
SEVADA HOLDINGS LTD. IV,
A CALIFORNIA LIMITED PARTNERSHIP
EFFECTIVE
DECEMBER 1999
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP ("AGREEMENT') OF SEVADA HOLDINGS LTD. IV,
a California limited partnership ("Partnership") is entered into as of March 1
1999 by and among ITASCA HOLDINGS LTD., a Nevada Corporation ("ITASCA"), as
general partner (General Partner"), and the entities listed on the attached
Exhibit B as limited partners ("Limited Partners"). The General Partner and
Limited Partners are collectively referred to as the "Partners".
ARTICLE I
---------
1. ORGANIZATION AND PURPOSE OF PARTNERSHIP
---------------------------------------
1.1 FORMATION: The Partnership was formed in March 1, 1999 in accordance
with the Uniform Limited partnership Act of California, as amended.
1.2 NAME: The name of the Partnership is Sevada Holdings Ltd. IV, a
California limited partnership, and all business of the Partnership will be
conducted under this name.
1.3 PURPOSE: The principal purpose of the Partnership is to pursue certain
Real Estate Investments as is more fully described in Exhibits C hereto, and
other opportunities as the General Partner may deem appropriate.
1.4 PRINCIPAL PLACE OF BUSINESS: The principal place of business of the
Partnership is the General Partner's office at 1925 Century Park East, Suite
1150, Los Angeles, California 90067 or any other location as may be subsequently
chosen by the General Partner upon prior notice of the new location to all
Partners.
1.5 ADDRESSES OF PARTNERS: The mailing addresses of the General Partner and
the Limited Partners are listed in Exhibits A and B of this Agreement.
1.6 TERM: The Partnership's term commenced effective December 1, 1999 and
will expire on December 31, 2020, subject to earlier termination up on the
occurrence of any of the following:
1.6.1 The termination, dissolution, retirement, removal, resignation,
withdrawal or bankruptcy of the General Partner or an assignment for the benefit
of its creditors by the General Partner unless the Limited Partner elects to
continue the Partnership as provided in Section 6.6 of this Agreement;
1.6.2 The agreement of Partners holding at least a majority of the
aggregate Profits Interest (as defined hereinafter) of the Partnership to
terminate the Partnership;
<PAGE>
1.6.3 An event of termination otherwise provided by this Agreement or
by law.
1.7 DOCUMENTS: The Partnership will execute and file the Documents
necessary to comply with the requirements of the laws of California for the
formation, continuation and operation of limited partnerships, including
fictitious business name statements. The Partners agree to execute all documents
and to undertake all other acts, as reasonably may be deemed necessary by the
General Partner in order to comply with the requirements of the laws of
California for the formation, continuation and operation of the Partnership.
ARTICLE II
----------
2. CONTRIBUTIONS TO CAPITAL
------------------------
2.1 DEFINITION OF UNITS: The interest of the Partners in the Partnership
will consist on 100 separate interests, or fractions thereof, referred to as
"Units." The interest of each of the Partners in the Partnership is the number
of Units set forth opposite the Partner's name on Exhibits A and B under the
caption "Number of Units".
2.2 ISSUANCE OF UNITS: The Partnership will issue the Units shown on
Exhibits A and B on the terms and conditions indicated in this Agreement,
including the obligation of each purchaser of Units to make the Capital
Contribution (as hereinabove defined) to the Partnership provided in Section 2.3
of this Agreement.
2.3 CONTRIBUTIONS OF LIMITED PARTNERS: The Limited Partners will not be
required to make contributions to the Partnership except as provided in this
Agreement. The Limited Partners' contributions will be made at the times and in
the manner provided in this Agreement. The Limited Partners will not be
personally liable for any debts, liabilities or obligations of the Partnership
except as otherwise provided under the Uniform Limited Partnership Act of
California. Each Partner will contribute the amount set forth opposite the
Partner's name in Exhibits A and B under the caption "Capital Contribution" to
the Partnership for the Units purchased by that Partner (the "Capital
Contribution").
2.4 ADMISSIONS OF LIMITED PARTNERS: The Partnership admits each person
listed on Exhibit B as a Limited Partner effective as of the date of this
Agreement. Each Limited Partner acknowledges its obligation to make the Capital
Contribution as shown said Exhibits to the Partnership for Units purchased by
the Limited Partner as set forth on the Exhibits in accordance with Section 2.3
of this Agreement.
2.5 CONTRIBUTION OF GENERAL PARTNER: The General Partner will not be
required to make contributions to the Partnership except as provided in Exhibit
A and elsewhere in this Agreement and will not be liable to any Limited Partner
for repayment of their Capital Contribution. The General Partner will be liable
to advance operating and administrative costs of the Partnership, not to exceed
$5000 per month.
<PAGE>
2.6 CAPITAL ACCOUNTS: A capital account ("Capital Account") will be
established for each Partner to which will be credited the amount of the
Partner's Capital Contribution, any subsequent contributions and the partner's
share of Profits (as hereinafter defined) and which will be debited with the
Partner's share of Losses (as hereinafter defined) and the amounts of
distributions made to the Partner. If any Partner has a negative balance (less
than zero) in his Capital Account upon liquidation of the Partnership (after
allocation of Profits and Losses upon such liquidation), that Partner shall
contribute cash to the Partnership in an amount equal to such negative balance,
and such cash shall be distributed to the Partners in accordance with their
positive balances.
2.7 CAPITAL AND PROFIT INTEREST: The ownership percentage or capital and
profits interest of each Partner equals the percentages shown on Exhibits A and
B under the captions "Capital Interest" (the "Capital Interest") and "Profits
Interest" (the "Profits Interest").
2.8 UNRETURNED CONTRIBUTIONS: A sub-account to each Partners' Capital
Account will be maintained by the Partnership for each partner which will be
credited with all contributions, including the Capital Contribution by each
Partner. These sub-accounts are referred to in this Agreement as "Unreturned
Contributions". The Unreturned Contribution for a Partner will be reduced by any
distribution to the Partner pursuant to section 3.3 of this Agreement.
ARTICLE III
-----------
3. PROFITS, LOSSES AND DISTRIBUTIONS
---------------------------------
3.1 DEFINITIONS: The following terms are defined for purposes of this
Agreement:
3.1.1 "Accounting Period" of the Partnership is the Partnership's
fiscal year.
3.1.2 "Affiliate" is a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the General Partner.
3.1.3 "Capital Event" is the sale, refinancing or other disposition of
all or a substantial portion of the Partnership's assets. Capital Event also
includes the recovery of hazard or casualty insurance (other than business
interruption insurance) proceeds in excess of any amount expended for
restoration or repair.
3.1.4 "Distributable Cash" is all cash of the Partnership, however
derived, less (I) the amount necessary for payment of all cost, expenses,
obligations and liabilities of the Partnership then due; (ii) the amount of any
refundable deposits; and (iii) the amount deemed necessary by the General
Partner, in the exercise of its reasonable discretion based on its analysis of
the Partnership's anticipated cash flow and cash requirements, to establish a
reserve for the payment of foreseen or unforeseen costs, expenses, obligations
or liabilities of the Partnership.
<PAGE>
3.1.5 "Operations" includes all transactions of the Partnership which
are not Capital Events.
3.1.6 "Profits" and "Losses" are the Partnership's net profits and net
losses, respectively, as finally determined for each Accounting Period for
Federal income tax purposes using the cash method of accounting.
3.2 ALLOCATION OF PROFITS AND LOSS: The Profits and Losses or Profits
Interest of the partnership for each Accounting Period commencing with the
Accounting Period ending December 31, 2000 will be allocated as shown at
Exhibits A and B.
3.3 DISTRIBUTIONS: Distributable Cash from Operations or Capital Events for
each Accounting Period will be distributed at the times provided in Section 3.4
of this Agreement among the Partners as follows:
3.3.1 Distributable Cash from Operations or Capital Events for each
Accounting Period will be distributed at the times provided in Section 3.4 of
this Agreement among the Partners as follows:
3.3.1.1 First, prorata to all Partners, on at least a quarterly
basis and in an amount sufficient to pay estimated taxes (Federal and State)
based upon each Partners' respective share of partnership income for the
quarter.
3.3.1.2 Next, a return of each Partners' Capital Contribution:
subject to any restrictions provided for in any loan agreement or to the
contractual arrangement of the Partnership; and
3.3.1.3 Then, as shown at Exhibit A and B to the General Partner
and to the Limited Partners.
3.4 TIME OF ALLOCATIONS AND DISTRIBUTIONS AND MISCELLANEOUS PROCEDURES:
3.4.1 Except as otherwise provided in this Agreement, distributions of
cash and allocation of Profits and Losses shall be made as soon as possible but
no later than 30 days from the time the cash becomes available.
3.4.2 The General Partner may at its discretion make additional
prorata distributions of Partnership cash in addition to those described in
Section 3.4.1 of this Agreement during an Accounting Period, provided that
adequate reserves have been established for Partnership obligations and further
provided that such distributions are not prohibited by loan or other agreements.
<PAGE>
3.4.3 Allocation of Profits and Losses and distributions of cash to
the partners will be allocated or distributed among the Partners in accordance
with each Partner's Profits Interest.
3.5 SHARING BETWEEN TRANSFEROR AND TRANSFEREE: If an interest in the
Partnership is transferred, the Profits and Losses allocable and the cash
Distributable to that interest for the Accounting Period during which the
transfer occurred will be allocated and distributed between the transferor and
transferee of the interest in proportion to the time during the Accounting
Period that the interest was owned by the transferor and transferee. The
transfer will be deemed to occur effective on the first day of the month in
which the transferor signs the agreement providing for the transfer of the
interest to the transferee. A Capital Account and an Unreturned Contribution
sub-account will be established for each transferee and will be credited or
debited as appropriate with an amount in proportion to the number of Units
respectively transferred and retained.
3.6 ELECTIONS: All elections required or permitted to be made by the
Partnership by the Internal Revenue Code of 1986, as amended, including, but not
limited to, the election pursuant to Section 754 will be made by the General
Partner in a manner which, in the General Partner reasonable judgment, will be
most advantageous to the Partners holding at least a majority of the aggregate
Capital Interest of the Partnership. The General Partner may require as a
condition to making an election that the Partner requesting an election agree to
pay any costs incurred by the Partnership in making the election or in
maintaining any records required to give effect to the election. Each Partner
will, upon request, supply the information necessary to properly give effect to
the election.
ARTICLE IV
----------
4. LOANS FROM PARTNERS
-------------------
4.1 LOANS FROM PARTNERS: Any Partner, including the General Partner, may
(but, except as otherwise described herein, is not obligated to) advance funds
to the Partnership if finds are deemed necessary by the General Partner. The
advances shall be evidenced by the Partnership's note payable to the lending
Partner. The note may provide for interest at the per annum rate often percent
(10%). Unless the note provides otherwise, it will be repaid in full prior to
any distributions to the Partners.
ARTICLE V
---------
5. POWERS, RIGHTS AND OBLIGATIONS OF PARTNERS
------------------------------------------
5.1 GENERAL PARTNER TO MANAGE BUSINESS: The General Partner will manage and
control the business of the Partnership. The Limited Partner will not
participate in or have any control over the Partnership business nor have any
<PAGE>
right or authority to act for or bind the Partnership. Any contract or agreement
to which the Partnership is made a party will be binding upon the partnership if
signed by the General Partner and the execution of the contract or agreement by
the General Partner will be conclusive evidence to any third party that all
authorizations and consents required under this Agreement have been obtained.
5.2 POWERS OF GENERAL PARTNER: Except as otherwise expressly provided in
the Agreement, the General Partner will possess and enjoy all the rights and
powers of a General Partner under the laws of California, including, but not
limited to, the power to:
5.2.1 Purchase assets and execute and deliver any collateral or
related documents, security agreements, deeds of trust or other documents and
instruments concerning the purchase;
5.2.2 Borrow money, on behalf of the Partnership, in connection with
financing any transactions;
5.2.3 Finance, manage, expand and further develop the business of the
Partnership;
5.2.4 Sell Units on the terms set forth in this Agreement; and
5.2.5 Execute any other documents necessary or appropriate to carry
out the intention and purposes of this Agreement
5.3 CONSENT OF PARTNERS: The General Partner, without the prior written
consent of the Partners holding at least a majority of the aggregate Capital
Interest of the Partnership, is expressly prohibited from:
5.3.1 Continuing the business of the Partnership upon the removal,
withdrawal, dissolution, retirement, resignation or bankruptcy of the General
Partner or an assignment for the benefits of its creditors by the General
Partner other than as may be necessary to conserve or maintain the assets of the
partnership, except as otherwise provided in this Agreement:
5.3.2 Selling, exchanging, transferring assigning, encumbering,
pledging or otherwise disposing of any of the Partnerships assets; and
5.3.3 Executing or delivering any assignment for the benefit of
creditors of the Partnership.
5.4 RESTRICTION ON AUTHORITY OF GENERAL PARTNER: Notwithstanding Section
5.3 of this Agreement, and in addition to other acts expressly prohibited or
restricted by this Agreement or by law, the General Partner is expressly
prohibited from:
5.4.1 Doing any act in contravention of this Agreement:
<PAGE>
5.4.2 Doing any act which would make it impossible to carry on the
ordinary business of the Partnership;
5.4.3 Confessing a judgment against the Partnership;
5.4.4 Possessing Partnership property or selling, exchanging,
transferring, assigning or leasing the rights of the Partnership in specific
Partnership property for other than a Partnership purpose:
5.4.5 Admitting any other person as a Partner, except as provided in
this Agreement; and
5.4.6 Performing any act which at the time the act occurred, would
subject any limited Partner to liability as a General Partner in any
jurisdiction in which the partnership does business.
5.5 DUTIES OF GENERAL PARTNER: The General Partner will use its best
efforts to carry out the purposes, business and objectives of the Partnership;
will devote the time to Partnership business as is reasonably required to carry
out the Partnership's purposes, businesses and objective will use its best
efforts to assure efficient management and operation of the Partnership; and
will fully discharge its fiduciary duty to the partnership and other Partners.
Without limiting the immediately preceding sentence, and in addition to all
other duties imposed by law or this Agreement the General Partner is obligated
to:
5.5.1 Act in a fiduciary manner regarding the partnership, the other
Partners and Partnership assets;
5.5.2 File and publish all certificates, statements or other documents
required by law for the formation and operation of the Partnership and for the
conduct of its business in all appropriate jurisdictions: provided, however,
that performance under the Section 5.5.2 of this Agreement will be excused
whenever the Limited Partner refuses to cooperate and their cooperation is
required in order to perform these duties:
5.5.3 Furnish the partners with the reports and information specified
in Section 8.3 of this Agreement:
5.5.4 Maintain the records of the Partnership assets and the reports
of attorneys, accountants or other professionals received by the Partnership;
5.5.5 Maintain complete books of account and records regarding
Partnership operations and business affairs as provided in Section 8.1 of this
Agreement;
<PAGE>
5.5.6 Keep all books and records of the Partnership available for
inspection and audit by the Limited Partners or their representatives as
provided in Section 8.2 of this Agreement;
5.5.7 Use its best efforts to maintain the status of the Partnership
as a "partnership" for Federal income tax purposes;
5.5.8 File all Federal, state or local tax returns and reports and
make all other filings which are required by law or governmental agencies;
5.5.9 Invest the finds of the Partnership (including reserves) which
are not distributed to the Partners and are, in the General Partner's present
opinion. temporarily not required for the conducts of the Partnership's
business, in government-insured interest-bearing savings accounts, short-term
governmental obligations or certificates of deposit of a commercial bank having
at least $250,000,000 of net worth; and
5.5.10 Cause the Partnership to make timely Federal income tax
elections as may be in the best interests of the Partners.
5.6 COMPENSATION OF GENERAL PARTNER: The compensation of the General
Partner under this Agreement are limited to 2O% of the proceeds of the sale of
the Partnership assets and 20% of the Profits, Losses and distributions of the
Partnership. The General Partner shall be allocated a $500,000 interest in the
proceeds of the real estate now owned by the Partnership, which is located in
the Dominican Republic and which is more fully described at Exhibit C hereto.
The Limited Partner shall be allocated a $2.0 million interest in the proceeds.
If the real estate is sold for less than a total of $2.5 million the net
proceeds shall be allocated in the Partnership Profit Ratio.
5.7 REMOVAL OF GENERAL PARTNER:
5.7.1 The General Partner may be removed only in accordance with 5.1
above, by an affirmative vote of the Partners holding at least a majority of the
aggregate Capital Interests of the Partnership. A written notice signed by the
partners voting for removal will be delivered to the General Partner informing
it of its removal and specifying the effective date of its removal. This notice
concurrently will be sent to all the Partners.
5.7.2 The General Partner's removal will be effective as of the date
specified in the notice provided for in Section 5.7.1 of this Agreement. This
removal date will not be less than 10 nor more than 30 days from the date on
which the notice is mailed.
5.7.3 If the General Partner is removed as provided in this Agreement,
the provisions of Section 6.6 and 6.7 of this Agreement will apply.
<PAGE>
5.8 INDEMNIFICATION OF GENERAL PARTNER: The Partnership will indemnify and
hold harmless the General Partner (and any other Partner found to be liable as a
General Partner) from any loss or damage incurred by reason of any act performed
or omitted by the General Partner in good faith on behalf of the Partnership and
in a manner within the scope of the authority granted to the General Partner by
this Agreement and in the best interests of the partnership, provided that (i)
the acts or missions do not constitute gross misconduct, breach of fiduciary
duty or intentional breach of the terms of this Agreement, and (ii) the
satisfaction of any indemnification and holding harmless will be from and
limited to Partnership assets and the Limited Partners will not have any
personal or other liability on account of the indemnification and holding
harmless of the General Partner.
5.9 RIGHTS OF LIMITED PARTNERS: In addition to all other rights and powers
possessed by a limited partner in a limited partnership under the laws of
California, the Limited Partners, holding at least a majority of the aggregate
Capital Interest of the Partnership, will be entitled to:
5.9.1 Amend the Agreement as provided in Section 10.11 hereof;
5.9.2 Dissolve the Partnership as provided in Section 1.6 hereof;
5.9.3 Remove the General Partner as provided in Section 5.7 hereof;
and
5.9.4 Approve or disapprove the sale of any assets of the partnership
as provided in Section 5.3.2 hereof.
5.10 OTHER ACTIVITIES OF PARTNERS: The Limited Partners and their
affiliates and the General Partner and its affiliates may engage in other
businesses similar in nature to the businesses of the Partnership or otherwise
without any duty or obligation to offer any business opportunity to the
Partnership or the other Partners or to account to the Partnership or the other
Partners regarding the business Opportunity or the profits derived from such
business opportunities. The Limited Partners understand and agree that the
General Partner and its Affiliates already are involved in other activities and
business, that they will engage in other activities and businesses and that the
General Partner and its Affiliates will not be required to devote their full
time to the business of the Partnership but only the time and effort reasonably
required to fulfill the obligations of the General Partner
5.11 INSURANCE
5.11.1 The Partnership will maintain at all times commercial general
liability insurance
<PAGE>
5.11.2 The Partnership will maintain other types of insurance, as
appropriate for the activities of the Partnership, all in amounts as the General
Partner deems prudent in its reasonable and good faith business judgment. All
insurance policies will name the partnership as the insured party.
5.12 MEETINGS: Meetings of the Partners may be called by the General
Partner or any Limited Partner holding more than 10% of the aggregate Capital
Interest of the Partnership for any matters for which the Partners may vote on
as set forth in this Agreement. A list of the names and addresses of all Limited
Partners will be maintained as part of the books and records of the Partnership
and will be made available upon request to any Limited Partner or his
representative for duplication at cost. Upon receipt of a written request either
in person or by registered mail stating the purpose of the meeting, the General
Partner will provide all Partners within ten days after receipt of the request,
written notice of the meeting and purpose of the meeting. The meeting will be
held on a date not less than 10 not more than 30 days after receipt for the
request, at a time and place convenient to the Partners.
ARTICLE VI
----------
6. ADMISSION AND WITHDRAWAL OF PARTNERS AND TRANSFER OF PARTNERSHIP INTERESTS
--------------------------------------------------------------------------
6.1 DEFINITIONS:
6.1.1 "Admission" of a Partner means the addition of a new Partner to
the Partnership other than through the transfer of an existing Partnership
interest.
6.1.2 "Withdrawal" of a Partner means the retirement or withdrawal of
a Partner.
6.1.3 "Transfer" of an interest in the Partnership means the transfer,
alienation, sale, assignment, levy, pledge or other disposition or encumbrance
of all or any part of an existing interest in the Partnership, whether voluntary
or involuntary.
6.1.4 "Involuntary Transfer" means a Transfer arising by reason of the
death, dissolution, insanity, incompetency, insolvency or bankruptcy of a
Partner, or by operation of law or to comply with any law, order, proclamation,
regulation, ordinance. demand or requirement of any governmental agency or by
judicial levy.
6.2 ADMISSION OR WITHDRAWAL OF A PARTNER:
6.2.1 Any admission or Withdrawal of a Partner will be deemed to occur
effective on the first day of the calendar month in which the Admission or
Withdrawal occurs, and any transfer will be deemed to occur effective on the
first day of the calendar month in which the Transfer occurs.
<PAGE>
6.2.2 No person will he admitted as a Limited Partner without the
prior written consent of all Partners.
6.2.3 No person will be admitted as a General Partner without the
prior written consent of all Partners.
6.2.4 In the event of the Admission of a Partner or the withdrawal of
a Partner, this Agreement will be promptly amended as necessary to reflect any
changes in the Profit and Loss allocations of the Partners, to reflect the
Capital contribution of the newly admitted Partner or the withdrawal of capital
by a withdrawing Partner, and to set forth any new provisions or to amend any
existing provisions of the Agreement which may be necessary or desirable in
light of the Admission or Withdrawal of a Partner.
6.2.5 A General Partner may withdraw at any time provided, however,
that the withdrawal will be effective on the tenth day following written notice
to each Partner of this intention to do so.
6.3 TRANSFER OF PARTNERSHIP INTEREST:
6.3.1 Except as otherwise provided in this Agreement or by law, a
Limited Partner may not Transfer all or any part of its interest as a Partner in
the partnership without the written consent of the General Partner, which
consent will not be unreasonable withheld.
6.3.2 Unless a transfer will cause the acceleration or breach of a
note secured by a Partnership property, consent of the General Partner will not
be required if the Transfer is an Involuntary Transfer, or if the Transfer is to
an existing Partner; or, if any partner is a joint venture or partnership or
corporation and the Transfer is to a member of the joint venture or partnership
or a shareholder of the corporation who was such a member or shareholder at the
time this Agreement is executed: or if the Transfer is to or for the benefit of
the spouse or a lineal descendant or ancestor of the transferring Partner: or if
the Transfer is by any corporation to a shareholder; or if the Transfer is to a
trust, Keogh, 40 1(k) or profit sharing plan for the benefit of the majority of
outstanding shares or other ownership interests in the transferee are owned by
any of the foregoing transferors; except for an Involuntary Transfer, consent
shall be required if the Transfer is of less than the entire interest in the
Partnership of the transferor.
6.4 RIGHT OF FIRST REFUSAL: A Partner (referred to in this Section 6.4 of
the Agreement as the "Selling Partner") may not, except as otherwise permitted
in this Section 6.4 of this Agreement, exchange, sell, or transfer all or any
portion of its interest in the Partnership to any person for value without first
offering the same for a period of thirty (30) days to the Partnership, at a
price upon terms no less favorable than those which the Selling Partner is
willing to accept from the Third Party, and be accompanied by a true copy of the
third party's offer. For thirty (30) days after receipt of the written offer,
the Partnership has the right to accept the Selling Partner's offer by written
notice of the acceptance to the Selling Partner. If the offer is accepted, the
Selling Partner and the Partnership will consummate the sale as soon thereafter
<PAGE>
as is reasonably possible. If the offer is not accepted, the Selling Partners
must offer such Partnership interest to all of the remaining Limited Partners.
Any accepting Partner shall acquire offered Partnership interests in proportion
to their relative Capital Interests. If the Partnership or the remaining
Partners have not accepted the offer to purchase the Selling Partner's interest
within the thirty (30) day period, the Selling Partner may exchange, sell or
transfer its interest to a third party only at a price and on terms no less
favorable to the Selling partner than the price and terms offered to the
partnership, without the further consent of the General Partner. If the Selling
Partner does not sell its interest to its proposed third party buyer within six
months after the Partnership refused the interest, the Selling Partner will be
obligated to again comply with this Section 6.4 of this Agreement. The
provisions of this Section 6.4 of this Agreement will not apply to a transaction
described in Section 6.3.2 of this Agreement. Any disputes that arise between
the Partnership and the Selling Partner over the price at which, and the terms
of which, the Partnership may purchase the Selling Partner's interest pursuant
to this Section 6.4 of this Agreement will be resolved by arbitration. A
majority of a panel of three arbitrators will decide all disputed issues as
promptly as possible. The Partnership and the Selling Partner each will select
an arbitrator for the panel with the first two arbitrators selecting the third
arbitrator. If the first two arbitrators are unable to select the third
arbitrator then the third arbitrator will be selected by the Los Angeles office
of the American Arbitration Association, whose rules and procedures will govern
the arbitration proceedings.
6.5 SUBSTITUTED LIMITED PARTNERS AND ASSIGNEES:
6.5.1 The transferee or proposed transferee of all or any part of a
Limited Partner's interest in the Partnership will not have the right to become
a substituted Limited partner in place of the transferor of the Limited
Partner's interest unless a fully executed, verified and acknowledged written
assignment has been filed with the General Partner expressly stating that it is
the transferor's intention that the transferee become Limited Partner in the
transferor's place and the transferor and transferee have executed, verified and
acknowledged all other documents, in form and substance reasonably satisfactory
to the General Partner, as the General Partner may reasonably deem necessary or
desirable to effect the Admission of a substituted Limited Partner, including
the appointment of the General Partner as the transferee's attorney-in-fact as
provided in Section 10.3 of this agreement and the written acceptance and
adoption by the transferee of the provisions of this Agreement and any
amendments to this Agreement. The transferee (including a legatee, distributee
or successor) will pay all reasonable expenses regarding admission as
substituted Limited Partner, including, but not limited to, the cost of the
preparation, filing and publishing of any amendment to this Agreement. After a
transferee has become a substituted Limited Partner, the General Partner will
promptly take the necessary and appropriate steps to prepare and record an
amendment to this Agreement and each substituted Limited Partner agrees that its
duly appointed attorney-in-fact may execute the amendment on its behalf.
6.5.2 A party which becomes a substituted Limited Partner succeeds to
all of the rights and powers and is subject to all of the obligations,
restrictions and liabilities of a Partner to the interest in the partnership
which is acquired by the party
<PAGE>
6.5.3 A transferee who does not become a substituted Limited Partner
will be entitled only to receive the share cash distributions and the return of
Capital Contributions to which the Partner from whom it acquired its interest in
the partnership would have been entitled for the interest acquired but,
notwithstanding any other revisions in this Agreement to the contrary, will have
no right to require any information or account of Partnership books and no other
rights and powers of a Partner. A transferee nevertheless is subject to all of
the provisions of this Agreement and to all of the obligations, restrictions and
liabilities under this Agreement for the interest acquired.
6.5.4 Until the time when the transferee of an interest in the
Partnership becomes a substituted Limited Partner, the transferor of the
interest remains subject to all of the obligations, restrictions and liabilities
under this Agreement for the interest and retains all rights and powers of a
Partner for the interest other than the right to receive cash distributions and
the return of the Capital Contribution.
6.6 CONTINUATION OF PARTNERSHIP INTERESTS:
6.6.1 In the event of the removal, withdrawal, dissolution,
retirement, resignation or bankruptcy of the General Partner or an assignment
for the benefit of its creditors by the General Partner, the Limited Partners
holding a majority of the aggregate Capital interest of the Partnership may
continue the business of the Partnership for the balance of the term specified
in this Agreement by electing a successor General Partner. Upon the election of
a successor General Partner, the predecessor General Partner will cease to be a
General Partner in the Partnership and its then general partner interest in the
Partnership will be convened into a comparable limited partners interest with
the same rights and priorities to distributions of cash.
6.6.2 The successor General Partner will agree in writing to be bound
by the provisions of this Agreement, and thereafter, will be deemed to be the
"General Partner" under this Agreement. To create and provide any successor
General Partner with an interest in the Partnership's Profits, Losses and cash
distributions, the Limited Partners holding at least a majority of the aggregate
Capital Interest of the Partnership may assign to the successor General
Partner's rights to allocations of Profits and Losses pursuant to Section 3.2
hereof and to distributions of cash pursuant to Section 3.3 hereof commencing
with the date the predecessor General Partner's rights thereto terminate
pursuant to Section 6.6.1 above.
6.7 CONTINUATION OF GENERAL PARTNER'S OBLIGATIONS: The removal, withdrawal,
retirement, resignation or assignment for the benefit of its creditors of a
General Partner will not relieve such General Partner of any of its obligations
to the Limited Partner of the Partnership which previously may have arisen under
this Agreement.
<PAGE>
ARTICLE VII
-----------
7. DISSOLUTION AND LIQUIDATION
---------------------------
7.1 WINDING UP AFFAIRS AND LIQUIDATION: Upon the expiration of the term of
the Partnership as provided in Section 1.6 of this Agreement, the Partnership
will be dissolved. Upon its dissolution, the persons required or permitted by
law to carry out the winding up of the affairs of the Partnership ("Liquidator")
will: (i) promptly notify all Partners of the dissolution; (ii) proceed to
liquidate the assets of the Partnership by converting the assets into cash
insofar as deemed practicable by the Liquidator at the highest price obtainable;
(iii) wind up the affairs of the Partnership; and (iv) after paying or providing
for the payment of all liabilities and obligations of the Partnership,
distribute the proceeds of liquidation and other assets of the Partnership as
provided by law and the terms of this Agreement.
7.2 DISTRIBUTION ON DISSOLUTION: Following the dissolution of the
Partnership, the proceeds of liquidation and other assets of the Partnership
will be applied and distributed in the following order of priority:
7.2.1 To the payment of debts and liabilities of the Partnership
(other than any loans and advances that may have been made by any of the
Partners, or amounts owing to any of the Partners) and the expenses of
liquidation;
7.2.2 To the setting up of any reserves that the Liquidator may deem
reasonably necessary for any contingent or unforeseen liabilities or obligations
of the Partnership, which reserves will be paid over to an escrow holder
designated by the Liquidator to be held of the purpose of disbursing the
reserves in payment of any contingent or unforeseen liabilities, and, at the
expiration of a period as the Liquidator deems advisable, any balance remaining
to be distributed in the manner hereafter provided;
7.2.3 To the payment of any loans and advances that may have been made
by any of the Partners or amounts owing to any of the Partners, except for
amounts included in Section 7.2.4; and
7.2.4 To the partners as provided in Section 3.3.1 of this Agreement.
7.3 ASSETS OTHER THAN CASH: Assets other than cash will be distributed in
kind on the basis of: (i) in the case of notes receivable, a fractional interest
as tenant-in-common with other Partners determined by a Partner's Capital
Interest in the Partnership and (ii) in the case of other assets, their then
fair market value as determined by an independent appraiser of the American
Institute of Real Estate Appraisers. To the extent feasible, each Partner will
be entitled to determine to what extent it wishes to have distributions to it
made in cash or in kind. As necessary, distributions in kind will be made to the
Partners as tenants-in-common.
<PAGE>
ARTICLE VIII
------------
8. BOOKS OF ACCOUNT AND PARTNERSHIP RECORDS
----------------------------------------
8.1 BOOKS OF ACCOUNT: The General Partner will keep and maintain, or cause
to be kept and maintained, in accordance with generally accepted accounting
principles consistently applied from year to year, complete and accurate books,
records and accounts of' the Partnership. These books will be closed and
balanced annually as of the end of each Accounting Period. An accounting of all
items of receipts, income, profits, costs, expenses and losses will be made by
the General Partner annually as of the last day of each Accounting Period and
also upon termination of this Agreement.
8.2 INSPECTION: All books, records and account of the Partnership are the
property of the Partnership and will be kept at all times at an office of the
General Partner. All Partners and their duly authorized representatives have the
right to examine the books, records and accounts at their place of normal
storage at any and all reasonable times and to make copies or extracts at the
inspecting Partner's expense.
8.3 REPORTS:
8.3.1 Within 120 days after the end of each calendar year of the
Partnership's operation, the General Partner will furnish each Partner with an
unaudited statement of income for the year.
8.3.2 Each year the General Partner will furnish each Partner with the
information concerning the Partnership that is necessary for the preparation of
the Partners' Federal income tax returns.
8.3.3 Each year the General Partner will furnish each Partner with an
unaudited annual report containing: (i) a balance sheet as of the end of the
Partnership's fiscal year and statements of income. Partners' equity, and
changes in financial position and a cash flow statement for the fiscal year and
(ii) a report of the activities of the Partnership during the fiscal year.
8.3.4 Except as otherwise expressly provided in this Agreement, all of
the reports and information to be furnished pursuant to this Section 8.3 of this
Agreement will be furnished at the expense of the Partnership and, unless
required to be certified by an independent certified public accountant, will be
certified by the General Partner. The General Partner also will furnish to any
Partner, at the Partner's expense, any other reports on the Partnership's
operation and condition as the Partner may reasonably request.
8.4 BANK ACCOUNTS: The General Partner will maintain in a bank which is a
member of the Federal Deposit Insurance Corporation one or more accounts, which
accounts will be used for the payment of the disbursements properly chargeable
to the Partnership, and in which will be deposited the receipts and income
received from the Partnership business. In addition, there will he deposited in
the accounts all amounts borrowed from third parties. All income, receipts and
amounts required by this Section 8.4 of this Agreement to be deposited in the
<PAGE>
accounts will be the property of the Partnership and received, held and
disbursed by the General Partner only for the purposes specified in this
Agreement. There will not be deposited in any accounts any funds other than
those specified above, and no other hinds will be commingled with these funds.
Withdrawals will be made from the accounts only for the purpose of paying
Partnership expenditures or distributions authorized by this Agreement.
8.5 ACCOUNTING DECISIONS: All decisions as to accounting elections, except
as specific provided to the contrary in this Agreement will be made by the
General Partner in accordance with generally accepted accounting principles
consistently applied and taking into account the best interests of the Limited
Partners.
8.6 FEDERAL INCOME TAX ELECTIONS:
8.6.1 The Partnership may, to the extent permitted by applicable
statues and regulations, or upon obtaining any necessary approvals of the
Commissioner of Internal Revenue, elect to use the methods or types of
depreciation as will permit the highest depreciation deductions in the early
years of the life of an asset, unless or until the General Partners determines
upon the advice of the Partnership's accountants that another method will be
more favorable to the Limited Partners.
8.6.2 The General Partner, upon the written request of Partners
holding at least a majority of the aggregate Capital Interest of the
Partnership, agrees to timely file an election pursuant to Section 754 of the
Internal Revenue Code of 1954, as amended, to adjust the basis of the
Partnership's property.
ARTICLE IX
----------
9. REPRESENTATIONS AND WARRANTIES OF THE PARTNERS
----------------------------------------------
9.1 GENERAL PARTNER: The General Partner warrants and represents to the
Limited Partners as follows:
9.1.1 The General Partner (and its signatory to this Agreement) has
all authority required to enter into this Agreement and has obtained all
requisite consents and approvals and, when executed by the General Partner's
signatory, this Agreement will be binding on the General Partner subject only to
the Limited Partner's due execution of the Agreement.
9.1.2 The General Partner covenants and agrees, for the benefit of the
Limited Partners, that throughout the term of' this Agreement it will at all
times use its best efforts, acting as a fiduciary on behalf of the Limited
Partners, to: (i) perform or cause to be performed its obligations under this
Agreement and all other agreements and documents executed in furtherance or in
connection with this Agreement and (ii) do or cause to be done all things
necessary or proper within its power or control to protect the rights of the
Limited Partners.
<PAGE>
9.2 LIMITED PARTNERS: The Limited Partners warrant and represent to the
General Partner as follows:
9.2.1 Each Limited Partner is acquiring its interest in the
Partnership as an investment for itself and not for the benefit of any other
person, and has no present intention to resell or otherwise transfer all or any
portion of the interest. Each Limited Partner acknowledges that the Partnership
interest will not be, and the Limited Partner has no right to require that they
be, registered under the securities laws of any State other than California.
Each Limited Partner acknowledges that the California Commissioner of
Corporations requires that the following legend be placed on any evidence of
ownership of Units held by California residents:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THE SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREOF,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES."
9.2.2 Each Limited Partner (and its signatory to this Agreement) has
all authority required to enter into this Agreement and has obtained all
requisite consents and approvals and, when executed by the Limited Partner, this
Agreement shall be binding on the Limited Partner subject only to its due
execution by other Partners. Proof of the above may be requested by the General
Partners at its discretion.
9.2.3 Based upon each Limited Partner's investment expertise gained
through experience, educational background, consultation with qualified
advisors, prior experience with similar investments or a combination thereof,
each Limited Partner believes that its investment in the Partnership is suitable
for it in view of his financial and tax situation, investment objectives and
investment objectives of the Partnership.
ARTICLE X
---------
10. MISCELLANEOUS PROVISIONS
------------------------
10.1 NOTICES: All notices, consents, waivers, request, votes or other
Instruments or communications provided for under this Agreement ("notices") will
be in writing, signed by the parties giving the notice, and will be deemed
properly given when actually received or when deposited in the United States
mail, if sent by registered or certified mail, return receipt requested, first
class postage and fees prepaid, addressed to the addresses as set forth in
Exhibits A and B. Each Partner may, by notice to all other Partners, specify a
new address for the receipt of notices.
<PAGE>
10.2 CONSENTS DEEMED GIVEN IF NOT WITHHELD: Whenever a consent, approval
waiver or affirmative vote of a Partner is required under this Agreement or is
desirable regarding any transaction, the Partner will be given notice requesting
the consent, approval, waiver or affirmative vote. If the Partner does not
respond within thirty (30) days (or the time period specified if a different
period is provided in the notice) after receipt of the notice, by delivery of a
notice to the General Partner (which includes a facsimile) specifically
withholding, or indicating an inability at the time to give the Partner's
consent, approval, waiver or affirmative vote, or requesting additional
pertinent documentation or information, then the Partner will be deemed
conclusively to have given his consent, approval, waiver or affirmative vote.
10.3 LIMITED POWER OF ATTORNEY: Each Limited Partner, by its execution of
this Agreement, irrevocably constitutes and appoints the General Partner as its
true and lawful attorney and agent, and to file or record in any appropriate
public office: (i) any certificate or other instrument which may be necessary,
desirable or appropriate to qualify or to continue the Partnership as a limited
partnership or to transact business as a limited partnership in any jurisdiction
in which the Partnership conducts business; (ii) any amendment to this Agreement
or to any certificate or other instrument which may be necessary, desirable or
appropriate to reflect the Admission of a Partner, the Withdrawal of a Partner
or the Transfer of all or any part of the interest of a Partner in the
Partnership or any additional Capital Contribution made or withdrawal of the
Capital Contribution made by a Partner; (iii) any certificates or instruments
which may be appropriate, necessary or desirable to reflect the dissolution and
termination of the Partnership; and (iv) any documents necessary to perfect the
Partnership's security interest in a Limited Partner's Units, including a UCC-1
Financing Statement. This power of attorney will be deemed to be coupled with an
interest and will survive the transfer by the Limited Partner of its interest in
the Partnership. This power of attorney to the General Partner is a limited
power of attorney that does not authorize the General Partner to act on behalf
of a Limited Partner except to complete the transactions described in this
Section 10.3 of this Agreement.
10.4 INTEGRATION: This Agreement embodies the entire agreement and
understanding which exists among the Partners relating to the subject matter of
this Agreement. There are no agreements, representations, warranties, or
statements regarding the subject matter of this Agreement, except as expressly
set forth in this .Agreement.
10.5 APPLICABLE LAW: This Agreement and the rights of the Partners will he
governed by and construed and enforced in accordance with the laws of
California.
10.6 COUNTERPARTS: This Agreement may be executed in counterparts and all
counterparts so executed shall constitute one Agreement binding on all the
parties. It shall not be necessary for each party to execute the same
counterpart.
10.7 SEVERABILITY: In case any one or more of the provisions contained in
this Agreement or any application of the provisions shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions or the remaining applications will not in any way he
affected or impaired.
<PAGE>
10.8 CAPTIONS FOR CONVENIENCE: The captions and headings in this Agreement
are for convenience only and will not be considered in interpreting any
provision of this Agreement.
10.9 BINDING EFFECT: Except as otherwise provided to the contrary, this
Agreement will be binding upon, and inure to the benefit of, the Partners and
their respective heirs, executors, administrators, successors and assigns.
10.10 GENDER AND TENSE: Whenever required by the context, the singular will
be deemed to include the plural, and the plural will be deemed to include the
singular, and the masculine, feminine and neuter genders will each be deemed to
include the other.
10.11 Amendment: This Agreement may be amended in whole or in part by an
agreement in writing signed by Limited Partner holding at least a majority of
the aggregate Capital Interest of the Partnership and such agreement will be
recorded to reflect any such amendment.
10.12 EXHIBITS: Exhibits referred to in this Agreement are incorporated by
reference into this Agreement.
10.13 WAIVER OF ACTION FOR PARTITION: Each Partner waives any right to
maintain partition any investment of the Partnership during the term of the
Partnership.
10.14 ATTORNEY'S FEES: In the event of the litigation, the prevailing party
will be entitled to recover reasonable attorney's fees and costs from the
non-prevailing party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
General Partner:
Itasca Holding Ltd.,
A Nevada Corporation
By: /S/ Kurt Von Hoffman
-------------------------
President
<PAGE>
SIGNATURE OF LIMITED PARTNER
Go Call Inc.,
A Delaware Corporation
By: /S/ Michael Ruge
-------------------------
Michael Ruge, CEO
and Authorized Signatory
<PAGE>
ITASCA HOLDING, LTD.
A Nevada Corporation
By: /S/ Kurt Von Hoffman
-------------------------
President
ACS FINANCIAL INC. RETIREMENT TRUST
By: /S/ Michael H. Artan
-------------------------
Michael H. Artan
Trustee
Tide Lines, LLC.
A Nevada Limited Liability Company
- --------------------------------------------------------------------------------
VIA FAX
- -------
Michael Ruge
2668 Larmar Road
Los Angeles, Ca 90068
January 18, 2000
Dear Mr. Ruge:
This is to confirm our agreement to terminate that certain agreement
dated August 18, 1999 with Go Call, Inc. which called for the exchange of stock
of Tide Lines, LLC. for GoBanner.com. (aka The Banner Ad Network) due to Go
Call, Inc.'s inability to deliver the assets agreed upon. A copy of said
agreement is attached hereto for your convenience. Please sign and return this
letter as acceptance of this termination.
Very truly yours
Tide Lines, LLC.
/s/ Michael J. Daniel
---------------------
Michael J. Daniel
President
Agreed and Accepted
/s/ Michael Ruge
- ----------------------
Michael Ruge
Go Call, Inc.
TO: GO CALL, INC.
AND TO: the directors and shareholders therof
As per the decision made at the Board of Directors meeting on July
16th, 1999, I hereby submit my resignation as a Director, Chief Executive
Officer and President of the Corporation, effective December 29th, 1999.
DATED as of the 29 day of Dec, 1999
/s/ Michael Ruge
----------------------------
Michael Ruge
ACKNOWLEDGED BY:
/s/ Irving Moon
----------------------------
Irving Moon, Director
/s/ James Hammer
----------------------------
James Hammer, Director
CONSENT TO ACT, ETC.
TO: GO CALL INC. (the "Corporation")
AND TO: the shareholders thereof
I HEREBY CONSENT to act as a director and officer of the Corporation,
such consent to continue in effect unless revoked by an instrument in writing
delivered to the Corporation.
I HEREBY CONSENT to any meeting of directors or of any committee of
directors of the Corporation to be held by means of such telephone, electronic
or other communication facilities as permit all persons participating in the
meeting to communicate with each other simultaneously and instantaneously, such
consent to continue in effect unless revoked by an instrument in writing
delivered to the Corporation.
DATED as of the 22 day of December, 1999.
/s/ James Hammer
-------------------------
JAMES HAMMER
TO: GO CALL INC.
CONSENT TO ACT, ETC.
TO: GO CALL, INC. (the "Corporation")
AND TO: the shareholders thereof
I HEREBY CONSENT to act as Chief Executive Officer of the Corporation
and to continue to act as a director of the Corporation.
DATED as of the 29th day of DECEMBER, 1999
/s/ Irving Insik Moon
----------------------------
IRVING INSIK MOON
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 79,424
<SECURITIES> 0
<RECEIVABLES> 502,264
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 625,916
<PP&E> 2,139,938
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 1,139,020
<BONDS> 0
0
186
<COMMON> 22,741
<OTHER-SE> 2,861,371
<TOTAL-LIABILITY-AND-EQUITY> 4,117,774
<SALES> 613,830
<TOTAL-REVENUES> 680,171
<CGS> 247,910
<TOTAL-COSTS> 4,289,886
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,609,715)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,609,715)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,609,715)
<EPS-BASIC> (.21)
<EPS-DILUTED> (.21)
</TABLE>
