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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR 12(G)
OF THE SECURITIES EXCHANGE ACT OF 1934
FUTUREONE, INC.
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(Name of Small Business Issuer in its Charter)
Nevada 84-1383677
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
4250 E. Camelback Rd., Suite K-192, Phoenix, Arizona 85018-2751
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(Address of principal executive offices) (Zip Code)
(602) 852-9725
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
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EXPLANATORY NOTE
The Company is filing this Form 10-SB Registration Statement on a
voluntary basis in order to comply with recently enacted rules of the National
Association of Securities Dealers, Inc., which require, among other things, the
Company to become registered with the Securities and Exchange Commission under
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, in order
for the Company to remain eligible for listing on the Over-the-Counter Bulletin
Board.
FUTURE ONE & DESIGN(R), PRIMESERV(R) and NeighborComm(TM) are
trademarks and trade names of the Company. Some trademarks and trade names
included in this Registration Statement are the property of third parties and
the use thereof does not imply a direct or indirect endorsement of the Company
by such third parties.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this Form 10-SB
contains express or implied statements which we believe are forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act and the Company intends that such forward-looking
statements be subject to the safe harbors created thereby. Additional written or
oral forward-looking statements may be made by the Company from time to time in
filings with the Securities and Exchange Commission, in its press releases,
quarterly conference calls or otherwise. The words "believes," "expects,"
"anticipates," "intends," "forecasts," "projects," "plans," "estimates" and
similar expressions identify forward-looking statements. Such statements reflect
the Company's current views with respect to future events and financial
performance or operations and speak only as of the date the statements are made.
Such forward-looking statements involve risks and uncertainties and readers are
cautioned not to place undue reliance on forward-looking statements. The
Company's actual results may differ materially from such statements. Factors
that cause or contribute to such differences include, but are not limited to,
the Company's limited operating history, unpredictability of operating results,
intense competition in various aspects of its business, the risks of rapid
growth, the Company's dependence on key personnel, uncertainty of product
acceptance, changes in laws and regulations, changes in economic conditions, and
an inability to obtain financing, as well as those discussed elsewhere in this
Form 10-SB. Although the Company believes that the assumptions underlying its
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the results
contemplated in such forward-looking statements will be realized. The inclusion
of such forward-looking information should not be regarded as a representation
by the Company or any other person that the future events, plans or expectations
contemplated by the Company will be achieved. The Company undertakes no
obligation to publicly update, review or revise any forward-looking statements
to reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statements is
based.
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
FutureOne, Inc. was incorporated in Nevada on March 22, 1994 as World's
Fare, Inc. World's Fare, Inc. acquired FutureOne, Inc., an Arizona corporation,
which was incorporated December 26, 1996, and the entities were combined in a
reverse merger under an Exchange Agreement dated February 20, 1998, which became
effective March 30, 1998. In August of 1998, World's Fare, Inc. changed its name
to FutureOne, Inc. When used in this registration statement, unless the context
requires otherwise, the terms "Company" and "FutureOne" refer to FutureOne,
Inc., a Nevada corporation (formerly World's Fare, Inc.), and all of FutureOne's
subsidiaries. The Company's principal offices are located at 4250 E. Camelback
Rd., Suite K-192, Phoenix, Arizona 85018-2751, telephone (602) 852-9725 and web
site www.futureone.com.
FutureOne believes it offers a diverse portfolio of communications
solutions to varied customers, and that by offering products and services,
including computers and communications equipment, networking, software
development, Internet access and services, advertising and graphic design
services, and underground cable construction services, it is in a position to
serve the total communications needs of its customers. The Company
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believes that it can maintain and build upon its existing products and services
as it expands into Internet e-commerce, telecommunications and convergence
technology.
Currently, FutureOne's business consists of the following:
- - NeighborComm(TM). FutureOne is developing convergence technology for
residential and commercial applications. FutureOne intends to ultimately
provide voice, data and video services through a single high-speed fiber
optic cable linked directly to residential developments or business and
industrial complexes. The Company's NeighborComm communities will also
include an Intranet designed specifically for the community it serves. The
technology will be marketed under the name NeighborComm (Neighborhood
Communications Systems).
- - Internet. The Company is an Internet access provider. Individual and
business subscribers are supported through the Company's expanding network
of Internet service access sites. The Company develops software
applications customized in accordance with customers' needs and is a
complete e-commerce solutions provider ("CCSP"). Web site development and
e-commerce solutions are designed and supported with on-line and off-line
advertising.
- - Communications Equipment Sales. The Company sells computer and
communications equipment, including complete lines of name brand
communications and computer products.
- - Construction Services. FutureOne is an engineering and underground cable
installation company and offers horizontal drilling and boring services for
all types of underground construction.
INDUSTRY
The Company plans to primarily compete in the communications industry,
but because of the unique lines of business in which it has historically and is
presently engaged, it is also involved and intends to remain involved on a
smaller scale in other industries, such as Internet services, computer and
communication equipment sales and underground cable construction.
CONVERGENCE TECHNOLOGY
The Company believes that the communications industry will continue to
develop and implement convergence technology. Recently, large companies such as
Microsoft Corporation, AT&T Corp., and Sprint Corporation have announced their
intentions to develop and test practical solutions to provide voice, video and
data as bundled services. The Company anticipates that customer demand for
higher speed Internet capabilities, as well as increasing demand for video
communications and teleconferencing, will require new services. In addition,
customer demand for applying the technology of the Internet to their everyday
lives on a local basis will require new applications. Many organizations, large
and small, are attempting to develop products and solutions to meet these
customer demands and, as a result, the industry is very competitive.
INTERNET SERVICES
The Internet services industry is changing rapidly as the Internet
becomes more widely accepted by the public and more customers become experienced
users. Most users are still connecting via traditional telephone connections
such as those offered by America Online, Inc., EarthLink Network, Inc., MSN
Network and most major telecommunications companies, but many are switching to
higher speed connections that are provided by cable modems, xDSL, and even
wireless connections. Commercial use of the Internet is increasing and
traditional web sites created by businesses are being upgraded. E-commerce sites
are increasing in number and are gaining greater commercial acceptance as
businesses understand and utilize the Internet as a sales tool.
COMMUNICATIONS EQUIPMENT SALES
The communications equipment sales industry, which includes computer
equipment sales, is also changing rapidly. There is constant demand for higher
speed and more technologically advanced equipment. While many
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smaller organizations are finding it difficult to economically compete with
larger organizations in the direct retail sales of communications equipment,
many of these smaller organizations are finding niche markets by taking
advantage of new developments in communications equipment, software and
networking and providing additional services in connection with equipment sales,
while others are able to compete in the wholesale market by providing lower
prices, not providing any additional services or supplying specialty equipment
not available from the large retail outlets.
Wholesale sales of communications equipment is highly competitive and
gross margins are small. National companies can traditionally offer more
products at lower prices because of their purchasing power. Smaller companies
are able to compete in this marketplace by accepting lower profit margins,
operating at reduced costs, negotiating more favorable resale and distributor
contracts and using creative marketing techniques.
UNDERGROUND CABLE CONSTRUCTION
The underground cable construction industry is also growing rapidly and
demand for qualified contractors is high. Major companies such as US West
Communications, Inc., NextLink Communications, Inc., MCI WorldCom, Inc. and Cox
Communications, Inc. have announced capital expenditure programs to upgrade
their networks to include fiber-optic cable and the National Cable Television
Association has recognized the necessity of rebuilding the nation's cable system
with fiber-optic cable.
HISTORY
INTERNET SERVICES
The Company's Internet services include personal and business dial up
accounts, high speed frame relay, ISDN and T-1 connections, virtual telephone
services, web site design and custom software development. These services are
provided primarily through FutureOne AZ and Networld.com Inc., a wholly owned
subsidiary of FutureOne AZ, which was incorporated in November 1995. The Company
has expanded its product lines and geographic area of operations with respect to
its Internet services through the following acquisitions:
- - On April 1, 1998, the Company acquired all of the issued and outstanding
common stock of LAN KASTER, INC., an Arizona corporation, which provides
Internet service to Prescott, Arizona and surrounding areas.
- - On May 11, 1998, the Company acquired all of the issued and outstanding
common stock of CARNET COMPUTER SERVICES, INC., which develops software
solutions for small- to medium-sized businesses in varying industries.
Major clients include the Robb Report, Magazine for the Affluent Lifestyle
and Barrett-Jackson: The World's Greatest Classic Car Auction. Its software
products include Manna-Navigator, Claims Manager, Attendee and Patient
Manager, which are distributed nationally.
- - On July 15, 1998, the Company acquired certain assets, including all of the
Internet customers, of Interworldnet Partnership, which provides Internet
service to Lake Havasu City, Arizona and surrounding areas.
- - On September 21, 1998, the Company acquired certain assets of PrimeServ
Corporation, including the PRIMESERV trademark under which it provides a
"virtual office" telephone solution by allowing subscribers to distribute a
single phone number, which can then be programmed to ring simultaneously on
office, home and cell phones. Each call is then screened to announce the
caller and the subscriber can answer the call on any of the phones to which
calls are directed. In addition, the system has a complete messaging center
that can be accessed from any phone and a fax message center that allows
subscribers to direct faxes to any fax number on demand.
- - On November 12, 1998, the Company acquired the Internet services business
of Globalkey, Inc., which was a small Internet service provider in Colorado
Springs, Colorado. In January 1999, Globalkey's Internet access supplier
terminated service to the Company because of prior payment disputes with
Globalkey, accordingly, the small number of customers acquired from
Globalkey have been lost and the Company is seeking a new supplier so it
can again offer Internet access in the Colorado Springs area.
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- - On March 31, 1999, the Company acquired all of the issued and outstanding
limited liability company interests of Ubiquity Design, LLC - dba Rocket
Science Creative, which is a graphic design and advertising agency. Rocket
Science Creative produces custom advertising for several major companies in
the Phoenix area and prior to its acquisition had been working with the
Company's Internet division on larger web sites and e-commerce solutions.
- - On June 16, 1999, the Company signed a letter of intent to purchase
Progressive Media LLC, an Arizona limited liability company, to provide
enhanced media services, including web-based animation, interactive CD-ROM
design, digital video production and postproduction, music and sound
production, and digital and traditional commercial photography. This
transaction is contingent upon a satisfactory due diligence review by the
Company and final approval by the Company's Board of Directors.
COMMUNICATIONS EQUIPMENT SALES
The Company's communications equipment sales division makes directs
sales of name brand computer and communications equipment at the wholesale
level. The Company's retail computer sales and services business line was
introduced in February 1997 by FutureOne AZ. The Company is in the process of
discontinuing its retail computer sales operations and expanding its wholesale
computer sale operations by adding personnel and facilities and entering into a
reseller agreement with Lucent Technologies Internetworking Systems (formerly
Ascend Communications, Inc.) to become an elite stocking distributor. The
Company now operates this line of business as its Communications Products
Division. The Company has expanded its product lines and geographic area of
operations through the following acquisitions:
- - On September 29, 1998, the Company acquired all of the issued and
outstanding common stock of PRIORITY SYSTEMS, INC., an Arizona corporation
based in Lake Havasu City, Arizona, which provided computer network systems
nationwide since 1988. Priority Systems is a provider of technology
products and services such as computer systems, computer peripherals, and
network management solutions to business and individual consumers. The
Company is in the process of divesting itself of the operations that
comprise Priority Systems by selling Priority Systems to its founder. As a
result, the Company expects to no longer compete in the retail market of
computer sales and services.
- - On September 29, 1998, the Company acquired all of the issued and
outstanding shares of Sonoran Industries, Inc., and retained the assets of
its Kachina International division, which sells data communications
equipment primarily to schools, government agencies, Internet providers and
value added resellers, as a factory direct distributor for communications
and computer components. Kachina International has developed a
sophisticated data base of Internet-related businesses and is based in
Phoenix, Arizona.
UNDERGROUND CABLE ENGINEERING AND CONSTRUCTION
The Company's underground cable engineering and construction operations
are conducted by OPEC CORP., a wholly owned subsidiary of the Company, which was
acquired by the Company in July 1998. The Company also provides horizontal
drilling and boring services through Abcon, Inc., which was acquired by the
Company in April 1999, as described below:
- - On July 29, 1998, the Company acquired all of the issued and outstanding
common stock of OPEC, which is engaged in underground cable construction
and has performed construction services for such companies as US WEST and
AT&T, and installs utility cable in the western United States. OPEC, which
has approximately 70 employees, is based in Colorado Springs, Colorado.
- - On April 19, 1999, the Company acquired all of the issued and outstanding
common stock of Abcon, Inc. ("Abcon"), which is an underground construction
company, specializing in horizontal drilling and boring. Abcon, which is
based in Phoenix, Arizona, provides services for large and small
telecommunications companies.
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- - On June 17, 1999, the Company entered into a letter of intent to acquire
Phase III Communications, Inc., a Colorado corporation, which provides
low-voltage cable and wiring services and other internal wiring solutions
for commercial and residential customers. The acquisition is contingent
upon a satisfactory due diligence review by the Company and final approval
by the Company's Board of Directors.
BUSINESS STRATEGY
The Company's objective is to meet the changing communication needs of
people. The Company intends to accomplish this objective through the development
of comprehensive communications technology and products that are packaged to
serve its customers' total communications needs.
The Company also intends to offer a broad range of communications
technology solutions for businesses. These include high speed Internet access,
I/P Telephony, converged networks, web site and e-commerce site development,
communications equipment, Internet-based advertising, consulting and specialized
software development. The Company also plans to position itself as a leading
provider of fiber optic cable construction to leading telecommunications
companies and national and regional developers.
The Company has identified the following four major lines of business:
- - Internet and related e-commerce services,
- - telecommunications, including convergence technology,
- - communications equipment sales and
- - communication engineering and construction services.
The Company believes that these lines of business compliment each other and
allow the Company to offer its customers complete communications solutions. In
addition, the Company has developed each of its lines of business to stand alone
in order to decrease the negative effects on the Company if a particular line of
business declines as a result of market conditions or other factors.
In implementing its strategy, the Company has identified the following
areas of emphasis:
- - Introduce New Products. The Company believes that it must continue to offer
its customers new products and technology to anticipate its customers'
expectations and needs. The successful continued development of
NeighborComm and the implementation of emerging technologies such as Voice
over Internet Protocol ("VOIP") are part of the Company's immediate
strategy.
- - Evaluate Acquisition Opportunities. The Company evaluates acquisition
opportunities on an ongoing basis and at any given time may be, and at the
present time is, engaged in discussions with respect to possible
acquisitions or other business combinations. The Company may seek strategic
acquisitions that can complement the Company's current or planned business
activities, including acquisitions that will help the Company implement and
complement its NeighborComm product.
_ Integrate Acquisitions. The Company is in the process of integrating all
the entities and technologies it has acquired. Each acquired entity is
sought out to provide a product or service that:
- contributes to the development of NeighborComm,
- stands alone with its own base of customers in its primary business
and
- enhances the ability of the Company's other operating entities to
provide larger groups of products or services.
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The Company has embarked on a continuing training program that educates
employees about the Company's lines of business. The Company believes its
employees and customers can benefit from a general understanding of the
products and services provided by each division of the Company. In
addition, the Company has an internal process of sharing customer databases
and references between divisions to attempt to capitalize on potential
cross-selling opportunities.
Integrating many acquired entities into an overall operating company
provides many challenges, including, without limitation: human resource
restraints and implementation of coordinated employee policies and
benefits; obtaining sufficient office and operating space; educating
employees and sales representatives about the Company's total product lines
and their relationships to each other; overcoming the logistics of
operating in multiple cities and states and complying with the laws and
regulations of many varied governmental agencies; establishing a corporate
communications system; and implementing financial and operational controls.
The Company believes it is meeting these challenges through such steps as
adding a Human Resource Director and a Director of Marketing, implementing
new training and communications programs and installing a new broad-based
accounting and financial controls system.
PRODUCTS AND SERVICES
INTERNET PRODUCTS AND SERVICES
INTERNET SERVICES. Through its subsidiary, Networld.com Inc., the
Company offers a complete selection of Internet access services, in both monthly
and fixed-term packages, designed to meet the varied needs of its customers.
These services vary from competitive residential dial-up services to high speed,
continuous Internet access services for businesses, such as Frame Relay and
Point-to-Point circuits. Currently, the Company offers local dial-up access from
Phoenix, Flagstaff, Tucson, Lake Havasu City, Prescott, Florence and Payson,
Arizona, and provides local dial-up access to Wickenburg, Arizona through a
franchise agreement.
The Company maintains a data communications center located in Phoenix,
Arizona that supports its Internet services. The network is connected to the
Internet via a fully redundant, fiber optic DS3 connection. The Company's
architecture is made up primarily of Sun Microsystems servers, NT Servers, Cisco
Systems routers, switches and firewall, and Ascend Communications and US
Robotics (3Com) access concentrators. It supports both Microsoft NT and UNIX
operating systems. The Company also employs a strategy for remote access service
that minimizes the need for dedicated network support personnel in outlying
locations. This architectural strategy will allow the Company to add additional
service locations in the future with a minimum of dedicated investment for both
hardware and systems support personnel.
VALUE ADDED INTERNET PRODUCTS AND SERVICES. The Company also offers a
complete selection of web site development and hosting services, e-commerce
development services, customized Internet client/server applications and
Internet-based applications for a number of industries.
- - WEB SITE DEVELOPMENT AND HOSTING. The Company offers a complete series of
web site design and development services for both business and personal
customers. In conjunction with the Company's graphics design and
advertising agency, the Company currently offers the following services:
project management; developing requirements; design services; web site
construction and hosting services. The Company's products include
multi-media skills, such as video streaming, audio and advanced animation
capabilities, Internet search engine registration and Internet marketing
services.
- - E-COMMERCE DEVELOPMENT AND HOSTING. The Company offers several e-commerce
programs directed at those businesses that are selling products or services
over the Internet. The Company's e-commerce offerings range from low-end,
entry level e-commerce development and hosting services to the most
sophisticated solutions required by large Internet merchants. Using
Microsoft's Site Server and advanced encryption capabilities as the basis
for its sophisticated solutions, the Company also possesses the project
management skills and technical design capabilities to link e-commerce
solutions with enterprise-wide, legacy databases as required.
- - CUSTOMIZED INTERNET CLIENT/SERVER APPLICATIONS. As the business community
has accepted the Internet as a major marketplace, and has acquired more
experience with Internet-based products and services, the demand for
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more complex Internet-based client/server solutions has grown. Through its
software development and Web services division, the Company offers services
to customers to create simple or complex Internet-based client/server
solutions and mainframe architectures. These solutions are prepared on both
a fixed bid and traditional time and materials basis.
- - INTERNET-BASED APPLICATIONS FOR VERTICAL MARKETS. The Company has built a
number of specialized Internet applications for business customers in
different industries. In some cases, the Company has retained the ownership
rights to the software, in others it has negotiated with customers to
obtain the ability to "re-sell" these applications in the future.
Standardized applications currently include:
- a reporting/query package for distributors of network marketing
companies called "Manna Navigator,"
- an auction marketplace application called "Internet Auction Server"
and
- an accounting/billing system for ophthalmologists.
- - VIRTUAL TELEPHONE SERVICE. The Company offers a custom telephone service,
under the trade name of PRIMESERV(R), which creates a "virtual office"
telephone solution by allowing subscribers to distribute a single phone
number to customers, friends and family, which can then be programmed to
ring simultaneously on office, home and cell phones. Each call is then
screened to announce the caller and the subscriber can answer the call on
any of the phones to which calls are directed. In addition the system has a
complete messaging center that can be accessed from any phone and a fax
message center that allows subscribers to direct faxes to any fax number on
demand.
COMMUNICATIONS EQUIPMENT SALES
The Company is an authorized reseller for computers manufactured by
International Business Machines Corporation, Hewlett-Packard Company and Toshiba
Corporation. The Company generally sells such products at a wholesale
"drop-ship" basis and occasionally in conjunction with the installation of large
networks.
FutureOne is a factory direct distributor of data communications
products to Internet service providers, schools, government agencies and other
value added resellers. The Company has preferred value added reseller or
distributor agreements with Lucent Technologies, Nortel Networks Corporation,
Cisco Systems, Inc. and Multi-Tech Systems, Inc. and distributes other name
brand products under various supplier agreements.
COMMUNICATIONS ENGINEERING AND CONSTRUCTION SERVICES.
The Company designs, engineers and installs copper, fiber and CATV
distribution and feeder facilities for communications and real estate
development companies in the western United States through its wholly owned
subsidiaries, OPEC CORP. and Abcon, Inc. The Company offers a full range of
underground construction services, including the installation of underground
cable in various terrains. The Company owns the equipment necessary for
trenching, plowing, drilling and directional boring and can splice copper and
fiber cable. The Company directs its construction services from Phoenix, Arizona
and Colorado Springs, Colorado. The Company generally engages in contracts
ranging from several thousand dollars to approximately $2,000,000, but recently
was awarded general construction contracts with US West Communications, Inc.
("US WEST") for all of Iowa and Nebraska and parts of Colorado. Although there
is no specific amount of work authorized under the contracts, these contracts
authorize OPEC to act as a general construction and maintenance contractor and
to provide engineering and cable installation services for US WEST in the
specified areas, during the term of the contracts.
TELECOMMUNICATIONS SERVICES AND CONVERGENCE TECHNOLOGY
The Company intends to enter the telecommunications service business
which will be done primarily within the context of the Company's NeighborComm
business. In order to enter into the telecommunications business, and provide
local and long distance telephone service, the Company will need state
regulatory approval in each state in which it intends to do business and an
Interconnection Agreement with an Incumbent Local Exchange
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Carrier or Regional Bell Operating Company for each state. A telephone
communications service provider that has attained the necessary requirements to
provide dial tone and other telecommunications services within a state or
combination of states is a Competitive Local Exchange Carrier. The Company
intends to meet the required standards to become a CLEC in several states.
In that regard, the Company has signed a letter of intent to purchase
an existing CLEC and to use its regulatory approval in Colorado, Oregon and
Montana and its Interconnection Agreement with US WEST in other states. The
Company also intends to apply for regulatory authority in other states such as
Arizona, Utah, Nevada, and New Mexico. The acquisition is contingent on a
satisfactory due diligence review by the Company's legal counsel, and final
approval by the Company's Board of Directors and the Colorado Public Utilities
Commission. While the Company believes it will be successful in obtaining the
necessary operating authorities to operate as a CLEC, there is no assurance that
the Company will obtain the necessary operating authorities to operate as a CLEC
in any jurisdiction on a timely basis if at all.
NeighborComm(TM). The Company believes the future of communications is
changing to respond to consumer demand for high speed communications and a
bundle of services that would include voice, video and data, which is known as a
convergence technology. Companies such as US Sprint, AT&T, and Microsoft have
recently announced their intentions to expand their operations into this new
communications technology. The Company also believes a communications vehicle
similar to the Internet is needed to connect residents, businesses and other
organizations within a local community.
The Company is developing the NeighborComm system and has recently been
working in cooperation with Lucent Technologies to install and test a working
model of the infrastructure for the system. In connection with such development,
Lucent Technologies has committed to provide the Company with a leasing line of
credit for $1,250,000. Additional amounts may be made available to the Company
when the Company achieves predetermined objectives.
Construction and installation of the underground cable has commenced at
the Ridgeview residential development in Colorado Springs, Colorado, which is
anticipated to include approximately 6,000 units. This is anticipated to be the
first NeighborComm neighborhood communications system in operation, however, the
Company has reached tentative verbal agreements with other developers in
Colorado Springs to install the NeighborComm system in their developments. The
Company anticipates that such agreements will require the developer to pay for
the installation of the cable and the Company will reimburse the developer out
of future profits for the cable, which will then be owned by the Company. The
Company may allow the developer to participate in profits for a fixed period of
time after the developer has received reimbursement for the cable.
The NeighborComm communications system being developed by the Company
is designed to ultimately allow for applications such as video conferencing and
video monitoring for security purposes, and voice (telephone), video (cable),
and data (Internet) service to consumers via one high-speed, fiber-optic
connection directly to the home or business. When implemented, the high speed
Internet connection will also be the source used for Voice over Internet
Protocol, which allows for long distance phone and facsimile calls to be made
over the Internet.
The Intranet capabilities of the Company's NeighborComm system are
based on the local community. Community-based businesses, schools and local
government agencies may be accessed through the NeighborComm start up page and
provisions are being made in the proprietary software developed by the Company
to allow for neighborhood chat lines, local want ads, community bulletin boards,
landlord and homeowner association administration and other local use features.
The Company believes it has positioned itself to supply the services
required to support its NeighborComm system and to take advantage of the
additional revenue sources that will be created by convergence technology in
general. The Company believes that its construction division will supply
services for the Company's projects and similar systems being installed by other
companies. This new technology will create the need for personal and business
computer and communications equipment, which can be supplied by the Company's
communications equipment division. The new technology may create a need for
additional web sites and e-commerce services from local vendors that previously
did not attempt to reach customers via the world wide Internet, but may want to
reach their local consumers via the Company's Intranet. These new users of the
Intranet may create opportunities for the
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Company's advertising and Internet services division. The Company also has its
own Internet facilities, which will supply the Internet access to these new
customers.
CUSTOMERS
INTERNET PRODUCTS AND SERVICES
The Company markets its Internet products and services to a wide
variety of individuals and businesses. As of June 30, 1999, the Company's
Internet access customer base consisted of approximately 7,300 customers.
Personal dial up access fees range from $15 to $20 per month and commercial
access fees range from $30 to $1,600 per month. PrimeServ fees range from $20 to
$50 per month. Other value added Internet services are provided on a direct
hourly fee, fixed fee or time and materials basis.
COMMUNICATIONS EQUIPMENT SALES
The Company markets its communications equipment primarily to a variety
of small and large local business customers and a nationwide base of Internet
Service Providers, Competitive Local Exchange Carriers, government agencies and
educational institutions.
COMMUNICATIONS ENGINEERING AND CONSTRUCTION SERVICES
The Company's communications engineering and construction services
operations serve major customers such as US WEST, Lucent Technologies, NextLink
Communications, Inc. and U.S. Home Corporation and also provide services to
smaller companies and developers.
TELECOMMUNICATIONS SERVICES AND CONVERGENCE TECHNOLOGY
The Company's convergence technology customers consist of developers in
Colorado and Arizona with whom the Company currently has verbal agreements and
commitments. The Company and these developers are currently negotiating
contracts, which the Company expects will formalize the Company's relationship
with such developers and finalize the magnitude of the projects to be undertaken
by the Company. The projects covered by the verbal commitments cover
approximately 25,000 units, which will be built over the next several years.
Although the Company has commitments from developers, its ultimate customers
will be the home buyers in the developments. The Company anticipates that when
it begins providing residents with a complete package of voice, video, and data
services, Company revenues may average approximately $100 per month per
household. There is no assurance that the Company will be able to formalize
these commitments or that it will recognize revenue from such services in the
amounts that it currently anticipates.
SUPPLIERS
INTERNET PRODUCTS AND SERVICES
The Company obtains bandwidth from two suppliers that are on fixed
contracts, its Internet connection from a single supplier on a fixed long term
contract and phone lines from several suppliers, some of which are on long term
contracts, while others are on month-to-month agreements.
COMMUNICATIONS EQUIPMENT SALES
The Company purchases computer equipment from authorized distributors
or manufacturers of computer products and software such as Tech Data, Pinacor
and Ingram Mirco. The Company does not maintain on-going contracts with these
suppliers. The Company purchases other communications equipment directly from
manufacturers such as Lucent Technologies, Nortel Networks Corporation, Cisco
Systems, Inc. and Multi-Tech Systems, Inc. or distributors authorized to
warehouse such data communication equipment for the manufacturers.
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The Company does not rely on any material third party suppliers in
connection with its communications engineering and construction services or its
telecommunications services and convergence technology operations.
SALES AND MARKETING
INTERNET PRODUCTS AND SERVICES
The Company markets its Internet products and services through its own
direct sales force, limited newspaper and trade publication advertising, limited
radio advertising and a network of value added resellers that recommend the
Company's Internet products and services to their customers. The Company also
places free brochures and software in various retail locations, including
computer and software stores, and participates in trade shows, conventions and
training seminars to promote its products.
COMMUNICATIONS EQUIPMENT SALES
The Company markets its communications equipment through a direct sales
force, telemarketing, direct mail campaigns, media advertising, catalogs, weekly
fax blasts, trade shows and conventions.
COMMUNICATIONS ENGINEERING AND CONSTRUCTION SERVICES
The Company attempts to grow and further develop this line of business
by selling to existing customers, applying to bid lists, and responding to
public notifications of potential contracts and referrals.
TELECOMMUNICATIONS SERVICES AND CONVERGENCE TECHNOLOGY
The Company's telecommunications products and services are currently
planned to be sold as a part of NeighborComm, which is anticipated to include
regular local and long distance telephone services. The Company also anticipates
that its telecommunications products and services will be offered to customers
in all states where the Company obtains operating authority.
NeighborComm is sold directly to large regional and national
residential and commercial developers. To date it has only been sold by key
management of the Company. Sales literature has been produced for a direct mail
distribution. After the NeighborComm system is installed in a development, the
Company will provide various on-site sales materials to encourage home buyers in
the development to obtain their communications services from FutureOne.
COMPETITION
The markets for all of the Company's products and services are
extremely competitive and it is expected that competition will intensify in the
future. The Company's ability to compete successfully depends on a number of
factors both within and outside its control, including the pricing policies of
its competitors and suppliers, the introduction of new products and services by
others, the availability of additional financing and general economic trends in
the industry.
INTERNET PRODUCTS AND SERVICES
The Company competes directly or indirectly with the following
categories of Internet service companies:
- commercial Internet access providers, and other national and regional
providers;
- established on-line service companies that also offer Internet access;
- nonprofit or educational Internet access providers and
- local and regional telecommunications companies and various cable
companies.
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Most of these competitors have substantially greater market presence,
engineering and marketing capabilities, and financial, technological and
personnel resources than those of the Company. As a result, competitors may be
able to develop and expand their communications and network infrastructures more
quickly, adapt more swiftly to new or emerging technologies and changes in
customer requirements, take advantage of acquisition and other opportunities
more readily, and devote greater resources to the marketing and sale of their
services than the Company. Increased competition could result in significant
price competition, which in turn could result in significant reductions in the
average selling price of the Company's services. There can be no assurance that
the Company will be able to offset the effects of any such price reductions
through an increase in the number of its subscribers, higher revenue from
enhanced services, cost reductions or otherwise. Increased competition could
inhibit the Company's ability to increase its market share and adversely affect
the Company's operating results. There can be no assurance that the Company will
have the financial resources, technical expertise or marketing and support
capabilities to continue to compete successfully.
It is possible that advertisers will pay Internet access providers
advertising fees in sufficient amounts to allow the Internet access providers to
give their subscribers "free" access to the Internet in return for the
advertisers' right to target all or a portion of the subscribers to market their
products. Those Internet access providers that have sufficiently large
subscriber bases should be able to make the transition on a profitable basis,
but small providers may not be able to generate sufficient advertising revenue
to compete with "free" access. If the Company can not build a large enough
subscriber base before this possible change occurs it could adversely affect the
Company's business, results of operations and financial condition.
The competition for other Internet services such as web site
development and e-commerce solutions is also intense and large companies such
Microsoft, US WEST and AT&T offer such services to larger customers. In order to
attract monthly hosting customers, some companies are offering these services
for free. There are also numerous individuals and small companies that design
web sites for businesses at extremely low prices, with which the Company cannot
economically compete. As a result, the Company must attract larger customers
that have more sophisticated needs. There are many companies competing for these
sophisticated customers and the available technology is constantly changing.
This requires the Company to consistently invest in new software tools and
training for its staff in order to develop and offer leading edge technological
solutions to attract customers.
COMMUNICATIONS EQUIPMENT SALES
The competition for sales of communications equipment, including
computers, is also intense, and the gross profit margins are often minimal. On
the wholesale level, the Company competes with large national companies that
offer more products and occassionally lower prices because of their sales volume
and purchasing power. As a result, the Company must be willing to accept lower
profit margins, maintain lower operating costs, negotiate favorable resale and
distributor contracts or find unique marketing and advertising programs to
continually market products to new customers and its existing customer base in
order to achieve and maintain a competitive position in the industry.
COMMUNICATIONS ENGINEERING AND CONSTRUCTION SERVICES.
The Company competes with regional firms and national companies such as
Fischel Companies, Burnup and Sims, Inc., Henkel & McCoy and numerous other
smaller contractors. The Company must obtain work through competitive bids. The
Company has acquired specialized construction equipment, such as large boring
and drilling machines, to be competitive in obtaining projects with the
requirements or portions of jobs requiring these specialties. In order to be
competitive, the Company must have access to a sufficiently mobile labor force,
sufficient equipment, and financial reserves to accept jobs in various parts of
the western United States. The Company is at a disadvantage in competing against
larger companies that have more personnel, equipment and financial resources
than the Company.
TELECOMMUNICATIONS SERVICES AND CONVERGENCE TECHNOLOGY
The telecommunications industry is highly competitive. The Company
believes the principal competitive factors affecting its business are customer
service, accurate billing, variety of services and, to a lesser extent, pricing
levels and clear pricing policies. The ability of the Company to compete
effectively depends upon its ability to
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maintain high quality, market-driven services at prices generally equal to or
below those charged by its competitors. To be competitive, the Company believes
it must be in a position to reduce its prices in order to meet reductions in
rates, if any, by others. Any such reductions could adversely affect the
Company. Many of the Company's current and potential competitors have financial,
personnel and other resources, including brand name recognition, substantially
greater than those of the Company, as well as other competitive advantages over
the Company.
FutureOne will be a recent entrant in the telecommunications services
industry and will not achieve and does not expect to achieve a significant
market share for any of its services in larger markets. In particular, local
telephone companies have long-standing relationships with their customers,
financial, technical, and marketing resources substantially greater than those
of the Company, the potential to subsidize competitive services with revenue
from a variety of businesses and currently benefit from some existing
regulations that favor these ILECs over FutureOne in some respects. While recent
regulatory initiatives, which allow CLECs to interconnect with ILEC facilities,
may provide increased business opportunities for FutureOne, such interconnection
opportunities have been (and likely will continue to be) accompanied by
increased pricing flexibility for, and relaxation of, regulatory increased
pricing flexibility or other regulatory relief and, such decisions could also
have a material adverse effect on the Company.
The Company also faces, and expects to continue to face, competition
from other current and potential market entrants, including long distance
carriers seeking to enter, reenter or expand entry into the local exchange
market such as AT&T, MCI, GTE and US Sprint. Competition also comes from other
CLECs, resellers of local exchange services, competitive access providers
("CAPs"), cable television companies, electric utilities, microwave carriers,
wireless telephone system operators and private networks built by large end
users. In addition, a continuing trend towards consolidation and strategic
alliances of telecommunications companies, as well as the development of new
technologies, could give rise to significant new competitors to the Company,
putting FutureOne at a competitive disadvantage. The Telecommunications Act
includes provisions which impose certain regulatory requirements on all LECs,
including the Company, while granting the FCC expanded authority to reduce the
level of regulation applicable to any or all telecommunications carriers,
including ILECs. The manner in which these provisions of the Telecommunications
Act are implemented and enforced could have a material adverse effect on the
Company's ability to compete successfully against ILECs and other
telecommunications service providers.
The change in the Telecommunications Act radically altered the market
opportunity for traditional CAPs and CLECs. Because most existing CAPs and CLECs
initially entered the market providing dedicated access in the pre-1996 era,
these companies had to build infrastructure before offering services. Since
passage of the Telecommunications Act, many CAPs have added switches to become
CLECs to take advantage of the opening of the local market. With the
Telecommunications Act requiring unbundling of the LEC installing switches and
leasing trunk and loop capacity until traffic volume justifies building
facilities, newer CLECs, including competitors that FutureOne may encounter in
some markets if it becomes a CLEC, will not have to replicate existing
facilities and can be more opportunistic in designing and implementing networks.
The Company is not currently providing, nor does it intend to supply,
wireless communication services. Many of the Company's competitors are offering
such services and may gain a competitive advantage over the Company as a result.
The Company believes that recent announcements by several large
telecommunications companies indicate that such companies are are positioning
themselves to provide convergence technology to existing telephone and cable
subscribers, as well as, installing convergence technology in new developments.
Based on the Company's existing technology, the Company will be limited to
providing its convergence technology services only in new construction.
GOVERNMENT REGULATION
The following summary of regulatory developments does not purport to
describe all present and proposed federal, state and local regulations affecting
the telecommunications industry. Other existing federal and state regulations
are currently the subject of judicial proceedings, legislative hearings and
administrative proposals which could change, in varying degrees, the manner in
which this industry operates. Neither the outcome of these proceedings, nor
their impact on the telecommunications industry or the Company, can be predicted
at this time.
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The Company's telecommunications facilities and services will be
subject to varying degrees of federal, state and local regulation. The 1934
Communications Act, as amended (the Act"), and the regulations promulgated by
the Federal Communications Commission ("FCC") thereunder, as well as the
applicable laws and regulations of the various states and state regulatory
commissions all govern the provision of telecommunications services. The FCC
exercises jurisdiction under Title II of the Act over all facilities of, and
services offered by, telecommunications common carriers to the extent such
services involve jurisdictionally interstate common carrier communications,
including international communications originating from or terminating in the
United States. State regulatory authorities retain jurisdiction over
jurisdictionally intrastate communications. Local governments sometimes impose
franchise or licensing requirements on local service competitors and/or
facilities companies.
FEDERAL REGULATION
The Telecommunication Act of 1996 ("Telcom Act") substantially revised
the Act and, among other things, established a dual federal-state regulatory
framework for the introduction of local competition throughout the United
States. In passing the Telecom Act, Congress sought to increase local
competition from newer competitors such as long distance carriers, cable TV
companies and public utility companies. Entities that provide local telephone
services in competition with the existing, incumbent local exchange companies
("ILECs") are known as competitive local exchange companies, or CLECs.
The Telecom Act establishes several means by which entities such as the
Company can offer local telephone services in competition with the ILECs. A CLEC
may choose to build its own local facilities, resell the local services of the
ILECs, lease unbundled network elements from ILECs, or employ a combination of
these options. The Telecom Act imposes on ILECs certain obligations to
interconnect their services and facilities with those of the CLECs. It also
specifically requires all local exchange carriers, including ILECs and CLECs,
not to prohibit or unduly restrict resale of their services, to establish number
portability, dialing parity and reciprocal compensation arrangements for the
transport and termination of telecommunications, and to provide
non-discriminatory access to telephone poles, ducts, conduits and rights-of-way.
It also makes competitive entry into other service or geographic markets more
attractive to Regional Bell Operating Companies ("RBOCs"), other ILECs, long
distance carriers and other companies and likely will increase the level of
competition the Company faces.
The FCC has significant responsibility in the manner in which the
Telecom Act will be implemented. The Telecom Act contemplates that states will
apply the federal regulations and oversee the implementation of all aspects of
interconnection not subject to FCC jurisdiction. The states also are tasked with
overseeing interconnection negotiations between ILECs and their new CLEC
competitors.
On August 8, 1996, the FCC released an order which established a
framework of minimum, national rules enabling state commissions and the FCC to
begin implementing many of the local competition provisions of the Telecom Act.
Among other things, the order prescribed certain minimum points of
interconnection, adopted a minimum list of unbundled network elements that ILECs
must make available to competitors, and adopted a methodology for states to use
when setting prices for unbundled network elements and for wholesale resale
services. In July 1997, the U.S. Court of Appeals for the Eighth Circuit struck
down certain of the rules (including the provisions establishing pricing
methodologies and default rates for resold services and unbundled network
elements). The appeals court concluded that the Telecommunications Act granted
the states the authority to set the rates for interconnection, unbundled network
elements and resold services and that the FCC therefore lacked jurisdiction to
issue the pricing rules or to preempt state pricing rules. In October 1997, the
Eighth Circuit issued an order clarifying that the RBOCs were not required to
rebundle unbundled network elements that competing carriers had purchased
separately.
The FCC, numerous IXCs and various other parties filed petitions for
certiorari with the U.S. Supreme Court, expressing concern, among other things,
about the lack of uniformity in pricing that may result from the Eighth
Circuit's rejection of national pricing. On January 25, 1999, the Supreme Court
issued a decision upholding the authority of the FCC to issue regulations - both
pricing and non-pricing - in implementing the local competition provisions of
the Telecommunications Act, rather than placing pricing authority at the state
level. In its decision, the Supreme Court, however, invalidated the FCC's
current list of the network elements that ILECs must make
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available on an unbundled basis. This, in turn, could affect whether the FCC
requires ILECs to provide certain other facilities used in providing broadband
services to competitors such as the Company on an unbundled basis. The FCC is
expected to issue a notice proposing a new list of network elements shortly. The
Eighth Circuit decisions and their recent reversal by the Supreme Court
perpetuate continuing uncertainty about the rules governing the pricing, terms
and conditions of interconnection agreements. Given this uncertainty, the
Company cannot guarantee that it will be able to obtain or enforce acceptable
interconnection terms or interconnection terms consistent with its business
plans.
The Telecom Act has already resulted in comprehensive changes in the
regulatory environment for the telecommunications industry as a whole, and will
have a material impact on the local exchange industry and the competitive
environment in which the Company operates. Nevertheless, the concept of
competitive local exchange services is a relatively new development in the
telecommunications industry, and the Company cannot predict how the relevant
provisions of the Telecom Act will be interpreted and implemented by the FCC,
state regulators, courts and the ILECs. Although passage of the Telecom Act has
resulted in increased opportunities for companies that are competing with the
ILECs, no assurance can be given that changes in current or future regulations
adopted by the FCC or state regulators or other legislative or judicial
initiatives relating to the telecommunications industry would not have a
material adverse effect on the Company's financial condition, results of
operations or cash flow.
To the extent that the Company expects to offer interstate long
distance services, it will be treated by the FCC as a so-called "nondominant"
carrier. The FCC subjects nondominant carriers to minimal regulation. However,
interstate carriers offering services to the public must comply with the federal
statutory and regulatory requirements of common carriage under the Act, must
file various reports and pay various fees and assessments, and remain subject to
the FCC's complaint jurisdiction. Among other things, interstate common carriers
must offer service on a non-discriminatory basis at just and reasonable rates.
Nondominant carriers need not obtain specific prior FCC approval to initiate or
expand domestic interstate services, although they must file a tariff with the
FCC containing the currently effective rates, terms and conditions of service
for its long distance services. Although the FCC has issued regulations
eliminating this tariffing requirement for all interstate non-dominant carriers,
those regulations have been stayed on appeal by third parties, and the Company
currently will be required to file tariffs with the FCC. If the FCC order
becomes effective, nondominant interexchange carriers will need to find new
means of providing notice to customers of prices, terms and conditions on which
they offer their interstate services.
In 1997, the FCC released an order establishing a significantly
expanded federal universal service subsidy regime which established new
universal service funds to support telecommunications and information services
provided to qualifying schools, libraries and rural health care providers, and
expanded the federal subsidies for local telephone services provided to
low-income consumers. The FCC collects money to fund this expanded regime from
interstate carriers and certain other entities. To the extent that the Company
provides intrastate, interstate or international telecommunications service, it
will be required to contribute to these programs. The Company's payments for the
schools and libraries and rural health care fund will depend on estimated
quarterly intrastate, interstate and international gross end-user
telecommunications revenues. Contribution factors vary quarterly and the FCC
bills carriers on a monthly basis. Contribution factors for 1999 ranged from
3.08 to 3.19% for the high cost and low income funds (interstate and
international revenues), and 0.72 to 0.76% for the schools, libraries, and rural
health care funds (intrastate, interstate and international revenues). Because
the contribution factors vary quarterly, the Company cannot currently accurately
determine the annualized impact on its annual performance.
As a telecommunications carrier, the Company will also be required to
comply with the Federal digital wiretapping regulations administered by the U.S.
Department of Justice and the FCC. The Communications Assistance to Law
Enforcement Act ("CALEA"), enacted in 1994, requires telecommunications carriers
such as Company to make available certain telecommunications capabilities to
U.S. law enforcement officials to permit those authorities to continue to
intercept communications involving advanced technologies such as digital and
wireless transmission communications. Under CALEA, courts may impose fines of up
to $10,000 per day on telecommunications carriers that fail to meet the required
capability functions, as determined by industry standards. The FCC recently
extended the compliance date for the CALEA capability requirements to June 30,
2000 to permit manufacturers sufficient time to develop CALEA compliant
equipment. The Company cannot predict the nature and extent of the impact the
CALEA requirements will have on its operations.
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The FCC may address regulatory non-compliance with a variety of
enforcement mechanisms, including monetary forfeitures, refund orders and
injunctive relief. The telecommunications industry varies substantially from
state to state and continues to change rapidly. Moreover, as deregulation at the
federal level occurs, some states are reassessing the level and scope of
regulation applicable to carriers. Regulators or third parties could raise
material issues with regard to Company's compliance or non-compliance with
applicable regulations. Future regulatory, judicial or legislative activities
could have a material adverse effect on the Company's financial condition,
results of operations or cash flow.
STATE REGULATION
The local and intrastate long distance telecommunications operations of
the Company will be subject to various state laws and regulations. Most states
regulate entry into local exchange and other intrastate service markets, and
states' regulation of CLECs vary in their regulatory intensity. The majority of
the states mandate that companies seeking to provide local exchange and other
intrastate services apply for and obtain certificates of public convenience and
necessity from a state public utility commission ("PUC"). This authorization
process generally requires the carrier to demonstrate that it has sufficient
financial, technical, and managerial capabilities and that granting the
authorization will serve the public interest. The Company expects to be
certified by the appropriate PUCs at first in the states of Colorado, Oregon and
Montana and later in other states. It cannot guarantee that it will be able to
successfully obtain such approvals.
In most states, the Company must also file and obtain prior regulatory
approval of tariffs for intrastate services. In addition, the Company must
update or amend the tariffs and, in some cases, the certificates of public
convenience and necessity, when rates are adjusted or new products are added to
the local and long distance services offered by the Company. In addition, most
states impose tariff requirements on carriers and require that common carriers
charge just and reasonable rates and not discriminate among similarly situated
customers. Some states also require the filing of periodic reports, the payment
of various regulatory fees and surcharges, and compliance with service standards
and consumer protection rules. States often require prior approvals or
notifications for certain transfers of assets (such as fiber optic cable or
other telecommunications facilities), customers, or ownership. Some states also
require approval or notice for the issuance of securities or debt or for name
changes. States generally retain the right to sanction a carrier or to revoke
certifications if a carrier violates relevant laws and/or regulations. If any
state regulatory agency concluded that the Company provided intrastate service
without the appropriate authority, or that it was not otherwise in compliance
with state PUC rules, that agency could initiate enforcement actions,
potentially including the imposition of fines, the disgorging of revenues, or
the refusal to grant the regulatory authority necessary for the future provision
of intrastate telecommunications services.
LOCAL GOVERNMENT REGULATION
The Company expects to own telecommunications facilities that may be
subject to certain local government requirements. In particular,
facilities-based companies must generally obtain street use and construction
permits and licenses and/or franchises to install and expand fiber optic
networks using municipal rights of way. In some municipalities carriers must pay
license or franchise fees based on a percentage of gross revenues or on a per
linear foot basis, as well as post performance bonds or letters of credit. The
Company cannot guarantee that it can obtain or retain franchises or that
franchise fees will remain at their current levels. While regulation of
municipal rights of way generally remains a matter under local jurisdiction,
some states have enacted or are considering enacting measures that affect the
ability of local governments to impose certain types of restrictions on
franchisees or to require certain types of concessions from carriers seeking
franchise agreements.
INTERNET REGULATION
In so far as the Internet is a relatively new medium, the legal
obligations and First Amendment rights of service providers and participants in
the Internet are not well defined and are evolving. Currently, Internet access
and online services are not subject to direct regulation in the United States,
but changes in the regulatory environment relating to the telecommunications and
media industry could have an effect on the Company's business. For example, FCC
regulatory review and rulemaking could result in regulation of the Internet and
online services industry, which could result in increased telecommunications
costs for participants in the Internet industry,
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including the Company. The Company cannot predict whether, or to what extent,
any such new rulemaking will occur, or what effect any such rulemaking would
have on the Company.
Certain provisions of the 1996 Telecommunications Act relating to
indecent communication over the Internet, generally referred to as the
Communications Decency Act of 1996, were held unconstitutional by the United
States Supreme Court in June 1997. These provisions had generally made it
illegal, subject to certain defenses, for persons to knowingly use an
interactive computer service to send or display "indecent" communications to
minors. In October 1998, Congress enacted the Children's Online Protection Act
("COPA") which creates criminal penalties for content on the Internet that may
be deemed "harmful to minors" (as defined in various court decisions) and
requires that such material be restricted. This law is currently being
challenged in federal district court. On February 1, 1999, a U.S. District Court
judge issued a preliminary injunction against enforcement of portions of that
Act and the U.S. Department of Justice has appealed that decision. The Company
has not changed any of its plans or policies as a result of the enactment of
COPA, and does not believe its current plans or policies violate this statute.
The Company cannot predict whether additional federal or similar state
legislation will be enacted in the future, whether any such future legislation
would be upheld, how courts would interpret any such future legislation or what
effect, if any, such legislation would have on the Company. There also are laws
that make it illegal to traffic in obscene or child pornographic materials,
including by a computer, and accordingly the Company subscribes to a newsgroup
service who's servers do not host certain newsgroups that it believes traffic in
child pornography. While the Company does not believe that its activities will
violate any of these laws, it cannot predict how a court would interpret these
laws in the Internet context or whether a court would hold that the Company has
a duty to monitor material being transmitted or, if notified that illegal
material is being transmitted, to attempt to stop or restrict such
transmissions.
In addition, the applicability to FutureOne of existing laws governing
issues such as intellectual property ownership, defamation and personal privacy
is uncertain. Courts have indicated that, under certain circumstances, online
service providers and Internet Service Providers ("ISPs") could be held
responsible for the publication of defamatory material or for failure to prevent
the distribution of material that infringes copyrights owned by others. The
Company does not edit or otherwise monitor the content accessed by subscribers
to its Internet services. In addition, the Company blocks access to newsgroups
that meet certain criteria indicating they carry child pornography. Future
interpretations by the courts of online defamation, privacy, copyright
infringement and other legal issues is also uncertain.
It is possible that in the future laws and regulations could be adopted
which address matters such as user privacy, copyrights, pricing and the
characteristics and quality of Internet services, among other areas.
Internet-related legislation and regulatory policies are continuing to develop
and we could be subject to increased regulation in the future. Laws or
regulations could be adopted in the future that may decrease the growth and
expansion of the Internet's use, increase the Company's cost of doing business,
or otherwise adversely affect the Company's business.
On April 5, 1999, US WEST filed a petition with the FCC asking the FCC
to find that Internet Protocol ("IP") telephony services are telecommunications
services, not enhanced services or information services, and therefore should be
subject to access charge and universal service obligations. The Company cannot
predict how the FCC will rule on US WEST's petition. If the FCC does ultimately
determine that IP telephony is subject to the FCC's access charge and universal
service regimes, such a ruling would likely substantially increase the the
Company's costs of providing IP telephony. US WEST filed similar requests before
the Nebraska Public Service Commission and the Colorado PUC.
The FCC may also issue new regulations governing the treatment of calls
to ISPs for the purposes of universal service obligations. In a recent report to
Congress, the FCC clarified that carriers must consider revenues earned from the
transmission services supplied to ISPs when calculating universal service
obligations. The FCC plans to address in the future the contribution
obligations, if any, of ISPs using their own facilities and ISPs providing
phone-to-phone IP telephony. The Company cannot predict the outcome of these
proceedings or their potential effect on its operations.
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TRADEMARKS
The Company has two registered trademarks, one for FUTURE ONE & DESIGN
and one for PRIMESERV. The Company has applied for a registered trademark with
the U.S. Patent and Trademark Office for NeighborComm. Such application is
currently pending, although there can be no assurances regarding when such
registration will be issued, if at all. The Company does not own any patents.
EMPLOYEES
As of June 30, 1999, the Company had 121 full-time employees, of whom
23 had executive or managerial responsibilities. None of the Company's employees
are represented by a union. The Company considers its relations with its
employees to be good.
The Company's growth continues to place significant demands on its
managerial resources. The success of the Company's business is substantially
dependent on the services of its senior management team, and the services of Mr.
Kendall Northern and Mr. Earl Cook. The Company has employment agreements with
Messrs. Northern and Cook, however, the loss of their services or the services
of its other officers and key technical personnel could have a material adverse
effect on the Company. To address these risks, the Company must, among other
things, continue to attract, retain and motivate qualified personnel. While the
Company, like other technology companies, has experienced some difficulty in
attracting and retaining qualified personnel, it has been successful in
attracting qualified personnel to date. There can be no assurance that the
Company will be successful in attracting or retaining qualified personnel in the
future.
INSURANCE
The Company maintains general liability, automobile liability,
workmens' compensation and umbrella coverage insurance in amounts which it
believes are customary for a company of its size engaged in a comparable
industry. However, there can be no assurance that the Company will not be
subject to claims in the future that its insurance may not cover or as to which
its coverage limits may be inadequate.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
Except for historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to,
statements regarding future events and the Company's plans and expectations. The
Company's actual results could differ materially from those discussed herein.
Readers are cautioned not to place undue reliance on the forward-looking
statements that relate to the Company's future performance. See "Special Note on
Forward-Looking Statements."
OVERVIEW
The Company is becoming a full service communications provider through
its entry into the convergence technology market and it has positioned itself as
a full service business communications solutions provider. The Company was
formed as an Internet Service Provider and began providing Internet services
including, personal and business dial up accounts, high speed frame relay
connections and web site design in November 1995. In February 1997, the Company
entered the retail computer sales and services market. In 1998 and 1999, the
Company expanded its product lines and geographic area of operations through
several strategic acquisitions. The Company is in the process of divesting its
retail computer sales and services operations and is currently engaged in
underground cable construction, providing Internet access, software development,
e-commerce development, wholesale communications and computer equipment sales,
advertising and graphics design.
The Company's ISP operations have faced the traditional problems of the
industry, including intense competition for customers which causes high customer
turnover rates. The Company is therefor concentrating on more commercial users
and high end e-commerce customers. Most of the Company's growth in personal ISP
customers has come through acquisitions. The Internet is continuing to expand
and more businesses are learning to
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use the Internet to reach more customers. As a result, businesses are requiring
more sophisticated e-commerce sites and applications. Through various
acquisitions, the Company has expanded into providing custom software and
complete e-commerce and advertising services. See "History - Internet Services."
Since the Company entered the retail personal computer market in 1997,
intense competition with large retail chains and manufacturers selling direct to
customers has lowered profit margins and absorbed a large portion of computer
equipment market. As a result, the Company has changed its focus to expand its
wholesale computer and data communications equipment division, which sells to
Internet Service Providers, Competitive Local Exchange Carriers, schools,
government agencies and resellers. The expansion of the Company's wholesale
products division has come primarily through acquisitions. See "History -
Communications Equipment Sales."
The Company is preparing to enter the convergence technology market.
The Company has entered the underground construction services market to provide
new and advanced fiber systems for existing and emerging communications
companies and for its own use to facilitate its entrance into the convergence
technology market. The Company entered the underground construction services
market primarily through strategic acquisitions. See "History - Underground
Cable Engineering and Construction."
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues
represented by specific expense and income items for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1997 1998
---- ----
REVENUES:
<S> <C> <C>
Internet Services................................... 66.3% 35.6%
Communications and Computer Sales and Services...... 33.7 8.3
Underground Construction Operations................. - 56.1
----- -----
TOTAL REVENUES................................. 100.0 100.0
----- -----
COSTS OF SALES AND OPERATING EXPENSES:
Cost of Internet Services........................... 46.4 27.9
Cost of Communications and Computer
Sales and Services................................ 26.0 7.2
Cost of Underground Construction Operations......... - 45.5
Depreciation and Amortization....................... 6.5 10.5
General and Administrative.......................... 39.8 47.5
----- -----
TOTAL OPERATING EXPENSES....................... 118.7 138.6
----- -----
LOSS FROM OPERATIONS.................................... (18.7) (38.6)
OTHER INCOME (LOSS), NET................................ (4.9) (1.2)
LOSS BEFORE INCOME TAXES................................ (23.6) (39.8)
PROVISION FOR INCOME TAXES.............................. - -
----- -----
NET LOSS....................................... (23.6)% (39.8)%
===== =====
</TABLE>
The Company's operating loss increased from $163,000 in 1997 to
$1,165,000 in 1998 and its net loss increased from $205,000 in 1997 to
$1,202,000 in 1998.
19
<PAGE> 20
The following table sets forth, for the periods indicated, the
unaudited pro-forma results of operations, which reflects the Company's
strategic acquisitions as if such acquisitions were consummated at the beginning
of the immediately preceding year.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1997 1998
---- ----
<S> <C> <C>
Revenues................ $5,466,000 $8,753,000
Net Loss................ (241,000) (1,274,000)
</TABLE>
YEAR ENDED SEPTEMBER 30, 1998 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1997
REVENUES
Total revenues were $3,021,000 for the fiscal year ended September 30,
1998, an increase of 247% from $871,000 for the fiscal year ended September 30,
1997. Internet services revenues increased $497,000, or 86%, from $578,000 in
1997 to $1,075,000 in 1998. This increase is primarily attributable to growth in
the Company's customer base and service areas, including customers acquired
through strategic acquisitions in April 1998 and July 1998. In addition,
Internet revenues increased as a result of the Company's acquisition of a
software development company in May 1998. See "History - Internet Services."
Communications and computer equipment sales and services revenues
decreased $42,000, or 14%, from $293,000 in 1997 to $251,000 in 1998. The
Company believes this decrease is the result of increased competition from large
retail chains and manufacturers selling direct to customers. The Company's
acquisitions at the end of fiscal 1998 of a value added computer services and a
wholesale computer sales division did not contribute revenues to the Company in
fiscal 1998. See "History - Computer Sales and Service."
The Company's underground construction operations contributed
$1,695,000 of revenue during the two months that it was owned by the Company in
fiscal 1998. Before being acquired by the Company, these operations had revenues
of $2,001,000 in 1997 and revenues of $4,984,000 for a comparable period in
1998. The Company believes that its underground construction operations will
significantly increase the Company's revenues over the next several years. See
"History - Underground Cable Engineering and Construction."
COSTS OF REVENUES
Cost of sales in the Internet services division includes the direct
cost of labor for systems operations, customer support and programmers,
communications charges and the cost of equipment obtained under operating
leases. Cost of sales increased $438,000, or 108%, from $404,000 in 1997 to
$842,000 in 1998. This increase is attributable to upgrades to the network that
are leased instead of purchased, higher salaries for network and support
personnel due to hiring personnel with higher skill levels and increased
communications cost to serve the increased number of customers.
Cost of sales in the computer sales and services, which includes cost
of parts and direct labor to assemble parts and provide service labor, declined
by $7,000, or 3%, from $226,000 in 1997 to $219,000 in 1998. The Company
believes that this decline is primarily attributable to increased competition
from large retailers and manufacturers. Gross margins from the Company's
computer sales and services decreased from 23% in 1997 to 13% in 1998.
Cost of sales for the Company's underground construction operations,
which includes materials and direct labor costs, was $1,376,000 during the two
months that it was owned by the Company during fiscal 1998. Before being
acquired by the Company, these operations had cost of sales of $1,434,000 in
1997 and cost of sales of $3,370,000 for a comparable period in 1998. The
increase is primarily attributable to an increase in labor costs. Gross margins
have declined for this division as a result of the Company focusing its
resources on larger projects, but the annualized gross margins for 1997 and 1998
were 28% and 32%, respectively.
20
<PAGE> 21
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased $1,085,000, or 313%, from
$347,000 in 1997 to $1,432,000 in 1998. Approximately $200,000 of this increase
is related directly to professional services and travel in connection with the
Company's acquisitions in 1998, including the acquisition and reverse merger in
March, 1998, and to integrate the operations of the acquired entities into the
Company. Approximately $435,000 is directly related to acquisitions that were
made in 1998, with $135,000 being attributed to the Internet service
acquisitions and $300,000 to the underground cable construction division. Other
increased expenses are the result of additional management and facilities due to
increased growth and to develop NeighborComm software and network solutions.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased from $57,000 in 1997 to
$318,000 in 1998. This increase is primarily attributable to acquisitions made
by the Company and reflects additional depreciation from fixed assets and
amortization of the intangible assets resulting from the acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company had net cash used in operating activities of $738,000 for
the year ended September 30, 1998 compared to $125,000 for the year ended
September 30, 1997. The primary reason for the increase in cash used in
operations was the increase in accounts receivable and related items related to
the Company's expanding business operations. The Company's investment activities
provided $119,000 from operations during 1998 and required $32,000 in 1997. The
primary reason for the cash provided from investing activities in 1998 was the
sale of trading securities that were acquired as part of the business
combination during 1998. Financing activities provided $1,169,000 in 1998 and
$178,000 in 1997. Substantially all of the financing activities related to the
sale of common stock.
Historically, the Company's cash flows from sales of its products and
services have not been sufficient to completely fund its operations, and
shortfalls have been funded primarily through equity financing. At September 30,
1998, the Company had cash and cash equivalents of $571,000, compared to cash
and cash equivalents of $21,000 at September 30, 1997. The increase in cash and
cash equivalents is primarily attributable to additional capital obtained from
$1,344,000 in net proceeds from private placements of the Company's common stock
and $123,000 from acquisitions. Such proceeds were offset by $738,000 used for
operations, $159,000 used for purchases of equipment and $68,000 for debt
payments.
The Company plans to continue to aggressively expand its business
operations through the remainder of fiscal 1999 and into fiscal 2000 which will
require more resources than are currently available to the Company. The
Company's business plan includes pursuing additional debt and equity financing
with financial institutions or strategic partners. The Company currently has a
stock purchase commitment from Blackwater Capital Partners, L.P., for up to
approximately $7,000,000 of which management expects to receive $2,500,000 by
September 30, 1999. There is no assurance that the Company will receive all or
any portion of the funds to be received from such stock purchase commitment in a
timely manner or at all. In the event the Company is unable to obtain additional
financing, the Company will not be able to fully undertake its business
expansion and will attempt to reduce costs to permit existing sources of capital
to finance the operations of the Company until such time additional sources
become available. The Company anticipates that the receipt of the remaining
amounts committed under the Blackwater Capital arrangement will provide the
funding necessary for the next 12 months when taken in conjunction with other
financing facilities presently in place.
YEAR 2000 COMPLIANCE
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a two
digit calendar year is commonly referred to as the "Year 2000 Compliance" issue.
As the calendar year 2000 approaches, such systems may be unable to accurately
process some date-based information.
21
<PAGE> 22
The Company is aware of the problems associated with the year 2000 date
change and has established and continues to evaluate and update its program to
address any potential year 2000 compliance issues relating to its:
- internal operating systems,
- vendors, facilities and other third parties and
- products and services.
The Company is currently assessing its material internal operating
systems for year 2000 compliance. The Company's assessment includes internal
production systems, accounting and financial systems, and software developed by
the Company. The Company expects this assessment to be completed by August 31,
1999 and anticipates testing of its internal operating systems to be completed
by October 31, 1999. Based on the preliminary results of this assessment, the
Company believes its material internal operating systems and software is year
2000 compliant. If the Company's major internal operating systems or software
are not year 2000 compliant in a timely manner, the Company's business
operations would be materially and adversely affected and the Company may be
required to incur unanticipated expenses to remedy any problems not addressed by
these compliance efforts.
The Company is currently evaluating the year 2000 readiness of its
material vendors and facilities with respect to IT, as well as non-IT, assets.
The Company is working with many of its material vendors and will evaluate
responses on a case-by-case basis. The Company is also in the process of
beginning its assessment of the year 2000 readiness of each of its facilities.
If the Company's major vendors or facilities are not year 2000 compliant in a
timely manner, the Company's business operations would be materially and
adversely affected and the Company may be required to incur unanticipated
expenses to remedy any problems.
The Company's development of products and services is accomplished
through in-house development, and acquisition or license from third parties. The
Company is assessing all of its internally developed and third-party developed
products and services for year 2000 readiness, and believes that all of such
products have been designed to satisfy the Company's year 2000 specifications.
The Company will continue to monitor newly developed or acquired products or
technology for year 2000 compliance. In the event that any of the Company's
developed or acquired products or technology are not year 2000 compliant in a
timely manner, the Company's sales may decline materially, customers and those
with whom they do business may assert product liability and other claims, and
the Company's business, results of operations and financial condition would be
materially and adversely affected.
To date, the Company has not completed its contingency plans in the
event that its internal operating systems, vendors, facilities, or products, or
any other components of its business operations, fail to operate in compliance
with the year 2000 century date change. The Company expects to develop its
contingency plans by October 31, 1999.
The estimated costs of the Company's year 2000 compliance program have
not had and are not expected to have a material effect on the Company's
financial position, results of operations or liquidity. However, there can be no
assurance that the Company will not experience material adverse consequences in
the event that the Company's year 2000 compliance program is not successful or
its vendors, or facilities are unable to resolve their year 2000 compliance
issues in a timely manner.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
This Form 10-SB contains "forward-looking statements" relating to,
without limitation, future economic performance, plans and objectives of the
Company for future operations and projections of revenue and other financial
items, that are based on the beliefs or, assumptions made by and information
currently available to the Company. The words "expect," "estimate,"
"anticipate," "believe," "intend," "plan," and similar expressions and
variations thereof are intended to identify forward-looking statements. The
cautionary statements in this "Factors that May Affect Future Operating Results"
section and elsewhere in this Form 10-SB identify important factors with respect
to such forward-looking statements, including risks and uncertainties, that
could cause actual result to differ materially from those expressed in or
implied by such forward-looking statements.
22
<PAGE> 23
LIMITED OPERATING HISTORY; UNPREDICTABILITY OF OPERATING RESULTS
The Company was incorporated on March 22, 1994, as World's Fare, Inc.,
but did not begin to generate meaningful revenue until October 1996 and has not
generated an operating profit to date. Although the Company has experienced
revenue growth in recent periods, in view of the Company's short operating
history and the rapidly changing nature of the computer and communication
provider market, such growth may not be sustainable and should not be considered
indicative of future operating results. The Company's results of operations may
become increasingly unpredictable from quarter to quarter as a result of
numerous factors, including market acceptance of the Company's current or future
products, fluctuations in the development and growth of the NeighborComm, the
mix of distribution channels through which the Company's products are sold, the
timing of orders and shipments of products, the Company's ability to introduce
new products, or the introduction or the announcement of competitive products.
The Company's current expense levels are based in part on its expectations of
future revenue and, as a result, net income (loss) for a given period could be
disproportionately affected by any reduction in revenue. There can be no
assurance that the Company will be able to achieve significant revenue from
sales of products in the future.
FutureOne is presently dependent upon additional capital resources to
enable it to carryout its business plan and attain profitabilities. Under its
arrangement with Blackwater Capital it expects to receive approximately $2.5
million by September 30, 1999. The lack of profitable operations and the need
for additional capital have resulted in the report of independent auditors
containing an uncertainties paragraph with respect to the abilities of FutureOne
to continue as a going concern.
MANAGEMENT OF GROWTH
The Company recently has experienced growth, primarily through
acquisitions, in both revenue and employees. This growth has resulted in an
increase in the responsibilities of the Company's management and has placed
added pressures on the Company's operating and financial systems. During fiscal
1998, the Company hired directly, or retained through strategic acquisitions,
107 new employees, including certain key members of management, to help the
Company manage its growth. The Company's ability to assimilate new personnel
will be critical to its performance, and there can be no assurance that the
management and systems currently in place will be adequate if its operations
continue to expand or that the Company will be able to implement additional
systems successfully and in a timely manner as required.
RISKS ASSOCIATED WITH THE EMERGING NEIGHBORCOMM MARKET
The market for the Company's NeighborComm system is in an early stage
of development. Because this market is only beginning to develop, it is
difficult to assess the size of this market and the product features and prices,
the optimal distribution strategy and the competitive environment that will
develop in this market. There is no assurance that the anticipated services that
comprise NeighborComm will be provided in a timely manner or at all. There is no
assurance that the NeighborComm product will be accepted by consumers or that
consumer acceptance will endure. In order to provide voice and video services to
consumers, the Company must obtain its own operating authorities or resell other
providers' services. The Company must therefore have operating authorities to
provide telephone services in each state that it intends to offer such service
and/or obtain operating authority to provide video services in various
localities. There is no guarantee that the Company will be granted such
authorities in a timely manner or at all. The Company is currently taking steps
to obtain telephone operating authorities, but to date the Company has not
applied for any video authority. If the Company is not granted direct authority
to provide telephone or video services in some or all locations, it may acquire
such services from other providers or resell the services of the providers, but
such services may not be available if and when needed or at rates that will
allow the Company to provide such services to its customers on a profitable
basis.
UNCERTAINTY OF PRODUCT ACCEPTANCE
The Company's NeighborComm system is a new product for the Company and
still under development. However, the Company is in the process of implementing
its first NeighborComm system. There can be no assurance, however, that the
Company will be able to continue to develop the NeighborComm system or that it
will
23
<PAGE> 24
achieve market acceptance. The failure of the NeighborComm system to achieve
such market acceptance, or maintain such acceptance, if achieved, as a result of
competition, technological change or other factors, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION
The market for computer and communication products and services is new,
intensely competitive, rapidly evolving and subject to rapid technological
change. The Company expects competition to intensify in the future. The Company
believes that the principal competitive factors affecting the market include
scope of product offerings, technical features, ease of use, reliability,
customer service and support and price. Although the Company believes that its
products currently compete favorably with respect to such factors, there can be
no assurance that the Company will maintain its competitive position against
current and potential competitors, especially those with significantly greater
financial, marketing, service, support, technical and other competitive
resources.
The Company's principal current competitors include AT&T, MCI, Sprint
and other major telecommunications companies. There can be no assurance that the
Company will not in the future face increased competition from such companies in
the bundled communication services market and therefore suffer loss of market
share to such companies. Moreover, due to the rapid expansion of the bundled
communication services market, the Company may face competition from new
entrants in the telecommunications industry. There can be no assurance that the
Company's current and potential competitors will not develop products that may
be more effective than the Company's current or future products or that the
Company's technologies and products would not be rendered obsolete by such
developments. Many of the Company's current and potential competitors have
longer operating histories, greater name recognition, larger installed customer
bases and significantly greater financial, technical and marketing resources
than the Company. As a result, they may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products than the Company. An
increase in competition could result in price reductions and loss of market
share. Such competition could have a material adverse effect on the Company's
business, financial condition and results of operations.
CHANGES IN TECHNOLOGY AND INDUSTRY STANDARDS
The communications industry is characterized by rapid changes,
including evolving industry standards, frequent new product introductions,
continuing advances in technology and changes in customer requirements and
preferences. The introduction of new technologies could render the Company's
existing products obsolete or unmarketable. There can be no assurance that the
Company will be able to counter challenges to its current products, that the
Company's future product offerings will keep pace with technological changes
implemented by competitors or persons seeking to provide communications
services, that its products will satisfy evolving consumer preferences or that
the Company will be successful in developing and marketing products for any
future technology. Failure to develop and introduce new products and product
enhancements in a timely fashion could have a material adverse effect on the
Company's business, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends to a significant extent on its
senior management and other key employees, including key development personnel.
The Company has employment agreements with Kendall Q. Northern, its President
and Chief Executive Officer, and Earl J. Cook, its Chief Financial Officer and
an Executive Vice President. The Company also believes that its future success
will depend in large part on its ability to attract and retain additional key
employees. Competition for such personnel is intense, and there can be no
assurance that the Company will be successful in attracting and retaining such
personnel. The Company's inability to attract and retain additional key
employees or the loss of one or more of its current key employees could have a
material adverse effect on the Company's business, financial condition and
results of operations.
DEPENDENCE ON TELECOMMUNICATIONS ACCESS
The Company must rely on other companies to provide data communications
capacity via leased telecommunications lines. If one or more of these companies
is unable or unwilling to provide or expand its current
24
<PAGE> 25
levels of service to the Company in the future, the Company's operations could
be materially and adversely affected. There are also indications that providers
of these services are going to increase the cost of their services to Internet
providers. It is unknown how this increased cost may affect the Company's
business, operating results or future expansion plans. Although
telecommunications lines are available from several sources, there can be no
assurance that the Company could obtain substitute services from other providers
at reasonable or comparable prices or in a timely fashion. In addition, the
Company is dependent on local telephone companies to provide local dial-up and
dedicated access lines for access to each of the Company's local sites.
RISK OF SYSTEM FAILURE
The success of the Company depends upon its ability to deliver high
quality, uninterrupted access to the Internet. Any system failure that causes
interruptions in the Company's operations could have a material adverse effect
on the Company. As the Company expands its network and data transmission grows,
increased stress will be placed upon network hardware and data transmission
systems. Although the Company's system includes redundancy and power supply
alternatives to protect its network, there can be no assurance that the Company
will not experience failures relating to individual sites, or even catastrophic
failure of the entire network. The Company's operations also depend upon its
ability to successfully expand the network and to integrate new and emerging
technologies and equipment into the network, which is likely to increase the
risk of system failure and cause unforeseen strains on its network. The
Company's network is also vulnerable to damage from fire, floods, earthquakes,
power loss, telecommunications failures and similar events, especially if such
an event occurs at the Company's operations center located in metropolitan
Phoenix, where a significant portion of the Company's computer equipment is
located. The Company carries property insurance, which may not be adequate to
compensate the Company for all losses that may occur. In any event, significant
or prolonged system failures could damage the reputation of the Company and
result in the loss of subscribers.
SECURITY
Despite the implementation of network security measures, the Company's
infrastructures remain vulnerable to computer viruses, break-ins and similar
disruptive problems caused by its subscribers or other Internet users. Computer
viruses, break-ins or other problems caused by third parties could lead to
interruptions, delays or a cessation in service to the Company's subscribers.
Furthermore, inappropriate use of the Internet by third parties also could
potentially jeopardize the security of confidential information stored in the
computer systems of the Company's customers, which may deter potential
subscribers. Alleviating problems caused by computer viruses, break-ins, or
other problems caused by third parties may require significant expenditures of
capital and resources by the Company, which could have a material adverse effect
on the Company.
DEPENDENCE ON SUPPLIERS
The Company has no long-term contracts with its suppliers, but the
Company has many dealer contracts with computer and equipment suppliers, which
allows it to purchase components and equipment at favorable prices and on
favorable credit terms. If any of these suppliers cancel, materially alter or
change the credit terms of their dealer contracts, such actions could adversely
affect the Company's communications equipment sales activities, profitability
and results of operation.
The Company depends on third-party suppliers for its leased line
connections or bandwidth. Some of these suppliers are competitors of the
Company. To the extent that these suppliers change their pricing structures, the
Company may be adversely affected. Moreover, the Company depends on third-party
suppliers of hardware components. Some components used by the Company in
providing its networking services are currently acquired or available from
limited sources. The Company also depends on a credit card company to provide
credit to a large portion of its subscribers and computer customers who charge
their merchandise and subscription fees on a monthly basis. To the extent the
credit card company is unwilling to extend such credit, or imposes more
restrictive conditions on the extension of such credit, including the
establishment of a reserve for chargebacks, the Company's business could be
adversely affected.
25
<PAGE> 26
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's principal administrative offices and its central
operating equipment are located in approximately 9,300 square feet of space in
Phoenix, Arizona. The Company occupies these premises under the lease agreement
expiring on January 31, 2001. In addition, the Company also leases other office
space of approximately 1,600 square feet and warehouse space of approximately
1,650 square feet in Phoenix, and other facilities in Prescott and Lake Havasu
City, Arizona, and Colorado Springs, Colorado aggregating approximately 9,000
square feet as of July 15, 1999. The Company considers its facilities to be
sufficient for current and anticipated operations. The Company may have to lease
additional space to accommodate any of its expansion plans.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the numbers of shares and percentage of
all shares of the Company's Common Stock outstanding as of June 30, 1999 held by
(i) any person known to the Company to be the beneficial owner of 5% or more of
the Company's outstanding Common Stock, (ii) each director and executive officer
of the Company, and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT & NATURE OF
OF BENEFICIAL OWNER (1) BENEFICIAL OWNER PERCENT OF CLASS (2)
----------------------- ---------------- --------------------
<S> <C> <C>
5% Shareholders
- ---------------
Muluha Limited (3) 1,400,000 (4) 10.8%
Daniel J. Romano 692,552 (5) 5.6%
Directors and Executive Officers
- --------------------------------
Kendall Q. Northern 2,127,906 (6) 16.8%
Earl J. Cook 1,880,406 (7) 14.9%
Donald D. Cannella 1,414,151 (8) 11.4%
Steven R. Green 157,605 (9) 1.3%
5,580,058 (10) 43.2%
All Executive Officers and Directors as
a Group (4 Persons)
</TABLE>
- ----------------------
(1) Except as otherwise indicated, each holder may be reached through the
Company at 4250 East Camelback Road, Suite K-192, Phoenix, Arizona 85018.
(2) The percentages shown are calculated based upon 12,456,211 shares of Common
Stock outstanding on June 30, 1999. The numbers and percentages shown
include the shares of Common Stock actually owned as of June 30, 1999 and
the shares of Common Stock that the identified person or group had the
right to acquire within 60 days of such date. In calculating the percentage
of ownership, all shares of Common Stock that the identified person or
group had the right to acquire within 60 days of June 30, 1999 upon the
exercise of options or warrants are deemed to be outstanding for the
purpose of computing the percentage of the shares of Common Stock owned by
such person or group, but are not deemed to be outstanding for the purpose
of computing the percentage of the shares of Common Stock owned by any
other person.
(3) Muluha Limited's address is c/o Stephanie Phillips, FAB
Securities of America, 50 Broadway, 14th Floor, New York, NY 10004.
(4) Includes 400,000 shares of Common Stock that Muluha Limited may acquire
upon the exercise of warrants exercisable within 60 days of June 30, 1999.
(5) Includes 5,000 shares of Common Stock held by Mr. Romano as Custodian for
his minor children
(6) Includes 300,000 shares of Common Stock held by Mr. Northern as Custodian
for his minor children and 205,406 shares of Common Stock that Mr. Northern
may acquire upon the exercise of warrants exercisable within 60 days of
June 30, 1999.
26
<PAGE> 27
(7) Includes 205,406 shares of Common Stock that Mr. Cook may acquire upon the
exercise of warrants exercisable within 60 days of June 30, 1999.
(8) Includes 20,000 shares of Common Stock held by Mr. Cannella as Custodian
for his minor children.
(9) Includes 107,605 shares of Common Stock held by Blackwater Capital
Partners, L.P. and 50,000 shares of Common Stock that Blackwater Capital
Partners, L.P., may acquire upon the exercise of warrants exercisable
within 60 days of June 30, 1999. As the managing partner of Blackwater
Capital Partners, L.P., Mr. Green has investment power with respect to such
shares.
(10) Includes 460,812 shares of Common Stock that such executive officers and
directors may acquire upon the exercise of warrants exercisable within 60
days of June 30, 1999.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following table sets forth information concerning the Company's
executive officers and directors. Except as otherwise noted, none of the
executive officers are directors or officers of any publicly owned corporation
or entity.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Kendall Q. Northern 36 Director, President and Chief Executive Officer
Earl J. Cook 56 Director, Executive Vice President, Treasurer
and Chief Financial Officer
Donald D. Cannella 29 Director
Steven R. Green 40 Director
</TABLE>
KENDALL Q. NORTHERN is a founder of FutureOne AZ and served as its
President and a Director since December 26, 1996. He has served as Director,
President and Chief Executive Officer of the Company since March 30, 1998. Mr.
Northern was the founder and former owner of Northern Computer Services, Inc.,
an Arizona based computer manufacturer, consulting and technical support company
which was a part of the Microsoft development network. Mr. Northern attended the
University of Utah to obtain a degree in computer sciences.
EARL J. COOK is a founder of FutureOne AZ and served as its Executive
Vice President and a Director since December 26, 1996. He has served as
Director, Executive Vice President, Treasurer and Chief Financial Officer of the
Company since March 30, 1998. He is the founder and currently an owner of a
financial consulting company in Florida. Mr. Cook is a Certified Public
Accountant and a graduate of Wayne State University with a degree in accounting.
Mr. Cook is the former Chief Financial Officer, Executive Vice President and
Director of McCulloch Properties, Inc., a major developer of cities such as Lake
Havasu City and Fountain Hills, Arizona.
STEVEN R. GREEN has served as a Director of the Company since August
1998. Mr. Green is the managing partner of Blackwater Capital Partners, L.P. Mr.
Green has held senior positions with Jefferies & Co. and Bear Sterns & Co., Inc.
as an institutional equity block trader assisting risk arbitrageurs, corporate
and financial takeover specialists, leveraged buyout groups, pension funds,
money managers and major corporations announcing large stock repurchase
programs. In 1990, Mr. Green formed Arcadian Capital, Inc., a boutique
investment banking firm specializing in coordinating mergers and acquisitions,
initial public offerings, recapitalizations and reorganizations. Mr. Green also
serves as a director for Duraswitch Industries, Inc., and U.S. 1 Industries,
Inc..
DONALD D. CANNELLA has served as a Director of the Company since August
1998. Mr. Cannella has been the President of OPEC CORP., a wholly owned
subsidiary of the Company, since November 1995. Prior to joining OPEC CORP., Mr.
Cannella served in various positions in the telecommunications industry since
1989.
Earl Cook's son, Eric Cook, serves as Secretary of the Company and
Kendall Northern's wife, Susan Northern, serves as Assistant Secretary of the
Company.
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<PAGE> 28
INVOLVEMENT IN LEGAL PROCEEDINGS
To the best of management's knowledge, during the past five years, none
of the following occurred with respect to a present or former director or
executive officer of the Company:
(1) Any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
(2) Any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of any competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; and
(4) Being found by a court of competent jurisdiction (in a civil
action), the commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment has
not been reversed, suspended, or vacated.
ITEM 6. EXECUTIVE COMPENSATION.
The following tables set forth the compensation received for services
rendered to the Company or its subsidiaries during the fiscal years ended
September 30, 1998 and 1997 by the Company's Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING WARRANTS
NAME AND PRINCIPAL POSITION YEAR SALARY ($) (#)
--------------------------- ---- ---------- ---
<S> <C> <C> <C>
Kendall Q. Northern 1998 64,615 205,406 (1)
President and Chief Executive Officer 1997 31,385 ---
</TABLE>
- -------------------
(1) Mr. Northern was awarded warrants to purchase 205,406 shares of Common
Stock for $2.93 per share. The warrants are fully vested and expire on
October 1, 2005.
WARRANT GRANTS
The following table sets forth information regarding warrant grants to
the Company's Chief Executive Officer during the fiscal year ended September 30,
1998.
WARRANT GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL WARRANTS
UNDERLYING WARRANTS GRANTED BY EMPLOYEES IN EXERCISE
NAME GRANTED FISCAL YEAR BASE PRICE EXPIRATION DATE
---- ------- ----------- ---------- ---------------
<S> <C> <C> <C> <C>
Kendall Q. Northern 205,406 (1) 50% $2.93 (2) October 1, 2005
</TABLE>
- -----------------------
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(1) Mr. Northern and one other executive officer of the Company were
awarded warrants to purchase an aggregate of 410,812 shares of Common
Stock. The warrants vested immediately upon grant, which was September
30, 1998.
(2) The exercise price per share under each warrant was equal to the fair
market value of Common Stock on the date of grant.
1999 KEY EMPLOYEE STOCK OPTION PLAN
The Company's 1999 Key Employee Stock Option Plan (the "1999 Stock
Option Plan") was approved by the Company's Board of Directors and became
effective on April 30, 1999, subject to shareholder approval. The 1999 Stock
Option Plan will be submitted to the Company's shareholders at the next
shareholder meeting for approval. In order for the 1999 Stock Option Plan to
become effective, the shareholders must approve the 1999 Stock Option Plan
within one year of the Board's adoption or the 1999 Stock Option Plan will be of
no effect and any options granted under the 1999 Stock Option Plan will be void.
The following is a summary of certain terms and provisions of the 1999 Stock
Option Plan. This summary does not propose to be a complete description of the
1999 Stock Option Plan and is subject to the detailed provisions of, and is
qualified in its entirety by reference to the 1999 Stock Option Plan.
The Company's 1999 Stock Option Plan is administered by the Company's
Board of Directors, or a committee of the Board. The Board selects the employees
to whom stock options are granted ("Optionees") and determines the number of
shares subject to each option and the type of option to be granted. Shares of
Common Stock issued pursuant to options awarded under the 1999 Stock Option Plan
shall be made available from authorized but unissued or reacquired shares of the
Company's Common Stock. The aggregate number of shares of Common Stock that may
be issued under the 1999 Stock Option Plan is 2,500,000, provided, however, that
the number of shares reserved for issuance pursuant to the 1999 Stock Option
Plan shall be adjusted to reflect stock dividends, stock splits and other
changes in capitalization.
Under the 1999 Stock Option Plan, the Company may grant options that
are intended to qualify as Incentive Stock Options ("Incentive Stock Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or options not intended to qualify as Incentive Stock
Options ("Non-Statutory Stock Options"). The Incentive Stock Options are not
transferable except by will or the laws of descent and distribution.
Non-Statutory Stock Options may be transferred pursuant to terms and conditions
established by the Board. Incentive Stock Options shall not be exercisable after
the expiration of ten years from the date of grant or upon an earlier expiration
date as a result of the retirement or the death of the Optionee. Options held by
an Optionee who ceases to be employed by the Company for any reason other than
retirement or death shall not be exercisable after the date employment
terminates. Also, in consideration of the Company granting the option, an
Optionee agrees that he will remain in the employ of the Company for a period of
not less than one year from the date of grant of the option, unless his
employment shall be terminated on the account of incapacity or with the consent
of the Company.
The exercise prices of options shall be set by the Board and, in the
case of Incentive Stock Options, shall not be less than the per share fair
market value of the outstanding shares of the Company on the date the option is
granted. If an Incentive Stock Option is granted to an employee who is, at the
time the option is granted, deemed for the purposes of Section 422 of the Code,
or any successor provisions, to own shares of the Company possessing more than
ten percent (10%) of the total combined voting power of all classes of shares of
the Company or of a parent or subsidiary of the Company, the Option Price shall
be at least one hundred and ten percent (110%) of the fair market value of the
Common Stock, and shall not be exercisable after the expiration of five years
from the date of grant. Options may be granted under the 1999 Stock Option Plan
at any time prior to ten years from adoption by the Board, on which date the
plan shall expire but without affecting any options then outstanding.
The Board may amend, modify or terminate at any time the 1999 Stock
Option Plan, except that the Board may not, without further shareholder
approval, increase the total number of shares as to which options may be granted
under the 1999 Stock Option Plan, change the employees or class of employees
eligible to receive options or
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<PAGE> 30
materially increase the benefits accruing to participants under the 1999 Stock
Option Plan. In addition, the Board may not take any action that would impair
the validity of any outstanding option or would prevent the incentive stock
options issued or to be issued under the 1999 Stock Option Plan from being
incentive stock options under Section 422 of the Code, or any successor
provision.
COMPENSATION OF DIRECTORS
All directors of the Company receive a director's fee of $2,500 per
month for serving on the Company's Board of Directors. In addition, directors
are reimbursed for actual out-of-pocket travel expenses to attend meetings of
the Company's Board of Directors.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Kendall Q. Northern and Earl J. Cook are currently employed by the
Company under employment contracts that became effective July 26, 1998. At that
time, the Company entered into an employment agreements with Messrs. Northern
and Cook which set forth the basic terms of employment, including salary,
performance bonuses, and employment duties. In addition, each employment
agreement provides that it is immediately terminable if there is a substantial
change in the management or ownership of the Company under which Messrs.
Northern and Cook have diminished roles in ownership or management control so
that in the sole opinion of Mr. Northern or Mr. Cook, as the case may be, it is
no longer in his best interests to remain an employee of the Company. Mr.
Northern or Mr. Cook, as the case may be, must provide notice of termination
within 30 days of receipt of notice of a Change of Control and the Company shall
be obligated to pay him (i) his annual salary, a performance bonus, and all
other benefits due him, and (ii) the greater of (a) ten percent (10%) of the
Company's net equity as reported on the Company's Balance Sheet at the end of
the month immediately preceding such termination, (b) ten percent (10%) of the
acquisition price of the Company pursuant to the Change in Control as calculated
in accordance with the terms of the employment agreement, or (c) $1,000,000.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In July 1998, the Company entered into a Stock Purchase Agreement with
Blackwater Capital Partners, L.P. and Blackwater Capital Group, L.L.C. Steven R.
Green, a director of the Company, is the managing partner of Blackwater Capital
Partners, L.P. Pursuant to the Stock Purchase Agreement, Blackwater Capital
agreed to immediately purchase for $375,000 certain units of the Company
consisting of an aggregate of 300,000 shares of Common Stock for $1.25 per share
and 150,000 warrants with an exercise price of $3.00 per share, which expired in
May, 1999 after the original expiration date was extended for six months by the
Company. In addition, Blackwater Capital agreed to purchase, or cause to be
purchased, up to 3,211,000 shares of Common Stock from the Company and 100,000
shares of Common Stock from each of Kendall Q. Northern and Earl J. Cook, the
Company's President and Chief Financial Officer, respectively, at a minimum
price of $2.93 per share for a total investment of approximately $10,000,000 and
a total sale of up to 3,411,000 shares of Common Stock. In connection with the
transactions contemplated by the Stock Purchase Agreement, Blackwater Capital
has been issued warrants to purchase 1,700,000 shares of the Company's Common
Stock exercisable at any time after vesting at a price of $1.00 per share. The
warrants are non-callable and vest from time to time as Blackwater Capital
completes the purchase of shares of Common Stock under the Stock Purchase
Agreement. Any shares issuable upon exercise of the warrants shall be
transferred to a voting trust established under a Voting Trust Agreement among
FutureOne (formerly World's Fare, Inc.), Blackwater Capital Group, L.L.C.,
certain shareholders of the Company, and Messrs. Northern and Cook, as
co-trustees. Blackwater Capital shall have certain registration rights with
respect to all shares of Common Stock and warrants held by Blackwater Capital
pursuant to the Stock Purchase Agreement.
As of June 30, 1999, 1,187,605 shares of the Company's Common Stock
were sold, including an aggregate of 50,000 shares by Messrs. Northern and Cook,
and 650,000 warrants have vested pursuant to the Stock Purchase Agreement.
Blackwater Capital has assigned 500,000 of its vested warrants to unrelated
third parties in connection with a stock purchase transaction under the Stock
Purchase Agreement and 100,000 warrants to a former Blackwater Capital partner.
The Stock Purchase Agreement also provides that Blackwater Capital may receive
fees and commissions to be determined by the Company's Board of Directors in the
event that Blackwater Capital assists the Company in completing certain
strategic acquisitions.
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<PAGE> 31
In connection with the Company's acquisition of OPEC CORP., the Company
assumed a lease for office space which is owned by a partnership controlled by
Donald D. Cannella, a director of the Company and President of OPEC CORP.
Payments under the lease are $3,000 per month. Although the lease expired in
December 1998, it automatically renews for successive one-year periods unless
terminated by one of its parties.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is a Nevada corporation and its affairs are governed by its
Articles of Incorporation and Bylaws and the Nevada General Corporation Law. The
following description of the Company's capital stock, which is complete in all
material respects, is qualified in its entirety by reference to the provisions
of the Company's Articles of Incorporation and Bylaws, copies of which have been
filed as exhibits to this Form 10-SB.
The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, par value $0.001 per share. As of June 30, 1999,
12,456,211 shares of Common Stock were issued and outstanding and an additional
1,060,812 shares of Common Stock may be issued upon exercise of outstanding
fully vested warrants. Shares of Common Stock may also be issued upon conversion
of two convertible notes in an aggregate amount of $29,700 (plus accrued
interest) at $1.625 per share. Of the 12,456,211 shares currently issued and
outstanding, 201,292 shares issued to certain employees of the Company remain
subject to awards that were made with vesting restrictions over the next two to
three years. In the event an employee's employment with the Company is
terminated prior to the vesting of such shares, the Company will cancel such
awards.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per share on
all matters to be voted on by shareholders and do not have cumulative voting
rights. The holders of Common Stock are entitled to receive dividends when, as
and if declared by the Board of Directors out of funds legally available. In the
event of liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in all assets remaining which are
available for distribution to them after payment of liabilities and after
provision has been made for each class of stock, if any, having preference over
the Common Stock. Holders of shares of Common Stock, as such, have no
conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to the Common Stock. All of the outstanding shares of
Common Stock are fully paid and nonassessable.
WARRANTS
The Company currently has warrants outstanding to purchase 2,110,812
shares of the Company's Common Stock, which were granted to Blackwater Capital,
some of which have been subsequently assigned by Blackwater Capital, and to
certain executive officers of the Company. The warrants granted to Blackwater
Capital are subject to vesting schedules related to amounts of funding provided
by Blackwater Capital. Of the 1,700,000 warrants granted to Blackwater Capital,
650,000 warrants are fully vested. The remaining warrants issued to Blackwater
Capital will only become vested if Blackwater Capital provides the remaining
funding contemplated by the Stock Purchase Agreement between the Company and
Blackwater Capital or the Company refuses to accept additional funding from
Blackwater Capital under the Stock Purchase Agreement. The shares of Common
Stock underlying the warrants, when issued upon exercise and payment of the
purchase price for such shares of Common Stock, will be fairly paid and
nonassessable. The warrants contain provisions that protect the purchase rights
of the holder upon the occurrence of certain events, such as the merger or
consolidation of the Company with or into another corporation or the sale of
substantially all of the assets of the Company. The Company is not required to
issue fractional shares upon exercise of the warrants. The holder will not
possess any rights as a shareholder of the Company until such holder exercises
the warrants.
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<PAGE> 32
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
The Company's Common Stock has been trading on the Over-the-Counter
Bulletin Board under the symbol FUTO since August 1998 and previously traded
under the symbol WRLF since October 14, 1997. The following sets forth the range
of high and low bid quotations for the periods indicated as reported by National
Quotation Bureau, Inc. Such quotations reflect prices between dealers, without
retail mark-up, markdown or commission and may not represent actual
transactions.
<TABLE>
<CAPTION>
HIGH BID LOW BID
-------- -------
<S> <C> <C>
April 1, 1999 through June 30, 1999.................................. $8.8750 $4.0000
January 1, 1999 through March 31, 1999............................... $10.1250 $2.8750
October 1, 1998 through December 31, 1998............................ $3.7500 $1.8750
July 1, 1998 through September 30, 1998.............................. $3.4375 $2.3750
April 1, 1998 through June 30, 1998.................................. $2.7500 $1.6875
January 1, 1998 through March 31, 1998............................... $1.6250 $1.2500
December 10, 1997 through December 31, 1997.......................... $.5625 $.4375
</TABLE>
As of June 30, 1999, there were approximately 176 holders of record of
the Company's Common Stock.
ITEM 2. LEGAL PROCEEDINGS.
All legal proceedings and actions involving the Company are of an
ordinary and routine nature incidental to the operations of the Company.
Management believes that such proceedings should not, individually or in the
aggregate, have a material adverse effect on the Company's business or financial
condition or results of operations. None of the Company's officers, directors,
or beneficial owners of 5% or more of the Company's outstanding securities is a
party adverse to the Company nor do any of the foregoing individuals have a
material interest adverse to the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The Company changed its independent auditor during calendar year 1998.
This change was by mutual consent due to the need for the Company's auditor to
be familiar with the requirements of financial statements for corporations
becoming reporting companies under the Securities Exchange Act of 1934. The
change was approved by the Board of Directors. The former accountant's report on
the Company's financial statements did not contain an adverse opinion or
disclaimer of opinion and was not modified as to uncertainty, audit scope, or
accounting principles. There were no disagreements with the former accountant on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure.
On December 8, 1998, the Company engaged Ernst & Young, LLP, as its
independent auditor.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The following provides information concerning all sales of securities
within the last three years which were not registered under the Securities Act.
In December 1996, the Company issued an aggregate of 100,000 shares of
Common Stock to two of its founders for $1,000 received in cash. Such shares
were issued without registration pursuant to an exemption from registration
under Section 4(2) of the Securities Act.
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<PAGE> 33
In January 1997, the Company issued a total of 10,000,000 shares to the
former stockholders and certain noteholders of Networld.com Inc., of which
7,800,000 shares were directly attributable to the Company's acquisition of
Networld.com Inc. and 2,200,000 shares were issued to certain noteholders of
Networld.com Inc. to redeem debt of Networld.com Inc. In November 1997,
5,000,000 of such shares of Common Stock were voluntarily tendered back to the
Company pursuant to certain capital adjustment agreements. Such shares were
issued without registration pursuant to an exemption from registration under
Section 4(2) of the Securities Act.
In March 1997, the Company exchanged 579,990 shares for notes and
leases issued by Networld.com Inc. in the aggregate amount of $242,703. Such
offering was made in reliance upon the exemptions from registration provided by
Sections 3(b), 4(2), and 4(6) of the Securities Act and Regulation D promulgated
thereunder.
In August and November 1997, the Company issued an aggregate of 250,000
shares of Common Stock in connection with obtaining an equipment financing line
of credit. Such shares were issued at $1.00 per share and were not registered
pursuant to an exemption from registration under Section 4(2) of the Securities
Act.
In October and November 1997, the Company issued 15,500 shares of
Common Stock to one investor at a price of $1.00 per share in connection with
the Company's purchase of certain equipment. Such shares were issued without
registration pursuant to an exemption from registration under Section 4(2) of
the Securities Act.
In 1997, the Company sold 152,000 shares of Common Stock to 11
investors for $152,000. Such offering was made pursuant to an exemption from
registration under Section 4(2) of the Securities Act and Regulation D
promulgated under the Securities Act.
In 1998, the Company sold a total of 40 units in consideration for
$12,500 per unit to 20 investors with each unit consisting of 10,000 shares of
Common Stock and warrants to purchase 5,000 shares of Common Stock at an
exercise price of $3.00 per share. Such warrants were redeemable by the Company
and expired in May 1999 after the original expiration date of November 1998 was
extended for six months by the Company. Such offering was made pursuant to an
exemption from registration under Section 4(2) of the Securities Act and
Regulation D promulgated under the Securities Act.
From March 1998 through July 1998, the Company issued an aggregate of
181,250 shares of Common Stock to a consultant for services rendered in
connection with the merger of World's Fare, Inc. with FutureOne Arizona. Such
shares were issued without registration pursuant to an exemption from
registration under Section 4(2) of the Securities Act.
In April 1998, the Company issued 50,000 shares to one holder in
consideration for promotional services provided to the Company. Such issuance
was made pursuant to an exemption from registration under Section 4(2) of the
Securities Act.
In April 1998, the Company issued a total of 215,385 shares of Common
Stock to eight holders in connection with the Company's acquisition of LAN
KASTER, INC. Such shares were issued without registration pursuant to an
exemption from registration under Section 4(2) of the Securities Act.
In May 1998, the Company issued a total of 100,000 shares of Common
Stock to the former stockholders of CARNET COMPUTER SERVICES, INC. in connection
with the Company's acquisition of CARNET. Such shares were issued without
registration pursuant to an exemption from registration under Section 4(2) of
the Securities Act.
In July 1998, the Company issued a total of (i) 40,000 shares of Common
Stock to the partners of InterworldNet Partnership in connection with the
Company's acquisition of InterworldNet's assets, and (ii) 2,334,000 shares to
the former stockholders of OPEC CORP. in connection with the Company's
acquisition of OPEC. The Company also issued 125,000 shares to one individual
for consulting services provided in connection with the Company's acquisition of
OPEC. Such shares were issued without registration pursuant to an exemption from
registration under Section 4(2) of the Securities Act.
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<PAGE> 34
In July 1998, the Company entered into a Stock Purchase Agreement with
Blackwater Capital Partners, L.P. and Blackwater Capital Group, L.L.C. Under the
Stock Purchase Agreement, Blackwater Capital agreed to purchase, or cause to be
purchased, up to 3,211,000 shares of the Company's Common Stock from the Company
and up to an aggregate of 200,000 shares from Messrs. Northern and Cook at a
minimum price of $2.93 per share. In connection with the Stock Purchase
Agreement, Blackwater Capital has been issued warrants to purchase 1,700,000
shares of the Company's Common Stock at $1.00 per share expiring in July 2005.
Such warrants vest upon Blackwater Capital's performance under the Stock
Purchase Agreement. To date, 1,187,605 shares of Common Stock have been sold
under the Stock Purchase Agreement, including an aggregate of 40,000 shares sold
by Messrs. Northern and Cook, and 650,000 warrants have vested in connection
therewith. Shares and warrants issued pursuant to the Stock Purchase Agreement
are issued without registration pursuant to an exemption from registration under
Section 4(2) of the Securities Act and Regulation D promulgated under the
Securities Act. In addition, under the Agreement, the Company sold to Blackwater
Capital a total 300,000 shares of Common Stock and warrants to purchase 150,000
shares of Common Stock at an exercise price of $3.00 per share in consideration
for $375,000. Such warrants were redeemable by the Company and expired in May of
1999, after the original expiration date was extended for six months by the
Company.
In September 1998, the Company issued a total of (i) 33,333 shares of
Common Stock to the stockholders of PrimeServ, Corp. in connection with the
Company's acquisition of the assets of PrimeServ, Corp., (ii) 92,308 shares of
Common Stock to the former sole stockholder of Sonoran Industries, Inc. in
connection with the Company's acquisition of Kachina and (iii) 185,306 shares of
Common Stock to the former stockholders of PRIORITY SYSTEMS, INC. in connection
with the Company's acquisition of PRIORITY SYSTEMS, INC. The Company also issued
an aggregate of 2,666 shares of Common Stock to two individuals as commission
for services rendered in connection with the acquisition of PrimeServ's assets.
Such shares were issued without registration pursuant to an exemption from
registration under Section 4(2) of the Securities Act. In addition, in September
1998, as part of the Blackwater Capital Stock Purchase Agreement, Blackwater
Capital acquired 177,605 shares of Common Stock at $2.93 per share. Such shares
were issued without registration pursuant to an exemption from registration
under Section 4(2) of the Securities Act and Regulation D promulgated under the
Securities Act.
In November 1998, the Company issued a total of 50,000 shares of Common
Stock to four individuals in connection with the Company's acquisition of
certain assets of Globalkey. Such shares were issued without registration
pursuant to an exemption from registration under Section 4(2) of the Securities
Act.
The Company issued a total of 222,500 shares of Common Stock to
employees in 1998 pursuant to employment contacts or as employment bonuses.
Certain stock awards were made with specific vesting restrictions over two to
three years. In addition, the Company issued a total of 5,000 shares in June
1998 to a consultant for services provided in connection with some of the
Company's corporate acquisitions. Such shares were issued without registration
pursuant to an exemption from registration under Section 4(2) of the Securities
Act.
In January 1999, as part of the Blackwater Capital Stock Purchase
Agreement, Messrs. Northern and Cook sold 40,000 shares and the Company sold (i)
960,000 shares of Common Stock and (ii) warrants to purchase 400,000 shares of
Common Stock at an exercise price of $1.00 per share, for an aggregate purchase
price of $2,300,000, which were assigned to a third party by Blackwater Capital.
The offering of such shares and warrants by the Company was made pursuant to an
exemption from registration under Section 4(2) of the Securities Act and
Regulation D promulgated under the Securities Act.
In February 1999, the holder of a convertible promissory note for
$25,000 elected to convert the note to 41,750 shares of Common Stock. Such
shares were issued without registration pursuant to an exception from
registration under Section 4(2) of the Securities Act.
In March 1999, the Company issued a total of 100,000 shares of Common
Stock to the former members of Ubiquity Design, LLC (dba Rocket Science
Creative) in connection with the Company's acquisition of Ubiquity Design. Such
shares were issued without registration pursuant to an exemption from
registration under Section 4(2) of the Securities Act.
In April 1999, the Company issued a total of 94,118 shares of Common
Stock to the former stockholders of Abcon, Inc. in connection with the Company's
acquisition of Abcon. Such shares were issued without registration pursuant to
an exemption from registration under Section 4(2) of the Securities Act. In
addition, the Company issued 100,000 shares to the key employee of Abcon
pursuant to an employment contract. This award was made
34
<PAGE> 35
with 25,000 shares vesting immediately and specific vesting restrictions on the
balance over two years. Such shares were issued without registration pursuant to
an exemption from registration under Section 4(2) of the Securities Act.
In May 1999, two holders exercised warrants that were granted under the
Company's Private Placement Memorandum of November 26, 1997 and purchased a
total of 10,000 shares at $3 per share. Such shares were issued without
registration pursuant to an exemption from registration under Section 4(2) of
the Securities Act.
In 1999, the Company has issued a total of 80,000 shares of Common
Stock to employees pursuant to employment contracts or as employment bonuses.
These awards were made with specific vesting restrictions over three years. In
addition, the Company issued a total of 2,500 shares in March 1999 to a
consultant for services provided in connection with employment agency services.
Such shares were issued without registration pursuant to an exemption from
registration under Section 4(2) of the Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. INDEMNIFICATION PROVIDED BY STATUTE:
Sections 78.037, 78.295, 78.300, 78.7502, 78.751 and 78.752 of the
Nevada Revised Statutes offer limitation of liability protection for officers
and directors and/or indemnification protection of officers, directors,
employees and agents of the Company, and provide as follows:
NRS 78.037 Articles of Incorporation; Optional provisions. The articles of
incorporation may also contain:
1. A provision eliminating or limiting the personal liability
of a director or officer to the corporation or its stockholders for
damages for breach of fiduciary duty as a director or officer, but such
a provision must not eliminate or limit the liability of a director or
officer for:
(a) Acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law; or
(b) The payment of distributions in violation of NRS
78.300.
2. Any provision, not contrary to the laws of this state, for
the management of the business and for the conduct of the affairs of
the corporation, and any provision creating, defining, limiting or
regulating the powers of the corporation or the rights, powers or
duties of the directors, and the stockholders, or any class of the
stockholders, or the holders of bonds or other obligations of the
corporation, or governing the distribution or division of the profits
of the corporation.
NRS 78.295. Liability of directors for declaration of distributions. A director
is fully protected in relying in good faith upon the books of account of the
corporation or statements prepared by any of its officials as to the value and
amount of assets, liabilities or net profits of the corporation, or any other
facts pertinent to the existence and amount of money from which distributions
may properly be declared.
NRS 78.300 Liability of directors for unlawful distributions.
1. The directors of a corporation shall not make distributions
to stockholders except as provided by this chapter.
2. In case of any willful or grossly negligent violation of
the provisions of this section, the directors under whose
administration the violation occurred, except those who caused their
dissent to be entered upon the minutes of the meeting of the directors
at the time, or who not then being present caused their dissent to be
entered on learning of such action, are jointly and severally liable,
at any time within 3 years after each violation, to the corporation,
and, in the event of its dissolution or insolvency, to its creditors at
the time of the violation, or any of them, to the lesser of the full
amount of the distribution made or of any loss sustained by the
corporation by reason of the distribution to stockholders.
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<PAGE> 36
NRS 78.7502 Discretionary and mandatory indemnification of officers, directors,
employees and agents: General provisions.
1. 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, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of
the corporation, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding if he
acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendre or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal
action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
2. 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 is or was
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him
in connection with the defense or settlement of the action or suit if
he acted in good faith and in a manner which he 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.
3. 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 in subsections 1
and 2, or in defense of any claim, issue or matter therein, the
corporation shall indemnify him against expenses, including attorneys'
fees, actually and reasonably incurred by him in connection with the
defense.
NRS 78.751 Authorization required for discretionary indemnification; advancement
of expenses, limitation on indemnification and advancement of expenses.
1. Any discretionary indemnification under NRS 78.7502 unless
ordered by a court or advanced pursuant to subsection 2, may 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
36
<PAGE> 37
(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.
2. The articles 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 is not entitled to be indemnified by
the corporation. The provisions of this subsection 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.
3. 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 articles of incorporation or any bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise, for either action in his official capacity or an
action in another capacity while holding his office, except
that indemnification, unless ordered by a court pursuant to
NRS 78.7502 or for the advancement of expenses made pursuant
to subsection 2, may not be made to or on behalf of any
director or officer if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud
or a knowing violation of the law and was material to the
cause of action.
(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.
NRS 78.752. Insurance and other financial arrangements against liability of
directors, officers, employees and agents.
1. A corporation may purchase and maintain insurance or make
other financial arrangements on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise for any liability asserted against him and
liability and expenses incurred by him in his capacity as a director,
officer, employee or agent, or arising out of his status as such,
whether or not the corporation has the authority to indemnify him
against such liability and expenses.
2. The other financial arrangements made by the corporation
pursuant to subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification
by granting a security interest or other lien on any assets of
the corporation.
(d) The establishment of a letter of credit, guaranty
or surety.
No financial arrangement made pursuant to this subsection may provide
protection for a person adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable for intentional
misconduct, fraud or a knowing violation of law, except with respect to
the advancement of expenses or indemnification ordered by a court.
37
<PAGE> 38
3. Any insurance or other financial arrangement made on behalf of a
person pursuant to this section may be provided by the corporation or any other
person approved by the board of directors, even if all or part of the other
person's stock or other securities is owned by the corporation.
4. In the absence of fraud:
(a) The decision of the board of directors as to the propriety
of the terms and conditions of any insurance or other financial
arrangement made pursuant to this section and the choice of the person
to provide the insurance or other financial arrangement is conclusive;
and
(b) The insurance or other financial arrangement:
(1) Is not void or voidable; and
(2) Does not subject any director approving it to
personal liability for his action, even if a director
approving the insurance or other financial arrangement is a
beneficiary of the insurance or other financial arrangement.
5. A corporation or its subsidiary which provides self-insurance for
itself or for another affiliated corporation pursuant to this section is not
subject to the provisions of Title 57 of NRS.
B. INDEMNIFICATION PROVIDED BY THE ARTICLES OF INCORPORATION: The Company's
Articles of Incorporation do not address indemnification of the Company's
Directors and Officers.
C. INDEMNIFICATION PROVIDED BY THE BY-LAWS OF THE COMPANY:
Article IX of the Company's By-Laws provides as follows:
1. GENERAL.
The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company) by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
2. DERIVATIVE ACTIONS.
The Company shall 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 Company to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including amounts paid in
settlement and attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged by a court of competent jurisdiction after exhaustion of all appeals
therefrom to be liable to the Company or for amounts paid in settlement to the
Company unless and only to the extent that the court in which such action or
suit was brought or
38
<PAGE> 39
other court of competent jurisdiction shall determine upon application that, in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
3. INDEMNIFICATION IN CERTAIN CASES.
To the extent that a director, officer, employee or agent of the
Company has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Sections 1 and 2 of Article IX of the
Company's Bylaws ("Article IX"), or in defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
4. PROCEDURE.
Any indemnification under Sections 1 and 2 of Article IX (unless
ordered by a court or advanced pursuant to Section 5 of Article IX) shall be
made by the Company only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
5. ADVANCES FOR EXPENSES.
Expenses incurred by a director, officer, employee, or agent of the
Company in defending a civil or criminal action, suit or proceeding shall be
paid by the Company as they are incurred and in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay the amount if it
shall be ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the Company as authorized in Article IX.
6. RIGHTS NOT-EXCLUSIVE.
The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to the other Sections of Article IX shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding such
office, except that indemnification, unless ordered by a court pursuant to
Section 2 of Article IX or for advancement of expenses made pursuant to Section
5 of Article IX, may not be made to or on behalf of any director or officer if a
final adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action.
7. INSURANCE.
The Company shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
liability and expenses incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of Article IX.
8. DEFINITION OF CORPORATION.
For the purposes of Article IX, references to "the Company" include, in
addition to the resulting corporation, all constituent corporations (including
any constituent of a constituent) absorbed in consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees and agents so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article IX
39
<PAGE> 40
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
9. OTHER DEFINITIONS.
For purposes of Article IX, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Company" shall include any service
as a director, officer, employee or agent of the Company which imposes duties
on, or involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Company" as referred to in Article IX.
10. CONTINUATION OF RIGHTS.
The indemnification and advancement of expenses provided by, or granted
pursuant to Article IX shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person. No amendment to or repeal of
Article IX shall apply to or have any effect on, the rights of any director,
officer, employee or agent under Article IX which rights come into existence by
virtue of acts or omissions of such director, officer, employee or agent
occurring prior to such amendment or repeal.
40
<PAGE> 41
PART F/S
The following financial statements are included herein:
Consolidated Financial Statements of Futureone, Inc. and subsidiaries.
Financial Statements of OPEC CORP.
Unaudited Pro Forma Condensed Consolidated Financial Statement
PART III
Item 1. Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Articles of Incorporation of the Company, including all amendments and
articles of exchanges thereto
2.2 By-Laws of the Company
2.3 First Amendment to By-Laws of the Company
2.4 Second Amendment to By-Laws of the Company
5.1 Voting Trust Agreement among the Company, Blackwater Capital Group, L.L.C.,
Certain Stockholders and Kendall Q. Northern and Earl J. Cook, dated July
25, 1998
6.1 Executive Employment Agreement between the Company and Kendall Q. Northern,
dated as of July 27, 1998
6.2 First Amendment to the Executive Employment Agreement between the Company
and Kendall Q. Northern, dated as of September 30, 1998*
6.3 Executive Employment Agreement between the Company and Earl J. Cook, dated
as of July 27, 1998
6.4 First Amendment to the Executive Employment Agreement between the Company
and Earl J. Cook, dated as of September 30, 1998*
6.5 Employment Agreement between OPEC CORP. and Donald D. Cannella, dated as of
August 1, 1998
6.6 Stock Purchase Agreement by and among World's Fare, Inc., dba FutureOne, a
Nevada corporation, and Blackwater Capital Partners, L.P., and Blackwater
Capital Group, L.L.C., dated as of July 25, 1998
6.7 Warrant for the Purchase of 1,700,000 Shares of Common Stock of World's
Fare, Inc. dba FutureOne
6.8 FutureOne, Inc. 1999 Key Employee Stock Option Plan
6.9 Form of FutureOne, Inc. Incentive Stock Option Agreement
6.10 Form of Warrant Agreement*
6.11 Lease by and between First Gracie, Limited Liability Company and
Networld.com Inc., dated November 28, 1995, as amended*
</TABLE>
41
<PAGE> 42
<TABLE>
<S> <C>
12.1 Letter on Change in Certifying Accountant
12.2 Subsidiaries of the Registrant
12.3 Consent of Ernst & Young LLP Independent Auditors
27 Financial Data Schedule
</TABLE>
*To be filed by amendment.
42
<PAGE> 43
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
FUTUREONE, INC.
By: /s/ Kendall Q. Northern
------------------------------
Kendall Q. Northern
Chief Executive Officer
43
<PAGE> 44
FutureOne,Inc. and Subsidiaries
Index to Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS OF FUTUREONE, INC. AND SUBSIDIARIES
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................................................F-2
Consolidated Balance Sheets as of September 30, 1997 and 1998..........................................F-3
Consolidated Statements of Operations for the years ended September 30,
1997 and 1998........................................................................................F-4
Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1997 and 1998..........................................................................F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 1997 and 1998..........................................................................F-6
Notes to Consolidated Financial Statements.............................................................F-7
FINANCIAL STATEMENTS OF OPEC CORP.
Report of Ernst & Young LLP, Independent Auditors.....................................................F-28
Balance Sheets as of September 30, 1997 and July 28, 1998.............................................F-29
Statements of Operations for the year ended September 30, 1997 and
for the ten months ended July 28, 1998..............................................................F-30
Statements of Stockholders' Equity for the year ended September 30,
1997 and ten months ended July 28, 1998.............................................................F-31
Statements of Cash Flows for the year ended September 30, 1997
and for the ten months ended July 28, 1998..........................................................F-32
Notes to Financial Statements.........................................................................F-33
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENT
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended September 30, 1998....................................................F-41
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements..........................................................................................F-42
</TABLE>
F-1
<PAGE> 45
Report of Independent Auditors
The Board of Directors and Stockholders
FutureOne, Inc.
We have audited the accompanying consolidated balance sheets of FutureOne, Inc.
and subsidiaries (the Company) as of September 30, 1998 and 1997, and the
related consolidated statements of operations, stockholders' 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
FutureOne, Inc. and subsidiaries at September 30, 1998 and 1997, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming FutureOne,
Inc. and subsidiaries will continue as a going concern. As more fully described
in Note 1, the Company has recurring losses, limited working capital and is not
expected to receive its next round of capital from its principal funding source
until after completion of its audited financial statements and completion of
certain other closing matters. These conditions raise substantial doubt about
the Company's ability to continue as a going concern (management's plans in
regard to those matters are also described in Note 1). The financial statements
do not include any adjustments to reflect the possible future effect on the
recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the outcome of this uncertainty.
Ernst & Young LLP
Phoenix, Arizona
June 8, 1999, except for
Note 13 for which the
date is June 29, 1999.
F-2
<PAGE> 46
FutureOne, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 571,229 $ 21,063
Trading securities 151,621 --
Trade accounts receivable, net of allowance for doubtful accounts of
approximately $65,000 and $17,000 at September 30, 1998 and 1997,
respectively 1,534,199 26,765
Cost and estimated earnings in excess of billings on uncompleted contracts 411,877 --
Inventory 49,861 6,322
Prepaid expenses and other assets 30,776 15,825
-----------------------------------
Total current assets 2,749,563 69,975
Property and equipment, net 1,903,838 264,744
Intangible assets, net 7,647,769 234,517
Other assets 193,856 11,079
-----------------------------------
$ 12,495,026 $ 580,315
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Credit lines payable $ 294,011 $ --
Notes payable to stockholders 7,450 36,326
Trade accounts payable 953,347 44,394
Accrued expenses 251,058 31,652
Accrued bonus 500,000 --
Accrual for loss contract 100,000 --
Taxes payable 297,198 --
Billings in excess of costs and estimated earnings on uncompleted contracts 72,005 --
Deferred revenue 31,389 --
Current portion of notes payable long term debt and capital leases 474,245 34,500
Other liabilities 110,591 6,093
-----------------------------------
Total current liabilities 3,091,294 152,965
Notes payable, less current portion 11,794 --
Capital lease payable, less current portion 742,894 --
Stockholders' equity:
Common stock, $.001 par value, 50,000,000 shares authorized and 11,055,344
and 6,049,490 shares issued and outstanding at September 30, 1998
and 1997, respectively 11,055 6,049
Additional paid-in capital 10,202,771 784,431
Accumulated deficit (1,564,782) (363,130)
-----------------------------------
Total stockholders' equity 8,649,044 427,350
-----------------------------------
$ 12,495,026 $ 580,315
===================================
</TABLE>
See accompanying notes.
F-3
<PAGE> 47
FutureOne, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1998 1997
---- ----
<S> <C> <C>
Revenues:
Internet access and services $ 1,074,941 $ 577,543
Computers and related services 251,194 293,402
Construction 1,695,111 --
---------------------------------
3,021,246 870,945
Costs of sales:
Internet access and services 841,780 403,744
Computer and related services 218,508 226,192
Construction 1,376,002 --
---------------------------------
2,436,290 629,936
---------------------------------
Gross profit 584,956 241,009
Operating expenses:
General and administrative 1,390,468 327,522
Depreciation and amortization 359,732 76,023
---------------------------------
Loss from operations (1,165,244) (162,536)
Other income (expense):
Unrealized loss on investments (17,910) --
Realized loss on investment (20,391) --
Interest expense (27,442) (48,403)
Other 29,335 5,769
---------------------------------
Net loss $(1,201,652) $ (205,170)
=================================
Net loss per common share:
Basic $ (0.16) $ (0.02)
=================================
Diluted $ (0.16) $ (0.02)
=================================
Weighted average shares:
Basic 7,677,566 9,293,937
=================================
Diluted 7,677,566 9,293,937
=================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 48
FutureOne, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK
$0.001 PAR VALUE ADDITIONAL
----------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1996 7,800,000 $7,800 $ (5,800) $ (157,960) $ (155,960)
Issuance of common stock:
FUTUREONE Arizona reverse merger 100,000 100 900 -- 1,000
Conversion of debt to equity 2,779,990 2,780 434,923 -- 437,703
Compensation to employees 7,500 7 3,742 -- 3,749
Private Placement Series 1, net of offering costs 112,000 112 95,916 -- 96,028
Lease arrangement execution costs 250,000 250 249,750 -- 250,000
Common stock returned to Company by shareholders (5,000,000) (5,000) 5,000 -- --
Net loss -- -- -- (205,170) (205,170)
----------------------------------------------------------------------
Balance at September 30, 1997 6,049,490 6,049 784,431 (363,130) 427,350
Issuance of common stock:
World's Fare, Inc. reverse merger 500,000 500 1,315 -- 1,815
Private Placement Series 1 40,000 40 39,960 -- 40,000
Private Placement Series 2, net of offering costs 700,000 700 588,420 -- 589,120
Commission on Series 2 Private Placement 181,250 181 181,069 -- 181,250
Equipment acquisition 15,500 16 15,484 -- 15,500
Services 2,000 2 1,998 -- 2,000
Compensation to employees 210,001 210 284,690 -- 284,900
LAN KASTER INC. acquisition 215,385 215 269,016 -- 269,231
Consultants for services 180,000 180 224,820 -- 225,000
CARNET COMPUTER SERVICES, INC. acquisition 100,000 100 124,900 -- 125,000
Interworldnet Partnership acquisition 40,000 40 49,960 -- 50,000
OPEC CORP acquisition 2,334,000 2,334 6,197,666 -- 6,200,000
PRIORITY SYSTEMS, INC. acquisition 185,306 185 542,762 -- 542,947
Purchase Agreement with accredited investor 177,605 178 520,505 -- 520,683
PrimeServ acquisition 35,999 36 105,442 -- 105,478
Kachina International acquisition 92,308 92 270,370 -- 270,462
Purchase of common stock from terminated employees (2,500) (2) (28) -- (30)
Repurchase of employee shares (1,000) (1) (9) -- (10)
Net loss -- -- -- (1,201,652) (1,201,652)
----------------------------------------------------------------------
Balance - September 30, 1998 11,055,344 $11,055 $10,202,771 $(1,564,782) $ 8,649,044
======================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 49
FutureOne Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1998 1997
--------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,201,652) $ (205,170)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 359,732 76,023
Provision for doubtful accounts 48,301 19,411
Deferred expenses (736) --
Stock compensation 346,876 3,749
Realized and unrealized loss on investments 38,301 --
Gain on sale of assets (3,543) (4,137)
Changes in operating assets and liabilities:
Trade accounts receivable (696,431) (36,750)
Costs and estimated earnings in excess of billings on uncompleted (245,028) --
contracts
Inventory (4,765) (6,322)
Prepaid expenses and other assets (9,913) (15,825)
Trade accounts payable 570,779 7,403
Accrued expenses 82,284 30,949
Accrual for loss contract 100,000 --
Taxes payable (27,577) --
Billings in excess of cost and estimated earnings on uncompleted (199,265) --
contracts
Other liabilities 104,498 6,093
---------------------------------
Net cash used in operating activities (738,139) (124,576)
INVESTING ACTIVITIES
Purchases of property and equipment (158,915) (54,640)
Proceeds from sale of property and equipment 18,799 14,028
Acquisitions of businesses, net of cash received 122,691 9,635
Trading securities 145,978 --
Purchase of subscriber list -- (3,257)
Change in other assets (9,254) 1,978
---------------------------------
Net cash provided by (used in) investing activities 119,299 (32,256)
FINANCING ACTIVITIES
Proceeds (repayments) from notes payable to shareholders (36,326) 21,326
Principal payments under capital lease obligations (70,193) --
Proceeds from issuance of common stock 1,343,553 97,028
Repurchase of common stock (40) --
Proceeds (repayments) from notes payable (67,988) 59,541
---------------------------------
Net cash provided by financing activities 1,169,006 177,895
---------------------------------
Increase in cash and cash equivalents 550,166 21,063
Cash and cash equivalents at beginning of period 21,063 --
---------------------------------
Cash and cash equivalents at end of period $ 571,229 $ 21,063
=================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 50
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 1998
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
FutureOne, Inc. (f/k/a World's Fare, Inc.) (the "Company") is a successor by
reverse merger to FutureOne AZ. World's Fare, Inc. was incorporated March 22,
1994 and 1,000 shares were issued to the founders in exchange for services. In
May 1997, World's Fare, Inc. approved a 500:1 stock split which increased the
outstanding shares to 500,000 and the authorized shares to 50,000,000 with a par
value of $.001. On March 30, 1998, World's Fare, Inc. issued 6,049,490 shares of
its common stock for all of the outstanding shares of FutureOne AZ to consummate
the reverse merger. On August 6, 1998, World's Fare, Inc. changed its name to
FutureOne, Inc.
FutureOne AZ is a successor by reverse merger to Networld.com Inc. FutureOne AZ
was incorporated December 26, 1996 and, 100,000 shares were issued to some of
the Founders to establish the business. In January 1997, FutureOne AZ issued
7,800,000 shares of its common stock for all of the outstanding shares of
Networld.com Inc. Networld.com Inc was incorporated November 25, 1995.
Networld.com Inc. had $437,703 in debt and loans at the time of the reverse
merger that were converted into 2,779,990 common shares of FutureOne AZ common
stock. The financial statements present Networld.com as the predecessor business
and the financial statements include its operations beginning October 1, 1996.
The Company and its subsidiaries are primarily a communications business, in
three related, but distinct, industry segments: i) Internet services, including
personal and business dial up accounts, high speed frame relay connections,
virtual telephone services, web site design and customer software development,
ii) computer sales and services, including direct sales of name brand computer
and communications equipment at both the wholesale and retail level, assembling
custom computers, installing and maintaining computer networks and providing
service contracts, and iii) underground cable engineering and construction. The
Company is also developing a convergence technology communications system known
as "NeighborComm(TM)" which, if successful, will allow the Company to provide
voice, video and data directly to customer's homes and businesses on a high
speed Intranet/Internet network.
During 1998, the Company has expanded its product lines and geographic area of
operations through acquisitions of other corporations and customers and assets
of other entities. The Company has offices and business facilities in Phoenix,
Lake Havasu City and Prescott, Arizona and Colorado Springs, Colorado and
Internet access sites in several cities in Arizona.
F-7
<PAGE> 51
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on a going concern
basis, which assumes continuity of operations and realization of assets and
liquidation of liabilities in the ordinary course of business. As shown in the
accompanying statement of operations, the Company incurred an aggregate net loss
of $1.4 million over the past two years, has limited working capital, and is not
expected to receive its next scheduled round of equity financing under its
arrangement with its principal funding source until after completion of its
audited financial statements for the year ended September 30, 1998 and
completion of certain other closing matters. These conditions raise substantial
doubt about the ability of the Company to continue as a going concern.
The Company's ability to improve its financial position will be influenced by,
among other things, operating results and customer response to the Company's
enhanced business model. The Company's ability to continue operations as a going
concern is dependent upon its ability to generate sufficient cash flow and
earnings to meet its obligations on a timely basis and to obtain additional
financing as may be required in the future.
Management of the Company has plans to aggressively expand business operations
during 1999 which will require more capital resources than are currently
available to the Company. The Company's business plans include pursuing
additional debt and or equity financing with financial institutions or strategic
partner(s). The Company currently has a stock purchase commitment from an entity
for an additional round of financing in the amount of approximately $7.0 million
of which $2.5 million management expects to receive before September 30, 1999. A
representative of that entity is also a member of the board of directors. In the
event the Company is unable to obtain additional financing, the Company will
scale back the scope of the planned roll out and reduce costs to permit existing
sources of capital to finance the operations of the Company until such time
additional sources become available.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, CARNET COMPUTER SERVICES, INC.,
FUTUREONE, INC. (an Arizona corporation), LAN KASTER, INC., Networld.com Inc.,
OPEC CORP. and PRIORITY SYSTEMS, INC. All significant intercompany accounts and
transactions have been eliminated.
The accompanying consolidated statement of operations includes the revenues and
expenses of the acquired entities from their actual date of acquisition, all of
which occurred at various dates during the year ended September 30, 1998.
F-8
<PAGE> 52
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
REVENUE AND COST RECOGNITION
The Company generates revenue from internet access, computer hardware sales and
construction contracts. Internet access revenues are recognized on a monthly
basis beginning in the period in which service is made available to a customer.
Customer payments collected in advance related to future service are deferred
and recognized as revenue in the period service is provided. Other internet and
programming services are billed as the work is completed.
Computer sales and service revenue is recognized as products are delivered,
services are completed or monthly fees have been earned for service contracts.
Revenue from firm-fixed-price contracts is recognized using the percentage of
completion method. Under this method, revenues recognized on firm-fixed-price
contracts are measured by the percentage of costs incurred to date to total
estimated costs for each contract. Provision for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs and depreciation. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty
provisions, and final contract settlements may result in revisions in costs and
income and are recognized in the period in which the revisions are determined.
Costs and estimated earnings in excess of billings represent revenues
recognized, using the percentage of completion method under firm-fixed-price
contracts, in excess of billings on those contracts. Company billing amounts to
a customer on firm-fixed-price contracts are usually specified in the contract
terms and conditions and usually consider passage of time, achievement of
certain project milestones or completion of the project.
CASH AND CASH EQUIVALENTS
The Company considers all money market funds with a maturity of three months or
less at the date acquired to be cash equivalents.
F-9
<PAGE> 53
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
SIGNIFICANT CUSTOMERS
For the year ended September 30, 1998 and 1997, the Company had revenues from
one large customer as a percent of total revenues as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1998 1997
---- ----
<S> <C> <C>
Customer A 15% --
</TABLE>
TRADING SECURITIES
Trading securities are valued at fair market value in accordance with generally
accepted accounting principles. Realized and unrealized gains and losses are
charged to earnings when identified.
ACCOUNTS RECEIVABLE
The Company sells its internet dial up accounts services to personal and
business accounts principally in Arizona. Computer hardware sales are made to
business accounts in the Western United States. Construction services provided
by the Company are performed primarily for utility companies and land developers
in the Western United States.
Accounts receivable are typically unsecured. The Company performs on going
credit evaluations of its retail customers and maintains reserves for potential
credit losses.
INVENTORIES
Inventories consist primarily of computer hardware held for sale. Inventories
are carried at the lower of cost or market using the first-in, first-out (FIFO)
method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation of property and equipment
is calculated using the straight-line method over the estimated useful lives of
the assets, generally three years for software and web site costs and five to
seven years for computer related equipment, construction equipment and vehicles.
F-10
<PAGE> 54
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INTANGIBLE ASSETS
Intangible assets consist of trademarks, goodwill, and subscriber lists and are
capitalized and amortized on a straight-line basis over their expected useful
lives, which range from three to ten years.
INCOME TAXES
The Company accounts for income taxes under the liability method pursuant to
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Under the liability method, deferred tax assets and liabilities are
determined from the expected future tax consequences of temporary differences
between the reported amounts of assets and liabilities and their tax bases.
EARNINGS PER SHARE
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards Board ("SFAS") No. 128, "Earnings per Share."
Earnings per common share amounts are based on the weighted average common
shares outstanding during the respective periods and earnings per common share,
assuming dilution, amounts are based on the weighted average common and dilutive
common equivalent shares outstanding during the respective periods.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense was
approximately $51,000 and $11,000 for the year ended September 30, 1998 and
1997, respectively.
STOCK-BASED COMPENSATION
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123 " Accounting for Stock-Based Compensation," and
accordingly, recognizes no compensation expense for employee stock option grants
made at fair value. Stock option grants to nonemployees are charged to expense
based upon the fair value of the options granted.
F-11
<PAGE> 55
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
COMPREHENSIVE LOSS
As of October 1, 1997, the Company adopted the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS No. 130). Statement 130 establishes new rules for
reporting and display of comprehensive income and its components. Comprehensive
loss is the same as net loss for all periods presented.
SEGMENT INFORMATION
Effective October 1, 1997, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS No.
131). SFAS No. 131 superseded FASB No. 14, "Financial Reporting of Segments of a
Business Enterprise." SFAS No. 131 establishes standards for the way that
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. SFAS No. 131
also establishes standards for related disclosures about products and services,
geographic areas, and major customers.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheets for cash and
cash equivalents, accounts receivable, accounts payable and accrued liabilities
approximate fair value because of the immediate or short-term maturity of these
financial instruments. The fair value of long-term debt is determined using
current applicable interest rates as of the balance sheet date and approximates
the carrying value of such debt because the underlying instruments are at
variable rates which are repriced frequently.
F-12
<PAGE> 56
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
RECLASSIFICATION
Certain reclassifications have been made to the 1997 financial statements to
conform with the 1998 presentation.
2. ACQUISITIONS
On April 1, 1998, the Company acquired 100 percent of the issued and outstanding
common stock of LAN KASTER, INC. (Internet service provider serving Prescott,
Arizona and surrounding areas) for consideration of 215,385 shares of the
Company's common stock with a fair value at date of issuance of $1.25 per share
or $269,231 in the aggregate. The acquisition was accounted for as a purchase
transaction.
On May 11, 1998, the Company acquired 100 percent of the issued and outstanding
common stock of CARNET COMPUTER SERVICES, INC. (computer software programmers)
for consideration of 100,000 shares of the Company's common stock with a fair
value at date of issuance of $1.25 per share or $125,000 in the aggregate. The
acquisition was accounted for as a purchase transaction.
On July 15, 1998, the Company acquired certain assets and assumed certain
liabilities of Interworldnet Partnership (Internet service provider serving Lake
Havasu City, Arizona and surrounding areas) for 40,000 shares of the Company's
common stock (fair value at date of issuance of $1.25 per share and total value
of $50,000) and $3,841 in cash which aggregates to $53,841 in total
consideration. The acquisition was accounted for as a purchase transaction.
On July 29, 1998, the Company acquired 100 percent of the issued and outstanding
common stock of OPEC CORP. (engaged in the business of underground cable
construction in the Western United States) for consideration of 2,334,000 shares
of the Company's common stock with a fair value at date of issuance of $2.66 per
share or $6,200,000 in the aggregate. The acquisition was accounted for as a
purchase transaction.
On September 21, 1998, the Company acquired certain assets of PrimeServ
Corporation (in the business of providing a virtual office telephone service to
customers) for consideration of $50,000 and 35,999 shares of the Company's
common stock with a fair value at date of issuance of $2.93 a share and total
value of $105,478 which aggregates to $155,478 in total consideration. The
acquisition was accounted for as a purchase transaction.
F-13
<PAGE> 57
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. ACQUISITION (CONTINUED)
On September 29, 1998, the Company acquired 100 percent of the issued and
outstanding shares of Sonora Industries, retained the assets of its Kachina
International operation (a factory direct distributor for communications and
computer components located in Phoenix, Arizona), and then resold the Sonora
stock to the original owner for $10. Consideration given in the transaction was
$66,759 in cash and 92,308 shares of the Company's common stock with a fair
value at date of issuance of $2.93 per share and total value of $270,462 which
aggregates to $337,221 in total consideration. The acquisition was accounted for
as a purchase transaction.
On September 29, 1998, the Company acquired 100 percent of the issued and
outstanding common stock of PRIORITY SYSTEMS, INC. (a provider of computer
network systems nationwide) for consideration of 185,306 shares of the Company's
common stock with a fair value of $2.93 per share and total value of $542,947.
The acquisition was accounted for as a purchase transaction.
For all acquisitions discussed above, the acquired tangible and identified
intangible assets have been recorded at their estimated fair values at the date
of acquisition with any excess purchase price reflected as goodwill. Purchase
accounting values for all acquisitions are assigned on a preliminary basis and
are subject to adjustment when final information as to the fair values of the
net assets acquired is available. The operations of the acquired businesses are
included in the statement of operations from the date of acquisition. Certain of
the acquired businesses have been merged into the Company and as such are no
longer subsidiaries.
A summary of the purchase price allocations for these acquisitions is as
follows:
<TABLE>
<CAPTION>
PRIORITY
LAN KASTER CARNET INTERWORLDNET OPEC PRIMESERV KACHINA SYSTEMS
---------- ------ ------------- ---- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Tangible assets acquired $ 34,083 $ 26,053 $ 67,176 $ 2,355,809 $ 133,000 $ 16,759 $ 169,899
Goodwill 180,005 99,474 -- 6,138,125 -- 320,462 715,888
Customer lists 100,000 -- 36,783 -- 22,478 -- --
Less: liabilities assumed (44,857) (527) (50,118) (2,293,934) -- -- (342,840)
Less: common stock issued (269,231) (125,000) (50,000) (6,200,000) (105,478) (270,462) (542,947)
----------------------------------------------------------------------------------------------
Cash purchase price $ -- $ -- $ 3,841 $ -- $ 50,000 $ 66,759 $ --
==============================================================================================
</TABLE>
F-14
<PAGE> 58
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. ACQUISITION (CONTINUED)
The following table sets forth the unaudited pro forma results of operations for
each year in which acquisitions occurred and for the immediately preceding year
as if the acquisitions were consummated at the beginning of the immediately
preceding year:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1998 1997
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 8,753,000 $ 5,466,000
Net loss $ (1,274,000) $ (241,000)
Net loss per common share, basic and diluted $ (0.13) $ (0.01)
</TABLE>
3. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted contracts consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30
1998 1997
---- ----
<S> <C> <C>
Costs incurred on uncompleted contracts $ 639,947 $ --
Estimated earnings 460,258 --
-------------------------------
1,100,205 --
Less billings to date (760,333) --
-------------------------------
$ 339,872 $ --
===============================
</TABLE>
Included in the accompanying balance sheet under the following captions:
<TABLE>
<CAPTION>
SEPTEMBER 30
1998 1997
---- ----
<S> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts $ 411,877 $ --
Billings in excess of costs and estimated earnings on
uncompleted contracts (72,005) --
---------------------------
$ 339,872 $ --
===========================
</TABLE>
F-15
<PAGE> 59
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30
1998 1997
---- ----
<S> <C> <C>
Furniture and fixtures $ 134,608 $ 21,509
Computers and other equipment 627,220 249,452
Construction equipment 825,541 --
Software and telephone lines 128,093 90,933
Vehicles 415,394 --
Leasehold improvements 27,057 --
-------------------------------
2,157,913 361,894
Less accumulated depreciation and amortization (254,075) (97,150)
-------------------------------
$ 1,903,838 $ 264,744
===============================
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 1997
---- ----
<S> <C> <C>
Goodwill $ 7,453,953 $ --
Customer lists 165,123 3,000
Trademarks 998 1,255
Debt issuance costs 250,000 250,000
-------------------------------
7,870,074 254,255
Less amortization (222,305) (19,738)
-------------------------------
$ 7,647,769 $ 234,517
===============================
</TABLE>
F-16
<PAGE> 60
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. NOTES PAYABLE
<TABLE>
<CAPTION>
SEPTEMBER 30
1998 1997
---- ----
<S> <C> <C>
8.0percent, note payable, unsecured, with interest payable semiannually until
February 2000 when all remaining principal and interest is due and payable,
convertible into common shares at $.60 per share, in February 1999, at the
option of the holder (see Note 13). $ 25,000 $ -
9.0percent, notes payable to former stockholders of LAN KASTER, INC.,
unsecured, interest payable April 2001 when all principal and interest is due
and payable. Principal and accrued interest is convertible to common shares
at option of holder at rate of $1.625 per share. 29,753 -
9.3percent, note payable, collateralized by a security interest in all assets
of OPEC CORP. Principal and interest payable monthly until
April 2001, when all principal and interest is due and payable. 18,086 -
9.75 percent, note payable, collateralized by a certificate of deposit,
principal and interest payable monthly until September 2000 when all
remaining principal and interest is due and payable. 17,304 -
19.0 percent, revolving credit facility, unsecured with minimum
principal and interest amounts due and payable monthly. 17,901 -
16 percent, unsecured, note payable with interest only payable monthly.
The principal was repaid in fiscal 1998. - 24,500
10 percent, unsecured, note payable, with interest only payable
monthly. The principal was repaid in fiscal 1998. - 10,000
--------------------------------
108,044 34,500
Less current portion (96,250) -
--------------------------------
$ 11,794 $34,500
================================
</TABLE>
Annual maturities of notes payable and long-term debt for the five years
succeeding September 30, 1998 are $96,250 in 1999, $6,913 in 2000, $4,881 in
2001 and $-0- in 2002. Interest payments were approximately $53,550 and $23,260
for the years ended September 30, 1998 and 1997, respectively.
F-17
<PAGE> 61
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. NOTES PAYABLE (CONTINUED)
The Company has a $480,000 revolving line of credit agreement with a financial
institution dated August 3, 1998, and expiring on July 15, 1999. Interest is
payable monthly and accrues at 1.25 percent over prime per annum, 9.75 percent
at September 30, 1998. The line is collateralized by all business assets of the
Company's OPEC CORP. subsidiary including, but not limited to, cash, accounts
receivable, property and equipment, and general intangibles and is personally
guaranteed by former OPEC stockholders. At September 30, 1998 assets
collateralized under the line of credit included cash of $135,000, accounts
receivable of $1,354,000, and property and equipment of $1,206,000. The terms of
the note require that the Company pay regular monthly payments of accrued
interest on the outstanding balance, with payment of all outstanding principal
plus all unpaid accrued interest due at maturity. The balance on the
line-of-credit as of September 1998, totaled $200,000.
The Company also has a $95,000 revolving line of credit with a bank, which is
used by the Company's computer sales and service division. The line renews after
90 days unless terminated by either party with sixty (60) days notice, bears
interest which is payable quarterly at 2.5 percent per month, and is
collateralized by specific accounts receivable. At September 30, 1998 accounts
receivable subject to the line of credit was $94,011. In addition, $9,400 of
cash is deposited in lending institution and held as collateral. The entire line
is due and payable at the expiration date. As of September 30, 1998, $94,011 had
been drawn on the line.
7. LEASES
The Company leases furniture and equipment under capital leases. The Company
also leases office facilities under noncancelable operating leases that expire
in various years through December 2001.
During the years ended September 30, 1998 and 1997, the Company acquired
$530,523 and $-0-, respectively, of equipment under capital leases,
respectively. The Company also assumed an additional $660,560 of capital leases
in conjunction with its 1998 acquisitions.
F-18
<PAGE> 62
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. LEASES (CONTINUED)
Future minimum payments under capital leases and noncancelable operating leases
with initial terms of one year or more consisted of the following at September
30, 1998:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------ ---------
<S> <C> <C>
1999 $ 377,995 $ 353,737
2000 366,750 305,475
2001 332,972 124,731
2002 215,893 28,200
2003 40,729 14,100
Thereafter -- --
-------------------------------
Total minimum lease payments 1,334,339 $ 826,243
===========
Less amounts representing interest (213,450)
-----------
Present value of net minimum lease payments 1,120,889
Less current portion (377,995)
-----------
$ 742,894
===========
</TABLE>
Total rental expense for all operating leases was approximately $84,000 and
$36,500 for the years ended September 30, 1998 and 1997, respectively. Historic
rental expense was significantly lower than future commitments due to the leases
assumed with business acquired in 1998, the largest of which occurred two months
prior to the end of the fiscal year.
In June 1997, the Company entered into a leasing arrangement with El Camino
Resources, Ltd. Under the terms of the lease, El Camino has agreed to provide
$150,000 of available credit to allow the Company to obtain equipment to expand
its Networld.com subsidiary's Internet operations in new cities and expand the
Phoenix facility. The lease for the equipment requires payments of $5,690 per
month once the lease is fully funded, for a term of 30 months, and includes a
buyout provision equal to the fair market value of the leased equipment at the
end of the lease, but not to exceed 20 percent of original cost. In conjunction
with the lease arrangement, the Company issued 250,000 shares of the Company's
common stock to El Camino and has agreed to provide up to $5,000 of Internet
services at no charge. At September 30, 1997 and 1998, approximately $49,000 and
$150,000 had been utilized on the lease arrangement.
F-19
<PAGE> 63
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. LEASES (CONTINUED)
Property and equipment includes the following amounts for leases that have been
capitalized:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
---- ----
<S> <C> <C>
Equipment $ 1,191,082 $ -
Less accumulated amortization (53,052) -
=========================
$ 1,138,030 $ -
=========================
</TABLE>
Amortization of leased assets is included in depreciation and amortization
expense.
8. INCOME TAXES
Deferred tax assets reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax asset and liabilities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Accrued expenses $ 25,200 $ --
Allowance for doubtful accounts 25,900 6,500
Fixed asset basis differences -- 31,700
Costs in excess of billings 23,200 --
Startup costs 7,300 7,200
Unrealized loss on investment 27,600 --
Net operating loss carryforwards 447,000 33,400
Other 34,400 --
---------------------------
Deferred tax assets 590,600 78,800
Valuation allowance (544,000) (78,600)
---------------------------
Net deferred tax assets 46,600 200
Deferred tax liabilities:
Fixed asset basis differences (15,100) --
Customer lists (31,300) --
Other (200) (200)
---------------------------
Net deferred tax asset/(liability) $ -- $ --
===========================
</TABLE>
F-20
<PAGE> 64
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
At September 30, 1998, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $1,118,000 that expire in
the years 2011 through 2018 for federal taxes purposes and will begin to expire
in 2001 for state tax purposes. As a result of common stock issued in connection
with private placements and 1998 acquisitions, the utilization of the net
operating loss carryforwards is subject to annual limitations in accordance with
Internal Revenue Code Section 382. The ultimate utilization of the net operating
loss carryforwards is also subject to future profitability of the Company.
In connection with their 1998 acquisitions, $41,000 of net deferred tax assets
were obtained by the Company. For financial reporting purposes, a valuation
allowance has been recorded to fully offset the net deferred tax assets obtained
by the Company in connection with their 1998 acquisitions. Any tax benefit
resulting from the realization of net deferred tax assets obtained in connection
with the Company's 1998 acquisitions will be accounted for as a reduction of the
purchase price of the acquired entities in the periods they are realized.
The valuation allowance increased $465,400 for the year ended September 30,
1998. The increase in 1998 is principally due to increases in deferred tax
assets related to net operating loss carryforwards.
9. STOCKHOLDERS' EQUITY
In February 1997 through October 1997, FutureOne AZ sold 164,500 shares of
FutureOne AZ common stock through a private placement offering to accredited
investors at $1.00 per share. A total of 112,000 shares were sold prior to
September 30, 1997 with net proceeds of $96,028. An additional 40,000 shares
were sold in October 1997 with net proceeds of $40,000.
During the year ended September 30, 1997 7,500 shares of common stock was issued
to employees as compensation with a fair value of $.50 per share. Such amounts
were recorded as expense.
In September 1997, the four original stockholders of the Company agreed to
return to the Company 5,000,000 shares of their common stock for no
consideration to facilitate a second private placement offering.
In November 1997, the Company issued 17,500 shares of the Company common stock
in exchange for goods and services. The shares were recorded at their fair value
of $1.00 per share for an aggregate value of $17,500. Amounts were recorded in
equity with a related charge to expense or asset recognition based upon the
consideration received.
F-21
<PAGE> 65
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. STOCKHOLDERS' EQUITY (CONTINUED)
In November 1997 through August 1998, FutureOne AZ sold 700,000 shares in a
second private placement offering at $1.25 per share to investors with net
proceeds of $770,370. In May and September 1998, FutureOne Inc. issued 143,750
and 37,500 shares, respectively, of the Company's common stock to advisors who
assisted the Company with its private placement as part of the related issuance
costs. The financial statements reflect the sale of the 700,000 shares net of
$181,250 of issuance costs attributable to the additional 181,250 shares issued
to its advisors. In connection with the private placement offering, 350,000
warrants to purchase one share of FutureOne AZ common stock for each warrant at
$3.00 per share were issued. The warrants expire May 27, 1999 and no warrants
were exercised as of September 30, 1998.
In December 1997, the Company repurchased 2,500 common shares from former
employees for $30.
On April 1, 1998, the Company issued 215,385 common shares in connection with
the acquisition of LAN KASTER, INC. The shares were determined to have a fair
value of $1.25 per share at date of issuance and an aggregate value of $269,231.
On May 11, 1998, the Company issued 100,000 common shares in connection with the
acquisition of CARNET COMPUTER SERVICES, INC. The shares were determined to have
a fair value of $1.25 per share at date of issuance and an aggregate value of
$125,000.
On July 15, 1998, the Company issued 40,000 shares of common stock in connection
with the acquisition of certain net assets of Interworldnet. The shares were
determined to have a fair value of $1.25 per share at the date of issuance and
an aggregate value of $50,000.
On May 18, 1998, the Company repurchased 1,000 common shares from a former
employee for $10.
In July 1998, the Company entered into a Stock Purchase Agreement with
Blackwater Capital Partners LP ("Blackwater") under which Blackwater must
arrange for the purchase of up to 3,211,000 shares of the Company's common stock
for an average price of $2.93 per share. As of September 30, 1998, Blackwater
and its capital sources had purchased 177,605 shares of common stock at a price
of $2.93 for net proceeds of $520,683. In connection with the Stock Purchase
Agreement, Blackwater has been issued warrants to purchase 1,700,000 shares of
the Company's common stock for $1.00 per share expiring July 2005. The warrants
vest upon Blackwater completing the purchase of shares under the Stock Purchase
Agreement. As of September 30, 1998, related to Blackwater's purchase of 300,000
shares in accordance with purchase agreement with accredited investor, 300,000
shares have vested and are unexercised.
F-22
<PAGE> 66
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. STOCKHOLDERS' EQUITY (CONTINUED)
On July 29, 1998, the Company issued 2,334,000 shares of common stock in
connection with the acquisition of OPEC CORP. The shares were determined
to have a fair value of $2.66 per share at date of issuance and an aggregate
value of $6,200,000.
On September 21, 1998, the Company issued 35,999 shares of common stock in
connection with the acquisition of PrimeServ. The shares were determined to have
a fair value of $2.93 per share at the date of issuance and an aggregate value
of $105,478.
On September 29, 1998, the Company issued 92,308 shares of common stock in
connection with the acquisition of Kachina International. The shares were
determined to have a fair value of $2.93 per share at the date of issuance and
an aggregate value of $270,462.
On September 29, 1998, the Company issued 185,306 shares of common stock in
connection with the acquisition of PRIORITY SYSTEMS, INC. The shares were
determined to have a fair value of $2.93 per share at the date of issuance and
an aggregate value of $542,947.
During the year ended September 30, 1998, the Company issued 210,001 shares of
the Company's common stock to employees as compensation. Share values at dates
of issuance ranged from $1.25 to $2.93 and had a total value of $284,900.
Compensation expense is being recognized based on the one year vesting period of
the stock issued.
During the year ended September 30, 1998, the Company issued 180,000 shares of
the Company's common stock to consultants for services. Share values at dates of
issuance were $1.25 and had a total value of $225,000.
Amounts were recorded as consulting expense as service was performed.
For the period ended September 30, 1998, the Company awarded total warrants to
purchase 410,812 shares of the Company's common stock for $2.93 per share as a
bonus to two officers of the Company. The warrants expire October 1, 2005.
10. CONTINGENCIES
The Company is subject to legal proceedings which arise out of the ordinary
course of business. Based upon advice from outside legal counsel, management is
of the opinion that these matters will have no material effect on the Company's
consolidated financial position.
F-23
<PAGE> 67
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. RELATED PARTY TRANSACTIONS
As of September 30, 1998 and 1997, the stockholders of the Company have made
loans to the Company as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Notes payable that bears interest at a rate of -0-per cent, with interest
payable annually. $7,450 $ -
Various notes payable that bear interest at the rate of 7 percent, with interest
only payable annually. The principal was repaid during
fiscal 1998. - 36,326
-------------------
$7,450 $36,326
===================
</TABLE>
As of September 30, 1998 and 1997, interest in the amount of $-0- and $1,685,
respectively was accrued and unpaid. Interest expense for the years ended
September 30, 1998 and 1997 was $6,021 and $4,571, respectively.
The Company sells computer equipment, services, and Internet access and services
to various officers, employees and stockholders. All such sales are considered
to be in the normal course of business and at prices that are charged to
nonrelated parties.
The Company assumed a lease for office space and a construction yard from a
partnership controlled by an individual, who became a major stockholder in the
Company when his corporation was acquired by the Company. The lease requires
payments of $3,000 per month and expires December 1998, but automatically renews
for annual periods unless terminated by either party. As of September 30, 1998,
$6,000 of rental expense is included in the consolidated statement of operations
from this lease.
F-24
<PAGE> 68
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. SEGMENT INFORMATION
The Company operates its business under internet services, computer sales and
services and underground cable engineering and construction. Management
evaluates the performance of the segments based upon revenues, gross margin,
pre-tax income and long-lived assets. For the periods ended September 30, 1998
and 1997, this information has been provided by segment. The Companies sales are
primarily in the Western United States with no international sales. Differences
in totals relate to amounts categorized as corporate activities.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues from external customers:
Internet services $ 1,074,941 $ 577,543
Computer sales 251,194 293,402
Underground cable 1,695,111 --
-------------------------------
$ 3,021,246 $ 870,945
===============================
Gross profit:
Internet services $ 233,161 $ 173,799
Computer sales 32,686 67,210
Underground cable 319,109 --
-------------------------------
$ 584,956 $ 241,009
===============================
Depreciation and amortization expense:
Internet services $ 256,641 $ 75,988
Computer sales 2,021 35
Underground cable 101,070 --
-------------------------------
$ 359,732 $ 76,023
===============================
Pre-tax (loss) income:
Internet services $(1,135,548) $ (215,021)
Computer sales (56,726) 9,851
Underground cable (9,378) --
-------------------------------
$(1,201,652) $ (205,170)
===============================
Long-lived assets:
Internet services $ 959,781 $ 278,567
Computer sales 1,116,852 516
Underground cable 7,173,207 --
-------------------------------
$ 9,249,840 $ 279,083
===============================
</TABLE>
F-25
<PAGE> 69
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
13. SUBSEQUENT EVENTS
On November 12, 1998, the Company acquired the Internet services business of
Globalkey, Inc. in a purchase business combination for consideration of 50,000
shares of the Company's common stock with a fair value at date of issuance of
$2.93 per share for a total consideration of $146,500. In January 1999, the
Internet access supplier terminated service to the Company because of prior
payment disputes with Globalkey, accordingly, the small number of customers
acquired from Globalkey have been lost and the Company is seeking a new supplier
so it can again offer Internet access in the Colorado Springs area.
On January 1, 1999, the Company adopted the FutureOne, Inc. 401(k) Plan (the
Plan). All employees of the Company are eligible to participate in the Plan when
they have met certain eligibility requirements. Employees are eligible to
participate in the Plan after one year of service and after having attained the
age of 21. After the initial enrollment date, all subsequent enrollments for
eligible employees will occur on January 1 and July 1 of each year. Employees
may defer up to 15 percent of their annual salary up to a maximum of $10,000.
The Company's matching percentage is equal to 20 percent of the employees
contribution on employee contributions of up to 5 percent.
On January 15, 1999, the Company sold 960,000 shares of the Company's common
stock in a private placement transaction to an accredited investor at $2.30 per
share which resulted in gross proceeds of $2,208,000 and net proceeds (after
commissions and expenses) of $1,967,400. The transaction was consummated as part
of the Blackwater Stock Purchase Agreement and as part of the transaction
Blackwater Capital assigned 400,000 of their warrants earned under the Agreement
to the Investor and 100,000 warrants to the Broker. The warrants are at $1 per
share and expire January 2005.
In February 1999, a note payable outstanding of $25,000 was converted into
41,667 common shares of the Company at the option of the holder.
On March 31, 1999, the Company acquired Ubiquity Design LLC - dba Rocket Science
Creative (full service graphic design and advertising agency) in a purchase
business combination for consideration of 100,000 shares of the Company's common
stock.
On April 19, 1999, the Company acquired Abcon, Inc. (underground cable
construction company) in a purchase business combination for consideration of
94,118 shares of the Company's common stock.
F-26
<PAGE> 70
FutureOne Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
13. SUBSEQUENT EVENTS (CONTINUED)
On April 30, 1999, the Board of Directors of the Company adopted the FutureOne,
Inc. 1999 Key Employee Stock Option Plan which authorizes that options to
purchase up to 2,500,000 shares of the Company's common stock may be issued to
Employees. No options have been awarded to date, all options awarded are subject
to approval by the Compensation Committee of the Board of Directors and the
entire plan requires stockholder approval within one year.
On June 16, 1999, the Company signed a letter of intent to purchase Progressive
Media LLC, an Arizona limited liability company, to provide enhanced media
services, including web-based animation, interactive CD-ROM design, digital
video production and postproduction, music and sound production, and digital and
traditional commercial photography. This transaction is contingent upon a
satisfactory due diligence review by the Company and final approval by the
Company's Board of Directors.
On June 17, 1999, the Company entered into a letter of intent to acquire Phase
III Communications, Inc., a Colorado corporation, which provides low-voltage
cable and wiring services and other internal wiring solutions for commercial and
residential customers. The acquisition is contingent upon a satisfactory due
diligence review by the Company and final approval by the Company's Board of
Directors.
F-27
<PAGE> 71
Report of Independent Auditors
Board of Directors
OPEC CORP.
We have audited the accompanying balance sheets of OPEC CORP. as of September
30, 1997 and July 28, 1998 and the related statements of operations,
shareholders' equity and cash flows for the year and ten months then ended,
respectively. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of OPEC CORP. at September 30,
1997 and July 28, 1998 and the results of its operations and its cash flows for
the year and ten months then ended in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Phoenix, Arizona
June 8, 1999
F-28
<PAGE> 72
OPEC CORP.
Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, JULY 28,
1997 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 237,200 $ 272,195
Investments -- 335,900
Accounts receivable 93,671 777,607
Costs and estimated earnings in excess of billings on
uncompleted contracts 35,996 166,849
Prepaid expenses 3,125 1,245
---------- ----------
Total current assets 369,992 1,553,796
Property and equipment, net 218,288 798,205
Deferred tax asset 4,876 17,128
Other noncurrent assets -- 3,808
---------- ----------
$ 593,156 $2,372,937
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit $ -- $ 200,000
Accounts payable 153,114 289,722
Accrued bonus to officers -- 500,000
Due to related parties 5,443 7,450
Accrued compensation and related taxes 21,420 30,968
Income taxes payable 4,054 274,775
Billings in excess of costs and estimated earnings on uncompleted
contracts 36,947 271,270
Current maturities of long-term debt and capital leases 67,813 161,843
---------- ----------
288,791 1,736,028
Noncurrent liabilities:
Capital leases, net of current portion 83,247 482,648
Deferred tax liability 9,894 29,964
---------- ----------
381,932 2,248,640
Shareholders' equity
Common stock, no par value, 1,000 shares authorized, 100 and
76 shares issued and outstanding at September 30, 1997 and
July 28, 1998, respectively 5,000 --
Retained earnings 206,224 124,297
---------- ----------
Total shareholders' equity 211,224 124,297
---------- ----------
Total liabilities and shareholders' equity $ 593,156 $2,372,937
========== ==========
</TABLE>
See accompanying notes.
F-29
<PAGE> 73
OPEC CORP.
Statements of Operations
<TABLE>
<CAPTION>
TEN
YEAR ENDED MONTHS ENDED
SEPTEMBER 30, JULY 28,
1997 1998
----------- -----------
<S> <C> <C>
Revenues $ 2,000,713 $ 3,288,806
Cost of sales 1,434,454 1,993,912
----------- -----------
Gross profit 566,259 1,294,894
Selling, general and administrative expenses 527,061 1,017,261
----------- -----------
Operating income 39,198 277,633
Other income (expense):
Unrealized gain (loss) on investments 616 (30,629)
Interest expense (7,537) (25,605)
Interest and dividend income -- 4,292
Other (695) 5,768
----------- -----------
(7,616) (46,174)
----------- -----------
Income before income taxes 31,582 231,459
Provision for income taxes (9,072) (286,039)
----------- -----------
Net income (loss) $ 22,510 $ (54,580)
=========== ===========
</TABLE>
See accompanying notes.
F-30
<PAGE> 74
OPEC CORP.
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK RETAINED SHAREHOLDERS'
--------------------------
SHARES TOTAL EARNINGS EQUITY
------ ----- -------- ------
<S> <C> <C> <C> <C>
Balance at October 1, 1996 -- $ -- $ 199,095 $ 199,095
Distributions to owners -- -- (15,381) (15,381)
Issuance of common stock 100 5,000 -- 5,000
Net income -- -- 22,510 22,510
--------- --------- --------- ---------
Balance at September 30, 1997 100 5,000 206,224 211,224
Repurchase of common stock (24) (5,000) (10,000) (15,000)
Distributions to owners -- -- (17,347) (17,347)
Net loss -- -- (54,580) (54,580)
--------- --------- --------- ---------
Balance at July 28, 1998 76 $ -- $ 124,297 $ 124,297
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-31
<PAGE> 75
OPEC CORP.
Statements of Cash Flows
<TABLE>
<CAPTION>
TEN MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, JULY 28,
1997 1998
------------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 22,510 $ (54,580)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 28,967 89,964
Loss on sale of property and equipment -- 4,283
Deferred taxes 5,018 7,818
Changes in operating assets and liabilities:
Accounts receivable 103,726 (683,936)
Prepaid expenses and other assets (3,125) 1,880
Costs and estimated earnings in excess of billings on uncompleted
contracts (20,364) (130,853)
Accounts payable 149,042 136,608
Accrued compensation 11,369 9,548
Accrued Bonus -- 500,000
Income taxes payable 4,054 270,721
Billings in excess of cost 17,136 234,323
--------- ---------
Net cash provided by operating activities 318,333 385,776
INVESTING ACTIVITIES
Purchases of property and equipment (85,077) (117,537)
Sales of property and equipment -- 90,000
Purchase of investments -- (335,900)
Increase in other assets -- (3,808)
Decrease in related party debt (757) 2,007
--------- ---------
Net cash used in investing activities (85,834) (365,238)
FINANCING ACTIVITIES
Payments on capital leases (9,251) (153,196)
Increase in line of credit -- 200,000
Issuance (repurchase) of common stock 5,000 (15,000)
Distributions to owners (15,381) (17,347)
--------- ---------
Net cash (used in) provided by financing activities (19,632) 14,457
--------- ---------
Increase in cash and cash equivalents 212,867 34,995
Cash at beginning of year 24,333 237,200
--------- ---------
Cash at end of year $ 237,200 $ 272,195
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Property and equipment acquired through capital lease obligations $ 155,864 $ 646,627
========= =========
</TABLE>
See accompanying notes.
F-32
<PAGE> 76
OPEC CORP.
Notes to Financial Statements
September 30, 1997 and July 28, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
OPEC CORP. ("OPEC," or "the Company") was incorporated in December 1995 in the
State of Colorado. The Company engages primarily in installation of
communication and cable television lines for commercial and residential
projects. Effective July 28, 1998, all of the Company's outstanding shares of
common stock were sold to Future One, Inc., and OPEC became a wholly owned
subsidiary of Future One, Inc. Financial statements included herein are prior to
the acquisition.
The Company's customer base primarily consists of commercial and residential
contractors located in El Paso County, Colorado. The Company performs ongoing
credit evaluations of its customer's financial condition and requires no
collateral from its customers.
REVENUES AND COST RECOGNITION
Revenue from firm-fixed-price contracts is recognized using the percentage of
completion method. Under this method, revenues recognized on firm-fixed-price
contracts are measured by the percentage of costs incurred to date to total
estimated costs for each contract. Provision for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs and depreciation. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty
provisions, and final contract settlements may result in revisions in costs and
income and are recognized in the period in which the revisions are determined.
Costs and estimated earnings in excess of billings on uncompleted contracts
represent revenues recognized, using the percentage of completion method under
firm-fixed-price contracts, in excess of billings on those contracts. Company
billing amounts to a customer on firm-fixed-price contracts are usually
specified in the contract terms and conditions and usually consider passage of
time, achievement of certain project milestones or completion of the project.
F-33
<PAGE> 77
OPEC CORP.
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SIGNIFICANT CUSTOMERS
For the year ended September 30, 1997 and for the ten months ended July 28,
1998, the Company had revenues from three large customers as a percent of total
revenues as follows:
<TABLE>
<CAPTION>
YEAR ENDED TEN MONTHS ENDED
SEPTEMBER 30, JULY 28,
1997 1998
------------- -----------------
<S> <C> <C>
Customer A 23% 10%
Customer B 15 -
Customer C - 15
</TABLE>
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with a maturity of three months or less from date of purchase
to be cash equivalents.
INVESTMENTS
Investments consist of mutual funds and are valued at fair market value and are
considered trading investments in accordance with generally accepted accounting
principles. Realized and unrealized gains and losses are recorded in income.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are being depreciated using the
straight-line method over their estimated useful lives as follows:
<TABLE>
<S> <C>
Computer and office equipment 5 years
Furniture and fixtures 7 years
Construction and radio equipment 3-10 years
Vehicles and trailers 5-7 years
Leasehold improvements 10 years
</TABLE>
F-34
<PAGE> 78
OPEC CORP.
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes under the liability method pursuant to
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). Under the liability method, deferred tax assets and
liabilities are determined based on the differences between the financial
reporting and tax bases of assets and liabilities using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying consolidated
financial statements. Actual results could differ from those estimates.
2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted contracts consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JULY 28,
1997 1998
--------- ---------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 246,496 $ 592,970
Estimated earnings 55,365 218,405
--------- ---------
301,861 811,375
Less billings to date (302,812) (915,796)
--------- ---------
$ (951) $(104,421)
========= =========
</TABLE>
Included in the accompanying balance sheet under the following captions:
<TABLE>
<CAPTION>
SEPTEMBER 30, JULY 28,
1997 1998
--------- ---------
<S> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts $ 35,996 $ 166,849
Billings in excess of costs and estimated earnings on
uncompleted contracts (36,947) (271,270)
--------- ---------
$ (951) $(104,421)
========= =========
</TABLE>
F-35
<PAGE> 79
OPEC CORP.
Notes to Financial Statements (continued)
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
SEPTEMBER 30, JULY 28,
1997 1998
--------- ---------
<S> <C> <C>
Leasehold improvements $ -- $ 12,629
Vehicles 111,347 292,013
Machinery and equipment 131,969 573,892
Computers -- 17,285
Office furniture and fixtures 5,441 12,529
--------- ---------
248,757 908,348
Less accumulated depreciation (30,469) (110,143)
========= =========
$ 218,288 $ 798,205
========= =========
</TABLE>
4. LINE OF CREDIT
The Company has a $480,000 revolving line of credit agreement with a financial
institution dated August 3, 1998, and expiring on July 15, 1999. Interest is
payable monthly and accrues at 1.25 percent over prime per annum, 9.75 percent
at July 28, 1998. The line is collateralized by all business assets including,
but not limited to, cash, accounts receivable, equipment, and general
intangibles and is personally guaranteed by most of the Company's stockholder's.
The terms of the note require that the Company pay regular monthly payments of
accrued interest on the outstanding balance, with payment of all outstanding
principal plus all unpaid accrued interest due at maturity. This line-of-credit
is an extension of the line in effect as of July 28, 1998. The balance on the
line-of-credit as of July 28, 1998, totaled $200,000.
F-36
<PAGE> 80
OPEC CORP.
Notes to Financial Statements (continued)
5. LEASES
Future minimum payments under capital leases and noncancelable operating leases
with initial terms of one year or more consisted of the following at July 28,
1998:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
1999 $212,018 $ 64,360
2000 199,770 33,050
2001 175,500 19,950
2002 91,250 --
2003 18,460 --
Thereafter -- --
-------- --------
Total minimum lease payments 696,998 --
Less amounts representing interest 52,507 --
-------- --------
Present value of net minimum lease payments 644,491 --
Less current portion 161,843 --
-------- --------
$482,648 $117,360
======== ========
</TABLE>
Total rental expense for all operating leases was approximately $25,000 and
$36,000 for the year ended September 30, 1997 and the ten month period ended
July 28, 1998, respectively.
In addition, the Company leases its operating facility under an operating lease
agreement for $3,000 per month from a partnership in which the majority of the
Company's stockholders are partners. This agreement expires December 31, 1998,
with the automatic renewal options for one year periods thereafter, unless
terminated by either party. Rent expense for the facility for the year ended
September 30, 1997 and ten months ended July 28, 1998, totaled approximately
$24,000 and $30,000, respectively.
F-37
<PAGE> 81
OPEC CORP.
Notes to financial statements (continued)
6. INCOME TAXES
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JULY 28,
1997 1998
------------- -------
<S> <C> <C>
Current:
Federal $ 2,654 $225,221
State 1,400 53,000
-------- --------
4,054 278,221
Deferred:
Federal 4,268 6,618
State 750 1,200
-------- --------
5,018 7,818
======== ========
$ 9,072 $286,039
======== ========
</TABLE>
The Company's effective tax rate for the ten months ended July 28, 1998 was
higher than the statutory rates primarily due to $500,000 of accrued bonus to
certain owner/managers of the business which are treated as shareholder
distributions for income tax accounting purposes.
Deferred income taxes reflect the tax effects of temporary differences between
the carrying value of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The significant components of
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, JULY 28,
1997 1998
------------ ---------
<S> <C> <C>
Deferred tax assets:
UNICAP adjustment $ 4,876 $ 4,876
Unrealized loss on investment -- 12,252
-------- --------
4,876 17,128
Deferred tax liabilities:
Depreciation and amortization (9,894) (29,964)
-------- --------
(9,894) (29,964)
======== ========
Net deferred tax asset (liability) $ (5,018) $(12,836)
======== ========
</TABLE>
F-38
<PAGE> 82
OPEC CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. YEAR 2000 ISSUE (UNAUDITED)
OPEC realizes the need to ensure operations will not be adversely impacted by
year 2000 software failures and believes that its internal accounting systems
are presently year 2000 compliant. The Company's equipment utilized to deliver
services to its customers is not materially reliant on embedded technology
potentially impacted by the year 2000 issue. In addition, the Company is not
materially reliant on third party systems (e.g. electronic data interchange) to
conduct business.
Communications have taken place and are ongoing with significant vendors,
customers and other third parties to confirm and monitor their plans to become
year 2000 ready and assess any possible risk to or effects on the current
operations. Contingency plans will be developed for significant third parties'
determined to be at high risk of noncompliance or business disruption.
8. SUBSEQUENT EVENT (UNAUDITED)
Effective July 28, 1998, all of the outstanding stock of OPEC CORP. was
acquired by FutureOne, Inc.
The Company has purchased over $451,000 in vehicles and equipment subsequent to
July 28, 1998, all of which is financed by additional debt.
F-39
<PAGE> 83
FutureOne, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Financial Statement
The unaudited pro forma condensed consolidated statement of operations gives
effect to the acquisition of OPEC CORP. ("OPEC") by FutureOne, Inc. FutureOne's
acquisition of OPEC was accounted for using the purchase method of accounting.
The assets acquired and liabilities assumed were recorded based on their
estimated fair values at the date of acquisition, July 28, 1998.
The unaudited pro forma condensed consolidated statement of operations for the
year ended September 30, 1998 gives effect to the acquisition of OPEC as if it
had occurred on October 1, 1997 and includes adjustments directly attributable
to the acquisition of OPEC that are expected to have a continuing impact on the
combined company. The unaudited pro forma condensed consolidated balance sheet
has not been presented as the September 30, 1998 consolidated balance sheet
presented in the consolidated financial statements of FutureOne includes the
balances of OPEC. There can be no assurance that actual pro forma adjustments
will not vary significantly from the estimated adjustments reflected in the
unaudited pro forma condensed consolidated statement of operations.
The unaudited pro forma information is derived from historical financial
statements of FutureOne and OPEC and should be read in conjunction with the
historical consolidated financial statements and related notes thereto of
FutureOne and the historical financial statements and related notes thereto of
OPEC. The unaudited pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the results of operations that would
have been reported if the acquisition had been consummated as presented in the
accompanying unaudited pro forma condensed consolidated statement of operations.
The unaudited pro forma information does not include the pro forma effect of the
Company's acquisition of other businesses that are not significant.
F-40
<PAGE> 84
FutureOne, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended September 30, 1998
<TABLE>
<CAPTION>
Pro Forma
FutureOne Ten Month OPEC Adjustments
Historical Historical Note 2 Pro Forma
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $ 3,021,246 $ 3,288,806 $ -- $ 6,310,052
Costs and expenses:
Cost of sales 2,436,290 1,993,912 -- 4,430,202
General and administrative 1,390,458 1,017,261 (500,000)(a) 1,907,719
Depreciation and amortization 359,742 -- 344,000 (b) 703,742
----------- ----------- ----------- -----------
Operating (loss) income (1,165,244) 277,633 156,000 (731,611)
Other expense 36,408 46,174 -- 82,582
----------- ----------- ----------- -----------
Income (loss) before income taxes (1,201,652) 231,459 156,000 (814,193)
Income taxes -- (286,039) 286,039 (c) --
=========== =========== =========== ===========
Net income (loss) $(1,201,652) $ (54,580) $ 442,039 $ (814,193)
=========== =========== =========== ===========
Historical and pro forma basic and diluted
net loss per share $ (0.16) $ (0.08)
=========== ===========
Shares used in historic and pro forma
basic and diluted net loss per share 7,677,566 1,945,000 (d) 9,622,566
=========== =========== ===========
</TABLE>
F-41
<PAGE> 85
FutureOne Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
For the Year Ended September 30, 1998
1. BASIS OF PRESENTATION
The Company acquired OPEC CORP. ("OPEC") on July 28, 1998.
The unaudited pro forma condensed consolidated statement of operations reflects
the effects of the acquisition of OPEC, assuming the acquisition had occurred as
of October 1, 1997 for the year ended September 30, 1998. The unaudited pro
forma information presented is not necessarily indicative of future consolidated
results of operations of FutureOne or the consolidated results of operations
that would have resulted had the acquisition taken place on October 1, 1997.
2. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL ADJUSTMENTS
The accompanying unaudited pro forma condensed consolidated financial statements
reflect the following pro forma adjustments.
(a) To reflect the elimination of a nonrecurring one time discretionary bonus
payable to certain members of management of OPEC immediately prior to the
acquisition of OPEC.
(b) To reflect amortization of goodwill resulting from the purchase price
allocation. Goodwill recorded was $6,188,000 and it is being amortized on
a straight-line basis over 15 years. The additional ten months of
amortization is $344,000.
(c) To eliminate income tax expense in combination as the combined entities
operations result in a net loss with no tax liability.
(d) To add additional weighted average shares for the 2,334,000 issued to
acquire OPEC.
3. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED HISTORIC AND PRO FORMA NET LOSS
PER SHARE
The net loss per share and shares used in computing the net loss per share for
the year ended September 30, 1998 are based upon historical weighted average
common shares outstanding for historical per share amounts, and are further
adjusted to reflect the issuance of 2,334,000 common shares in connection with
the acquisition of OPEC on July 28, 1998 as though they had been issued on
October 1, 1997.
F-42
<PAGE> 86
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Articles of Incorporation of the Company, including all amendments and
articles of exchanges thereto
2.2 By-Laws of the Company
2.3 First Amendment to By-Laws of the Company
2.4 Second Amendment to By-Laws of the Company
5.1 Voting Trust Agreement among the Company, Blackwater Capital Group, L.L.C.,
Certain Stockholders and Kendall Q. Northern and Earl J. Cook, dated July
25, 1998
6.1 Executive Employment Agreement between the Company and Kendall Q. Northern,
dated as of July 27, 1998
6.2 First Amendment to the Executive Employment Agreement between the Company
and Kendall Q. Northern, dated as of September 30, 1998*
6.3 Executive Employment Agreement between the Company and Earl J. Cook, dated
as of July 27, 1998
6.4 First Amendment to the Executive Employment Agreement between the Company
and Earl J. Cook, dated as of September 30, 1998*
6.5 Employment Agreement between OPEC CORP. and Donald D. Cannella, dated as of
August 1, 1998
6.6 Stock Purchase Agreement by and among World's Fare, Inc., dba FutureOne, a
Nevada corporation, and Blackwater Capital Partners, L.P., and Blackwater
Capital Group, L.L.C., dated as of July 25, 1998
6.7 Warrant for the Purchase of 1,700,000 Shares of Common Stock of World's
Fare, Inc. dba FutureOne
6.8 FutureOne, Inc. 1999 Key Employee Stock Option Plan
6.9 Form of FutureOne, Inc. Incentive Stock Option Agreement
6.10 Form of Warrant Agreement*
6.11 Lease by and between First Gracie, Limited Liability Company and
Networld.com Inc., dated November 28, 1995, as amended*
12.1 Letter on Change in Certifying Accountant
12.2 Subsidiaries of the Registrant
12.3 Consent of Ernst & Young LLP Independent Auditors
27 Financial Data Schedule
</TABLE>
*To be filed by amendment.
<PAGE> 1
Exhibit 2.1
Articles of Incorporation Filing fee:
(PURSUANT TO NRS 78) Receipt #:
STATE OF NEVADA
[Filed Stamp] [State of Nevada Seal]
STATE OF NEVADA
Secretary of State
(For office use)
(For filing office use)
IMPORTANT: Read instructions on reverse side before completing this form.
TYPE OR PRINT (BLACK INK ONLY)
1. NAME OF CORPORATION: World's Fare, Inc.
2. RESIDENT AGENT: (designated resident agent and his STREET ADDRESS in Nevada
where process may be served)
Name of Resident Agent: Resident Agency National
Street Address: 377 South Nevada Street Carson City County
Street No. Street Name
Carson City NV 89701
City Zip
3. SHARES: (number of shares the corporation is authorized to issue)
Number of shares with par value: none Par value: N/A
Number of shares without par value: 1000
4. GOVERNING BOARD: shall be styled as (check one): X Directors____Trustees
The FIRST BOARD OF DIRECTORS shall consist of one members and the
names and addresses are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Michael A. Ruby 13295 N. 94th Way Scottsdale, AZ 85260
Name Address City/State/Zip
Name Address City/State/Zip
Name Address City/State/Zip
</TABLE>
5. PURPOSE (optional -- see reverse side): The purpose of the corporation
shall be:
Investment and Holding Company
6. PERSONAL LIABILITY (pursuant to NRS 78.037): Check one:_____Accept
XX Decline (if you chose accept see 6(a))
6(a)If you chose accept, please check one:__________Limiting
__________Eliminating
7. OTHER MATTERS: Any other matters to be included in these articles may be
noted on separate pages and incorporated by reference herein as a part of
these articles: Number of pages attached None .
8. SIGNATURES OF INCORPORATORS: The names and addresses of each of the
incorporators signing the articles: (signatures must be notarized)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Michael A. Ruby
Name (print) Name (print)
13295 N. 94th Way Scottsdale, AZ 85260
Address City/State/Zip Address City/State/Zip
/s/Michael A. Ruby
Signature Signature
Subscribed and sworn to before me this
21st day of
Name (print)
March , 1994.
Address City/State/Zip
/s/G. Blume
Signature Notary Public
</TABLE>
9: CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT [NOTARY SEAL]
I, Resident Agency National hereby accept appointment as Resident Agent for the
above named corporation.
/s/ Catherine A. Mead March 22, 1994
Signature of Resident Agent Date
<PAGE> 2
[Filed Stamp] CERTIFICATE OF AMENDMENT OF ____ [Receipt Stamp]
No. C 4435-94 World's Fare, Inc.
__________________ ______________________
Name of Corporation
We the undersigned Donald R. Kern and
__________________________________
President or Vice President
Donald R. Kern of World's Fare, Inc.
__________________ ______________________
Secretary or Assistant Secretary Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened held on the 7th day of May, 1997 adopted a resolution to amend
_____ _________
the original articles as follows:
Article 3 is hereby amended to read as follows:
____
50,000,000 authorized shares of common stock at $0.001 par value
Delete wording of 1000 shares of no par value
The number of shares of the corporation outstanding and issued to vote on
an amendment to the Articles of Incorporation is 1000 that the said __________
and amendment have been consented to and approved by a majority vote of the
stockholders _________________________ each class of stock outstanding and
_____________________ thereof.
/s/Donald R. Kern
___________________________________
President or Vice President
___________________________________
Secretary or Assistant Secretary
State of Arizona )
) ss.
County of Maricopa )
On May , 1997 personally appeared before me _________________ Donald R.
Kern and acknowledged that they executed the above instrument.
David B. Stocker
___________________________________
Signature of Notary
[Seal of Notary]
<PAGE> 3
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
World's Fare, Inc.
------------------------------------------------
Name of Corporation
We the undersigned Kendall Q. Northern (president) and
---------------------------------------------
President or Vice President
Earl J. Cook of World's Fare, Inc.
- -------------------------------- --------------------------------------------
Secretary or Assistant Secretary Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened held on the 14th day of July , 1998 adopted a
---------- ------------------------
resolution to amend the original articles as follows:
Article 1 is hereby amended to read as follows:
----------
"The name of the corporation shall be FutureOne, Inc."
The number of shares of the corporation outstanding and issued to vote
on an amendment to the Articles of Incorporation is Below that the said
changes(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereof.
7,520,125 /s/ Kendall Q. Northern
---------------------------------------
President or Vice President
/s/ Earl J. Cook
---------------------------------------
Secretary or Assistant Secretary
State of Arizona )
) ss.
County of Maricopa )
On August 8, 1998 personally appeared before me, a
----------------------------------
Notary Public, Kendall Q. Northern (president) and acknowledged
------------------------------------------------
that they executed the above instrument.
/s/ Earl J. Cook
---------------------------------------
Signature of Notary
[Seal of Notary]
<PAGE> 4
RECEIPT NO. FY9800050538
ARIZONA BAR FOUNDATION
03/12/1998 175.00
REC'D BY KIM DRAGO $125.00
FILED ARTICLES OF EXCHANGE
IN THE OFFICE OF THE BY AND BETWEEN
SECRETARY OF STATE OF THE
STATE OF NEVADA FUTUREONE, INC.
(An Arizona Corporation)
MAR 30 1998
AND
NO. C4435-94
/s/ DEAN HELLER WORLD'S FARE, INC.
DEAN HELLER, SECRETARY OF STATE (A Nevada Corporation)
THESE ARTICLES OF EXCHANGE dated this 20 day of February, 1998, by and
between FutureOne, Inc., an Arizona Corporation (hereinafter referred to as
"FutureOne"), and World's Fare, Inc., a Nevada Corporation (hereinafter referred
to as "World's Fare").
RECITALS
FutureOne has an aggregate number of authorized shares of capital stock
being a single class, common stock without series, consisting of One Hundred
Million (100,000,000) shares, $0.01 par value, of which Six Million Three
Hundred Fifty-Four Thousand Nine Hundred and Ninety (6,354,990) shares are fully
paid, issued and outstanding on the books of the Corporation (pre-exchange).
FutureOne reserves the right to amend the issued and outstanding shares to
compensate for shares sold under FutureOne's Private Placement Memorandum dated
November 26, 1997.
The principal office of FutureOne is located at 4250 East Camelback
Road, Suite K-192, Phoenix, Arizona 85018; David B. Stocker, 4745 North Seventh
Street, Suite 234, Phoenix, Arizona 85014, is the registered agent of record
upon whom service of process for FutureOne may be received within the state of
Arizona, and the corporation is governed by Arizona law.
World's Fare has an aggregate number of authorized shares of capital
stock being a single class, common stock without series, consisting of Fifty
Million (50,000,000) shares, $0.001 par value, of which Five Hundred Thousand
(500,000) shares are fully paid, issued and outstanding on the books of the
Corporation (pre-exchange).
The principal office of World's Fare is located at 669 Peoria Street,
Suite 289, Aurora, Colorado 80011; Resident Agency National, 377 South Nevada
Street, Carson City, Nevada 89703 is the registered agent of record upon whom
service of process for World's Fare may be received within the state of Nevada;
and the corporation is governed by Nevada law.
The Boards of Directors of the Parties recommended and noticed these
Articles of Exchange in accordance with the Arizona Revised Statutes and the
Nevada Revised Statutes.
Page 1 of 16
<PAGE> 5
The transactions contemplated under this Agreement were adopted and
ratified on January 19, 1998 at a Special Meeting of Shareholders of FutureOne
by a majority of the common shares of record. By a majority vote of the common
shares of record, there being 6,354,990 issued and outstanding shares entitled
to vote with 5,574,495 voting in favor of the exchange and zero voting against
the exchange.
The transactions contemplated under this Agreement were adopted and
ratified on January 15, 1998 at a Special Meeting of Shareholders of World's
Fare by a majority of the common shares of record. There being 500,000 issued
and outstanding shares entitled to vote, with 500,000 by either proxy or in
person for the exchange and zero against the exchange; and
The respective Boards of Directors of FutureOne and World's Fare have
determined that it is desirable, upon the terms and subject to the conditions
set forth herein, that FutureOne be acquired by World's Fare, that World's Fare
be the parent corporation, and that FutureOne be a wholly-owned subsidiary of
World's Fare, with the shares of FutureOne common stock outstanding prior to the
effective date of the acquisition being converted into shares of World's Fare or
a one-for-one basis, with the effect that World's Fare shall become the owner of
100 percent of the issued and outstanding common stock of FutureOne, all as
hereinafter set forth.
Accordingly, in consideration of the mutual covenants and agreements
contained herein, it is agreed that, in accordance with the applicable statutes
of the States of Arizona and Nevada, FutureOne shall be at the "Effective Time"
(as that term is defined in Section 1.2 hereof) acquired by World's Fare (the
"Acquisition"), and that the terms and conditions of the Acquisition, the mode
of carrying same into effect, the manner and basis of converting shares, and
such other provisions as are deemed necessary or desirable to be effected by the
Acquisition.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
benefits contained herein, it is agreed by and between the parties as follows:
ARTICLE I
Terms of Acquisition
1.1 Acquisition. At the Effective Time, FutureOne shall be acquired by
World's Fare, such that FutureOne shall be a wholly-owned subsidiary of World's
Fare, the separate existence of FutureOne shall continue, and World's Fare shall
continue in existence as the parent corporation, doing business as "FutureOne."
From and after the Effective Time, the corporate
Page 2 of 16
<PAGE> 6
existence of World's Fare, with all its rights, privileges, immunities, powers
and purposes, shall continue unaffected and unimpaired by the Acquisition.
1.2 Closing and Effective Time. The consummation of the Acquisition of
FutureOne by World's Fare (the "Closing") shall take place at the offices of
David B. Stocker, Esq., 4745 North Seventh Street, Suite 234, Phoenix, Arizona
85014, at 10:00 a.m. Phoenix, Arizona time, on the first day after which (a) all
conditions set forth in this Agreement have been satisfied, or (b) at such other
place, date, and time as may be agreed upon in writing by FutureOne and World's
Fare. The date on which the closing shall take place shall be hereinafter
referred to as the "Closing Date." Simultaneously with the consummation of the
Closing, this Agreement, or Articles of Exchange, as appropriate, and all other
instruments or documents required to make the Acquisition effective or complete
the transaction as contemplated by the terms of this Agreement shall be filed
with the appropriate governmental agencies or authorities in accordance with the
provisions of the laws of the States of Arizona and Nevada. The date on which
the Acquisition shall become effective shall be the date all appropriate filings
have been made in accordance with Arizona and Nevada law and such date is herein
call the "Effective Time."
1.3 Effect of Acquisition. At the Effective Time, the effects of the
consummation of the Acquisition on FutureOne and World's Fare shall be that
World's Fare shall own all of the issued and outstanding shares of Common Stock
of FutureOne, and FutureOne shall become a wholly-owned subsidiary of World's
Fare.
1.4 Bylaws. At the Effective Time, the Bylaws of FutureOne shall become
and remain the bylaws of the World's Fare until amended or repealed in the
manner therein provided and in accordance with the Articles of Incorporation of
World's Fare and applicable law.
1.5 Officers and Directors. At the Effective Time, the directors of
FutureOne, Kendall Q. Northern and Earl J. Cook, shall be the sole directors of
World's Fare. Such directors and officers shall serve from and after the
Effective Time until their respective successors are duly elected and qualified.
At the Effective Time, the current board of directors of World's Fare shall
resign.
1.6 Other action. Upon and after the Effective Time, FutureOne and
World's Fare shall take all such action as shall be deemed necessary or
appropriate by any of the parties to this Agreement in connection with the
Acquisition. In case that at any time after the Effective Time, FutureOne and
World's Fare shall consider or be advised that any further deeds, assignments,
conveyances, or instruments are necessary or desirable to carry
Page 3 of 16
<PAGE> 7
out the provisions of the Agreement, the proper officers and directors of
FutureOne and World's Fare as of the Effective Time shall execute and deliver
any and all proper deeds, assignments, and assurances of law, and do all things
necessary or appropriate and proper to carry out the provisions of the terms of
this Agreement.
ARTICLE II
Terms of the Transaction and Manner and Basis of
Converting Shares of FutureOne
2.1 Shares of World's Fare. Each share of World's Fare Common Stock
held by current shareholders prior to the Effective Time shall continue to
remain issued and outstanding and be unaffected by the Acquisition, which
shares, together with the shares of FutureOne Common Stock converted by virtue
of the Acquisition under Section 2.2 below shall, after the effectiveness of the
Acquisition, constitute the total issued and outstanding World's Fare Common
Stock.
2.2 Exchange of outstanding shares of FutureOne. At the Effective Time,
all of the 6,354,990 common shares being fully paid, issued, and outstanding on
the corporate books of FutureOne, shall be exchanged on a basis of one (1) fully
paid and non-assessable share of the common stock of World's Fare for each one
(1) common share held by FutureOne. Upon execution of these Articles of
Exchange, the shareholders of FutureOne will be instructed to deposit all
6,354,990 shares at the following address:
Holladay Stock Transfer Agency ("Transfer Agent")
4350 East Camelback Road
Phoenix, Arizona 85018
After the effective date, said shares shall be exchanged as described herein,
each certificate shall be exchanged without cost to the shareholder. Any
additional or mutable exchanges requested by FutureOne shareholders will be
charged the prevailing rate by the transfer agent. In the event of the
termination or abandonment by any Party prior to the effective date, all shares
held by the transfer agent will be promptly returned via registered mail to each
FutureOne shareholder. From and after the Effective Time, the shares of
FutureOne Common Stock outstanding immediately prior thereto shall cease to be
shares of FutureOne, irrespective of whether certificates evidencing such shares
have been surrendered, and there shall be no further transfer or issuance of
certificates for FutureOne Common Stock, provided, however, that with respect to
any certificate thereto issued which has been lost or destroyed, World's Fare
may replace such certificate upon receipt of satisfactory evidence of ownership
of the shares represented
Page 4 of 16
<PAGE> 8
thereby and of appropriate indemnification.
2.3 Authorized but unissued shares of common stock of World's Fare. All
authorized but unissued shares of World's Fare Common Stock shall continue as
authorized but unissued shares of World's Fare Common Stock after the Effective
Time of the Acquisition.
ARTICLE III
Representations and Warranties of World's Fare
3.1 Due incorporation, good standing, qualification. World's Fare is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation with all requisite corporate power and
authority to own, operate, and lease its properties and to carry on its business
as presently conducted. World's Fare is not subject to any material disability
by reason of the failure to be duly qualified as a foreign corporation for the
transaction of business and in good standing under the laws of any jurisdiction.
3.2 Capitalization of World's Fare.
(a) As of the date of this Agreement, the authorized capital stock of
World's Fare consists of 50,000,000 shares of Common Stock, par value of $0.001,
500,000 of which are issued and outstanding. All of the issued and outstanding
shares of World's Fare Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. There are no outstanding subscriptions,
options, warrants, convertible securities, costs, commitments, or agreements to
which World's Fare is a party calling for or requiring the issuance, transfer,
sale or other disposition of any shares of Common Stock of World's Fare, either
in all events or upon the occurrence of a contingency, or calling for or
requiring the issuance of any securities or rights convertible into or
exchangeable for shares of Common Stock of World's Fare.
(b) As of the Effective Time, World's Fare issued and outstanding
Common Stock shall consist of 6,834,990 million shares. Of World's Fare Common
Stock, World's Fare represents that (500,000) shares are "unrestricted", as that
term is defined in Rule 144 of the Securities and Exchange Act of 1933, and the
remaining Common Stock is "restricted" under Rule 144. FutureOne acknowledges
that the restricted securities have not been registered under the Securities Act
of 1933 or any applicable state securities laws, and they may not be offered for
sale, sold, transferred, pledged or hypothecated without an effective
registration statement under the Securities Act and under any applicable state
securities laws, or an opinion of counsel satisfactory to World's Fare, that an
exemption from such
Page 5 of 16
<PAGE> 9
registration is available.
3.3 Financial statement and Due Diligence. The audited financial
statement of World's Fare as of September 1, 1997, as examined by Alvin H.
Bender, independent certified public accountant, and the accompanying "Due
Diligence" materials, as submitted to the National Association of Securities
Dealers, Inc., on Form 15c2-11, are incorporated by reference herein as Exhibit
A, a copy of which has been delivered to FutureOne, present fairly and
accurately the consolidated financial and corporate position of World's Fare as
of the date indicated and the report of its operations and changes in the
financial position for the period then ended, in conformity with generally
accepted accounting principles applied on a consistent basis, and includes all
adjustments, consisting only of normally occurring accruals, necessary for a
fair statement of the results of operations for such period. World's Fare does
not have any material liabilities or obligations of a type which would be
included on a balance sheet prepared in accordance with generally accepted
accounting principles, whether or not accrued or contingent and whether or not
determined or determinable, including, without limitations tax liabilities,
except as disclosed in said audited financial statement.
3.4 No material change. Since September 1, 1997, there has not been (i)
any material change in the financial conditions and Due Diligence Report as
referred to in Section 3.3 above, business, properties, or assets of World's
Fare, (ii) any event or condition of any character which has materially and
adversely affected the business of World's Fare, or (iii) any mortgage or pledge
of any material amount of the properties or assets of World's Fare, except in
each case as disclosed in or contemplated by the financial statements and
related footnotes thereto referred in Section 3.3 above.
3.5 Tax matters. World's Fare has duly filed with all of the
appropriate federal, state, and local and foreign governmental agencies all tax
returns and reports which are required to be filed by any individual, entity, or
governmental agency, and have paid in full all taxes, interests, penalties,
assessments or deficiencies shown to be due on such tax returns and reports or
claimed to be due by any taxing authority. World's Fare is not a party to any
pending action or proceeding threatened by any governmental authority, for
assessment or collection of taxes, and no claims for assessment or collection of
taxes have been asserted against World's Fare.
3.6 Title to properties. World's Fare has good and clear title to all
significant properties and assets, real and personal, which its purports to own,
free and clear of all security interests, liens, claims, encumbrances and
charges, except for (i) liens for current taxes not yet due and payable,
Page 6 of 16
<PAGE> 10
(ii) liens, encumbrances and claims disclosed in the Audited Financial
Statements and related notes thereto of World's Fare referred to in Section 3.3
above of this Article III, and (iii) such imperfections of title, easements and
encumbrances, if any, as are not material in character, amount or extent and do
not materially detract from the value, or materially interfere with the use of
the property subject thereto or affected thereby or otherwise materially impair
business operations being conducted thereon. All leases pursuant to which
World's Fare leases any substantial amount of real or personal property are
valid and effective in accordance with the respective terms.
3.7 Litigation. There is no action, suit or proceeding pending or, to
the knowledge of World's Fare, threatened against or affecting World's Fare, at
law or in equity, or before or by any individual, entity, or federal, state,
municipal or any other governmental department, commission, board, bureau,
agency or instrumentality, which, if determined adversely to World's Fare, would
individually or in the aggregate have a material adverse effect on the business,
properties, operations, prospects or assets, or the condition, financial or
otherwise, of World's Fare.
3.8 Rights and licenses. World's Fare is not subject to any material
liability by reason of its failure to possess any trademark, trademark right,
trade name, trade name right or license.
3.9 Authority and compliance; no violation. World's Fare has full
corporate power and lawful authority to execute and deliver this Agreement, and
to consummate and perform the transactions contemplated hereby. The execution
and delivery of this Agreement, and the consummation and performance of the
transactions contemplated hereby shall have been duly and validly authorized by
all necessary corporate and other proceedings, and this Agreement shall
constitute the valid obligation of World's Fare, legally binding upon it in
accordance with its terms. No approval or consent of any federal, state, county,
local or other governmental agency or body is required to be obtained by World's
Fare in connection with the execution, delivery, consummation and performance of
this Agreement by World's Fare. The execution, delivery, consummation and
performance of this Agreement by World's Fare shall not conflict with or result
in a breach or violation of any material term or provision, or constitute a
material default under, any statute, indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which World's Fare is a party or
by which it is bound, or any law, order writ, injunction, decree, rule or
regulation of any court or any governmental agency or body.
3.10 Brokers Fees and/or Finders Fees. No fees to any broker or finder
are due under this Agreement.
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<PAGE> 11
3.11 Other. World's Fare has fully disclosed, and shall disclose, all
financial and corporation information regarding this transaction, whether
material or inconsequential, to FutureOne.
ARTICLE IV
Representations and Warranties of FutureOne
4.0 Due Incorporation, good standing, qualification. FutureOne is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation with all requisite corporate
power and authority to own, operate and lease its properties and carry on its
business as presently conducted. FutureOne is not subject to any material
disability by reason of the failure to be duly qualified as a foreign
corporation for the transaction of business and in good standing under the laws
of any jurisdiction.
4.1 Authority and compliance; no violation. FutureOne has full
corporate power and lawful authority to execute and deliver this Agreement, and
to consummate and perform the transactions contemplated hereby. The execution
and delivery of this Agreement by FutureOne, and the consummation and
performance of the transactions contemplated hereby shall have been fully and
validly authorized by all necessary corporate and other proceedings, and this
Agreement shall constitute the valid obligation of FutureOne, legally binding
upon it in accordance with its terms. No approval or consent of any federal,
state, county, local or other governmental agency or body is required to be
obtained by FutureOne in connection with the execution, delivery, consummation
and performance of this Agreement by FutureOne. The execution, delivery,
consummation and performance of this Agreement by FutureOne shall not conflict
with or result in the breach or violation of any term or provision of, or
constitute a material default under, any statute, indenture, mortgage, deed of
trust, note agreement, or other agreement or instrument by which it is bound, or
any law, order, writ, injunction, decree, rule or regulation of any court or any
governmental agency or body.
ARTICLE V
Covenants of World's Fare
5.1 Shareholders notification. Subsequent to the Effective Time,
World's Fare shall notify all of its shareholders of the completion of the terms
of this Agreement and the transactions contemplated hereunder.
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<PAGE> 12
5.2 Access. World's Fare shall give FutureOne and its counsel,
accountants, investment advisers and other representatives, access during normal
business hours without unreasonably interfering with the business operations to
all information, books and records of World's Fare, and to make copies thereof
or extracts therefrom and shall furnish to FutureOne all such documents and
information with respect thereto as it may, from time to time, reasonably
request.
5.3 Operation of business of World's Fare. Prior to the Closing Date,
World's Fare shall not, without written consent of FutureOne, which consent will
not be unreasonably withheld: (a) dispose of any material properties or assets;
(b) take or omit to take any action which action or omission would cause any
material adverse change to occur in the financial affairs of World's Fare, nor
waive any statute of limitations so as to extend any tax or other liability of
World's Fare; (c) engage in any material activities or transactions which shall
be outside the ordinary course of its respective business as conducted at the
date hereof; (d) amend its respective charters or bylaws; (e) issue any stock or
any other securities or grant or otherwise issue any options or rights to
subscribe for, or convertible into, its stock; (f) enter into any employment
agreements or consulting agreements with employees of World's Fare, or increase
the compensation payable or to become payable by World's Fare to any of its
officers, directors, employees or agents over the amounts payable as of the date
of this Agreement, or adopt or amend any employee benefit plan or arrangement of
World's Fare, other than increases or amendments in the ordinary course of
business or required by law or by union contracts; (g) declare, set aside or pay
any dividend or make any other distribution or assets to its stockholders; (h)
make any loans or advances (other than for reasonable, ordinary and necessary
business expenses) to employees of World's Fare; and (i) except for this
Agreement, enter into any contract to merge or consolidate with or into any
other entity or change the character of World's Fare.
5.4 OTC Bulletin Board Listing. World's Fare warrants that upon the
Effective Date, World's Fare will have maintained its listing on the National
Association of Securities Dealers, Inc. OTC Bulletin Board.
5.5 Supplementary Action. At any time, or from time to time, after the
Effective Time, the last acting officers of World's Fare, or the new officers of
World's Fare as the parent corporation, may, in the name of World's Fare,
execute and deliver all such proper deeds, assignments and other instruments and
take or cause to be taken all such further or other action as the acquiring
corporation may deem necessary or desirable in order to vest, perfect or confirm
in the parent corporation, title to and possession of all of FutureOne's
property, rights, privileges, immunities, powers and purposes, and otherwise
carry
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<PAGE> 13
out the purposes and intent of this Agreement.
ARTICLE VI
Additional Agreements
6.1 Tax Free Qualification. The parties hereto intend that the
transactions contemplated by this Agreement shall qualify as a tax-free exchange
under Section 368 of the Internal Revenue Code.
6.2 Accounting methods. The parties hereto warrant that all financial
statements and other financial information have been prepared in accordance with
Generally Accepted Accounting Principles.
6.3 Resignations. Upon the Effective Date, World's Fare shall turn over
to FutureOne original resignations of each of its officers and directors.
6.4 Consolidated Financial Statements. Immediately subsequent to the
Effective Time, World's Fare shall complete a consolidated financial statement
of FutureOne and World's Fare within a reasonable period of time.
6.5 Service of Process. World's Fare may be served with process in the
State of Nevada in any proceeding for enforcement of all obligations arising
from these Articles of Exchange, including those obligations to dissenting
shareholders.
ARTICLE VII
Conditions Precedent to Obligations of all Parties
The obligations of World's Fare and FutureOne to consummate the
Acquisition are subject to the fulfillment prior to or at the Closing of each of
the following conditions, except as such parties may legally waive such
conditions in writing:
7.1 Litigation. On the Closing Date, there shall not be pending or
threatened any claim, action, suit or proceeding against any of the parties
hereto or any of their affiliates which, if adversely determined, might prevent
or materially hinder consummation of the Acquisition contemplated by this
Agreement, result in payment of substantial damages as a result of such
Acquisition and the transactions contemplated hereby or otherwise materially
impair the benefits to any party or parties contemplated hereby and no
investigation by any governmental agency shall be pending or threatened which
might eventually result in any such suit, action or other proceeding.
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<PAGE> 14
7.2 Corporate documents. As of the Effective Date, World's Fare shall
turn over to FutureOne all original corporate and financial records and copies
of any other records of World's Fare.
ARTICLE VIII
Termination
8.1 Procedure for termination. Notwithstanding any other section or
provision of this Agreement, this Agreement may be terminated by written notice
of termination at any time before the Closing Date (whether before or after
action with respect hereto by the World's Fare shareholders) only as follows:
(a) by the mutual consent of the Boards of Directors of World's Fare
and FutureOne;
(b) by the Board of Directors of FutureOne, upon two days, written
notice to World's Fare given at any time if all of the conditions precedent set
forth in this Agreement have not been fulfilled or waived;
(b) by the Board of Directors of World's Fare, upon two days' written
notice to FutureOne given at any time if all of the conditions set forth in this
Agreement have not been fulfilled or waived;
8.2 Effect of termination. In the event this Agreement is terminated,
the Agreement shall forthwith become void and of no further force and effect and
there shall be no obligation on the part of World's Fare and FutureOne, or their
respective officers, directors or shareholders except as set forth in Section
9.13 below.
8.3 Notice of termination. The power of termination provided in this
Article VIII, when exercised as herein provided, shall be effective only upon
delivery to the other corporate parties of a notice in writing of such exercise
signed on behalf of the terminating party by its President.
Article IX
General Provisions
9.1 Notices. Any notice hereunder to a party shall be deemed to be
properly served in writing and personally delivered or mailed to:
In the case of World's Fare:
World's Fare, Inc.
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<PAGE> 15
669 Peoria Street
Suite 289
Aurora, Colorado 80011
Attention: Donald R. Kern, President
In the case of FutureOne:
FutureOne, Inc.
4250 East Camelback Road
Suite K-192
Phoenix, Arizona 85018-2751
Attention: Kendall Q. Northern, President
or to such other address as may have been furnished in writing by such party to
the other parties to this Agreement, and shall be deemed to have been given as
of the time delivered or, if mailed, as of the time acknowledged as received if
mailed registered or certified mail, postage prepaid, it being the intention
that all notices pursuant hereto shall be effective only upon receipt.
9.2 Interpretations. To the extent permitted by the context in which
used, (a) words in the singular number shall include the plural, words in the
masculine gender shall include the feminine and neuter, and vice versa, and (b)
references to "persons" or "parties" in this Agreement shall be deemed to refer
to natural persons, corporations, and all other entities. This instrument shall
be construed in accordance with the fair meaning of its language, and shall not
be construed for or against the party drafting it, solely because of such fact.
9.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed, shall constitute an original copy
hereof, but all of which together shall constitute one and the same document.
9.4 Section headings and gender. The section headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof. The use of the masculine or any
other pronoun herein when referring to any party has been for convenience only
and shall be deemed to refer to the particular party intended regardless of the
actual gender of such party.
9.5 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the transactions contemplated
hereby, and any previous agreements or understandings between the parties
regarding the subject matter hereof are merged into and superseded by this
Agreement.
9.6 Nonassignability. The obligations of this Agreement are personal to
each party, and neither the rights nor obligations under this Agreement may be
assigned or transferred by any party in any manner whatsoever, nor are such
rights or
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<PAGE> 16
obligations subject to involuntary alienation, assignment or transfer.
9.7 Exclusive governing law. This Agreement has been executed and
delivered in the State of Arizona, and it shall be exclusively construed in
accordance with the laws of the State of Arizona.
9.8 Severability. The unenforceability, invalidity, or illegality of
any provision of this Agreement, shall not render the other provisions
unenforceable, invalid, or illegal. If any term, provision, covenant or
condition of this Agreement is invalidated due to its scope or breadth, such
term, provision, covenant, or condition shall be deemed valid to the extent of
the scope or breadth permitted by law in accordance with the intent of the
parties as expressed herein.
9.9 Waiver of terms. Any of the terms and conditions of this Agreement,
to the extent permitted by law, may be waived at any time by the party which is
or whose shareholders are entitled to the benefit thereof by action taken by the
boards of directors of such party, or by the President thereof authorized to act
for such party, whether before or after action with respect to this Agreement on
behalf of the shareholders of the parties, or any one or more of them, provided,
however, that such action shall be taken only if, in the judgment of the board
of directors or officer taking such action, such waiver will not have a
materially adverse effect on the benefits intended hereunder to the shareholders
of its or his corporation. Such action shall be evidenced by written notice
signed by its President of the party taking such action.
9.10 Cooperation. Subject to the terms and conditions herein provided,
each of the parties hereto shall use its best lawful efforts to take, or cause
to be taken, such action, to execute and deliver, or cause to be delivered, such
additional documents and instruments and to do or cause to be done all things
necessary, proper or advisable, under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated by
this Agreement.
9.11 Arbitration; Exclusive jurisdiction and venue. The parties hereby
agree to exclusively submit all controversies, claims, and matters of difference
to arbitration in Phoenix, Arizona, according to the rules and practices of the
American Arbitration Association from time to time in force, except to the
extent that such rules and practices are inconsistent with the terms of this
Agreement. This submission and agreement to arbitrate shall be specifically
enforceable. The arbitrator shall exclusively apply Arizona law as though he or
she were bound by the applicable statutes and precedents in case law. The
arbitrator shall have the power to issue any award, judgment,
Page 13 of 16
<PAGE> 17
decree, or order of relief that a court of law or equity could issue under
Arizona law, including but not limited to money damages, specific performance,
or injunctive relief. In the event that any party refuses to submit to
arbitration, the party that has submitted to arbitration shall be empowered to
file the appropriate action in a court in Maricopa County, Arizona. In all
disputes, the non-prevailing party shall be pay the reasonable attorneys, fees
and costs of the prevailing party.
9.12 Enforcement. The failure of either party to enforce any provision
of this Agreement shall not be construed as a waiver or limitation of that
party's right to subsequently enforce and compel strict compliance with every
provision of this Agreement.
9.13 Attorneys fees and costs. Except as otherwise provided herein,
each party hereto shall pay its own expenses incurred in connection with this
Agreement and the transactions incurred in connection with this Agreement and
the transactions contemplated hereby, except that FutureOne shall pay the cost
of printing any documents required to be printed in connection with the
transactions contemplated by this Agreement and any filing fees incurred in
connection with any governmental filings or approvals required to be made or
obtained in connection with this Agreement.
9.14 Amendment of Agreement. Notwithstanding anything to the contrary
in this Agreement, to the extent permitted by law, this Agreement may be
amended, supplemented or interpreted at any time by written instrument duly
executed by each of the parties hereto which shall have been authorized by
appropriate action taken by the board of directors of the parties hereto and, in
the case of an interpretation, the actions of such board of directors shall be
binding.
9.15 Governing law of merged entities. World's Fare, as the acquiring
corporation, is to be governed by the laws of the State of Nevada, and shall
comply with the applicable provisions of the laws of the State of Nevada as
amended. These Articles of Exchange shall be filed with the Nevada Secretary of
State and the Arizona Secretary of State so that;
(a) World's Fare may be served with process in any proceeding for
enforcement of Rights of Dissenting Shareholders of FutureOne against World's
Fare; and
(b) World's Fare may be served with process in any proceeding for the
enforcement of any obligation under the provisions of the Nevada Revised
Statutes pertaining to dissenting shareholders of World's Fare; and
(c) The former shareholders of FutureOne which as the
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<PAGE> 18
acquired corporation, are entitled only to the rights as provided herein and
under the Arizona Revised Statutes and the Nevada Revised Statutes and;
(d) World's Fare will promptly pay to dissenting shareholders of
FutureOne the amounts, if any, to which they may be entitled under the above
referenced statutes.
9.16 Indemnification. The Board of Directors of FutureOne hereby
indemnify, hold harmless, and agree to defend the Board of Directors of World's
Fare for any and all financial statements, and any acts or actions, whether
financial or otherwise, regarding FutureOne, and that said financial statements
represent the true and complete financial position of FutureOne. The Board of
Directors of World's Fare indemnify, hold harmless, and agree to defend the
Board of Directors of FutureOne for any and all financial statements, and any
acts or actions, whether financial or otherwise, regarding World's Fare, and
that said financial statements represent the true and complete financial
position of World's Fare.
///
///
IN WITNESS WHEREOF, each of the Parties hereto, pursuant to authority
duly granted to each by their respective board of directors, has caused these
Articles of Exchange between World's Fare and FutureOne, to be executed by its
respective authorized officers on the date first written above.
World's Fare, Inc.
(a Nevada corporation)
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<PAGE> 19
By: /s/ Donald R. Kern /s/ Donald R. Kern
------------------------------- ------------------------------
Donald R. Kern, President Donald R. Kern, Secretary
FutureOne, Inc.
(an Arizona corporation)
By: /s/ Kendall Q. Northern
-------------------------------
Kendall Q. Northern, President
State of Colorado )
) ss.
County of Arapahoe )
Subscribed and sworn to before me by Donald R. Kern this 26th day of
March, 1998.
/s/ Ellen Meents
-----------------------------------
Notary Public
My commission expires: 3-23-2000 [Notary Seal]
Page 16 of 16
<PAGE> 20
RECEIPT NO. FY9800069809
ARIZONA BAR FOUNDATION
00/17/1998 175.00
REC'D BY SSH ($125)
FILED ARTICLES OF EXCHANGE
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE BY AND BETWEEN
STATE OF NEVADA
Lankaster, Inc.
JUL 10 1998 (An Arizona Corporation)
NO. C4435-94 AND
/s/ DEAN HELLER
DEAN HELLER, SECRETARY OF STATE WORLD'S FARE. Inc., d.b.a. FutureOne
(A Nevada Corporation)
THESE ARTICLES OF EXCHANGE dated this 1st day of April, 1998, by and
between Lankaster Inc., an Arizona Corporation (hereinafter "LANKASTER"), and
World's Fare, Inc., d.b.a. FutureOne, a Nevada Corporation (hereinafter
"FutureOne").
RECITALS
FutureOne has an aggregate number of authorized shares of capital stock
being a single class, common stock without series, consisting of Fifty Million
(50,000,000) shares, $0.001 par value, of which approximately Seven Million Five
Hundred Thousand (7,500,000) shares are fully paid, issued and outstanding on
the books of the Corporation (pre-exchange).
The principal office of FutureOne is located at 4250 East Camelback
Road, Suite K-192, Phoenix, Arizona 85018; Resident Agency National, 377 South
Nevada Street, Carson City, Nevada 89703 is the registered agent of record upon
whom service of process for FutureOne may be received within the state of
Nevada, and the corporation is governed by Nevada law.
LANKASTER has an aggregate number of authorized shares of capital stock
being a single class, common stock without series, consisting of One Million
(1,000,000) shares, $0.001 par value, of which Twenty-five Thousand (25,000)
shares are fully paid, issued and outstanding on the books of the Corporation
(pre-exchange).
The principal office of LANKASTER is located at 232 N. Cortez Street,
Prescott, Arizona 86301; Tony Shaw, 140 N. Granite Street, Prescott, Arizona
86301, is the registered agent of record upon whom service of process for
LANKASTER may be received within the state of Arizona, and the corporation is
governed by Arizona law.
The Boards of Directors of the Parties will recommend and notice these
Articles of Exchange if required by the Arizona Revised Statutes and the Nevada
Revised Statutes.
The transactions contemplated under this Agreement were adopted and
ratified on March 28, 1998 at a Special Meeting of Shareholders of FutureOne by
a majority of the common shares of record;
The transactions contemplated under this Agreement were adopted and
ratified on March 28, 1998 at a Special Meeting of Shareholders of LANKASTER by
a majority of the common shares of record; and
The respective Boards of Directors of FutureOne and LANKASTER have determined
that it is desirable, upon the terms and subject to the conditions set forth
herein, that FutureOne acquire LANKASTER and that LANKASTER be a wholly-owned
subsidiary of FutureOne, with the shares of LANKASTER's common stock being
converted into shares of FutureOne, with the effect that FutureOne shall become
the owner of 100 percent of the issued and outstanding common stock of
LANKASTER, all as hereinafter set forth.
Accordingly, in consideration of the mutual covenants and agreements contained
herein, it is agreed that, in
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<PAGE> 21
accordance with the applicable statutes of the States of Arizona and Nevada,
LANKASTER shall be at the "Effective Time" (as that term is defined in Section
1.2 hereof) acquired by FutureOne (the "Acquisition"), and that the terms and
conditions of the Acquisition, the mode of carrying same into effect, the manner
and basis of converting shares, and such other provisions as arc deemed
necessary or desirable to be effected by the Acquisition.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
benefits contained herein, it is agreed by and between the parties as follows:
ARTICLE I
Terms of Acquisition
1.1 Acquisition. At the Effective Time, LANKASTER shall be acquired by
FutureOne, such that LANKASTER shall be a wholly-owned subsidiary of FutureOne,
the separate existence of LANKASTER shall continue, and FutureOne shall continue
in existence as the parent corporation, doing business as "FutureOne." From and
after the Effective Time, the corporate existence of FutureOne, with all its
rights, privileges, immunities, powers and purposes, shall continue unaffected
and unimpaired by the Acquisition.
1.2 Closing and Effective Time. The consummation of the Acquisition of
LANKASTER by FutureOne (the "Closing") shall take place at the offices of
LANKASTER at 10:00 a.m., Arizona time, on the first day after which (a) all
conditions set forth in this Agreement have been satisfied; or (b) at such other
place, date, and time as may be agreed upon by FutureOne and LANKASTER. The date
on which the closing shall take place shall be hereinafter referred to as the
"Closing Date." Simultaneously, with the consummation of the Closing, this
Agreement, or Articles of Exchange, as appropriate, and all other instruments or
documents required to make the Acquisition effective or complete the transaction
as contemplated by the terms of this Agreement shall be filed with the
appropriate governmental agencies or authorities in accordance with the
provisions of the laws of the States of Arizona and Nevada. The date on which
the Acquisition shall become effective shall be the date all appropriate filings
have been made in accordance with Arizona and Nevada law and such date is herein
call the "Effective Time."
1.3 Effect of Acquisition. At the Effective Time, the effects of the
consummation of the Acquisition on FutureOne and LANKASTER shall be that
FutureOne shall own all of the issued and outstanding shares of Common Stock of
LANKASTER, and LANKASTER shall become a wholly-owned subsidiary of FutureOne.
1.4 Bylaws. At the Effective Time, the Bylaws of FutureOne shall become
and remain the bylaws of the LANKASTER until amended or repealed in the manner
therein provided and in accordance with the Articles of Incorporation of
FutureOne and applicable law.
1.5 Officers and Directors. At the Effective Time, the directors and
officers of FutureOne, Kendall Q. Northern and Earl J. Cook, shall be the sole
directors and officers of FutureOne and LANKASTER. Such directors and officers
shall serve from and after the Effective Time until their respective successors
are duly elected and qualified. At the Effective Time, the current board of
directors of LANKASTER shall immediately resign.
1.6 Other action. Upon and after the Effective Time, LANKASTER shall
take all such action as shall be deemed necessary or appropriate by FutureOne.
In case that, at any time after the Effective Time, FutureOne and LANKASTER
shall consider or be advised that any further deeds, assignments, conveyance or
instruments are necessary or desirable to carry out the provisions of the
Agreement, the proper officers and directors of FutureOne and LANKASTER as of
the Effective Time shall execute and deliver any and all proper deeds,
assignments, and assurances of law, and do all things necessary or appropriate
and proper to carry out the provisions of the terms of this Agreement.
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<PAGE> 22
ARTICLE II
Terms of the Transaction and the Manner and Basis of
Converting the Shares of LANKASTER
2.1 Shares of FutureOne. Each share of FutureOne Common Stock held by
current shareholders prior to the Effective Time shall continue to remain issued
and outstanding and be unaffected by the Acquisition, which shares, together
with the shares of LANKASTER Common Stock convened by virtue of the Acquisition
under Section 2.2 below shall, after the effectiveness of the Acquisition,
constitute the total issued and outstanding FutureOne Common Stock.
2.2 Exchange of shares of LANKASTER. At the Effective Time, all of the
25,000 issued and outstanding common shares of LANKASTER shall be exchanged for
215,385 shares of FutureOne. Upon execution of these Articles of Exchange, the
shareholders of LANKASTER will be instructed to deposit all 25,000 shares, in a
manner that will effectuate the proper transfer of said stock to FutureOne, at
the following address:
Holladay Stock Transfer Agency ("Transfer Agent")
4350 East Camelback Road
Phoenix, Arizona 85018
After the effective date, said shares shall be exchanged as described herein,
each certificate shall be exchanged without cost to the shareholder. Any
additional or mutable exchanges requested by LANKASTER shareholders will be
charged, to said LANKASTER shareholders, the prevailing rate by the transfer
agent. In the event of the termination or abandonment by any Party prior to the
effective date, all shares held by the transfer agent will be promptly returned
via registered mail to each LANKASTER shareholder. From and after the Effective
Time, the shares of LANKASTER Common Stock outstanding immediately prior thereto
shall cease to be shares of LANKASTER, irrespective of whether certificates
evidencing such shares have been surrendered, and there shall be no further
transfer or issuance of certificates for LANKASTER Common Stock, provided,
however, that with respect to any certificate thereto issued, which has been
lost or destroyed, FutureOne may replace such certificate upon receipt of
satisfactory evidence of ownership of the shares represented thereby and of
appropriate indemnification.
2.3 Cash Payment. FutureOne shall pay to the order of the shareholders
designated, in writing, by LANKASTER, as additional consideration, the aggregate
sum of $15,000.00 within 5 business days of the Closing.
ARTICLE III
Representations and Warranties of FutureOne
3.1 Due incorporation, good standing, qualification. FutureOne is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation with all requisite corporate power and
authority to own, operate, and lease its properties and to carry on its business
as presently conducted.
3.2 Authority and compliance; no violation. FutureOne, to the best of
its knowledge, has full corporate power and lawful authority to execute and
deliver this Agreement, and to consummate and perform the transactions
contemplated hereby.
3.3 Other. FutureOne, to the best of its knowledge, has disclosed
relevant financial and corporate information regarding this transaction to
LANKASTER.
Page 3 of 9
<PAGE> 23
ARTICLE IV
Representations and Warranties of LANKASTER
4.0 Due Incorporation, good standing, qualification. LANKASTER is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation with all requisite corporate
power and authority to own, operate and lease its properties and carry on its
business as presently conducted. LANKASTER is not subject to any material
disability by reason of the failure to be duly qualified as a foreign
corporation for the transaction of business and in good standing under the laws
of any jurisdiction.
4.1 Authority and compliance; no violation. LANKASTER has full
corporate power and lawful authority to execute and deliver this Agreement, and
to consummate and perform the transactions contemplated hereby. The execution
and delivery of this Agreement by LANKASTER, and the consummation and
performance of the transactions contemplated hereby shall have been fully and
validly authorized by all necessary corporate and other proceedings, and this
Agreement shall constitute the valid obligation of LANKASTER, legally binding
upon it in accordance with its terms. No approval or consent of any federal,
state, county, local or other governmental agency or body is required to be
obtained by LANKASTER in connection with the execution, delivery, consummation
and performance of this Agreement by LANKASTER. The execution, delivery,
consummation and performance of this Agreement by LANKASTER shall not conflict
with or result in the breach or violation of any term or provision of, or
constitute a material default under any statute, indenture, mortgage, deed of
trust, note agreement, or other agreement or instrument by which it is bound, or
any law, order, writ, injunction, decree, rule or regulation of any court or any
governmental agency or body.
4.2 Financial statement and Due Diligence. LANKASTER represents that,
prior to the Effective date, it has provided FutureOne with complete financial
statements that fairly and accurately the consolidated financial and corporate
position of LANKASTER as of the date indicated and the report of its operations
and changes in the financial position for the period then ended, in conformity
with generally accepted accounting principles applied on a consistent basis, and
includes all adjustments, consisting only of normally occurring accruals,
necessary for a fair statement of the results of operations for such period.
LANKASTER does not have any material liabilities or obligations of a type which
would be included on a balance sheet prepared in accordance with generally
accepted accounting principles, whether or not accrued or contingent and whether
or not determined or determinable, including, without limitation, tax
liabilities, except as disclosed in such audited financial statement.
4.3 No material change. Since February 1, 1998, there has not been (i)
any material change in the financial conditions and Due Diligence Report as
referred to in Section 4.2 above, business, properties, or assets of LANKASTER,
(ii) any event or condition of any character which has materially and adversely
affected the business of LANKASTER, or (iii) any mortgage or pledge of any
material amount of the properties or assets of LANKASTER, except in each case as
disclosed in or contemplated by the financial statements and related footnotes
thereto referred in Section 4.2 above.
4.4 Tax matters. LANKASTER has duly filed with all of the appropriate
federal, state, and local and foreign governmental agencies all tax returns and
reports which are required to be filed by any individual, entity, or
governmental agency, and have paid in full all taxes, interests, penalties,
assessments or deficiencies shown to be due on such tax returns and reports or
claimed to be due by any taxing authority. LANKASTER is not a party to any
pending action or proceeding threatened by any governmental authority, for
assessment or collection of taxes, and no claims for assessment or collection of
taxes have been asserted against LANKASTER.
4.5 Title to properties. LANKASTER has good and clear title to all
significant properties and assets, real and personal, which its purports to own,
free and clear of all security interests, liens, claims, encumbrances and
charges, except for (i) liens for current taxes not yet due and payable, (ii)
liens, encumbrances and claims disclosed in the Audited Financial Statements and
related notes thereto of LANKASTER referred to in Section 3.3 above of this
Article III, and (iii) such imperfections of title, easements and encumbrances,
if any, as are not material in character, amount or extent and do not materially
detract from the value, or materially interfere with the use of the
Page 4 of 9
<PAGE> 24
property subject thereto or affected thereby or otherwise materially impair
business operations being conducted thereon. All leases pursuant to which
LANKASTER leases any substantial amount of real or personal property are valid
and effective in accordance with the respective terms.
4.6 Litigation. There is no action, suit or proceeding pending or, to
the knowledge of LANKASTER, threatened against or affecting LANKASTER, at law or
in equity, or before or by any individual, entity, or federal, state, municipal
or any other governmental department, commission, board, bureau, agency or
instrumentality, which, if determined adversely to LANKASTER, would individually
or in the aggregate have a material adverse effect on the business, properties,
operations, prospects or assets, or the condition, financial or otherwise, of
LANKASTER.
4.7 Rights and licenses. LANKASTER is not subject to any material
liability by reason of its failure to possess any trademark, trademark right,
trade name, trade name right or license.
4.9 Other. LANKASTER has fully disclosed, and shall disclose, all
financial and corporate information regarding this transaction, whether material
or inconsequential, to FutureOne.
ARTICLE V
Covenants of FutureOne
5.1 Shareholders notification. Subsequent to the Effective Time,
FutureOne shall notify all of its shareholders of the completion of the terms of
this Agreement and the transactions contemplated hereunder.
ARTICLE VI
Additional Agreements
6.1 Tax Free Qualification. The parties hereto intend that the
transactions contemplated by this Agreement shall qualify as a tax-free exchange
under Section 368 of the Internal Revenue Code.
6.2 Accounting methods. The parties hereto warrant that all financial
statements and other financial information have been prepared in accordance with
Generally Accepted Accounting Principles.
6.3 Resignations. Upon the Effective Date, LANKASTER shall turn over to
FutureOne original resignations of each of its officers and directors.
6.4 Service of Process. FutureOne may be served with process in the
State of Nevada in any proceeding for enforcement of all obligations arising
from these Articles of Exchange.
6.5 Bank accounts. Immediately after the closing Lancaster shall notify
any and all banks and/or financial institutions of this Exchange Agreement and
shall direct them to remove any and all account signatures and replace them with
the signatures of Kendall Northern and Earl Cook.
6.6 Lankaster Shareholder Notes. Prior to closing, Lankaster shall, to
the satisfaction of FutureOne, identify, substantiate and document any and all
notes and/or liabilities due any and all shareholders and/or related parties, as
of the Effective date. Lankaster shall apply the $15,000, referred to in
paragraph 2.3 above, to the above referenced Shareholder notes. Any remaining
balance due any shareholder and/or related party shall be converted into a new
note, with principal and interest, payable no sooner than three (3) years from
the effective date of this Agreement, except that, said notes shall be, at any
time hereafter, convertible to stock. The stock convertion price and the
interest rate of said notes shall be negotiated and agreed upon prior to the
Closing.
Page 5 of 9
<PAGE> 25
ARTICLE VII
Conditions Precedent to Obligations of all Parties
7.1 Obligations. The obligations of the parties to consummate the
Acquisition are subject to the fulfillment prior to or at the Closing of each of
the following conditions, except as such parties may legally waive such
conditions in writing:
7.2 Litigation. On the Closing Date, there shall not be pending or
threatened any claim, action, suit or proceeding against any of the parties
hereto or any of their affiliates which, if adversely determined, might prevent
or materially hinder consummation of the Acquisition contemplated by this
Agreement, result in payment of substantial damages as a result of such
Acquisition and the transactions contemplated hereby or otherwise materially
impair the benefits to any party or parties contemplated hereby and no
investigation by any governmental agency shall be pending or threatened which
might eventually result in any such suit, action or other proceeding.
7.3 Corporate documents. As of the Effective Date, LANKASTER shall
immediately turn over to FutureOne any and all original corporate and financial
records and copies of any other records of LANKASTER.
7.4 Covenants not to compete. LANKASTER shareholders shall execute an
agreement not to compete with FutureOne, in a form acceptable to FutureOne,
prior to the Closing date.
ARTICLE VIII
Termination
8.1 Procedure for termination. Notwithstanding any other section or
provision of this Agreement this Agreement may be terminated by written notice
of termination at any time before the Closing Date only as follows:
(a) by the mutual consent of the Boards of Directors of LANKASTER and
FutureOne; and
(b) by the Board of Directors of FutureOne, upon two days' written
notice to LANKASTER given at any time if all of the conditions precedent set
forth in this Agreement have not been fulfilled or waived;
8.2 Effect of termination. In the event this Agreement is terminated,
the Agreement shall forthwith become void and of no further force and effect and
there shall be no obligation on the part of LANKASTER and FutureOne, or their
respective officers, directors or shareholders except as set forth in Section
9.13 below.
8.3 Notice of termination. The power of termination provided in this
Article VIII, when exercised as herein provided, shall be effective only upon
delivery to the other corporate parties of a notice in writing of such exercise
signed on behalf of the terminating party by its President.
Page 6 of 9
<PAGE> 26
Article IX
General Provisions
9.1 Notices. Any notice hereunder to a party shall be deemed to be
properly served in writing and personally delivered or mailed to:
In the case of LANKASTER:
Lankaster, Inc.
232 N. Cortez Street
Prescott, Arizona 85301
Attention: Clarissa Mathieson, Secretary
In the case of FutureOne:
World's Fare, Inc., d.b.a. FutureOne.
4250 East Camelback Road
Suite K-192
Phoenix, Arizona 85018-2751
Attention: Kendall Q. Northern, President
Or to such other address as may have been furnished in writing by such party to
the other parties to this Agreement, and shall be deemed to have been given as
of the time delivered or, if mailed, as of the time acknowledged as received if
mailed registered or certified mail, postage prepaid, it being the intention
that all notices pursuant hereto shall be effective only upon receipt.
9.2 Interpretations. To the extent permitted by the context in which
used; (a) words in the singular number shall include the plural, words in the
masculine gender shall include the feminine and neuter, and vice versa; and (b)
references to "persons" or "parties" in this Agreement shall be deemed to refer
to natural persons, corporations, and all other entities. This instrument shall
be construed in accordance with the fair meaning of its language, and shall not
be construed for or against the party drafting it, solely because of such fact.
9.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed, shall constitute an original copy
hereof, but all of which together shall constitute one and the same document.
9.4 Section heading, and gender. The section headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof. The use of the masculine or any
other pronoun herein when referring to any party has been for convenience only
and shall be deemed to refer to the particular party intended regardless of the
actual gender of such party.
9.5 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the transactions contemplated
hereby, and any previous agreements or understandings between the parties
regarding the subject matter hereof are merged into and superseded by this
Agreement.
9.6 Non-assignability. The obligations of this Agreement are personal
to each party and neither the rights nor obligations under this Agreement may be
assigned or transferred by any party in any manner whatsoever, nor are such
rights or obligations subject to involuntary alienation, assignment or transfer.
9.7 Exclusive governing law. This Agreement has been executed and
delivered in the State of Arizona, and it shall be exclusively construed in
accordance with the laws of the State of Arizona.
9.8 Severability. The unenforceability, invalidity, or illegality of
any provision of this Agreement shall not
Page 7 of 9
<PAGE> 27
render the other provisions unenforceable, invalid, or illegal. If any term,
provision, covenant or condition of this Agreement is invalidated due to its
scope or breadth, such term, provision, covenant, or condition shall be deemed
valid to the extent of the scope or breadth permitted by law in accordance with
the intent of the parties as expressed herein.
9.9 Waiver of terms. Any of the terms and conditions of this Agreement,
to the extent permitted by law, may be waived at any time by the party which is
or whose shareholders are entitled to the benefit thereof by action taken by the
boards of directors of such party, or by the President thereof authorized to act
for such party, whether before or after action with respect to this Agreement on
behalf of the shareholders of the parties, or any one or more of them, provided,
however, that such action shall be taken only if, in the judgment of the board
of directors or officer taking such action, such waiver will not have a
materially adverse effect on the benefits intended hereunder to the shareholders
of its or his corporation. Such action shall be evidenced by written notice
signed by its President of the party taking such action.
9.10 Cooperation. Subject to the terms and conditions herein provided,
each of the parties hereto shall use its best lawful efforts to take, or cause
to be taken, such action, to execute and deliver, or cause to be delivered, such
additional documents and instruments and to do or cause to be done all things
necessary, proper or advisable, under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated by
this Agreement.
9.11 Arbitration; Exclusive jurisdiction and venue. The parties hereby
agree to exclusively submit all controversies, claims, and matters of difference
to arbitration in Phoenix, Arizona, according to the rules and practices of the
American Arbitration Association from time to time in force, except to the
extent that such rules and practices are inconsistent with the terms of this
Agreement. This submission and agreement to arbitrate shall be specifically
enforceable. The arbitrator shall exclusively apply Arizona law as though he or
she were bound by the applicable statutes and precedents in case law. The
arbitrator shall have the power to issue any award, judgment, decree, or order
of relief that a court of law or equity could issue under Arizona law, including
but not limited to money damages, specific performance, or injunctive relief In
the event that any party refuses to submit to arbitration, the party that has
submitted to arbitration shall be empowered to file the appropriate action in a
court in Maricopa County, Arizona. In all disputes, the non-prevailing party
shall be pay the reasonable attorneys' fees and costs of the prevailing party.
9.12 Enforcement. The failure of either party to enforce any provision
of this Agreement shall not be construed as a waiver or limitation of that
party's right to subsequently enforce and compel strict compliance with every
provision of this Agreement.
9.13 Attorneys fees and costs. Except as otherwise provided herein,
each party hereto shall pay its own expenses incurred in connection with this
Agreement and the transactions incurred in connection with this Agreement and
the transactions contemplated hereby.
9.14 Amendment of Agreement. Notwithstanding anything to the contrary
in this Agreement, to the extent permitted by law, this Agreement may be
amended, supplemented or interpreted at any time by written instrument duly
executed by each of the parties hereto which shall have been authorized by
appropriate action taken by the board of directors of the parties hereto and, in
the cast of an interpretation, the actions of such board of directors shall be
binding.
9.15 Governing law of merged entities. FutureOne, as the acquiring
corporation, is to be governed by the laws of the State of Nevada, and shall
comply with the applicable provisions of the laws of the State of Nevada as
amended. These Articles of Exchange shall be filed with the Nevada Secretary of
State and the Arizona Secretary of State so that;
(a) FutureOne may be served with process in any proceeding for
enforcement of Rights of Dissenting Shareholders of LANKASTER against FutureOne;
and
Page 8 of 9
<PAGE> 28
(b) FutureOne may be served with process in any proceeding for the
enforcement of any obligation under the provisions of the Nevada Revised
Statutes pertaining to dissenting shareholders of LANKASTER; and
(c) The former shareholders of LANKASTER, which as the acquired
corporation, are entitled only to the rights as provided herein and under the
Nevada Revised Statutes
9.16 Indemnification. The Board of directors of LANKASTER hereby
indemnifies, holds harmless and agrees to defend FutureOne for any and all
financial statements, and any acts or actions; whether financial or otherwise,
regarding LANKASTER, and that said financial statements represent the true and
complete financial position of LANKASTER.
IN WITNESS WHEREOF, each of the Parties hereto, pursuant to authority duly
granted to each by their respective board of directors, has caused these
Articles of Exchange between LANKASTER and FutureOne to be executed by its
respective authorized officers on the date first written above.
World's Fare, Inc., d.b.a. FutureOne
(A Nevada corporation)
/s/Kendall Q Northern /s/ Eric J. Cook
- ----------------------------- ----------------------------------------
By: Kendall Q. Northern Eric J. Cook, Secretary
Its: President World's Fare, Inc.
Lankaster, Inc. State of Arizona )
(An Arizona corporation) ) ss.
County of Maricopa )
Subscribed and sworn to before me by
Kendall Q. Northern and Eric J. Cook
/s/ this 1st day of April, 1998.
- -----------------------------
By: /s/
- -----------------------------
Its: /s/
------------------------ ----------------------------------------
Notary Public
State of Arizona )
) ss.
County of Maricopa )
Subscribed and sworn to before me by Kendall Q. Northern this 1st day of April,
1998.
/s/ Eric J. Cook
----------------------------------------
Notary Public
My commission expires: July 17, 1999
[Notary Seal]
Page 9 of 9
<PAGE> 29
FILED RECEIPT NO. FY9900007959
IN THE OFFICE OF THE Arizona Bar Foundation
SECRETARY OF STATE OF THE 08/13/1998 $135.00
STATE OF NEVADA REC'D BY AW
AUG 13 1998
NO. C4435-94
/s/ DEAN HELLER
DEAN HELLER, SECRETARY OF STATE
- ------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
Filed by:
World's Fare, Inc.
-----------------------------------------------------------------------
Name of Corporation
We the undersigned Kendall Q. Northern (President) and
------------------------------------------------------
President or Vice President
Eric Cook of World's Fare, Inc.
- --------------------------------- --------------------------------------
Secretary or Assistant Secretary Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened, held on the 14th day of July 1998 adopted a resolution to amend
the original articles as follows.
Article 1 is hereby amended to read as follows:
"The name of the corporation shall be FutureOne, Inc."
The number of shares of the corporation outstanding and
entitled to vote on an amendment to the Articles of
Incorporation is Below that the said change(s) and amendment
have been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of
stock outstanding and entitled to vote thereon.
7,520,125 /s/ Kendall Q. Northern
--------------------------------
*President or Vice President
/s/ Eric Cook
--------------------------------
Secretary or Assistant Secretary
State of Arizona )
---------------------
) ss.
County of Maricopa
--------------------- )
On August 8, 1998 , personally appeared before me, a Notary Public,
-----------------------
Kendall Q. Northern (president) , who acknowledged
----------------------------------------------
Names of Persons Appearing and Signing Document
that they executed the above instrument.
/s/ Eric Cook
-------------------------------
Signature of Notary
[Notary Seal]
*Only the President or Vice President's signature need to be acknowledged.
<PAGE> 30
RECEIPT NO. FY9800070471
Arizona Bar Foundation
06/19/1998
Rec'd by KD $175.00
FILED Articles of Exchange
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE By and Between
STATE OF NEVADA
Carnet Computer Services, Inc.
AUG 19 1998 (A Nevada Corporation)
No. C4435-94 AND
/s/ Dean Heller
WORLD'S FARE, Inc., d.b.a. FutureOne
DEAN HELLER, SECRETARY OF STATE (A Nevada Corporation)
THESE ARTICLES OF EXCHANGE dated this 11th day of May, 1998, by and
between, Carnet Computer Services, Inc., a Nevada Corporation (hereinafter
"CARNET") and World's Fare, Inc., d.b.a. FutureOne, a Nevada Corporation
(hereinafter "FutureOne").
RECITALS
FutureOne has an aggregate number of authorized shares of capital stock
being a single class, common stock without series, consisting of Fifty Million
(50,000,000) shares. $0.001 par value, of which approximately Seven Million
Eight Hundred Thousand (7,800,000) shares are fully paid, issued and outstanding
on the books of the Corporation (pre-exchange)
The principal office of FutureOne is located at 4250 East Camelback
Road, Suite K-192, Phoenix, Arizona 85018; Resident Agent National, 377 S.
Nevada St., Carson City NV 89703, is the registered agent of record upon whom
service of process for FutureOne may be received within the state of Nevada, and
the corporation is governed by Nevada law.
CARNET has an aggregate number of authorized shares of capital stock
being a single class, common stock without series, consisting of Twenty Five
Thousand (25,000) shares, no par value, of which one Hundred (100) shares are
fully paid, issued and outstanding on the books of the Corporation
(pre-exchange).
The principal office of CARNET is located at 5530 E. Washington,
Phoenix Arizona 85034; Geoffrey Roullard, 321 N. Walsh St., Carson City, NV
89701 is the registered agent of record upon whom service of process for CARNET
may be received within the state of Nevada, and the corporation is governed by
Nevada law.
The transactions contemplated under this Agreement were adopted and
ratified on February 19, 1998 at a Special Meeting of the Board of Directors of
FutureOne, Inc, a wholly owned subsidiary of FutureOne by a unanimous vote of
the Directors and reaffirmed by the Board of Directors of FutureOne on May 7,
1998;
The transactions contemplated under this Agreement were adopted and
ratified on March 28, 1998 at a Special Meeting of Shareholders of CARNET by a
majority of the common shares of record; and
The respective Boards of Directors of FutureOne and CARNET have determined that
it is desirable upon the terms and subject to the conditions set forth herein,
that FutureOne acquire CARNET and that CARNET be a wholly-owned subsidiary of
FutureOne, with the shares of CARNET's common stock being converted into shares
of FutureOne, with the effect that FutureOne shall become the owner of 100
percent of the issued and outstanding shares of common stock of CARNET, all as
hereinafter set forth.
Accordingly, in consideration of the mutual covenants and agreements
contained herein, it is agreed that, in accordance with the applicable statutes
of the States of Arizona and Nevada, CARNET shall be at the "Effective Time" (as
that term is defined in Section 1.2 hereof) acquired by FutureOne (the
"Acquisition") and that the terms and conditions of the Acquisition, the mode,
of carrying same into effect, the manner and basis of converting shares, and
such other provisions as are deemed necessary or desirable to be effected by the
Acquisition.
Page 1 of 8
<PAGE> 31
NOW, THEREFORE, in consideration of the mutual promises, agreements and
benefits contained herein, it is agreed by and between the parties as follows:
ARTICLE I
Terms of Acquisition
1.1 Acquisition. At the Effective Time, CARNET shall be acquired by
FutureOne, such that CARNET shall be a wholly-owned subsidiary of FutureOne, the
separate existence of CARNET shall continue, and FutureOne shall continue in
existence as the parent corporation. All of the operations of CARNET shall
hereinafter be merged into and conducted by FutureOne, Inc., a wholly-owned
subsidiary of FutureOne. From and after the Effective Time, the corporate
existence of FutureOne, with all its rights, privileges, immunities, powers and
purposes, shall continue unaffected and unimpaired by the Acquisition.
1.2 Closing and Effective Time. The consummation of the Acquisition of
CARNET by FutureOne (the "Closing") shall take place at the offices of
FutureOne, at 10:00 a.m., Arizona time, on the first day after which (a) all
conditions set forth in this Agreement have been satisfied; or (b) at such other
place, date, and time as may be agreed upon by FutureOne and CARNET. The date on
which the closing shall take place shall be hereinafter referred to as the
"Closing Date." Simultaneously, with the consummation of the Closing, this
Agreement, or Articles of Exchange, as appropriate, and all other instruments or
documents required to make the Acquisition effective or complete the transaction
as contemplated by the terms of this Agreement shall be filed with the
appropriate governmental agencies or authorities in accordance with the
provisions of the laws of the States of Arizona and Nevada. The date on which
the Acquisition shall become effective shall be the date all appropriate filings
have been made in accordance with Arizona and Nevada law and such date is herein
call the "Effective Time."
1.3 Effect of Acquisition. At the Effective Time, the effects of the
consummation of the Acquisition on FutureOne and CARNET shall be that FutureOne
shall own all of the issued and outstanding shares of Common Stock of CARNET,
and CARNET shall become a wholly-owned subsidiary of FutureOne.
1.4 By-laws. At the Effective Time, the Bylaws of FutureOne shall
become and remain the bylaws of the CARNET until amended or repealed in the
manner therein provided and in accordance with the Articles of Incorporation of
FutureOne and applicable law.
1.5 Officers and Directors. At the Effective Time, the directors and
officers of FutureOne, Kendall Q. Northern and Earl J. Cook, shall be the sole
directors and officers of FutureOne and CARNET. Such directors and officers
shall serve from and after the Effective Time until their respective successors
are duly elected and qualified. At the Effective Time, the current board of
directors of CARNET shall immediately resign.
1.6 Other action. Upon and after the Effective Time, CARNET shall take
all such action as shall be deemed necessary or appropriate by FutureOne. In
case that, at any time after the Effective Time, FutureOne and CARNET shall
consider or be advised that any further deeds, assignments, conveyances or
instruments are necessary or desirable to carry out the provisions of the
Agreement, the proper officers and directors of FutureOne and CARNET as of the
Effective Time shall execute and deliver any and all proper deeds, assignments,
and assurances of law, and do all things necessary or appropriate and proper to
carry out the provisions of the terms of this Agreement.
Page 2 of 8
<PAGE> 32
ARTICLE II
Terms of the Transaction and the Manner and Basis of
Converting the Shares of CARNET
2.1 Shares of FutureOne. Each share of FutureOne Common Stock held by
current shareholders prior to the Effective Time shall continue to remain issued
and outstanding and be unaffected by the Acquisition, which shares, together
with the shares of CARNET Common Stock converted by virtue of the Acquisition
under Section 2.2 below shall, after the effectiveness of the Acquisition,
constitute the total issued and outstanding FutureOne Common Stock.
2.2 Exchange of shares of CARNET. At the Effective Time, all of the 100
common shares of CARNET shall be exchanged for 100,000 shares of FutureOne. Upon
execution of these Articles of Exchange, the shareholders of CARNET will be
instructed to deposit all 100 issued & shares at the following address:
Holladay Stock Transfer Agency ("Transfer Agent")
4350 East Camelback Road
Phoenix, Arizona 85018
After the effective date, said shares shall be exchanged as described herein,
each certificate shall be exchanged without cost to the shareholder. Any
additional or mutable exchanges requested by CARNET shareholders will be
charged, to said CARNET shareholders, the prevailing rate by the transfer agent.
In the event of the termination or abandonment by any Party prior to the
effective date, all shares held by the transfer agent will be promptly returned
via registered mail to each CARNET shareholder. From and after the Effective
Time the shares of CARNET Common Stock outstanding immediately prior thereto
shall cease to be shares of CARNET, irrespective of whether certificates
evidencing such shares have been surrendered, and there shall be no further
transfer or issuance of certificates for CARNET Common Stock provided, however,
that with respect to any certificate thereto issued, which has been lost or
destroyed, FutureOne may replace such certificate upon receipt of satisfactory
evidence of ownership of the shares represented thereby and of appropriate
indemnification.
ARTICLE III
Representations and Warranties of FutureOne
3.1 Due incorporation, good standing, qualification. FutureOne is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation with all requisite corporate power and
authority to own, operate, and lease its properties and to carry on its business
as presently conducted.
3.2 Authority and compliance; no violation. FutureOne, to the best of
its knowledge, has full corporate power and lawful authority to execute and
deliver this Agreement, and to consummate and perform the transactions
contemplated hereby.
3.6 Other. FutureOne, to the best of its knowledge, has disclosed, and
shall disclose, relevant financial and corporate information regarding this
transaction to CARNET.
Page 3 of 8
<PAGE> 33
ARTICLE IV
Representations and Warranties of CARNET
4.0 Due Incorporation, good standing, qualification. CARNET is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation with all requisite corporate
power and authority to own, operate and lease its properties and carry on its
business as presently conducted. CARNET is not subject to any material
disability by reason of the failure to be duly qualified as a foreign
corporation for the transaction of business and in good standing under the laws
of any jurisdiction.
4.1 Authority and compliance; no violation. CARNET has full corporate
power and lawful authority to execute and deliver this Agreement, and to
consummate and perform the transactions contemplated hereby. The execution and
delivery of this Agreement by CARNET, and the consummation and performance of
the transactions contemplated hereby shall have been fully and validly
authorized by all necessary corporate and other proceedings, and this Agreement
shall constitute the valid obligation of CARNET, legally binding upon it in
accordance with its terms. No approval or consent of any federal, state, county,
local or other governmental agency or body is required to be obtained by CARNET
in connection with the execution, delivery, consummation and performance of this
Agreement by CARNET. The execution, delivery, consummation and performance of
this Agreement by CARNET shall not conflict with or result in the breach or
violation of any term or provision of, or constitute a material default under,
any statute, indenture, mortgage, deed of trust, note agreement, or other
agreement or instrument by which it is bound, or any law, order, writ,
injunction, decree, rule or regulation of any court or any governmental agency
or body.
4.2 Financial Statement and Due Diligence. CARNET represents that,
prior to the Effective date, it has provided FutureOne with complete financial
statements that fairly and accurately present the financial condition of CARNET
as of the date indicated and the report of its operations and changes in the
financial position for the period then ended in conformity with generally
accepted accounting principles applied on a consistent basis and includes all
adjustments, including normally occurring accruals, necessary for a fair
presentation of the statement of operations for such period. CARNET does not
have any material liabilities or obligations of a type which would be included
on a balance sheet prepared in accordance with generally accepted accounting
principles, whether or not accrued or contingent and whether or not determined
or determinable, including without limitation, tax liabilities, except as
disclosed in said financial statements.
4.3 No material change. Since March 1, 1998, there has not been (1) any
material change in the financial condition and Financial Statement as referred
to section 4.2 above or the business properties or assets of CARNET (ii) any
event or condition of any character which has materially and adversely affected
the business of CARNET, or (iii) any mortgage, pledge of any amount of the
properties or asset of CARNET except in each case as disclosed in, or
contemplated by, the financial statements and related footnotes thereto referred
to in section 4.2 above.
4.4 Tax matters. CARNET has duly riled with all of the appropriate
federal, state, local and foreign governmental agencies all tax returns and
reports which are required to be filed by any individual, entity or governmental
agency, and have paid in full all taxes, interest, penalties, assessments or
deficiencies shown to be due on any such tax returns and reports or claimed to
be due by any taxing authority. CARNET is not a party to any pending action or
proceeding threatened by any governmental authority, for assessment or
collection of taxes, and no claims for assessment or collection of taxes have
been asserted against CARNET.
4.5 Title to properties. CARNET has good and clear title to all
significant properties and assets, real and personal, which it purports to own,
free and clear of all security interests, liens, claims, encumbrances and
charges except for (1) liens for current taxes not yet due and payable, (ii)
liens, encumbrances and claims disclosed in the Financial Statements and related
notes thereto of CARNET referred to in section 4.2 above of this Article IV and
(iii) such imperfections of title, easements and encumbrances, if any, as are
not material in the character, amount or extent and do no materially detract
from the value or materially interfere with the use of the property subject
thereto or affected thereby or otherwise materially impair business operations
being conducted thereon.
Page 4 of 8
<PAGE> 34
4.6 Litigation. There is no action, suit or proceeding pending or, to
the knowledge of CARNET, threatened against or affecting CARNET, at law or in
equity, or before or by any individual, entity, or federal, state, municipal or
any other governmental department, commission, board, bureau, agency or
instrumentality, which if determined adversely to CARNET, would individually or
in the aggregate have a material adverse effect on the business, properties,
operations, prospects or assets, or the condition, financial or otherwise, of
CARNET.
4.7 Rights and Licenses. CARNET, is not subject to any material
liability by reason of its failure to possess any trademark, trademark right,
trade name, trade name right or license.
4.8 Other. CARNET has fully disclosed, and shall disclose, all
financial and corporate information regarding this transaction, whether material
or inconsequential, to FutureOne.
ARTICLE V
Covenants of FutureOne
5.1 Shareholders notification. Subsequent to the Effective Time,
FutureOne shall notify all of its shareholders of the completion of the terms of
this Agreement and the transactions contemplated hereunder.
ARTICLE VI
Additional Agreements
6.1 Tax Free Qualification. The parties hereto intend that the
transactions contemplated by this Agreement shall qualify as a tax-free exchange
under Section 368 of the Internal Revenue Code.
6.2 Accounting methods. The parties hereto warrant that all financial
statements and other financial information have been prepared in accordance with
Generally Accepted Accounting Principles.
6.3 Resignations. Upon the Effective Date, CARNET shall turn over to
FutureOne original resignations of each of its officers and directors.
6.4 Employment Agreement. Prior to the closing, Stephen Heitz and
FutureOne, Inc. shall enter into a long term employment agreement whereby
FutureOne, Inc. shall employ Mr. Heitz as a Vice President of Software
Development.
6.5 Bank Accounts. Immediately after the closing, CARNET shall close
all bank accounts and transfer any remaining balance to FutureOne.
6.6 CARNET Shareholder Loans. Prior to closing CARNET shall have any
amounts currently owed to stockholders, in the form of principal or interest,
contributed by such shareholders to the capital of the corporation and no
amounts shall be due to any shareholder as of the date of closing.
Page 5 of 8
<PAGE> 35
ARTICLE VII
Conditions Precedent to Obligations of all Parties
7.1 Obligations. The obligations of the parties to consummate the
Acquisition are subject to the fulfillment prior to or at the Closing of each of
the following conditions, except as such parties may legally waive such
conditions in writing:
7.2 Litigation. On the Closing Date, there shall not be pending or
threatened any claim, action, suit or proceeding against any of the parties
hereto or any of their affiliates, which, if adversely determined, might prevent
or materially hinder consummation of the Acquisition contemplated by this
Agreement, result in payment of substantial damages as a as a result of such
Acquisition and the transactions contemplated hereby or otherwise materially
impair the benefits to any party or parties contemplated hereby and no
investigation by any governmental agency shall be pending or threatened which
might eventually result in any such suit, action or other proceeding.
7.3 Corporate documents. As of the Effective Date, CARNET shall
immediately turn over to FutureOne any and all original corporate and financial
records and copies of any other records of CARNET.
Article VIII
General Provisions
8.1 Notices. Any notice hereunder to a party shall be deemed to be
properly served in writing and personally delivered or mailed to:
In the case of CARNET:
Carnet Computer Services, Inc.
5530 E. Washington
Phoenix Arizona 85034
Attention: Stephen Heitz
In the case of FutureOne:
World's Fare, Inc.
4250 East Camelback Road
Suite K-114
Phoenix, Arizona 85018-2751
Attention: Earl J. Cook, Executive Vice President
Or to such other address as may have been furnished in writing by such party to
the other parties to this Agreement, and shall be deemed to have been given as
of the time delivered or, if mailed, as of the time acknowledged as received if
mailed registered or certified mail, postage prepaid, it being the intention
that all notices; pursuant hereto shall be effective only upon receipt.
8.2 Interpretations. To the extent permitted by the context in which
used; (a) words in the singular number shall include the plural, words in the
masculine gender shall include the feminine and neuter, and vice versa; and (b)
references to "persons" or "parties" in this Agreement shall be deemed to refer
to natural persons, corporations, and all other entities. This instrument shall
be construed in accordance with the fair meaning of its language, and shall not
be construed for or against the party drafting it, solely because of such fact.
8.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed, shall constitute an original copy
hereof, but all of which together shall constitute one and the same document.
Page 6 of 8
<PAGE> 36
8.4 Section headings and gender. The section headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof. The use of the masculine or any
other pronoun herein when referring to any party has been for convenience only
and shall be deemed to refer to the particular party intended regardless of the
actual gender of such party.
8.5 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the transactions contemplated
hereby, and any previous agreements or understandings between the parties
regarding the subject matter hereof are merged into and superseded by this
Agreement.
8.6 Non-assignability. The obligations of this Agreement are personal
to each party, and neither the rights nor obligations under this Agreement may
be assigned or transferred by any party in any manner whatsoever, nor are such
rights or obligations subject to involuntary alienation, assignment or transfer.
8.7 Exclusive governing law. This Agreement has been executed and
delivered in the State of Arizona, and it shall be exclusively construed in
accordance with the laws of the State of Arizona.
8.8 Severability. The unenforceability, invalidity, or illegality of
any provision of this Agreement shall not render the other provisions
unenforceable, invalid, or illegal. If any term, provision, covenant or
condition of this Agreement is invalidated due to its scope or breadth, such
term, provision, covenant, or condition shall be deemed valid to the extent of
the scope or breadth permitted by law in accordance with the intent of the
parties as expressed herein.
8.9 Waiver of terms. Any of the terms and conditions of this Agreement,
to the extent permitted by law, may be waived at any time by the party which is
or whose shareholders are entitled to the benefit thereof by action taken by the
boards of directors of such party, or by the President thereof authorized to act
for such party, whether before or after action with respect to this Agreement on
behalf of the shareholders of the parties, or any one or more of them, provided,
however, that such action shall be taken only if, in the judgment of the board
of directors or officer taking such action, such waiver will not have a
materially adverse effect on the benefits intended hereunder to the shareholders
of its or his corporation. Such action shall be evidenced by written notice
signed by its President of the party taking such action.
8.10 Cooperation. Subject to the terms and conditions herein provided,
each of the parties hereto shall use its best lawful efforts to take, or cause
to be taken, such action, to execute and deliver, or cause to be delivered, such
additional documents and instruments and to do or cause to be done all things
necessary, proper or advisable, under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated by
this Agreement.
8.11 Arbitration; Exclusive jurisdiction and venue. The parties hereby
agree to exclusively submit all controversies, claims, and matters of difference
to arbitration in Phoenix, Arizona, according to the rules and practices of the
American Arbitration Association from time to time in force, except to the
extent that such rules and practices are inconsistent with the terms of this
Agreement. This submission and agreement to arbitrate shall be specifically
enforceable. The arbitrator shall exclusively apply Arizona law as though he or
she were bound by the applicable statutes and precedents in case law. The
arbitrator shall have the power to issue any award, judgment, decree, or order
of relief that a court of law or equity could issue under Arizona law, including
but not limited to money damages, specific performance, or injunctive relief. In
the event that any party refines to submit to arbitration, the party that has
submitted to arbitration shall be empowered to file the appropriate action in a
court in Maricopa County, Arizona. In all disputes, the non-prevailing party
shall be pay the reasonable attorneys' fees and costs of the prevailing party.
8.12 Enforcement. The failure of either party to enforce any provision
of this Agreement shall not be construed as a waiver or limitation of that
party's right to subsequently enforce and compel strict compliance with every
provision of this Agreement.
Page 7 of 8
<PAGE> 37
8.13 Attorneys' fees and costs. Except as otherwise provided herein,
each party hereto shall pay its own expenses incurred in connection with this
Agreement and the transactions incurred in connection with this Agreement and
the transactions contemplated hereby.
8.14 Amendment of Agreement. Notwithstanding anything to the contrary
in this Agreement, to the extent permitted by law, this Agreement may be
amended, supplemented or interpreted at any time by written instrument duly
executed by each of the parties hereto which shall have been authorized by
appropriate action taken by the board of directors of the parties hereto and, in
the case of an interpretation, the actions of such board of directors shall be
binding.
8.15 Governing law of merged entities. FutureOne, as the acquiring
corporation, is to be governed by the laws of the State of Nevada, and shall
comply with the applicable provisions of the laws of the State of Nevada as
amended. These Articles of Exchange shall be filed with the Nevada Secretary of
State and the Arizona Secretary of State so that;
(a) FutureOne may be served with process in any proceeding for
enforcement of Rights of Dissenting Shareholders of CARNET against FutureOne;
and
(b) FutureOne may be saved with process in any proceeding for the
enforcement of any obligation under the provisions of the Nevada Revised
Statutes pertaining to dissenting shareholders of CARNET; and
(c) The former shareholders of CARNET, which as the acquired
corporation, are entitled only to the rights as provided herein and under the
Nevada Revised Statutes
8.16 Indemnification. The Board of directors of CARNET hereby
indemnifies, holds harmless, and agrees to defend FutureOne for any and all
financial statements, and any acts or actions, whether financial or otherwise,
regarding CARNET, and that said financial statements represent the true and
complete financial position of CARNET.
IN WITNESS WHEREOF, each of the Parties hereto, pursuant to authority duly
granted to each by their respective board of directors, has caused these
Articles of Exchange between CARNET and FutureOne, to be executed by its
respective authorized officers on the date first written above.
World's Fare, Inc., d.b.a. FutureOne
(A Nevada corporation)
State of Arizona )
) ss.
County of Maricopa )
/s/ Kendall Q. Northern
- -----------------------------------
By: Kendall Q. Northern
Its: President
Subscribed and sworn to before me
by Kendall Q. Northern and Stephen
Heitz this 11th day of May, 1998.
/s/ Eric Cook
- -----------------------------------
By: Eric Cook, Secretary
Carnet Computer Services, Inc.
(A Nevada corporation) /s/ Eric Cook
-------------------------------
Notary Public
/s/ Stephen Heitz
- ------------------------------------
By: Stephen Heitz My commission expires: 07/17/99
Its: Director/Secretary/Treasurer
President [Notary Seal]
- ------------------------------------
By:
- ------------------------------------
Its:
- ------------------------------------
Page 8 of 8
<PAGE> 38
(R) RECEIPT NO. FY9900010100
Arizona Bar Foundation
08/25/1998 Current Balance $175.00
Printed by SH $125.00
ARTICLES OF EXCHANGE
FILED
IN THE OFFICE OF THE BY AND BETWEEN
SECRETARY OF STATE OF THE
STATE OF NEVADA OPEC, Corp
(A Colorado Corporation)
AUG 25 1998
AND
NO. C4435-94
/s/ DEAN HELLER WORLD'S FARE, Inc., d.b.a. FutureOne
DEAN HELLER, SECRETARY OF STATE (A Nevada Corporation)
THESE ARTICLES OF EXCHANGE dated this 29th day of July, 1998,
by and between OPEC Corp., a Colorado corporation (hereinafter "OPEC") and
World's Fare, Inc., d.b.a. FutureOne, a Nevada Corporation (hereinafter
"FutureOne").
RECITALS
FutureOne has an aggregate number of authorized share of capital stock
being a single class, common stock without series, consisting of Fifty Million
(50,000,000) shares, $0.001 par value, of which approximately Seven Million Nine
Hundred Thousand (7,900,000) shares are fully paid, issued and outstanding on
the books of the Corporation (pre-exchange).
The principal office of FutureOne is located at 4250 East Camelback
Road, Suite K-192, Phoenix, Arizona 85018; Resident Agency National, 377 South
Nevada Street, Carson City, Nevada 89703 is the registered agent of record upon
whom service of process for FutureOne may be received within the state of
Nevada, and the corporation is governed by Nevada law.
OPEC has an aggregate number of authorized share of capital stock being
a single class, common stock without series, consisting of One Thousand (1,000)
shares, no par value, of which Seventy Six (76) shares are fully paid, issued
and outstanding on the books of the Corporation (pre-exchange).
The principal office of OPEC is located at 5930 Paonia Court, Colorado
Springs, Colorado; Donald D. Cannella, 6332 Firestar Lane, Colorado Springs,
Colorado 80918, is the registered agent of record upon whom service of process
for OPEC may be received within the state of Colorado; and the corporation is
governed by Colorado law.
The Boards of Directors of the Parties will recommend and notice these
Articles of Exchange if required by the Colorado Revised Statutes and/or the
Nevada Revised Statutes.
The transactions contemplated under this Agreement were adopted and
ratified on July 28, 1998 at a Special Meeting of the Board of Directors of
FutureOne by a unanimous vote of the Directors;
Page 1 of 11
<PAGE> 39
The transactions contemplated under this Agreement were adopted and
ratified on July 28, 1998 at a Special Meeting of Shareholders of OPEC by a
unanimous vote of the common shares of record; and
The respective Boards of Directors of FutureOne and OPEC have determined that
it is desirable, upon the terms and subject to the conditions set forth herein,
that FutureOne acquire OPEC and that OPEC be a wholly-owned subsidiary of
FutureOne, with the shares of OPEC's common stock being converted into shares
of FutureOne, with the effect that FutureOne shall become the owner of 100
percent of the issued and outstanding common stock of OPEC, all as hereinafter
set forth.
Accordingly, in consideration of the mutual covenants and Agreements contained
herein, it is agreed that, in accordance with the applicable statutes of the
States of Colorado and Nevada, OPEC shall be at the "Effective Time" (as that
term is defined in Section 1.2 hereof) acquired by FutureOne (the
"Acquisition") and that the terms and conditions of the Acquisition, the mode
of carrying same into effect, the manner and basis of converting shares, and
such other provisions as are deemed necessary or desirable to be effected by
the Acquisition.
NOW, THEREFORE, in consideration of the mutual promises, Agreements and
benefits contained herein, it is agreed by and between the parties as follows:
ARTICLE I
Terms of Acquisition
1.1 Acquisition. At the Effective Time, OPEC shall be acquired by
FutureOne, such that OPEC shall be a wholly-owned subsidiary of FutureOne, the
separate existence of OPEC shall continue, and FutureOne shall continue in
existence as the parent corporation, doing business as "FutureOne." From and
after the Effective Time, the corporate existence of FutureOne, with all its
rights, privileges, immunities, powers and purposes, shall continue unaffected
and unimpaired by the Acquisition.
1.2 Closing and Effective Time. The consummation of the Acquisition of
OPEC by FutureOne (the "Closing") shall take place at the offices of Alpern,
Myers, Stuart, Scheuerman and Levinson, a legal services LLC, 14 N. Sierra
Madre, Colorado Springs, Colorado 80903, at 2:00 PM, Colorado time, on the first
day after which (a) all conditions set forth in this Agreement have been
satisfied; or (b) at such other place, date, and time as may be agreed upon by
FutureOne and OPEC. The date on which the closing shall take place shall be
hereinafter referred to as the "Closing Date." Simultaneously, with the
consummation of the Closing, this Agreement, or Articles of Exchange, as
appropriate, and all other instruments or documents required to make the
Acquisition effective or complete the transaction as contemplated by the terms
of this Agreement shall be filed with the appropriate governmental agencies or
authorities in accordance with the provisions of the laws of the States of
Colorado and Nevada. The date on which the Acquisition shall become effective
shall be the date all appropriate filings have been made in accordance with
Colorado and Nevada law and such date is herein call the "Effective Time."
1.3 Effect of Acquisition. At the Effective Time, the effects of the
consummation of the Acquisition on FutureOne and OPEC shall be that FutureOne
shall own all of the issued and outstanding shares of Common Stock of OPEC, and
OPEC shall become a wholly-owned subsidiary of FutureOne.
Page 2 of 11
<PAGE> 40
1.4 By-laws. At the Effective Time, the Bylaws of OPEC may be amended
as necessary to be consistent with the fiscal year of FutureOne and to allow
other provisions of this Agreement to be carried out according to terms
specified herein.
1.5 Officers and Directors. As of the closing date, the Directors of
FutureOne, Kendall Q. Northern and Earl J. Cook, shall be appointed as a
Director and consultant to the Board, respectively, of OPEC and shall serve from
and after the Closing Date for a period of five years according to the terms
specified in Section 6.4 of this Agreement. As of the closing date, the current
board of directors of OPEC shall continue to serve as directors of OPEC and
Donald D. Cannella and Daniel J. Romano shall be appointed as a Director and
Advisor to the Board, respectively, of FutureOne and shall serve from and after
the Closing Date until the next annual meeting of shareholders. The new Board
members shall be paid the same fees and expenses as all other Board members of
FutureOne, which fee is currently $2,500 per month.
1.6 Other action. Upon and after the Effective Time, OPEC shall take
all such action as shall be deemed necessary or appropriate by FutureOne. In
case that, at any time after the Effective Time, FutureOne and OPEC shall
consider or be advised that any further deeds, assignments, conveyances, or
instruments are necessary or desirable to carry out the provisions of the
Agreement, the proper officers and directors of FutureOne and OPEC as of the
Effective Time shall execute and deliver any and all proper deeds, assignments,
and assurances of law, and do all things necessary or appropriate and proper to
carry out the provisions of the terms of this Agreement.
ARTICLE II
Terms of the Transaction and the Manner and Basis of
Converting the Shares of OPEC
2.1 Shares of FutureOne. Each share of FutureOne Common Stock held by
current shareholders prior to the Effective Time shall continue to remain issued
and outstanding and be unaffected by the Acquisition, which shares, together
with the shares of OPEC Common Stock converted by virtue of the Acquisition
under Section 2.2 below shall, after the effectiveness of the Acquisition,
constitute the total issued and outstanding FutureOne Common Stock.
2.2 Exchange of shares of OPEC. At the Effective Time, all of the
Seventy Six (76) issued and outstanding common shares of OPEC shall be exchanged
for the number of shares of FutureOne computed by dividing the ultimate purchase
price, as determined in Section 2.3 below, by Three Dollars ($3). Upon execution
of these Articles of Exchange, the shareholders of OPEC will be instructed to
deposit all Seventy Six (76) shares, in a manner that will effectuate the proper
transfer of said stock to FutureOne, at the following address:
Holladay Stock Transfer Agency ("Transfer Agent")
4350 East Camelback Road, Suite F100
Phoenix, Arizona 85018
Page 3 of 11
<PAGE> 41
After the effective date, said shares shall be exchanged as described herein,
each certificate shall be exchanged without cost to the shareholder. Any
additional or mutable exchanges requested by OPEC shareholders will be charged,
to said OPEC shareholders, the prevailing rate by the transfer agent. In the
event of the termination or abandonment by any Party prior to the effective
date, all shares held by the transfer agent will be promptly returned via
registered mail to each OPEC shareholder. From and after the Effective Time, the
shares of OPEC Common Stock outstanding immediately prior thereto shall cease to
be shares of OPEC, irrespective of whether certificates evidencing such shares
have been surrendered, and there shall be no further transfer or issuance of
certificates for OPEC Common Stock, provided, however, that with respect to any
certificate thereto issued, which has been lost or destroyed, FutureOne may
replace such certificate upon receipt of satisfactory evidence of ownership of
the shares represented thereby and of appropriate indemnification.
2.3 Purchase Price of OPEC. The Parties hereto have mutually agreed,
that based on the financial statements and other documents presented by OPEC to
FutureOne, and based upon FutureOne's independent investigation that the value
of OPEC indicated by these records is $7,000,000.00 after OPEC pays currently
accrued bonuses to its management in the sum of $500,000.00 and accordingly the
stockholders of OPEC will receive 2,334,000 shares of FutureOne stock. However,
within sixty (60) days of the closing. OPEC shall deliver to FutureOne an
audited financial statement prepared by a licensed Certified Public Accountant
and a business appraisal prepared by a qualified business appraiser, both of
which shall be paid for by OPEC. If either, or both, of these reports indicates
a fair market value significantly different, with significantly different
meaning more than 15% below, the mutually agreed purchase price indicated above,
than the mutually agreed purchase price indicated above, shall be revised down
to, a mutually agreed upon amount; but, nevertheless, the purchase price shall
not be reduced to less than $6,000,000.00.
ARTICLE III
Representations and Warranties of FutureOne
3.1 Due incorporation, good standing, qualification. FutureOne is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation with all requisite corporate power and
authority to own, operate, and lease its properties and to carry on its business
as presently conducted and is, or will be, promptly after Closing, authorized to
do business in the State of Colorado.
3.2 Authority and compliance; no violation. FutureOne has full
corporate power and lawful authority to execute and deliver this Agreement, and
to consummate and perform the transactions contemplated hereby. The execution
and delivery of this Agreement by FutureOne, and the consummation and
performance of the transactions contemplated hereby shall have been fully and
validly authorized by all necessary corporate and other proceedings, and this
Agreement shall constitute the valid obligation of FutureOne, legally binding
upon it in accordance with its terms. No approval or consent of any federal,
state, county, local or governmental agency or body is required to be obtained
by FutureOne in connection with the execution, delivery, consummation and
performance of this Agreement by FutureOne. The execution, delivery,
consummation and performance of this Agreement by FutureOne shall not conflict
with or result in the breach or violation of any term or provision of, or
constitute a material default under, any statute,
Page 4 of 11
<PAGE> 42
indenture, mortgage, deed of trust, note agreement, or other agreement or
instrument by which it is bound, or any law, order, writ, injunction, decree,
rule or regulation of any court of any governmental agency or body.
3.3 Other. FutureOne, to the best of its knowledge, has disclosed
relevant financial and corporate information regarding this transaction to OPEC.
ARTICLE IV
Representations and Warranties of OPEC
4.0 Due Incorporation, good standing, qualification. OPEC is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation with all requisite corporate
power and authority to own, operate and lease its properties and carry on its
business as presently conducted. OPEC is not subject to any material disability
by reason of the failure to be duly qualified as a foreign corporation for the
transaction of business and in good standing under the laws of any jurisdiction.
4.1 Authority and compliance; no violation. OPEC has full corporate
power and lawful authority to execute and deliver this Agreement, and to
consummate and perform the transactions contemplated hereby. The execution and
delivery of this Agreement by OPEC, and the consummation and performance of the
transactions contemplated hereby shall have been fully and validly authorized by
all necessary corporate and other proceedings, and this Agreement shall
constitute the valid obligation of OPEC, legally binding upon it in accordance
with its terms. No approval or consent of any federal, state, county, local or
other governmental agency or body is required to be obtained by OPEC in
connection with the execution, delivery, consummation and performance of this
Agreement by OPEC. The execution, delivery, consummation and performance of this
Agreement by OPEC shall not conflict with or result in the breach or violation
of any term or provision of, or constitute a material default under, any
statute, indenture, mortgage, deed of trust, note agreement, or other agreement
or instrument by which it is bound, or any law, order, writ, injunction, decree,
rule or regulation of any court or any governmental agency or body.
4.2 Financial Statement and Due Diligence. OPEC represents that, to the
best of its knowledge prior to the Effective date, it has provided FutureOne
with complete, but unaudited, financial statements that fairly and accurately
present the financial and corporate position of OPEC as of the date indicated
and the report of its operations and changes in the financial position for the
period then ended, in conformity with generally accepted accounting principles
applied on a consistent basis, and includes other than $500,000.00 in accrued
management bonuses all material adjustments, consisting only of normally
occurring accruals, necessary for a fair statement of the results of operations
for such period. OPEC does not have any material liabilities or obligations of a
type which would be included on a balance sheet prepared in accordance with
generally accepted accounting principles, whether or not accrued or contingent
and whether or not determined or determinable, including, without limitation,
tax liabilities, except as disclosed in said financial statements.
4.3 No material change. Since July 1, 1998, there has not been (i) any
material adverse change in the financial conditions and Due Diligence Report as
referred to in Section 4.2 above, business, properties, or assets of OPEC, (ii)
any event or condition of any character which has materially and adversely
affected
Page 5 of 11
<PAGE> 43
the business of OPEC, or (iii) any mortgage or pledge of any material amount of
the properties or assets of OPEC, except in each case as disclosed in or
contemplated by the financial statements and related footnotes thereto referred
in Section 4.2 above and as set forth in the Letter of Intent between the
parties.
4.4 Tax matters. OPEC has duly filed with all of the appropriate
federal, state, and local and foreign governmental agencies all tax returns and
reports which are required to be filed by any individual, entity, or
governmental agency, and have paid in full all taxes interests, penalties,
assessments or deficiencies shown to be due on such tax returns and reports or
claimed to be due by any taxing authority. OPEC is not a party to any pending
action or proceeding threatened by any governmental authority, for assessment or
collection of taxes, and no claims for assessment or collection of tax have been
asserted against OPEC.
4.5 Title to properties. OPEC has good and clear title to all
significant properties and assets, real and personal, which it purports to own,
free and clear of all security interests, liens, claims, encumbrances and
charges, except for (i) liens for current taxes not yet due and payable, (ii)
liens, encumbrances and claims disclosed in the Financial Statements and related
notes thereto of OPEC referred to in Section 4.2 above of this Article IV, and
(iii) such imperfections of title, easements and encumbrances, if any, as are
not material in character, amount or extent and do not materially detract from
the value, or materially interfere with the use of the property subject thereto
or affected thereby or otherwise materially impair business operations being
conducted thereon. All leases pursuant to which OPEC leases any substantial
amount of real or personal property are valid and effective in accordance with
the respective terms.
4.6 Litigation. There is no action, suit or proceeding pending or, to
the knowledge of OPEC, threatened against or affecting OPEC, at law or in
equity, or before or by any individual, entity, or federal, state, municipal or
any other governmental department, commission, board, bureau, agency or
instrumentality, which, if determined adversely to OPEC, would individually or
in the aggregate have a material adverse effect on the business, properties,
operations, prospects or assets, or the condition, financial or otherwise, of
OPEC.
4.7 Rights and licenses. OPEC is not subject to any material liability
by reason of its failure to possess any trademark, trademark right, trade name,
trade name right or license.
4.8 Other. OPEC, to the best of its knowledge has fully disclosed, and
shall disclose, all material financial and corporate information regarding this
transaction, to FutureOne.
ARTICLE V
Covenants of FutureOne
5.1 Shareholders notification. Subsequent to the Effective Time,
FutureOne shall notify all of its shareholders of the completion of the terms of
this Agreement and the transactions contemplated hereunder.
ARTICLE VI
Additional Agreements
Page 6 of 11
<PAGE> 44
6.1 Tax Free Qualification. The parties hereto intend that the
transactions contemplated by this Agreement shall qualify as a tax-free exchange
under Section 368 of the Internal Revenue Code. Each party has relied on its own
professional tax advisors in determining the income tax effects of this
transaction on their corporations and the stockholders of their corporation.
6.2 Accounting methods. The parties hereto warrant that all financial
statements and other financial information have been prepared in accordance with
Generally Accepted Accounting Principles except as stated herein to the
contrary.
6.3 Employment Contracts. Upon the Effective Date, OPEC shall enter
into employment contracts with each of its two current officers and directors.
The contracts shall include the following basic terms: (i) The contracts shall
be for a period of five years, (ii) the contracts shall be terminable only for
cause, with cause defined as gross negligence or willful misconduct (iii) the
compensation of the president shall be at least $120,000.00 per year with a
bonus of at least $60,000.00 if certain goals are achieved, (iv) the
compensation of the Vice president shall be at least $90,000.00 per year with a
bonus of at least $40,000.00 if certain goals are achieved, (v) such
compensation shall only be payable if predetermined revenue and profit goals,
which support such compensation, are achieved and (vi) officers of OPEC shall be
entitled to other benefits that are, or may be made available to, FutureOne
management, including stock option plans.
6.4 Board of Directors. FutureOne agrees that for the five years of
"autonomous Operation" as defined in Section 6.6 below, that it will not expand
the Board of Directors to more than three members and will elect Donald D.
Cannella, Daniel J. Romano and Kendall Q. Northern to the Board of Directors and
Earl J. Cook as a consultant to the Board of Directors of OPEC, as long as they
are willing to serve in such capacity. The Directors and consultant shall be
paid a monthly fee of $2,500, plus required travel expenses, for serving in such
capacity and Directors and consultant shall only be removed from such capacity
for cause, with cause defined as gross negligence or willful misconduct.
6.5 Bank accounts and Loans. Immediately after the closing, OPEC shall
continue its present banking relationships, but shall notify any and all banks
and/or financial institutions of this Exchange Agreement and FutureOne shall
within a reasonable period of time, after the closing date, use its best efforts
to assist OPEC in arranging to have all of OPEC's obligations which are
guaranteed by Stockholders refinanced to remove any personal guarantees of the
current Stockholders.
6.6 Autonomous Operation. For a period of five years from the closing
date and to the extent provided by law, the day to day operations of OPEC shall
be managed by the current officers and directors in a manner consistent with
past operations and sound business policies. Such operating authority shall be
restricted only by the following: (i) the necessary imposition of those policies
adopted by FutureOne, which allow for the providing of qualified group benefits
to all employees, (ii) the consolidation of financial information and tax
reporting, (iii) any credit obtained by OPEC must be based an its own financial
strength and (iv) other matters which require FutureOne to administer policies
according to its legal fiduciary responsibility.
The parties further agree that there shall be no transfer of funds or assets
between the Parties, except as specified in Section 6.7 below, without the
express permission of the Boards of Directors of both Parties.
Page 7 of 11
<PAGE> 45
The restrictions of this provision may be terminated prior to the five year
period indicated above, by mutual Agreement of the Parties, as approved by their
Boards of Directors.
6.7 OPEC Management Responsibility to FutureOne. Although the Parties
agree to the autonomous operations of OPEC, the Parties agree that there are
certain management services and obligations that need to be fulfilled by
FutureOne. Accordingly, for a period of five yews, OPEC hereby agrees to pay to
FutureOne a monthly management fee of Five Thousand ($5,000.00) per month and to
pay to FutureOne an amount equal to Eighty Percent (80%) of the Federal and
State Income taxes that would be payable by OPEC, if they were not filing a
consolidated tax return with FutureOne, if OPEC is not required to pay said
taxes because of Net Operating Losses available to FutureOne. In addition OPEC
agrees to provide FutureOne with regular financial and operating reports that
will allow FutureOne management to monitor its activities.
ARTICLE VII
Conditions Precedent to Obligations of all Parties
7.1 Obligations. The obligations of the parties to consummate the
Acquisition are subject to the fulfillment prior to or at the Closing of each of
the following conditions, except as such parties may legally waive such
conditions in writing:
7.2 Litigation. On the Closing Date, there shall not be pending or
threatened any claim, action, suit or proceeding against any of the parties
hereto or any of their affiliates which, if adversely determined, might prevent
or materially hinder consummation of the Acquisition contemplated by this
Agreement, result in payment of substantial damages as a result of such
Acquisition and the transactions contemplated hereby or otherwise materially
impair the benefits to any party or parties contemplated hereby and no
investigation by any governmental agency shall be pending or threatened which
might eventually result in any such suit, action or other proceeding.
7.3 Corporate documents. As of the Effective Date, OPEC shall
immediately make available to FutureOne any and all original corporate and
financial records and copies of any other records of OPEC and OPEC shall provide
for the safekeeping of all such documents.
7.4 Covenants not to compete. As part of their employment contracts,
current OPEC shareholders shall execute an Agreement not to compete with
FutureOne while they are still employees of OPEC and for a period of one year
thereafter if Shareholder voluntarily leaves his employment with OPEC.
Article VIII
General Provisions
8.1 Notices. Any notice hereunder to a party shall be deemed to be
properly served in writing and personally delivered or mailed to:
In the case of OPEC:
Page 8 of 11
<PAGE> 46
OPEC, Corp.
5930 Paonia Court
Colorado Springs, CO 80915
Attn: Donald D. Cannella, President
In the case of FutureOne:
World's Fare, Inc., d.b.a. FutureOne.
4250 East Camelback Road
Suite K-192
Phoenix, AZ 85018-2751
Attention: Kendall Q. Northern, President
Or to such other address as may have been furnished in writing by such Party to
the other Parties to this Agreement, and shall be deemed to have been given as
of the time delivered or, if mailed, as of the time acknowledged as received or
five business days after mailing, whichever shall first occur, if mailed
registered or certified mail, postage prepaid.
8.2 Interpretations. To the extent permitted by the context in which
used; (a) words in the singular number shall include the plural, words in the
masculine gender shall include the feminine and neuter, and vice versa; and (b)
references to "persons" or "parties" in this Agreement shall be deemed to refer
to natural persons, corporations, and all other entities. This instrument shall
be construed in accordance with the fair meaning of its language, and shall not
be construed for or against the party drafting it, solely because of such fact.
8.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed, shall constitute an original copy
hereof, but all of which together shall constitute one and the same document.
8.4 Section headings and gender. The section headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof. The use of the masculine or any
other pronoun herein when referring to any party has been for convenience only
and shall be deemed to refer to the particular party intended regardless of the
actual gender of such party.
8.5 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the transactions contemplated
hereby, and any previous Agreements or understandings between the parties
regarding the subject matter hereof are merged into and superseded by this
Agreement.
8.6 Non-assignability. The obligations of this Agreement are personal
to each party, and neither the rights nor obligations under this Agreement may
be assigned or transferred by any party in any manner whatsoever, nor any such
rights or obligations subject to involuntary alienation, assignment or transfer.
8.7 Exclusive governing law. This Agreement shall be exclusively
construed in accordance with the laws of the State of Arizona.
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<PAGE> 47
8.8 Severability. The unenforceability, invalidity, or illegality of
any provision of this Agreement shall not render the other provisions
unenforceable, invalid, or illegal. If any term, provision, covenant or
condition of this Agreement is invalidated due to its scope or breadth, such
term, provision, covenant, or condition shall be deemed valid to the extent of
the scope or breadth permitted by law in accordance with the intent of the
parties as expressed herein.
8.9 Waiver of terms. Any of the terms and conditions of this Agreement,
to the extent permitted by law, may be waived at any time by the party which is
or whose shareholders are entitled to the benefit thereof by action taken by the
boards of directors of such party, or by the President thereof authorized to act
for such party, whether before or after action with respect to this Agreement on
behalf of the shareholders of the parties, or any one or more of them, provided,
however, that such action shall be taken only if, in the judgment of the board
of directors or officer taking such action, such waiver will not have a
materially adverse effect on the benefits intended hereunder to the shareholders
of its or his corporation. Such action shall be evidenced by written notice
signed by its President of the party taking such action.
8.10 Cooperation. Subject to the terms and condition herein provided,
each of the parties hereto shall use its best lawful effort to take, or cause to
be taken, such action, to execute and deliver, or cause to be delivered, such
additional documents and instruments and to do or cause to be done all things
necessary, proper or advisable, under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated by
this Agreement.
8.11 Arbitration; Exclusive jurisdiction and venue. The parties hereby
agree to exclusively submit all controversies, claims, and matters of difference
to arbitration in Phoenix, Arizona, according to the rules and practices of the
American Arbitration Association from time to time in force, except to the
extent that such rules and practices are inconsistent with the terms of this
Agreement. This submission and Agreement to arbitrate shall be specifically
enforceable. The arbitrator shall exclusively apply Arizona law as though he or
she were bound by the applicable statutes and precedents in case law. The
arbitrator shall have the power to issue any award, judgment, decree, or order
of relief that a court of law or equity could issue under Arizona law, including
but not limited to money damages, specific performance, or injunctive relief. In
all disputes, the non-prevailing party shall be pay the reasonable attorneys'
fees and costs of the prevailing party. Judgment on any award rendered by the
arbitrator(s) shall be entered in Maricopa County, Arizona and may be entered in
any court having jurisdiction thereof.
8.12 Enforcement. The failure of either party to enforce any provision
of this Agreement shall not be construed as a waiver or limitation of that
party's right to subsequently enforce and compel strict compliance with every
provision of this Agreement. All provisions of this Agreement that are not to be
performed prior to or at Closing, shall survive Closing.
8.13 Attorneys fees and costs. Except as otherwise provided herein,
each party hereto shall pay its own expenses incurred in connection with this
Agreement and the transactions incurred in connection with this Agreement and
the transactions contemplated hereby.
8.14 Amendment of Agreement. Notwithstanding anything to the contrary
in this Agreement to the extent permitted by law, this Agreement may be amended,
supplemented or interpreted at any time by written instrument duly executed by
each of the parties hereto which shall have been authorized by
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<PAGE> 48
appropriate action taken by the board of directors of the parties hereto and, in
the case of an interpretation, the actions of such board of directors shall be
binding.
8.15 Governing law of merged entities. FutureOne, as the acquiring
corporation, is to be governed by the laws of the State of Nevada, and shall
comply with the applicable provisions of the laws of the State of Nevada as
amended. These Articles of Exchange shall be filed with the Nevada Secretary of
State and the Arizona Secretary of State so that;
(a) FutureOne may be served with process in any proceeding for
enforcement of Rights of Dissenting Shareholders of OPEC against FutureOne; and
(b) FutureOne may be served with process in any proceeding for
the enforcement of any obligation under the provisions of the Nevada Revised
Statutes pertaining to dissenting shareholders of OPEC; and
The former shareholders of OPEC, which as the acquired corporation, are
entitled only to the rights as provided herein and under the Nevada Revised
Statutes
8.16 Indemnification. OPEC hereby indemnifies, holds harmless, and
agrees to defend FutureOne, its officers and Directors, from any and all claim
that may arise from any and all acts or actions, whether intentional or
otherwise, of OPEC that may have occurred before the closing date of this
Agreement or may arise from this Agreement, if it shall be determined that OPEC
has breached any of its representations or warranties under this Agreement or if
any financial statements delivered under this Agreement shall contain material
misstatements of fact.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to authority duly
granted to each by their respective board of directors, has caused these
Articles of Exchange between OPEC and FutureOne, to be executed by its
respective authorized officers on the date first written above.
World's Fare, Inc., d.b.a. FutureOne OPEC, Corp.
(A Nevada corporation) (A Colorado corporation)
/s/ Kendall Q. Northern /s/ Donald D. Cannella
- ----------------------------------- -----------------------------------
By: Kendall Q. Northern By: Donald D. Cannella
Its: President Its: President
OPEC Shareholders
/s/ Donald D. Cannella /s/ Daniel J. Romano
- ----------------------------------- -----------------------------------
Donald D. Cannella Daniel J. Romano
World's Fare, Inc., d.b.a. Future One State of Arizona )
)
/s/ Eric J. Cook County of Maricopa )
- -----------------------------------
By: Eric J. Cook
Secretary Subscribed and sworn to before
me by Kendall Q. Northern this
29th day of July, 1998
[Notary Seal] /s/ Eric J. Cook
-----------------------------------
Notary Public
My Commission expires 7-17-99
Page 11 of 11
<PAGE> 49
ARTICLES OF EXCHANGE
FILED
IN THE OFFICE OF THE BY AND BETWEEN
SECRETARY OF STATE OF THE
STATE OF NEVADA FutureOne, Inc.
(A Nevada Corporation)
NOV 24 1998
and
NO. C4435-94
/s/ DEAN HELLER Priority Systems, Inc.
DEAN HELLER, SECRETARY OF STATE (An Arizona Corporation)
THESE ARTICLES OF EXCHANGE entered into this 29th day of
September, 1998, by and between, Priority Systems, Inc., an Arizona Corporation
(hereinafter "PSI"), and FutureOne. Inc., a Nevada Corporation (hereinafter
"FutureOne").
RECITALS
FutureOne has an aggregate number of authorized shares of capital stock
being a single class, common stock without series, consisting of Fifty Million
(50,000,000) shares, $0.001 par value, of which approximately Ten Million Eight
Hundred Seventy Five Thousand (10,875,000) shares are fully paid, issued and
outstanding on the books of the Corporation (pre-exchange).
The principal office of FutureOne is located at 4250 East Camelback
Road, Suite K-192, Phoenix, Arizona 85018; Resident Agency National, 377 South
Nevada Street, Carson City, Nevada 89703 is the registered agent of record upon
whom service of process for FutureOne may be received within the state of
Nevada, and the corporation is governed by Nevada law.
PSI has an aggregate number of authorized shares of capital stock being
a single class, common stock without series, consisting of One Million
(1,000,000) shares, One Dollar ($1.00) par value, of which Fifty Six Thousand
Seven Hundred Fifty (56,750) shares are fully paid, issued and outstanding on
the books of the Corporation (pre-exchange).
The principal office of PSI is located at 2099 Acoma Blvd., Lake Havasu
City, Arizona; David Scheller 2009 W. Acoma Blvd, Lake Havasu City, AZ 86403 is
the registered agent of record upon whom service of process for PSI may be
received within the state of Arizona; and the corporation is governed by Arizona
law.
The Boards of Directors of the Parties will recommend and notice these
Articles of Exchange if required by the Arizona Revised Statutes and/or the
Nevada Revised Statutes.
The transactions contemplated under this Agreement were adopted and
ratified on September 28, 1998 at a Special Meeting of the Board of Directors of
FutureOne by a unanimous vote of the Directors;
The transactions contemplated under this Agreement were adopted and
ratified on September 28, 1998 at a Special Meeting of Shareholders of PSI by a
unanimous vote of the common shares of record; and
Page 1 of 10
<PAGE> 50
The respective Boards of Directors of FutureOne and PSI have determined that it
is desirable, upon the terms and subject to the conditions set forth herein,
that FutureOne acquire PSI and that PSI be a wholly-owned subsidiary of
FutureOne, with the shares of PSI's common stock being converted into shares of
FutureOne, with the effect that FutureOne shall become the owner of 100 percent
of the issued and outstanding common stock of PSI, all as hereinafter set forth.
Accordingly, in consideration of the mutual covenants and Agreements contained
herein, it is agreed that, in accordance with the applicable statutes of the
States of Arizona and Nevada. PSI shall be at the "Effective Time" (as that term
is defined in Section 1.2 hereof) acquired by FutureOne (the "Acquisition"), and
that the terms and conditions of the Acquisition, the mode of carrying same into
effect, the manner and basis of converting shares, and such other provisions as
are deemed necessary or desirable to be effected by the Acquisition.
NOW, THEREFORE, in consideration of the mutual promises, Agreements and
benefits contained herein, it is agreed by and between the parties as follows:
ARTICLE I
Terms of Acquisition
1.1 Acquisition. At the Effective Time, PSI shall be acquired by
FutureOne, such that PSI shall be a wholly-owned subsidiary of FutureOne, the
separate existence of PSI shall continue, and FutureOne shall continue in
existence as the parent corporation, doing business as "FutureOne." From and
after the Effective Time, the corporate existence of FutureOne, with all its
rights, privileges, immunities, powers and purposes, shall continue unaffected
and unimpaired by the Acquisition.
1.2 Closing and Effective Time. The consummation of the Acquisition of
PSI by FutureOne (the "Closing") shall take place at the offices of FutureOne,
Inc. at 2:00 PM, Arizona time on the first day after which (a) all conditions
set forth in this Agreement have been satisfied; or (b) at such other place,
date, and time as may be agreed upon by FutureOne and PSI. The date on which the
closing shall take place shall be hereinafter referred to as the "Closing Date."
Simultaneously, with the consummation of the Closing, this Agreement, or
Articles of Exchange, as appropriate, and all other instruments or documents
required to make the Acquisition effective or complete the transaction as
contemplated by the terms of this Agreement shall be filed with the appropriate
governmental agencies or authorities in accordance with the provisions of the
laws of the States of Arizona and Nevada. The date on which the Acquisition
shall become effective shall be the date all appropriate filings have been made
in accordance with Arizona and Nevada law and such date is herein call the
"Effective Time."
1.3 Effect of Acquisition. At the Effective Time the effects of the
consummation of the Acquisition on FutureOne and PSI shall be that FutureOne
shall own all of the issued and outstanding shares of Common Stock of PSI, and
PSI shall become a wholly-owned subsidiary of FutureOne.
1.4 By-laws. At the Effective Time, the Bylaws of PSI may be amended as
necessary to be consistent with the fiscal year of FutureOne and to allow other
provisions of this Agreement to be carried out according to terms specified
herein
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<PAGE> 51
1.5 Officers and Directors. As of the closing date, the Directors of
FutureOne, Kendall Q. Northern and Earl J. Cook, shall be appointed as a
Directors of PSI and shall serve from and after the Closing Date until their
respective successors are duly elected and qualified. As of the closing date
Michael Mazick shall continue to serve as directors of PSI and any and all other
Directors shall resign.
1.6 Other action. Upon and after the Effective Time, PSI shall take all
such action as shall be deemed necessary or appropriate by FutureOne. In case
that, at any time after the Effective Time, FutureOne and PSI shall consider or
be advised that any further deeds, assignments, conveyances, or instruments are
necessary or desirable to carry out the provisions of the Agreement, the proper
officers and directors of FutureOne and PSI as of the Effective Time shall
execute and deliver any and all proper deeds, assignments, and assurances of
law, and do all things necessary or appropriate and proper to carry out the
provisions of the terms of this Agreement.
ARTICLE II
Terms of the Transaction and the Manner and Basis of
Converting the Shares of PSI
2.1 Shares of FutureOne. Each share of FutureOne Common Stock held by
current shareholders prior to the Effective Time shall continue to remain issued
and outstanding and be unaffected by the Acquisition, which shares, together
with the shares of PSI Common Stock converted by virtue of the Acquisition under
Section 2.2 below shall, after the effectiveness of the Acquisition, constitute
the total issued and outstanding FutureOne Common Stock.
2.2 Exchange of shares of PSI. At the Effective Time, all of the Fifty
Six Thousand Seven Hundred Fifty (56,750) issued and outstanding common shares
of PSI shall be exchanged for the number of shares of FutureOne computed by
dividing the ultimate purchase price as determined in Section 2.3 below, by
Three and one sixteenth Dollars ($3.0625). Upon execution of these Articles of
Exchange, the shareholders of PSI will be instructed to deposit all Fifty Six
Thousand Seven Hundred Fifty (56,750) shares, in a manner that will effectuate
the proper transfer of said stock to FutureOne at the following address:
Holladay Stock Transfer Agency ("Transfer Agent")
4350 East Camelback Road, Suite F100
Phoenix, Arizona 85018
After the effective date, said shares shall be exchanged as described herein,
each certificate shall be exchanged without cost to the shareholder. Any
additional or mutable exchanges requested by PSI shareholders will be charged,
to said PSI shareholders, the prevailing rate by the transfer agent. In the
event of the termination or abandonment by any Party prior to the effective
date, all shares held by the transfer agent will be promptly returned via
registered mail to each PSI shareholder. From and after the Effective Time, the
shares of PSI Common Stock outstanding immediately prior thereto shall cease to
be shares of PSI, irrespective of whether certificates evidencing such shares
have been surrendered, and there shall be no further transfer or issuance of
certificates for PSI Common Stock, provided, however, that with respect to any
certificate thereto issued, which has been lost or destroyed, FutureOne may
replace such certificate upon receipt of satisfactory evidence of ownership of
the shares represented thereby and of appropriate indemnification.
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<PAGE> 52
2.3 Purchase Price of PSI. The Parties hereto have mutually agreed,
that based on the Financial statements and other documents presented by PSI to
FutureOne, that the value of PSI indicated by these records is $567,500 and
accordingly the stockholders of PSI will receive 185,306 shares of FutureOne
stock.
ARTICLE III
Representations and Warranties of FutureOne
3.1 Due incorporation, good standing, qualification. FutureOne is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation with all requisite corporate power and
authority to own, operate, and lease its properties and to carry on its business
as presently conducted.
3.2 Authority and compliance; no violation. FutureOne, to the best of
its knowledge, has full corporate power and lawful authority to execute and
deliver this Agreement, and to consummate and perform the transactions
contemplated hereby.
3.3 Other. FutureOne, to the best of its knowledge has disclosed
relevant financial and corporate information regarding this transaction to PSI.
ARTICLE IV
Representations and Warranties of PSI
4.0 Due Incorporation, good standing, qualification. PSI is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation with all requisite corporate
power and authority to own, operate and lease its properties and carry on its
business as presently conducted. PSI is not subject to any material disability
by reason of the failure to be duly qualified as a foreign corporation for the
transaction of business and in good standing under the laws of any jurisdiction.
4.1 Authority and compliance; no violation. PSI has full corporate
power and lawful authority to execute and deliver this Agreement, and to
consummate and perform the transactions contemplated hereby. The execution and
delivery of this Agreement by PSI, and the consummation and performance of the
transactions contemplated hereby shall have been fully and validly authorized by
all necessary corporate and other proceedings, and this Agreement shall
constitute the valid obligation of PSI, legally binding upon it in accordance
with its terms. No approval or consent of any federal, state, county, local or
other governmental agency or body is required to be obtained by PSI in
connection with the execution, delivery, consummation and performance of this
Agreement by PSI. The execution, delivery, consummation and performance of this
Agreement by PSI shall not conflict with or result in the breach or violation of
any term or provision of, or constitute a material default under, any statute,
indenture, mortgage, deed of trust, note agreement, or other agreement or
instrument by which it is bound, or any law, order, writ, injunction, decree,
rule or regulation of any court or any governmental agency or body.
4.2 Financial statement and Due Diligence. PSI represents that, prior
to the Effective date, it has provided FutureOne with complete financial
statements that fairly and accurately present the financial and corporate
position of PSI as of the date indicated and the report of its operations and
changes in the financial position for the period then ended, in conformity with
generally accepted accounting principles applied on a consistent basis, and
includes all adjustments, consisting only of
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<PAGE> 53
normally occurring accruals, necessary for a fair statement of the results of
operations for such period. PSI does not have any material liabilities or
obligations of a type which would be included on a balance sheet prepared in
accordance with generally accepted accounting principles, whether or not accrued
or contingent and whether or not determined or determinable, including, without
limitation, tax liabilities, except as disclosed in said financial statements.
4.3 No material change. Since August 17, 1998, there has not been (i)
any material change in the financial conditions and Due Diligence Report as
referred to in Section 4.2 above, business, properties, or assets of PSI, (ii)
any event or condition of any character which has materially and adversely
affected the business of PSI, or (iii) any mortgage or pledge of any material
amount of the properties or assets of PSI, except in each case as disclosed in
or contemplated by the financial statements and related footnotes thereto
referred in Section 4.2 above.
4.4 Tax matters. PSI has duly filed with all of the appropriate
federal, state, and local and foreign governmental agencies all tax returns and
reports which are required to be filed by any individual, entity, or
governmental agency, and have paid in full all taxes, interests, penalties,
assessments or deficiencies shown to be due on such tax returns and reports or
claimed to be due by any taxing authority. PSI is not a party to any pending
action or proceeding threatened by any governmental authority, for assessment or
collection of taxes, and no claims for assessment or collection of taxes have
been asserted against PSI.
4.5 Title to properties. PSI has good and clear title to all
significant properties and assets, real and personal, which its purports to own,
free and clear of all security interests, liens, claims, encumbrances and
charges, except for (i) liens for current taxes not yet due and payable, (ii)
liens, encumbrances and claims disclosed in the Financial Statements and related
notes thereto of PSI referred to in Section 4.2 above of this Article IV, and
(iii) such imperfections of title, easements and encumbrances, if any, as are
not material in character, amount or extent and do not materially detract from
the value, or materially interfere with the use of the property subject thereto
or affected thereby or otherwise materially impair business operations being
conducted thereon. All leases pursuant to which PSI leases any substantial
amount of real or personal property are valid and effective in accordance with
the respective terms.
4.6 Litigation. There is no action, suit or proceeding pending or, to
the knowledge of PSI, threatened against or affecting PSI, at law or in equity,
or before or by any individual, entity, or federal, state, municipal or any
other governmental department, commission, board, bureau, agency or
instrumentality, which, if determined adversely to PSI, would individually or in
the aggregate have a material adverse effect on the business, properties,
operations, prospects or assets, or the condition, financial or otherwise of
PSI.
4.7 Rights and licenses. PSI is not subject to any material liability
by reason of its failure to possess any trademark, trademark right, trade name,
trade name right or license.
4.8 Other. PSI has fully disclosed, and shall disclose, all financial
and corporate information regarding this transaction, whether material or
inconsequential, to FutureOne.
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<PAGE> 54
ARTICLE V
Covenants of FutureOne
5.1 Shareholders notification. Subsequent to the Effective Time,
FutureOne shall notify all of its shareholders of the completion of the terms of
this Agreement and the transactions contemplated hereunder.
ARTICLE VI
Additional Agreements
6.1 Tax Free Qualification. The parties hereto intend that the
transactions contemplated by this Agreement shall qualify as a tax-free exchange
under Section 368 of the Internal Revenue Code. Each party has relied on its own
professional tax advisors in determining the income tax effects of this
transaction on their corporations and the stockholders of their corporation.
6.2 Accounting methods. The parties hereto warrant that all financial
statements and other financial information have been prepared in accordance with
Generally Accepted Accounting Principles.
6.3 Employment Contracts. Upon the Effective Date, PSI shall enter into
an employment contract with Michael Mazick. The contract shall include the
following basic terms: (i) The contracts shall be for a period of three years,
(ii) the contract shall be terminable only for cause, with cause defined as
gross negligence or willful misconduct (iii) the compensation of Mr. Mazick
shall be $100,000 per year plus a bonus if certain goals are achieved, (iv) such
compensation shall only be payable if predetermined revenue and profit goals,
which support such compensation, are achieved and (vi) Mr. Mazick shall be
entitled to other benefits that are, or may be made available to, FutureOne
management, including stock option plans.
6.4 PSI Management Responsibility to FutureOne. PSI agrees to provide
FutureOne with regular financial and operating reports that will allow FutureOne
management to monitor its activities.
ARTICLE VII
Conditions Precedent to Obligations of all Parties
7.1 Obligations. The obligations of the parties to consummate the
Acquisition are subject to the fulfillment prior to or at the Closing of each of
the following conditions, except as such parties may legally waive such
conditions in writing:
7.2 Litigation. On the Closing Date, there shall not be pending or
threatened any claim, action, suit or proceeding against any of the parties
hereto or any of their affiliates which, if adversely determined, might prevent
or materially hinder consummation of the Acquisition contemplated by this
Agreement, result in payment of substantial damages as a result of such
Acquisition and the transactions contemplated hereby or otherwise materially
impair the benefits to any party or parties contemplated hereby and no
investigation by any governmental agency shall be pending or threatened which
might eventually result in any such suit, action or other proceeding.
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<PAGE> 55
7.3 Corporate documents. As of the Effective Date, PSI shall
immediately make available to FutureOne any and all original corporate and
financial records and copies of any other records of PSI and PSI shall provide
for the safekeeping of all such documents.
7.4 Covenants not to compete. Current PSI shareholders and key
employees shall execute an all Agreements not to compete with PSI or FutureOne.
Article VIII
General Provisions
8.1 Notices. Any notice hereunder to a party shall be deemed to be
properly served in writing and personally delivered or mailed to:
In the case of PSI:
PSI, Corp.
2099 W. Acoma Bld.
Lake Havasu City, AZ 86403
Attn Michael Mazick, President
In the case of FutureOne:
FutureOne. Inc.
4250 East Camelback Road
Suite K-192
Phoenix, AZ 85018-2751
Attention: Kendall Q. Northern, President
Or to such other address as may have been furnished in writing by such party to
the other parties to this Agreement and shall be deemed to have been given as of
the time delivered or, if mailed, as of the time acknowledged as received if
mailed registered or certified mail, postage prepaid, it being the intention
that all notices pursuant hereto shall be effective only upon receipt.
8.2 Interpretations. To the extent permitted by the context in which
used; (a) words in the singular number shall include the plural, words in the
masculine gender shall include the feminine and neuter, and vice versa; and (b)
references to "persons" or "parties" in this Agreement shall be deemed to refer
to natural persons, corporations, and all other entities. This instrument shall
be construed in accordance with the fair meaning of its language, and shall not
be construed for or against the party drafting it, solely because of such fact.
8.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed, shall constitute an original copy
hereof, but all of which together shall constitute one and the same document.
8.4 Section headings and gender. The section headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof. The use of the masculine or any
other pronoun herein when referring to any party has been for convenience only
and shall be deemed to refer to the particular party intended regardless of the
actual gender of such party.
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<PAGE> 56
8.5 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the transactions contemplated
hereby, and any previous Agreements or understandings between the parties
regarding the subject matter hereof are merged into and superseded by this
Agreement.
8.6 Non-assignability. The obligations of this Agreement are personal
to each party, and neither the rights nor obligations under this Agreement may
be assigned or transferred by any party in any manner whatsoever, nor are such
rights or obligations subject to involuntary alienation, assignment or transfer.
8.7 Exclusive governing law. This Agreement shall be exclusively
construed in accordance with the laws of the State of Arizona.
8.8 Severability. The unenforceability, invalidity or illegality of any
provision of this Agreement shall not render the other provisions unenforceable,
invalid, or illegal. If any term, provision, covenant or condition of this
Agreement is invalidated due to its scope or breadth, such term, provision,
covenant, or condition shall be deemed valid to the extent of the scope or
breadth permitted by law in accordance with the intent of the parties as
expressed herein.
8.9 Waiver of terms. Any of the terms and conditions of this Agreement,
to the extent permitted by law, may be waived at any time by the party which is
or whose shareholders are entitled to the benefit thereof by action taken by the
boards of directors of such party, or by the President thereof authorized to act
for such party, whether before or after action with respect to this Agreement on
behalf of the shareholders of the parties, or any one or more of them, provided,
however, that such action shall be taken only if, in the judgment of the board
of directors or officer taking such action, such waiver will not have a
materially adverse effect on the benefits intended hereunder to the shareholders
of its or his corporation. Such action shall be evidenced by written notice
signed by its President of the party taking such action.
8.10 Cooperation. Subject to the terms and conditions herein provided
each of the parties hereto shall use its best lawful efforts to take, or cause
to be taken, such action, to execute and deliver, or cause to be delivered, such
additional documents and instruments and to do or cause to be done all things
necessary, proper or advisable, under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated by
this Agreement.
8.11 Arbitration; Exclusive jurisdiction and venue. The parties hereby
agree to exclusively submit all controversies, claims and matters of difference
to arbitration in Phoenix, Arizona according to the rules and practices of the
American Arbitration Association from time to time in force, except to the
extent that such rules and practices are inconsistent with the terms of this
Agreement. This submission and Agreement to arbitrate shall be specifically
enforceable. The arbitrator shall exclusively apply Arizona law as though he or
she were bound by the applicable statutes and precedents in case law. The
arbitrator shall have the power to issue any award, judgment, decree, or order
of relief that a court of law or equity could issue under Arizona law, including
but not limited to money damages, specific performance, or injunctive relief. In
the event that any party refuses to submit to arbitration, the party that has
submitted to arbitration shall be empowered to file the appropriate action in a
court in Maricopa County, Arizona. In all disputes, the non-prevailing party
shall be pay the reasonable attorneys' fees and costs of the prevailing party.
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<PAGE> 57
8.12 Enforcement. The failure of either party to enforce any provision
of this Agreement shall not be construed as a waiver or limitation of that
party's right to subsequently enforce and compel strict compliance with every
provision of this Agreement.
8.13 Attorneys fees and costs. Except as otherwise provided herein,
each party hereto shall pay its own expenses incurred in connection with this
Agreement and the transactions incurred in connection with this Agreement and
the transactions contemplated hereby.
8.14 Amendment of Agreement. Notwithstanding anything to the contrary
in this Agreement, to the extent permitted by law, this Agreement may be
amended, supplemented or interpreted at any time by written instrument duly
executed by each of the parties hereto which shall have been authorized by
appropriate action taken by the board of directors of the parties hereto and, in
the case of an interpretation, the actions of such board of directors shall be
binding.
8.15 Governing law of merged entities. FutureOne, as the acquiring
corporation, is to be governed by the laws of the State of Nevada, and shall
comply with the applicable provisions of the laws of the State of Nevada as
amended. These Articles of Exchange shall be filed with the Nevada Secretary of
State and the Arizona Secretary of State so that:
(a) FutureOne may be served with process in any proceeding for
enforcement of Rights of Dissenting Shareholders of PSI against FutureOne; and
(b) FutureOne may be served with process in any proceeding for the
enforcement of any obligation under the provisions of the Nevada Revised
Statutes pertaining to dissenting shareholders of PSI, and
(c) The former shareholders of PSI, which as the acquired
corporation, are entitled only to the rights as provided
herein and under the Nevada Revised Statutes
8.16 Indemnification. The current Stockholders, Board of Directors and
officers of PSI hereby indemnifies, holds harmless, and agrees to defend
FutureOne, its officers and Directors, from any and all claims that may arise
from any and all acts or actions, whether intentional or otherwise, of PSI that
may have occurred before the closing date of this Agreement or may arise from
this Agreement, if it shall be determined that PSI has breached any of its
representations or warranties under this Agreement or if any financial
statements delivered under this Agreement shall contain material misstatement of
fact.
IN WITNESS WHEREOF, each of the Parties hereto, pursuant to authority duly
granted to each by their respective board of directors has caused these Articles
of Exchange between PSI and FutureOne, to be executed by its respective
authorized officers on the date first written above.
FutureOne Inc. Priority Systems, Inc.
(a Nevada corporation) (an Arizona corporation)
/s/Kendall Q. Northern /s/Michael Mazick
---------------------------------- -----------------------------
By: Kendall Q. Northern By: Michael Mazick
Its: President Its: President
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<PAGE> 58
FutureOne, Inc.
/s/Eric J. Cook
--------------------
By: Eric J. Cook
Its: Secretary
PSI Shareholders
/s/Michael Mazick /s/Eric Drell
-------------------------------- -----------------------------------
Michael Mazick Eric Drell
/s/David Scheller /s/Steve Bently
-------------------------------- -----------------------------------
David Scheller Steve Bently
State of Arizona )
County of Maricopa )
Sworn and subscribed to me this 29 day of SEPT 1998 by Kendall Q. Northern and
Michael Mazick, Presidents of FutureOne, Inc. and Priority Systems, Inc.,
respectively and known to me to be the individuals subscribed by said name in
and who executed the foregoing instrument and acknowledged that they executed
same for the uses and purposes therein set forth.
/s/Eric J. Cook
-------------------------------------------
Notary Public
My Commission Expires [Notary Seal]
----------
State of Arizona )
County of Maricopa )
Sworn and subscribed to me this day of 1998 by Eric J. Cook,
---- --------------
Secretary of FutureOne, Inc. and known to be the individual subscribed by said
name in and who executed the foregoing instrument and acknowledged that they
executed same for the uses and purposes therein set forth.
------------------------------------
Notary Public
My Commission Expires
--------------
Page 10 of 10
<PAGE> 59
FILED ARTICLES OF EXCHANGE ($125.00)
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE BY AND BETWEEN
STATE OF NEVADA
FutureOne, Inc.
APR 08 1999 (A Nevada Corporation)
NO. C4435-94 AND
/s/Dean Heller
DEAN HELLER, SECRETARY OF STATE Ubiquity Design LLC
(An Arizona Limited Liability
Company)
THESE ARTICLES OF EXCHANGE are entered into this 31st day of
March, 1999, by and between, Ubiquity Design LLC dba Rocket Science Creative, an
Arizona Limited Liability Company (hereinafter "Ubiquity"), and FutureOne, Inc.,
a Nevada Corporation (hereinafter "FutureOne").
RECITALS
FutureOne has an aggregate number of authorized shares of capital stock
being a single class, common stock without series, consisting of Fifty Million
(50,000,000) shares $0.001 par value, of which approximately Twelve Million One
Hundred Thirty Five Thousand (12,135,000) shares are fully paid, issued and
outstanding on the books of the Corporation (pre-exchange).
The principal office of FutureOne is located at 4250 East Camelback
Road, Suite K-192, Phoenix, Arizona 85018; Resident Agency National, 377 South
Nevada Street, Carson City, Nevada 89703 is the registered agent of record upon
whom service of process for FutureOne may be received within the state of
Nevada, and the corporation is governed by Nevada law.
Ubiquity has an aggregate capital consisting of One hundred (100)
Member shares, issued and outstanding on the books of the company which
represents 100% ownership of Ubiquity (pre-exchange).
The principal office of Ubiquity is located at 4388 N. Civic Center
Plaza, Suite 200 Scottsdale Arizona, 85251, Blume Law Firm PC 11801 N. Tatum
Blvd., Suite 108, Phoenix, Arizona 85028-1612, is the registered agent of record
upon whom service of process for Ubiquity may be received within the state of
Arizona; and the company is governed by Arizona law.
The Boards of Directors and/or Managing Member of the Parties will
recommend and notice these Articles of Exchange pursuant to the Arizona Revised
Statutes and the Nevada Revised Statutes.
The transactions contemplated under this Agreement were adopted and
ratified on March 10, 1999 at a Special Meeting of the Board of Directors of
FutureOne by a unanimous vote of the Directors.
The transactions contemplated under this Agreement were adopted and
ratified on March 10, 1999 at a Special Meeting of Members of Ubiquity by a
unanimous vote of the Member shares of record, and
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<PAGE> 60
The respective Boards of Directors of FutureOne and Members of Ubiquity have
determined that it is desirable, upon the terms and subject to the conditions
set forth herein, that FutureOne acquire Ubiquity and that Ubiquity be a
wholly-owned subsidiary of FutureOne, with the member shares of Ubiquity's
common stock being converted into shares of FutureOne, with the effect that
FutureOne shall become the owner of 100 percent of the issued and outstanding
member shares of Ubiquity, all as hereinafter set forth.
Accordingly, in consideration of the mutual covenants and Agreements contained
herein, it is agreed that, in accordance with the applicable statutes of the
States of Arizona and Nevada. Ubiquity shall be at the "Effective Time" (as that
term is defined in Section 1.2 hereof) acquired by FutureOne (the
"Acquisition"), and that the terms and conditions of the Acquisition, the mode
of carrying same into effect, the manner and basis of convening shares, and such
other provisions as are deemed necessary or desirable to be effected by the
Acquisition.
NOW, THEREFORE, in consideration of the mutual promises, Agreements and
benefits contained herein, it is agreed by and between the parties as follows:
ARTICLE I
Terms of Acquisition
1.1 Acquisition. At the Effective Time, Ubiquity shall be acquired by
FutureOne, such that Ubiquity shall be a wholly-owned division of FutureOne, or
one of its subsidiaries, and the separate existence of Ubiquity will be
terminated, and FutureOne shall continue in existence as the parent corporation,
doing business as "FutureOne." From and after the Effective Time, the corporate
existence of FutureOne, with all its rights, privileges, immunities, powers and
purposes, shall continue unaffected and unimpaired by the Acquisition.
1.2 Closing and Effective Time. The consummation of file Acquisition of
Ubiquity by FutureOne (the "Closing") shall take place at the offices of
FutureOne, Inc. at 3:30 PM, Arizona time, on the first day after which (a) all
conditions set forth in this Agreement have been satisfied: or (b) at such other
place, date, and time as may be agreed upon by FutureOne and Ubiquity. The date
on which the closing shall take place shall be hereinafter referred to as the
"Closing Date." Simultaneously, with the consummation of the Closing, this
Agreement, or Articles of Exchange, as appropriate, and all other instruments or
documents required to make the Acquisition effective or complete the transaction
as contemplated by the terms of this Agreement shall be filed with the
appropriate governmental agencies or authorities in accordance with the
provisions of the laws of the States of Arizona and Nevada. The date on which
the Acquisition shall become effective shall be the date all appropriate filings
have been made in accordance with Arizona and Nevada law and such date is herein
call the "Effective Time."
1.3 Effect of Acquisition. At the Effective Time, the effects of the
consummation of the Acquisition of FutureOne and Ubiquity shall he that
FutureOne shall own all of the issued and outstanding Member shares of Ubiquity,
and Ubiquity shall become a wholly-owned division of FutureOne, or one of its
subsidiaries.
1.4 Management Agreement. At the Effective Time, the Management
Agreement of Ubiquity may be amended as necessary to be consistent with the
fiscal year of FutureOne and to allow other provisions of this Agreement to be
carried out according to terms specified herein.
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<PAGE> 61
1.5 Manager. As of the closing date, certain Directors of FutureOne,
Kendall Q. Northern and Earl J. Cook, shall be appointed as the Managers of
Ubiquity and shall serve from and after the Closing Date. As of the closing date
any and all other Managers of Ubiquity shall resign.
1.6 Other action. Upon and after the Effective Time, Ubiquity shall
take all such action as shall be deemed necessary or appropriate by FutureOne.
In case that, at any time after the Effective Time, FutureOne and Ubiquity shall
consider or be advised that any further deeds, assignments, conveyances, or
instruments are necessary or desirable to carry out the provisions of the
Agreement, the proper officers and directors of FutureOne and Ubiquity as of the
Effective Time shall execute and deliver any and all proper deeds, assignments,
and assurances of law, and do all things necessary or appropriate and proper to
carry out the provisions of the terms of this Agreement.
ARTICLE II
Terms of the Transaction and the Manner and Basis of Converting the
Shares of Ubiquity
2.1 Shares of FutureOne. Each share of FutureOne Common Stock held by
current shareholders prior to the Effective Time shall continue to remain issued
and outstanding and be unaffected by the Acquisition, which shares, together
with the shares of Ubiquity Common Stock converted by virtue of the Acquisition
under Section 2.2 below shall, after the effectiveness of the Acquisition,
constitute the total issued and outstanding FutureOne Common Stock.
2.2 Exchange of shares of Ubiquity. At the Effective Time, all of the
One Hundred (100) issued and outstanding Member shares of Ubiquity, or a
certified ownership list, shall be exchanged for the number of shares of
FutureOne computed by dividing the unpaid balance of the purchase price, as
determined in Section 2.3 below, by the closing price of FutureOne stock on the
OTC Bulletin Board as of the date of the offer, by FutureOne, to acquire
Ubiquity (January 12, 1999), which was $3.50 per share. Upon execution of these
Articles of Exchange, the shareholders of Ubiquity will be instructed to deposit
all One Hundred (100) Member shares, or a certified ownership list, in a manner
that will effectuate the proper transfer of said Member shares to FutureOne, at
the following address:
Holladay Stock Transfer Agency ("Transfer Agent")
4350 Fast Camelback Road, Suite F100
Phoenix, Arizona 85018
After the effective date, said Member shares shall be exchanged as described
herein, each certificate shall be exchanged without cost to the shareholder. Any
additional or mutable exchanges requested by Ubiquity shareholders will be
charged to said Ubiquity shareholders, the prevailing rate by the transfer
agent. In the event of the termination or abandonment by any Party prior to the
effective date, all shares held by the transfer agent will by promptly returned
via registered mail to each Ubiquity shareholder. From and after the Effective
Time, the member shares of Ubiquity outstanding immediately prior thereto shall
cease to be shares of Ubiquity, irrespective of whether certificates evidencing
such shares have been surrendered, and there shall be no further transfer or
issuance of certificates for Ubiquity Member shares, provided, however, that
with respect to any certificate thereto issued, which has been lost or
destroyed, FutureOne may replace such certificate upon receipt of satisfactory
evidence of ownership of the shares represented thereby and of appropriate
indemnification.
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<PAGE> 62
2.3 Purchase Price of Ubiquity. The Parties hereto have mutually
agreed, that based on the financial statements and other documents presented by
Ubiquity to FutureOne, that the value of Ubiquity indicated by these records is
$350,000 and accordingly the Members of Ubiquity shall be paid the number of
shares of FutureOne stock as determined under Section 2.2 above.
ARTICLE III
Representations and Warranties of FutureOne
3.1 Due incorporation, good standing, qualification. FutureOne is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation with all requisite corporate power and
authority to own, operate, and lease its properties and to carry on its business
as presently conducted.
3.2 Authority and compliance; no violation. FutureOne, to the best of
its knowledge, has full corporate power and lawful authority to execute and
deliver this Agreement, and to consummate and perform the transactions
contemplated hereby.
3.3 Other. FutureOne, to the best of its knowledge, has disclosed
relevant financial and corporate information regarding this transaction to
Ubiquity.
ARTICLE IV
Representations and Warranties of Ubiquity
4.0 Due Incorporation, good standing, qualification. Ubiquity is a
Limited Liability Company duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of organization with all requisite
corporate power and authority to own, operate and lease its properties and carry
on its business as presently conducted. Ubiquity is not subject to any material
disability by reason of the failure to be duly qualified as a foreign
corporation for the transaction of business and in good standing under the laws
of any jurisdiction.
4.1 Authority and compliance; no violation. Ubiquity has full corporate
power and lawful authority to execute and deliver this Agreement, and to
consummate and perform the transactions contemplated hereby. The execution and
delivery of this Agreement by Ubiquity, and the consummation and performance of
the transactions contemplated hereby shall have been fully and validly
authorized by all necessary Members and other proceedings, and this Agreement
shall constitute the valid obligation of Ubiquity, legally binding upon it in
accordance with its terms. No approval or consent of any federal, state, county,
local or other governmental agency or body is required to be obtained by
Ubiquity in connection with the execution, delivery, consummation and
performance of this Agreement by Ubiquity. The execution, delivery, consummation
and performance of this Agreement by Ubiquity shall not conflict with or result
in the breach or violation of any term or provision of, or constitute a material
default under, any statute, indenture, mortgage, deed of trust, note agreement,
or other agreement or instrument by which it is bound, or any law, order, writ,
injunction, decree, rule or regulation of any court or any governmental agency
or body.
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<PAGE> 63
4.2 Financial statement and Due Diligence. Ubiquity represents that,
prior to the Effective date, it has provided FutureOne with complete financial
statements that fairly and accurately present the financial and corporate
position of Ubiquity as of the date indicated and the report of its operations
and changes in the financial position for the period then ended, in conformity
with generally accepted accounting principles applied on a consistent basis, and
includes all adjustments, consisting only of normally occurring accruals,
necessary for a fair statement of the results of operations for such period.
Ubiquity does not have any material liabilities or obligations of a type which
would be included on a balance sheet prepared in accordance with generally
accepted accounting principles, whether or not accrued or contingent and whether
or not determined or determinable, including, without limitation, tax
liabilities, except as disclosed in said financial statements.
4.3 No material change. Since December 31, 1998, there has not been (i)
any material change in the financial conditions and Due Diligence Report as
referred to in Section 4.2 above, business, properties, or assets of Ubiquity,
(ii) any event or condition of any character which has materially and adversely
affected the business of Ubiquity, or (iii) any mortgage or pledge of any
material amount of the properties or assets of Ubiquity, except in each case as
disclosed in or contemplated by the financial statements and related footnotes
thereto referred in Section 4.2 above.
4.4 Tax matters. Ubiquity has duly filed with all of the appropriate
federal, state, and local and foreign governmental agencies all tax returns and
reports which are required to be filed by any individual, entity, or
governmental agency, and have paid in full all taxes, interests, penalties,
assessments or deficiencies shown to be due on such tax returns and reports or
claimed to be due by any taxing authority. Ubiquity is not a party to any
pending action or proceeding threatened by any governmental authority, for
assessment or collection of taxes, and no claims for assessment or collection of
taxes have been asserted against Ubiquity.
4.5 Title to properties. Ubiquity has good and clear title to all
significant Properties and assets, real and personal, which its purports to own,
free and clear of all security interests, liens, claims, encumbrances and
charges, except for (i) liens for current taxes not yet due and payable, (ii)
liens, encumbrances and claims disclosed in the Financial Statements and related
notes thereto of Ubiquity referred to in Section 4.2 above of this Article IV,
and (iii) such imperfections of title, easements and encumbrances, if any, as
are not material in character, amount or extent and do not materially detract
from the value, or materially interfere with the use of the property subject
thereto or affected thereby or otherwise materially impair business operations
being conducted thereon. All leases pursuant to which Ubiquity leases any
substantial amount of real or personal property are valid and effective in
accordance with the respective terms.
4.6 Litigation. There is no action, suit or proceeding, pending or, to
the knowledge of Ubiquity, threatened against or affecting Ubiquity, at law or
in equity, or before or by any individual, entity, or federal, state, municipal
or any other governmental department, commission, board, bureau, agency or
instrumentality which, if determined adversely to Ubiquity, would individually
or in the aggregate have a material adverse effect on the business, properties,
operations, prospects or assets, or the condition, financial or otherwise of
Ubiquity.
4.7 Rights and licenses. Ubiquity is not subject to any material
liability by reason of its failure to process any trademark, trademark right,
trade name, trade name right or license.
4.8 Other. Ubiquity has fully disclosed, and shall disclose, all
financial and corporate information regarding this transaction, whether material
or inconsequential, to FutureOne.
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<PAGE> 64
ARTICLE V
Covenants of FutureOne
5.1 Shareholders notification. Subsequent to the Effective Time,
FutureOne shall notify all of its shareholders of the completion of the terms of
this Agreement and the transactions contemplated hereunder.
ARTICLE VI
Additional Agreements
6.1 Tax Free Qualification. The parties hereto intend that the
transactions contemplated by this Agreement shall qualify as a tax-free exchange
under Section 368 of the Internal Revenue Code. Each party has relied on its own
professional tax advisors in determining the income tax effects of this
transaction on their entities and the stockholders/Members of their entities.
6.2 Accounting methods. The parties hereto warrant that all financial
statements and other financial information have been prepared in accordance with
Generally Accepted Accounting Principles.
6.3 Prior Earned Compensation. The parties agree that certain
adjustments will be made to the Financial statements of Ubiquity so that certain
compensation and/or earnings for 1998, may be paid to the members of Ubiquity.
There were approximately $36,000 of uncollected accounts receivable and
approximately $11,000 of unpaid accounts payable still outstanding as of year
end. Therefor, prior to the closing, Ubiquity shall record certain amounts due
to its members to be paid to its members from the proceeds of the accounts
receivable, if and when collected, but only after paying the accounts payable.
The effect of this provision is intended to allow the members to withdraw their
prior year earnings available from the net cash flow of existing accounts
receivable and accounts payable, but that under no circumstances shall any cash
be provided by FutureOne to pay any such amount due the members arising from
this provision.
6.4 Employees. Ubiquity agrees to terminate any and all employees
and/or employment contracts as of the closing date and the three employees that
FutureOne desires to retain shall be employed by FutureOne, or one of its
subsidiaries, under employment agreements entered into concurrently with the
signing of this Agreement.
6.5 Resignations. Immediately after the Closing Date, Ubiquity shall
turn over to FutureOne original resignations of each of Managers.
ARTICLE VII
Conditions Precedent to Obligations of all Parties
7.1 Obligations. The obligations of the parties to consummate the
Acquisition are subject to the fulfillment prior to or at the Closing of each of
the following conditions, except as such parties may legally waive such
conditions in writing:
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7.2 Litigation. On the Closing Date, there shall not be pending or
threatened any claim. action, suit or proceeding against any of the parties
hereto or any of their affiliates which, if adversely determined, might prevent
or materially hinder consummation of the Acquisition contemplated by this
Agreement, result in payment of substantial damages as a result of such
Acquisition and the transactions contemplated hereby or otherwise materially
impair the benefits to any party or parties contemplated hereby and no
investigation by any governmental agency shall be pending or threatened which
might eventually result in any such suit, action or other proceeding.
7.3 Company documents. As of the Effective Date, Ubiquity shall
immediately make available to FutureOne any and all original company and
financial records and copies of any other records of Ubiquity, Ubiquity shall
provide for the safekeeping of all such documents.
7.4 Covenants not to compete. Current Ubiquity Members and employees
shall, concurrently with the signing of this Agreement, execute an Agreement not
to compete with Ubiquity or FutureOne for a period of three years.
Article VIII
General Provisions
8.1 Notices. Any notice hereunder to a party shall be deemed to be
properly served in writing and personally delivered or mailed to:
In the case of Ubiquity:
Ubiquity Design LLC
4388 N. Civic Center Plaza, #200
Scottsdale, Arizona 85251
Attn: R. Tucker Woodbury, Managing Member
In the case of FutureOne:
FutureOne, Inc.
4250 Fast Camelback Road
Suite K-192
Phoenix, AZ 85018-2751
Attention: Kendall Q. Northern, President
Or to such other address as may have been furnished in writing by such party to
the other parties to this Agreement, and shall be deemed to have been given as
of the time delivered or, if mailed, as of the time acknowledged as received if
mailed registered or certified mail, postage prepaid, it being the intention
that all notices pursuant hereto shall be effective only upon receipt.
8.2 Interpretation. To the extent permitted by the context in which
used: (a) words in the singular number shall include the plural, words in the
masculine gender shall include the feminine and neuter, and vice versa; and (b)
references to "persons" or "parties" in this Agreement shall be deemed to refer
to natural persons, corporations, and all other entities. This instrument shall
be construed in accordance with the fair meaning of its language, and shall not
he construed for or against the party drafting it, solely because of such fact.
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<PAGE> 66
8.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed, shall constitute an original copy
hereof, but all of which together shall constitute one and the same document.
8.4 Section headings and gender. The section headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof. The use of the masculine or any
other pronoun herein when referring to any party has been for convenience only
and shall be deemed to refer to the particular party intended regardless of the
actual gender of such party.
8.5 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the transactions contemplated
hereby, and any previous Agreements or understandings between the parties
regarding the subject matter hereof arc merged into and superseded by this
Agreement.
8.6 Non-assignability. The obligations of this Agreement are personal
to each party, and neither the rights nor obligations under this Agreement may
be assigned or transferred by any party in any manner whatsoever, nor are such
rights or obligations subject to involuntary alienation, assignment or transfer.
8.7 Exclusive governing law. This Agreement shall be exclusively
construed in accordance with the laws of the State of Arizona.
8.8 Severability. The unenforceability, invalidity, or illegality of
any provision of this Agreement shall not render the other provisions
unenforceable, invalid, or illegal. If any term, provision, covenant or
condition of this Agreement is invalidated due to its scope or breadth, such
term, provision, covenant, or condition shall be deemed valid to the extent of
the scope or breadth permitted by law in accordance with the intent of the
parties as expressed herein.
8.9 Waiver of terms. Any of the terms and conditions of this Agreement,
to the extent permitted by law, may be waived at any time by the party which is
or whose shareholders/Members are entitled to the benefit thereof by action
taken by the boards of directors/Manager of such party, or by the officer
thereof authorized to act for such party, whether before or after action with
respect to this Agreement on behalf of the shareholders/Members of the parties,
or any one or more of them, provided, however, that such action shall be taken
only if, in the judgment of the board of directors/Manager or officer taking
such action, such waiver will not have a materially adverse effect on the
benefits intended hereunder to the shareholders/Members of its or his entity.
Such action shall be evidenced by written notice signed by the officer of the
party taking such action.
8.10 Cooperation. Subject to the terms and conditions herein provided,
each of the parties hereto shall use its best lawful efforts to take, or cause
to he taken, such action, to execute and deliver, or cause to be delivered, such
additional documents and instruments and to do or cause to be done all things
necessary, proper or advisable, under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated by
this Agreement.
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8.11 Arbitration; Exclusive jurisdiction and venue. The parties hereby
agree to exclusively submit all controversies, claims, and matters of difference
to arbitration in Phoenix, Arizona, according to the rules and practices of the
American Arbitration Association from time to time in force, except to the
extent that such rules and practices are inconsistent with the terms of this
Agreement. This submission and Agreement to arbitrate shall be specifically
enforceable. The arbitrator shall exclusively apply Arizona law as though he or
she were bound by the applicable statutes and precedents in case law. The
arbitrator shall have the power to issue any award, judgment, decree, or order
of relief that a court of law or equity could issue under Arizona law, including
but not limited to money damages, specific performance, or injunctive relief. In
the event that any party refuses to submit to arbitration, the party that has
submitted to arbitration shall be empowered to file the appropriate action in a
court in Maricopa County, Arizona. In all disputes, the non-prevailing party
shall be pay the reasonable attorneys' fees and costs of the prevailing party.
8.12 Enforcement. The failure of either party to enforce any provision
of this Agreement shall not be construed as a waiver or limitation of that
party's right to subsequently enforce and compel strict compliance with every
provision of this Agreement.
8.13 Attorneys fees and costs. Except as otherwise provided herein,
each party hereto shall pay its own expenses incurred in connection with this
Agreement and the transactions incurred in connection with this Agreement and
the transactions contemplated hereby.
8.14 Amendment of Agreement. Notwithstanding anything to the contrary
in this Agreement, to the extent permitted by law, this Agreement may be
amended, supplemented or interpreted at any time by written instrument duly
executed by each of the parties hereto which shall have been authorized by
inappropriate action taken by the board of directors/Manager of the parties
hereto and, in the case of an interpretation, the actions of such board of
directors/Manager shall be binding.
8.15 Governing law of merged entities. FutureOne, as the acquiring
corporation, is to be governed by the laws of the State of Nevada, and shall
comply with the applicable provisions of the laws of the State of Nevada as
amended. These Articles of Exchange shall be filed with the Nevada Secretary of
State and the Arizona Secretary of State so that:
(a) FutureOne may be served with process in any proceeding for
enforcement of Rights of Dissenting Members of Ubiquity against FutureOne; and
(b) FutureOne may be served with process in any proceeding for the
enforcement of any obligation under the provisions of the Nevada Revised
Statutes pertaining to dissenting shareholders of FutureOne; and
(c) The former Members of Ubiquity, which as the acquired entity, are
entitled only to the rights as provided herein and under the Nevada Revised
Statutes
8.16 Indemnification. The current Members and Manager of Ubiquity
hereby indemnify, hold harmless, and agree to defend FutureOne, its officers and
Directors, from any and all claims that may arise from any and all acts or
actions, whether intentional or otherwise, of Ubiquity that may have occurred
before the closing date of this Agreement or may arise from this Agreement, if
it shall be determined that Ubiquity has breached any of its representations or
warranties under this Agreement or it any financial statements delivered under
this Agreement shall contain material misstatements of fact.
Page 9 of 12
<PAGE> 68
IN WITNESS WHEREOF, each of the Parties hereto, pursuant to authority duly
granted to each by their respective board of directors/Manager, has caused these
Articles of Exchange between Ubiquity and FutureOne, to be executed by its
respective authorized officers on the date first written above.
FutureOne, Inc. Ubiquity Design, LLC
(a Nevada corporation) (an Arizona limited liability company)
/s/Kendall Q. Northern /s/R. Tucker Woodbury
------------------------------ -----------------------------------
By: Kendall Q. Northern By: R. Tucker Woodbury
Its: President Its: Manager
FutureOne, Inc.
/s/Eric J. Cook
------------------------------
By: Eric J. Cook
Its: Secretary
Ubiquity Members
/s/R. Tucker Woodbury /s/Shalome Patrick
------------------------------ -----------------------------------
R. Tucker Woodbury Shalome Patrick
/s/Craig A. Budwitz /s/Randall S. Smith
------------------------------ -----------------------------------
Craig A. Budwitz Randall S. Smith
State of Arizona )
County of Maricopa )
Sworn and subscribed to me this 31 day of MARCH 1999 by Kendall Q. Northern,
President of FutureOne, Inc., known to me to be the individual subscribed by
said name in and who executed the foregoing instrument and acknowledged that
they executed same for the uses and purposes therein set forth.
/s/Eric J. Cook My Commission Expires
- ---------------------------------- -------------------
Notary Public [Notary Seal]
State of Arizona )
County of Maricopa )
Sworn and subscribed to me this 31 day of March 1999 R. Tucker Woodbury Managing
Member of Ubiquity Design LLC, respectively and known to me to be the
individuals subscribed by said name in and who executed the foregoing instrument
and acknowledged that they executed same for the uses and purposes therein set
forth.
/s/Eric J. Cook My Commission Expires
- ----------------------------- -------------------
Notary Public [Notary Seal]
Page 10 of 12
<PAGE> 69
State of Arizona )
County of Maricopa )
Sworn and subscribed to me this 31st day of March 1999 by Eric J. Cook,
Secretary of FutureOne, Inc. and known to me to be the individual subscribed by
said name in and who executed the foregoing instrument and acknowledged that
they executed same for the uses and purposes therein set forth.
/s/Donna L. Lewis My Commission Expires 7-16-2001
- ----------------------------- -------------------
Notary Public [Notary Seal]
State of Arizona )
County of Maricopa )
Sworn and subscribed to me this 31 day of MARCH 1999 R. Tucker Woodbury Managing
Member of Ubiquity Design LLC, respectively and known to me to be the
individuals subscribed by said name in and who executed the foregoing instrument
and acknowledged that they executed same for the uses and purposes therein set
forth.
/s/Eric J. Cook My Commission Expires
- ----------------------------- -------------------
Notary Public [Notary Seal]
State of Arizona )
County of Maricopa )
Sworn and subscribed to me this 31 day of MARCH 1999 by Craig A. Budwitz, a
Member of Ubiquity Design, LLC, and known to me to be the individual subscribed
by said name in and who executed the foregoing instrument and acknowledged that
they executed same for the uses and purposes therein set forth.
/s/Eric J. Cook My Commission Expires
- ----------------------------- -------------------
Notary Public [Notary Seal]
State of Arizona )
County of Maricopa )
Sworn and subscribed to me this 31 day of MARCH 1999 by Shalome Patrick, a
member of Ubiquity Design LLC, and known to me to be the individual subscribed
by said name in and who executed the foregoing instrument and acknowledged that
they executed same for the uses and purposes therein set forth.
/s/Eric J. Cook My Commission Expires
- ----------------------------- -------------------
Notary Public [Notary Seal]
Page 11 of 12
<PAGE> 70
State of Arizona )
County of Maricopa )
Sworn and subscribed to me this 31 day of MARCH 1999 by Randall S. Smith a
Member of Ubiquity Design, LLC, and known to me to be the individuals subscribed
by said name in and who executed the foregoing instrument and acknowledged that
they executed same for the uses and purposes therein set forth.
/s/Eric J. Cook My Commission Expires
- ----------------------------- -------------------
Notary Public [Notary Seal]
Page 12 of 12
<PAGE> 1
Exhibit 2.2
BY-LAWS
OF
WORLD'S FARE, INC.
ARTICLE I - OFFICES
The office of the Corporation shall be located in the city and state
designated in the Articles of Incorporation. The Corporation may also maintain
offices at such other places within or without the United States as the Board of
Directors may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
SECTION 1 - ANNUAL MEETINGS:
The annual meeting of the shareholders of the Corporation shall be held
within 90 days after the close of the fiscal year of the Corporation for the
purpose of electing directors and transacting such other business as may
properly come before the meeting.
SECTION 2 - SPECIAL MEETINGS:
Special meetings of the shareholders may be called at any time by the
Board of Directors or by the President and shall be called by the President or
the Secretary at the written request of the holders of twenty five percent (25%)
of the shares then outstanding and entitled to vote thereat, or as otherwise
required under state statutes.
SECTION 3 - PLACE OF MEETINGS:
All meetings of shareholders shall be held at the principal office of
the Corporation or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
SECTION 4 - NOTICE OF MEETINGS:
a. Written notice of each meeting of shareholders, whether annual or
special, stating the time and place it is to be held, shall be served either
personally or by mail, not less than ten nor more than fifty days before the
meeting to each shareholder and to any other persons to whom the giving of
notice may be required by law. Notice of a special meeting shall also state the
purpose or purposes for which the meeting is called and shall indicate that it
is being issued by, or at the direction of, the person or persons calling the
meeting. If mailed, such notice shall be directed to each such shareholder at
his address as it appears on the records of the shareholders of the Corporation,
unless he shall have previously filed with the Secretary of the Corporation a
written request that notices intended for him be mailed to some other address,
in which case, it shall be mailed to the address designated in such request.
<PAGE> 2
b. Notice of any meeting need not be given to any person who may become
a shareholder of record after the mailing of such notice and prior to the
meeting, or to any shareholder who attends such meeting, in person or by proxy,
to any shareholder who, in person or by proxy, submits a signed waiver of notice
either before or after such meeting. Notice of the holding of any previously
adjourned meeting of shareholders need not be given unless otherwise required by
statute.
SECTION 5 - QUORUM:
a. Except as otherwise provided herein or by statute, the presence at
the commencement of such meetings in person or by proxy of shareholders of
record, holding a majority of the total number of shares of the Corporation then
issued and outstanding and entitled to vote shall be necessary and sufficient to
constitute a quorum for the transaction of any business. The withdrawal of any
shareholder after the commencement of a meeting shall have no effect on the
existence of a quorum after a quorum has been established at such meeting.
b. Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At the holding of a
previously adjourned meeting, at which a quorum is present, any business may be
transacted which might have been transacted at the original meeting as if a
quorum had been present.
SECTION 6 - VOTING:
a. Except as otherwise provided by statute, any corporate action, other
than the election of directors, to be taken by vote of the shareholders shall be
authorized by a majority of votes cast at a meeting of shareholders by the
holders of shares entitled to vote thereon.
b. Except as otherwise provided by statute, at each meeting of
shareholders, each holder of record of shares of the Corporation entitled to
vote thereat shall be entitled to one vote for each share registered in his name
on the books of the Corporation.
c. Each shareholder entitled to vote on any matter, at or without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been executed in writing by the shareholder himself
or by his attorney-in-fact thereunto duly authorized in writing. No proxy shall
be valid after the expiration of eleven months from the date of its execution
unless the persons executing it shall have specified therein the length of time
it is to continue in force. Such instrument shall be exhibited to the Secretary
at the meeting and shall be filed with the records of the Corporation.
2
<PAGE> 3
ARTICLE III - BOARD OF DIRECTORS
SECTION 1 - NUMBER, ELECTION AND TERM OF OFFICE:
a. The number of the directors of the Corporation shall consist of at
least two (2) and not more than nine (9) members.
b. The members of the Board of Directors of the Corporation shall be
elected by receiving a majority of the votes cast at a meeting of shareholders
by the holders of shares entitled to vote in the election.
c. Each director shall hold office until the annual meeting of the
shareholders next succeeding his election and until his successor is elected and
qualified or until his prior death, resignation or removal.
SECTION 2 - DUTIES AND POWERS:
The Board of Directors shall be responsible for the control and
management of the affairs, property and interests of the Corporation and may
exercise all powers of the Corporation, except as are in the Articles of
Incorporation or by statute expressly conferred upon or reserved to the
shareholders.
SECTION 3 - ANNUAL AND REGULAR MEETINGS; NOTICE:
a. A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders at the place of
such annual meeting of shareholders.
b. The Board of Directors, from time to time, may provide by resolution
for the holding of other regular meetings of the Board of Directors and may fix
the time and place thereof.
c. Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limit and in the manner set forth in paragraph
(b) of Section 4 of this Article III with respect to special meetings, unless
such notice shall be waived in the manner set forth in paragraph (c) of such
Section 4.
SECTION 4 - SPECIAL MEETINGS; NOTICE:
a. Special meetings of the Board of Directors shall be held whenever
called, as specified in the respective notices or waivers of notice thereof.
3
<PAGE> 4
b. Notice of special meetings shall be mailed, sent via electronic mail
or fax directly to each director, addressed to him at his residence or usual
place of business, at least two (2) days before the day on which the meeting is
to be held or shall be delivered to him personally or given to him orally not
later than the day before the day on which the meeting is to be held. A notice,
or waiver of notice, except for the purposes described in Section 8 of this
Article III, need not specify the purpose of the meeting.
c. Notice of any special meeting shall not be required to be given to
any director who shall attend such meeting without protesting prior thereto or
at its commencement, the lack of notice to him, or who submits a signed waiver.
SECTION 5 - CHAIRMAN:
At all meetings of the Board of Directors, the Chairman of the Board,
if any and if present shall preside. If there shall be no Chairman or he shall
be absent, then the President shall preside, and in his absence a Chairman
chosen by the Directors shall preside.
SECTION 6 - QUORUM AND ADJOURNMENTS:
a. At all meetings of the Board of Directors, the presence of a
majority of the entire Board shall be necessary and sufficient to constitute a
quorum for the transaction of business except as otherwise provided by law or by
these By-Laws.
b. A majority of the directors present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the same
from time to time without notice until a quorum shall be present.
SECTION 7 - MANNER OF ACTING:
a. At all meetings of the Board of Directors, each director present
shall have one vote, irrespective of the number of shares of stock, if any,
which he may hold.
b. Except as otherwise provided by statute, by the Articles of
Incorporation or by these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
4
<PAGE> 5
SECTION 8 - VACANCIES:
Any vacancy in the Board of Directors occurring by reason of an
increase in the number of directors or by reason of the death, resignation,
disqualification, removal, unless a vacancy created by the removal of a director
by the shareholders shall be filled by the shareholders at the meeting at which
the removal was effected, or inability to act of any director or otherwise,
shall be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
SECTION 9 - RESIGNATION:
Any director may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the Corporation. Unless
otherwise specified in such written notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or such officer and the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 10 - REMOVAL:
Any director may be removed with or without cause at any time by the
shareholders, at a special meeting of the shareholders called for that purpose,
and may be removed, for cause, by action of the Board.
SECTION 11 - SALARY:
No stated salary shall be paid to directors, as such for the their
services but, by resolution of the Board of Directors, a fixed sum and expenses
of attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board; provided, however, that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefore.
SECTION 12 - CONTRACTS:
a. In the absence of fraud, no contract or other transaction between
this Corporation and any other corporation shall be impaired, affected or
invalidated, nor shall any director be liable in any way by reason of the fact
that any one or more of the directors of the Corporation is or are interested
in, or is a director or officer, or are directors or officers of such other
corporation, provided that such facts are disclosed or made known to the Board
of Directors.
5
<PAGE> 6
b. Any director, personally and individually, may be a party to or may
have an interest in any contract or transaction of this Corporation and no
director shall be liable in any way by reason of such interest, provided that
the fact of such interest be disclosed or made known to the Board of Directors,
and provided that the Board of Directors shall authorize, approve or ratify such
contract or transaction by majority vote of the Directors voting. If there are
any Directors not having a direct interest in such transaction present to vote,
any Director having an interest in such transaction shall abstain from voting on
such action, even though, such director or directors may be counted in
determining the presence of a quorum at such meeting. This Section shall not be
construed to impair or invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law, common, statutory or
otherwise, applicable thereto.
SECTION 13 - COMMITTEES:
The Board of Directors, by resolution adopted by a majority of the
entire Board, may from time to time designate from among its members an
executive committee and such other committees, and alternate members thereof, as
they deem desirable, with such powers and authority, to the extent permitted by
law, as may be provided in such resolution. Each such committee shall serve at
the pleasure of the Board.
ARTICLE IV - OFFICERS
SECTION 1 - NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE:
a. The officers of the Corporation shall consist of a President, a
Secretary and such other officers or assistant officers, including a Chairman of
the Board of Directors, a Treasurer and one or more Vice Presidents, as the
Board of Directors may from time to time deem advisable. Any officer, other than
the Chairman of the Board of Directors, may be, but is not required to be a
director of the Corporation. Any two or more offices may be held by the same
person, unless state law otherwise dictates.
b. The officers of the Corporation shall be elected by the Board of
Directors at the regular annual meeting of the Board following the annual
meeting of shareholders.
c. Each officer shall hold office until the annual meeting of the Board
of Directors next succeeding his election and until his successor shall have
been elected and qualified or until his death, resignation or removal.
SECTION 2 - RESIGNATION:
Any officer may resign at any time by giving written notice of such
resignation to the Board of Directors or to the President or the Secretary of
the Corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
by such officer and the acceptance of such resignation shall not be necessary to
make it effective.
6
<PAGE> 7
SECTION 3 - REMOVAL:
Any officer may be removed, either with or without cause, and a
successor elected by the Board at any time.
SECTION 4 - VACANCIES:
A vacancy in any office by reason of death, resignation, inability to
act, disqualification or any other cause, may at any time be filled for the
unexpired portion of the term by the Board of Directors.
SECTION 5 - DUTIES OF OFFICERS:
Officers of the Corporation shall, unless otherwise provided by the
Board of Directors, each have such powers and duties as generally pertain to
their respective offices as well as such powers and duties as may be set forth
in these By-Laws or may, from time to time, be specifically conferred or imposed
by the Board of Directors. The President shall be the chief executive officer of
the Corporation.
SECTION 6 - SURETIES AND BONDS:
In case the Board of Directors shall so require, any officer, employee
or agent of the Corporation shall execute to the Corporation a bond in such sum
and with such surety or sureties as the Board of Directors may direct,
conditioned on the faithful performance of their duties to the Corporation,
including responsibility for negligence and for the accounting for all property,
funds or securities of the Corporation which may come into their hands.
SECTION 7 - SHARES OF OTHER CORPORATIONS:
Whenever the Corporation is the holder of shares of any other
corporation, any right or power of the Corporation as such shareholder,
including the attendance, acting and voting at shareholders' meetings and
execution of waivers, consents, proxies or other instruments, may be exercised
on behalf of the Corporation by the President, any Vice President or such other
person as the Board of Directors may authorize.
ARTICLE V - SHARES OF STOCK
SECTION 1 - CERTIFICATE OF STOCK:
a. The certificates representing shares of the Corporation shall be in
such form as shall be adopted by the Board of Directors and shall be numbered
and registered in the order issued. They shall bear the holder's name and the
number of shares and shall be signed by (I) the Chairman of the Board or the
President or a Vice President and (II) the Secretary or any Assistant Secretary.
b. No certificate representing shares shall be issued until the full
amount of consideration therefore has been paid, except as otherwise permitted
by law.
7
<PAGE> 8
SECTION 2 - LOST OR DESTROYED CERTIFICATES:
The holder of any certificate representing shares of the Corporation
shall immediately notify the Corporation of any loss or destruction of the
certificate representing the same. The Corporation may issue a new certificate
in the place of any certificate theretofore issued by it, which is certified by
the owner to have been lost or destroyed. The Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the Board may
direct and with such surety or sureties as may be satisfactory to the Board to
indemnify the Corporation against any claims, loss, liability or damage it may
suffer on account of the issuance of the new certificate. A new certificate may
be issued without requiring any such certification or bond when in the judgment
of the Board of Directors, it is proper so to do.
SECTION 3 - TRANSFERS OF SHARES:
a. Transfers of shares of the Corporation shall be made on the share
records of the Corporation only by the holder of record thereof, in person or by
his duly authorized attorney, upon surrender for cancellation of the certificate
or certificates representing such shares, with an assignment or power of
transfer endorsed thereon or delivered therewith duly executed, with such proof
of the authenticity of the signature and of authority to transfer and of payment
of transfer taxes which may be required.
b. The Corporation shall be entitled to treat the holder of record of
any share or shares as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other claim
to, or interest in, such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
SECTION 4 - RECORD DATE:
In lieu of closing the share records of the Corporation, the Board of
Directors may fix, in advance, a date not exceeding fifty days, nor less than
ten days, as the record date for the determination of shareholders entitled to
receive notice of, or to vote at, any meeting of shareholders, or to consent to
any proposal without a meeting or for the purpose of determining shareholders
entitled to receive payment of any dividends, or allotment of any rights, or for
the purpose of any other action. If no record date is fixed, the record date for
the determination of stockholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the day next preceding the
day on which notice is given or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the resolution of
the directors relating thereto is adopted. When a determination of shareholders
of record entitled to notice of or to vote any meeting of shareholders has been
made as provided for herein, such determination shall apply to any adjournment
thereof, unless the directors fix a new record date for the adjourned meeting.
8
<PAGE> 9
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of
any funds available therefore as often, in such amounts and at such time or
times as the Board of Directors may determine. Before making any distribution of
profits of the Corporation, there may be set aside such sums as the Board of
Directors, from time to time, in their sole discretion, may deem necessary to be
in the best interest of the Corporation, to be held as a reserve fund for any
purpose determined by the Board of Directors, which shall be held apart until
otherwise released from reserves or authorized disbursed by the Board of
Directors.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall end September 30, unless
subsequently changed by the Board of Directors, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The Corporate Seal, if any, shall be in such form as shall be approved
from time to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
SECTION 1 - BY SHAREHOLDERS:
All By-Laws of the Corporation shall be subject to alteration or repeal
and new By-Laws may be made by a majority vote of the shareholders at the time
entitled to vote in the election of Directors.
SECTION 2 - BY DIRECTORS:
The Board of Directors shall have power to make, adopt, alter, amend
and repeal, from time to time, By-Laws of the Corporation; provided, however,
that the shareholders entitled to vote with respect thereto as in this Article
IX, Section 1, may alter, amend or repeal By-Laws made by the Board of
Directors, except that the Board of Directors shall have no power to change the
quorum for meeting of shareholders or of the Board of Directors or to change any
provisions of the By-Laws with respect to the removal of Directors or the
filling of vacancies in the Board resulting from the removal by the
shareholders. If any By-Laws regulating an impending election of Directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of Directors,
the By-Laws so adopted, amended or repealed, together with a concise statement
of the changes made.
9
<PAGE> 10
ARTICLE X - SAVINGS CLAUSE
Should any part, clause, provision or condition of these By-Laws be
held to be void, invalid or inoperative, for any reason, then such invalidity
shall not effect any other part, clause, provision or condition hereof, but the
remainder of these By-Laws shall be as effective as though such part, clause,
provision or condition had not been contained herein.
KNOW ALL MEN BY THESE PRESENTS
The undersigned certifies the foregoing By-Laws have been adopted as
the amended By-Laws of the Corporation at a Special Meeting of the Board of
Directors on March 31, 1998.
Dated
------------------------
- -----------------------------
Secretary
10
<PAGE> 1
Exhibit 2.3
FIRST AMENDMENT TO THE BY-LAWS
OF
FUTUREONE, INC., A NEVADA CORPORATION
Section 11 of Article III of the By-Laws of the Corporation be, and it
hereby is amended as follows:
Section 11. Fees and Compensation. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
board.
<PAGE> 1
Exhibit 2.4
SECOND AMENDMENT TO THE BY-LAWS
OF
FUTUREONE, INC., A NEVADA CORPORATION
This Article IX of the By-Laws of the Corporation be, and it hereby is
amended as follows:
ARTICLE IX --INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. GENERAL.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. DERIVATIVE ACTIONS.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including amounts paid in
settlement and attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
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 such action or suit was brought or other court of competent jurisdiction
shall determine upon application that, in view of all the circumstances of the
case, the person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
1
<PAGE> 2
3. INDEMNIFICATION IN CERTAIN CASES.
To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2 of this Article IX,
or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
4. PROCEDURE.
Any indemnification under Sections 1 and 2 of this Article IX (unless
ordered by a court or advanced pursuant to Section 5 of this Article IX) shall
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. Such determination shall be made (a) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (b) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
5. ADVANCES FOR EXPENSES.
Expenses incurred by a director, officer, employee, or agent of the
Corporation in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation as they are incurred and in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay the amount if
it shall be ultimately determined by a court of competent jurisdiction that he
is not entitled to be indemnified by the Corporation as authorized in this
Article IX.
6. RIGHTS NOT-EXCLUSIVE.
The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to the other Sections of this Article IX shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any law, bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding such
office, except that indemnification, unless ordered by a court pursuant to
Section 2 of this Article IX or for advancement of expenses made pursuant to
Section 5 of this Article IX, may not be made to or on behalf of any director or
officer if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was material
to the cause of action.
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7. INSURANCE.
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and liability and expenses incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article IX.
8. DEFINITION OF CORPORATION.
For the purposes of this Article IX, references to "the Corporation"
include, in addition to the resulting corporation, all constituent corporations
(including any constituent of a constituent) absorbed in consolidation or merger
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees and agents so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article IX with respect to the resulting or surviving
corporation as he or she would have with respect to such constituent corporation
if its separate existence had continued.
9. OTHER DEFINITIONS.
For purposes of this Article IX, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
IX.
10. CONTINUATION OF RIGHTS.
The indemnification and advancement of expenses provided by, or granted
pursuant to this Article IX shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person. No amendment to or repeal of
this Article IX shall apply to or have any effect on, the rights of any
director, officer, employee or agent under this Article IX which rights come
into existence by virtue of acts or omissions of such director, officer,
employee or agent occurring prior to such amendment or repeal.
This Article X of the By-Laws of the Corporation be, and it hereby is
amended as follows:
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ARTICLE X - AMENDMENTS
BY SHAREHOLDERS:
All By-Laws of the Corporation shall be subject to alteration or repeal
and new By-Laws may be made by a majority vote of the shareholders at the time
entitled to vote in the election of Directors.
BY DIRECTORS:
The Board of Directors shall have power to make, adopt, alter, amend
and repeal, from time to time, By-Laws of the Corporation; provided, however,
that the shareholders entitled to vote with respect thereto as in this Article
X, Section 1, may alter, amend or repeal By-Laws made by the Board of Directors,
except that the Board of Directors shall have no power to change the quorum for
meeting of shareholders or of the Board of Directors or to change any provisions
of the By-Laws with respect to the removal of Directors or the filling of
vacancies in the Board resulting from the removal by the shareholders. If any
By-Laws regulating an impending election of Directors is adopted, amended or
repealed by the Board of Directors, there shall be set forth in the notice of
the next meeting of shareholders for the election of Directors, the By-Laws so
adopted, amended or repealed, together with a concise statement of the changes
made.
This Article XI of the By-Laws of the Corporation be, and it hereby is
incorporated herein:
ARTICLE XI - SAVINGS CLAUSE
Should any part, clause, provision or condition of these By-Laws be
held to be void, invalid or inoperative, for any reason, then such invalidity
shall not effect any other part, clause, provision or condition hereof, but the
remainder of these By-Laws shall be as effective as though such part, clause,
provision or condition had not been contained herein.
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Exhibit 5.1
VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT made at Phoenix, Arizona on July 25, 1998, among
World's Fare, Inc., a Nevada corporation, dba FutureOne (the "Company"), and
Blackwater Capital Group, L.L.C., the stockholders of the Company who now or
hereafter become parties hereto (the "Stockholders"), and Kendall Q. Northern
and Earl J. Cook and their successors in trust (the "Trustee" or "Co-Trustees").
Whereas in order to secure continuity and stability of the Company's
policy and management, the stockholders deem it advisable to deposit all or part
of their stock in the Company with the Trustee, and
Whereas the Trustee has consented to act under this Agreement for the
purposes herein provided,
It is therefore agreed:
1. Agreement. Copies of this Agreement, and of every supplemental or
amendatory agreement, shall be filed in the Company's principal office in
Phoenix, Arizona. All such copies shall be open to the inspection of the
Company's stockholders daily during business hours. All voting trust
certificates issued as hereinafter provided shall be issued, received, and held
subject to all the terms of this Agreement. Every person, firm, or corporation
entitled to receive voting trust certificates representing shares of capital
stock, and their transferees and assigns, upon accepting the voting trust
certificates issued hereunder, shall be bound by the provisions of this
Agreement.
2. Transfer of stock to trustee.
(a) The Stockholders shall deposit with the Trustee certificates for
their company stock as set forth after their respective signatures to this
Agreement. The Stockholders may at any time deposit additional certificates for
the Company's stock with the Trustee, but no stockholder shall be required to
deposit certificates for all of his stock unless he so elects. No stock shall be
deposited hereunder except stock having general voting powers, as provided in
the Articles of Incorporation or the Bylaws. All such stock certificates shall
be endorsed, or accompanied by such instruments of transfer as to enable the
Trustee to cause such certificates to be transferred into the name of the
Trustee, as hereinafter provided. On receipt by the Trustee of the certificates
for any such shares and their transfer into the name of the Trustee, the Trustee
shall hold them subject to the terms of this Agreement, and shall thereupon
issue and deliver to the Stockholders voting trust certificates for the shares
so deposited.
(b) All certificates for stock of the Company transferred and
delivered to the Trustee pursuant to this Agreement shall be surrendered by the
Trustee to the Company and canceled, and new certificates therefore shall be
issued to and held by the Trustee in the name of "Kendall Q. Northern and Earl
J. Cook as Voting Co-Trustees."
3. Voting trust certificates. The voting trust certificates shall be in
the following form.
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No.____
World's Fare, Inc. dba FutureOne
A Nevada Corporation
Voting Trust Certificate for Capital Stock
This certifies that __________________ or registered assigns is
entitled to all the benefits arising from the deposit with the Trustee,
under the Voting Trust Agreement hereinafter mentioned, of certificates
for _____ shares of the capital stock of World's Fare, Inc., a Nevada
corporation, dba FutureOne (the "Company"), as provided in such Trust
Agreement and subject to the terms thereof. The registered holder
thereof, or assigns, is entitled to receive payment equal to the amount
of cash dividends, if any, received by the Trustee upon the number of
shares of capital stock of the Company in respect to which this
certificate is issued. Dividends received by the Trustee in the
Company's common or other stock having general voting powers shall be
payable in voting trust certificates, in form similar hereto. Until the
Trustee has delivered the stock held under such Trust Agreement to the
holders of the trust certificates, or to the Company, as specified in
such Trust Agreement, the Trustee shall possess and be entitled to
exercise all rights and powers of an absolute owner of such stock,
including the right to vote thereon for every purpose, and to execute
consents in respect hereof for every purpose, it being expressly
stipulated that no voting right passes to the owner hereof, or his
assigns, under this certificate or any agreement, expressed or implied.
This certificate is issued, received, and held under, and the rights of
the owner hereof are subject to, the terms of a Voting Trust Agreement
dated July 25, 1998, between the Company and Kendall Q. Northern and
Earl J. Cook, of Phoenix, Arizona, and their successors in trust, and
various holders of similar certificates. (Copies of the Voting Trust
Agreement, and of every agreement amending or supplementing it, are on
file in the Company's principal office in Phoenix, Arizona, and shall
be open to the inspection of the Company's stockholders daily during
business hours.) The holder of this certificate, by acceptance hereof,
assents and is bound to all the provisions of the Voting Trust
Agreement as if he had signed it in person.
In the event of the dissolution or total or partial liquidation of the
Company, the monies, securities, or property received by the Trustee in
respect to the stock deposited under such Trust Agreement shall be
distributed among the registered holders of trust certificates in
proportion to their interests as shown by the books of the Trustee.
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In the event that the Trustee receives any dividend or distribution
other than in cash or Company stock having general voting powers, the
Trustee shall distribute the same to the registered holders of voting
trust certificates, on the date of such distribution, or to the
registered certificate holders at the close of business on the date
fixed by the Trustee for taking a record to determine the certificate
holders entitled to such distribution, pursuant to the provisions of
paragraph 6 of the Trust Agreement. Such distribution shall be made to
the certificate holders ratably in accordance with the number of shares
represented by their respective voting trust certificates.
Stock certificates for the number of shares of capital stock then
represented by this certificate, or the net proceeds in cash or
property of such shares, shall be due and deliverable hereunder upon
the termination of such Trust Agreement as provided therein.
The Voting Trust Agreement shall continue in full force and effect
until July 25, 2008 (subject to extension as hereinafter set forth),
unless terminated prior thereto, as provided in the agreement. The
agreement may be extended for successive ten-year periods, as provided
therein.
This certificate may only be transferred upon receipt of written
permission from the Company, and the Company may, in its sole
discretion, withhold said permission. In the event permission is
granted, this certificate may transferable on the books of the Trustee
at his office in Phoenix, Arizona (or elsewhere as designated by the
Trustee), by the holder thereof, either in person or by attorney duly
authorized, in accordance with the rules established for that purpose
by the Trustee, in its sole discretion, and on surrender of this
certificate properly endorsed. Title to this certificate when duly
endorsed shall, to the extent permitted by law and the Trustee, be
transferable with the same effect as in the case of negotiable
instrument. Each holder hereof agrees that delivery of this
certificate, duly endorsed by any holder hereof, shall vest title
hereto and all rights hereunder in the transferee; provided, however,
that the Trustee may treat the registered holder hereof, or when
presented duly endorsed in blank the bearer hereof, as the absolute
owner hereof, and all rights and interests represented hereby, for all
purposes. The Trustee shall not be bound or affected by any notice to
the contrary, or by any notice of any trust, whether express or
implied, or constructive, or of any charge or equity respecting the
title or ownership of this certificate, or the share of stock
represented hereby; provided, however, that no delivery of stock
certificates hereunder, or the proceeds thereof, shall be made without
surrender hereof properly endorsed.
This certificate shall not be valid for any purpose until duly signed
by the Trustee.
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The word "Trustee" as used in this certificate means the
Trustee or the successor Trustee acting under such Voting
Trust Agreement.
In witness whereof the Trustee has signed this certificate on
__________, 19__.
______________________________
Trustee
(Form of Assignment):
For value received ____________ hereby assigns the within
certificate, and all rights and interests represented thereby,
to _________________ and appoints ___________ attorney to
transfer this certificate on the books of the Trustee
mentioned therein, with full power of substitution.
Dated:
_______________________(Seal)
In presence of:
________________________________
________________________________
Note: The signature to this assignment must correspond with
the name as written upon the face of this certificate in every
particular, without alteration, enlargement, or any change
whatever. All endorsements, in the discretion of the Trustee,
shall be guaranteed by a bank or trust company satisfactory to
the Trustee.
4. Transfer of certificates.
(a) This certificate may only be transferred upon receipt of
written permission from the Company, and the Company may, in its sole
discretion, withhold said permission. In the event permission is granted, the
voting trust certificates may be transferable at the Trustee's principal office
in Phoenix, Arizona (and at such other offices as the Trustee may designate by
an instrument signed by him and sent by mail to the registered holders of voting
trust certificates), on the books of the Trustee, by the registered owner
thereof, either in person or by attorney thereto duly authorized, upon surrender
thereof, according to the rules established for that purpose by the Trustee, in
its sole discretion. The Trustee may treat the registered holders as owner
thereof for all purposes, but he shall not be required to deliver stock
certificates hereunder without the surrender of such voting trust certificates.
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(b) If a voting trust certificate is lost, stolen, mutilated,
or destroyed, the Trustee, in his discretion, may issue a duplicate of such
certificate upon receipt of: (1) evidence of such fact satisfactory to him; (2)
indemnity satisfactory to him; (3) the existing certificate, if mutilated; and
(4) his reasonable fees and expenses in connection with the issuance of a new
trust certificate. The Trustee shall not be required to recognize any transfer
of voting a trust certificate not made in accordance with the provisions hereof,
unless the person claiming such ownership has produced indicia of title
satisfactory to the Trustee, and has in addition deposited with the Trustee
indemnity satisfactory to him.
5. Termination procedure.
(a) Upon the termination of this Agreement at any time, as
hereinafter provided, the Trustee, at such time as he may choose during the
period commencing 20 days before and ending 20 days after such termination,
shall mail written notice of such termination to the registered owners of the
voting trust certificates, at the address appearing on the Trustee's transfer
books. After the date specified in any such notice (which dates shall be fixed
by the Trustee), the voting trust certificates shall cease to have any effect,
and their holders shall have no further rights under this Agreement other than
to receive certificates for shares of the Company's stock or other property
distributable under the terms hereof and upon the surrender of such voting trust
certificates.
(b) Within 30 days after the termination of this Agreement,
the Trustee shall deliver, to the registered holders of all voting trust
certificates, certificates for the number of shares of the Company's capital
stock represented thereby, upon the surrender thereof properly endorsed, such
delivery to be made in each case at the Trustee's office.
(c) At any time subsequent to 30 days after the termination of
this Agreement, the Trustee may deposit with the Company sock certificates
representing the number of shares of capital stock represented by the voting
trust certificates then outstanding, with authority in writing to the Company to
deliver such stock certificates in exchange for voting trust certificates
representing a like number of shares of the capital stock of the Company. Upon
such deposit all further liability of the Trustee for the delivery of such stock
certificates and the delivery or payment of dividends upon surrender of the
voting trust certificates shall cease, and the Trustee shall not be required to
take any further action hereunder.
6. Dividends.
(a) Prior to the termination of this Agreement, the holder of
each voting trust certificate shall be entitled to receive payments equal to the
cash dividends, if any, received by the Trustee upon a like number and class of
shares of the Company's capital stock as is called for by each such voting trust
certificate. If any dividend in respect of the stock deposited with the Trustee
is paid, in whole or in part, in the Company's stock having general voting
powers, the Trustee shall likewise hold, subject to the terms of this Agreement,
the certificates for stock which are received by him on account of such
dividend. The holder of each voting trust certificate representing stock on
which such stock dividend has been paid shall be entitled to receive a voting
trust certificate issued under this Agreement for the number of shares and class
of stock received as such dividend with respect to the shares represented by
such voting trust
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certificate. Holders entitled to receive the dividends described above shall be
those registered as such on the Trustee's transfer books at the close of
business on the day fixed by the Company for the taking of a record to determine
those holders of its stock entitled to receive such dividends, or if the Trustee
has a fixed date, as hereinafter in this paragraph provided, for the purpose of
determining the holders of voting trust certificates entitled to receive such
payment or distribution then registered as such at the close of business on the
date so fixed by the Trustee.
(b) If any dividend in respect of the stock deposited with the
Trustee is paid other than in cash or in capital stock having general voting
powers, then the Trustee shall distribute the same among the holders of voting
trust certificates registered as such at the close of business on the day fixed
by the Trustee for taking a record to determine the holders of voting trust
certificates entitled to receive such distribution. Such distribution shall be
made to such holders of voting trust certificates ratably, in accordance with
the number of shares represented by their respective voting trust certificates.
(c) The Trustee may temporarily close its transfer books for a
period not exceeding 20 days preceding the date fixed for the payment or
distribution of dividends or the distribution of assets or rights, or at any
other time in the Trustee's discretion. In lieu of providing for the closing of
the books against the transfer of voting trust certificates, the Trustee may fix
a date not exceeding 20 days preceding any date fixed by the Company for the
payment or distribution of dividends, or for the distribution of assets or
rights, as a record date for the determination of the holders of voting trust
certificates entitled to receive such payment or distribution. The holders of
voting trust certificates of record at the close of business on such date shall
exclusively be entitled to participate in such payments or distribution.
(d) In lieu of receiving cash dividends upon the capital stock
of the Company and paying the same to the holders of voting trust certificates
pursuant to the provisions of this Agreement, the Trustee may instruct the
Company in writing to pay such dividends to the holders of the voting trust
certificates. Upon receipt of such written instructions, the Company shall pay
such dividends directly to the holders of the voting trust certificates. Upon
such instructions being given by the Trustee to the Company, and until revoked
by the Trustee, all liability of the Trustee with respect to such dividends
shall cease. The Trustee may at any time revoke such instructions and by written
notice to the Company direct it to make dividend payments to the Trustee.
7. Subscription rights. If any stock or other securities of the
Company are offered for subscription to the holders of its capital stock
deposited hereunder, the Trustee, promptly upon receipt of notice of such offer,
shall mail a copy thereof to each holder of the voting trust certificates. Upon
receipt by the Trustee, at least five days prior to the last day fixed by the
Company for subscription and payment, of a request from any such registered
holder of voting trust certificates to subscribe in his behalf, accompanied with
the sum of money required to pay for such stock or securities (not in excess of
the amount subject to subscription in respect of the shares represented by the
voting trust certificate held by such certificate holder), the Trustee shall
make such subscription and payment. Upon receiving from the Company the
certificates for shares or securities so subscribed for, the Trustee shall issue
to such holder a voting trust certificate in respect thereof if the shares or
securities do not have general voting powers. If, however, the shares or
securities do not have general voting powers, the Trustee shall mail or
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<PAGE> 7
deliver such securities to the certificate holder in whose behalf the
subscription was made, or may instruct the Company to make delivery directly to
the certificate holder entitled thereto.
8. Dissolution of Company. In the event of the dissolution of, or
total or partial liquidation of the Company, whether voluntary or involuntary,
the Trustee shall receive the monies, securities, rights, or property to which
the holders of the Company's capital stock deposited hereunder are entitled, and
shall distribute the same among the registered holders of voting trust
certificates in proportion to their interests, as shown by the books of the
Trustee. Alternatively, the Trustee may in his discretion deposit such monies,
securities, rights, or property with any bank or trust company doing business in
Phoenix, Arizona, with authority and instructions to distribute the same as
above provided, and upon such deposit all further obligations or liabilities of
the Trustee in respect of such monies, securities, rights, or property so
deposited shall cease.
9. Reorganization of company. If the Company is merged into or
consolidated with another corporation, or all or substantially all of its assets
are transferred to another corporation, then in connection with such transfer
the term "Company" for all purposes of this Agreement shall be deemed to include
such successor corporation, and the Trustee shall receive and hold under this
Agreement any stock of such successor corporation received on account of the
ownership, as Trustee hereunder, of the stock held hereunder prior to such
mergers, consolidation, and transfer. Voting trust certificates issued and
outstanding under this Agreement at the time of such merger, consolidation, or
transfer may remain outstanding, or the Trustee may, in his discretion,
substitute for such voting trust certificates new voting trust certificates in
appropriate form, and the terms "stock" and "capital stock" as used herein shall
be taken to include any stock which may be received by the Trustee in lieu of
all or any part of the Company's capital stock.
10. Rights of Trustee.
(a) Until the actual delivery to the holders of voting trust
certificates issued hereunder of stock certificates in exchange therefore, and
until the surrender of the voting trust certificates upon cancellation, the
Trustee shall have the right, subject to the provisions of this paragraph
hereinafter set forth, to exercise, in person or by his nominees or proxies, all
stockholders' voting rights and powers in respect of all stock deposited
hereunder, and to take part in or consent to any corporate or stockholders'
action of any kind whatsoever. The right to vote shall include the right to vote
for the election of directors, and in favor of or against any resolution or
proposed action of any character whatsoever, which may be presented at any
meeting or require the consent of the Company's stockholders. Without limiting
such general right, it is understood that such action or proceeding may include,
upon terms satisfactory to the Trustee or to his nominees or proxies thereto
appointed by him, mortgaging, creating a security interest in, and pledging of
all or any part of the Company's property, the lease or sale of all or any part
of its property, for cash, securities, or other property, and the dissolution of
the Company, or its consolidation, merger, reorganization, or recapitalization.
(b) In voting the stock held by him hereunder either in person
or by his nominees or proxies, the Trustee shall exercise his best judgment to
select suitable directors of the Company, and shall otherwise, insofar as he may
as a stockholder of the Company, take such
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part or action in respect to the management of its affairs as he may deem
necessary so as to be kept advised on the affairs of the Company and its
management. In voting upon any matter that may come before him at any
stockholders' meeting, the Trustee shall exercise like judgment. The Trustee,
however, shall not be personally liable for any action taken pursuant to his
vote or any act committed or omitted to be done under this Agreement, provided
that such commission or omission does not amount to willful misconduct on his
part and that he at all times exercises good faith in such matters.
11. Trustees.
(a) The Trustee (and any successor Trustee) may at any time
resign by mailing to the registered holders of voting trust certificates a
written resignation, to take effect ten days thereafter or upon its prior
acceptance. Upon the death of both Kendall Q. Northern and Earl J. Cook, or upon
their resignations as Co-Trustees, there shall be during the remainder of this
Agreement three trustees acting together, and any act, decision, or vote by the
successor Trustees shall be deemed the act, decision, or vote of such Trustees
if concurred in by a majority of them. Kendall Q. Northern and Earl J. Cook
shall have the right at any time hereafter to designate three trustees to
succeed them as Trustees under this Agreement upon their death or resignation.
Such designation may be made by filing in the Company's principal office, in
Phoenix, Arizona, a deed of appointment of such successor Trustees, duly
executed by them, under seal, and acknowledged as deeds for the conveyance of
real estate are required to be acknowledged under the laws of Arizona then in
force. Any designation by Kendall Q. Northern and Earl J. Cook of successor
Trustees may be revoked in whole or in part by them at any time, without notice
to the person so designated, by filing a deed of revocation in the same form as
the deed of appointment herein above provided for and in the same places.
Whether or not the persons designated by Kendall Q. Northern and Earl J. Cook
have assumed their duties as Trustees hereunder, Kendall Q. Northern and Earl J.
Cook, upon revoking such designation, or upon the death or resignation of
successor Trustees, shall have the right to designate their successor Trustees.
Upon the death or resignation of both Kendall Q. Northern and Earl J. Cook, the
three Trustees designated by them, as hereinabove provided, shall become
successor Trustees hereunder. Upon their death or resignation without having
appointed three Trustees to succeed them (or if they have appointed such
Trustees but have revoked the appointment of any of them, or any of them has
died or resigned and Kendall Q. Northern and Earl J. Cook have failed to appoint
a successor), and upon the death or resignation of any successor Trustee acting
hereunder, further Trustees under this Agreement to make up the necessary three
in number shall be designated by the registered holders of voting trust
certificates issued and outstanding under this Agreement representing a majority
of the number of shares of stock standing in the name of the Trustee hereunder.
(b) The rights, powers, and privileges of the Trustee named
hereunder shall be possessed by the successor Trustees, with the same effect as
though such successors had originally been parties to this Agreement. The word
"Trustee" as used in this Agreement, means the Trustee or any successor Trustees
acting hereunder, and shall include both the single and plural number. The words
"he," "him," and "his," as used in this Agreement in reference to the Trustee
shall mean "they," "them," and "their," respectively, when more than one Trustee
is acting hereunder.
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12. Term.
(a) This Agreement shall continue in effect until July 25,
2008 (subject to extension as hereinafter set forth), but shall terminate upon
the following: (1) the execution and acknowledgement (as deeds for the
conveyance of real estate are required to be acknowledged under the laws of
Arizona then in effect) by the Trustee hereunder of a deed of termination, duly
filed in the Company's office in Phoenix, Arizona; or (2) a formal request of
termination in writing by the registered holders of all voting trust
certificates outstanding under this agreement to the Trustee, and the execution
and acknowledgement of a deed of termination (as deeds for the conveyance of
real estate are required to be acknowledged under the laws of Arizona then in
effect) by said registered holders of all the voting trust certificates, duly
filed in the Company's principal office in Phoenix, Arizona. Upon receipt of
said written request of termination and deed of termination from the registered
holders, the Trustee, in his sole discretion, may elect to terminate the trust,
provided that upon said request by the registered holders, the Trustee shall not
unreasonably refuse to terminate the trust. Further, this Agreement shall be
terminated in the event of a registered public offering as contemplated under
Section 1.4 of the Stock Purchase Agreement dated concurrently herewith.
(b) At any time within two years prior to July 25, 2008, or at
any time within two years prior to the time of expiration hereof as theretofore
extended, one or more holders of voting trust certificates hereunder may, by
agreement in writing and with the Trustee's written consent, extend the duration
of this Agreement for an additional period not exceeding ten years. In the event
of such extension, the Trustee shall, prior to the time of expiration as
hereinabove provided, as originally fixed, or as theretofore extended, as the
case may be, file in the Company's principal office in Phoenix, Arizona, a copy
of such extension agreement, and of the consent thereto. Thereupon the duration
of this voting trust agreement shall be extended for the period fixed by such
extension agreement, provided, however, that no such extension agreement shall
extend the term of this Agreement beyond the maximum period then permitted by
applicable law or affect the rights or obligations of the persons not parties
thereto.
13. Compensation and reimbursement of trustee. The Trustee shall
serve without compensation. The Trustee shall have the right to incur and pay
such reasonable expenses and charges, to employ and pay such agents, attorneys,
and counsel as he may deem necessary and proper to effectuate this Agreement.
All such expenses or charges incurred by and due to the Trustee may be deducted
from the dividends or other moneys or property received by him on the stock
deposited hereunder. Nothing herein contained shall disqualify the Trustee or
successor Trustees, or incapacitate them from serving the Company or any of its
subsidiaries as officer or director, or in any other capacity, and in any such
capacity receive compensation.
14. Notice.
(a) Unless otherwise specifically provided herein, any notice
to or communication with the holders of the voting trust certificates hereunder
shall be deemed to be sufficiently given or made if enclosed in postpaid
envelopes (regular not registered mail) addressed to such holders at their
respective addresses appearing on the Trustee's transfer books, and deposited in
any post office or post office box. The addresses of the holders of voting trust
certificates, as shown on the Trustee's transfer books, shall in all cases be
deemed to be the
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addresses of voting trust certificate holders for all purposes under this
Agreement, without regard to what other or different addresses the Trustee may
have for any voting trust certificate holder on any other books or records of
the Trustee. Every notice so given shall be effective, whether or not received,
and the date of mailing shall be the date such notice is deemed given for all
purposes.
(b) Any notice to the Company hereunder shall be sufficient if
enclosed in a postpaid envelope and sent by registered mail to the Company
addressed as follows: 4250 East Camelback Road, Suite K-192, Phoenix, Arizona
85018, or to such other address as the Company may designate by notice in
writing to the Trustee.
(c) Any notice to the Trustee hereunder may be enclosed in a
postpaid envelope and sent by registered mail to the Trustee, addressed to him
at such addresses he may from time to time furnish in writing to the Company,
and if no such address has been so furnished by the Trustee, then to him in care
of the Company.
(d) All distributions of cash, securities, or other property
hereunder by the Trustee to the holders of voting trust certificates may be
made, in the Trustee's discretion, by mail (regular or registered mail, as the
Trustee may deem advisable), in the same manner as hereinabove provided for the
giving of notices to the holders of voting trust certificates.
15. Entire agreement. This Agreement supersedes all agreements
previously made between the parties relating to its subject matter. There are no
other understandings or agreements between them.
16. Non-Waiver. No delay or failure by a party to exercise any
right under this Agreement, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right, unless otherwise expressly
provided herein.
17. Headings. Headings in this Agreement are for convenience only
and shall not be used to interpret or construe its provisions.
18. Governing law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Arizona.
19. 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.
20. Binding effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of each of the parties and their
respective legal representatives, successors and assigns.
10
<PAGE> 11
In witness whereof the Company and the Trustee have signed and sealed
this Agreement, and the Stockholders have signed and sealed this Agreement and
have stated the number of shares of capital stock of the company deposited
respectively by them.
___________________________________
World's Fare, Inc., dba FutureOne
By: Kendall Q. Northern
President
___________________________________
Kendall Q. Northern
Co-Trustee
___________________________________
Earl J. Cook
Co-Trustee
___________________________________
Blackwater Capital Group, L.L.C.
By: Steven R. Green
Managing Member
___________________________________
Blackwater Capital Group, L.L.C.
By: John B. Sadler, Jr.
Member
11
<PAGE> 1
Exhibit 6.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made this 27th day of July 1998, , by and between World's Fare,
Inc. dba FutureOne, a Nevada corporation, FutureOne, Inc., an Arizona
corporation (hereinafter jointly called "Company") and Kendall Q. Northern
(hereinafter called "Employee") shall be effective as of July 26, 1998.
RECITALS:
WHEREAS, The Company, located in Phoenix Arizona, is a full service
communications company providing Internet access, Web Site development and
hosting, custom software development, computer sales and services and
communications and networking solutions; and
WHEREAS, The Company was co-founded by Employee and Employee has performed
services for the Company and served as its President and member of the Board of
Directors since its inception.
WHEREAS, The Employee has previously performed services for the Company for a
portion of the time with no compensation and for a period of time at
compensation below the fair market value of his services.
WHEREAS, The Employee was willing to perform services under this arrangement
because Employee believed it was in the best interest of the Company to conserve
cash flow in a start up environment and with the understanding that Employee
would be fairly compensated when the Company was able to pay fair compensation.
WHEREAS, The Company, now desires to enter into a permanent employment
relationship with Employee pursuant to the terms and conditions set forth
herein; and
WHEREAS, Employee is willing to accept such permanent employment with The
Company, pursuant to the terms and conditions set forth in this Agreement; and
NOW THEREFORE, the Parties hereto, in consideration of the mutual covenants and
promises hereinafter contained, do hereby agree as follows:
TERMS
1. EMPLOYMENT DUTIES. The Company hereby employs Employee to perform the
following duties as the President and Chief Executive Officer of the
Company.
a. Carry out all of the functions as President and Chief Executive
Officer as defined in the By-laws of the Company and as established
by the Board of Directors.
2. PERFORMANCE. Employee agrees to devote all of the time and effort
necessary to perform the duties described in Section 1 above in a manner
satisfactory to the Company and to perform such other duties as are
assigned to him from time to time by the Board of Directors of the
Company.
<PAGE> 2
3. TERM. Except as provided in Section 7 below, the term of this Contract
shall be five (5) years from the effective date hereof. This Agreement
shall automatically renew for periods of one year, unless earlier
terminated in accordance with the provisions of Section 7 below or either
party gives written notice, at least six (6) months prior to the automatic
renewal date, of their intention not to renew this Agreement.
4. COMPENSATION.
a. ANNUAL SALARY. In consideration for the services to be rendered by
Employee in his capacity hereunder, the Company agrees to pay
Employee an initial annual salary of One Hundred Thousand & 00/100
dollars ($100,000.00).
b. DIRECTORS FEES. In addition Employee shall be paid any fees paid to
members of the Board of Directors as established by the Board of
Directors as long as he is a member of the Board of Directors.
c. PERFORMANCE BONUSES. Employee is responsible for Company
profitability, developing new product lines and services, corporate
growth through acquisitions and raising additional capital and as an
incentive to perform these functions in the best manner possible,
the Company shall pay Employee a stock performance bonus determined
as follows:
By measuring the increases in the net "Stockholders Equity" on the
audited Balance Sheet of the Company as of each of its year ends
occurring during the term of this Agreement, with the first year end
being September 30, 1998 and the base year being September 30, 1997,
and then:
Such stock bonuses shall be computed to be equal to two and one half
percent (2.5%) of the dollar increase in such Stockholder Equity and
the number of shares earned and payable shall be equal to said
percentage dollar amount divided by $1.
For example if the net increase in stockholder equity is $1,000,000,
Employee shall receive 25,000 shares of stock.
Such stock bonus shall be paid within thirty (30) days after the
audited year end financial statements of the Company have been
prepared or such other time as is mutually agreeable to the Company
and Employee. Such stock may be "Restricted" as that term is defined
under the Securities Act of 1933 as amended.
In addition to the above described stock performance bonus, Employee
shall be eligible to receive any other cash or stock bonuses and any
stock options awarded by the Board of Directors of the Company
during the Term of this Agreement.
d. OTHER BENEFITS. Employees salary, and/or bonus, may be adjusted by
mutual consent of the parties at any time during the term of this
contract or any subsequent extension hereof. In addition, the
Company may provide other employment benefits as per Section 5
below.
<PAGE> 3
5. EMPLOYEE BENEFITS. The Company, at its sole discretion, may provide
certain group benefits to all employees and agrees that Employee will be
covered by any such plans adopted by the Company and Employee hereby
agrees to submit to any medical or other examination and to execute and
deliver any application or other instrument in writing, reasonably
necessary to effectuate such plans and benefits.
6. EXPENSES. The Company will also reimburse the employee for all reasonable
and necessary business expenses which are approved in advance by the
Company.
7. TERMINATION. Except as otherwise provided in this agreement all
compensation, bonuses and other benefits shall cease upon death,
disability or termination. Based on the following circumstances or
conditions this Employment Agreement shall be terminated as follows:
a. DEATH/EXPIRATION OF THIS AGREEMENT WITHOUT RENEWAL. By Employees
death or upon the expiration of the term of this Agreement and the
Company shall be obligated, in either event, to pay Employee their
annual salary and prorated stock performance bonus and any other
benefits actually due Employee up to the date of death or expiration
of the Agreement.
b. TOTAL DISABILITY. For the purpose of this Agreement, the term "total
disability" means Employee's inability, because of serious physical
and/or mental injury, illness or impairment, certified by a licensed
medical doctor and by whatever supporting documents required by the
Company, to perform his assigned duties for more than three (3)
consecutive months; and the Company shall be obligated, in that
event, to pay Employee their annual salary, pro-rated stock
performance bonus and any other benefits actually due up to the date
of disability.
c. EMPLOYEE NOTICE. At the election of Employee upon Six (6) Months
written notice to Company and the Company shall only be obligated,
in that event, to pay Employee their annual salary, pro-rated stock
performance bonus and any other benefits actually due up to the date
of termination.
d. WITH CAUSE. Employee's employment may be terminated for cause at any
time upon fifteen (15) days written notice. For the purpose of this
Agreement "for cause" is defined to include, but not be limited to
the following: intentional or unintentional acts by Employee having
the effect or causing significant harm to the business interests of
The Company; but to the extent that such acts are curable, Employee
shall have ten (10) business days following receipt of notice of
said material breach to cure such breach. Any notice to Employee
shall specify the facts and circumstances claimed to provide the
basis for such termination. In the event of termination of this
Agreement under this section, the Company shall only be obligated to
pay Employee their annual salary, and any other benefits earned or
due up to the actual date of termination.
<PAGE> 4
e. DEFAULT Employee shall have the option to immediately terminate this
Agreement if the Company fails to comply with the terms and
conditions of this Agreement.
Upon failure of the Company to meet any of its obligations due
Employee under this Agreement or there is any other material breach
of this Agreement, and to the extent that it is curable, Employee
shall give written notice to the Company and shall specify the facts
and circumstances claimed to be a breach of this Agreement. The
Company shall have five (5) business days following receipt of such
written notice of said material breach to cure such breach. If said
breach is not cured by the Company within such time period than it
shall be deemed as if the Company has terminated this Agreement
"Without Cause" and the Company shall be obligated, to pay Employee
their annual salary, pro-rated stock performance bonus and any other
benefits actually due up to the date of termination, with the date
of termination being determined as of the date of notice, as
determined by Section 19 of this Agreement. Under these
circumstances the Employee shall have no further obligations to the
Company from and after the termination date, but the Company shall
remain obligated to Employee for any amounts or benefits owed
Employee prior to the termination date.
f. SUBSTANTIAL CHANGE IN MANAGEMENT OR OWNERSHIP OF THE COMPANY.
Employee shall have the option to immediately terminate this
Agreement if there is a substantial change in management and/or
ownership of the Company under which Kendall Q. Northern and Earl J.
Cook have diminished roles in ownership or management control so
that, in the sole opinion of Employee, it is not deemed in his best
long term interest to continue as an employee of the Company under
this Agreement.
Upon notice or knowledge of such a change of management or control
of the Company, Employee shall have thirty (30) days in which to
provide the Company with written notice to terminate this Agreement.
The date of termination shall be determined as of the date of
notice, as determined by Section 19 of this Agreement, and if this
Agreement is terminated by Employee, under this Section, the Company
shall be obligated to pay Employee the following:
1) His annual salary, a pro-rated stock performance bonus and any
other benefits actually due Employee up to the date of
termination and;
2) An amount equal to the greater of i) ten percent (10%) of the
Company's net equity as indicated on the Company's Balance
Sheet at the end of the month prior to the termination of this
Agreement by Employee; ii) ten percent (10%) of the
"acquisition price of the Company" as calculated by applying
the purchase price of the new controlling interest shares to
all of the issued and outstanding shares of the Company; iii)
One Million & 00/100 Dollars ($1,000,000).
The Employee's option to terminate this Agreement under this Section shall take
precedents over any other termination provision of Section 7 and termination by
Employee under this Section shall release Employee from the Covenant not to
Compete under Section 8 of this Agreement.
<PAGE> 5
8. AGREEMENT NOT TO COMPETE. Employee hereby agrees and stipulates that he
shall not compete, in the personal and/or business internet access, web
site development and hosting, computer sales and services, programming
and software development and networking solutions business, either
directly or indirectly, in any way that competes with the business
opportunities of the Company, for any period that he is receiving any
compensation from the Company under this Agreement and not less than
one (1) years from the date of any termination of this Agreement as
provided in Section 7 of this Agreement, without the express written
permission of the Company. Employee hereby further acknowledges, agrees
and stipulates, that he has received fair and adequate consideration,
in the form of stock and or cash, in exchange for this Agreement.
9. PROPRIETARY INFORMATION. Employee shall treat as information proprietary
to the Company any and all data and/or information discovered and/or
disclosed and shall not (directly or indirectly) use any such information
and/or data for his own benefit or disclose or fail to use its best
efforts to prevent the disclosure of the same to any other person or
entity for any purpose or reason whatsoever, during the term of this
Agreement or at any time thereafter.
10. PROPRIETARY INFORMATION DEFINED. Proprietary information includes but
is not limited to unique concepts, products, services,
company/corporate strategy and business development, including plans
relating to this acquisition, expansion, marketing, financials, client
lists and other business information, operating information, policies,
practices and processes, database and networking systems, information
relating to employees, customers, prospective customers and suppliers,
whether such information is documented, contained electronically and/or
contained on any other medium.
11. REPRODUCTION OF PROPRIETARY INFORMATION. Employee stipulates that he will
not, at any time, make any reproduction, copy, abstract, summary and/or
precis of the whole or of any part of any Proprietary Information without
the prior express written consent of the Company, in which case said
reproduction, copy, abstract, summary and/or precis shall remain the
property of the Company.
12. CONFIDENTIALITY. Employee stipulates that he shall keep any and all
Proprietary Information obtained, during the term of this Agreement or any
time thereafter, in the strictest of confidence and secrecy.
13. NON-DISCLOSURE. Employee stipulates that he shall not, during the term of
this Agreement or any time thereafter, in any way or by any means,
disclose, disseminate and /or distribute any Proprietary Information to
any third party without the prior express written consent of the Company.
14. NON-CIRCUMVENTION. Employee stipulates that he shall not, during the term
of this Agreement or any time thereafter, in any way or by any means
implement and /or use any Proprietary Information, circumvent, usurp an
opportunity, take advantage of and/or benefit from, through the exclusion
of the Company, any Proprietary Information obtained.
<PAGE> 6
15. INJUNCTIVE RELIEF. The Employee recognizes and agrees that, a breach
of this Agreement will cause irreparable harm to the Company and no
amount of monetary damages can adequately compensate the Company for
the injury that would be caused by said breach. Accordingly, Employee
hereby stipulates that should the Company have a good faith reason to
believe that Employee is breaching or taking steps to breach any
material provision of this Agreement then the Company shall be entitled
to immediate issuance of an ex-parte temporary restraining order, by a
Court, enjoining the Employee from engaging in the opposed activities.
16. WAIVER. A Party's failure to insist on compliance or enforcement of any
provision of this Agreement shall not effect the validity or
enforceability or constitute a waiver of future enforcement of that
provision or any other provision of this Agreement by that Party or any
other party.
17. LAW, JURISDICTION AND VENUE. This Agreement shall in all respects be
exclusively subject to, and governed by, the laws of the state of Arizona.
Exclusive venue and jurisdiction for any and all disputes shall lie in
Maricopa County, Arizona. The Parties hereto stipulate that any dispute
arising out of this Agreement shall be submitted to binding arbitration in
Arizona pursuant to the arbitration rules and regulations, as codified in
the Arizona Revised Statutes.
18. VALIDITY. The invalidity or unenforceability of any provision in this
Agreement shall not in any way effect the validity or enforceability of
any other provision and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision had never been in this
Agreement.
19. NOTICE. All notices and other communications provided for or permitted
hereunder shall be made by hand delivery, overnight courier, certified or
registered mail, postage prepaid and return receipt requested, telex or
facsimile transmission.
If to the Company If to Employee
4250 E. Camelback Rd., Ste. K-192 5146 E. Tamblo
Phoenix, Arizona 85018 Phoenix, AZ 85044
Fax: 602-852-9727 Fax: ______________
All such notices shall be deemed to have been duly given:
when delivered, by hand if personally delivered; and
the next day, after being sent by overnight courier; and
when received, if by mail; and
when received (as electronically acknowledged), if by facsimile
transmission.
<PAGE> 7
20. AMENDMENTS. This Agreement may be amended, at any time, only by the
written mutual consent of the Parties hereto, with any such Amendment to
be invalid unless it is both written and signed by both Parties.
21. LEGAL FEES AND COSTS. The Parties hereby stipulate and agree that in the
event that a dispute arises between the Parties, relating to this
Agreement, and one or both of the Parties deem it necessary to hire an
attorney to protect its rights and/or resolve said dispute, then the
prevailing Party, in any action, shall be entitled to recover and collect,
from the non-prevailing Party, all reasonable attorney's fees and costs
incurred.
22. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between the Parties and no representations, promises,
agreements and/or understandings, written or oral, relating to this
Agreement by either Party not contained herein shall be of any force or
effect.
IN WITNESS WHEREOF, The Company and Employee have duly executed this Agreement
this 27th day of July, 1998.
World's Fare, Inc. dba FutureOne Employee
/s/ Earl J. Cook /s/ Kendall Q. Northern
- ----------------- ---------------------------
By: Earl J. Cook By: Kendall Q. Northern
Its: Executive Vice President
FutureOne, Inc.
/s/ Earl J. Cook
- --------------------------
By: Earl J. Cook
Its: Executive Vice President
<PAGE> 1
Exhibit 6.3
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made this 27th day of July 1998, , by and between World's Fare,
Inc. dba FutureOne, a Nevada corporation, and FutureOne, Inc., an Arizona
corporation, (hereinafter jointly called "Company") and Earl J. Cook
(hereinafter called "Employee") shall be effective as of July 26, 1998
RECITALS:
WHEREAS, The Company, located in Phoenix Arizona, is a full service
communications company providing Internet access, Website development and
hosting, custom software development, computer sales and services and
communications and networking solutions; and
WHEREAS, The Company was co-founded by Employee and Employee has performed
services for the Company and served as its Executive Vice President and member
of the Board of Directors since its inception.
WHEREAS, The Employee has previously performed services for the Company for a
portion of the time with no compensation and for a period of time at
compensation below the fair market value of his services.
WHEREAS, The Employee was willing to perform services under this arrangement
because Employee believed it was in the best interest of the Company to conserve
cash flow in a start up environment and with the understanding that Employee
would be fairly compensated when the Company was able to pay fair compensation.
WHEREAS, The Company, now desires to enter into a permanent employment
relationship with Employee pursuant to the terms and conditions set forth
herein; and
WHEREAS, Employee is willing to accept such permanent employment with The
Company, pursuant to the terms and conditions set forth in this Agreement; and
NOW THEREFORE, the Parties hereto, in consideration of the mutual covenants and
promises hereinafter contained, do hereby agree as follows:
TERMS
1. EMPLOYMENT DUTIES. The Company hereby employs Employee to perform the
following duties as the Executive Vice President and Chief Operating
Officer of the Company.
a. Carry out all of the functions as Executive Vice President and Chief
Operating Officer as defined in the By-laws of the Company and other
duties as established by the President and Board of Directors.
2. PERFORMANCE. Employee agrees to devote all of the time and effort
necessary to perform the duties described in Section 1 above in a manner
satisfactory to the Company and to perform such other duties as are
assigned to him from time to time by the President and Board of Directors
of the Company.
<PAGE> 2
3. TERM. Except as provided in Section 7 below, the term of this Contract
shall be five (5) years from the effective date hereof. This Agreement
shall automatically renew for periods of one year, unless earlier
terminated in accordance with the provisions of Section 7 below or either
party gives written notice, at least six (6) months prior to the automatic
renewal date, of their intention not to renew this Agreement.
4. COMPENSATION.
a. ANNUAL SALARY. In consideration for the services to be rendered by
Employee in his capacity hereunder, the Company agrees to pay
Employee an initial annual salary of Eighty Thousand & 00/100
dollars ($80,000.00).
b. DIRECTORS FEES. In addition Employee shall be paid any fees paid to
members of the Board of Directors as established by the Board of
Directors as long as he is a member of the Board of Directors.
c. PERFORMANCE BONUSES. Employee is responsible for Company
profitability, developing new product lines and services, corporate
growth through acquisitions and raising additional capital and as an
incentive to perform these functions in the best manner possible,
the Company shall pay Employee a stock performance bonus determined
as follows:
By measuring the increases in the net "Stockholders Equity" on the
audited Balance Sheet of the Company as of each of its year ends
occurring during the term of this Agreement, with the first year end
being September 30, 1998 and the base year being September 30, 1997,
and then:
Such stock bonuses shall be computed to be equal to two and one half
percent (2.5%) of the dollar increase in such Stockholder Equity and
the number of shares earned and payable shall be equal to said
percentage dollar amount divided by $1.
For example if the net increase in stockholder equity is $1,000,000,
Employee shall receive 25,000 shares of stock.
Such stock bonus shall be paid within thirty (30) days after the
audited year end financial statements of the Company have been
prepared or such other time as is mutually agreeable to the Company
and Employee. Such stock may be "Restricted" as that term is defined
under the Securities Act of 1933 as amended.
In addition to the above described stock performance bonus, Employee
shall be eligible to receive any other cash or stock bonuses and any
stock options awarded by the Board of Directors of the Company
during the Term of this Agreement.
d. OTHER BENEFITS. Employees salary, and/or bonus, may be adjusted by
mutual consent of the parties at any time during the term of this
contract or any subsequent extension hereof. In addition, the
Company may provide other employment benefits as per Section 5
below.
<PAGE> 3
5. EMPLOYEE BENEFITS. The Company, at its sole discretion, may provide
certain group benefits to all employees and agrees that Employee will be
covered by any such plans adopted by the Company and Employee hereby
agrees to submit to any medical or other examination and to execute and
deliver any application or other instrument in writing, reasonably
necessary to effectuate such plans and benefits.
6. EXPENSES. The Company will also reimburse the employee for all reasonable
and necessary business expenses which are approved in advance by the
Company. The Company acknowledges that Employee's personal residence is in
Niceville Florida and accordingly the Company agrees to pay all necessary
travel and lodging expenses of Employee when Employee is required to be in
Phoenix or other locations requested by the Company
7. TERMINATION. Except as otherwise provided in this agreement all
compensation, bonuses and other benefits shall cease upon death,
disability or termination. Based on the following circumstances or
conditions this Employment Agreement shall be terminated as follows:
a. DEATH/EXPIRATION OF THIS AGREEMENT WITHOUT RENEWAL. By Employees
death or upon the expiration of the term of this Agreement and the
Company shall be obligated, in either event, to pay Employee their
annual salary and prorated stock performance bonus and any other
benefits actually due Employee up to the date of death or expiration
of the Agreement.
b. TOTAL DISABILITY. For the purpose of this Agreement, the term "total
disability" means Employee's inability, because of serious physical
and/or mental injury, illness or impairment, certified by a licensed
medical doctor and by whatever supporting documents required by the
Company, to perform his assigned duties for more than three (3)
consecutive months; and the Company shall be obligated, in that
event, to pay Employee their annual salary, pro-rated stock
performance bonus and any other benefits actually due up to the date
of disability.
c. EMPLOYEE NOTICE. At the election of Employee upon Six (6) Months
written notice to Company and the Company shall only be obligated,
in that event, to pay Employee their annual salary, pro-rated stock
performance bonus and any other benefits actually due up to the date
of termination.
d. WITH CAUSE. Employee's employment may be terminated for cause at any
time upon fifteen (15) days written notice. For the purpose of this
Agreement "for cause" is defined to include, but not be limited to
the following: intentional or unintentional acts by Employee having
the effect or causing significant harm to the business interests of
The Company; but to the extent that such acts are curable, Employee
shall have ten (10) business days following receipt of notice of
said material breach to cure such breach. Any notice to Employee
shall specify the facts and circumstances claimed to provide the
basis for such termination. In the event of termination of this
Agreement under this section, the Company shall only be obligated to
pay Employee their annual salary, and any other benefits earned or
due up to the actual date of termination.
<PAGE> 4
e. DEFAULT. Employee shall have the option to immediately terminate
this Agreement if the Company fails to comply with the terms and
conditions of this Agreement.
Upon failure of the Company to meet any of its obligations due
Employee under this Agreement or there is any other material breach
of this Agreement, and to the extent that it is curable, Employee
shall give written notice to the Company and shall specify the facts
and circumstances claimed to be a breach of this Agreement. The
Company shall have five (5) business days following receipt of such
written notice of said material breach to cure such breach. If said
breach is not cured by the Company within such time period than it
shall be deemed as if the Company has terminated this Agreement
"Without Cause" and the Company shall be obligated, to pay Employee
their annual salary, pro-rated stock performance bonus and any other
benefits actually due up to the date of termination, with the date
of termination being determined as of the date of notice, as
determined by Section 19 of this Agreement. Under these
circumstances the Employee shall have no further obligations to the
Company from and after the termination date, but the Company shall
remain obligated to Employee for any amounts or benefits owed
Employee prior to the termination date.
f. SUBSTANTIAL CHANGE IN MANAGEMENT OR OWNERSHIP OF THE COMPANY.
Employee shall have the option to immediately terminate this
Agreement if there is a substantial change in management and/or
ownership of the Company under which Kendall Q. Northern and Earl J.
Cook have diminished roles in ownership or management control so
that, in the sole opinion of Employee, it is not deemed in his best
long term interest to continue as an employee of the Company under
this Agreement.
Upon notice or knowledge of such a change of management or control
of the Company, Employee shall have thirty (30) days in which to
provide the Company with written notice to terminate this Agreement.
The date of termination shall be determined as of the date of
notice, as determined by Section 19 of this Agreement, and if this
Agreement is terminated by Employee, under this Section, the Company
shall be obligated to pay Employee the following:
1) His annual salary, a pro-rated stock performance bonus and any
other benefits actually due Employee up to the date of
termination and;
2) An amount equal to the greater of i) ten percent (10%) of the
Company's net equity as indicated on the Company's Balance
Sheet at the end of the month prior to the termination of this
Agreement by Employee; or ii) ten percent (10%) of the
"acquisition price of the Company" as calculated by applying
the purchase price of the new controlling interest shares to
all of the issued and outstanding shares of the Company; or
iii) One Million & 00/100 Dollars ($1,000,000).
The Employee's option to terminate this Agreement under this Section shall take
precedents over any other termination provision of Section 7 and termination by
Employee under this Section shall release Employee from the Covenant not to
Compete under Section 8 of this Agreement.
<PAGE> 5
8. AGREEMENT NOT TO COMPETE. Employee hereby agrees and stipulates that he
shall not compete, in the personal and/or business internet access,
website development and hosting, computer sales and services,
programming and software development and networking solutions business,
either directly or indirectly, in any way that competes with the
business opportunities of the Company, for any period that he is
receiving any compensation from the Company under this Agreement and
not less than one (1) year from the date of any termination of this
Agreement as provided in Section 7 of this Agreement, without the
express written permission of the Company. Employee hereby further
acknowledges, agrees and stipulates, that he has received fair and
adequate consideration, in the form of stock and or cash, in exchange
for this Agreement.
9. PROPRIETARY INFORMATION. Employee shall treat as information proprietary
to the Company any and all data and/or information discovered and/or
disclosed and shall not (directly or indirectly) use any such information
and/or data for his own benefit or disclose or fail to use its best
efforts to prevent the disclosure of the same to any other person or
entity for any purpose or reason whatsoever, during the term of this
Agreement or at any time thereafter.
10. PROPRIETARY INFORMATION DEFINED. Proprietary information includes but
is not limited to unique concepts, products, services,
company/corporate strategy and business development, including plans
relating to this acquisition, expansion, marketing, financials, client
lists and other business information, operating information, policies,
practices and processes, database and networking systems, information
relating to employees, customers, prospective customers and suppliers,
whether such information is documented, contained electronically and/or
contained on any other medium.
11. REPRODUCTION OF PROPRIETARY INFORMATION. Employee stipulates that he will
not, at any time, make any reproduction, copy, abstract, summary and/or
precis of the whole or of any part of any Proprietary Information without
the prior express written consent of the Company, in which case said
reproduction, copy, abstract, summary and/or precis shall remain the
property of the Company.
12. CONFIDENTIALITY. Employee stipulates that he shall keep any and all
Proprietary Information obtained, during the term of this Agreement or any
time thereafter, in the strictest of confidence and secrecy.
13. NON-DISCLOSURE. Employee stipulates that he shall not, during the term of
this Agreement or any time thereafter, in any way or by any means,
disclose, disseminate and /or distribute any Proprietary Information to
any third party without the prior express written consent of the Company.
14. NON-CIRCUMVENTION. Employee stipulates that he shall not, during the term
of this Agreement or any time thereafter, in any way or by any means
implement and /or use any Proprietary Information, circumvent, usurp an
opportunity, take advantage of and/or benefit from, through the exclusion
of the Company, any Proprietary Information obtained.
<PAGE> 6
15. INJUNCTIVE RELIEF. The Employee recognizes and agrees that, a breach
of this Agreement will cause irreparable harm to the Company and no
amount of monetary damages can adequately compensate the Company for
the injury that would be caused by said breach. Accordingly, Employee
hereby stipulates that should the Company have a good faith reason to
believe that Employee is breaching or taking steps to breach any
material provision of this Agreement then the Company shall be entitled
to immediate issuance of an ex-parte temporary restraining order, by a
Court, enjoining the Employee from engaging in the opposed activities.
16. WAIVER. A Party's failure to insist on compliance or enforcement of any
provision of this Agreement shall not effect the validity or
enforceability or constitute a waiver of future enforcement of that
provision or any other provision of this Agreement by that Party or any
other party.
17. LAW, JURISDICTION AND VENUE. This Agreement shall in all respects be
exclusively subject to, and governed by, the laws of the state of Arizona.
Exclusive venue and jurisdiction for any and all disputes shall lie in
Maricopa County, Arizona. The Parties hereto stipulate that any dispute
arising out of this Agreement shall be submitted to binding arbitration in
Arizona pursuant to the arbitration rules and regulations, as codified in
the Arizona Revised Statutes.
18. VALIDITY. The invalidity or unenforceability of any provision in this
Agreement shall not in any way effect the validity or enforceability of
any other provision and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision had never been in this
Agreement.
19. NOTICE. All notices and other communications provided for or permitted
hereunder shall be made by hand delivery, overnight courier, certified or
registered mail, postage prepaid and return receipt requested, telex or
facsimile transmission.
If to the Company If to Employee
4250 E. Camelback Rd., Ste. K-192 337 Jamaica Way
Phoenix, Arizona 85018 Niceville, FL 32578-3830
Fax: 602-852-9727 Fax: 850-897-2605
All such notices shall be deemed to have been duly given:
when delivered, by hand if personally delivered; and
the next day, after being sent by overnight courier; and
when received, if by mail; and
when received (as electronically acknowledged), if by facsimile
transmission.
20. AMENDMENTS. This Agreement may be amended, at any time, only by the
written mutual consent of the Parties hereto, with any such Amendment to
be invalid unless it is both written and signed by both Parties.
<PAGE> 7
21. LEGAL FEES AND COSTS. The Parties hereby stipulate and agree that in the
event that a dispute arises between the Parties, relating to this
Agreement, and one or both of the Parties deem it necessary to hire an
attorney to protect its rights and/or resolve said dispute, then the
prevailing Party, in any action, shall be entitled to recover and collect,
from the non-prevailing Party, all reasonable attorney's fees and costs
incurred.
22. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between the Parties and no representations, promises,
agreements and/or understandings, written or oral, relating to this
Agreement by either Party not contained herein shall be of any force or
effect.
IN WITNESS WHEREOF, The Company and Employee have duly executed this Agreement
this 27th day of July 1998.
World's Fare, Inc. dba FutureOne Employee
/s/ Kendall Q. Northern /s/ Earl J. Cook
- ----------------------- ---------------------
By: Kendall Q. Northern By: Earl J. Cook
Its: President
FutureOne, Inc.
/s/ Kendall Q. Northern
- -----------------------
By: Kendall Q. Northern
Its: President
<PAGE> 1
Exhibit 6.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT made this 29th day of July 1998, , by and between OPEC, Corp.
(hereinafter called "Company") and Donald D. Cannella (hereinafter called
"Employee") shall be effective as of August 1, 1998
RECITALS:
WHEREAS, The Company, desires to enter into an employment relationship with
Employee pursuant to the terms and conditions set forth herein; and
WHEREAS, Employee is willing to accept such employment with the Company,
pursuant to the terms and conditions set forth in this Agreement; and
NOW THEREFORE, the Parties hereto, in consideration of the mutual covenants and
promises hereinafter contained, do hereby agree as follows:
TERMS
1. EMPLOYMENT DUTIES. The Company hereby employs Employee to perform the
following duties as the President of the Company.
a. Perform all duties of President as described in the Bylaws of the
corporation, to supervise the management of the day to day affairs
of the Company, the hiring of personnel, the bidding and negotiation
of construction contracts, the satisfactory completion of
construction projects, the acquisition of equipment and to carry out
any other duties assigned to him by the Board of Directors of the
Company.
b. To serve as a Director of the Company.
2. PERFORMANCE. Employee agrees to devote reasonable time and effort
necessary to perform the duties described in Section 1 above in a manner
satisfactory to the Company and to perform such other duties as are
assigned to him from time to time by the Board of Directors of the
Company.
3. TERM. Except as provided in Section 7 below, the term of this Contract
shall be five (5) years from the effective date hereof. This Agreement
shall automatically renew for periods of one year, unless earlier
terminated in accordance with the provisions of Section 7 below or either
party gives written notice, at least thirty days (30) prior to the
automatic renewal date, of their intention not to renew this Agreement.
4. COMPENSATION.
a. In consideration for the services to be rendered by Employee in his
capacity hereunder, Employee shall be compensated as follows:
<PAGE> 2
An annual salary of One Hundred Twenty Thousand & 00/100 Dollars
($120,000), which shall be payable in equal installments based on
the Company's normal pay periods.
b. A bonus of Sixty Thousand & 00/100 Dollars ($60.000), if the
Company, under Employee's management, achieves those revenue and
profit goals as approved by the Board of Directors at the beginning
of each fiscal year. Such bonus shall be payable within 30 days
after the end of each fiscal year.
c. Employees salary, may be adjusted by mutual consent of the parties
at any time during the term of this contract or any subsequent
extension hereof. In addition, the Company may provide other
employment benefits as per Section 5 below.
5. EMPLOYEE BENEFITS. The Company, at its sole discretion, may provide
certain group benefits to all full time employees and agrees that Employee
will be covered by any such plans adopted by the Company while he is a
full time employee and Employee hereby agrees to submit to any medical or
other examination and to execute and deliver any application or other
instrument in writing, reasonably necessary to effectuate such plans and
benefits.
6. EXPENSES. The Company will reimburse the employee for all reasonable
and necessary business expenses which are approved in advance by the
Company.
7. TERMINATION. Employment under this Agreement may be terminated as follows:
a. DEATH/EXPIRATION OF THIS AGREEMENT WITHOUT RENEWAL. By Employees
death or upon the expiration of the term of this Agreement and the
Company shall be obligated, in either event, to pay Employee his
annual salary, a prorated bonus and benefits actually due Employee
up to the actual date of death or expiration of the Agreement.
b. TOTAL DISABILITY. For the purpose of this Agreement, the term "total
disability" means Employee's inability, because of serious physical
and/or mental injury, illness or impairment, certified by a licensed
medical doctor and by whatever supporting documents are requested by
the Company, to perform his assigned duties for more than Ninety
(90) consecutive days; and the Company shall be obligated, in that
event, to pay Employee his annual salary, a prorated bonus and
benefits actually due up to the date of disability.
c. EMPLOYEE NOTICE. At the election of Employee upon thirty (30) days
written notice to Company and the Company shall only be obligated,
in that event, to pay Employee their normal compensation up to the
actual date of termination and benefits actually due Employee up to
the date of termination. Upon receipt of such notice from Employee
the Company, at its sole discretion, may terminate this Agreement
immediately and pay Employee his annual salary, a prorated bonus and
benefits actually due Employee up to such date of termination as
hereby invoked by the Company.
<PAGE> 3
d. WITH CAUSE. Employee's employment may be terminated for cause at any
time upon five (5) days written notice. For the purpose of this
Agreement "for cause" is defined to include, but not be limited to
the following: (i) willful, malicious and grossly negligent acts by
Employee having the effect or causing significant harm to the
business interests of The Company; (ii) the failure of Employee to
devote reasonable time, energies and efforts to the performance of
his duties; (iii) the conviction of Employee of any felony crime;
(iv) the violation of any specific written direction of the Board of
Directors relating to services to be rendered by him or the scope of
his duties as contemplated by this Agreement; (v) the commission by
Employee of any other material breach of this Agreement, and to the
extent that this act is curable, Employee has not cured it within
five (5) business days following receipt of notice of said material
breach. Any notice to Employee shall specify the facts and
circumstances claimed to provide the basis for such termination. In
the event of termination of this Agreement under this section, the
Company shall only be obligated to pay Employee his compensation,
and benefits earned or due up to the actual date of termination.
e. DEFAULT. Employee shall have the option to immediately terminate
this agreement if the Company fails to comply with the terms and
conditions of this Agreement, but only if such default or breach of
this Agreement is not caused, directly or indirectly, by Employee in
his managerial and fiduciary capacity under this Agreement, whereby
Employee's, intentional or unintentional, acts have caused the
Company, through lack of work or excess expenditures, to be unable
to meet its financial obligations under this Agreement. Upon failure
of the Company to meet any of its obligations due Employee under
this Agreement or there is any other material breach of this
Agreement, and to the extent that it is curable, Employee shall give
written notice to the Company and shall specify the facts and
circumstances claimed to be as breach of this Agreement. The Company
shall have five (5) business days following receipt of such written
notice of said material breach to cure such breach. If said breach
is not cured by the Company within such time period than it shall be
deemed as if the Company has terminated this Agreement "Without
Cause" and Employee shall be entitled to all amounts due hereunder
as if the Agreement had not been terminated.
8. AGREEMENT NOT TO COMPETE. Employee hereby agrees and stipulates that he
shall not compete, in the cable construction business or any other
business engaged in by the Company, the Company's parent corporation,
World's Fare, Inc. or any of its subsidiaries or affiliates, either
directly or indirectly, or compete in any other way with the business
opportunities of any of these entities, for any period that he is
receiving any compensation from the Company under this Agreement and
not less than one (1) years from the date of any termination of this
Agreement as provided in Section 7 of this Agreement, without the
express written permission of the Company. Employee hereby further
acknowledges, agrees and stipulates, that he has received fair and
adequate consideration, in the form of stock and or cash, in exchange
for this Agreement.
<PAGE> 4
9. PROPRIETARY INFORMATION. Employee shall treat as information proprietary
to the Company any and all data and/or information discovered and/or
disclosed and shall not, directly or indirectly, use any such information
and/or data for his own benefit or disclose or fail to use its best
efforts to prevent the disclosure of the same to any other person or
entity for any purpose or reason whatsoever, during the term of this
Agreement or at any time thereafter.
10. PROPRIETARY INFORMATION DEFINED. Proprietary information includes but
is not limited to unique concepts, products, services,
company/corporate strategy and business development, including plans
relating to this acquisition, expansion, marketing, financials, client
lists and other business information, operating information, policies,
practices and processes, database and networking systems, information
relating to employees, customers, prospective customers and suppliers,
whether such information is documented, contained electronically and/or
contained on any other medium.
11. REPRODUCTION OF PROPRIETARY INFORMATION. Employee stipulates that he will
not, at any time, make any reproduction, copy, abstract, summary and/or
precis of the whole or of any part of any Proprietary Information without
the prior express written consent of the Company, in which case said
reproduction, copy, abstract, summary and/or precis shall remain the
property of the Company.
12. CONFIDENTIALITY. Employee stipulates that he shall keep any and all
Proprietary Information obtained, during the term of this Agreement or any
time thereafter, in the strictest of confidence and secrecy.
13. NON-DISCLOSURE. Employee stipulates that he shall not, during the term of
this Agreement or any time thereafter, in any way or by any means,
disclose, disseminate and/or distribute any Proprietary Information to
any third party without the prior express written consent of the Company.
14. NON-CIRCUMVENTION. Employee stipulates that he shall not, during the term
of this Agreement or any time thereafter, in any way or by any means
implement and/or use any Proprietary Information, circumvent, usurp an
opportunity, take advantage of and/or benefit from, through the exclusion
of the Company, any Proprietary Information obtained.
15. INJUNCTIVE RELIEF. The Employee recognizes and agrees that, a breach
of this Agreement will cause irreparable harm to the Company and no
amount of monetary damages can adequately compensate the Company for
the injury that would be caused by said breach. Accordingly, Employee
hereby stipulates that should the Company have a good faith reason to
believe that Employee is breaching or taking steps to breach any
material provision of this Agreement then the Company shall be entitled
to immediate issuance of an ex-parte temporary restraining order, by a
Court, enjoining the Employee from engaging in the opposed activities.
16. WAIVER. A Party's failure to insist on compliance or enforcement of any
provision of this Agreement shall not effect the validity or
enforceability or constitute a waiver of future enforcement of that
provision or any other provision of this Agreement by that Party or any
other party.
<PAGE> 5
17. LAW, JURISDICTION AND VENUE. This Agreement shall in all respects be
exclusively subject to, and governed by, the laws of the state of
Colorado. Exclusive venue and jurisdiction for any and all disputes shall
lie in El Paso County, Colorado. The Parties hereto stipulate that any
dispute arising out of this Agreement shall be submitted to binding
arbitration in Colorado pursuant to the arbitration rules and regulations
of the American Arbitration Association.
18. VALIDITY. The invalidity or unenforceability of any provision in this
Agreement shall not in any way effect the validity or enforceability of
any other provision and this Agreement shall be construed in all respects
as if such invalid or unenforceable provision had never been in this
Agreement.
19. NOTICE. All notices and other communications provided for or permitted
hereunder shall be made by hand delivery, overnight courier, certified or
registered mail, postage prepaid and return receipt requested, telex or
facsimile transmission.
If to the Company If to Employee
----------------- --------------
5930 Paonia Ct. 6332 Firestar Ln.
Colorado Springs, CO 80918 Colorado Springs, CO 80918
Fax: 719-630-8261 Fax:
------------------
All such notices shall be deemed to have been duly given:
when delivered, by hand if personally delivered; and
the next day, after being sent by overnight courier; and
when received, if by mail; and when
received (as electronically acknowledged), if by facsimile transmission.
20. AMENDMENTS. This Agreement may be amended, at any time, only by the
written mutual consent of the Parties hereto, with any such Amendment to
be invalid unless it is both written and signed by both Parties.
21. LEGAL FEES AND COSTS. The Parties hereby stipulate and agree that in the
event that a dispute arises between the Parties, relating to this
Agreement, and one or both of the Parties deem it necessary to hire an
attorney to protect its rights and/or resolve said dispute, then the
prevailing Party, in any action, shall be entitled to recover and collect,
from the non-prevailing Party, all reasonable attorney's fees and costs
incurred.
22. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between the Parties and no representations, promises,
agreements and/or understandings, written or oral, relating to this
Agreement by either Party not contained herein shall be of any force or
effect.
IN WITNESS WHEREOF, The Company and Employee have duly executed this Agreement
this 29th day of July, 1998.
OPEC, Corp. Employee
/s/ Daniel J. Romano /s/ Donald D. Cannella
- -------------------- ----------------------
By: Daniel J. Romano By: Donald D. Cannella
Its: Vice President
<PAGE> 1
Exhibit 6.6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 25th day of July, 1998,
by and among World's Fare, Inc., dba FutureOne, a Nevada corporation (the
"Company"), and Blackwater Capital Partners, L.P. ("BCP"), and Blackwater
Capital Group, L.L.C. ("BCG"), both of which may be referred to herein as an
"investor" or the "Investors".
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Common Stock and Warrants. Subject to the
terms and conditions of this Agreement, the Investors agree to purchase at the
Closing, and purchase or cause to be purchased pursuant to Section 1.4 below,
and the Company and certain Insiders of the Company (see Section 1.5) agree to
sell and issue to the Investors at the Closing, and to the Investors and/or
other persons pursuant to Sections 1.4 and 1.6, that number of shares of the
Company's and certain Insider's Common Stock, as well as Warrants issued by the
Company, all as set forth and for the purchase prices stated herein.
1.2 Closing. The purchase and sale of the Units contemplated under
Section 1.3 shall take place at the offices of the Company, at 5:00 p.m.
Mountain Standard Time on July 25, 1998, or at such other time and place as the
Company and Investors acquiring in the aggregate more than one-half of the
shares of Common Stock sold pursuant hereto mutually agree upon orally or in
writing (which time and place are designated as the "Closing"). At the Closing
the Company shall deliver to each Investor a certificate representing the Common
Stock that such Investor is purchasing against payment of the purchase price
therefore by certified check, wire transfer, or a combination thereof.
1.3 Funding upon Execution of this Agreement. Upon the execution of
this Agreement, BCP shall purchase thirty (30) Units of the Company's Private
Placement Memorandum dated November 26, 1997 (the "PPM"), for a purchase price
of $375,000. Pursuant to the PPM, BCP shall receive 300,000 shares of Common
Stock priced at $1.25 per share, and 150,000 Warrants exercisable at $3.00 per
share. A copy of the PPM and the PPM Warrant Agreement have been previously
supplied to the Investors, receipt of which is hereby acknowledged, and copies
of same are attached hereto as Exhibit 1. Immediately subsequent to the purchase
of the Units contemplated under this Section 1.3, the Company shall close the
PPM, and the Company shall not accept any other monies pursuant to the PPM.
1.4 Subsequent Sales of Common Stock. BCP shall purchase, or cause to
be purchased by third party investors approved by the Company in its sole
discretion ("Third Party Investors"), up to an additional 3,211,000 shares of
Common Stock of the Company, and shall purchase, or cause to be purchased
100,000 shares of Common Stock each from Kendall Q. Northern and Earl J. Cook
(the "Insiders") (see Section 1.5), for a total investment of $10,000,000 (the
"total investment"), and for a maximum total sale of 3,411,000 shares. The
Company and the Insiders shall sell up to the balance of the authorized number
of shares of Common Stock not sold at the Closing at a minimum price of $2.93169
per share. The shares
-1-
<PAGE> 2
may be sold at a price higher than $2.93169 per share. The total investment may
be divided into four (4) equal payments of $2,500,000 per payment, each said
payment to be divided between the Company and the Insiders as stated herein. On
or before 5:00 p.m. Mountain Standard Time on August 15, 1998, BCP shall
purchase, or cause to be purchased, the first block of shares of Common Stock
representing the first payment of $2,500,000. The number of shares sold in each
block shall be a fraction (x) the numerator of which shall be the amount of
$2,500,000, and (y) the denominator of which shall be the price per share. The
number of shares sold in each block shall include 25,000 shares sold by Kendall
Q. Northern, and 25,000 shares sold by Earl J. Cook. The second, third, and
fourth payments made by BCP or Third Party Investors shall be completed in a
time frame to be determined by the Board of Directors of the Company and the
board advisor referenced in Section 5.7. Subsequent to the first payment of
$2,500,000, the remaining shares representing the $7,500,000 to be invested
thereafter (the "remaining shares") may be sold through a registered public
offering. In the event of a registered public offering, the structure of four
(4) equal payments referenced herein may be abrogated, provided that, in any
event, the total net proceeds to the Company under this Section 1.4, including
the first payment of $2,500,000, shall total $10,000,000. In the event that the
remaining shares are sold at a price higher than $2.93169 per share, BCP shall
have the option to purchase from the Company the portion of the remaining
authorized shares not sold to fulfill the total investment of $10,000,000 at a
price of $0.01 per share (the "option shares"), pursuant to an Option Agreement
between the Company and BCP to be executed subsequent to the date of this
Agreement. The number of option shares shall equal 3,211,000 shares minus the
number of shares not sold to cause the total investment of $10,000,000.
1.5 Sales by Insiders. The Insiders shall each sell to BCP and/or Third
Party Investors 100,000 shares of Common Stock previously issued to each
Insider. Said shares shall be included in the shares purchased by BCP or Third
Party Investors pursuant to Section 1.4 above. The sales of shares by both Mr.
Northern and Mr. Cook may be divided into four (4) equal parts of 25,000 shares
each, with the sale of each part taking place concurrently with each payment
contemplated under Section 1.4. The sales of all of the Insiders' shares shall
be at a minimum price of $2.93169 per share, but may be sold at a higher price
as envisioned under Section 1.4.
1.6 Warrants. Upon the execution of this Agreement, and pursuant to the
Warrant Agreement dated concurrently herewith, and attached hereto as Exhibit 2,
the Company shall issue to BCG 300,000 fully vested warrants that are
exercisable by BCG at a price of $1.00 per share for a term of seven (7) years
from the date of this Agreement. The warrants issued under the Warrant Agreement
shall be noncallable by the Company for a period of seven (7) years. The Company
shall also issue an additional 1,400,000 warrants to BCG exercisable at any time
at a price of $1.00 per share and non-callable by the Company, all of which
shall vest in four (4) equal parts of 350,000 warrants per part, upon each of
the first, second, third, and fourth payments of $2,500,000 made by BCP or Third
Party Investors as referenced in Section 1.4.
1.7 Refusal of Funding. Subsequent to the first payment referenced in
Section 1.4, the Company shall retain the right to refuse one or more of the
subsequent payments contemplated under said section. In the event of any refusal
by the Company of the subsequent
-2-
<PAGE> 3
payments by the Investors or Third Party Investors, all warrants held by BCP not
then vested shall immediately become fully vested.
1.8 Voting Trust. At the Closing, the Investors shall also execute as
parties thereto the Voting Trust Agreement dated concurrently herewith (the
"Voting Trust"), a copy of which is attached hereto as Exhibit 3. At the Closing
and thereafter, any share certificates issued by the Company pursuant to the
Warrant Agreement shall be transferred by the Investors to Voting Trust.
1.9 Termination. The duties of BCP with respect to purchasing, or
causing the purchase of, the shares referenced in Section 1.4, shall terminate
at 5:00 p.m. Mountain Standard Time on July 25, 2000.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted in the
Company's business plan incorporated into the Company's Private Placement
Memorandum dated November 26, 1997, heretofore furnished to the Investors (the
"Business Plan"). The Company is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure to so qualify would have
a material adverse effect on its business or properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
Company consists, or will consist immediately prior to the Closing, of:
(a) Common Stock. 50,000,000 shares of common stock ("Common Stock") of
which 7,580,125 shares are issued and outstanding as of June 30, 1998.
(b) The outstanding shares of Common Stock are all duly and validly
authorized and issued, fully paid and nonassessable, and were issued in
accordance with the registration or qualification provisions of the Securities
Act of 1933, as amended (the "Act") and any relevant state securities laws or
pursuant to valid exemptions therefrom.
(c) Except for (A) the warrants issued prior to the date of this
Agreement pursuant to the Company's Private Placement Memorandum dated November
26, 1997, and (B) and other agreements engaged in the normal course of business,
there are no material outstanding options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from the Company of any shares of its capital stock. The Company is not a party
or subject to any agreement or understanding, and, to the best of the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.
-3-
<PAGE> 4
2.3 Subsidiaries. Other than (i) the Articles of Exchange agreement
dated February 20, 1998, between the Company and FutureOne, Inc., an Arizona
corporation, (ii) the Articles of Exchange Agreement dated April 1, 1998 between
the Company and Lankaster, Inc., an Arizona corporation, (iii) the Articles of
Exchange agreement dated May 11, 1998, between the Company and Carnet Computer
Services, Inc., a Nevada corporation, all of which having been previously
disclosed to the Investors, the Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement. The Company is currently in negotiations to
purchase all of the assets of Interworldnet, an Arizona general partnership, in
exchange for stock and the assumption of certain debts. The Company is also
negotiating the possible purchases of several internet service provider
companies and other communications related companies.
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, including the Voting Trust and the Warrant
Agreements, the performance of all obligations of the Company hereunder and
thereunder, and the authorization, issuance (or reservation for issuance), sale
and delivery of the Common Stock being sold hereunder has been taken or will be
taken prior to the Closing, and this Agreement and the Warrant Agreements
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) as limited under applicable
federal or state securities laws.
2.5 Valid Issuance of Common Stock. The Common Stock that is being
purchased by the Investors hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and,
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Voting Trust and under applicable state and federal
securities laws, and with the exception that the Investors shall not transfer
any shares or Voting Trust Certificates to any parent entity, subsidiary, or any
other related party of the Investors, except as agreed upon by the Board of
Directors.
2.6 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for the filings pursuant to Regulation D of the Act and
applicable state securities laws.
2.7 Offering. Subject in part to the truth and accuracy of the
Investors' representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Common Stock and the Warrants as contemplated by this
Agreement are exempt from the registration requirements of the Act, and neither
the Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
-4-
<PAGE> 5
2.8 Returns and Complaints. The Company has received no customer
complaints concerning its products and/or services that would constitute a
material adverse effect on the Company's business or prospects.
2.9 Litigation. There is no material action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement, or the right of the Company to enter into such
agreements, or to consummate the transactions contemplated hereby or thereby, or
that might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company. The Company 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. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.10 Proprietary Information. Each key employee and officer of the
Company has executed a Proprietary Information Agreement. The Company, after
reasonable investigation, is not aware that any of current its key employees or
officers are in violation thereof, and the Company will use its best efforts to
prevent any such violation.
2.11 Patents and Trademarks. To the best of its knowledge (but without
having conducted any special investigation or patent search), the Company has
sufficient title and ownership of all patents, trademarks, service marks, trade
names, copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted as
described in the Business Plan without any conflict with or infringement of the
rights of others. Other than a franchise agreement with Kenneth P. Eck to use
the "FutureOne" name for internet service in Wickenburg, Arizona (the
"Wickenburg franchise"), there are no material outstanding options, licenses, or
agreements of any kind relating to the foregoing, nor is the Company bound by or
a party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person or
entity. The Company has not received any communications alleging that the
Company has violated or, by conducting its business as proposed, would violate
any of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity. The Company
is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree, or order of any court or administrative
agency, that would interfere with the use of his or her best efforts to promote
the interests of the Company or that would conflict with the Company's business
as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying an of the Company's business by the employees of the
company, nor the conduct of the Company's business as proposed, will, to the
best of the Company's knowledge, conflict with or result in a breach of the
terms, conditions, or provisions of, or constitute a default under, any
contract, covenant or instrument under which any of such employees is now
obligated. The Company does not believe
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it is or will be necessary to utilize any inventions of any of its employees (or
people it currently intends to hire) made prior to their employment by the
Company.
2.12 Compliance with Other Instruments.
(a) The Company is not in violation or default in any material respect
of any provision of its Bylaws, or in any material respect of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound, or, to the best of its knowledge, of any provision of any federal or
state statute, rule or regulation applicable to the Company. The execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby and thereby will not result in any such
violation or be in conflict with or constitute with or without the passage of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event that results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of
any material permit, license, authorization, or approval applicable to the
Company, its business or operations or any of its assets or properties.
(b) The Company has avoided every condition, and has not performed any
act, the occurrence of which would result in the Company's loss of any right
granted under any license, distribution or other agreement.
2.13 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby, employment
agreements to be executed subsequent to the date of this Agreement by Kendall Q.
Northern and Earl J. Cook, as approved by the Board of Directors, and the
repayment of certain notes to Earl J. Cook and Kenneth Eck, as disclosed in the
Company's Financial Statements, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgements, orders, writs or decrees to which the Company
is a party or by which it is bound that may involve (i) obligations (contingent
or otherwise) of, or payments to the Company in excess of, $5,000, with the
exception of certain software royalties from Carnet, or (ii) the license of any
patent, copyright, trade secret or other proprietary right to or from the
Company, with the exception of the Wickenburg franchise referenced in Section
2.11, or (iii) provisions restricting or affecting the development, manufacture
or distribution of the Company's products or services, or (iv) indemnification
by the Company with respect to infringements of proprietary rights.
(c) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) made any loans or advances to any person in excess of
$5000, other than ordinary advances for travel expenses, or (iii) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of certain assets and its inventory in the ordinary course of business.
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(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any contract,
agreement or instrument, or subject to any restriction under its Bylaws that
adversely affect its business as now conducted or as proposed to be conducted in
the Business Plan, its properties or its financial condition.
2.14 Related-Party Transactions. The Company is not indebted (or
committed to make loans or extend or guarantee credit) to any employee, officer,
or director of the Company or member of his or her immediate family. To the best
of the Company's knowledge, none of such persons currently has any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, officers, or
directors of the Company and members of their immediate families may own stock
in the publicly traded companies that may compete with the Company. No member of
the immediate family of any officer or director of the Company is directly or
indirectly interested in any material contract with the Company.
2.15 Permits. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
2.16 Environmental and Safety Laws. To the best of its knowledge, the
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
2.17 Manufacturing and Marketing Rights. With the exception of the
Wickenburg franchise referenced in Section 2.11, the Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products.
2.18 Disclosure. The Company has fully provided the Investors with all
the information that such investors have requested for deciding whether to
purchase the Common Stock and Warrants. To the best of its knowledge, neither
this Agreement, the Voting Trust, the Warrant Agreement, nor any other
statements or certificates made or delivered in connection herewith or therewith
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein not misleading.
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2.19 Business Plan. The Business Plan incorporated in the Company's
Private Placement Memorandum dated November 26, 1997, previously delivered to
the Investors has been prepared in good faith by the Company and does not
contain any untrue statement of a material fact nor does it omit to state a
material fact necessary to make the statements made therein not misleading.
2.20 Registration Rights. The Company will grant and agree to grant
registration rights, including piggyback rights, to all shares and warrants held
by BCG and BCP.
2.21 Corporate Documents. Except for any amendments necessary to
satisfy representations and warranties or conditions contained herein, the
Bylaws of the Company are available for review by counsel for the Investors.
2.22 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens that arise in the ordinary course of business and do
not materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to the best of its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
2.23 Financial Statements. The Company has delivered to the Investors
its audited financial statements (balance sheet and profit and loss statement,
statement of stockholders' equity and statement of cash flows, including notes
thereto) as of September 30, 1997 (the "Financial Statements"). The Company is
in the process of preparing financial statements for the fiscal year ending May
31, 1998. The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and with each other, except that unaudited
Financial Statements may not contain all footnotes required by generally
accepted accounting principles. The Financial Statements fairly present the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein, subject in the case of unaudited Financial
Statements to normal year-end audit adjustments. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to September 30, 1997 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Company. Except
as disclosed in the Financial Statements, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.24 Changes. Since September 30, 1997, but with the exception of
transactions disclosed herein, and transactions engaged in the ordinary course
of business, there has not been:
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(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a material debt
owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(e) any material change or amendment to a material contract or
arrangement by which the company or any of its assets or properties is bound or
subject;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(g) to the best of its knowledge, any impending resignation or
termination of employment of any key officer of the Company;
(h) receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of the Company;
(i) any mortgage, pledge, transfer of a security interest in, or lien
created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(j) any loans or guarantees made by the Company to or for the benefit
of its employees, officers, or directors, or any members of their immediate
families, other than travel advances and other advances made in the ordinary
course of its business;
(k) any declaration, setting aside or payment or other distribution in
respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any such stock by the Company,
except with respect to the repurchase of shares of previously issued to
terminated non-key employees;
(l) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company (as such business is presently conducted and as it is proposed to be
conducted); or
2.25 Employee Benefit Plans. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
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2.26 Tax Returns, Payments and Elections. The Company has filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The provision for
taxes of the Company as shown in the Financial Statements is adequate for taxes
due or accrued as of the date thereof. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended (the "Code"), to be treated as a
Subchapter S corporation or a collapsible corporation pursuant to Section
1362(a) or Section 341(f) of the Code, nor has it made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation or amortization) that would have a material effect on
the Company, its financial condition, its business as presently conducted or
proposed to be conduction or any of its properties or material assets. The
Company has never had any tax deficiency proposed or assessed against it and has
not executed any waiver of any statute of limitations on the assessment or
collection of any tax or governmental charge. None of the Company's federal
income tax returns and none of its state income or franchise tax or sales or use
tax returns has ever been audited by governmental authorities. Since the date of
the Financial Statements, the Company has made adequate provisions on its books
of account for all taxes, assessments and governmental charges with respect to
its business, properties and operations for such period. The Company has
withheld or collected from each payment made to each of its employees, the
amount of all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositaries.
2.27 Insurance. The Company has in full force and effect standard fire
and casualty insurance policies, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed.
2.28 Minute Books. The minute books of the Company are available to the
Investors, and contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
2.29 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the best of the
Company's knowledge, has sought to represent any of the employees,
representatives or agents of the Company. There is no strike or other labor
dispute involving the Company pending, or to the best of the Company's
knowledge, threatened, that could have a material adverse effect on the assets,
properties, financial condition, operating results, or business of the Company
(as such business is presently conducted and as it is proposed to be conducted),
nor is the Company aware of any labor organization activity involving its
employees. The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. The employment of each officer and employee
of the Company is terminable at the will of the Company. To the
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best of its knowledge, the Company has complied in all material respects with
all applicable state and federal equal employment opportunity and other laws
related to employment.
2.30 Net Operating Loss Carryforward. The information contained in the
Financial Statements or otherwise provided to counsel for the Investors
regarding the application of Section 382 of the Code to the Company's federal
net operating loss carryforward is true and correct to the best of the Company's
knowledge.
2.31 Use of Investor Proceeds. With the exception of the proceeds from
the Insider sales referenced in Section 1.5, the Company shall use the funds
invested under this Agreement for the implementation of the "30 City Wire-Up
Program", for selective acquisitions, and for ordinary operating expenses, all
as approved by the Board of Directors.
3. Representations and Warranties of the Investors. Each Investor
hereby represents and warrants that:
3.1 Authorizations. Such Investor has full power and authority to enter
into this Agreement, the Voting Trust, and the Warrant Agreements, and each such
agreement constitutes its valid and legally binding obligation, and enforceable
in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with such
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Agreement such Investor hereby confirms,
that the Common Stock to be received by such Investor (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, such Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
3.3 Financial Capability To Consummate Transactions. Each Investor
warrants that it is financially capable of fulfilling all obligations under and
contemplated by this Agreement. Each Investor acknowledges that a failure to
perform at any time by any Investor may or will cause substantial and
irreparable harm to the Company.
3.4 Disclosure of Information. Such Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Common Stock. Such Investor further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Common Stock and the business,
properties, prospects and financial condition of the Company. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 of this Agreement or the right of the Investors to rely
thereon.
3.5 Conduct of Investors as Members of the Board of Directors. Pursuant
to Section 5.8, each named member of the Board of Directors warrants that he
will fulfill his fiduciary
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responsibility to the Board, and he will fully and faithfully perform all duties
as a member of the Board, including without limitation, being available for
special and regular Board meetings, and not disclosing to any third party any
proprietary information gained as a result of membership on the Board.
3.6 Investment Experience. Such Investor is an Investor in securities
of companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in Common Stock. If other than an
individual, Investor also represents it has not been organized for the purpose
of acquiring the Common Stock.
3.7 Accredited Investor. Such Investor is an "accredited investor"
within the meaning of the Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.8 Restricted Securities. Such Investor understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.9 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, such Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3, and:
(a) There is then in effect a Registration Statement under the Act
covering such proposed dispositions and such disposition is made in accordance
with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such disposition
will not require registration of such shares under the Act. It is agreed that
the Company will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances.
(c) BCP and BCG shall not transfer any shares owned or controlled by
either or both of them to any party related or affiliated with or to BCP and/or
BCG, except upon written permission of the Company, in its sole discretion.
3.10 Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
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(a) "These securities have not been registered under the Securities Act
of 1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(b) Any legend required by the laws of the States of Nevada and
Arizona.
3.11 Further Representations by Foreign Investors. If an Investor is
not a United States person, such Investor hereby represents that he or she has
satisfied himself or herself as to the full observance of the laws of his or her
jurisdiction in connection with any invitation to subscribe for the Securities
or any use of this Agreement, including (i) the legal requirements within his
jurisdiction for the purchase of the Securities, (ii) any foreign exchange
restrictions applicable to such purchase, (iii) any governmental or other
consents that may need to be obtained, and (iv) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale, or transfer of the Securities. Such Investor's subscription and payment
for, and his or her continued beneficial ownership of the Securities, will not
violate any applicable securities or other laws of his or her jurisdiction.
4. Corporate Securities Law. These securities are offered pursuant to
an exemption from registration with the United States Securities and Exchange
Commission contained in sections 3(b) and 4(2) of the Securities Act of 1933 and
Rule 506 of Regulation D promulgated thereunder. No registration statement or
application to register these securities has been or will be filed with the
Commission or any state securities commission.
5. Conditions of Investor's Obligations at Closing. The obligations of
each Investor under Subsection 1 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 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. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.
5.4 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Investors' counsel, and they shall have received
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all such counterpart original and certified or other copies of such documents as
they may reasonably request.
5.5 Proprietary Information and Employee Stock Purchase Agreements.
Each key employee of the Company shall have entered into a Proprietary
Information Agreement. Subsequent to the date of this Agreement, each hold of
Common Stock of the Company shall enter into an Employee Stock Purchase
Agreement in the form to be approved by the Board of Directors.
5.6 Bylaws. The Bylaws of the Company shall provide that the Board of
Directors of the Company shall consist of at least two (2) and not more than
nine (9) persons.
5.7 Board of Directors. Upon the Closing, the directors of the Company
shall be Messrs. Kendall Q. Northern, Earl J. Cook, and Steven R. Green. Mr.
John B. Sadler, Jr. shall serve as a non-voting advisor to the Board of
Directors, shall receive notice of all board meetings, and shall have the right
to attend all board meetings. Beginning in the first month subsequent to the
first payment referenced in Section 1.4, the board members and board advisor
referenced in this Section 5.8 shall each be paid the sum $2,500 per month by
the Company.
5.8 Future Compensation to BCG and BCP. BCG and/or BCP will be
compensated in the future for assisting the Company in completing appropriate
acquisitions. The compensation will include expenses and fees involved in the
acquisitions, and the exact amount of the compensation will be determined by the
persons referenced in Section 5.7.
5.9 Voting Trust. The Company and each Investor shall have entered into
the Voting Trust in the form attached as Exhibit 3.
5.10 Warrant Agreements. The Company and each Investor shall have
entered into the PPM Warrant Agreement, and the Warrant Agreement, in the form
attached as Exhibits 1 and 2.
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment an or before the Closing of each of the following conditions by that
Investor:
6.1 Representations and Warranties. The representations and warranties
of the Investor contained in Section 3 shall be true an and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the Closing.
6.2 Payment of Purchase Price. The Investors shall have delivered the
purchase price specified in Section 1.3, and the Investors shall collectively
have acquired and paid for at the Closing at least 300,000 shares of Common
Stock and 150,000 Warrants.
6.3 Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
Closing.
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7. Miscellaneous.
7.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or an behalf of the Investors or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Arizona as applied to agreements among Arizona
residents entered into and to be performed entirely within Arizona.
7.4 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.
7.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, 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 on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
7.7 Finder's Fee Indemnification. Each Investor agrees to indemnify and
to hold harmless the Company from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which such Investor
or any of its officers, partners, employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is effected, the
Company shall pay only the costs and expenses that it has incurred with respect
to the negotiation, execution,
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delivery and performance of this Agreement. The Investors shall be responsible
for the fees of counsel for the Investors. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the Voting Trust,
or the Warrant Agreements, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be amended
and the other observance of any term 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 Company and the holders of
a majority of Common Stock issued. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
7.10 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 the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Aggregation of Stock. All shares of the Common Stock held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
7.12 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
___________________________________
World's Fare, Inc., dba FutureOne
By: Kendall Q. Northern
President
___________________________________
World's Fare, Inc., dba FutureOne
By: Earl J. Cook
Executive Vice-President
-16-
<PAGE> 17
____________________________________________
Blackwater Capital Partners, L.P. (Investor)
By: Steven Green
Managing Member of Blackwater Capital Group, L.L.C.
____________________________________________
Blackwater Capital Croup, L.L.C. (Investor)
By: John B. Sadler, Jr.
Member
-17-
<PAGE> 1
Exhibit 6.7
VOID AFTER 5:00 P.M. MOUNTAIN STANDARD TIME, ON JULY 25, 2005
NEITHER THIS WARRANT NOR THE WARRANT STOCK HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE COMPANY WILL NOT TRANSFER THIS WARRANT OR THE
WARRANT STOCK UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING SUCH
WARRANT OR SUCH WARRANT STOCK AS THE CASE MAY BE, UNDER THE SECURITIES ACT OF
1933 AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM
AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING THAT IN
THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS,
OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF
1933.
WORLD'S FARE, INC. DBA FUTUREONE
(a Nevada corporation)
Warrant for the Purchase of 1,700,000 Shares
of Common Stock, $0.001 par value
FOR VALUE RECEIVED, World's Fare, Inc., dba FutureOne (the "Company"),
an Arizona corporation, hereby certifies that Blackwater Capital Group, L.L.C.
(the "Holder"), is entitled, subject to the provisions of this Warrant, to
purchase from the Company at any time, or from time to time during the period
commencing on the date hereof and expiring at 5:00 p.m. Mountain Standard Time,
on July 25, 2005 (the "Expiration Date"), up to 1,700,000 fully paid and
non-assessable shares of Common Stock at a price of $1.00 per share (the
"Exercise Price").
The term "Common Stock" means the Common Stock, $0.001 par value per
share, of the Company as constituted on July 25, 1998 (the "Base Date"),
together with any other equity securities that may be issued by the Company in
respect thereof or in substitution therefor. The number of shares of Common
Stock to be received upon the exercise of this Warrant may be adjusted from time
to time as hereinafter set forth. The shares of Common Stock deliverable or
delivered upon such exercise, as adjusted from time to time, are hereinafter
referred to as "Warrant Stock."
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant certificate, and
(in the case of loss, theft or destruction) of satisfactory indemnification, and
upon surrender and cancellation of this Warrant certificate, if mutilated, the
Company shall execute and deliver a new Warrant certificate of like tenor and
date.
Section 1. Exercise of Warrant. This Warrant may be exercised, subject
to the requirements set forth herein, in whole, or in part, at any time during
the period commencing on the date hereof, and shall consist of one (1) block of
300,000 warrants that shall be fully vested upon the execution of this Warrant
Agreement, and four (4) subsequent equal blocks of 350,000 warrants. Pursuant to
the Stock Purchase Agreement dated currently herewith (the
-1-
<PAGE> 2
"Agreement"), each block of 350,000 warrants will become fully vested and may be
exercised only upon completion of each payment of $2,500,000 contemplated under
the Agreement, and Sections 1.4 and 1.6 specifically therein. Pursuant to
Section 1.7 of the Agreement, in the event of any refusal by the Company of the
subsequent payments, all warrants herein shall immediately become fully vested.
The Warrants herein expire at 5:00 p.m. Mountain Standard Time on the Expiration
Date set forth above, or, if such day is a day on which banking institutions in
Phoenix, Arizona are authorized by law to close, then on the next succeeding day
that shall not be such a day, by presentation and surrender of this Warrant
certificate to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Warrant Exercise Form attached hereto
duly executed and accompanied by payment (by certified or cashier's (i.e.,
official bank) check, payable to the order of the Company) of the aggregate
Exercise Price for the number of shares specified in such form and instruments
of transfer, if appropriate, duly executed by the Holder. If this Warrant should
be exercised in part only, the Company shall, upon surrender of this Warrant
certificate for cancellation, execute and deliver a new Warrant certificate
evidencing the rights of the Holder thereof to purchase the balance of the
shares purchasable hereunder. Upon receipt by the Company of this Warrant
certificate, together with the Exercise Price, at its office, or by the stock
transfer agent of the Company at its office, if any, in proper form for exercise
as described above, together with an agreement to comply with the restrictions
on transfer and related covenants contained herein, and with the terms of the
Voting Trust executed concurrently herewith (the "Voting Trust"), and a
representation as to investment intent and any other matter required by counsel
to the Company, signed by the Holder (and if other than the original Holder
accompanied by proof, satisfactory to counsel for the Company, of the right of
such person or persons to exercise the Warrant), the Holder shall be deemed to
be the holder of record of the shares of Common Stock issuable upon such
exercise, and shall transfer said shares to the Voting Trust, even if the stock
transfer books of the Company shall then be closed or certificates representing
such shares of Common Stock shall not have been delivered to the Holder. The
Holder shall pay any and all documentary stamp or similar issue or transfer
taxes payable in respect of the issue or delivery of shares of Common Stock on
exercise of this Warrant. The Company shall promptly thereafter issue
certificate(s) evidencing the Common Stock so purchased, and the Voting Trust
certificates representing the Common Stock.
Section 2. Reservation of Shares. The Company shall at all times
reserve for issuance and delivery upon exercise of this Warrant all shares of
Common Stock or other shares of capital stock of the Company (and other
securities) from time to time receivable upon exercise of this Warrant. All such
shares (and other securities) shall be duly authorized and, when issued upon
exercise, shall be validly issued, fully paid and non-assessable.
Section 3. No Fractional Shares. No fractional shares or script
representing fractional shares shall be issued upon the exercise of this
Warrant, but the Company shall pay the Holder an amount equal to the fair market
value of such fractional share of Common Stock in lieu of each fraction of a
share otherwise called for upon any exercise of this Warrant. For purposes of
this Warrant, the fair market value of a share of Common Stock shall equal the
closing sale price (or if not available the average of the closing bid and asked
prices) on the business day prior to exercise of this Warrant, or, if the Common
Stock is then not publicly traded, then the price determined in good faith by
the Board of Directors of the Company.
-2-
<PAGE> 3
Section 4. Transfer.
4.1 Securities Laws. Neither this Warrant nor the Warrant
Stock have been registered under the Securities Act of 1933. The Company will
not offer this Warrant or the Warrant Stock unless (i) there is an effective
registration covering such Warrant or such shares, as the case may be, under the
Securities Act of 1933 and applicable states securities laws, (ii) it first
receives a letter from an attorney, acceptable to the Company's board of
directors or its agents, stating that in the opinion of the attorney the
proposed transfer is exempt from registration under the Securities Act of 1933
and under all applicable state securities laws, or (iii) the transfer is made
pursuant to Rule 144 under the Securities Act of 1933.
4.2 Conditions to Transfer. Prior to any such proposed
transfer, and as a condition thereto, if such transfer is not made pursuant to
an effective registration statement under the Securities Act, the Holder will,
if requested by the Company, deliver to the Company (i) an investment covenant
signed by the proposed transferee, (ii) an agreement by such transferee that the
restrictive investment legend set forth above be placed on the certificate or
certificates representing the securities acquired by such transferee, (iii) an
agreement by such transferee that the Company may place a "stop transfer order"
with its transfer agent or registrar, and (iv) an agreement by the transferee to
indemnify the Company to the same extent as set forth in the next succeeding
paragraph. The Company may, in its sole discretion, refuse to the transfer, or
to approve the transfer, for any reason.
4.3 Indemnity. The Holder acknowledges that the Holder
understands the meaning and legal consequences of this Section, and the Holder
hereby agrees to indemnify and hold harmless the Company, its representatives
and each officer and director thereof from and against any and all loss, damage
or liability (including all attorneys' fees and costs incurred in enforcing this
indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or any
other breach of this Warrant, (b) any transfer of any of this Warrant or the
Warrant Stock in violation of the Securities Act, the Securities Exchange Act of
1934, as amended, or the rules and regulations promulgated under either of such
acts, (c) any transfer of this Warrant or any of the Warrant Stock not in
accordance with this Warrant or (d) any untrue statement or omission to state
any material fact in connection with the investment representations or with
respect to the facts and representations supplied by the Holder to counsel to
the Company upon which its opinion as to a proposed transfer shall have been
based.
4.4 Holdback Period and Transfer. Except as specifically
restricted hereby, this Warrant and the Warrant Stock issued may be transferred
by the Holder in whole or in part at any time or from time to time only upon
written permission of the Company, in its sole discretion. In the event that the
Company publicly offers shares of its Common Stock, the Warrant Stock may be
sold from the date of the Company's initial public offering of securities only
in the discretion of the Company and the Underwriter. Upon surrender of this
Warrant certificate to the Company or at the office of its stock transfer agent,
if any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and
-3-
<PAGE> 4
deliver a new Warrant certificate in the name of the assignee named in such
instrument of assignment, and this Warrant certificate shall promptly be
canceled. Any proposed assignment must be approved in writing by the Company
prior thereto. Any assignment, transfer, pledge, hypothecation or other
disposition of this Warrant attempted contrary to the provisions of this
Warrant, or any levy of execution, attachment or other process attempted upon
this Warrant, shall be null and void and without effect.
Section 5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity, and the rights of the Holder are limited to those expressed in
this Warrant.
Section 6. Anti-Dilution Provisions.
6.1 Stock Splits, Dividends, Etc.
6.1.1 If the Company shall at any time subdivide its
outstanding shares of Common Stock (or other securities at the time receivable
upon the exercise of the Warrant) by recapitalization, reclassification or
split-up thereof, or if the Company shall declare a stock dividend or distribute
shares of Common Stock to its stockholders, the number of shares of Common Stock
subject to this Warrant immediately prior to such subdivision shall be
proportionately increased, and if the Company shall at any time combine the
outstanding shares of Common Stock by recapitalization, reclassification or
combination thereof, the number of shares of Common Stock subject to this
Warrant immediately prior to such combination shall be proportionately
decreased. Any such adjustment and adjustment to the Exercise Price pursuant to
this Section shall be effective at the close of business on the effective date
of such subdivision or combination or if any adjustment is the result of a stock
dividend or distribution then the effective date for such adjustment based
thereon shall be the record date therefor.
6.1.2 Whenever the number of shares of Common Stock
purchasable upon the exercise of this Warrant is adjusted, as provided in this
Section, the Exercise Price shall be adjusted to the nearest cent by multiplying
such Exercise Price immediately prior to such adjustment by a fraction (x) the
numerator of which shall be the number of shares of Common Stock purchasable
upon the exercise immediately prior to such adjustment, and (y) the denominator
of which shall be the number of shares of Common Stock so purchasable
immediately thereafter.
6.2 Adjustment for Reorganization, Consolidation, Merger, Etc.
In case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this Warrant)
after the Base Date or in case after such date the Company (or any such other
corporation) shall consolidate with or merge into another corporation or convey
all or substantially all of its assets to another corporation, then, and in each
such case, the Holder of this Warrant upon the exercise as provided in Section 1
at any time after the consummation of such reorganization, consolidation, merger
or conveyance, shall be entitled to receive, in lieu of the securities and
property receivable upon the exercise of this Warrant prior to such
consummation, the securities or property to which such Holder would have been
entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto; in
-4-
<PAGE> 5
each such case, the terms of this Warrant shall be applicable to the securities
or property received upon the exercise of this Warrant after such consummation.
6.3 Certificate as to Adjustments. In each case of an
adjustment in the number of shares of Common Stock receivable on the exercise of
this Warrant, the Company at its expense shall promptly compute such adjustment
in accordance with the terms of the Warrant and prepare a certificate executed
by an officer of the Company setting forth such adjustment and showing the facts
upon which such adjustment is based. The Company shall forthwith mail a copy of
each such certificate to each Holder.
6.4 Notices of Record Date, Etc. In case:
6.4.1 the Company shall take a record of the holders of
its Common Stock (or other securities at the time receivable upon the exercise
of the Warrant) for the purpose of entitling them to receive any dividend (other
than a cash dividend at the same rate as the rate of the last cash dividend
theretofore paid) or other distribution, or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other securities,
or to receive any other right; or
6.4.2 of any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
then, and in each such case, the Company shall mail or cause to be mailed to
each Holder a notice specifying, as the case may be, (A) the date on which a
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place, and
the time, if any, to be fixed, as to which the holders of record of Common Stock
(or such other securities at the time receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
twenty (20) days prior to the date therein specified, and this Warrant may be
exercised prior to said date during the term of the Warrant.
6.5 Threshold for Adjustments. The Company shall not be
required to give effect to any adjustment in the Exercise Price. No adjustment
shall be made by reason of the issuance of shares upon conversion rights, stock
issuance rights or similar rights currently outstanding or any change in the
number of treasury shares held by the Company.
Section 7. Warrants Non-callable. The Company may not at any time call
any Warrants contemplated hereunder.
Section 8. Legend and Stop Transfer Orders. Unless the shares of
Warrant Stock have been registered under the Securities Act, upon exercise of
any of this Warrant and the issuance of any of the shares of Warrant Stock, the
Company shall instruct its transfer agent, if any, to enter stop transfer orders
with respect to such shares, and all certificates representing shares of
-5-
<PAGE> 6
Warrant Stock shall bear on the face thereof substantially the following legend,
insofar as is consistent with Arizona law:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THE COMPANY WILL NOT TRANSFER THIS CERTIFICATE
UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING THE
SHARES REPRESENTED BY THIS CERTIFICATE UNDER THE SECURITIES
ACT OF 1933 AND ALL APPLICABLE STATE SECURITIES LAWS, (ii) IT
FIRST RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE
BOARD OF DIRECTORS OR ITS AGENTS, STATING THAT IN THE OPINION
OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL
APPLICABLE STATE SECURITIES LAWS, (iii) THE TRANSFER IS MADE
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933.
Section 9. Officer's Certificate. Whenever the number or kind of
securities purchasable upon exercise of this Warrant or the Exercise Price shall
be adjusted as required by the provisions hereof, the Company shall forthwith
file with its Secretary or Assistant Secretary at its principal office and with
its stock transfer agent, if any, an officer's certificate showing the adjusted
number of kind of securities purchasable upon exercise of this Warrant and the
adjusted Exercise Price determined as herein provided and setting forth in
reasonable detail such facts as shall be necessary to show the reason for and
the manner of computing such adjustments. Each such officer's certificate shall
be made available at all reasonable times for inspection by the Holder and the
Company shall, forthwith after each such adjustment mail by certified mail a
copy of such certificate to the Holder.
Section 10. Notice. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt, if to
the Holder, at his/her address as shown on the books of the Company, and if to
the Company, at its principal office, 4250 East Camelback Road, Suite K-192,
Phoenix, Arizona 85018-2751. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing, a party's address which shall be deemed given at
the time of receipt thereof.
Section 11. Binding Effect. The provisions of this Warrant shall be
binding upon and inure to the benefit of (1) the parties hereto, (2) the
successors and assigns of the Company, and (3) if the Holder is a corporation,
partnership, or other business entity, the successors of the Holder.
Section 12. Nonassignability and Nontransferability. The Warrant rights
referenced herein are not assignable or transferable to any third party,
including any related party, except upon written permission of the Company prior
thereto.
Section 13. Pronouns. Any masculine personal pronoun shall be
considered to mean the corresponding feminine or neuter personal pronoun, as the
context requires.
-6-
<PAGE> 7
Dated this 25th day of July, 1998.
____________________________________________
World's Fare Inc., dba FutureOne
By: Kendall Q. Northern
President
____________________________________________
World's Fare, Inc., dba FutureOne
By: Earl J. Cook
Executive Vice-President
____________________________________________
Blackwater Capital Group, L.L.C. (Investor)
By: Steven R. Green
Managing Member
____________________________________________
Blackwater Capital Group, L.L.C. (Investor)
By: John B. Sadler, Jr.
Member
-7-
<PAGE> 8
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing __________ shares of Common Stock of World's
Fare, Inc., dba FutureOne and hereby makes payment of $__________ in payment
therefor.
Date:_________________________
________________________________
Blackwater Capital Group, L.L.C.
By:_____________________________
Its:____________________________
-8-
<PAGE> 1
Exhibit 6.8
FUTUREONE, INC.
1999 KEY EMPLOYEE STOCK OPTION PLAN
1. Purpose of Plan. The Purpose of this Plan is to advance the interest
of FutureOne, Inc., a Nevada corporation (hereinafter called the "Company") and
its shareholders by providing a means whereby employees of the Company may be
given an opportunity to purchase shares of Common Stock (hereinafter called
"shares") of the Company under options granted under the Plan, to the end that
the Company may retain present personnel upon whose judgment, initiative and
efforts the successful conduct of the business of the Company largely depends,
and may attract new personnel. Some of the options granted under the Plan shall
be options which are intended to qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any successor provision, and are hereinafter sometimes called "incentive stock
options".
2. Shares Subject to the Plan. The aggregate number of shares of the
Company for which options may be granted under this Plan shall be 2,500,000;
provided, however, that whatever number of shares shall remain reserved for
issuance pursuant to the Plan at the time of any stock split, stock dividend or
other change in the Company's capitalization shall be appropriately and
proportionately adjusted to reflect such stock dividend, stock split or other
change in capitalization. Such shares shall be made available from authorized
but unissued or reacquired shares of the Company. Any shares for which an option
is granted hereunder that are released from such option for any reason shall
become available for other options to be granted under this Plan.
3. Administration of the Plan. This Plan shall be administered under
the supervision of the Board of Directors ("Board"), provided that the Board may
delegate any of its powers hereunder to a committee of the Board. Subject to the
express provisions of this Plan, the Board shall have conclusive authority to
construe and interpret the Plan and any stock option agreement entered into
thereunder, and to establish, amend, and rescind rules and regulations for its
administration.
4. Granting of Options. The Board from time to time shall designate
from among the employees of the Company those employees to whom stock options to
purchase shares shall be granted under this Plan, the number of shares that
shall be subject to each option so granted, and the type of option granted. The
Board shall direct an appropriate officer of the Corporation to execute and
deliver option agreements to employees reflecting the grant of options. All
actions of the Board under this Paragraph shall be conclusive; provided,
however, the aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock options are
exercisable for the first time by any individual during any calendar year (under
this Plan or any other plan of the Company and subsidiary corporations that
provides for the granting of incentive stock options) shall not exceed $100,000.
Any incentive stock option that is granted to any employee who is, at the time
the option is granted, deemed for purposes of Section 422 of the Code, or any
successor provision, to own shares of the Company possessing more than ten
percent (10%) of the total combined voting power of all classes of shares of the
Company or of a parent or subsidiary of the Company, shall have an option price
<PAGE> 2
that is at least 110 percent of the fair market value of the stock, and shall
not be exercisable after the expiration of five years from the date it is
granted.
5. Option Period. No incentive stock option granted under this Plan may
be exercised later than ten years from the date of grant.
6. Option Price. The option price shall be fixed by the Board and set
forth in the Option Agreement, which price (in the case of incentive stock
options) shall not be less than the per share fair market value of the
outstanding shares of the Company on the date that the option is granted, as
determined by the Board. The Board may fix such option price and authorize one
or more officers of the Company to compute the price. The option price may be
payable in cash, Company stock, or a combination thereof. The date on which the
Board approves the granting of an option shall be deemed the date on which the
option is granted.
7. Option Agreement. The Option Agreement in which option rights are
granted to an employee shall be in the applicable form (consistent with this
Plan) from time to time approved by the Board and shall be signed on behalf of
the Company by the Chairman of the Board, the President or any Vice President of
the Company other than the employee who is a party thereto, and shall be dated
as of the date of the granting of the option, as determined in Paragraph 6
hereof.
8. Transferability of Options. No incentive stock option shall be
transferable by the optionee except by will or the laws of descent and
distribution, and the incentive stock options granted hereunder may be exercised
during the employee's lifetime only by him or his guardian or legal
representative. Non-statutory stock options may be transferred by the employee
only pursuant to such terms and conditions as may be established by the Board.
9. Amendment and Termination of the Plan. The Company, by action of its
Board of Directors, reserves the right to amend, modify or terminate at any time
this Plan, or, by action of the Board with the consent of the optionee, to
amend, modify or terminate any outstanding option agreement, except that the
Company may not, without further shareholder approval, increase the total number
of shares as to which options may be granted under the Plan (except increases
attributable to the adjustments authorized in Paragraph 2 hereof), change the
employees or class of employees eligible to receive options, or materially
increase the benefits accruing to participants under the Plan. Moreover, no
action may be taken by the Company (without the consent of the optionee) that
will impair the validity of any option then outstanding or that will prevent the
incentive stock options issued or to be issued under this Plan from being
"incentive stock options" under Sections 422 of the Code, or any successor
provision.
10. Effective Date of Plan. The Plan shall be effective upon adoption
of the Plan by the Board of Directors of the Company. The Plan shall be
submitted to the shareholders of the Company for approval within one year after
its adoption by the Board of Directors and, if the Plan shall not be approved by
the shareholders within said period, the Plan shall be void and of no effect.
Any options granted under the Plan prior to the date of approval by the
shareholders shall be void if such shareholders' approval is not obtained.
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<PAGE> 3
11. Expiration of Plan. Options may be granted under this Plan at any
time prior to 10 years from adoption by the Board, on which date the Plan shall
expire but without affecting any options then outstanding.
-3-
<PAGE> 1
Exhibit 6.9
FUTUREONE, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT, dated this ___ day of
_____________, 1999, (being the date this option is granted, herein referred to
as the "Grant Date") by and between FutureOne, Inc., a Nevada corporation
(hereinafter called the "Company"), and _____________ (hereinafter called the
"Optionee"), an employee of the Company.
W I T N E S S E T H:
That the Parties hereto have agreed and do hereby agree as follows:
Section 1. The Company hereby grants to the Optionee the option of
purchasing the number of the Company's shares of Common Stock (hereinafter
called "Shares") at the price and subject to the terms and conditions as
hereinafter set forth.
Section 2. The aggregate number of Shares purchasable is ____________.
Section 3. The option price is $___________ per share.
Section 4. This option is not transferable by the Optionee otherwise
than by will or by the laws of descent and distribution, and is exercisable,
during the lifetime of the Optionee, only by him or his guardian or legal
representative. Furthermore, except as otherwise provided in Sections 6, 7, and
11, this option can be exercised only if the Optionee has remained continuously
from the date this option is granted in the employ of the Company.
Section 5. Notwithstanding any other provision hereof, this option
shall not be exercisable after the expiration of ten years from the date this
option is granted, or upon such earlier expiration date as may be provided by
Sections 6, 7, or 11. This option shall become exercisable to the extent
indicated according to the following schedule:
<TABLE>
<CAPTION>
Period Percent Exercisable
<S> <C>
Before the first anniversary of the Grant Date 0%
On or after the first anniversary of the Grant Date
and before the second anniversary of the Grant Date 33 1/3%
On or after the second anniversary of the Grant Date
and before the third anniversary of the Grant Date 66 2/3%
On or after the third anniversary of the Grant Date 100%
</TABLE>
<PAGE> 2
Section 6. If the Optionee shall cease to be employed by the Company by
reason of retirement in accordance with any retirement plan or policy of the
Company then in effect, the Optionee, at any time within the six month period
following such retirement (but within the ten year period specified in Section
5) may exercise the option rights with respect to the remaining shares
purchasable hereunder.
Section 7. If the Optionee shall die while in the employ of the
Company, then within the one year period following his death (but within the ten
year period specified in Section 5) the person entitled by will or the
applicable laws of descent and distribution may exercise the option rights to
the extent that the Optionee was entitled to exercise the same immediately prior
to his death.
Section 8. If the Optionee shall cease to be employed by the Company
for any reason other than retirement or death, this option shall not be
exercisable after the date employment terminates.
Section 9. In consideration of the granting of this option, the
Optionee agrees that he will remain in the employ of the Company for a period of
not less than one year from the date this option is granted, unless his
employment shall be terminated on account of incapacity or with the consent of
the Company. Nothing herein contained shall limit or restrict any right which
the Company would otherwise have to terminate the employment of the Optionee
with or without cause or to adjust his compensation.
Section 10. In the event that at any time prior to the expiration of
this option each of the outstanding Shares (except Shares held by dissenting
shareholders) shall be changed to or exchanged for a different number or kind of
shares of stock or other securities of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, then for all purposes of this option (i) there
shall be substituted for each Share purchasable hereunder the number and kind of
shares of stock or other securities into which each such Share shall be so
changed, or for which each such Share shall be so exchanged, (ii) the option
price shall be appropriately adjusted (if necessary) by the Board to reflect
such transaction, and (iii) the shares or securities so substituted for each
such Share shall be subject to purchase at the option price, as adjusted. In the
event that the Company shall issue a stock dividend with respect to the Shares,
the number of Shares then purchasable hereunder shall be adjusted by adding to
each such Share the number of Shares which would have been distributed as a
stock dividend thereon had such Share been outstanding on the record date for
payment of the stock dividend, and each such Share together with said additional
Shares shall be purchasable at the option price, adjusted if necessary to
reflect such dividend. In the event that there shall be any other change in the
number or kind of outstanding Shares or other securities of the Company, or of
any shares of stock or other securities into which Shares shall have been
changed or for which they shall have been exchanged, then the Board may make
such adjustment in the number or kind of shares of stock or other securities
subject to purchase, and the option price, as above provided, as the Board, in
its sole discretion, may determine is equitably required by such change, and
such adjustments so made shall be effective and binding for all purposes of this
option. Anything to the contrary herein notwithstanding, the Optionee shall not
be entitled to purchase a fraction of a Share under this option.
-2-
<PAGE> 3
Section 11. (a) If the Company shall liquidate or dissolve, or shall be
a party to a merger or consolidation with respect to which the Company shall not
be the surviving corporation, the Company shall give written notice thereof to
the Optionee at least thirty days prior thereto. To the extent that this option
shall not have been exercised on or prior to the effective date of such
liquidation, dissolution, merger or consolidation, it shall terminate on said
date, unless it is assumed by another corporation.
(b) Notwithstanding anything to the contrary contained in this
Agreement, this option shall immediately become exercisable in full upon the
occurrence of a "change in control" as defined in paragraph (c).
(c) The term "change in control" shall mean the first to
occur of the following events:
(i) The acquisition by any unrelated person of beneficial
ownership (as that term is used for purposes of the
Securities Exchange Act of 1934 (the "Act")) of 20%
or more of the then outstanding shares of common
stock of the Company or the combined voting power of
the then outstanding voting securities of the Company
entitled to vote generally in the election of
directors. The term "unrelated person" means any
person other than (x) the Company and any subsidiary,
(y) an employee benefit plan or trust of the Company
or any subsidiary, and (z) a person who acquires
stock of the Company pursuant to an agreement with
the Company that is approved by the Board in advance
of the acquisition, unless the acquisition results in
a Change of Control pursuant to section (ii) below.
For purposes of this subsection, a "person" means an
individual, entity, or group, as that term is used
for purposes of the Act, or
(ii) Any tender or exchange offer, merger or other
business combination, sale of assets or contested
election, or any combination of the foregoing
transactions, if the result of such transaction is
that the persons who were directors of the Company
before such transaction shall cease to constitute a
majority of the Board of the Company or any successor
to the Company.
Section 12. Subject to the terms and conditions hereof, this
option may be exercised by delivering to the Company at the office of
its Treasurer a written notice, signed by the person entitled to
exercise the option, of the election to exercise the option and stating
the number of Shares to be purchased. Such notice shall, as an
essential part thereof, be accompanied by the payment of the full
purchase price of the Shares then to be purchased. Upon payment within
the time period specified by the Company of the amount, if any, in
cash, required to be withheld for Federal, state and local tax purposes
on account of the exercise of the option (provided that the Optionee
may at the time of exercise authorize the Company to withhold from his
next salary payment of all or part of the amount, if any, required to
be withheld by the Company on account of such exercise)
-3-
<PAGE> 4
the option shall be deemed exercised as of the date the Company
received such notice. Payment of the full purchase price must be made
in cash, previously-owned shares of Company stock or any combination
thereof. Upon the proper exercise of the option, the Company shall
issue in the name of the person exercising the option, and deliver to
him, a certificate or certificates for the Shares purchased. The
Optionee agrees that as holder of the option he shall have no rights as
shareholder or otherwise in respect of any of the Shares as to which
the option shall not have effectively been exercised as herein
provided.
Section 13. This option shall not be exercisable if such
exercise would violate:
(a) Any applicable state securities law;
(b) Any applicable registration or other requirements
under the Securities Act of 1933, as amended, or
applicable requirements of any stock exchange upon
which shares of the Company's stock trade; or
(c) Any applicable legal requirement of any other
governmental authority.
Furthermore, if a Registration Statement with respect to the Shares to be issued
upon the exercise of this option is not in effect or if counsel for the Company
deems it necessary or desirable in order to avoid possible violation of the
Securities Act of 1933, as amended (the "Act"), the Company may require, as a
condition to its issuance and delivery of certificates for the Shares, the
delivery to the Company of a commitment in writing by the person exercising the
option that at the time of such exercise it is his intention to acquire such
Shares for his own account for investment only and not with a view to, or for
resale in connection with, the distribution thereof; that such person
understands the Shares may be "restricted securities" as defined in Rule 144 of
the Securities and Exchange Commission; and that any resale, transfer or other
disposition of said Shares will be accomplished only in compliance with Rule
144, the Act, or other or subsequent applicable Rules and Regulations
thereunder. The Company may place on the certificates evidencing such Shares an
appropriate legend reflecting the aforesaid commitment and may refuse to permit
transfer of such certificates until it has been furnished evidence satisfactory
to it that no violation of the Act or the Rules and Regulations thereunder would
be involved in such transfer.
Section 14. The Board of Directors shall have authority, subject to the
express provisions of the Company's 1999 Stock Option Plan (the "Plan") and this
Agreement, to establish, amend and rescind rules and regulations relating to the
Plan, and to make all other determinations in the judgment of the Board
necessary or desirable for the administration of the Plan. The Board may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in this Agreement in the manner and to the extent it shall deem expedient to
carry the Plan into effect and it shall be the sole and final judge of such
expediency. All actions by the Board under the provisions of this paragraph
shall be conclusive for all purposes.
-4-
<PAGE> 5
Section 15. Notwithstanding any provisions hereof, this option shall be
subject to all of the provisions of the Plan as from time to time in force
consistently with the provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate as of the day and year first above written.
FUTUREONE, INC.
By:
Optionee
-5-
<PAGE> 1
Exhibit 12.1
[Alvin H. Bender, C.P.A. Letterhead]
July 16, 1999
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: REGISTRATION STATEMENT ON FORM 10-SB OF FUTUREONE, INC.
Gentlemen:
I have read the section titled "Changes In And Disagreements With
Accountants" included in the Registration Statement on Form 10-SB dated July
19, 1999 of FutureOne, Inc. filed with the Securities and Exchange Commission
and am in agreement with the statements contained therein.
Very truly yours,
/s/ Alvin H. Bender
BPD/lba
Enclosures
Copy: Kendall Q. Northern
<PAGE> 1
EXHIBIT 12.2
Subsidiaries of Registrant
<TABLE>
<CAPTION>
JURISDICTION OF INCORPORATION OR
SUBSIDIARY ORGANIZATION
- ---------- ------------
<S> <C>
FUTUREONE, INC. Arizona
OPEC CORP. Colorado
PRIORITY SYSTEMS, INC. Arizona
Ubiquity Design, LLC Arizona
NETWORLD.COM, INC.(1) Arizona
Abcon, Inc. Arizona
</TABLE>
- --------
(1) NETWORLD.COM, INC. is a wholly-owned subsidiary of FUTUREONE, INC., an
Arizona corporation.
<PAGE> 1
Exhibit 12.3
CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
We consent to the use of our report on the financial statements of FutureOne,
Inc. dated June 8, 1999, except for Note 13 for which the date is June 29, 1999
and to the use of our report on the financial statements of OPEC CORP. dated
June 8, 1999 in this Form 10-SB of FutureOne, Inc.
/s/ ERNST & YOUNG LLP
Phoenix, Arizona
July 20, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 571,229
<SECURITIES> 151,621
<RECEIVABLES> 1,599,199
<ALLOWANCES> 65,000
<INVENTORY> 49,861
<CURRENT-ASSETS> 2,749,563
<PP&E> 2,157,913
<DEPRECIATION> 254,075
<TOTAL-ASSETS> 12,495,026
<CURRENT-LIABILITIES> 3,091,294
<BONDS> 0
0
0
<COMMON> 11,055
<OTHER-SE> 8,637,989
<TOTAL-LIABILITY-AND-EQUITY> 12,495,026
<SALES> 251,194
<TOTAL-REVENUES> 3,021,246
<CGS> 218,508
<TOTAL-COSTS> 2,436,290
<OTHER-EXPENSES> 1,750,200
<LOSS-PROVISION> 48,301
<INTEREST-EXPENSE> 27,442
<INCOME-PRETAX> (1,201,652)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,201,652)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,201,652)
<EPS-BASIC> (.16)
<EPS-DILUTED> (.16)
</TABLE>
