U.S. Securities and Exchange Commission
Washington, D.C.
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
AMENDMENT NO. 1
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Site2Shop.Com, Inc.
(Name of Small Business Issuer in its charter)
NEVADA 88-0382813
(State) (I.R.S. Employer Identification No.)
2001 West Sample Road, Suite 101, Pompano Beach, Florida 33064
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number (954) 969-1010
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
None
Securities to be registered pursuant to 12(g) of the Act:
Common Stock $.001 Par Value
(Title of Class)
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THIS REGISTRATION STATEMENT CONTAINS "FORWARD-LOOKING" STATEMENTS
REGARDING POTENTIAL FUTURE EVENTS AND DEVELOPMENTS AND MATTERS THAT ARE NOT
HISTORICAL FACTS AFFECTING THE BUSINESS OF THE COMPANY. BECAUSE SUCH
FORWARD-LOOKING STATEMENTS INCLUDE RISKS AND UNCERTAINTIES, ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. ALL STATEMENTS WHICH ADDRESS OPERATING PERFORMANCE, EVENTS OR
DEVELOPMENTS THAT MANAGEMENT EXPECTS OR ANTICIPATES TO INCUR IN THE FUTURE,
INCLUDING STATEMENTS RELATING TO SALES AND EARNINGS GROWTH OR STATEMENTS
EXPRESSING GENERAL OPTIMISM ABOUT FUTURE OPERATING RESULTS ARE FORWARD-LOOKING
STATEMENTS. THE FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT
VIEWS AND ASSUMPTIONS REGARDING FUTURE EVENTS AND OPERATING PERFORMANCE. MANY
FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM ESTIMATES CONTAINED
IN MANAGEMENTS' FORWARD-LOOKING STATEMENTS. THE DIFFERENCES MAY BE CAUSED BY A
VARIETY OF FACTORS, INCLUDING BUT NOT LIMITED TO ADVERSE ECONOMIC CONDITIONS,
COMPETITIVE PRESSURES, INADEQUATE CAPITAL, UNEXPECTED COSTS, LOWER REVENUES AND
NET INCOMES AND FORECASTS, THE POSSIBILITY OF THE COMPANY'S OPERATING RESULTS
AND FINANCIAL CONDITION, INABILITY TO CARRY OUT MARKETING AND SALES PLANS, LOSS
OF KEY EXECUTIVES, AMONG OTHER THINGS. SUCH STATEMENTS RELATE TO, AMONG OTHER
THINGS, (I) FUTURE OPERATIONS OF THE COMPANY, INCLUDING POTENTIAL STRATEGIC
TRANSACTIONS; (II) COMPETITION FOR CUSTOMERS FOR THE COMPANY'S PRODUCTS AND
SERVICES; (III) THE EFFECT OF POTENTIAL GOVERNMENT REGULATION UPON THE COMPANY'S
OPERATIONS; AND (IV) OTHER STATEMENTS ABOUT THE COMPANY OR THE DIRECT RESPONSE
AND TELEVISION PRODUCTION INDUSTRIES.
FORWARD LOOKING STATEMENTS MAY BE INDICATED BY THE WORDS "EXPECTS,"
"ESTIMATES", "ANTICIPATES", "INTENDS", "PREDICTS", "BELIEVES" OR OTHER SIMILAR
EXPRESSIONS. FORWARD-LOOKING STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS
FORM AND INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS
OF THE COMPANY AND ITS DIRECTORS AND OFFICERS WITH RESPECT TO NUMEROUS ASPECTS
OF THE COMPANY AND ITS BUSINESS. THE COMPANY'S ABILITY TO PREDICT RESULTS OR THE
EFFECT OF ANY PENDING EVENTS ON THE COMPANY'S OPERATING RESULTS IS INHERENTLY
SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING THE RISKS ATTENDANT TO
COMPETITION FOR CUSTOMERS AND MEDIA ACCESS; THE RISKS OF PRESENTING PRODUCTS AND
SERVICES THAT WILL BE ACCEPTED BY THE MARKET; AND THE EFFECTS OF GOVERNMENT
REGULATION.
PART I
The Company is filing this Form 10-SB on a voluntary basis to (1)
provide current, public information to the investment community and (2) to
comply with the OTC Bulletin Board Eligibility Rule (SR-NASD-98-51, as amended)
as approved by the Securities and Exchange Commission in Release No. 34-40878.
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ITEM 1. DESCRIPTION OF BUSINESS
- ---------------------------------
OVERVIEW
Site2Shop.Com, Inc. (the "Company", "Site2Shop.Com") is engaged in the
marketing, production and distribution of television programs. The Company
produces both educational half-hour television programs through its wholly owned
subsidiary, Tricom Pictures and Productions, Inc. ("Tricom") and half-hour
shop-at-home programming through the Site2Shop.com TV program. All programs are
distributed to national audiences through a combination of any or all of the
following: ABC affiliates, NBC affiliates, CBS affiliates, FOX affiliates, UPN
affiliates and WB affiliates (collectively "network affiliates"), independent
television stations and targeted cable networks.
BACKGROUND
The Company was incorporated in Nevada on August 1, 1990 under the
name Woodie III, Inc., to engage in the activity of general business,
investments, research and development, manufacturing and real estate
development. In August 1996, the Company changed its corporate name to Tee-Rifik
Corp. From inception through May 1998, the Company had been seeking investors in
order to finance and commence revenue producing activities. On June 24, 1998,
the Company entered into an Agreement and Plan of Reorganization (the
"Agreement") with Shop TV and Television, Inc., a Florida corporation
("Site2Shop"), whereby Site2Shop and Tee-Rifik Corp. merged. Through the terms
of the merger Agreement, Tee-Rifik Corp. acquired all the outstanding common
stock of Site2Shop. The existing stockholders of Tee-Rifik Corp. retained their
116,400 (post reverse split- see below) shares and the stockholders of Site2Shop
received (post reverse split) shares at a ratio of 1,250 to 1 for a total of
1,250,000 shares. Due to the majority ownership of the Company after the
transaction by the Site2Shop stockholders and Tee-Rifik Corp.'s lack of
substantial assets, liabilities or marketable products, the transaction was
treated as a reverse acquisition of Tee-Rifik Corp. by Site2Shop using the
pooling method for accounting purposes. As part of the Agreement, the Company
changed its corporate name to Shop T.V., Inc., and its principal business became
retailing and television broadcasting.
On February 5, 1999, Shop T.V., Inc. changed its name to
Site2Shop.Com, Inc. to reflect its focus on the Internet. On March 8, 1999, the
Company completed its acquisition of Tricom. The senior management and majority
shareholders of Site2Shop.Com owned the then majority of Tricom shares of common
stock outstanding. On February 23, 1999, Site2Shop.Com also completed a one for
ten (1:10) reverse split of the issued and outstanding shares of common stock,
whereby a stockholder owning 10 shares of common stock prior to the reverse
split, would own 1 share of common stock after the reverse split. Unless
otherwise indicated herein, the information in this filing relating to the
common stock has been restated to reflect such split. The trading symbol was
also changed from SHTV to its current EBUY.
The Company's executive offices are located at 2001 West Sample Road,
Suite 101, Pompano Beach, Florida, 33064; Telephone (954) 969-1010.
THE INDUSTRY AND MARKET
The direct response transactional television programming industry was
developed in the United States after the Federal Communications Commission
rescinded its limitations on advertising minutes per hour in 1984, thereby
permitting 30-minute blocks of television advertising. The deregulation of the
cable television industry and the resulting proliferation of cable channels
increased the available media time and led to the growth of the United States
direct response transactional programming and the direct response educational
programming industries. Producers of these types of programming combined direct
response marketing and retailing principles within a television talk show-type
format and purchased media time from cable channels to air their programming.
After an initial growth period, the industry consolidated through the end of the
1980s. At the same time, increased attention from the Federal Trade Commission
and federal and state consumer protection agencies led to greater regulation of
the industry. By the early 1990s, direct response transactional television
programming and home shopping cable channels had become a more accepted forum
for obtaining information about products and services and making purchases from
home. As the industry matured, the variety of products marketed through direct
response transactional television programming steadily increased. Today,
offerings as diverse as car care products and weight loss programs are marketed
in this manner.
According to a survey conducted by the National Infomercial Marketing
Association ("NIMA") conducted in 1995, the latest year for which data is
available, approximately 10,000 infomercials are aired per week in the United
States for a total of 5,000 hours per week. NIMA estimates that its members
purchased $550 million of media in 1995 to support its programming and that
their clients' sales approximated $1.15 billion. The Company believes that the
market is highly fragmented and ripe for consolidation. Accordingly, it is
focused on increasing its level of operations in order to promote growth and
market share.
PRODUCTS AND SERVICES
OVERVIEW
The Company's products and services are rendered principally from its
two wholly owned subsidiaries (i) Site2Shop and (ii) Tricom.
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SITE2SHOP
Site2Shop's principal business is the marketing, production and
distribution of thirty (30) minute infomercials in a shop-at-home format.
Site2Shop markets its vendors' products through (i) a half-hour shop-at-home
program called "site2shop.com TV," (ii) on its Internet web site at
www.site2shop.com, and (iii) at its retail store located in Pompano Beach,
Florida. Site2shop.com TV is aired nationally through a combination of any or
all of the following: network affiliates, independent television stations and
targeted cable networks. The program features unique products as well as items
generally available. Typically, sales personnel of Site2Shop search through
various media sources (newspapers, internet and magazines) for products to
potentially feature on site2shop.com TV. The manufacturers/distributors are
contacted and asked to provide samples of their products for evaluation of
inclusion on the show by a focus group. The criteria utilized by the focus group
primarily are based on function, form and salability and the products being
featured on future shows as to compatibility. If the product coincides with the
criteria, the supplier/distributor is contacted and presented with the
opportunity of show participation via a segment on the show of approximate
duration of 1 - 3 minutes. If the manufacturer/distributor ("Participant") is
amenable, the parties enter into a contract whereby Site2Shop will feature the
product and/or Company logo in a targeted national publication, whose readership
is most apt to purchase the product, in conjunction with the promotion of the
particular show. Additionally, Site2Shop produces the segment (inclusive of
field production, graphics, music, program editing, set design and on-camera
talent) for the Participant for inclusion on the show for airing through the
aforementioned TV media and provides the Participant with a copy tape of the
segment. In consideration of such services, the Participant pays a one-time,
flat rate "Product Insertion Fee", typically due within thirty days of signing
the contract. The fee is based on management's experience and best estimate of
the cost to render the contractual services plus an element of profit. On July
1, 1998, the Company entered into an agreement with Tricom whereby Tricom would
have the exclusive right to the production of all audio/visual programming
created by the Company for a period of five years. In consideration of such
services, Tricom is a paid a fee per segment produced for the Company. Tricom
was owned entirely by the Executive Officers of the Company (85%) and existing
stockholders of the Company (15%). On March 8, 1999, the Company completed its
acquisition of Tricom.
While typically only ten products are featured on each half-hour
segment of the program, viewers have the opportunity to view Site2Shop's entire
catalog, currently featuring more than 500 products, many of which also are
available at the retail store located in the Pompano Beach Mall and through the
Company's Internet web site.
The products offered by Site2Shop include but are not limited to
jewelry, housewares, apparel, electronics, collectibles, toys, educational
products, and sporting equipment. Unlike some retailers, which focus essentially
on national brands, a majority of the products offered by Site2Shop comprise a
combination of national brands as well as private brand or non-branded products.
Site2Shop purchases the merchandise offered by it on both a consignment basis
(for products sold in the retail facility) and on a terms basis for products
sold through fulfillment and on the internet (at wholesale and retail prices as
negotiated in the aforementioned contract). Site2Shop maintains minimum
inventory levels.
The Site2Shop.Com TV program is a pre-recorded electronic retail sales
program that is aired by cable television systems and television broadcast
stations throughout the country on a prepaid airtime basis by the Company.
Site2Shop.Com TV is available in half-hour segments only, which enables network
and cable affiliates to air the programs in available time slots. Some of the
major television broadcasting outlets used by the Site2Shop to air its shows
are:
Station Market Affiliation
- ------------ --------------------- -----------------
KJWY Salt Lake City, Utah NBC
Time Warner Los Angeles, California CABLE
TCI Miami Miami, Florida CABLE
TNN National CABLE
WCIV Charleston, South Carolina ABC
WGTW Philadelphia, Pennsylvania INDEPENDENT
WJYS Chicago, Illinois INDEPENDENT
WVVH New York, New York INDEPENDENT
Site2Shop's electronic retail sales and programming are intended to
create a friendly sales environment, which promotes sales and customer loyalty
through offering unique products, coupled with product information and
entertainment. During a typical program, an announcer introduces each product to
the co-hosts. The hosts of the show then describe the merchandise, sometimes
with the assistance of a guest representing the product vendor and sometimes
with ordinary users of the product, and convey information relating to the
product such as price, features, uses, and assembly requirements. The price,
item number, and toll-free number for ordering are continuously aired during
each product description. Viewers purchase merchandise by MasterCard, Visa,
Discover or American Express credit cards by calling a toll-free telephone
number continuously aired during the program. Site2Shop contracts with Alert
Communications, Inc., a national call center, which provides order fulfillment
for Site2Shop on a fee for service basis based on the volume of calls which it
handles. Once received, orders are electronically transmitted to the product
vendor, who ships the product directly to the customer. Site2Shop bills the
customer but remits to the product vendor the sales proceeds less a shipping and
handling charge. Generally, any item purchased from Site2Shop.Com TV may be
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returned within 30 days for a full refund of the purchase price, excluding the
original shipping and handling charges. Site2Shop does not guarantee the sale of
any product featured on its show. Furthermore, the Participant retains the
profits (defined as the difference between retail and wholesale price and de
minimis handling charge) from fulfillment sales until such time that the
Participant has recouped the Product Insertion Fee.
TRICOM
Tricom's (a Florida corporation) principal business is the marketing,
production and distribution of thirty (30) minute educational programs. These
programs are distributed through a combination of any or all of the following:
network affiliates, independent television stations and targeted cable networks.
Tricom programs feature the expertise of companies to enhance and augment the
content of each episode. Such companies as AllState Insurance, Bristol Meyers-
Squibb and Smith-Kline- Beecham have been featured or appeared on Tricom
programs. Topics for the programs include but are not limited to parenting,
health, cooking, home improvement and presented in a news magazine-style format
with all segments having a strand of commonality about the topic.
Tricom researchers contact various national consumer oriented
companies whose business and activities address topics of specific interest to
targeted audiences (e.g. children's health issues to an audience of parents with
children in ages ranging from infancy to pre-teen). The researchers request data
from these companies for review and compatibility with future planned episodes
of Tricom programs. If the data and subject matter are compatible, the
researcher will contact the company regarding featuring a segment of (generally)
3-5 minutes in duration in a future episode. If amenable, Tricom and the company
enter into a contractual arrangement whereby Tricom will feature the company's
logo and/or product on two full-page advertisements in a targeted national
publication in conjunction with the promotion of the television program series
and related episodes. Additionally, Tricom will produce the segment (including
field production, graphics, editing, set design and on camera talent) and
broadcast the program a minimum of twenty times in local and national markets so
as to reach a potential of 60 million households around the country. The
stations selected for broadcasting are based Designated Market Areas and the
television viewership (defined by the number of households potentially able to
view programming if all television sets were on simultaneously for the area) of
such areas as ranked and calculated by the National Association of Television
Program Executives Listing Guide and SRDS (formerly known as Standard Rating and
Data Service). The company is given a copy of its segment tape and also granted
a license to use such tape for any lawful business purpose.
In consideration of such services, the Company agrees to pay Tricom
within thirty days of signing the contract a one time, flat rate "Scheduling
Fee" which is based on management's experience, knowledge and best estimate of
the cost to render such services and an element of profit. Additionally Tricom
owns complete licensing rights to the segment tape which it may use for any
lawful business purpose and also maintains editorial control over all
programming and collateral material.
Tricom also maintains the production facilities for the Company. These
facilities include two complete editing facilities, two camera crews, an
in-house studio with working sets and complete animation and graphic
capabilities. Tricom is currently offering these facilities on fee for service
basis in the local market in order to maximize utilization and expand potential
revenue venues.
SALES AND MARKETING
SITE2SHOP
Site2Shop employs over twenty (20) salespersons who seek out products
for possible feature on one or several targeted programs. Currently, vendors
wishing to have their merchandise marketed by Site2Shop execute an agreement
(the "Vendor Agreement") with the Company. Typically, a Vendor Agreement
provides that in consideration for an one-time payment (the "Product Insertion
Fee"), Site2Shop will include the vendor's product in one 1-3 minute segment,
promote the airing of the show, and agrees to air the program to a potential
household reach of 50 million homes throughout the United States. The program
airs a minimum of twenty times, generally in twenty different Designated Market
Areas (DMA) (although a program may air more than once in a DMA but usually on
the same television station in the DMA) so that the programs potential household
reach is 50 million on a first run basis. The stations selected for broadcast
can be any combination of any or all network affiliates, independent cable and
cable networks and independent affiliates. The shows generally air over a three
month span of time so that a minimum potential household reach of 50 million is
attained. As part of the Vendor Agreement, the vendor receives a copy of his
tape segment (as part of the Product Insertion Fee) for which he is granted a
license to use the tape for any lawful business purpose.
Additionally, Site2Shop may include the product on its Internet
e-commerce website or commercial retail store located in a mall in Pompano
Beach, Florida. These transactions are separate from the Vendor Agreement.
Internet purchases by Site2Shop from the vendor are on negotiated terms as to
cost and payment term. All profits from internet sales inure to Site2Shop.
Commercial retail store purchases from vendors are made on a consignment basis
with cost and payment terms determined on a negotiated basis.
If or when sales of the product directly from the airing of the show
(by a viewer dialing an 800 number appearing on the show) result in a profit to
the vendor aggregating the Product Insertion Fee, Site2Shop and the vendor share
in the remaining profit generated from future sales on an equal basis. For
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purposes of the Vendor Agreement, "profit" is defined as the difference between
the standard wholesale price for the product and the retail sales price paid by
the purchaser.
Vendor Agreements at various stages of fulfillment are in place for
approximately 200 national vendors. Vendor Agreements executed during the first
calendar quarter of 1999 already exceed $1.5 million.
On February 9, 1999, the Company entered into a contract to list
product for sale on the bid4it(TM), an Internet auction site, operated by
CyberQuest, Inc. ("CyberQuest") The Company establishes a minimum bid which it
will accept for each product listed for sale on the site and the quantity
available for sale. All products listed have a 30-day money back guarantee from
date of delivery. Those purchasers orders that equal or exceed the minimum bid
are forwarded to the Company for fulfillment and contain all pertinent
information necessary to ship the order and file applicable sales and use taxes.
The Company provides CyberQuest with proof of shipment which provides the basis
of payment by CyberQuest to the Company. The Company is paid by automatic
deposit into a Company designated account. The payment to be received is based
on the unit selling price, applicable sales taxes and freight less a sliding
scale fee charged by CyberQuest based on the sales value of the transaction. The
contract may be terminated by either party by written notice. The product is
purchased on a negotiated basis as to purchase price and payment terms from
manufacturers/distributors whose products are featured on its half-hour
shop-at-home programming. All profits from this auction site inure to the
Company. To date, the Company has not listed any products for sale on this
auction site due to technological compatibility problems.
In April 1999, the Company entered into an agreement with Yahoo!,
Inc.("Yahoo") under its Yahoo! Delivers program whereby Yahoo! sent e-mails to
Yahoo users who specifically requested to be notified of special promotions.
Approximately, 12,000 users were contacted over the month of April advising them
of the Company's new portal site. In consideration of such services, the Company
paid Yahoo a one-time fee of $10,000. The portal site was opened on April 15,
1999 using the Yahoo! Store concept which allows businesses the ability to
design websites, utilize state-of-the-art tracking tools while affording easy
access to e-commerce to millions of internet users. In consideration of such
services, the Company pays Yahoo a $300 all-inclusive fee monthly fee, on a
month-to-month basis. Either party may terminate the agreement (in writing). To
date there have been 52,000 web pages viewed by the visitors to the portal site,
however, the Company has not been readily able to determine the sales impact, if
any, upon its operations.
TRICOM
Tricom employs over twenty (20) salespersons who seek out industry
experts, companies and/or products for possible feature on one or several
targeted programs. Currently, companies wishing to have their product or service
featured on one of the educational television programs, produced by Tricom,
execute an agreement (the "Production Authorization") with Tricom. Typically, a
Production Authorization provides that in consideration for an one-time payment
(the "Scheduling Fee"), Tricom will include the participant in one 3-5 minute
segment, promote the airing of the segment and agrees to air the program to a
potential household reach of 60 million homes throughout the United States.
Selected companies have their product or service featured in at least two
targeted national publications in conjunction with the promotion of the program.
They also receive a copy of the segment that is fully produced by Tricom.
Production Authorizations signed in 1998 accounted for over $2.4 million dollars
of scheduling fees representing 81 contracts.
SIGNIFICANT CUSTOMERS
During 1998, no customer accounted for more than 10% of net sales.
MANUFACTURING AND SUPPLIES/PRODUCTION OF PROGRAMS
The Company does not currently manufacturer any products that are
featured on any of their television programs. Furthermore, the Company does not
depend on any one manufacturer to supply products for any television program.
The Company does produce most or all of the television programs through
its in-house production and editing facility. The Company currently owns or
leases two broadcast quality video production cameras, two Media 100 editing
systems and many related items critical in the production and distribution of
its television programs.
COMPETITION
Due to the fact that the scope of the business has moved into many
industries (television, home shopping, production, Internet commerce and
retail), there are many companies that actively compete with the Company.
However, there are very few companies that compete directly with the core
business of the Company. The majority of these companies can be found in the
shop-at-home television industry. These would include: Home Shopping Network
(HSN), QVC, ValueVision and Shop at Home. Of the aforementioned companies, most
have substantially greater financial, technical and other resources and have
established reputations for their success in their ability to sell products
through a shop-at-home format. The Company does not know of any direct
competitor that currently charges a "product insertion fee" whereby a
participant on the show pays a monetary fee to have their product exclusively
featured in 3-5 minute segment a on a taped show that airs a minimum of 20 times
to a national audience through any combination of network affiliates,
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independent cable stations, cable networks or independent television station,
that has a potential household reach of 50 million and/or offers the vendors a
share of the profits based on the success of the program.
Tricom does have a number of competitors, primarily located in the
South Florida area, that market and produce very similar programs. These include
among others, Five Star Productions, Global Solutions Network, Millenium
Productions and ITV.
GOVERNMENT REGULATION
Although the Company's programming is not subject to specific
government regulation, the Company is dependent on the television broadcast
stations and cable television systems to air its programs. A substantial portion
of a broadcaster's business is subject to various statutes, rules, regulations
and orders relating to communications and generally administered by the Federal
Communications Commission (FCC). The communications industry, including the
operation of broadcast television stations, cable television systems, satellite
distribution systems and, in some respects, cable stations which produce their
own programming is subject to substantial federal regulation, particularly
pursuant to the Communications Act of 1934, as amended, the Telecommunications
Act of 1996 and the rules and regulations promulgated by the FCC. Cable
television systems are also subject to regulation at the state and local level.
Regulations which have an adverse affect on broadcasters with whom the Company
contracts to air its programs, could have a material adverse impact upon the
Company and the Company's ability to purchase airtime.
The Company collects and remits sales tax in the state in which it has
a physical presence. Certain states in which the Company's only activity is
direct marketing and e-commerce have attempted to require such merchants, such
as the Company, to collect and remit sales tax on sales to customers residing in
such states. A 1995 United States Supreme Court decision held that Congress can
legislate such a change. Thus far, Congress has taken no action to that effect.
The Company is prepared to collect sales tax for other states, if laws are
passed requiring such collection. The Company does not believe that a change in
the tax laws requiring the collection of sales tax will have a material adverse
effect on the Company's financial condition or results of operations.
To date, the Company has not incurred any costs or unusual expenses as
a result of government regulations imposed upon it. Nor has any current
governmental regulation materially impacted the operations of the Company or the
manner in which it conducts business.
LICENSES, PATENTS AND TRADEMARKS
A trademark applications have been submitted and applied for under the
name of site2shop.com. The television program titles used by all divisions of
the Company are covered by public use. The Company also owns the Internet domain
names site2shop.com, site2bid.com, site2buy.com, site2sell.com and
site2auction.com.
EMPLOYEES
The Company currently has 100 full-time employees, 17 of which are in
management and administration, 18 are in production and 65 are in sales,
marketing and research. The Company retains a number of part and full-time
consultants in the area of production, graphic design and Website maintenance.
ITEM 2. MANAGEMENT'S DISCUSSION and ANALYSIS
- ------------------------------------------------
Site2Shop.Com, Inc.
OVERVIEW
On June 24, 1998, the Company acquired 100% of the issued and
outstanding shares of Common Stock of Site2Shop, a privately held Florida
corporation, in exchange for 1,250,000 shares of the Company's Common Stock (the
"Exchange"). The Executive Officers of the Company owned 91.5% of the
outstanding shares of Common Stock of Site2Shop subsequent to the Exchange.
Prior to the Exchange, neither the Company nor Site2Shop conducted revenue
producing activities. On July 1, 1998, the Company entered into an Agreement
(the "Production Agreement") with Tricom, a company owned entirely by the
Executive Officers of the Company (85%) and by existing shareholders of the
Company (15%). The Production Agreement gives Tricom the exclusive right to
produce television programming on behalf of the Company for each customer for
whom the Company contracts at a fee of $7,000 per contract, for a period of five
years. The production services include but are not limited to developing
marketing concepts, creating audio/video footage and creating print and other
advertising and promotion materials. The fee was based on management's best
estimate of the cost to furnish such services and an element of profit. As the
Company commenced significant operations concomitantly with the inception of the
Production Agreement, comparative financial data and a discussion thereof
between historical periods would not be meaningful. Accordingly, the following
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discussion relates solely to the Company (sans Tricom).
FOR THE YEAR ENDED AND AS OF DECEMBER 31, 1998
RESULTS OF OPERATIONS
REVENUES
Revenues for the year totaled $1,198,241 of which $1,156,369 (97%)
were derived from contracts to produce (segments on) television programs using
the percentage of completion method of accounting and the remaining $41,872 (3%)
representing commercial retail store sales of the products and services featured
on the aforementioned programs.
COST OF SALES
Cost of sales for the year totaled $724,691 representing 60% of
revenues. The largest elements of cost of sales were production services
($355,240; 49.0%) rendered by Tricom, television airtime ($159,769; 22.0%) and
production salaries($127,579; 17.6%).
SELLING EXPENSES
Selling expenses for the year totaled $554,989 representing 46.3% of
revenues. Salaries and wages, including related payroll taxes and benefits
totaled $528,550 (95.2% of Selling expenses).
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the year totaled $1,143,092
representing 95.4% of revenues. Salaries and wages, including related payroll
taxes and benefits totaled $937,568 (82% of general and administrative
expenses).
FOR THE THREE MONTHS ENDED AND AS OF MARCH 31, 1999 (UNAUDITED)
On February 9, 1999, the Company agreed to acquire all the outstanding
shares of Common Stock (1,000) of Tricom in exchange for 10,000,000 shares of
Common stock of the Company. The Executive Officers of the Company owned 85% of
the outstanding shares of Common Stock of Tricom at the time of the acquisition;
the holders of the remaining 15% of Tricom shares of Common Stock were owners of
Common Stock of the Company prior this transaction. As a result of the
acquisition, the Executive Officers collective ownership in the Company
increased from 71.0% to 83.1% and the remaining Tricom shareholders' ownership
in the Company increased from 5.6% to 13.7%. The Acquisition has been accounted
for as a "purchase", using pooling accounting. However, because the Company and
Tricom have a common control group, the net assets of Tricom will be acquired at
a carryover historical basis. As the Company did not conduct revenue producing
activities prior to June 24, 1998, comparative financial quarterly data and a
discussion thereof between historical periods would not be meaningful. The
foregoing discussion includes the combined operations, and combined liquidity
and capital resources of the Company and Tricom as if the acquisition occurred
as of January 1, 1999.
RESULTS OF OPERATIONS
REVENUES
Revenues for the quarter totaled $2,171,586 of which $2,162,391
(99.5%) were derived from contracts to produce television programs using the
percentage of completion method of accounting; $851,700 from Tricom contracts
(educational programming) and $1,310,691 from Site2Shop contracts (shop-at-home
programs). Retail store sales from Site2Shop programs totaled $5,763 and
fulfillment sales from Site2Shop programs totaled $2,115 respectively for the
period.
COST OF SALES
Cost of sales for the period totaled $398,678 or 18.4% of revenues.
The major elements for the period were production salaries, payroll taxes and
benefits totaling $159,858 ($147,747 Tricom and $12,111 Site2Shop)(40.1%) and
purchased airtime on television stations of $101,881 (Tricom) (25.5%).
SELLING EXPENSES
Selling expenses for the period totaled $469,557 or 21.6% of revenues.
Salaries, wages, payroll taxes and benefits aggregated $392,968 ($141,850 Tricom
and $251,117 Site2Shop) (83.7%) for the period.
GENERAL AND ADMINISTRATIVE EXPENSES
General and Administrative expenses for the period totaled $678,556 or
31.2% of revenues. Salaries, wages and related payroll taxes and benefits for
the period were $386,502 ($188,062 Tricom and $198,440 Site2Shop) (57%) and
space rental expenses were $65,089 ($36,397 Tricom and $28,692 Site2Shop)(9.6%).
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth and cash requirements until
recently primarily from sales of its securities. The Company does not currently
have any credit facilities from any financial institutions or private lenders.
At December 31, 1998, the Company had a working capital deficiency of
$1,003,015. Additionally, the Company had additional signed contracts totaling
$1,132,000 for which performance had yet to commence and payment had yet to be
7
<PAGE>
received. Operating activities utilized cash of $123,855 primarily due to a net
loss of $1,224,531, an increase in accounts receivable of $285,343, offset by an
increase in deferred revenue of $1,263,716 and an increase in accounts payable
and accrued expenses of $133,595. Cash used in investing activities was $98,203
reflecting the purchase of fixed assets. Net cash provided by financing
activities of $230,901 consists primarily of the sale of 25,000 shares of its
Common Stock ($250,000) pursuant to a private offering under Rule 506 of
Regulation D of the Securities Act of 1933, as amended. The proceeds were
primarily used for working capital.
At March 31, 1999, the Company had a working capital deficiency of
$2,489,197 and stockholders' deficit of $2,147,507. Additionally, the Company
had signed contracts totaling $1,975,500 ($576,800 attributable to Tricom and
$1,398,700) for which performance had yet to commence and payment had yet to be
received. Operating activities for period provided cash of $343,082 primarily
from net income for the period of $391,795 and an increase in deferred revenue
of $211,620 offset by an increase in accounts receivable of $378,222. Cash used
in investing activities totaled $54,532 reflecting capital expenditures for
the period. Cash provided from financing activities totaled $148,462 primarily
from the commencement of a sale of shares of common stock to private investors
pursuant to a private offering under Rule 504 of Regulation D of the Securities
Act of 1933 as amended, net of a repayment of a net bank overdraft of $56,139 in
connection with the acquisition of Tricom. As of March 31, 1999, proceeds from
the sale of 224,000 shares of common stock totaled $223,200. On April 6, 1999,
the Company completed the private offering by selling an aggregate of 1,000,800
shares of its common stock and raised $1 million. The proceeds have been used
for working capital but are primarily invested in cash equivalents.
Until the current quarter, the Company has not generated sufficient
working capital to fund its operating activities. Previous to the current
quarter, the Company had financed its operating activities solely through the
sale of its shares of its common stock to private investors under exemption from
registration of such securities provided by the Securities Act of 1933. In
February 1999, the Securities and Exchange Commission revised Rule 504 of
Regulation D to effectively limit the circumstances where general solicitation
is permitted and "freely tradable" securities may be issued in reliance on the
Rule to transactions:
(1) registered under state law requiring public filing and
delivery of a disclosure statement to investors before sale,
or
(2) exempted under state law permitting general solicitation and
advertising so long as the sales are made to accredited
investors.
Since most transactions under Rule 504 are private ones, they will continue to
be permissible under exemption, but general solicitation and advertising will
not be permitted and the securities will be "restricted". In light of this
revision, the Company's ability to raise funds through the sale of "unrestricted
/ freely tradable" shares of its common stock to private investors may be
severely impaired. Accordingly, there can be no assurances that the Company will
be successful in obtaining additional financing in connection with this, or any
other financing possibility, on terms acceptable to the Company, or at all.
TRICOM
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
REVENUES
Revenues for the year were $6,485,900 of which $6,128,192 (94.5%)
represents television programming revenues using the percentage of completion
method of accounting and $355,240 (4.5%) represents revenue earned, using the
percentage of completion method of accounting for performing television
production services on behalf of Site2Shop customers during the period of July
1, 1998 through December 31, 1998.
COST OF SALES
Cost of sales for the year totaled $1,896,452 representing 29.2% of
revenues. The major elements of cost of sales were salaries, payroll taxes and
benefits totaling $1,321,684 (69.7%) and procurement of television airtime of
$295,183 (15.6%).
SELLING, GENERAL and ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses totaled $2,645,005
representing 40.8% of revenues. Salaries, payroll taxes and benefits aggregated
$1,303,338 (49.3%) of total SG&A expenses. Space costs inclusive of rent,
utilities, security and maintenance totaled $163,332 (6.2%).
LIQUIDITY AND CAPITAL RESOURCES
The Company has been unable to fund its cash requirements through
operations despite net income of $1,210,443 for the year ended December 31,
1998. The Company does not currently have any credit facilities from any
financial institutions or private lenders. Tricom had a working capital
deficiency of $2,075,745 and an accumulated deficit of $1,854,145 as of
December 31, 1998. Cash used by operations was $82,024 despite net income of
$1,210,443 primarily because of a decrease in deferred revenue of $2,484,029.
Cash used by investing activities totaled $32,961 for capital expenditures. Cash
provided from financing activities totaled $68,884 primarily from an excess of
cash needs over and above cash balances and anticipated cash collections. The
bank overdraft, which occurs infrequently, are reflected in the financial
statements, and result from a variation between those estimates (of receipts)
and actual results. Tricom (and the Company) have an informal arrangement with
8
<PAGE>
its financial institution to allocate Tricom's financial resources in multiple
cash accounts in order to minimize bank overdrafts. Tricom has not been charged
interest on overdrafts but has paid a fee of $30 for each overdraft check
honored by the bank.
In July 1998, Tricom entered into the aforementioned Production
Agreement with the Company providing for a $7,000 fee for production services
performed by Tricom for each customer with whom the Company has a contract.
Tricom recognizes this revenue under the percentage of completion method of
accounting. As of December 31, 1998, the Company had contracts with participants
for which Tricom's aggregate fee of approximately $800,000 had yet to be
recorded as no production services were performed by Tricom and accordingly no
fee was paid by the Company.
On February 9, 1999, the Company agreed to acquire all the outstanding
shares of Tricom in consideration of ten million shares of its common stock.
STRATEGY
The Company's goal is to be recognized as a national leader in direct
response marketing by implementing an aggressive growth strategy. The key
elements of the Company's strategy to achieve this objective are:
* Increase the Number of Customers Participating in the Company's Programs.
The Company is constantly searching for additional participants seeking a
cost effective means of marketing and advertising their products and
services which potentially represent additional opportunities of selling
their products through venues currently not being utilized (i.e.,
television, internet and retail store), thereby increasing their revenues.
As part of the process, the Company searches for new entreprenurial
companies offering products for sale that currently are not widely
distributed, appear to have potential consumer appeal and have a retail
price point which is conducive for high unit volume. The Company beleieves
that there are numerous companies with such a profile whose means of
product distribution venues could be increased with the marketing and
distribution products and services offered by the Company.
* Expand the Number of Distribution Opportunities. The Company currently
offers its customers' products for sale on its television programs, website
and retail store. As e-commerce has proliferated in a relatively short
period of time, the number of websites offering products for sale has
comensurately increased. The Company believes that in a relative short
period of time, those websites which are well capitalized, maintain
technological excellence and are retail/ auction oriented will ultimately
prevail in a consolidation of the marketplace. The Company believes that
such a consolidation will ultimately lead to a lower transaction cost
thereby making websites available to the Company and its customers which
were formerly cost prohibitive. These cost effective websites could provide
the Company with potential additional revenue opportunites based upon the
numerous products and services currently featured on its programs.
* Maintain Industry Leadership in Direct Response Transactional Television
and Educational and Entertainment Television. The Company seeks to maintain
and utilize state-of-the-art production equipment in order to produce
television programming reflecting technical excellence. Addtionally, the
Company seeks to hire highly trained production, support and artistically
creative personnel. The Company believes that by maintaining a high level
of technological excellence and well trained personnel, it can foster an
increase in its customer base through providing high quality programming
which promotes increased revenue potential for its direct response
customers and heightens public awareness of issues pertinent to its
educational programming customers.
The Company's ability to grow is, however, is dependent upon its
ability to identify suitable candidates for its services, as to which there is
no assurance.
YEAR 2000 ISSUES
The efficient operation of the Company's business is dependent in part
on its computer hardware, software programs and operating systems (collectively,
"Programs and Systems"). These Programs and Systems are used in key areas of the
Company's business, including, but not limited to, merchandise purchasing,
pricing, sales, research, order fulfillment, credit card clearing house,
financial reporting as well as in various administrative functions. The Company
continuously evaluates its Programs and Systems to identify potential Year 2000
compliance issues. These actions are necessary to ensure that the Programs and
Systems will recognize and process the Year 2000 and beyond. It is anticipated
that some degree of modification and/or replacement of the Company's Programs
and Systems may be necessary to make such Programs and Systems Year 2000
compliant. The Company is also communicating with production equipment
manufacturers, financial institutions and others to coordinate Year 2000
conversion.
Based on the present information, the Company believes that it will be
able to achieve Year 2000 compliance through a combination of modification of
some existing Programs and Systems, and the replacement or upgrade of other
Programs and Systems that are already Year 2000 compliant. However no assurance
can be given that these efforts will be successful. The Company believes that
under "a worst case scenario", the Company's cameras used in the production of
its television programming, which contain microchips, could be inoperable for
approximately one week, thereby causing a minimal delay in its production
9
<PAGE>
schedule. However, none of its contracts with its customers are exact date
specific as to the production and airing of the related programming. The Company
currently believes that the aggregate expenses and capital expenditures
associated with achieving Year 2000 compliance (inclusive of expenditures made
to date) will approximate $50,000.
ITEM 3. DESCRIPTION OF PROPERTY
- ---------------------------------
The Company currently leases approximately 15,797 square feet of office
and production space at 2001 West Sample Road, Pompano Beach, Florida, which
also serves as its corporate headquarters. The current aggregate monthly rental
amount is $12,677. Additionally, the Company is required to pay its pro-rata
share of the common operating costs of the building. The lease on this property
commenced on June 1, 1994 and continues through May 2001, with one additional
three-year renewal option at the Company's discretion. If the Company elects to
renew its lease, prior to expiration, the annual rent will be adjusted by four
percent per year.
The Company leases approximately 2,376 square feet of retail space at
the Pompano Square Mall, Pompano Beach, Florida, which houses its retail
facility. The current minimum monthly rental amount is $1,679, inclusive of
sales tax. Additionally, the Company is required to pay incremental rent based
on a percentage of sales in excess of an annual sales volume at the mall and
it's pro-rata share of the common operating costs of the mall; both as defined
by the lease. The lease on this property commenced on February 15, 1998 and
continues through March 2001.
Additionally, the Company rents 3,500 square feet of warehouse space on
a month-to-month basis at a monthly rental amount of $1,892.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
The following table sets forth certain information regarding the
Company's Common Stock beneficially owned on April 30, 1999, for (i) each
shareholder known by the Company to be the beneficial owner of five (5%) percent
or more of the Company's outstanding Common Stock, (ii) each of the Company's
executive officers and directors, and (iii) all executive officers as a group.
In general, a person is deemed to be a "beneficial owner" of a security if that
person has or shares the power to vote or direct the voting of such security, or
the power to dispose of or to direct the disposition of such security. A person
is also deemed to be a beneficial owner of any securities to which the person
has the right to acquire beneficial ownership within sixty (60) days. At April
30, 1999, there were 12,479,702 Shares ("Shares") of the Company's Common Stock,
par value $.001 (the "Common Stock") outstanding.
<TABLE>
<CAPTION>
Name and Address of Number of Shares of Common Percentage of
Beneficial Owner (1) Stock Beneficially Owned Beneficial Ownership
- ---------------------- ------------------------- ---------------------
<S> <C> <C> <C>
Mark Alfieri 4,596,985 (2) 35.7
Jack Alan Levine 4,601,000 (3) 35.7%
Eric Warm 1,390,190 (4) 11.0%
Mark Weicher - (5) -.%
All Executive Officers and
Directors as a Group (4 persons) 11,722,675 78.8%
</TABLE>
- --------------------------------------------------
(1) Unless otherwise indicated, the address of each of the listed
beneficial owners identified is 2001 West Sample Road, Pompano Beach,
Florida 33064.
(2) Mr. Alfieri is Chief Executive Officer, Director, President and
Treasurer of the Company. Includes options to purchase 61,905 Shares at
$1.00 per Share through December 21, 2003 and 348,000 Shares at $2.375
per Share through March 31, 2004. Includes 3,702,500 shares held by
the Alfieri-Eade Family Limited Partnership #1 of which Mr. Alfieri is
the general partner.
(3) Mr. Levine is Chairman of the Board of Directors, Vice President and
Secretary of the Company. Includes options to purchase 61,905 Shares
at $1.00 per Share through December 21, 2003 and 348,000 Shares at
$2.375 per Share through March 31, 2004. Includes 3,702,500 shares held
by the Jack Alan Levine Family Limited Partnership #1 of which Mr.
Levine is the general partner.
(4) Mr. Warm is Chief Operating Officer and a Director of the Company.
Includes options to purchase 26,190 Shares at $1.00 per Share through
December 21, 2003 and 104,000 Shares at $2.375 per Share through March
31, 2004.
(5) Mr. Weicher is Chief Financial Officer of the Company. Does not include
options to purchase 5,000 Shares at $1.00 per Share through March 31,
2004; vesting right inures upon the completion of 24 months with the
Company (January 24, 2001). Mr. Weicher's percentage of beneficial
ownership is less than 0.01%.
ITEM 5. DIRECTORS and EXECUTIVE OFFICERS
- ------------------------------------------
The following table sets forth the names, positions with the Company
and ages of the executive officers and directors of the Company. Directors will
be elected at the Company's annual meeting of shareholders and serve for one
10
<PAGE>
year or until their successors are elected. Officers are elected by the Board,
and their terms of office are, except as governed by employment contract, at the
discretion of the Board.
<TABLE>
<CAPTION>
Name Age Position
<S> <C>
Mark A. Alfieri 30 Chief Executive Officer,
President and Treasurer
Jack A. Levine 41 Vice President, Secretary and
Chairman of the Board of
Directors
Eric J. Warm 30 Chief Operating Officer, Vice
President and Director
Mark Weicher 47 Chief Financial Officer
</TABLE>
Mr. Alfieri has served as Chief Executive Officer, President and Treasurer since
July 1998. In July 1994, Mr. Alfieri founded Alfieri Marketing Corporation, a
fully integrated marketing firm and predecessor to Shop TV and Television, Inc.
In 1991, Mr. Alfieri founded Alfieri and Associates, Inc., a marketing and
advertising company and the predecessor of Tricom Pictures & Productions, Inc.
Mr. Levine has served as Vice President and Chairman of the Board of Directors
since July 1998. Prior to such time, Mr. Levine co-founded Tricom Pictures and
Productions, Inc. with Mr. Alfieri in 1994 and has served as its Vice President.
Mr. Warm has served as Chief Operating Officer and Director since July 1998.
From 1994 through June 1998, Mr. Warm has served as Vice President of Operations
of Tricom Pictures and Productions, Inc. Mr. Warm received a Bachelor of Science
in Business Administration from the University of Florida in 1990.
Mr. Weicher has served as Chief Financial Officer since January 1999. From 1997
through 1998, Mr. Weicher served in a similar capacity at Computer Access
International, Inc., a refurbisher and distributor of trailing technology
hardware and peripherals. Mr. Weicher served as Controller of Complete
Management, Inc., a physician practice-management company, from 1995 through
1996. From 1992 through 1994, Mr. Weicher served as Controller of Ware
Industries, Inc. a manufacturer and distributor of light gauged, roll formed
steel products. Mr. Weicher is a Certified Public Accountant in the State of New
York.
ITEM 6. EXECUTIVE COMPENSATION
- -------------------------------
The following table sets forth the cash and other compensation paid by
the Company to its Chief Executive Officer and to each of the executive officers
of the Company who received annual compensation in excess of $100,000 for the
year ended December 31, 1998.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
NAME AND OTHER ANNUAL
PRINCIPAL POSITION SALARY BONUS COMPENSATION
- ---------------------- -------- ------------ -------------
<S> <C> <C> <C> <C>
Mark Alfieri,
Chief Executive Officer $175,515 $125,000 $5,607 (1)
Jack Levine,
Vice President $192,495 $125,000 $5,846 (2)
Eric Warm
Chief Operating Officer $248,865 $ 0 $ 0
</TABLE>
- ----------
(1) Represents auto lease payments and related costs.
(2) Represents auto lease payments and related costs.
OPTION HOLDINGS
The following table sets forth information with respect to the grant of
options to purchase shares of common stock during the calendar year ended
December 31, 1998 ("1998) and for the four month period ended April 30, 1999
("1999"), to each person named in the Summary Compensation Table.
11
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIR.
NAME PERIOD GRANTED(#)(1) PERIOD ($/SHARE) DATE
- ---------- ------ -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Mark Alfieri 1999 348,000 40.9 $2.375 Mar.31,2004
1998 61,905 39.6 $1.00 Dec.21,2003
Jack Levine 1999 348,000 40.9 $2.375 Mar.31,2004
1998 61,905 39.6 $1.00 Dec.21,2003
Eric Warm 1999 104,000 12.2 $2.375 Mar.31,2004
1998 26,190 16.7 $1.00 Dec.21,2003
</TABLE>
- ----------
(1) None of the above parties have exercised any of their options as of
April 30, 1999. All of the above options vested on the respective date of
grants.
EMPLOYMENT AGREEMENTS
Mark Alfieri, President and CEO. On June 29, 1998, the Company entered
into a three-year employment agreement (the "Agreement") with Mr. Alfieri
whereby Mr. Alfieri will serve as President and a member of the Board of
Directors and received a signing bonus of $125,000. The Agreement called for
annual base compensation of $450,000 in 1998 and $250,000 in 1999 and 2000 with
bonuses based upon the Company earning a minimum net income of $250,000 and
bonus payments ranging from $50,000 to $125,000 predicated on net income ranging
from $250,001 to $500,000 for 1998 and 1999. Bonus payments for 2000 would range
from $50,000 to $125,000 predicated on Company earning net income (after bonus)
range of $500,001 to $750,000. Additionally, the Agreement provides for a
monthly auto allowance of $1,200 plus insurance and maintenance. On April 4,
1999, the Company and Mr. Alfieri mutually modified the Agreement, retroactive
to April 1, 1999, as a result of the acquisition of Tricom Pictures and
Productions, Inc. (See Part II Item 4.- Recent Sales of Unregistered
Securities), whereby the annual compensation was raised to $325,000 and bonuses
are to be paid monthly at the discretion of the Bonus Committee of which Mr.
Alfieri is a member. The Agreement is automatically renewable for successive
one-year terms unless the parties mutually agree in writing to alter the terms
or one or both of the parties exercises their right, in accordance with the
terms of the Agreement, to terminate the Agreement.
Jack Levine, Vice President. On June 29, 1998, the Company entered
into a three-year employment agreement (the "Agreement") with Mr. Levine whereby
Mr. Levine will serve as Vice President and a member of the Board of Directors
and received a signing bonus of $125,000. The Agreement called for annual base
compensation of $450,000 in 1998 and $250,000 in 1999 and 2000 with bonuses
based upon the Company earning a minimum net income of $250,000 and bonus
payments ranging from $50,000 to $125,000 predicated on net income ranging from
$250,001 to $500,000 for 1998 and 1999. Bonus payments for 2000 would range from
$50,000 to $125,000 predicated on Company earning net income (after bonus) range
of $500,001 to $750,000. Additionally, the Agreement provides for a monthly auto
allowance of $1,200 plus insurance and maintenance. On April 4, 1999, the
Company and Mr. Levine mutually modified the Agreement, retroactive to April 1,
1999, as a result of the acquisition of Tricom Pictures and Productions, Inc.
(See Part II Item 4.-Recent Sales of Unregistered Securities), whereby the
annual compensation was raised to $325,000 and bonuses are to be paid monthly at
the discretion of the Bonus Committee of which Mr. Levine is a member. The
Agreement is automatically renewable for successive one-year terms unless the
parties mutually agree in writing to alter the terms or one or both of the
parties exercises their right, in accordance with the terms of the Agreement, to
terminate the Agreement.
Eric Warm, Vice President and Chief Operating Officer. On August 1,
1998, the Company entered into a three-year employment agreement (the
"Agreement") with Mr. Warm whereby Mr. Warm will serve as Chief Operating
Officer and a member of the Board of Directors. The Agreement called for annual
base compensation of $200,000 in 1999 and 2000 respectively, with 1999 bonuses
based upon Company earning a minimum net income of $250,000 and bonus payments
ranging from $25,000 to $62,500 predicated on net income ranging from $250,001
to $500,000. Bonuses in 2000 are based upon the Company earning a minimum net
income of $500,000 and bonus payments ranging from $25,000 to $62,500 predicated
on net income ranging from $500,001 to $750,000. Additionally, the Agreement
provides for a monthly auto allowance of $500 plus insurance and maintenance. On
April 4, 1999, the Company and Mr. Warm mutually modified the Agreement,
retroactive to April 1, 1999, as a result of the acquisition of Tricom Pictures
and Productions, Inc. (See Part II Item 4-Recent Sales of Unregistered
Securities), whereby bonuses are to be paid monthly at the discretion of the
Bonus Committee of which Mr. Warm is a member. The Agreement is automatically
renewable for successive one-year terms unless the parties mutually agree in
writing to alter the terms or one or both of the parties exercises their right,
in accordance with the terms of the Agreement, to terminate the Agreement.
1998 AMENDED STOCK OPTION PLAN
On September 10, 1998 the Board of Directors adopted the Company's 1998
Stock Option Plan (the "Plan"). On December 1, 1998, the Plan was amended by
Consent of the Board of Directors and Majority Shareholders to increase the
number of shares of common stock which may be purchased by option (the "Plan
Option" as hereinafter defined), from 1,500,000 to 3,000,000.
12
<PAGE>
The Company believes the Plan will foster an increase in proprietary
interest in the Company by its directors, officers, employees and consultants,
and to align more closely their interests with the interests of the Company's
shareholders. The Plan will also aid the Company in attracting and retaining the
services of experienced and highly qualified employees and professionals. The
Board of Directors or a Committee of the Board of Directors (the "Committee"),
of the Company, will administer the Plan which includes, without limitation, the
selection of the person(s) who will be granted Plan Options under the Plan, the
type of Plan Options to be granted, the number of shares subject to each Plan
Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not so qualify
("Non-Qualified Options"). In addition, the Plan also allows for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person and to receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. Any Incentive Option
granted under the Plan must provide for an exercise price of not less than 100%
of the fair market value (as defined) of the underlying shares on the date of
such grant, but the exercise price of any Incentive Option granted to an
eligible employee owning 10% of the Company's Common Stock must be at least 110%
of such fair market value as determined on the date of the grant. The term of
each Plan Option and the manner in which it may be exercised is determined by
the Board of Directors or the Committee, provided that no Plan Option may be
exercisable more than 10 years after the date of its grant and in the case of an
Incentive Option granted to an eligible employee owning more than 10% of the
Company's Common Stock, no more than five years after the date of the grant. The
exercise price of Non-Qualified Options shall be determined by the Board of
Directors or the Committee.
The per share purchase price of shares subject to the Plan Options
granted under the Plan may be adjusted in the event of certain changes in the
Company's capitalization, but any such adjustment shall not change the total
purchase price payable upon the exercise in full of Plan Options granted under
the Plan. Officers, directors, key employees and consultants of the Company and
its subsidiaries will be eligible to receive Non-Qualified Options under the
Plan. Only officers, directors, and employees of the Company who are employed by
the Company or by any subsidiary thereof are eligible to receive Incentive
Options.
All Plan Options are non-assignable and non-transferable, except by
will or by the laws of descent and distribution, during the lifetime of the
optionee, and may be exercised only by such optionee. If an optionee's
employment is terminated for any reason (other than death or disability or
termination for cause), or if an optionee is not an employee of the Company but
is a member of the Company's Board of Directors and his service as a Director is
terminated for any reason (other than death or disability), the Plan Option
granted to him shall lapse to the extent unexercised on the earlier of the
expiration date or 30 days following the date of his termination. If the
optionee dies during the term of his employment, the Plan Option granted to him
shall lapse to the extent unexercised on the earlier of the expiration date of
the Plan Option or the date one year following the date of the optionee's death.
If the optionee is permanently and totally disabled within the meaning of
Section 22(c) (3) of the Internal Revenue Code of 1986, the Plan Option granted
to him lapses to the extent unexercised on the earlier of the expiration date of
the option or one year following the date of such disability.
The Board of Directors or the Committee may amend, suspend or terminate
the Plan at any time, except that no amendment shall be made which (i) increases
the total number of shares subject to the Plan or changes the minimum purchase
price therefor (except in either case in the event of adjustments due to changes
in the Company's capitalization), (ii) affects outstanding Plan Options or any
exercise right thereunder, (iii) extends the term of any Plan Option beyond ten
years, or (iv) extends the termination date of the Plan. Unless the Plan shall
theretofore have been suspended or terminated by the Board of Directors, the
Plan shall terminate approximately 10 years from the date of the Plan's
adoption. Any such termination of the Plan shall not affect the validity of any
Plan Options previously granted thereunder.
As of April 19, 1999, 1,109,335 Plan Options have been granted
pursuant to the Plan. The following table summarizes the status of the Options
issued and outstanding:
<TABLE>
<CAPTION>
Description Number of Options Expiration Dates
- ----------------- ----------------- ----------------------------
<S> <C>
Options Granted 1,109,335
Non-Vested Options 156,835
---------
Vested Options-all unexercised 952,500 Sept.10, 2003 - Mar.31, 2004
=========
</TABLE>
ITEM 7. INTEREST OF MANAGEMENT AND OTHER CERTAIN TRANSACTIONS
- --------------------------------------------------------------
On July 1, 1998, the Company entered into an Agreement (the "Tricom
Agreement") with Tricom, a company which was 85% owned by the executive officers
of the Company and the remaining 15% owned by stockholders of the Company,
whereby Tricom acquired the exclusive right to the production of all
13
<PAGE>
audio/visual television programming created by the Company. The production
services include but are not limited to (i) the creation of audio/video footage
for broadcast on television or other media, (ii) the creation of all print
advertising pertaining to the aforementioned programming and (iii) procurement
of media time and/or space. In consideration of such services, Tricom charges
the Company a fee of $7,000 per segment produced. The Agreement terminates on
June 30, 2003.
On July 13, 1998, the Company acquired all the assets of the marketing
division of Tricom for a note of $250,000. The note bears interest at 8% per
annum and is payable over five years with a balloon payment in the final month.
On February 10, 1999 the Company announced plans to acquire Tricom in
exchange for 10 million shares of Company's Common Stock, subject to receiving a
fairness opinion reflecting a valuation of Tricom of not less than $10 million.
The Company's Board of Directors retained the services of an independent
experienced business appraisal firm to make such a determination. The firm
concluded that based on its review and analysis of the transaction and all
relevant factors and data, the fair market value of Tricom approximated $11.4
million and that transaction was fair to the shareholders of the Company from a
financial point of view . On March 8, 1999, the Company completed its
acquisition Tricom on the previously announced terms. Tricom was 85% owned by
the Executive Officers of the Company at the time of acquisition and all
shareholders of Tricom were exisiting stockholders of the Company prior to the
acquisition. On the date the Company's shares were issued to the Tricom
stockholders, the market value of the stock issued approximated (March 8, 1999),
$28,750,000.
As of February 1, 1999, the Company advanced $97,000 to a company,
Legal Street Enterprises, Inc., which is 67% owned by the Executive Officers
(Messrs. Alfieri and Levine, individually; 33.333% each) of the Company.
Interest payments commence on August 1, 1999 and for 59 consecutive months
thereafter. A balloon payment of the pricipal amount is due with the 60th month
interest payment.
ITEM 8. DESCRIPTION OF SECURITIES
- ----------------------------------
The Company is authorized to issue 150,000,000 shares of Common Stock,
par value $.001 per Share. As of April 30, 1999, there were 12,479,702 shares of
Common Stock issued and outstanding.
COMMON STOCK
The holders of shares of Common Stock are entitled to share, on a
ratable basis, such dividends as may legally be declared by the Board of
Directors out of funds, legally available therefor. Upon liquidation,
dissolution or winding up of the Company, after payment to the creditors, the
assets of the Company will be divided pro rata on a per share basis among the
holders of the Common Stock.
Each holder of Common Stock is entitled to one vote. Holders of Common
Stock do not have cumulative voting rights which means that the holders of more
than 50% of the shares voting for the election of Directors can elect all of the
Directors if they choose to do so, and, in such event, the holders of the
remaining shares will not be able to elect any Directors. The By Laws of the
Company require that only a majority of the issued and outstanding shares of the
Company need be represented to constitute a quorum and to transact business at a
stockholders' meeting. The Common Stock has no preemptive, subscription or
conversion rights and is not redeemable by the Company.
OPTIONS
Currently there are options to purchase up to 5,335 shares of Common
Stock of the Company at $35.625 per share which will vest upon completion of 36
months of continuous employment with the Company commencing with the optionee's
hire date and be exercisable through September 9, 2003.
In addition, there are (i) options to purchase 150,000 shares of Common
Stock at $1.00 per share which are exercisable immediately and through December
21, 2003; (ii) options to purchase 5,000 shares of Common Stock at $10.00 per
share which will vest on March 31, 2001 and be exercisable through March 31,
2004; and (iii) options to purchase 800,000 shares of Common Stock at $2.375 per
share which are exercisable immediately and through March 31, 2004.
SHARES ELIGIBLE FOR FUTURE SALE
As of April 30, 1999, the Company has outstanding 12,479,702 shares of
Common Stock. Of the total outstanding shares of Common Stock, 1,117,202 shares
of Common Stock are freely tradable without restriction or further registration
under the Securities Act of 1933 (the "Act"), 1,250,00 shares of Common Stock
(1,138,175 shares held by Executive Officers of the Company)will be eligible for
sale after June 23, 1999 under Rule 144,if the conditions of the Rule have been
met. On July 30, 1998, 12,500 shares of Common Stock will be eligible for sale
under Rule 144. On March 7, 2000, 10,000,000 shares of Common Stock (8,500,000
shares held by Executive Officers of the Company) will be eligible for sale
under Rule 144, if the conditions of the Rule are met. On April 17, 2000,
100,000 shares of Common Stock will be eligible for sale under Rule 144.
Under Rule 144, a person (or persons whose shares are aggregated) who
has beneficially owned restricted securities for at least one year, including
the holding period of any prior owner except an affiliate, would be generally
entitled to sell within any three month period a number of shares that does not
14
<PAGE>
exceed the greater of (i) 1% of the number of the then outstanding shares of the
Common Stock or (ii) the average weekly trading volume of the Common Stock in
the public market during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. Any person (or persons whose shares are aggregated) who is not deemed
to have been an a affiliate of the Company at any time during the three months
preceding a sale, and who has beneficially owned shares for at least two years
(including any period of ownership of preceding non-affiliated holders), would
be entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner-of-sale provisions, public information requirements or
notice requirements.
The Company is unable to estimate the amount of restricted securities
that will be sold under Rule 144 because this will depend, among other factors,
on the market price for the shares of Common Stock and the personal
circumstances of the sellers.
15
<PAGE>
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS OF THE REGISTRANT'S COMMON EQUITY AND
- ----------------------------------------------------------------------------
OTHER SHAREHOLDER MATTERS
-------------------------
The Company's shares of Common Stock are traded over-the-counter and quoted on
the OTC Electronic Bulletin Board under the symbol "EBUY". From inception of
listing on the OTC Electronic Bulletin Board (July 20, 1998) through February
23, 1999, the Company's shares of Common Stock traded under the symbol "SHTV".
The reported high and low bid prices for the Common Stock are shown below for
the period from inception of trading in July 1998 through April 30, 1999. The
quotations reflect inter-dealer prices and do not include retail mark-ups,
mark-downs or commissions. The prices do not necessarily reflect actual
transactions. On February 23, 1999, the Company implemented a reverse one for
ten (1:10) common stock split to shareholders of record as of February 22, 1999.
The prices listed below have not been restated to give retroactive effect to the
inception date of trading for such split.
<TABLE>
<CAPTION>
Period High Low
- ------------------------------------------------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
July 20, 1998 (inception) to September 30, 1998 $6.50 $1.625
Quarter Ended December 31, 1998 $3.9375 $ .10
Quarter Ended March 31, 1999 $4.125 $ .17
April 1, 1999 to April 30, 1999 $3.8725 $2.125
</TABLE>
The closing bid and asked prices of the Company's Common Stock on
April 30, 1999 were $2.625 and $2.625, respectively, as quoted on the OTC
Electronic Bulletin Board. On April 30, 1999, there 57 active shareholders of
record of the Company's Common Stock.
The transfer agent for the Company's Common Stock is Florida Atlantic
Stock Transfer, Inc., 7130 Nob Hill Road, Tamarac, Florida, 33321.
The Company has never paid cash dividends on its Common Stock. The
Company presently intends to retain future earnings, if any, to finance the
expansion of its business and does not anticipate that any cash dividends will
be paid in the foreseeable future. The future dividend policy will depend upon
the Company's earnings, capital requirements, expansion plans, financial
condition and other relevant factors.
ITEM 2. LEGAL PROCEEDINGS
- --------------------------
The Company is involved in legal proceedings arising in the ordinary
course of business. The Company is not involved in any legal proceedings that it
believes will result, individually or in the aggregate, in a material adverse
effect upon its financial condition or its operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- ------------------------------------------------------
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SALES OF SECURITIES
- ---------------------------------------------------------
On February 23, 1999 the Company undertook a one for 10 (1:10) reverse
stock split of its Common Stock. All figures set forth below give retroactive
effect to the reverse split.
In June 1998, the Company issued 1,250,000 shares of its Common Stock
in exchange for 100% of the issued and outstanding (1,000) shares of Common
Stock of Site2Shop, pursuant to the Agreement. The issuance of the shares was
exempt from the registration requirements of the Act pursuant to Section 4(2) of
the Act.
On July 31, 1998, the Company completed a private offering of 25,000
shares of Common Stock in consideration of $250,000 to two accredited and
otherwise qualified investors based on their financial resources and knowledge
of investments. In addition, each of the investors was provided with information
and had access to relevant information concerning the Company. Accordingly, the
issuance of the securities was exempt from the registration requirements of the
Act pursuant to the exemption set forth in Section 4(2) and Rule 506 of the Act.
In January 8, 1999, the Company issued an option to purchase 5,000
shares of Common Stock, exercisable at $10.00 per share during the period of
January 1, 2000 through January 1, 2002. The purchaser was accredited or
otherwise had such experience in financial and business matters so that he was
able to evaluate the risks and merits of an investment in the Company. The
investor also had a was a former officer with the Company (Tee-Rifik Corp.) and
was provided access to relevant information concerning the Company. Accordingly,
this transaction was exempt from the registration requirements of the Securities
Act pursuant to the exemption set forth in Section 4(2) of the Securities Act.
16
<PAGE>
On March 8, 1999, the Company acquired all the issued and
outstanding shares of Tricom, a company controlled by the executive officers of
the Company, for 10,000,000 shares of the Company's Common Stock. The issuance
of the shares was exempt the registration requirements of the Act pursuant to
Section 4(2) of the Act.
During the period of January 5, 1999 through April 6, 1999, the Company
issued 1,000,800 shares of Common Stock to 29 investors for gross proceeds of
$1,000,000 in connection with an offering pursuant to Rule 504 of Regulation D
of the Act.
On April 8, 1999, the Company issued 50,000 shares of its Common Stock
to a consultant in consideration for services to be rendered. The issuance of
the shares was exempt from registration requirements of the Act pursuant to
Section 4 (2) of the Act.
On April 15, 1999, the Company issued 40,000 shares of its Common
Stock to a consultant in consideration for services to be rendered over the next
four years. The issuance was exempt from registration requirements of the Act
pursuant to Section 4 (2) of the Act.
On April 18, 1999, the Company issued 10,000 shares of its Common
Stock to two attorneys for legal services to be rendered. The issuance was
exempt from registration requirements of the Act pursuant to Section 4 (2) of
the Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- --------------------------------------------------
Section 78.751 of the Nevada General Corporation Law, provides as
follows:
1. A corporation may indemnify any person who was or is threatened to
be made 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 was or is a Director,
officer, employee or agent of the corporation, or is or was serving
at the request of another corporation as a director, officer,
employee or agent of another corporation, partnership or joint
venture, trust or other enterprise, against expenses, including
attorneys' fees, judgements, 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 judgement, 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 judgement 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 or 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, he must be indemnified by the corporation against
expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by
by a court or advanced pursuant to subsection 5, must be made by
the corporation only as authorized in the specific case upon a
determination that indemnification of the Director, officer,
employee or agent is proper under the circumstances. The
determination must be made:
(a) By the stockholders;
17
<PAGE>
(b) By the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to the act, suit or
proceeding;
(c) If a majority vote of a quorum consisting of Directors who
were not parties to the act, suit or proceeding do orders, by
independent legal counsel in written opinion; or
(d) If a quorum consisting of Directors who were not parties to
the act, suit or proceeding can not be obtained, by independent
legal counsel in a written opinion.
5. 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 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.
6. The indemnification and advancement of expenses authorized in or 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
an 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 subsection 2 or for the
advancement of expenses made pursuant to subsection 5, may not be
made to or on behalf of any Director or officer if a final
adjudication established 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.
The Executed Organizational Meeting of Directors and Shareholders of
Site2Shop.Com, Inc. of February 24 1999 provides as follows:
It is resolved that the Corporation shall hereby indemnify and
hold harmless all officers and directors of the Corporation from
any and all manner of action, suit or legal proceeding (whether
judicial, quasi-judicial or administrative in nature) and whether
such action, suit or legal proceeding occurs on the trial level,
appellate level or in any court or tribunal whatsoever.
18
<PAGE>
PART F/S
The financial statements and supplementary data are included herein.
FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements of the Company, include the audited
consolidated balance sheet at December 31, 1998 and the related audited
consolidated statement of operations, consolidated changes in stockholders'
deficit, and consolidated cash flows for the year ended December 31, 1998, the
unaudited consolidated balance sheet at March 31, 1999 and the related
consolidated statements of operations and consolidated cash flows for the three
months ended March 31, 1999 giving effect to the Tricom acquisition as if it
occurred on January 1, 1999.
The pro forma financial data is based upon the historical financial
statements of the Company and Tricom and include an unaudited pro forma combined
statement of operations for the year ended December 31, 1998 giving effect to
the Tricom acquisition as if it had occurred as of January 1, 1998 and the
unaudited pro forma combined balance sheets as of December 31, 1998 giving
effect to the Tricom acquisition as if it had occurred as of December 31, 1998.
The financial statements also included the audited balance sheets of
Tricom Pictures and Productions, Inc. as of December 31, 1998 and 1997
respectively and the related audited statements of operations, changes in
stockholders' deficit, and consolidated cash flows for the years then ended.
<TABLE>
<CAPTION>
Table of Contents
Page
----
SITE2SHOP.COM., INC.
<S> <C>
Report of Independent Auditors................................ F- 1
Consolidated Balance Sheet as of December 31, 1998............ F- 2
Consolidated Statement of Operations for the Year Ended
December 31, 1998............................................ F- 3
Consolidated Statement of Stockholders' Deficit for the
Year Ended December 31, 1998................................. F- 4
Consolidated Statement of Cash Flows for the Year Ended
December 31, 1998............................................ F- 5
Notes to Consolidated Financial Statements.................... F- 7
Interim Consolidated Balance Sheets as of December 31, 1998
(Audited)and March 31, 1999 (Unaudited)...................... F-12
Interim Consolidated Statements of Operations for the Three
Months Ended March 31, 1999 (Unaudited)..................... F-13
Interim Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1999 (Unaudited)...................... F-14
Notes to Interim Consolidated Financial Statements (Unaudited) F-16
TRICOM PICTURES AND PRODUCTIONS, INC.
Report of Independent Auditors................................ F-18
Balance Sheets as of December 31, 1998 and 1997............... F-19
Statements of Operations and Accumulated Deficits for the
Years Ended December 31, 1998 and 1997....................... F-20
Statements of Cash Flows for the Years Ended December31, 1998
and 1997..................................................... F-21
Statement of Stockholders' Deficit for the Years Ended
December 31, 1998 and 1997.................................. F-23
Notes to Financial Statements................................ F-24
PRO FORMA FINANCIAL DATA..................................... F-28
</TABLE>
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Site2Shop.Com, Inc.
Pompano Beach, Florida
We have audited the accompanying consolidated balance sheet of
Site2Shop.Com, Inc. as of December 31, 1998 and the related consolidated
statements of operations, stockholders' deficit and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Site2Shop.com, Inc. as of December 31, 1998, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
/s/ Feldman Sherb Ehrlich & Co., P.C.
Feldman Sherb Ehrlich & Co., P.C.
Certified Public Accountants
New York, New York March 5, 1999 except
for Note 10b as to which date is
April 6, 1999.
F - 1
<PAGE>
SITE2SHOP.COM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
---------------
CURRENT ASSETS
<S> <C>
Cash .......................................................... $ 8,843
Accounts receivable, net of allowance for doubtful accounts of
$224,000 .................................................... 285,343
Due from related party ........................................ 19,099
Prepaid and other current assets .............................. 81,011
-----------
TOTAL CURRENT ASSETS ..................................... 394,296
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net ........................ 86,536
OTHER ASSETS ..................................................... 7,572
-----------
Total assets............................................. $ 488,404
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses ......................... $ 133,595
Deferred revenue .............................................. 1,263,716
-----------
TOTAL CURRENT LIABILITIES ............................... 1,397,311
NOTE PAYABLE -RELATED PARTY ...................................... 250,000
STOCKHOLDERS' DEFICIT
Common Stock- $.001 par, 150,000,000 shares authorized,
1,391,400 issued and outstanding ............................ 1,391
Additional paid-in capital .................................... 314,233
Accumulated deficit ........................................... (1,474,531)
-----------
Total stockholders' deficit.............................. (1,158,907)
-----------
Total liabilities and stockholders' deficit.............. $ 488,404
===========
</TABLE>
See Notes to Consolidated Financial Statements
F - 2
<PAGE>
<TABLE>
<CAPTION>
SITE2SHOP.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<S> <C>
REVENUES ...................................... $ 1,198,241
COST OF SALES ................................. 724,691
------------
GROSS PROFIT ............................. 473,550
EXPENSES
Selling ................................. 554,989
General and administrative .............. 1,143,092
------------
1,698,081
------------
NET LOSS....................................... $ (1,224,531)
============
NET LOSS PER COMMON SHARE-BASIC ............... $ (1.57)
=============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES- BASIC 782,085
============
</TABLE>
See Notes to Consolidated Financial Statements
F - 3
<PAGE>
<TABLE>
SITE2SHOP.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Common Stock Additional Total
Number Paid-in Accumulated Stockholders'
of Shares Amount Capital Deficit Deficit
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 116,400 $ 116 $ -- $ -- $ 116
Common stock issued for
acquisition ........... 1,250,000 1,250 (1,250) -- --
Distribution ............. -- -- -- (250,000) (250,000)
Sale of common stock ..... 25,000 25 249,975 -- 250,000
Stock options issued for
services .............. -- -- 65,624 -- 65,624
Net income ............... -- -- -- (1,224,531) (1,224,531)
----------- ----------- ----------- ------------- ------------
Balance, December 31, 1998 1,391,400 $ 1,391 $ 314,233 $(1,474,531) $(1,158,907)
=========== =========== =========== ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
F - 4
<PAGE>
<TABLE>
<CAPTION>
SITE2SHOP.COM, INC.AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASHFLOWS
YEAR ENDED DECEMBER 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss............................................ $(1,224,531)
------------
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation and amortization ................ 11,667
Stock options issued for services ............ 65,624
Changes in assets and liabilities:
Increase in accounts receivable ................. (285,343)
Increase in prepaid and other current assets .... (81,011)
Increase in other assets ........................ (7,572)
Increase in accounts payable and accrued expenses 133,595
Increase in deferred revenue .................... 1,263,716
------------
Total Adjustments ............................ 1,100,676
------------
NET CASH USED IN OPERATIONS............................ (123,855)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................... (98,203)
------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES ........... (98,203)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock ........................ 250,000
Payments to related party .......................... (19,099)
------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES ....... 230,901
------------
NET CASH INCREASE ..................................... 8,843
CASH- beginning of year ............................... -
------------
CASH- end of year ..................................... $ 8,843
============
</TABLE>
See Notes to Consolidated Financial Statements
F - 5
<PAGE>
<TABLE>
<CAPTION>
SITE2SHOP.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
YEAR ENDED DECEMBER 31, 1998
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
<S> <C>
Cash paid during the year for interest .................. $ -
========
Non-cash investing activities:
Purchase of marketing division from company held under
common control for note ........................... $250,000
========
Common stock issued for acquisition .................. $ 1,250
========
</TABLE>
See Notes to Consolidated Financial Statements
F - 6
<PAGE>
SITE2SHOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
1. BUSINESS
- -------------
On June 24, 1998, Site2Shop.Com, Inc., (formerly Tee-Rifik Corp.) (the
"Company"), a Nevada corporation, acquired 100% of the issued and
outstanding shares of Shop TV and Television, Inc. ("Shop"), a
privately held Florida corporation. The existing stockholders of the
Company retained their 116,400 shares and the stockholders of Shop
received shares of the Company at a ratio of 1,250 to 1 for a total of
1,250,000 shares. Due to the majority ownership of the Company after
the transaction by the former Shop stockholders (91.5%) and the
Company's lack of substantial assets, liabilities, or marketable
products and/or services, the transaction is considered to be a
reverse acquisition, whereby Shop is deemed to be the accounting
acquirer and to be both the predecessor entity and continuing entity.
Accordingly, the combination of the two companies is recorded as a
recapitalization of Shop, whereby the combined assets and liabilities
are recorded on an historical basis. As neither the Company nor Shop
were actively engaged in revenue producing activities prior to this
transaction the Company's operations have only been indcluded since
June 24, 1998.
Effective July 1, 1998, the Company acquired the marketing division
of Tricom Pictures and Productions, Inc. ("Tricom") a related party
owned by the majority shareholders of the Company.
The Company's business is to market its vendors' products through (i) a
half-hour shop-at-home program, (ii) its internet website, (iii) a
commercial retail store. The Company, through a resolution of the
Board of Directors, changed its name as of February 9, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------
A. Principles of Consolidation - The consolidated financial statements
include the accounts of Site2Shop.com, Inc. and its wholly-owned
subsidiary, Shop TV and Television, Inc.. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
B. Equipment and Leasehold Improvements - Equipment is carried at cost.
Depreciation and amortization are computed using the straight-line
method over the useful lives of the various assets. Leasehold
improvements are amortized over the lesser of their useful lives or the
lease term.
C. Revenue - A portion of revenue represents revenues from contracts to
produce television programs using the "percentage-of-completion-method"
recognizing revenue relative to the proportionate progress on such
contracts as measured by the ratio which costs incurred by the Company
to date bear to total anticipated costs on each program.
Deferred revenue represents amounts which have been billed and not yet
earned in accordance with this method. Deferred revenue at
December 31, 1998 was $1,263,716. At December 31, 1998 the Company had
additional signed contracts totaling $1,132,000 for which performance
had yet to commence.
D. Fair Value of Financial Instruments - The carrying amounts reported
in the balance sheet for cash, receivables, and accounts payable
approximate their fair market value based on the short-term maturity of
these instruments.
E. Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
F - 7
<PAGE>
F. Income taxes - Income taxes are accounted for under Statement of
Financial Accounting Standards No.109, "Accounting for Income Taxes,"
which is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's
financial statements or tax returns.
G. Net income (loss) per share - The Company has adopted Statement of
Financial Accounting Standard No. 128, Earnings per Share;" specifying
the computation, presentation, and disclosure requirements of earnings
per share information. Basic earnings per share has been calculated
based upon the weighted average number of common shares outstanding.
Stock options have been excluded as common stock equivalents in the
diluted earnings per share because they are either antidilutive, or
their effect is not material. On February 23, 1999, the Company
affected a 1 for 10 reverse stock split. The financial statements have
been restated to give retroactive recognition to the reverse stock
split.
H. Stock based compensation - The Company accounts for stock transactions
in accordance with APB Opinion No. 25, "Accounting for Stock
Issued to Employees." In accordance with the Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based
Compensation," the Company has adopted the pro forma disclosure
requirements of Statement No. 123.
I. Impairment of long-lived assets - The Company reviews long-lived assets
for impairment whenever circumstances and situations change such
that there is an indication that the carrying amounts may not be
recovered. At December 31, 1998, the Company believes that there has
been no impairment of its long-lived assets.
J. Concentration of Risk - Credit losses, if any, have been provided
for in the financial statements and are based on management's
expectations. The Company's accounts receivable are subject to
potential concentrations of credit risk. The Company does not
believe that it is subject to any unusual or significant risks, in the
normal course of business.
3. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
- -----------------------------------------
Equipment and Leasehold Improvements are as follows:
<TABLE>
<CAPTION>
Estimated Useful December 31,
Lives 1998
----------------- ------------
<S> <C> <C>
Furniture and Fixtures ........................ 7 Years $19,700
Computer Equipment ............................ 5 Years 13,913
Office Equipment .............................. 5 Years 2,759
Leasehold Improvements ........................ 6 Years 12,611
Leasehold Improvements - Retail Store ......... 4 Years 37,505
Retail Store - Equipment ...................... 5 Years 7,515
Retail Store - Signs .......................... 4 Years 4,200
-------
98,203
Less: Accumulated depreciation and amortization
11,667
=======
$86,536
=======
</TABLE>
F - 8
<PAGE>
4. RELATED PARTY TRANSACTIONS
- -------------------------------
Acquisition of Tricom marketing division - On July 1, 1998 the Company
acquired the marketing division of Tricom (the "Division"), a company
substantially owned by the majority stockholders of the company, for a
note of $250,000. The note bears interest at 8% per annum and is
payable over five years with a balloon payment in the final month. The
acquisition was accounted for under the purchase method of accounting
with the basis used to record the assets of the Division as zero which
is the transferor's historical cost basis. The purchase price of
$250,000 has been recorded as a distribution to the stockholders of the
Company. The accompanying statement of operations includes the revenues
and expenses of the Division from the respective closing date.
Included in cost of sales at December 31, 1998, is $353,920 of
production expense to Tricom.
Due from Tricom - As of December 31, 1998, the Company is owed $19,099
from Tricom.
5. COMMON STOCK
- -----------------
In July 1998, the Company completed a private placement of 25,000
shares of its common stock for $250,000.
6. INCOME TAXES
- -----------------
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes ("SFAS No.109").
SFAS No.109 requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the financial
statements and tax basis of assets and liabilities, and for the expected
future tax benefit to be derived from tax loss and tax credit
carryforwards. SFAS No. 109 additionally requires the establishment of a
valuation allowance to reflect the likelihood of realization of deferred
tax assets.
The provision for income taxes differs from the amount computed
applying the statutory federal income tax rate to income before income
taxes as follows:
<TABLE>
<CAPTION>
December 31, 1998
---------------------
<S> <C>
Statutory federal income tax rate............ 34.0
State taxes, net of federal tax benefit...... 3.6
Other........................................ (.9)
------
36.7
Permanent differences........................ (36.7)
------
0
======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
---------------------
<S> <C>
Income tax benefit computed at statutory rate $(450,000)
Effect of permanent differences ............. 450,000
----------
Provision for income taxes (benefit) ........ $ -
==========
</TABLE>
F - 9
<PAGE>
7. COMMITMENTS
- ----------------
a. Operating Leases - The Company leases its office, retail store,
and warehouse under noncancellable operating leases. Rent expense was
$54,223 for the year ended December 31, 1998. The leases expire through
May 2001.
Minimum rental commitments are as follows:
<TABLE>
<CAPTION>
Minimum
Year Rental
---- --------
<S> <C> <C>
1999 $ 52,927
2000 $ 55,503
2001 $ 19,454
</TABLE>
b. Employment Agreements - the Company has employment agreements with three
key executive officers. The agreements continue for three years ending
between June and August of 2001 and provide for severance payments under
certain circumstances. The agreements provide the officers with certain
additional rights after a change of control (as defined) of the Company
occurs. As of December 31, 1998, if all of the officers under contract
were to be terminated without good cause (as defined) under these
contracts, the Company's liability would be approximately $2,125,000.
Additionally, certain officers received signing bonuses as part of these
agreements and all officers are entitled to annual bonuses based on the
net income of the Company.
8. ACQUISITIONS
- -----------------
On July 13, 1998, the Company acquired the marketing division of Tricom
Pictures, Inc. (the "Division") for $250,000 which was included in the
due to related party. The purchase price exceeded the assets acquired by
$250,000, which amount has been reflected as a distribution of
capital to the stockholders of the Company. The accompanying statement of
operations includes the revenues and expenses of the Division
subsequent to the respective closing date.
9. STOCK OPTIONS
- ------------------
The Company adopted a Stock Option Plan (the "Plan") in September 1998.
The Plan is administered by a committee ("Committee") appointed by the
Board of Directors and provides that the Committee has sole discretion to
select options and to establish terms and conditions of each option,
subject to the provisions of the Plan. If options granted are
"incentive stock options," the exercise price of the options may not be
less than 100% of the fair market value of the Company's stock on the
date of the grant (110% of the fair market value if the grant is to an
employee who owns more than 10% of the outstanding common stock).
Non-statutory options may be granted under the Plan at an exercise
price of not less than 55% of fair market value of the common stock on
the date of the grant. The maximum grant term is ten years. The Plan is
designed for officers, directors, and other key employees and is
authorized to grant up to 3,000,000 shares of common stock. As of
December 31, 1998, 156,375 options have been granted at prices ranging
from $1.00 to $35.60 per share and no options have been exercised.
F - 10
<PAGE>
For disclosure purposes the fair value of each stock option grant is
estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for stock
options granted during the year ended December 31, 1998: annual
dividends of $0.00, expected volatility of 50%, risk-free interest rate
of 6.0% and expected life of 5 years for all grants. The
weighted-average fair values of the stock options granted during the
year ended December 31, 1998 was $2.20.
If the Company recognized compensation cost for the employee stock
option plan in accordance with SFAS No. 123, the Company's pro forma
net loss and loss per share would have been $(1,432,677) and $(1.83) in
1998.
The following table summarizes the changes in options outstanding and
the related price ranges for shares of the Company's common stock:
<TABLE>
<CAPTION>
Number of
Number of Price per Share Shares
Shares Range Exercisable
----------- --------------- --------------
<S> <C> <C> <C>
Outstanding at January 1,..
1998..................... - -- - -- -
Granted ................... 156,375 $1.00 - $35.60 150,000
Exercised ................. - -- - -- -
Canceled .................. (730) $35.60 -
-------- -------------- -------
Outstanding at December 31,
1998 155,645 $1.00 - $35.60 150,000
============== =======
</TABLE>
On February 23, 1999, the Company affected a 1 for 10 reverse stock
split. All options granted and related exercise prices have been
restated to give retroactive recognition to the reverse stock split.
10. SUBSEQUENT EVENTS
- ----------------------
a. On February 5, 1999, the Company acquired Tricom, an entity controlled
by the majority stockholders of the Company for 10,000,000 shares of
the Company's common stock. The transaction will be treated as a
purchase of companies under common control which will be accounted for
as an "as if" pooling of interests.
10. SUBSEQUENT EVENTS-continued
- ----------------------
b. As of April 6, 1999, the Company had completed a private placement of
1,000,800 shares of common stock for $1,000,000.
F - 11
<PAGE>
SITE2SHOP.COM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
------------ -------------
(Audited) (Unaudited)
ASSETS
---------------
CURRENT ASSETS
<S> <C> > <C>
Cash .......................................................... $ 8,843 $ 445,855
Accounts receivable, net of allowance for
doubtful accounts of $224,000 at December 31, 1998 and
and $395,021 at March 31, 1999.............................. 285,343 1,012,274
Due from related party ........................................ 19,099 97,000
Prepaid and other current assets .............................. 81,011 146,078
----------- ------------
TOTAL CURRENT ASSETS .................................... 394,296 1,701,207
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net ........................ 86,536 320,198
OTHER ASSETS ..................................................... 7,572 39,388
----------- ------------
Total assets............................................. $ 488,404 $ 2,060,793
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses ......................... $ 133,595 $ 157,852
Deferred income taxes payable.................................. -0- 1,157,000
Capital lease obligations- current portion..................... -0- 23,554
Deferred revenue .............................................. 1,263,716 2,851,998
----------- ------------
TOTAL CURRENT LIABILITIES ............................... 1,397,311 4,190,404
NOTE PAYABLE -RELATED PARTY ...................................... 250,000 -0-
CAPITAL LEASE OBLIGATIONS......................................... -0- 17,446
STOCKHOLDERS' DEFICIT
Common Stock- $.001 par, 150,000,000 shares authorized,
1,391,400 issued and outstanding at December 31, 1998 and
11,602,899 at March 31, 1999................................. 1,391 11,603
Additional paid-in capital .................................... 314,233 751,346
Accumulated deficit ........................................... (1,474,531) (2,910,006)
----------- ------------
Total stockholders' deficit.............................. (1,158,907) (2,147,057)
----------- ------------
Total liabilities and stockholders' deficit.............. $ 488,404 $ 2,060,793
=========== ============
</TABLE>
See Notes to Consolidated Financial Statements
F - 12
<PAGE>
<TABLE>
<CAPTION>
SITE2SHOP.COM, INC.
CONSOLIDATED STATEMENT OF INCOME
For the THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
<S> <C>
REVENUES ...................................... $ 2,171,586
COST OF SALES ................................. 398,678
------------
GROSS PROFIT ............................. 1,772,908
EXPENSES
Selling ................................. 469,557
General and administrative .............. 678,556
------------
1,148,113
------------
OPERATING INCOME............................... 624,795
PROVISION FOR INCOME TAXES..................... 233,000
------------
NET INCOME..................................... $ 391,795
============
NET INCOME PER COMMON SHARE-BASIC ............. $ 0.03
=============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES- BASIC 11,483,649
============
</TABLE>
See Notes to Consolidated Financial Statements
F - 13
<PAGE>
<TABLE>
<CAPTION>
SITE2SHOP.COM, INC.
CONSOLIDATED STATEMENT OF CASHFLOW
For the THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net income......................................... $ 391,795
------------
Adjustments to reconcile net income to net cash
used in operations:
Depreciation and amortization ................ 40,512
Deferred income taxes......................... 233,000
Changes in assets and liabilities:
Increase in accounts receivable ................. (378,222)
Increase in prepaid and other current assets .... (9,655)
Increase in other assets ........................ (8,393)
(Decrease) in accounts payable and accrued
expenses........................................ (137,575)
Increase in deferred revenue .................... 211,620
------------
Total Adjustments ............................ (48,713)
------------
NET CASH PROVIDED BY OPERATIONS........................ 343,082
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................... (54,532)
------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES ........... (54,532)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock ........................ 223,200
Payments to related party .......................... (10,000)
Payments of capital lease obligations............... (8,599)
Net Bank overdraft repaid in merger................. (56,139)
------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES ....... 148,462
------------
NET CASH INCREASE ..................................... 437,012
CASH- beginning of year ............................... 8,843
------------
CASH- end of year ..................................... $ 445,855
============
</TABLE>
See Notes to Consolidated Financial Statements
F - 14
<PAGE>
<TABLE>
<CAPTION>
SITE2SHOP.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
For the THREE MONTHS ENDED MARCH 31, 1999
Unaudited
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
<S> <C>
Cash paid during the year for interest .................. $ 1,453
============
Non-cash investing activities:
Common stock issued for acquisition .................. $ 10,000
============
Retirement of 12,500 shares of common stock........... $ 26,875
============
</TABLE>
F - 15
<PAGE>
SITE2SHOP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1999
1. BASIS OF PRESENTATION
- -------------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three months ended March 31, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999. For further information, refer to the financial
statements and and notes thereto included in the Site2Shop.Com, Inc. (the
"Company") audited financial statements for the year ended December 31, 1998 and
the financial statements and notes thereto included in the Tricom Pictures &
Productions, Inc. ("Tricom") audited financial statements for the year ended
December 31, 1998.
2. SIGNIFICANT EVENTS
- ----------------------
On February 9, 1999, the Company entered into an agreement to merge
(the "Merger Agreement") with Tricom, a privately held Florida corporation,
engaged in the marketing, production and distribution of television programming,
into a wholly-owned subsidiary. The stockholders of Tricom; three of whom are
Executive Officers of the Company and owned 71.0% collectively of the common
stock of the Company (85% of Tricom) and five (remaining) stockholders
collectively owned 5.6% of the Company (15% of Tricom). Under the terms of the
Merger Agreement, the Tricom stockholders exchanged their shares at a ratio of
100,000 to 1 for a total of 10 million shares. As a result of the merger, the
Executive Officers of the Company collectively owned 83.1% of the common stock
of the Company and the remaining five (former Tricom) stockholders owned 13.7%
of the common stock of the Company. As both companies were under common control,
the combination of the two companies is deemded to be purchase and accounted for
"as if" a pooling of interests, whereby the combined assets and liabilities are
recorded on an historical basis. Additionally, the transaction is recorded as if
it occurred as of January 1, 1999. Accordingly, the Consolidated Statement of
Operations for the three months ended March 31, 1999 included the operations of
both companies since January 1, 1999.
During the period of January 15, 1999 through April 6, 1999, the
Company issued 1,000,800 shares of common stock to 29 investors for gross
proceeds of one million dollars in connection with an offering pursuant to Rule
504 of Regulation D of the Securities Act of 1933 as ammended.
3. SUBSEQUENT EVENTS
- ---------------------
On April 1, 1999, the Company issued options to Executive Officers and
nine employees (as an inducement to remain with the Company) to purchase 850,000
shares of common stock of the Company. The options (800,000) issued to the
Executive Officers vested upon issuance and were issued at an exercise price
equal to the fair market value on the date of grant. The options issued to
employees (50,000) vested upon completion of 24 months of continuous service
from the date of grant and were issued at an exercise price at less than fair
market value. The compensation expense recorded on the date of grant
approximated $68,000. All options expire on March 31, 2004.
During the period of April 6, 1999 through April 18, 1999, the Company
issued 100,000 shares of its common stock, in aggregate, to two attorneys and
two consultants for professional services to be rendered over a period ranging
from one to four years from the respective dates of issuance. The aggregate
market value of the issued shares based on their date of issuance was $244,000.
F - 16
<PAGE>
4. RECAPITALIZATION
- --------------------
On February 23, 1999, the Company affected a 1 for 10 reverse stock
split. All outstanding shares, and per share amounts included in the
accompanying financial statements have been retroactively adjusted to reflect
the reverse stock split.
5. NET INCOME PER SHARE
- -------------------------
Net income per share has been computed by dividing net income by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the periods, retroactively adjusted to reflect the reverse
stock split.
F - 17
<PAGE>
INDEPENDENT AUDITORS' REPORT
March 5, 1999
To the Board of Directors
Tricom Pictures and Productions, Inc.
Pompano Beach, Florida
We have audited the accompanying balance sheets of Tricom Pictures and
Productions, Inc. as of December 31, 1998 and 1997, and the related statements
of operations, stockholders' deficit and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tricom Pictures and
Productions, Inc. as of December 31, 1998 and 1997 and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ Feldman Sherb Ehrlich & Co., P.C.
Feldman Sherb Ehrlich & Co., P.C.
Certified Public Accountants
New York, New York
F - 18
<PAGE>
TRICOM PICTURES AND PRODUCTIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
------------- ------------
ASSETS
---------------
CURRENT ASSETS
<S> <C> <C>
Cash .......................................................... $ 41,802 $ 87,903
Accounts receivable, net of allowance for doubtful accounts of
$205,918 at December 31, 1998 and $0 at December 31, 1997.... 285,343 927,960
Advances from related party ................................... 87,000 -0-
Prepaid and other current assets .............................. 55,412 -0-
----------- ------------
TOTAL CURRENT ASSETS ..................................... 532,923 1,015,863
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net ........................ 219,642 278,343
NOTE RECEIVABLE - RELATED PARTY................................... 250,000 -0-
OTHER ASSETS ..................................................... 23,423 33,356
----------- ------------
Total assets............................................. $ 1,025,988 $ 1,327,562
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES
Cash overdraft- only for one bank.............................. $ 97,941 $ -0-
Accounts payable and accrued expenses ......................... 161,832 242,704
Due to related party........................................... 19,099 -0-
Deferred income taxes payable.................................. 924,000 190,000
Capital lease obligations- current portion..................... 29,134 60,516
Deferred revenue .............................................. 1,376,662 3,860,691
----------- ------------
TOTAL CURRENT LIABILITIES ............................... 2,608,668 4,353,911
CAPITAL LEASE OBLIGATIONS......................................... 20,465 37,239
STOCKHOLDERS' DEFICIT
Common Stock- no par, 200 shares authorized, 100 shares issued
and outstanding at December 31, 1998 and 1997................ 100 100
Additional paid-in capital .................................... 314,233 -0-
Accumulated deficit ........................................... (1,854,145) (3,064,588)
----------- ------------
Total stockholders' deficit.............................. (1,603,145) (3,063,588)
----------- ------------
Total liabilities and stockholders' deficit.............. $ 1,025,988 $ 1,327,562
=========== ============
</TABLE>
See Notes to Financial Statements
F - 19
<PAGE>
<TABLE>
<CAPTION>
TRICOM PICTURES AND PRODUCTIONS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICITS
Years Ended December 31,
-----------------------------
1998 1997
------------- -------------
<S> <C> <C>
REVENUES ...................................... $ 6,485,900 $ 7,123,683
COST OF SALES ................................. 1,496,452 2,591,770
------------ ------------
GROSS PROFIT ............................. 4,589,448 4,531,913
EXPENSES
Selling ................................. 405,422 409,433
General and administrative .............. 2,239,583 4,036,790
------------ ------------
2,645,005 4,446,223
------------ ------------
OPERATING INCOME............................... 1,944,443 85,690
PROVISION FOR INCOME TAXES..................... 734,000 190,000
------------ ------------
NET INCOME (LOSS).............................. 1,210,443 (104,310)
ACCUMULATED DEFICIT-beginning of year.......... (3,064,588) (2,960,278)
------------ ------------
ACCUMULATED DEFICIT-end of year................ $ (1,854,145) $ (3,064,588)
============ ============
</TABLE>
See Notes to Financial Statements
F - 20
<PAGE>
<TABLE>
<CAPTION>
TRICOM PICTURES AND PRODUCTIONS, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31,
-----------------------------
1998 1997
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss)/income................................... $ 1,210,443 $ (104,310)
------------ -------------
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation and amortization ................ 91,662 77,460
Deferred income taxes............ ............ 734,000 190,000
Changes in assets and liabilities...................
Decrease in accounts receivable ................. 579,251 536,323
Increase in advances to related parties.......... (87,000) -0-
Decrease (increase) in prepaid and other current
assets ......................................... (55,412) 9,750
Decrease (increase) in other assets ............. 9,933 (730)
Increase (decrease) in accounts payable and
accrued expenses................................ (80,872) 98,111
(Decrease) in deferred revenue .................. (2,484,029) (703,029)
------------ -------------
Total Adjustments ............................ (1,292,467) 207,885
------------ -------------
NET CASH (USED IN) PROVIDED BY OPERATIONS.............. (82,024) 103,575
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................... (32,961) (97,515)
------------ -------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES ........... (32,961) (97,515)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in cash overdraft.......................... 97,941 -0-
Repayment of capital lease obligations.............. (48,156) (50,480)
Repayment to shareholder............................ -0- (10,000)
Advances from related party......................... 19,099 -0-
------------ --------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES ....... 68,884 (60,480
------------ --------------
NET CASH DECREASE...................................... (46,101) (54,420)
CASH- beginning of year ............................... 87,903 143,323
------------ -------------
CASH- end of year ..................................... $ 41,802 $ 87,903
============ =============
</TABLE>
See Notes to Financial Statements
F - 21
<PAGE>
<TABLE>
<CAPTION>
TRICOM PICTURES AND PRODUCTIONS, INC.
STATEMENTS OF CASH FLOWS (continued)
Years Ended December 31,
-----------------------------
1998 1997
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
<S> <C> <C>
Cash paid during the year for interest .................. $ 9,815 $ 10,981
======== ============
Non-cash investing activities:
Sale of marketing division from company held under
common control for note ........................... $250,000 $ -0-
======== ============
Capitalized equipment leases ......................... $ -0- $ 126,296
======== ============
</TABLE>
See Notes to Financial Statements
F - 22
<PAGE>
<TABLE>
TRICOM PICTURES AND PRODUCTIONS, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
<CAPTION>
Common Stock Additional Total
Number Paid-in Accumulated Stockholders'
of Shares Amount Capital Deficit Deficit
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 100 $ 1,000 $ -0- $ (2,960,278) $ (2,959,278)
Net loss ................. -0- -0- -0- (104,310) (104,310)
------- --------- --------- ------------ ------------
Balance, December 31, 1997 100 1,000 -0- (3,064,588) (3,064,588)
Sale of marketing division -0- -0- 250,000 -0- 250,000
Net income ............... -0- -0- -0- 1,210,443 1,210,443
------- --------- --------- ------------ ------------
Balance, December 31, 1998 100 $ 1,000 $ 250,000 $ (1,854,145) $ (1,603,145)
======= ========= ========= ============ ============
</TABLE>
See Notes to Financial Statements
F - 23
<PAGE>
TRICOM PICTURES AND PRODUCTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1. BUSINESS
- -------------
Tricom Pictures and Productions, Inc. ("The Company") was formed in
1991 as a small advertising and marketing company, the named Alfieri and
Associates. In May of 1994, the Company was reorganized and began operating
under the name of Tricom Pictures and Productions, Inc. the company produces
broadcast quality, educational, entertaining and informative television programs
that are distributed nationally via cable channels, network affiliates and
independent stations nationwide. The Company's programming mission is to educate
and inform its viewers on topics and trends of interest to specific target
markets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------
A. Revenue - A portion of revenue represents revenues from contracts to
produce television programs using the "percentage-of-completion-method"
recognizing revenue relative to the proportionate progress on such
contracts as measured by the ratio which costs incurred by the Company
to date bear to total anticipated costs on each program.
Deferred revenue represents amounts which have been billed and not yet
earned in accordance with this method. Deferred revenue at
December 31, 1998 was $1,376,662. At December 31, 1998 the Company had
additional signed contracts totaling $1,132,000 for which performance
had yet to commence
B. Equipment and Leasehold Improvements - Equipment is carried at cost.
Depreciation and amortization are computed using the straight-line
method over the useful lives of the various assets. Leasehold
improvements are amortized over the lesser of their useful lives or the
lease term.
C. Income taxes - Income taxes are accounted for under Statement of
Financial Accounting Standards No.109, "Accounting for Income Taxes,"
which is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's
financial statements or tax returns.
D. Fair Value of Financial Instruments - The carrying amounts reported
in the balance sheet for cash, receivables, and accounts payable
approximate their fair market value based on the short-term maturity of
these instruments.
E. Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
F. Impairment of long-lived assets - The Company reviews long-lived assets
for impairment whenever circumstances and situations change such
that there is an indication that the carrying amounts may not be
recovered. At December 31, 1998, the Company believes that there has
been no impairment of its long-lived assets.
J. Concentration of Risk - Credit losses, if any, have been provided
for in the financial statements and are based on management's
expectations. The Company's accounts receivable are subject to
potential concentrations of credit risk. The Company does not
believe that it is subject to any unusual or significant risks, in the
normal course of business.
F - 24
<PAGE>
2. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
- -----------------------------------------
Equipment and Leasehold Improvements are as follows:
<TABLE>
<CAPTION>
Estimated Useful December 31, December 31,
Lives 1998 1997
----------------- ------------ ------------
<S> <C> <C>
Furniture and Fixtures ........................ 7-10 Years $ 49,473 $ 40,225
Computer Equipment ............................ 5- 7 Years 104,859 103,832
Office Equipment .............................. 5- 7 Years 117,361 113,769
Leasehold Improvements ........................ 3 Years 18,173 8,208
Vehicles................ ...................... 3 Years 9,130 -0-
Production Equipment .......................... 7 Years 196,182 196,182
--------- ---------
495,178 462,216
Less: Accumulated depreciation and amortization (275,536) (183,873)
========= =========
$ 219,642 $ 278,343
========= =========
</TABLE>
3. COMMITMENTS
- -----------------
Commitments- The Company leases its offices under non-cancelable leases.
Rent expense for the years ended December 31, 1998 and 1997 was $128,288 and
$124,799, respectively. The leases expire in May 2001.
Minimum rental commitments are as follows:
<TABLE>
<CAPTION>
Year Minimum Rental
---- --------------
<S> <C> <C>
1999 $ 119,691
2000 $ 119,691
2001 $ 49,871
</TABLE>
Contingencies- The company is a defendant in various lawsuits and claims in
which in the aggregate seek general and punitive damages approximating $82,000;
these matters arise out of the normal course of business. The company intends
to vigorously defend itself in these actions, and in any event, does not believe
these actions singularly or combined would have a material adverse effect on the
Company's financial statements or business operations.
4. CAPITAL LEASE OBLIGATIONS
- ------------------------------
The Company lease equipment under non-cancelable lease agreements which
expire at various times through the year 2000. Principal payments under these
capitalized lease obligations over their remaining terms are as follows:
<TABLE>
<CAPTION>
Year Annual Payment
---- --------------
<S> <C> <C>
1999 $ 33,111
2000 21,790
---------
54,901
Less: amounts representing interest 5,302
---------
Net present values 49,599
Less: capital lease obligations-current 29,134
---------
Capital Lease Obligation $ 20,465
=========
</TABLE>
F - 25
<PAGE>
5. RELATED PARTY TRANSACTIONS
- -------------------------------
Advances- At December 31, 1997, the Company had advanced $87,000 to a
related party which is 67% owned by two of the Executive Officers of the
Company; and who own 74% of the Company. The advances are payable on demand. In
January 1999, the Company lent an additional $10,000 at which time the related
party gave the Company a Note for $ 97,000 with interest accruing at the rate of
8% per annum. Payment of interest commences on August 1, 1999 and for 59
consecutive months thereafter and the principal to be paid in full with the last
monthly interest payment.
Sale of marketing division - On July 13, 1998 the Company sold its newly
created marketing division to Site2Shop.Com.Inc.("Shop"), a company 89.9% owned
by the stockholders of the Company, for a note of $250,000. The note bears
interest at 8% per annum and is payable over five years with a balloon payment
in the final month. The sales price exceeded the Company's basis in the assets
transferred by $250,000 which has been included in additional paid-in capital.
Due to Shop- At December 31, 1998, the Company owes $19,099 to Shop.
Included in sales at December 31, 1998, is $353,920 of production fees
charged to Shop in connection with the rendering of production services to Shop.
6. INCOME TAXES
- -----------------
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes ("SFAS No.109"). SFAS
No.109 requires the recognition of deferred tax assets and liabilities for both
the expected impact of differences between the financial statements and tax
basis of assets and liabilities, and for the expected future tax benefit to be
derived from tax loss and tax credit carryforwards. SFAS No. 109 additionally
requires the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. As of December 31, 1998 the Company had a
net deferred tax liabilities of $924,000.
Effective January 1, 1997, the Company's S corporation election was
terminated making it subject to Corporate income taxes.
The provision for income taxes for the years ended December 31, 1998 and 1997
are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Deferred $ 734,000 $ 190,000
=========== ===========
</TABLE>
The major deferred tax liability (asset) items at December 31, 1998 and
1997, respectively, are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Deferred revenue............... $1,174,000 $ 232,000
Net operating loss carryforward (250,000) (42,000)
---------- ----------
$ 924,000 $ 190,000
========== ==========
</TABLE>
F - 26
<PAGE>
The provision for income taxes differs from the amount computed applying the
statutory federal income tax rate to income before income taxes as follows:
<TABLE>
<CAPTION>
Year End December 31,
---------------------
1998 1997
-------- ---------
<S> <C> <C>
Statutory federal income tax rate............ 34.0 % 34.0 %
State taxes, net of federal tax benefit...... 3.6 3.6
Other........................................ .1 0.0
Effect of change in tax filing status........ 0.0 130.7
------- --------
37.7 % 168.3
Permanent differences........................ (36.7) 53.4
------- --------
0.0 % 221.7 %
======= ========
</TABLE>
7. SUBSEQUENT EVENTS
- ---------------------
On February 5, 1999, the Company was acquired by Site2Shop.Com., Inc., an
entity 76.6% owned by the stockholders of the Company, prior to the
transaction, for 10,000,000 shares of Site2Shop.Com., Inc.'s common stock.
F - 27
<PAGE>
PRO FORMA FINANCIAL DATA
Introduction
The following pro forma financial data is based upon historical
financial statements of Site2Shop.Com, Inc. and has been prepared to illustrate
the effects on such historical financial data of the Tricom Acquisition. The
unaudited pro forma combined statements of operations for the year ended
December 31, 1998 gives effect to the Tricom Acquisition as if it had been
completed as of January 1, 1998 The unaudited pro forma combined balance sheets
give effect to the Tricom Acquisition as if such transaction had been completed
on December 31, 1998. The Tricom Acquisition is reflected using the "as
if" pooling method of accounting.
The pro forma financial data is provided for comparative purposes only
and does not purport to represent the actual financial position or results of
operations of the Company that actually would have been obtained if the Tricom
Acquisition had been consummated on the dates specified, nor is it necessarily
indicative of the results of operations that may be achieved in the future.
The pro forma financial data are based upon certain assumptions and
adjustments described in the notes thereto and should be read in conjunction
therewith. See the financial statements, including the notes thereto, appearing
elsewhere herein.
F - 28
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
For the year ended December 31, 1998
<CAPTION>
Historical Pro Forma
-------------------------- -------------------------
Acquisition
Site2Shop.Com Tricom Adjustments Combined
------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Total Revenue .............................. $ 1,198 $ 6,486 $ (354)(1) $ 7,330
Cost of sales .............................. 725 1,896 (354)(1) 2,267
----------- ------- --------- -------
Gross Profit ........................... 473 4,590 - 5,063
Selling, general and administrative expenses 1,698 2,645 (749)(2) 3,594
----------- ------- --------- -------
Income (loss) from operations .............. (1,225) 1,945 749 1,469
Pro forma taxes (benefit) on income (loss).. - 734 472 (3) 552
----------- ------- --------- -------
Pro forma net income (loss) ................ $ (1,225) $ 1,211 $ 2,254 $ 917
=========== ======= ========= =======
Net income (loss) per common share-basic ... $ (1.57) $ 0.09
=========== =======
Weighted average common shares .............
outstanding- basic ......................... 782,085 10,000,000(4) 10,782,085
=========== ========== ==========
</TABLE>
Notes to Unaudited Pro Forma Combined Statements of Income
- ----------------------------------------------------------
(1) To eliminate intercompany productions fees.
(2) To adjust officers' compensation expense to reflect the terms of the
respective employment agreements as if the terms had been in effect
commencing January 1, 1998.
(3) To adjust effective tax rate to statutory rate (37.6%).
(4) To reflect issuance of 10,000,000 shares of common stock in conjunction
with acquisition of Tricom. The acquisition of Tricom has been treated
as a purchase of companies under common control which will be accounted
for as an "as if" pooling of interests.
F - 29
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
As of December 31, 1998
(in thousands)
<CAPTION>
Historical Pro Forma
------------------------ ---------------------------
Acquisition
Site2Shop.Com Tricom Adjustments(1) Combined
------------- -------- ------------- ---------
<S> <C> <C> <C> <C>
Cash................................... $ 9 $ 42 $ -- $ 51
Accounts receivable- net .............. 285 349 -- 634
Advances to affiliate ................. - 87 -- 87
Due from related party ................ 19 - (19)(2) -
Prepaid and other current assets ...... 81 55 -- 136
-------- -------- ------ --------
Total current assets .................. 394 533 (19) 908
Equipment and leasehold
improvements- net .................. 87 220 -- 307
Note receivable- related party ........ - 250 (250)(2) -
Other assets .......................... 8 23 31
-------- -------- ------ --------
Total assets .......................... $ 489 $ 1,026 $(269) $ 1,246
======== ======== ====== ========
Current liabilities:
Cash overdraft ..................... $ - $ 98 $ -- $ 98
Accounts payable and accrued
expenses ........................ 135 162 -- 297
Due to related party ............... - 19 (19)(2) -
Deferred income taxes payable ...... - 924 -- 924
Capital lease obligations- current
portion ......................... - 29 -- 29
Deferred revenue ................... 1,264 1,377 2,641
-------- -------- ------ --------
Total current liabilities ............. 1,399 2,609 (19) 3,989
Note payable- related party ........... 250 - (250)(2) -
Capital lease obligations, less current
Portion ............................ - 20 -- 20
-------- -------- ------ --------
Total liabilities ..................... 1,649 2,629 (269) 4,009
-------- -------- ------ --------
Stockholders' equity:
Common stock ....................... 1 1 9 (2) 10
Additional paid-in capital ......... 314 250 (9)(2) 555
Accumulated deficit ................ (1,475) (1,854) (3,329)
-------- ------- ------ --------
Total stockholders' equity ............ (1,160) (1,603) - (2,763)
-------- -------- ------ --------
Total liabilities and stockholders'
equity ............................. $ 489 $ 1,026 $ (269) $ 1,246
======== ======== ======== ========
</TABLE>
Notes to Unaudited Pro Forma Combined Balance Sheet
- ---------------------------------------------------
(1) The acquisition of Tricom has been treated as a purchase of companies
under common control which will be accounted for as an "as if" pooling
of interests.
F - 31
<PAGE>
Notes to Unaudited Pro Forma Combined Balance Sheet - continued
- ------------------------------------------------------ -------
(2) To eliminate intercompany payables and receivables.
(3) To reflect the acquisition of Tricom in consideration of the issuance of
10,000,000 shares of common stock.
F - 32
<PAGE>
PART III
<TABLE>
ITEM 2. INDEX TO EXHIBITS
<CAPTION>
Exhibit No. Description of Document
<S> <C>
2 Agreement and Plan of Reorganization
2.1 Merger Agreement of February 9, 1999
3.1 Articles of Incorporation
3.1.2 Certificate of Amendment of Articles of Incorporation
dated August 16, 1996
3.1.3 Certificate of Amendment of Articles of Incorporation dated
June 25, 1998
3.1.4 Certificate of Amendment of Articles of Incorporation dated
February 9, 1999
10 Agreement for Sale of Asset dated July 13, 1998 between
Registrant and Tricom Pictures & Productions, Inc.
10.1 Exclusive Production Agreement dated July 1, 1998 between
Registrant and Tricom Pictures & Productions, Inc.
10.2 Executive Employment Agreement dated June 29, 1998 between
Registrant and Mark Alfieri
10.3 Executive Employment Agreement dated June 29, 1998 between
Registrant and Jack Levine
10.4 Executive Employment Agreement dated August 18, 1998 between
Registrant and Eric Warm
21 Subsidiaries of Registrant
99 Shop T.V., Inc. 1998 Stock Option Plan
99.1 Promissory Note of February 1, 1999
</TABLE>
20
<PAGE>
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.
SITE2SHOP.COM, INC.
Date: May 14, 1999 By:/S/MARK ALFIERI
------------------
Mark Alfieri, President
21
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made this 24th day of June, 1998,
by and between TEE-RIFIK CORP., a Nevada corporation (hereinafter called "the
Company"), and all. of the stockholders (hereinafter called "the Stockholders")
of SHOP T.V. TELEVISION, INC., a Florida corporation (hereinafter called "Shop")
whose names are set forth on Exhibit A attached hereto and by this reference
made a part hereof.
W I T N E S S E T H :
1. Plan of Reorganization. The Stockholders represent and warrant that they are
the holders and beneficial owners of all of the issued and outstanding shares of
the stock of Shop, which consists of one thousand (1,000) shares of the common
stock of Shop. It is the intention of the parties hereto that all of the issued
and outstanding shares of common stock of Shop shall be acquired by the Company
in exchange solely shares of its voting common stock. It in the express
intention of the parties hereto that the said exchange shall be a tax-exempt
transaction fully in compliance with Section 368(a)(1)(B) of the Internal
Revenue Code of 1954, as amended.
2. Exchange of Shares. The Company and the Stockholders agree that all
of the one thousand (1,000) shares of the issued and outstanding common stock of
Shop shall be exchanged with the Company for twelve million five hundred
thousand (12,500,000) shares of the common stock of the Company. A list of all
of the Stockholders showing the number of shares of common stock of Shop held
and owned by each of them together with the number of shares of common stock of
the Company which each of them will receive in exchange is attached hereto as
Exhibit A and by this reference made a part hereof. The Stockholders agree and
acknowledge that the. shares of common stock of the Company which they will
receive are "restricted" securities and that the Stockholders will hold such
shares for investment.
3. Delivery of the Shares. On the Closing Date (as hereinafter
defined), the Stockholders will deliver certificates for or the shares of the
common stock of Shop duly endorsed by the Stockholders in order to make the
Company the sole owner thereof, free and clear of all claims, liens, and
encumbrance, and on the Closing Date delivery of the shares of the common stock
of the Company will be made to the Stockholders as set forth on said Exhibit A
hereto.
4. Representations of the Stockholders. The Stockholders hereby
represent and warrant to the Company and to each other as follows:
a. As of the Closing Date the Stockholders will be the sole
owners of their respective shares of the common stock of Shop appearing
of record in their names, such shares will be free from all claims,
liens, or encumbrances, and the Stockholders will have the unqualified
right to transfer the said shares.
b. The said shares constitute validly issued shares of the
common stock of Shop and are fully paid and nonassessable.
c. Shop is and will be on the Closing Date in good standing as
a Florida corporation.
5. Representations of the Company. The Company represents and warrants
to the Stockholders as follows:
a. As of the Closing Date the total issued and outstanding
shares of the common stock of the Company shall be 2,500,000 shares.
b. As of the Closing Date there will no outstanding options,
stock purchase warrants, or any other securities which are convertible
into or exchangeable for any shares of the stock of the Company of any
class or classes or to which shall be attached or shall appertain any
option, warrant, or other instrument or instruments that shall confer
upon the holder or owner thereof the right to subscribe for or purchase
from the Company any shares of its stock of any class or classes.
c. As of the Closing Date, the shares of the common stock of
the Company to be issued to the Stockholders will constitute the valid
and legally issued shares of the Company, fully paid and nonassessable
and, except for the "restricted" nature of the said securities, will
be legally equivalent in all respects to the common stock of the
Company issued and outstanding as of the date hereof.
d. The officers of the Company are duly authorized to execute
this Agreement and Plan of Reorganization pursuant to, authorization of
the Company's Board of Directors.
e. The Company's financial statements dated December 31, 1996,
December 31, 1997, and May 31, 1998 are true and correct statements for
the periods indicated and fairly present the financial position of
the Company. There are no substantial liabilities, either fixed or
contingent, not reflected in such, financial statements other than
contracts or obligations in the usual course of business; and no
contracts or obligations in the usual course of business are liens
or other liabilities, which, if disclosed, would alter substantially
the financial condition of the Company as reflected in such financial
statements.
f. Since May 31, 1998 there have not been, and prior to the
Closing Date there will not be, any material changes in financial
position of the company except changes arising in the ordinary course
of business.
g. The Company is not involved in any pending litigation or
governmental investigation or proceeding not reflected in such
financial statements or otherwise disclosed in writing the
Stockholders.
h. The Company is and as of the Closing date will be in good
standing as a Nevada corporation.
i. The shares of the common stock of the Shop are being
acquired by the Company for investment and there is no present
intention of the part of the Company to dispose of such shares.
6. Deposit of Stock. All certificates for the shares the common stock
of the Company and Shop will be deposited with the Company's attorney, Patrick
C. Clary, Chartered, as trustee, at its offices located at 520 South Fourth
Street, Suite 360, Las Vegas, Nevada 89101.
7. The Closing. The Closing Date will be at the aforesaid offices of
the Company's said attorney on June 26, 1998 at 12:00 noon, or such other date
and time as the parties hereto may agree.
8. Reverse Splits. The parties hereto acknowledge that prior to the
execution of this Agreement and Plan of Reorganization, the Company approved a
reverse-split in the shares of its issued and outstanding common stock, so that
the total number of the Company issued and outstanding shares of stock have
reduced from 3,750,000 to 2,500,000. After the Closing, the Company will not
effect any additional reverse splits during the period of eighteen (18) months
from the date of this Agreement.
9.Indemnification. The parties hereto agree to and shall indemnify each
other and their respective successors, assigns, heirs, and personal
representatives against any and all damages resulting from any breach of any
representation, warranty, or agreement set forth in this Assignment and
Agreement or the untruth or inaccuracy thereof. The parties hereto further agree
to and shall indemnify each other and their successors, assigns, heirs, personal
representatives against any and all debts, liabilities, choses in action, or
claims of any nature, absolute or contingent, resulting from such breach untruth
or inaccuracy. This indemnity, shall survive the closing of the transactions
contemplated hereunder but shall be limited to liabilities of which one party
hereto shall receive notice in writing from the other party or their or its
successors and assigns within five (5) years from the date hereof. Such party or
their, his or its successors, assigns, heirs and personal representatives shall
notify the other parties or parties of any such liabilities, breach of warranty,
untruth, or inaccuracy of representation or any claim thereof with reasonable
promptness, and such party or parties or their or its successors and assigns
shall have, at their election, the right to compromise or defend any such matter
involving asserted liability through counsel of their own choosing and at their
expense. Such notice and opportunity to compromise or defend, if applicable,
shall be a condition precedent to any liability of such party under indemnity.
In the event that a party hereto undertakes to compromise or defend any such
liability, then such party shall notify the other party or their, his or its
successors, assigns, heirs, and personal representatives shall cooperate with
the other party or parties and their or its counsel in the compromising or
defending against any such liabilities.
10. Survival of Representations. The representations, warranties, and
agreements of the parties hereto contained in this Agreement and Plan of
Reorganization shall, not be discharged or dissolved upon but shall survive the
closing hereunder and shall be unaffected by any investigation made by any party
at any time.
11. Attorneys' Fees. If any litigation is commenced between the parties
hereto, or their representatives concerning any provisions of this Agreement and
Plan of Reorganization or the rights and duties of any person or entity in
relation to it, the party prevailing in such litigation shall be entitled, in
addition to such other relief as may be granted, to a reasonable sum as and for
her or its attorneys' fees in such litigation.
12. Counterparts. This Agreement and Plan of Reorganization may be
executed in counterparts and as executed shall constitute agreement, binding on
both of the parties to it, notwithstanding that both parties are not signatory
to the original or to the same counterpart.
13. Binding Effect. Except as otherwise provided to the contrary, this
Agreement and Plan of Reorganization shall be binding upon and inure to the
benefit of the parties signatory to this Agreement and Plan of Reorganization
and their personal representatives, heirs, successors and assigns.
14. Headings. The headings of the paragraphs of this Agreement and Plan
of Reorganization in no way define, limit, extend or interpret the scope of,
this Agreement and Plan of Reorganization or of any particular paragraph or
section.
15. Additional Documents. Each of the parties hereto agrees to execute
with acknowledgment or affidavit, if required, any and all additional documents
which may be necessary or expedient in consummation of this Agreement and Plan
of Reorganization and the achievement of its purposes.
16. Validity. If any provision of this Agreement and Plan of
Reorganization is held to be invalid the same shall not affect in any, respect
whatsoever the validity of the remainder of this Agreement and Plan of
Reorganization.
17. Interpretation. When the context in which words are used in this
Agreement and Plan of Reorganization indicates that such is the intent, words in
the singular number shall include the plural and in the masculine gender shall
include the feminine and neuter, and vice versa.
18. Applicable Law. It is the intention of the parties that the laws of
the State of Nevada govern the validity of this Agreement and Plan of
Reorganization, the construction of its terms and conditions, and the
interpretation of the rights and duties of the parties.
19. Integrated Agreement. This Agreement and Plan of Reorganization
constitutes the entire understanding and agreement among the parties with
respect to the subject matter of it, and there are no agreements,
understandings, restrictions representations or warranties among the parties
other than those set forth or provided in this Agreement and Plan of
Reorganization.
IN WITNESS WHEREOF the parties hereto have executed this Agreement and Plan of
Reorganization the day and year first hereinabove written.
TEE-RIFIK CORP.
By:/S/AL HERNANDEZ
President
ATTEST:
/S/SERGIO GARCIA
Secretary
SHOP T.V. & TELEVISION, INC.
Attest:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
/S/MARK ALFIERI ............ /S/JACK LEVINE /S/ERIC WARM
- --------------- -------------- -------------
Mark Alfieri ............ Jack Levine Eric Warm
4,845,800 Shares ........... 4,885,950 Shares 1,650,000 Shares
Date: /S/JUNE 25, 1998 ..... Date:/S/JUNE 25, 1998 Date:/S/JUNE 25, 1998
/S/RON SECRETO ............. /S/DOUG CAMPBELL
- -------------- ----------------
Ron Secreto ............. Doug Campbell
262,500 Shares ............. 262,500 Shares
Date:/S/JUNE 25, 1998 ...... Date:/S/JUNE 25, 1998
</TABLE>
<TABLE>
EXHIBIT A
<CAPTION>
Name of Stockholder Shop Shares Tee-Rifik Corp. Shares
- ------------------- ----------- ----------------------
<S> <C> <C>
Mark Alfieri ........................... 381.09 4,845,800
Jack Levine ............................ 384.36 4,885,950
Eric Warm .............................. 145 1,650,000
Ron Secreto ............................ 25 262,500
Doug Campbell .......................... 25 262,500
Cliff Grossman ......................... 15 225,000
Glenn Grossman ......................... 5 75,000
Nick Ferber ............................ 5 75,000
Pat Bates .............................. .66 9,900
Jim Schneider .......................... .66 9,900
Wayne Gill ............................. .66 9,900
Mike Harper ............................ .33 4,950
E.W. Bostain ........................... .66 9,900
Louis Alfieri, Sr ...................... .66 9,900
Adeline Alfieri ........................ .66 9,900
Albert Alfieri ......................... .66 9,900
Louis Alfieri, Jr ...................... .66 9,900
Richard Alfieri ........................ .66 9,900
Elias Eade, Jr ......................... .66 9,900
Ed Eade ................................ .66 9,900
Paul Eade .............................. .66 9,900
Paula Eade ............................. .66 9,900
Michele Argentieri ..................... .66 9,900
Pierre Eade ............................ .66 9,900
Andrew Brief ........................... .66 9,900
Michael Levine ......................... 1.5 22,500
Gerald Levine .......................... 1.5 22,500
Beth Lerner ............................ .66 9,900
-------- -----------
TOTAL: ................................. 1,000.00 12,500,000
</TABLE>
======== ===========
MERGER AGREEMENT
THIS MERGER AGREEMENT is made this 9th day of February, 1999, by and
between Site2Shop.Com, Inc., a Nevada corporation (hereinafter called the
"Company"), and all of the stockholders (hereinafter called the "Stockholders")
of Tricom, Inc., a Florida corporation (hereinafter called "Tricom") whose names
are set forth on Exhibit A attached hereto and by this reference made apart
hereof.
W I T N E S S E T H :
1.Plan of Merger. The Stockholders represent and warrant that they
are the holders and beneficial owners of all of the issued and outstanding
shares of the stock of Tricom, which consists of one hundred (100) shares of the
common stock of Tricom. It is the intention of the parties hereto that all of
the issued and outstanding shares of common stock of Tricom shall be acquired by
the Company in exchange for solely shares of its voting common stock. It is the
express intention of the parties hereto that the said exchange shall be a
tax-exempt transaction fully in compliance with Section 368 (a) (1) (B) of the
Internal Revenue Code of 1954, as amended.
2. Exchange of Shares. The Company and the Stockholders agree that
all of the one hundred (100) shares of the issued and outstanding common stock
of Tricom shall be exchanged with the Company for one hundred million
(100,000,000) shares of the common stock of the Company. A list of all of the
Stockholders showing the number of shares of common stock of Tricom held and
owned by each of them together with the number of shares of common stock of the
Company which each of them will receive in exchange is attached hereto as
Exhibit A and by this reference made a part hereof. The Stockholders agree and
acknowledge that the shares of common stock of the Company, which they will
receive, are "restricted" securities and that the Stockholders will hold such
shares for investment.
3. Delivery of the Shares. On the Closing Date (as hereinafter
defined), the Stockholders will deliver certificates for the shares of the
common stock of Tricom duly endorsed by the Stockholders in order to make the
Company the sole owner thereof, free and clear of all claims, liens, and
encumbrance, and on the Closing Date delivery of the shares of the common stock
of the Company will be made to the Stockholders as set forth on said Exhibit A
hereto.
4. Representations of the Stockholders. The Stockholders hereby
represent and warrant to the Company and to each other as follow:
a. As the Closing Date, the Stockholders will be the sole owners
of their respective shares of the common stock of Tricom
appearing of record in their names, such shares will be free from
all claims, liens, or encumbrances, and the Stockholders will
have the unqualified right to transfer the said shares.
b. The said shares constitute validly issued shares of the common
stock of Tricom and are fully paid and nonassessable.
c. Tricom is and will be on the Closing Date in good standing as
a Florida corporation.
5. Representations of the Company. The Company represents and warrants
to the Stockholders as follows:
a. As of the Closing Date, the total issued and outstanding
shares of the common stock of the Company shall be 14,529,000
shares.
b. As of the Closing Date, the shares of the common stock of the
Company to be issued to the Stockholders will constitute the
valid and legally issued shares of the Company, fully paid and
nonassessable and, except for the "restricted" nature of the said
securities, will be legally equivalent in all respects to the
common stock of the Company issued and outstanding as of the date
hereof.
c. The officers of the Company are duly authorized to execute
this Merger Agreement pursuant to authorization of the Company's
Board of Directors.
d. The Company's financial statements dated December 31, 1998 are
true and correct statements for the period indicated and fairly
present the financial position of the Company. There are no
substantial liabilities, either fixed or contingent, not
reflected in such financial statements other than contracts or
obligations in the usual course of business; and no contracts or
obligations in the usual course of business are liens or other
liabilities, which, if disclosed, would alter substantially the
financial condition of the Company as reflected in such financial
statements.
e. Since December 31, 1998 there have not been, and prior to the
Closing Date there will not be, any material changes in the
financial position of the Company except changes arising in the
ordinary course of business.
f. The Company is not involved in any pending litigation or
governmental investigation nor proceeding not reflected in such
financial statements or otherwise disclosed in writing to the
Stockholders.
g. The Company is and as of the Closing Date will be in good
standing as a Nevada corporation.
h. The shares of the common stock of the Tricom shares are being
acquired by the Company for investment and there is no present
intention of the part of the Company to dispose of such shares.
6. Deposit of Stock. All certificate for the shares the common stock
of the Company and Tricom will be deposited with the Company's attorney, A.
Wayne Gill, as trustee, at its offices located at 2001 West Sample Road, Suite
301, Pompano Beach, Florida, 33064.
7. The Closing. The Closing Date will be at the aforesaid offices of
the Company's said attorney on March 8, 1999 at 12:00 noon, or such other date
and time as the parties hereto may agree.
8. Reverse Splits. The parties hereto acknowledge that prior to the
execution of the Merger Agreement, the Company approved a 10:1 reverse-split in
the shares of its issued and outstanding common stock, including those shares
issued in connection with this Merger Agreement, so that the total number of the
Company issued and outstanding shares of stock after the reverse split have
reduced from 114,529,000 to 11,452,900.
9. Indemnification. The parties hereto agree to and shall indemnify
each other and their respective successors, assigns, heirs, and personal
representatives against any and all damages resulting from any breach of any
representation, warranty, or agreement set forth in this Agreement or the
untruth or inaccuracy thereof. The parties hereto further agree to and shall
indemnify each other and their successors, assignees, heirs, and personal
representatives against any and all debts, liabilities, choses in action, or
claims of any nature, absolute or contingent, resulting from such breach,
untruth or inaccuracy. This indemnity shall survive the closing of the
transactions contemplated hereunder but shall be limited to liabilities of which
one party hereto shall receive notice in writing from the other party or their
or its successors and assignees within five (5) years from the date hereof. Such
party or their, his or its successors, assignees, heirs and personal
representatives shall notify the other parties or parties of any such
liabilities, breach of warranty, untruth, or inaccuracy of representation or any
claim thereof with reasonable promptness, and such party or parties or their or
its successors and assigns shall have, at their election, the right to
compromise or defend any such matter involving asserted liability through
counsel of their own choosing and at their expense. Such notice and opportunity
to compromise or defend, if applicable, shall be a condition precedent to any
liability of such party under this indemnity. In the event that a party hereto
undertakes to compromise or defend any such liability, then such party shall
notify the other party or their, his or its successors, assigns, heirs, and
personal representatives shall cooperate with the other party or parties and
their or its counsel in the compromising or defending against any such
liabilities.
10. Survival of Representations. The representations, warranties, and
agreements of the parties hereto contained in this Merger Agreement shall not be
discharged or dissolved upon but shall survive the closing hereunder and shall
be unaffected by any investigation made by any party at any time.
11. Attorneys' Fees. If any litigation is commenced between the
parties hereto or their representatives concerning any provision of this Merger
Agreement or the rights and duties of any person or entity in relation to it,
the party prevailing in such litigation shall be entitled, in addition to such
other relief as may be granted, to a reasonable sum as and for her or its
attorneys' fees in such litigation.
12. Counterparts. This Merger Agreement may be executed in
counterparts and as executed shall constitute agreement, binding on both of the
parties to it, notwithstanding that both parties are not signatory to the
original or to the same counterpart.
13. Binding Effect. Except as otherwise provided to the contrary, this
Merger Agreement shall be binding upon and inure to the benefit of the party's
signatory to this Merger Agreement and their personal representatives, heirs,
successors and assigns.
14. Headings. The headings of the paragraphs of this Merger Agreement
in no way define, limit, extend or interpret the scope of this Merger Agreement
or of any particular paragraph or section.
15. Additional Documents. Each of the parties hereto agrees to execute
with acknowledgment or affidavit, if required, any and all additional documents
which may be necessary or expedient in the consummation of this Merger Agreement
and the achievement of its purposes.
16. Validity. If any provision of this Merger Agreement is held to be
invalid, the same shall not affect in any respect whatsoever the validity of the
remainder of this Merger Agreement.
17. Interpretation. When the context in which words are used in this
Merger Agreement indicates that such is the intent, words in the singular number
shall include the plural and in the masculine gender shall include the feminine
and neuter, and vice versa.
18. Applicable Law. It is the intention of the parties that the laws
of the State of Florida govern the validity of this Merger Agreement, the
construction of its terms and conditions, and the interpretation of the rights
and duties of the parties.
19. Integrated Agreement. This Merger Agreement constitutes the entire
understanding and agreement among the parties with respect to the subject matter
of it, and there are no agreement, understandings, restrictions, representations
or warranties among the parties other than those set forth or provided in this
Merger Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Merger Agreement the
day and year first hereinabove written.
Site2Shop.Com, Inc.
By:/S/Mark Alfieri
------------------
President
ATTEST:
/S/Mark Weicher
Tricom Pictures and Productions, Inc.
By:/S/Jack Levine
-----------------
Vice President
ATTEST:
/S/Bonnie Harrison
<TABLE>
EXHIBIT A
<CAPTION>
Site2Shop.Com.,Inc.
Name of Stockholder Tricom Shares Shares
- ------------------- ------------ ----------------------
<S> <C> <C> <C>
Mark Alfieri(1)......................... 37.025 3,702,500
Jack Levine (2)......................... 37.025 3,702,500
Eric Warm .............................. 10.950 1,095,000
Ron Secreto ............................ 5.000 500,000
Doug Campbell .......................... 5.000 500,000
Cliff Grossman ......................... 3.000 500,000
Glenn Grossman ......................... 1.000 100,000
Nick Ferber ............................ 1.000 100,000
------- ----------
Total 100.000 10,000,000
======= ==========
</TABLE>
(1)- The shares issued by Site2Shop.Com., Inc. in exchange for Mr. Alfieri's
Tricom shares were issued in the name of The Alfieri-Eade Family Limited
Patnership #1 of which Mr. Alfieri is the general partner.
(2)- The shares issued by Site2Shop.Com., Inc. in exchange for Mr. Levine's
Tricom shares were issued in the name of The Jack Alan Levine Family
Limited Partnership #1 of which Mr. Levine is the general partner.
F I L E D
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
AUG 0 1, 1990
JANICE SUE DEL PAPA SECRETARY OF STATE
/S/JANICE SUE DEL PAPA
ARTICLES OF INCORPORATION
OF
WOODIE III, INC.
KNOW ALL MEN BY THESE PRESENTS:
We, the undersigned, natural persons of the age of 21 years, or more,
acting as incorporators of a corporation under the Nevada Business Corporation
Act, adopt the following Articles of Incorporation for such corporation:
ARTICLE I - NAME
The name of the Corporation shall be Woodie III, Inc.
ARTICLE II - DURATION
The period of its duration shall be perpetual, unless dissolved or
terminated according to law.
ARTICLE III - CORPORATE PURPOSES
The general purposes and objects for which the corporation is organized
are:
a. The primary purpose of the corporation is to engage in the activity
of general business, investments, research & development, manufacturing and real
estate development.
b. To do each and every thing necessary, suitable or proper for the
accomplishment of any of the purposes or the attainment of anyone or more of the
subjects herein enumerated, or which may at anytime appear conducive to or
expedient for protection or benefit of this corporation, and to do said acts as
fully and to the same extent as natural persons might, or could do, in any part
of the world as principals, agents, partners, trustees or otherwise, either
alone or in conjunction with any other person, association or corporation.
c. The foregoing clauses shall be construed both as objects and powers
and shall not be held to limit or restrict in any manner the general powers
of the corporation and the enjoyment and exercise thereof as conferred by the
laws of the State of Nevada; and it is the intention that the purposes, objects
and powers specified in each of the paragraphs shall be considered as
independent objects and powers.
ARTICLE IV - SHARES OF STOCK
The aggregate number of shares which the corporation shall have
authority to issue is 5,000,000 shares of common stock at par value of $0.001
per share, or a total capitalization of $5,000.00.
There shall be no cumulative voting, and all pre-emptive rights are
denied. Each share shall entitle the holder thereof to one vote at all meetings
of the stockholders.
Stockholders shall not be liable to the corporation or its creditors
for any debts or obligations of the corporation.
ARTICLE V - STOCK RESTRICTIONS
All shares of stock in the company are assignable and any stockholder
may sell, assign and transfer his shares and certificates of stock at pleasure
except that no such transfer, sale or assignment shall be valid unless and until
it shall have been entered upon the books of the company and the old certificate
or certificates shall have been surrendered for cancellation to the secretary
and a new certificate or certificates issued in lieu of the same.
ARTICLE VI - COMMENCING BUSINESS
The corporation will not commence business until consideration of the
value of at least One Thousand Dollars (1,000.00) has been received for the
issuance of shares.
ARTICLE VII - REGISTERED AGENT AND OFFICE
The name and post office address of its initial registered agent is
David Meadow, 6221 Bullion St., Las Vegas, NV 89103.
The post office address of its initial principal office is 6221 Bullion
St., Las Vegas, NV 89103.
ARTICLE VIII - DIRECTORS
That the number of directors of this corporation, their qualifications,
terms of office and the time and manner of their election, removal and
resignation shall be as follows:
The number of directors shall not be less than three (3) nor
more than seven (7), the exact number within such limits to be
determined in the manner prescribed by the by-laws.
Directors shall be elected at the annual meeting of the
stockholders of this corporation and shall serve for one (1)
year and until their successors shall have been duly elected
and qualified.
A majority of the entire number of directors, but not less
than (2), shall be necessary to form a quorum of the board of
directors, authorized to transact the business and exercise
the corporate powers of the corporation.
Such officers shall consist of:
(a) President;
(b) One or more Vice Presidents as shall be provided by
the bylaws or the board of directors;
(c) A Secretary:
(d) A Treasurer - may be held by officers who concurrently
hold another office.
Such officers shall be elected annually by the board of
directors and shall serve for one (1) year and until their
successors shall have been duly elected and qualified.
Any officer may be removed by vote of a majority of the board of
directors or in such other manner as may be prescribed in the
by-laws.
ARTICLE IX
That the following named person, parties hereto, shall be the directors
and officers of this corporation from the date hereof and until their successors
shall have been elected and qualified:
PRESIDENT & CHAIRMAN OF THE BOARD: Woody Porter
709 North Main St.
Las Vegas, NV 89101
VICE PRESIDENT & DIRECTOR: Jeff W. Bradley
3438 East Hacienda # B
Las Vegas, NV 89119
SECRETARY/TREASURER & DIRECTOR: David Meadow
6221 Bullion St.
Las Vegas, NV 89103
ARTICLE X - SHAREHOLDER LIABILITY
That the private property of the stockholders of this corporation shall
not be liable for the debts or obligations of the corporation.
ARTICLE XI - INCORPORATORS
The name and address of each incorporator is:
Woody Porter
709 North Main St.
Las Vegas, NV 89101
Jeff W. Bradley
1438 East Hacienda #B
Las Vegas, NV 89119
David Meadow
6221 Bullion St.
Las Vegas, NV 8910
ARTICLE XII - 1244 STOCK
Shares of stock of this corporation authorized and issued pursuant to
these Articles of Incorporation within two (2) years from the date of
incorporation are, for the purpose of the Internal Revenue Code, authorized and
issued in compliance with and as prescribed by Section 1244 of the Internal
Revenue Code of 1954, as amended shall be known as "Section 1244 Stock".
ARTICLE XIII - DIRECTORS' AND OFFICERS' CONTRACTS
No contract or other transaction between this corporation and one or
more of its directors or any other corporation, firm, association or entity in
which one or more of its directors are directors or officers are financially
interested shall be either void or voidable because of such relationship or
interest, or because such director or directors, are present at the meeting of
the board of directors or a committee thereof, which authorizes, approves or
ratifies such contracts or transaction, or because his or their votes are
counted for such purpose, if: (a) the fact of such relationship or interest is
disclosed or known to the board of directors or committee which authorizes,
approves or ratifies the contract or transaction by vote or consent sufficient
for the purpose without counting the votes or consents of such interested
director: or (b) the fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent: or, (c) the contract or
transaction is fair and reasonable to the corporation. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the board of directors or committee thereof which authorizes, approves or
ratifies such contract or transaction.
IN WITNESS WHEREOF, the said parties, incorporators hereof, have
hereunto subscribed their names this /S/9TH day of /S/JULY , 1990.
/S/WOODY PORTER
---------------
Woody Porter
/S/JEFF W. BRADLEY
------------------
Jeff W. Bradley
/S/DAVID MEADOWS
----------------
David Meadows
STATE OF NEVADA )
):
COUNTY OF CLARK )
SUBSCRIBED AND SWORN to before me by
This day of /S/9TH day of /S/JULY 1990.
My Commission Expires:
/S/SUSAN OWENS
--------------
Susan Owens
NOTARY PUBLIC
Residing in Las Vegas, Nevada
NOTARY PUBLIC
County of Clark State of Nevada
SUSAN OWENS
My Appointment Expires Aug. 28, 1990
CERTIFICATE OF AMENDMENT
FILED
OF
IN THE OFFICE OF THE
SECRETARY OF. STATE OF THE ARTICLES OF INCORPORATION
STATE OF NEVADA
OF
AUG 2 3 1996
WOODIE III, INC.
On the 16th day of August 1996, pursuant to the Nevada Revised
Statutes, the Annual Meeting of Shareholders representing a majority of the
holders was called. Whereas, there being 1,250,000 common shares validly issued
and outstanding and entitled to vote, shareholders voted either by proxy or in
person 830,375 shares FOR, representing 70% being a majority and 0 shares
against, to amend the Articles of Incorporation of Woodie III, Inc.
Therefore, the Corporation does by these presents Amend its Articles of
Incorporation as follows:
The name of the corporation is changed to TEE-RIFIK CORP.
I Debra Thurman President and Kathryn Councilman Secretary of Woodie,
III, Inc. do hereby swear and affirm that the Certificate of Amendment as
contained herein is true and correct as adopted by a majority of shareholders on
August 16th, 1996, Dated this 20th day of August 20, 1996.
BY:/S/DEBRA THURMAN
-------------------
Debra Thurman, PRESIDENT
BY:/S/KATHRYN COUNCILMAN
------------------------
Kathryn Councilman, SECRETARY
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
The undersigned Notary Public certified, deposes and states that Debra
Thurman and Kathryn Councilman, personally appeared before me and executed the
foregoing on behalf of the Corporation as its President and Secretary, this 20th
day of August, 1996.
/S/DON W PAR
------------
Notary Public in and for said
NOTARY PUBLIC County and State
STATE OF NEVADA
County of Clark
DON W. PARR
Appt. 95-0674-1
My Appointment Expires Oct. 13,1999
FILED
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUN 26 1998
DEAN HELLER, SECRETARY OF STATE
TEE-RIFIK CORP.
Name of Corporation
We the undersigned Alfonso Hernandez, Jr. and
President or Vice President
Sergio Garcia of TEE-RIFIK CORP.
Secretary or Assistant Secretary Name of Corporation
Do hereby certify:
That the board of Directors of said corporation at a meeting duly convened and
held on the 25th day of June, 1998, adopted a resolution to amend the original
articles of incorporation as follows:
Article I is hereby amended to read as follows: The name of the corporation
shall be Shop TV, Inc. The number of shares of the corporation outstanding and
entitled to vote on amendment to the Articles of Incorporation 2,500,00; that
the said change(s) and amendment has been consented to and approved by
majority vote of the stockholders holding at least a majority of each class of
stock and entitled to vote thereon.
/S/AL HERNANDEZ
---------------
President of Vice President
/S/SERGIO GARCIA
----------------
Secretary or Assistant Secretary
State of /S/NEVADA
County of /S/CLARK
On /S/JUNE 25, 1998 personally appeared before me, a Notary Public, /S/AL
HERNANDEZ - SERGIO GARCIA who acknowledge that he/she executed the above
document.
/S/E.V. STAMBRO
---------------
Notary Public
Dean Heller STATE OF NEVADA Telephone 702.687.5203
Secretary or State OFFICE OF THE SECRETARY OF STATE Fax 702.687.3471
101 N. CARSON ST. STE. 3 Web site http://sos.state.nv.us
CARSON CITY, NEVADA 99701-4796 Filing fee:
Certificate of Amendment to Articles of Incorporation
For Profit Nevada Corporations
(Pursuant to NRS 78.385 and 78.390 After Issuance of Stock)
-Remit In Duplicate -
1. Name of corporation: SHOP TV, INC.
2. The articles have been amended as follows (provide article numbers, if
available): The name of the corporation shall be changed to:
SITE2SHOP.COM, INC.
3. The vote by which the stockholders holding shares in the corporation
entitling them to exercise, at least a majority of the voting power, or such
greater proportion of the voting power as may be required in the case of a vote
by classes or series, or as may be required by the provisions of the articles of
incorporation have voted in favor of the amendment is: 63% .
4. Signatures
/S/MARK ALFIERI /S/JACK LEVINE
- --------------- --------------
President or Vice President Secretary or Asst. Secretary
(acknowledgement required) (acknowledgement required)
State of: /S/FLORIDA
County of: /S/BROWARD
This instrument was acknowledged before me on /S/FERUARY 9, 1999 by /S/JACK
LEVINE (Name of Person) as /S/SECRETARY AND /S/MARK ALFIERI AS /S/PRESIDENT
LORETTA A LOMBARDO
NOTARY PUBLIC STATE OF FLORIDA
COMMISSION NO. CC521250
MY COMMISSION EXP. DEC.27, 1999
/S/LORETTA A. LOMBARDO
----------------------
*If any proposed amendment would alter of change any preference or any relative
or other right given to any class or series of outstanding shares, then the
amendment must be approved by the vote, in addition to the affirmative vote
otherwise required, of the holders of shams representing a majority of the
voting power of each class or series affected by the amendment regardless of
limitations or restrictions on the voting power thereof.
IMPORTANT: Failure to include any of the above information and remit the proper
fees may cause this filing to be rejected.
AGREEMENT FOR SALE OF ASSET
THIS AGREEMENT made and entered into by and between TRICOM PICTURES &
PRODUCTIONS, INC., a Florida Corporation, with a usual place of business at 2001
West Sample Road, Suite #101, Pompano Beach, Florida 33064 ("SELLER"), SHOP
T.V., INC., a Nevada Corporation, with a usual place of business at 2001 West
Sample Road, Suite #401, Pompano Beach, Florida 33064 ("BUYER"), all as their
respective interests exist and are herein represented.
WHEREAS, SELLER is a national marketing and sales organization
operating at the aforementioned address; and
WHEREAS, SELLER is the owner of all singular assets (tangible and
intangible) relating to or concerning the National Marketing Division of BUYER
(the "Marketing Division"); and
WHEREAS, SELLER is desirous of selling the Marketing Division to BUYER;
and
WHEREAS, BUYER is desirous of purchasing the Marketing Division from
SELLER on terms as herein contained;
NOW, THEREFORE, for good and valuable consideration and in
consideration of the covenants, agreements, terms, and provisions as herein
contained, mutually agreed by and between the parties as follows:
ARTICLE I: Sale of Assets
SELLER agrees to sell, and BUYER agrees to purchase and acquire all of
the following assets, chattels, and items as owned by, located on, and used in
connection with the Marketing Division from the SELLER:
a. All of the inventory, merchandise and intellectual property
existing as of the date of closing concerning or relating to the
Marketing Division;
b. All tools of the trade, accessories, and appurtenances,
without limiting the generality of the foregoing, used in
connection with the Marketing Division; and
c. All of the goodwill of the SELLER, together with all price lists,
supplier lists, customer lists, secret formulas, and trade secrets
to the extent they exist used in connection with the Marketing
Division.
ARTICLE II: Purchase Price
BUYER agrees to pay SELLER and SELLER agrees to accept as the full
purchase price for all the singular assets to be sold under Article I, supra,
the total purchase price of Two Hundred and Fifty Thousand Dollars
($250,000.00).
ARTICLE III: Payment Of Purchase Price
The purchase price as hereinabove to be determined in accordance with
Article II, supra, shall be paid in the manner following; at the time of sale:
BUYER shall execute a Promissory Note in the sum of Two Hundred and
Fifty Thousand Dollars ($250,000.00) with annual interest thereon at 8% payable
in 60 monthly installments of interest-only payments, concluding in a balloon
principal payment in the sixtieth (60th) month of the loan, all as set forth in
Exhibit "A" (the "Note").
ARTICLE IV: Sale Free and Clear
SELLER agrees that it shall sell said assets free and clear of all
liens, encumbrances, liabilities and claims of parties adverse thereto. SELLER
agrees:
a. That any and all liens, encumbrances, security agreements, tax
liens, liabilities or attachments of record shall be fully
discharged at the time of closing;
b. To indemnify BUYER from any present or future asserted claims
against assets sold to BUYER.
ARTICLE V: SELLER'S Warranties
The SELLER warrants and represents to BUYER with knowledge that the
BUYER will rely on same to enter this transaction, each and all of the
following:
a. That the SELLER owns all and singular assets being sold hereunder,
and has full and marketable title to same; and
b. That there are no known governmental or administrative
proceedings filed against the SELLER which materially affects
this transaction.
ARTICLE VI: Brokers
The parties warrant and represent to each other that there are no
brokers to this transaction and none entitled to commission.
ARTICLE VII: Entire Agreement
This Agreement constitutes the entire and exclusive agreement between
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, both written and
oral, between the parties hereto with respect to such subject matter. This
Agreement may not be modified in whole or in part except by a written instrument
executed by all of the parties hereto.
ARTICLE VIII: Divisibility
If any portion of this Agreement is held to be unreasonable, arbitrary,
or against the public policy, this Agreement shall be considered divisible both
as to time and as to the geographic area, and each month of the specified period
shall be deemed to be a separate period of time. In the event any Court
determines the specified time period or geographic area to be unreasonable,
arbitrary or against public policy, a lesser period of time or geographic area
which is determined to be reasonable, non-arbitrary and not against public
policy may be enforced.
ARTICLE IX: Applicable Law
This Agreement shall be governed for all purposes by the laws of the
State of Florida. Venue for any action to enforce or challenge the Agreement
shall be exclusively in the courts of Broward County, Florida.
ARTICLE X: Section Headings
The section and other headings contain in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
any of the provisions of this Agreement.
ARTICLE XI: Effective Date
The effective date of this Agreement shall be July 13, 1998.
IN WITNESS WHEREOF, EACH OF THE Parties has duly signed this Agreement on the
date noted below.
TRICOM PICTURES, & PRODUCTIONS, INC.
By:/S/JACK LEVINE /S/ERIC WARM
- ----------------- ------------
Jack Levine, Vice President Witness
Date:/S/JANUARY 2, 1999
- -----------------------
SHOP T.V., INC.
By:/S/MARK ALFIERI /S/ERIC WARM
- ------------------ ------------
Mark Alfieri, President Witness
Date:/S/JANUARY 2, 1999
- -----------------------
EXHIBIT A
PROMISSORY NOTE
$250,000.00 July 13, 1998
FOR VALUE RECEIVED, SHOP TV, INC. promises to pay to Tricom Pictures &
Productions, Inc., located at 2001 West Sample Road, Suite 101, Pompano Beach,
Florida, 33064, the sum of $250,000.00 (TWO HUNDRED AND FIFTY THOUSAND DOLLARS
AND NO CENTS) plus interest at the rate of 8% (Eight Percent) per annum.
Interest shall be payable monthly commencing on August 1, 1999 and for 59
consecutive months thereafter on the unpaid principal balance. The principal
shall be paid in lump sum in addition to and with the 60th interest payment.
In the event of default, SHOP TV, INC., agrees to pay all court costs and
attorneys' fees incurred by TRICOM PICTURES & PRODUCTIONS, INC. in order to
enforce and collect payment under this Note.
TRICOM PICTURES & PRODUCTION, INC.
By:/S/JACK LEVINE
- -----------------
Jack Levine, Vice President
Date: /S/JANUARY 2, 1999
- ------------------------
SHOP TV, INC.
By:/S/MARK ALFIERI
- ------------------
Mark Alfieri, President
Date:/S/JANUARY 2, 1999
- -----------------------
EXCLUSIVE PRODUCTION AGREEMENT
THIS EXCLUSIVE PRODUCTION AGREEMENT made and entered into by and between TRICOM
PICTURES & PRODUCTIONS, INC., a Florida Corporation, with a usual place of
business at 2001 West Sample Road, Suite # 101, Pompano Beach, Florida 33064
("TRICOM"), and SHOP T.V. INC., a Nevada Corporation, with a usual place of
business at 2001 West Sample Road, Suite #401 Florida 33064 ("SHOP T.V. INC.")
all as their respective interests exist and are herein represented.
WHEREAS, TRICOM is a national marketing and sales organization specializing in
the production of audio/visual programming for television and operating at the
aforementioned address; and
WHEREAS, TRICOM is the owner of audio/visual production facilities used in
production of television programming, located at the aforementioned address; and
WHEREAS, SHOP T.V. INC. is also in the business of marketing and producing
audio/visual programming for television; and
WHEREAS, SHOP T.V. INC. is desirous of engaging TRICOM as its exclusive
production facility for the production of its television programming; and
WHEREAS, TRICOM is desirous of being the exclusive producer of SHOP T.V. INC.'S
television programming;
NOW, THEREFORE, for good and valuable consideration and in consideration of the
covenants, agreements, terms, and provisions as herein contained, mutually
agreed by and between the parties as follows:
ARTICLE 1: Production of Audio/Visual Television Programming
The parties hereby agree that TRICOM shall have the exclusive right to
the production of all audio/visual television programming created by SHOP T.V.
INC. for a period of five (5) years from the date of this agreement. For the
purposes of this Agreement, production shall encompass:
1. creating audio/video footage containing marketing concepts created
by SHOP T.V. INC. for broadcast on television or other approved
media;
2. obtaining television airtime for approved audio/video footage
containing marketing concepts created by SHOP T.V. INC.; and
3. creating all print advertising for approved audio/video
footage containing marketing concepts created by SHOP T.V. INC.
ARTICLE II: Price
SHOP T.V. INC. agrees to pay TRICOM in advance of TRICOM undertaking
any production work (for each participant with whom SHOP T.V. INC. contracts)
the sum of seven thousand dollars ($7,000.00) per segment, for production
work performed by TRICOM in TRICOM'S production facilities, as indicated in
Article I herein. Any other production work undertaken by TRICOM in behalf of
SHOP T.V. INC. shall be at rates negotiated by the parties.
ARTICLE III: Expenses
The parties agree that SHOP T.V. INC. shall pay for all expenses
related to any production work conducted by TRICOM on location, in behalf of
SHOP T.V. INC. Said expenses shall include, but not be limited to reasonable
travel expenses and location related costs.
ARTICLE IV: Entire Agreement
This Agreement constitutes the entire and exclusive agreement between
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, both written and
oral, between the parties hereto with respect to such subject matter. This
Agreement may not be modified in whole in part except by a written instrument
executed by all of the parties hereto.
ARTICLE V: Divisibility
If any portion of this Agreement is held to be unreasonable, arbitrary
or against public policy, this Agreement shall be considered divisible both as
to time and as to geographic area, and each month of the specified period shall
be deemed to be a separate period of time. In the event any Court determines the
specified time period or geographic area to be unreasonable, arbitrary or
against public policy, a lesser time period or geographic area which is
determined to be reasonable, non-arbitrary and not against public policy may be
enforced.
ARTICLE VI: Applicable Law
This Agreement shall be governed for all purposes by the laws of the
State of Florida. Venue for any action to enforce or challenge the Agreement
shall be exclusively in the courts of Broward County, Florida.
ARTICLE VII: Section Headings
The section and other headings contain in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of any of the
provisions of this Agreement.
ARTICLE VIII: Effective Date
This Agreement shall be effective as of the date of execution by the parties
hereto.
IN WITNESS WHEREOF, EACH OF THE Parties has duly signed this Agreement on the
date first written below.
TRICOM PICTURES & PRODUCTIONS, INC.
By:/S/JACK LEVINE /S/CYNTHIA ROSS
- ----------------- ---------------
Jack Levine, Vice President WITNESS
Date: July 1, 1998
SHOP T.V., INC.
By:/S/MARK ALFIERI /S/BONNIE HARRISON
- ------------------ ------------------
Mark Alfieri, President WITNESS
Date: July 1, 1998
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 29th day of June 1998, (the "Effective Date"), between TEE-RIFIK CORP.
(name to be changed to Shop T.V., Inc.), a Nevada corporation, whose principal
place of business is 1984 North Rainbow, Suite 103, Las Vegas, Nevada 89108 (the
"Company") and MARK ALFIERI an individual whose address is 1460 S.W. 14th Drive,
Boca Raton, Florida 33432 (the "Executive").
RECITALS
A. The Company is a Nevada corporation and is principally engaged in
the business of multimedia sales and marketing (the "Business").
B. The Company desires to employ the Executive and desires to continue
to employ the Executive and the Executive desires to continue in the employ of
the Company.
C. The Company has established a valuable reputation and goodwill in
the Business.
D. The Executive, by virtue of the Executive's employment with the
Company has become familiar with and possessed with the manner, methods, trade
secrets and other confidential information pertaining to the Company's business,
including the Company's customer base.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and the Executive do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
2. Employment. The Company hereby employs the Executive as its
President, and the Executive hereby accepts employment, upon the
terms and conditions hereinafter set forth.
3. Authority and Power During Employment Period.
a. Duties and Responsibilities. During the term of this
Agreement, the Executive shall serve as President of the Company
and shall have general executive operating supervision over the
business and affairs of the Company, its subsidiaries and
divisions, subject to the guidelines and direction of the Board of
Directors of the Company. It is further the intention of the
parties that at all times during the "Term," as hereinafter
defined, of the Agreement, the Executive shall serve as a member of
the Board of Directors of the Company, in accordance with the
Bylaws of the Company.
b. Time Devoted. Throughout the term of the Agreement, the
Executive shall devote substantially all of the Executive's
business time and attention to the business and affairs of the
Company consistent with the Executive's senior executive position
with the Company, except for reasonable vacations and illness or
incapacity, but nothing in the Agreement shall preclude the
Executive from engaging in any business for Tricom Pictures
& Productions, Inc. or any personal business including as a member
of the board of directors of related companies, charitable and
community affairs, provided that such activities do not interfere
with the regular performance of the Executive's duties and
responsibilities under this Agreement.
4. Term. The Term of employment hereunder will commence on the date as
set forth above and terminate three (3) years from the Effective Date,
and such term shall automatically be extended for successive one (1)
year terms thereafter unless (1) the parties mutually agree in writing
to alter or amend the terms of the Agreement; or(2) one or both of the
parties exercises their right, pursuant to Section 6 herein, to
terminate this employment relationship. For purposes of this Agreement,
the Term (the "Term") shall include the initial term and all renewals
thereof.
5. Compensation and Benefits.
a. Salary and Bonus. The Executive shall be entitled to salary
and bonus as set forth on Exhibit A attached hereto.
b. Signing Bonus. Upon execution of this Agreement, Executive
shall receive $125,000.
c. Executive Benefits. The Executive shall be entitled to
participate in all benefit programs of the Company currently
existing or hereafter made available to executives and/or other
salaried employees, including, but not limited to, pension and,
other retirement plans, group life insurance, hospitalization,
surgical and major medical coverage, sick leave, disability and
salary continuation, vacation and holidays, cellular telephone
and all related costs and expenses, long-term disability, and
other fringe benefits.
d. Vacation. During each fiscal year of the Company, the
Executive shall be entitled to reasonable vacation time and to
utilize such vacation as the Executive shall determine; provided
however, that the Executive shall evidence reasonable judgment with
regard to appropriate vacation scheduling. Notwithstanding
the foregoing, employee shall be entitled to four (4) weeks
vacation per year, with unused vacation accruing to the following
year.
e. Business Expense Reimbursement. During, the Term of
employment, the Executive shall be entitled to receive proper
reimbursement for all reasonable, out-of-pocket expenses incurred
by the Executive (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder, provided the Executive properly
accounts therefor.
f. Automobile Expenses. The Company shall provide the Executive
with an automobile allowance not to exceed $1,200.00 per month plus
insurance. The Company shall also pay all reasonable maintenance
of for the automobile that is the subject of the automobile
allowance.
6. Consequences of Termination of Employment.
a. Death. In the event of the death of the Executive during
the Term, salary shall be paid to the Executive's designated
beneficiary, or, in the absence of such designation, to the estate
or other legal representative of the Executive for a period of one
(1) year from and after the date of death.
b. Disability.
(1) In the event of the Executive's disability, as
hereinafter defined, the Executive shall be entitled to
compensation in accordance with the Company's disability
compensation practice for senior executives, including any
separate arrangement or policy covering the Executive, but in
all events the Executive shall continue to receive the
Executive's salary for a period, at the annual rate in
effect immediately prior to the commencement of disability, of
not less than 180 days from the date on which the disability
has been deemed to occur as hereinafter provided below. Any
amounts provided for in this Section 6(b) shall be offset by
other long-term disability benefits provided to the Executive
by the Company.
(2) "Disability," for the purposes of this Agreement, shall
be deemed to have occurred in the event (A) the Executive is
unable by reason of sickness or accident, to perform the
Executive's duties under this Agreement for an aggregate of
180 days in any twelve-month period or (B) the Executive his
a guardian of the person or estate appointed by a court of
competent jurisdiction. Termination due to disability shall
be deemed to have occurred upon the first day of the month
following the determination of disability as defined in the
preceding sentence.
Anything herein to the contrary notwithstanding, if, following a
termination of employment hereunder due to disability as provided
in the preceding paragraph, the Executive becomes reemployed, whether
as an Executive or a consultant to the Company, any salary, annual
incentive payments or other benefits earned by the Executive from such
reemployment shall offset any salary continuation due to the Executive
hereunder commencing with the date of re-employment.
c. Termination by the Company for Cause.
(1) Nothing herein shall prevent the Company from
terminating Employment for "Cause," as hereinafter defined.
The Executive shall continue to receive salary for a period
ending two (2) years after the date of such termination plus
any accrued Bonus through such date of termination. Any rights
and benefits the Executive may have in respect of any other
compensation shall be determined in accordance with the terms
of such other compensation arrangements or such plans or
programs.
(2) "Cause" shall mean and include those actions or events
specified below in subsections (A) through (E) to the extent
the same occur, or the events constituting the same take
place, subsequent to the date of execution of this Agreement:
(A) Committing or participating in an injurious act of fraud,
gross neglect or embezzlement against the Company;
(B)committing or participating in any other injurious act or
omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Company, monetarily or
otherwise; (C) engaging in a criminal enterprise involving
moral turpitude; (D) conviction of an act or acts constituting
a felony under the laws of the United States or any state
thereof, or (E) any assignment of this Agreement by the
Executive in violation of Section 13 of this Agreement. No
actions, events or circumstances occurring or taking place at
any time prior to the date of this Agreement shall in any
event constitute or provide any basis for any termination of
this Agreement for Cause;
(3) Notwithstanding anything else contained in this
Agreement, this Agreement will not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Executive a notice of termination stating
that the Executive committed one of the types of conduct set
forth in this Section 6(c)contained in this Agreement and
specifying the particulars thereof and the Executive shall
be given a thirty (30) day period to cure such conduct, if
possible.
d. Termination by the Company Other than for Cause
(1) The foregoing notwithstanding, the Company may terminate
the Executive's employment for whatever reason it deems
appropriate; provided, however, that in the event such
termination is not based on Cause, as provided in Section 6(c)
above, the Company may terminate this Agreement upon giving
three (3) months' prior written notice. During such three (3)
month period, the Executive shall continue to perform the
Executive's duties pursuant to this Agreement, and the Company
shall continue to compensate the Executive in accordance with
this Agreement The Executive will receive, at the Executive's
option, either (A) a lump sum equal to the "Compensation and
Benefits," as hereinafter defined, for the remaining balance
of the Term of this Agreement, at the then current rate,
reduced to present value, as set forth in Section 280G of the
Internal Revenue Code or (B) for the remaining balance of the
Term of this Agreement from and after the date of any such
termination, the Company shall on the last day of each
calendar month pay to the Executive such "Compensation and
Benefits," which shall be an amount equal to (Y) One Hundred
percent (100%) of the Executive's compensation and benefits
set forth in Section 5, which shall specifically include the
Salary and Executive Benefits (the "Compensation and
Benefits"), on the date of any such termination, divided by
(Z) twelve (12). provided, however, that if (A) there is a
decrease in the Executive's Compensation and Benefits of
more than five (5%) percent prior to termination for any
reason other than for "Cause", and (B) the Executive is
terminated without cause, the Compensation and Benefits shall
be as existed immediately prior to such a decrease. The
Executive will be entitled to continued Compensation and
Benefits coverage and credits as provided in Section 5 or to
reimbursement for the cost of providing the Executive with
comparable benefit coverage during the term in which the
Executive is receiving payments from the Company after
termination pursuant to Section 6(d). Such benefit coverage
will be offset by comparable coverage provided to the
Executive in connection with subsequent employment.
(2) In the event that the Executive's employment with the
Company is terminated pursuant to this Section 6(d),
Section 6(f), Section 6(g) of this Agreement and all
references thereto shall be inapplicable as to the Executive
and the Company.
e. Voluntary Termination. In the event the Executive terminates
the Executive's employment on the Executive's own volition (except
as provided in Section 6(f) and/or Section 6(g)) prior to the
expiration of the Term of this Agreement, including any renewals
thereof, such termination shall constitute a voluntary termination
and in such event the Executive shall be limited to the same rights
and benefits as provided in connection with a termination for Cause
as provided in Section 6(c).
f. Constructive Termination of Employment. If the Executive so
elects, a termination by the Company without Cause under Section
6(d) shall be deemed to have occurred upon the occurrence of one or
more of the following events without the express written consent of
the Executive:
(1) a significant change in the nature or scope of the
authorities, powers, functions, duties or responsibilities
attached to Executive's position as described in Section 3; or
(2) any reduction in the Executive's salary; or
(3) a material breach of the Agreement by the Company, or
(4) a material reduction of the Executive's benefits under
any employee benefit plan, program or arrangement (for
Executive individually or as part of a group) of the Company
as then in effect or as in effect on the effective date of
the Agreement, which reduction shall not be effectuated for
similarly situated employees of the Company; or
(5) failure by a successor company to assume the obligations
under the Agreement.
Anything herein to the contrary notwithstanding, the Executive shall
give written notice to the Board of Directors of the Company that the
Executive believes an event has occurred which would result in a
Constructive Termination of the Executive's employment under this
Section 6(f), which written notice shall specify the particular act or
acts, on the basis of which the Executive intends to so terminate the
Executive's employment, and the Company shall then be given the
opportunity, within fifteen (15) days of its receipt of such notice to
cure said event, provided, however, there shall be no time period
permitted to cure a second or subsequent occurrence under this Section
6(f)(whether such second occurrence be of the same or a different event
specified in subsections (1) through (5) above).
g. Termination Following a Change of Control.
(1) In the event that a "Change in Control" or an "Attempted
Change in Control" as hereinafter defined, of the Company
shall occur at any time during the Term hereof, the Executive
shall have the right to terminate the Executive's employment
under this Agreement upon thirty (30) days written notice
given at any time within one year after the occurrence of such
event, and such termination of the Executive's employment with
the Company pursuant to this Section 6(g)(1), and, in any such
event, such termination shall be deemed to be a Termination
by the Company Other than for Cause and the Executive shall
be entitled to such Compensation and Benefits as set forth in
Subsection 6(h) of this Agreement.
(2) For purposes of this Agreements a "Change in Control" of
the Company shall mean a change in control (A) as set forth in
Section 280G of the Internal Revenue Code or (B) of a nature
that would be required to be reported in response to Item 1 of
the current report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); provided that,
without limitation, such a change in control shall be deemed
to have occurred at such time as:
(A) any "person" other than the Executive, (as such
term is used in Section 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing
fifty percent (50%)or more of the combined voting power
of the Company's outstanding securities then having the
right to vote at elections of directors; or,
(B) the individuals who at the commencement date of
the Agreement constitute the Board of Directors cease
for any reason to constitute a majority thereof unless
the election, or nomination for election, of each new
director was approved by a vote of at least two thirds
of the directors then in office who were directors at
the commencement of the Agreement; or
(C) there is a failure to elect three or more (or such
number of directors as would constitute a majority of
the Board of Directors) candidates nominated by
management of the Company to the Board of Directors; or
(D) the business of the Company for which the
Executive's services are principally performed is
disposed of by the Company pursuant to a partial or
complete liquidation of the Company, a sale of assets
(including stock of a subsidiary of the Company) or
otherwise.
Anything herein to the contrary notwithstanding, this Section 6(g)(2)
will not apply where the Executive gives the Executive's explicit
written waiver stating that for the purposes of this Section 6(g)(2) a
Change in Control shall not be deemed to have occurred. The
Executive's participation in any negotiations or other matters in
relation to a Change in Control shall in no way constitute such a
waiver which can only be given by an explicit written waiver as
provided in the preceding sentence.
An "Attempted Change in Control" shall be deemed to have occurred if
any substantial attempt, accompanied by significant work efforts and
expenditures of money, is made to accomplish a Change in Control, as
described in subparagraphs (A), (B), (C) or (D) above whether or not
such attempt is made with the approval of a majority of the then
current members of the Board of Directors.
(3) In the event that, within twelve (12) months of any
Change in Control of the Company or any Attempted Change in
Control of the Company, the Company terminates the
employment of the Executive under this Agreement, for any
reason other than for Cause as defined in Section 6(c), or the
Executive's employment is constructively terminated as defined
in Section 6(f), then, in any such event such termination
shall be deemed to be a Termination by the Company Other than
for Cause and the Executive shall be entitled to such
Compensation and Benefits as set forth in Subsection 6(d) of
this Agreement.
h. Compensation and Benefits Upon Termination of Executive
Employment. In the event of any termination of Executive's
employment Other than for Cause under Section 6(d), or any
termination of Executive's employment pursuant to Section 6(f) or
Section 6(g), on the effective date of any such termination, the
Executive shall be entitled to receive the following:
(1) All life, disability and health insurance benefits to
which he was entitled to continue to receive thirty (30) days
prior to the Effective Date of the Settlement Agreement, for a
period of two (2) years following the effective date of such
termination; provided that in the Executive's sole discretion,
the Executive may receive the cash equivalent of all or any
part of such life, disability and/or health insurance benefits
from the Company in lieu of receiving such benefits; plus
(2) Compensation equal to three (3) times the Executive's
annual Salary, based upon the greater of the Executive's
Salary (i) immediately prior to the effective date of
termination or (ii) or as of ninety (90) days prior to the
effective date of termination. All Compensation shall be
payable to the Executive bi-weekly; provided that in the
event that the Executive is entitled to receive the
Compensation as a result of a Change in Control, at the
Executive's option, the Executive may receive either (i) a
lump sum equal to the Compensation due to the Executive
pursuant to Section 6(h) reduced to present value, as set
forth in Section 280G of the Internal Revenue Code or
(ii) bi-weekly; plus
(3) The provisions of this Section 6(h) notwithstanding, the
Compensation and Benefits to be received by the Executive
pursuant to this Section 6(h) shall not exceed the amount set
forth in Section 162(m) of the Internal Revenue Code, or its
successor provision.
7. Indemnification. The Executive shall continue to be covered by the
Certificate of Incorporation and/or the Bylaws of the Company with
respect to matters occurring on or prior to the date of termination
of the Executive's employment with the Company, subject to all the
provisions of Nevada and Federal law and the Certificate of
Incorporation and Bylaws of the Company then in effect. Such
reasonable expenses, including attorneys' fees, that may be covered by
the Certificate of Incorporation and/or Bylaws of the Company shall be
paid by the Company on a current basis in accordance with such
provision, the Company's Certificate of Incorporation and Nevada law.
To the extent that any such payments by the Company pursuant to the
Company's Certificate of Incorporation and/or Bylaws may be subject
to repayment by the Executive pursuant to the provisions of the
Company's Certificate of Incorporation or Bylaws, or pursuant to Nevada
or Federal law, such repayment shall be due and payable by the
Executive to the Company within twelve (12) months after the
termination of all proceedings, if any, which relate to such repayment
and to the Company's affairs for the period prior to the date of
termination of the Executive's employment with the Company and as to
which Executive has been covered by such applicable provisions.
8. Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or the
Executive's estate or beneficiaries shall be subject to the withholding
of such amounts, if any, relating to tax and other payroll deductions
as the Company may reasonably determine it should withhold pursuant to
any applicable law or regulation. In lieu of withholding such amounts,
the Company may accept other arrangements pursuant to which it is
satisfied that such tax and other payroll obligations will be
satisfied in a manner complying with applicable law or regulation.
9. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent
postage prepaid by registered or certified mail return receipt
requested, by overnight delivery; by courier; or by confirmed telecopy,
in the case of the Executive to the Executive's last place of business
or residence as shown on the records of the Company, or in the case of
the Company to its principal office as set forth in the first paragraph
of this Agreement, or at such other place as it may designate.
10. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions
hereunder shall not affect its right thereafter to enforce the same,
nor shall a waiver by either party of any breach of any provision
hereof be taken or held to be a waiver of any other preceding or
succeeding breach of any term or provision of this Agreement. No
extension of time for the performance of any obligation or act shall be
deemed to be an extension of time for the performance of any other
obligation or act hereunder.
11. Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all
prior and contemporaneous agreements or understandings among the
parties hereto concerning the Employment Agreement. This Agreement may
be amended, modified, superseded or canceled, and any of the terms,
covenants, representations, warranties or conditions hereof may be
waived, only by a written instrument executed by the parties or in the
case of a waiver, by the party to be charged.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which shall constitute but one agreement.
13. Binding Effective/Assignment. This Agreement shall be binding upon
the parties hereto, their heirs, legal representatives, successors and
assigns. This Agreement shall not be assignable by the Executive but
shall be assignable by the Company in connection with the sale,
transfer or other disposition of its business or to any of the
Company's affiliates controlled by or under common control with the
Company.
14. Governing Law. This Agreement shall become valid when executed and
accepted by Company. The parties agree that it shall be deemed made
and entered into in the State of Florida and shall be governed and
construed under and in accordance with the laws of the State of
Florida. Anything in this Agreement to the contrary notwithstanding,
the Executive shall conduct the Executive's business in a lawful manner
and faithfully comply with applicable laws or regulations of the state,
city or other political subdivision in which the Executive is located.
15. Further Assurances. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to
carry out the intent and purposes of this Agreement.
16. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the
scope or intent of any of the provisions of this Agreement.
17. Survival. Any termination of this Agreement shall not, however,
affect the ongoing provisions of this Agreement, which shall survive
such termination in accordance with their terms.
18. Severability. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section,
subsection, paragraph, sentence, clause, phrase or word or of any
provision of this Agreement shall not affect the validity or
enforceability of the remaining portions thereof.
19. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement the
successful party will be awarded reasonable attorneys' fees at all
trial and appellate levels, expenses and costs.
20. Venue. Company and Executive acknowledge and agree that the U.S.
District for the Southern District of Florida, or if such court lacks
jurisdiction, the 15th Judicial Circuit (or its successor) in and for
Broward County, Florida, shall be the venue and exclusive proper
forum in which to adjudicate any case or controversy arising either,
directly or indirectly, under or in connection with this Agreement and
the parties further agree that, in the event of litigation out of or in
connection with this Agreement in these courts, they will not contest
or challenge the jurisdiction or venue of these courts.
21. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the
document.
THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ ALL OF THE TERMS OF THIS
AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS AND
CONDITIONS.
IN WITNESS WHEREOF, he parties have executed this Agreement as of date set forth
in the last paragraph of this Agreement.
Witness: The Company:
TEE-RIFIK CORP.
/S/ERIC WARM By:/S/JACK LEVINE
- ------------ ------------------
Eric Warm Jack Levine, Vice President
Witness: THE EXECUTIVE
/S/ERIC WARM /S/MARK ALFIERI
- ------------ ---------------
Eric Warm Mark Alfieri
SCHEDULE A
1998 $450,000.00 Base Salary
1999 $250,000.00 Base Salary
<TABLE>
BONUS STRUCTURE
<CAPTION>
Net Income to Company Bonus Payment (1)
------------------------- ------------------
<S> <C> <C>
$1.00 - $250,000.00 No Bonus
$250,000.01 - $350,000.00 A $50,000.00 Bonus
$350,000.01 - $450,000.00 An additional $50,000.00 Bonus
$450,000.01 - $500,000.00 An additional $25,000.00 Bonus
</TABLE>
- ------------------------------------
(1) Bonuses will be proportionate to the Company receiving a minimum bottom line
of $250,000.00 after bonuses paid.
2000 $250,000.00 Base Salary
<TABLE>
BONUS STRUCTURE
<CAPTION>
Net Income to Company Bonus Payment (1)
------------------------- ------------------
<S> <C> <C>
$1.00 - $500,000.00 No Bonus
$500,000.01 - $600,000.00 A $50,000.00 Bonus
$600,000.01 - $700,000.00 An additional $50,000.00 Bonus
$700,000.01 - $750,000.00 An additional $25,000.00 Bonus
</TABLE>
- ----------------------------
(1) Bonuses will be proportionate to the Company receiving a minimum bottom line
of $500,000.00 after bonuses paid.
Witness: The Company:
TEE-RIFIK CORP.
/S/ERIC WARM By:/S/JACK LEVINE
------------ -----------------
Eric Warm Jack Levine, Vice President
Witness: THE EXECUTIVE
/S/ERIC WARM /S/MARK ALFIERI
------------ ---------------
Eric Warm Mark Alfieri
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 29th day of June 1998, (the "Effective Date"), between TEE-RIFIK CORP.
(name to be changed to Shop T.V., Inc.), a Nevada corporation, whose principal
place of business is 1984 North Rainbow, Suite 103, Las Vegas, Nevada 89108 (the
"Company") and JACK LEVINE, an individual whose address is 11330 Timberlodge
Terrace, Boca Raton, Florida 33428 (the "Executive").
RECITALS
A. The Company is a Nevada corporation and is principally engaged in
the business of multimedia sales and marketing (the "Business").
B. The Company desires to employ the Executive and desires to continue
to employ the Executive and the Executive desires to continue in the
employ of the Company.
C. The Company has established a valuable reputation and goodwill in
the Business.
D. The Executive, by virtue of the Executive's employment with the
Company has become familiar with and possessed with the manner,
methods, trade secrets and other confidential information pertaining to
the Company's business, including the Company's customer base.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and the Executive do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
2. Employment The Company hereby employs the Executive as its
President, and the Executive hereby accepts employment, upon the terms
and conditions hereinafter set forth.
3. Authority and Power During Employment Period. .
a. Duties and Responsibilities. During the term of this
Agreement, the Executive shall serve as President of the Company
and shall have general executive operating supervision over the
business and affairs of the Company, its subsidiaries and
divisions, subject to the guidelines and direction of the Board of
Directors of the Company. It is further the intention of the
parties that at all times during the "Term," as hereinafter
defined, of the Agreement, the Executive shall serve as a member of
the Board of Directors of the Company, in accordance with the
Bylaws of the Company.
b. Time Devoted. Throughout the term of the Agreement the
Executive shall devote substantially all of the Executive's
business time and attention to the business and affairs of the
Company consistent with the Executive's senior executive position
with the Company, except for reasonable vacations and illness or
incapacity but nothing in the Agreement shall preclude the
Executive from engaging in any business for Tricom Pictures &
Productions, Inc. or any personal business including as a member of
the board of directors of related companies, charitable and
community affairs, provided that such activities do not interfere
with the regular performance of the Executive's duties and
responsibilities under this Agreement.
4. Term. The Term of employment hereunder will commence on the date as
set forth above and terminate three (3) years from the Effective Date,
and such term shall automatically be extended for successive one
(1) year terms thereafter unless (1) the parties mutually agree in
writing to alter or amend the terms of the Agreement; or (2) one or
both of the parties exercises their right, pursuant to Section 6
herein, to terminate this employment relationship. For purposes of this
Agreement, the Term (the "Term") shall include the initial term and all
renewals thereof.
5. Compensation and Benefits.
a. Salary and Bonus. The Executive shall be entitled to salary
and bonus as set forth on Exhibit A attached hereto.
b. Signing Bonus. Upon execution of this Agreement, Executive
shall receive $125,000.
c. Executive Benefits. The Executive shall be entitled to
participate in an benefit programs of the Company currently
existing or hereafter made available to executives and/or other
salaried employees, including, but not limited to, pension and
other retirement plans, group life insurance, hospitalization,
surgical and major medical coverage, sick leave, disability and
salary continuation, vacation and holidays, cellular telephone and
all related costs and expenses, long-term disability and other
fringe benefits.
d. Vacation. During each fiscal year of the Company, the
Executive shall be entitled to reasonable vacation time and to
utilize such vacation as the Executive shall determine; provided
however, that the Executive shall evidence reasonable judgment with
regard to appropriate vacation scheduling. Notwithstanding the
foregoing, employee shall be entitled to four (4) weeks vacation
per year, with unused vacation accruing to the following year.
e. Business Expense Reimbursement. During the Term of
employment, the Executive shall be entitled to receive proper
reimbursement for all reasonable, out-of-pocket expenses incurred
by the Executive (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder, provided the Executive properly
accounts therefor.
f. Automobile Expenses. The Company shall provide the Executive
with an automobile allowance not to exceed $1,200.00 per month plus
insurance. The Company shall also pay all reasonable maintenance
of for the automobile that is the subject of the automobile
allowance.
6. Consequences of Termination of Employment.
a. Death. In the event of the death of the Executive during the
Term, salary shall be paid to the Executive's designated
beneficiary, or, in the absence of such designation, to the estate
or other legal representative of the Executive for a period of one
(1) year from and after the date of death.
b. Disability.
(1) In the event of the Executive's disability, as
hereinafter defined the Executive shall be entitled to
compensation in accordance with the Company's disability
compensation practice for senior executives, including any
separate arrangement or policy covering the Executive, but
in all events the Executive shall continue to receive
the Executive's salary for a period, at the annual rate in
effect immediately prior to the commencement of disability,
of not less than 180 days from the date on which the
disability has been deemed to occur as hereinafter provided
below. Any amounts provided for in this Section 6(b) shall be
offset by other long-term disability benefits provided to
the Executive by the Company.
(2) "Disability" for the purposes of this Agreement, shall be
deemed to have occurred in the event (A) the Executive is
unable by reason of sickness or accident, to perform the
Executive's duties under this Agreement for an aggregate of
180 days in any twelve-month period or (B) the Executive has a
guardian of the person or estate appointed by a court of
competent jurisdiction. Termination due to disability shall be
deemed to have occurred upon the first day of the month
following the determination of disability as defined in the
preceding sentence.
(3) Anything herein to the contrary notwithstanding if,
following a termination of employment hereunder due to
disability as provided in the preceding paragraph, the
Executive becomes reemployed, whether as an Executive or a
consultant to the Company, any salary, annual incentive
payments or other benefits earned by the Executive from such
reemployment shall offset any salary continuation due to the
Executive hereunder commencing with the date of reemployment.
c. Termination by the Company for Cause.
(1) Nothing herein shall prevent the Company from
terminating Employment for "Cause", as hereinafter defined.
The Executive shall continue to receive salary for a period
ending two (2) years after the date of such termination plus
any accrued Bonus through such date of termination. Any
rights and benefits the Executive may have in respect of any
other compensation shall be determined in accordance with the
terms of such other compensation arrangements or such plans or
programs.
(2) "Cause" shall mean and include those actions or events
specified below in subsections (A) through (E) to the extent
the same occur, or the events constituting the same take
place, subsequent to the date of execution of this Agreement:
(A) Committing or participating in an injurious act of fraud,
gross neglect or embezzlement against the Company;
(B) committing or participating in any other injurious act or
omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Company, monetarily or
otherwise; (C) engaging in a criminal enterprise involving
moral turpitude; (D) conviction of an act or acts constituting
a felony under the laws of the United States or any state
thereof; or (E) any assignment of this Agreement by the
Executive in violation of Section 13 of this Agreement. No
actions, events or circumstances occurring or taking place at
any time prior to the date of this Agreement shall in any
event constitute or provide any basis for any termination of
this Agreement for Cause;
(3) Notwithstanding anything else contained in this Agreement
this Agreement will not be deemed to have been terminated for
Cause unless and until there shall have been delivered to the
Executive a notice of termination stating that the Executive
committed one of the types of conduct set forth in this
Section 6(c) contained in this Agreement and specifying the
particulars thereof and the Executive shall be given a thirty
(30) day period to cure such conduct if possible.
d. Termination by the Company Other than for Cause.
(1) The foregoing notwithstanding, the Company may terminate
the Executive's employment for whatever reason it deems
appropriate; provided, however, that in the event such
termination is not based on Cause, as provided in Section 6(c)
above, the Company may terminate this Agreement upon giving
three (3) months' prior written notice. During such three (3)
month period, the Executive shall continue to perform the
Executives duties pursuant to this Agreement, and the Company
shall continue to compensate the Executive in accordance with
this Agreement. The Executive will receive, at the Executive's
option, either (A) a lump sum equal to the "Compensation and
Benefits," as hereinafter defined, for the remaining balance
of the Term of this Agreement, at the then current rate,
reduced to present value, as set forth in Section 280G of the
Internal Revenue Code or (B) for the remaining balance of the
Term of this Agreement from and after the date of any such
termination, the Company shall on the last day of each
calendar month pay to the Executive such "Compensation and
Benefits" which shall be an amount equal to (Y) One Hundred
percent (100%) of the Executive's compensation and benefits
set forth in Section 5, which shall specifically include the
Salary and Executive Benefits (the "Compensation and
Benefits") on the date of any such termination, divided by
(Z) twelve (12); provided however, that if (A) there is a
decrease in the Executive's Compensation and Benefits of more
than five (5%) percent prior to termination for any reason
other than for "Cause", and (B) the Executive is terminated
without cause, the Compensation and Benefits shall be as
existed immediately prior to such a decrease. The Executive
will be entitled to continued Compensation and Benefits
coverage and credits as provided in Section 5 or to
reimbursement for the cost of providing the Executive with
comparable benefit coverage during the term in which the
Executive is receiving payments from the Company after
termination pursuant to Section 6(d). Such benefit coverage
will be offset by comparable coverage provided to the
Executive in connection with subsequent employment.
(2) In the event that the Executive's employment with the
Company is terminated pursuant to this Section 6(d),
Section 6(f), Section 6(g) of this Agreement and all
references thereto shall be inapplicable, as to the Executive
and the Company.
e. Voluntary Termination. In the event the Executive
terminates the Executive's employment on the Executive's own
volition (except as provided in Section 6(f) and/or Section 6(g))
prior to the expiration of the Term of this Agreement, including
any renewals thereof, such termination shall constitute a voluntary
termination and in such event the Executive shall be limited to
the same rights and benefits as provided in connection with a
termination for Cause as provided in Section 6(c).
f. Constructive Termination of Employment. If the Executive so
elects, a termination by the Company without Cause under
Section 6(d)shall be deemed to have occurred upon the occurrence of
one or more of the following events without the express written
consent of the Executive:
(1) a significant change in the nature or scope of the
authorities, powers, functions, duties or responsibilities
attached to Executive's position as described in Section 3; or
(2) any reduction in the Executive's salary; or
(3) a material breach of the Agreement by the Company, or
(4) a material reduction of the Executive's benefits under
any employee benefit plan, program or arrangement (for
Executive individually or as part of a group) of the Company
as then in effect or as in effect on the effective date of the
Agreement, which reduction shall not be effectuated for
similarly situated employees of the Company; or
(5) failure by a successor company to assume the
obligations under the Agreement.
Anything herein to the contrary notwithstanding the Executive shall
give written notice to the Board of Directors of the Company that the
Executive believes an event has occurred which would result in a
Constructive Termination of the Executive's employment under this
Section 6(f), which written notice shall specify the particular act or
acts on the basis of which the Executive intends to so terminate the
Executive's employment, and the Company shall then be given the
opportunity within fifteen (15) days of its receipt of such notice to
cure said event, provided, however, there shall be no time period
permitted to cure a second or subsequent occurrence under this
Section 6(f)(whether such second occurrence be of the same or a
different event specified in subsections (1) through (5) above)
g. Termination Following a Change of Control.
(1) In the event that a "Change in Control" or an "Attempted
Change in Control" as hereinafter defined, of the Company
shall occur at any time during the Term hereof, the Executive
shall have the right to terminate the Executive's employment
under this Agreement upon thirty (30) days written notice
given at any time within one year after the occurrence of such
event, and such termination of the Executive's employment with
the Company pursuant to this Section 6(g)(1), and, in any such
event, such termination shall be deemed to be a Termination by
the Company Other than for Cause and the Executive shall be
entitled to such Compensation and Benefits as set forth in
Subsection 6(h) of this Agreement.
(2) For purposes of this Agreement, a "Change in Control" of
the Company shall mean a change in control (A) as set forth in
Section 280G of the Internal Revenue Code or (B) of a nature
that would be required to be reported in response to Item 1 of
the current report on Form 8-K, as in effect on the date
hereof pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); provided that,
without limitation, such a change in control shall be deemed
to have occurred at such time as:
(A) any "person", other than the Executive, (as such
term is used in Section 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in
Rule l3d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting
power of the Company's outstanding securities then
having the right to vote at elections of directors; or,
(B) the individuals who at the commencement date of the
Agreement constitute the Board of Directors cease for any
reason to constitute a majority thereof unless the
election, or nomination for election, of each now
director was approved by a vote of at least two
thirds of the directors then in office who were
directors at the commencement of the Agreement; or
(C) there is a failure to elect three or more (or such
number of directors as would constitute a majority of the
Board of Directors) candidates nominated by management of
the Company to the Board of Directors; or
(D) the business of the Company for which the
Executive's services are principally performed is
disposed of by the Company pursuant to a partial or
complete liquidation of the Company, a sale of assets
(including stock of a subsidiary of the Company) or
otherwise.
Anything herein to the contrary notwithstanding this Section 6(g)(2)
will not apply where the Executive gives the Executive's explicit
written waiver stating that for the purposes of this Section 6(g)(2) a
Change in Control shall not be deemed to have occurred. The
Executive's participation in any negotiations or other matters in
relation to a Change in Control shall in no way constitute such a
waiver which can only be given by an explicit written waiver as
provided in the preceding sentence.
An "Attempted Change in Control" shall be deemed to have occurred if
any substantial attempt, accompanied by significant work efforts and
expenditures; of money, is made to accomplish a Change in Control, as
described in subparagraphs (A), (B), (C) or (D) above whether or not
such attempt is made with the approval of a majority of the then
current members of the Board of Directors.
(3) In the event that, within twelve (12) months of any
Change in Control of the Company or any Attempted Change in
Control of the Company, the Company terminates the employment
of the Executive under this Agreement, for any reason other
than for Cause as defined in Section 6(c), or the Executive's
employment is constructively terminated as defined in Section
6(f), then, in any such event, such termination shall be
deemed to be a Termination by the Company Other than, for
Cause and the Executive shall be entitled to such Compensation
and Benefits as set forth in Subsection 6(d) of this
Agreement.
h. Compensation and Benefits Upon Termination of Executive
Employment. In the event of any termination of Executive's
employment Other than for Cause under Section 6(d), or any
termination of Executive's employment pursuant to Section 6(f) or
Section 6(g), on the effective date of any such termination, the
Executive shall be entitled to receive the following:
(1) All life, disability and health insurance benefits to
which he was entitled to continue to receive thirty (30) days
prior to the Effective Date of the Settlement Agreement, for a
period of two (2) years following the effective date of such
termination; provided that in the Executives sole discretion,
the Executive may receive the cash equivalent of all or any
part of such life, disability and/or health insurance benefits
from the Company in lieu of receiving such benefits; plus
(2) Compensation equal to three (3) times the Executive's
annual Salary, based upon the greater of the Executive's
Salary (i) immediately prior to the effective date of
termination or (ii) or as of ninety (90) days prior to the
effective date of termination. All Compensation shall be
payable to the Executive bi-weekly; provided that in the event
that the Executive is entitled to receive the Compensation as
a result of a Change in Control, at the Executive's option,
the Executive may receive either (i) a lump sum equal to the
Compensation due to the Executive pursuant to Section 6(h)
reduced to present value, as set forth in Section 280G of the
Internal Revenue Code or (ii) bi-weekly; plus
The provisions of this Section 6(h) notwithstanding, the Compensation
and Benefits to be received by the Executive pursuant to this
Section 6(h)shall not exceed the amount set forth in Section 162(m) of
the Internal Revenue Code, or its successor provision.
7. Indemnification. The Executive shall continue to be covered
by the Certificate of Incorporation and/or the Bylaws of the Company
with respect to matters occurring on or prior to the date of
termination of the Executive's employment with the Company, subject to
all the provisions of Nevada and Federal law and the Certificate of
Incorporation and Bylaws of the Company then in, effect. Such
reasonable expenses, including attorneys' fees, that may be covered by
the Certificate of Incorporation and/or Bylaws of the Company shall be
paid by the Company on a current basis in accordance with such
provision, the Company's Certificate of Incorporation and Nevada law.
To the extent that my such payments by the Company pursuant to the
Company's Certificate of Incorporation and/or Bylaws may be subject to
repayment by the Executive pursuant to the provisions of the Company's
Certificate of Incorporation or Bylaws, or pursuant to Nevada or
Federal law, such repayment shall be due and payable by the Executive
to the Company within twelve (12) months after the termination of all
proceedings if any, which relate to such repayment and to the Company's
affairs for the period prior to the date of termination of the
Executive's employment with the Company and as to which Executive has
been covered by such applicable provisions.
8. Withholding. Anything to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the Executive
or the Executive's estate or beneficiaries shall be subject to the
withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold
pursuant to any applicable law or regulation. In lieu of withholding
such amounts, the Company may accept other agreements pursuant to
which it is satisfied that such tax and other payroll obligations
will be satisfied in a manner complying with applicable law or
regulation.
9. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent
postage prepaid by registered or certified mail, return receipt
requested; by overnight delivery; by courier; or by confirmed telecopy,
in the case of the Executive to the Executive's last place of business
or residence as shown on the records of the Company, or in the case of
the Company to its principal office as set forth in the first paragraph
of this Agreement, or at such other place as it may designate.
10. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions
hereunder shall not affect its right thereafter to enforce the same,
nor shall a waiver by either party of any breach of any provision
hereof be taken or hold to be a waiver of any other preceding or
succeeding breach of any term or provision of this Agreement. No
extension of time for the performance of any obligation or act shall
be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
11. Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all
prior and contemporaneous agreements or understandings among the
parties hereto concerning the Employment Agreement. This Agreement may
be amended modified, superseded or canceled, and any of the terms,
covenants, representations, warranties or conditions hereof may be
waived, only by a written instrument executed by the parties or, in the
case of a waiver, by the party to be charged.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which shall constitute but one agreement.
13. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and
assigns. This Agreement shall not be assignable by the Executive but
shall be assignable by the Company in connection with the sale,
transfer or other disposition of its business or to any of the
Company's affiliates controlled by or under common control with the
Company.
14. Governing. This Agreement shall become valid when executed and
accepted by Company. The parties agree that it shall be deemed made and
entered into in the State of Florida and shall be governed and
construed under and in accordance with the laws of the State of
Florida. Anything in this Agreement to the contrary notwithstanding,
the Executive shall conduct the Executive's business in a lawful
manner and faithfully comply with applicable laws or regulations of the
state, city or other political subdivision in which the Executive is
located.
15. Further Assurances. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to
carry out the intent and purposes of this Agreement.
16. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the
scope or intent of any of the provisions of this Agreement.
17. Survival. Any termination of this Agreement shall not, however,
affect the ongoing provisions of this Agreement which shall survive
such termination in accordance with their terms.
18. Severability. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section,
subsection, paragraph, sentence, clause, phrase or word or of any
provision of this Agreement shall not affect the validity or
enforceability of the remaining portions thereof.
19. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement,
the successful party will be awarded reasonable attorneys' fees at all
trial and appellate levels, expenses and costs.
20. Venue. Company and Executive acknowledge and agree that the U.S.
District for the Southern District of Florida, or if such court lacks
jurisdiction, the 15th Judicial Circuit (or its successor) in and for
Broward County, Florida, shall be the venue and exclusive proper forum
in which to adjudicate any case or controversy arising either, directly
or indirectly, under or in connection with this Agreement and the
parties further agree that, in the event of litigation arising out of
or in connection with this Agreement in these courts, they will not
contest or challenge the jurisdiction or venue of these courts.
21. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the
document.
THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ ALL OF THE TERMS OF THIS
AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS AND
CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of date set
forth in the first paragraph of this Agreement.
Witness: The Company:
TEE-RIFIK CORP.
/S/ERIC WARM By:/S/MARK ALFIERI
- ------------ ------------------
Eric Warm Mark Alfieri, Chief Executive Officer
Witness: THE EXECUTIVE
/S/ERIC WARM /S/JACK LEVINE
- ------------ --------------
Eric Warm JACK LEVINE
SCHEDULE A
1998 $450,000.00 Base Salary
1999 $250,000.00 Base Salary
<TABLE>
BONUS STRUCTURE
<CAPTION>
Net Income to Company Bonus Payment (1)
------------------------- ------------------
<S> <C> <C>
$1.00 - $250,000.00 No Bonus
$250,000.01 - $350,000.00 A $50,000.00 Bonus
$350,000.01 - $450,000.00 An additional $50,000.00 Bonus
$450,000.01 - $500,000.00 An additional $25,000.00 Bonus
</TABLE>
- ----------
(1) Bonuses will be proportionate to the Company receiving a minimum bottom
line of $250,000.00 after bonuses paid.
2000 $250,000.00 Base Salary
<TABLE>
BONUS STRUCTURE
<CAPTION>
Net Income to Company Bonus Payment (1)
------------------------- ------------------
<S> <C> <C>
$1.00 - $500,000.00 No Bonus
$500,000.01 - $600,000.00 A $50,000.00 Bonus
$600,000.01 - $700,000.00 An additional $50,000.00 Bonus
$700,000.01 - $750,000.00 An additional $25,000.00 Bonus
</TABLE>
- ----------
(1) Bonuses will be proportionate to the Company receiving a minimum bottom line
of $500,000.00 after bonuses paid.
Witness: The Company:
TEE-RIFIK CORP.
/S/ERIC WARM By:/S/MARK ALFIERI
------------ ------------------
Eric Warm Mark Alfieri, Chief Executive Officer
Witness: THE EXECUTIVE
/S/ERIC WARM /S/JACK LEVINE
------------ --------------
Eric Warm Jack Levine
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 18th day of August 1998, (the "Effective Date"), between SHOP TV &
TELEVISION, INC. a Nevada corporation, whose principal place of business is 2001
W. Sample Road, Pompano Beach, Florida 33441 (the "Company") and Eric Warm, an
individual (the "Executive") whose address is 4876 NW 25th Way, Boca Raton,
Florida 33434.
RECITALS
The Company is a Nevada corporation and is principally engaged in the
business of multimedia sales and marketing (the "Business").
A. The Company desires to employ the Executive and desires to continue to
employ the Executive and the Executive desires to continue in the employ of
the Company.
B. The Company has established a valuable reputation and goodwill in the
Business.
C. The Executive, by virtue of the Executive's employment with the Company
has become familiar with and possessed with the manner, methods, trade
secrets and other confidential information pertaining to the Company's
business, including the Company's customer base.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and the Executive do hereby agree as follows:
1. Recitals. The above recitals are true, correct and are herein
incorporated by reference.
2. Employment. The Company hereby employs the Executive as its
Vice President and the Executive Operating Officer hereby accepts
employment, upon the terms and conditions hereinafter set forth.
3. Authority and Power During Employment Period.
a. Duties and Responsibilities. During the term of this
Agreement, the Executive shall serve as Vice President of the
Company and shall have general executive operating supervision over
the business and affairs of the Company, its subsidiaries and
divisions subject: to the guidelines and direction of the Board of
Directors of the Company. It is further the intention of the
parties that at all times during the "Term," as hereinafter
defined, of the Agreement, the Executive shall serve as a member of
the Board of Directors of the Company, in accordance with the
Bylaws of the Company.
b. Time Devoted. Throughout the term of the Agreement, the
Executive shall devote substantially all of the Executive's
business time and attention to the business and affairs of the
Company consistent with the Executive's senior executive position
with the Company, except for reasonable vacations and illness or
incapacity, but nothing in the Agreement shall preclude the
Executive from engaging in any business for Tricom Pictures &
Productions, Inc. or any personal business including as a member of
the board of directors of related companies, charitable and
community affairs, provided that such activities do not interfere
with the regular performance of the Executives duties and
responsibilities under this Agreement.
4. Term. The Term of employment hereunder will commence on the date as
set forth above and terminate three (3) years from the Effective Date,
and such term shall automatically be extended for successive one
(1) year terms thereafter unless (1) the parties mutually agree in
writing to alter or amend the terms of the Agreement; or (2) one or
both of the parties exercises their right pursuant to Section 6
herein, to terminate, this employment relationship. For purposes of
this Agreement, the Term (the "Term") shall include the initial term
and all renewals thereof.
5. Compensation and Benefits
a. Salary and Bonus. The Executive shall be entitled to salary
and bonus as set forth on Exhibit A attached hereto.
b. Executive Benefits. The Executive shall be entitled to
participate in all benefit programs of the Company currently
existing or hereafter made available to executives and/or other
salaried employees, including, but not limited to, pension and
other retirement plans, group life insurance, hospitalization,
surgical and major medical coverage, sick leave, disability and
salary continuation, vacation and holidays, cellular telephone and
all related costs and expenses, long-term disability, and other
fringe benefits.
c. Vacation. During each fiscal year of the Company, the
Executive shall be entitled to reasonable vacation time and to
utilize such vacation as the Executive shall determine; provided
however, that the Executive shall evidence reasonable judgment with
regard to appropriate vacation scheduling. Notwithstanding the
foregoing, employee shall be entitled to four (4) weeks vacation
per year, with unused vacation accruing to the following year.
d. Business Expense Reimbursement. During the Term of employment,
the Executive shall be entitled to receive proper reimbursement
for all reasonable, out-of-pocket expenses incurred by the
Executive (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder, provided the Executive properly
accounts therefor.
e. Automobile Expenses. The Company shall provide the Executive
with an automobile allowance not to exceed $500.00 per month plus
insurance. The Company shall also pay all reasonable
maintenance for the automobile that is the subject of the
automobile allowance.
6. Consequences of Termination of Employment.
a. Death. In the event of the death of the Executive during the
Term, salary shall be paid to the Executive's designated
beneficiary, or, in the absence of such designation, to the estate
or other legal representative of the Executive for a period of one
(1) year from and after the date of death.
b. Disability.
(1) In the event of the Executive's disability, as
hereinafter defined the Executive shall be entitled to
compensation in accordance with the Company's disability
compensation practice for senior executives, including any
separate arrangement or policy covering the Executive, but in
all events the Executive shall continue to receive the
Executive's salary for a period, at the annual rate in effect
immediately prior to the commencement of disability, of not
less than 180 days from the date on which the disability has
been deemed to occur as hereinafter provided below. Any
amounts provided for in this Section 6(b) shall be offset by
other 1ong-term disability benefits provided to the Executive
by the Company.
(2) "Disability" for purposes of this Agreement, shall be
deemed to have occurred in the event (A) the Executive is
unable by reason of sickness or accident, to perform the
Executive's duties under this Agreement for an aggregate of
190 days in any twelve-month period or (B) the Executive has
a guardian or the person or estate appointed by a court of
competent jurisdiction. Termination due to disability shall be
deemed to have occurred upon the first day of the month
following the determination of disability as defined in the
preceding sentence.
Anything herein to the contrary notwithstanding, if, following a
termination of employment hereunder due to disability as provided in
the preceding paragraph, the Executive becomes re-employed, whether as
an Executive or a consultant to the Company, any salary, annual
incentive payments or other benefits earned by the Executive from such
re-employment shall offset any salary continuation due to the Executive
hereunder commencing with the date of re-employment.
c. Termination by the Company for Cause.
(1) Nothing hereunder shall prevent the Company from
terminating Employment for "Cause" as hereinafter defined.
The Executive shall continue to receive salary only for the
period ending twenty (20) days after the date of such
termination plus accrued Bonus through such date of
termination. Any rights and benefits the Executive may have in
respect of any other compensation shall be determined in
accordance with the terms of such other compensation
arrangements or such plans or programs.
(2) "Cause" shall mean and include those actions or events
specified below in subsections (A) through (E) to the extent
the same occur, or the events constituting the same take place
subsequent to the date of execution of this Agreement: (A)
Committing or participating in an injurious act of fraud,
gross neglect or embezzlement against the Company, (B)
committing or participating in any other injurious act or
omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Company, monetarily or
otherwise; (C) engaging in a criminal enterprise involving
moral turpitude; (D) conviction of an ad or acts constituting
a felony under the laws of the United States or any state
thereof, or (E) any assignment of this Agreement by the
Executive in violation of Section 13 of this Agreement. No
actions, events or circumstances occurring or taking place at
any time prior to the date of this Agreement shall in any
event constitute or provide any basis for any termination of
this Agreement for Cause;
(3) Notwithstanding anything else contained in this
Agreement this Agreement will not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Executive a notice of termination, stating
that the Executive committed one of the types of conduct set
forth in Section 6(c) contained in this Agreement and
specifying the particulars thereof and the Executive shall be
given a thirty (30) day period to cure such conduct if
possible.
d. Termination by the Company Other than for Cause.
(1) The foregoing notwithstanding, the Company may
terminate the Executive's employment for whatever reason it
deems appropriate; provided, however, that in the event such
termination is not based on Cause, as provided in Section 6(c)
above, the Company may terminate this Agreement upon giving
three (3) months prior written notice. During such three (3)
month period, the Executive shall continue to Perform the
Executive's duties pursuant to this Agreement and the Company
shall continue to compensate the Executive in accordance with
this Agreement. The Executive will receive, at the Executive's
option, either (A) a lump sum equal to the "Compensation and
Benefits," as hereinafter defined. for the remaining balance
of the Term of this Agreement, at the current rate, reduced to
present value as set forth in Section 280G of the Internal
Revenue Code or (B) for the remaining balance of the Term of
this Agreement from and after the date of any such
termination, the Company shall on the last day of each
calendar month pay to the Executive such "Compensation and
Benefits", which shall be an amount equal to (y) one Hundred
percent (100%) of the Executive's compensation and benefits
set forth in Section 5, which shall specifically include the
Salary and Executive Benefits (the "Compensation and
Benefits'), on the date of any such termination, divided by
(Z) twelve (12); provided, however, that If (A) there is a
decrease in the Executive's Compensation and Benefits of more
than five (5%) percent prior to termination for any reason
other than for "Cause", and (B) the Executive. is terminated
without cause. the Compensation and Benefits shall be as
existed immediately prior to such a decrease. The Executive
will be entitled to continued Compensation and Benefits
coverage and credits as provided in Section 5 or to
reimbursement for the cost of providing the Executive with
comparable benefit coverage during the term in which the
Executive is receiving payments from the Company after
termination pursuant to Section 6(d). Such benefit coverage
will be offset by comparable coverage provided to the
Executive in connection with subsequent employment
(2) In the event that the Executive's employment with the
Company is terminated pursuant to this Section 6(d),
Section 6(f), Section 6(g) of this Agreement and all
references thereto shall be inapplicable as to the Executive
and the Company.
e. Voluntary Termination. In the event the Executive terminates
the Executive's employment on the Executive's own volition (except
as provided in Section 6(f) and/or Section 6(g)) prior to the
expiration of the Term of this Agreement, including any renewals
thereof, such termination shall constitute a voluntary termination
and in such event the Executive shall be limited to the same rights
and benefits as provided in connection with a termination for Cause
as provided in Section 6(c).
f. Termination of Employment. If the Executive so elects, a
termination by the Company without Cause under Section 6(d) shall
be deemed to have occurred upon the occurrence of one or more of
the following events without the express written consent of the
Executive:
(1) a significant change in the nature or scope of the
authorities, powers, functions, duties or responsibilities
attached to Executive's position as described in Section 3; or
(2) any reduction in the Executive's salary; or
(3) a material breach of the Agreement by the Company; or
(4) a material reduction of the Executive's benefits under
any employee benefit plan, program or arrangement (for the
Executive individually or as part of a group) of the Company
as then in effect or as in effect on the effective date of the
Agreement which reduction shall not be effectuated for
similarly situated employees of the Company; or
(5) failure by a successor company to assume the obligations
under the Agreement.
Anything herein to the contrary notwithstanding, the Executive shall
give written notice to the Board of Directors of the Company that the
Executive believes an, event has occurred which would result in a
Constructive Termination of the Executive's employment under this
Section 6(f), which written notice shall specify the particular act or
acts, on the basis of which the Executive intends to so terminate the
Executive's employment, and the Company shall then be given the
opportunity, within fifteen (15) days of its receipt of such notice
to cure said event, provided, however, there shall be no time period
permitted to cure a second or subsequent occurrence under this &
Section 6(f) (whether such second occurrence be of the same or a
different event specified in subsections (1) through (5) above).
g. Termination Following a Change of Control.
(1) In the event that a "Change in Control" or an "Attempted
Change in Control as hereinafter defined, of the Company
shall occur at any time during the Term hereof, the Executive
shall have the right to terminate the Executive's employment
under this Agreement upon thirty (30) days written notice
given at any time within one year after the occurrence of such
event, and such termination of the Executive's employment
with the Company pursuant to this Section 6(g)(l), and, in
any such event, such termination shall be deemed to be a
Termination by the Company Other than for Cause and the
Executive shall be entitled to such Compensation and Benefits
as set forth in Subsection 6(h) of this Agreement.
(2) For purposes of this Agreement, a "Change in Control" of
the Company shall mean a change in control (A) as set forth
in Section 280G of the Internal Revenue Code or (B) of a
nature that would be required to be reported in response to
Item 1 of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); provided that
without limitation, such a change in control shall be deemed
to have occurred at such time as:
(A) any "person", other than the Executive, (as
such term is used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power
of the Company's outstanding securities then having the
right to vote at elections of directors; or,
(B) the individuals who at the commencement date of
the Agreement constitute the Board of Directors cease
for any reason to constitute a majority thereof unless
the election, or nomination for election, of each new
director was approved by a vote of at least two thirds
of the directors then in office who were directors at
the commencement of the Agreement; or
(C) there is a failure to elect three or more (or such
number of directors as would constitute a majority of
the Board of Directors) candidates nominated by
management of the Company to the Board of Directors; or
(D) the business of the Company for which the
Executive's services are principally performed is
disposed of by the Company pursuant to a partial or
complete liquidation of the Company, a sale of assets
(including stock of a subsidiary of the Company) or
otherwise.
Anything herein to the contrary notwithstanding, this Section 6(g)(2)
will not apply where the Executive gives the Executive's explicit
written waiver stating that for the purpose of this Section 6(g)(2) a
Change in Control shall not be deemed to have occurred. The Executive's
participation in any negotiations or other matters in relation to a
Change in Control shall in no way constitute such a waiver which can
only be given by an explicit written waiver as provided in the
preceding sentence.
An "Attempted Change in Control" shall be deemed to have occurred if
any substantial attempt accompanied by significant work efforts and
expenditures of money, is made to accomplish a Change in Control, as
described in subparagraphs (A), (3), (C) or (D) above whether or not
such attempt is made with the approval of a majority of the then
current members of the Board of Directors.
(3) In the event that within twelve (12) months of any
Change in Control of the Company or any Attempted Change in
Control of the Company, the Company terminates the employment
of the Executive under this Agreement for any reason other
than for Cause as defined in Section 6(c), or the Executive's
employment is constructively terminated as defined in Section
6(f), then, in any such event. Such termination shall be
deemed to be a Termination by the Company Other than for Cause
and the Executive shall be entitled to such Compensation and
Benefits as set forth in Subsection 6(d) of this Agreement
h. Compensation and Benefits Upon Termination of Executive
Employment. In the event of any termination of Executive's
employment Other than for Cause under Section 6(d),or any
termination of Executive's employment pursuant to Section 6(f) or
Section 6(g), and the effective date of such termination, the
Executive shall be entitled to receive the following:
(1) All life, disability and health insurance benefits to
which he was entitled to continue to receive thirty (30) days
prior to the Effective Date of the Settlement Agreement, for a
period of six (6) months following the effective date of such
termination; provided that in the Executive's sole discretion,
the Executive may receive the cash equivalent of all or any
part of such life, disability and/or health insurance benefits
from the Company in lieu of receiving such benefits; plus
(2) Compensation equal to one (1) time the Executive's
annual Salary, based upon the greater of the Executive's
Salary (i) immediately prior to the effective date of
termination or (ii) or as of ninety (90) days prior to the
effective date of termination. All Compensation shall be
payable to the Executive by-weekly; provided that in the
event that the Executive is entitled to receive the
Compensation as a result of a Change in Control, at the
Executive's option, the Executive may receive either (i) a
lump sum equal to the Compensation due to the Executive
pursuant to Section 6(h) reduced to present value, as set
forth in Section 280G of the Internal Revenue Code or
(ii) by-weekly; plus
The provisions of this Section 6(h) notwithstanding, the Compensation
and Benefits to be received by the Executive pursuant to this
Section 6(h) shall not exceed the amount set forth in Section 162(m) of
the Internal Revenue Code, or its successor provision.
7. Indemnification. The Executive shall continue to be covered by the
Certificate of Incorporation and/or the Bylaws of the Company with
respect to matters occurring on or prior to the date of termination
of the Executive's employment with the Company, subject to all the
provisions of Nevada and Federal law and the Certificate of
Incorporation and Bylaws of the Company then in effect. Such reasonable
expenses including attorneys' fees that may be covered by the
Certificate of Incorporation and/or Bylaws of the Company shall be paid
by the Company on a current basis in accordance with such provision,
the Company's Certificate of Incorporation and Nevada law. To the
extent that any such payment by the Company pursuant to the
Company's Certificate of Incorporation and/or Bylaws may be subject
to repayment by the Executive pursuant to the provisions of the
Company's Certificate of Incorporation or Bylaws, or pursuant to Nevada
or Federal law, such repayment shall be due and payable by the
Executive to the Company within twelve (12) months after termination
of all proceedings, if any, which relate to such repayment and to the
Company's affairs for the period prior to the date of termination of
the Executive's employment with the Company and as to which Executive
has been covered by such applicable provisions.
8. Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or the
Executive's estate or beneficiaries shall be subject to the withholding
of such amounts, if any, relating to tax and other payroll deductions
as the Company may reasonably determine it should withhold pursuant to
any applicable law or regulation. In lieu of withholding such amounts,
the Company may accept other arrangements pursuant to which it is
satisfied that such tax and other payroll obligations will be satisfied
in a manner complying with applicable law or regulation.
9. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent
postage prepaid by registered or certified mail return receipt
requested; by overnight delivery; by courier; or by confirmed telecopy,
in the case of the Executive to the Executive's last place of business
or residence as shown an the records of the Company, or in the case of
the Company to its principal office as set forth in the first paragraph
of this Agreement, or at such other place as it may designate.
10. Covenant Not to Compete and Non-Disclosure of Information.
a. Covenant Not to Compete. The Executive acknowledges and
recognizes the highly competitive nature of the Company's business
and the goodwill continued patronage, and specifically the names
and addresses of the Company's Customers (as hereinafter defined)
constitute a substantial asset of the Company having been acquired
through considerable time, money and effort. Accordingly, in
consideration of the execution of this Agreement, in the event
the Executive's employment is terminated by reason of disability
pursuant to Section 6(b) or for Cause pursuant to Section 6(c),
then the Executive agrees to the following:
(1) That during the Restricted Period (as hereinafter
defined) and within the Restricted Area (its hereinafter
defined), the Executive will not, individually or in
conjunction with others, directly or indirectly, engage in any
Competitive Business Activities (as hereinafter defined),
whether as an officer, director, proprietor, employer,
partner, independent contractor, investor (other than as a
holder solely as an investment of less than 1% of the
outstanding capital stock of a publicly traded corporation),
consultant, advisor or agent.
(2) That during the Restricted Period and within the
Restricted Area, the Executive will not, directly or
indirectly compete with the Company by soliciting, inducing or
influencing any of the Company's Customers which have a
business relationship with the Company at the time during the
Restricted Period to discontinue or reduce the extent of such
relationship with the Company.
b. Non-Disclosure of Information. In the event Executive's
employment has been terminated pursuant to either Section 6(b) or
Section 6(c) hereof, Executive agrees that, during the Restricted
Period, Executive will not use or disclose any Proprietary
Information of the Company for the Executive; own purposes or for
the benefit of any entity engaged in Competitive Business
Practices. As used herein, the term "Proprietary Information"
shall mean trade secrets or confidential proprietary information of
the Company which are material to the conduct of the business of
the Company. No information can be considered Proprietary
Information unless the same is a unique process or method material
to the conduct of Company's Business, or is a customer list or
similar list of persons engaged in business activities with
Company, or if the same is otherwise in the public domain or is
required to be disclosed by order of any court or by reason of any
statute, rule, regulation ordinance or other governmental
requirement. Executive further agrees that in the event his
employment is terminated pursuant to Sections 6(b) or 6(c) above,
all Documents in his possession at the time of his termination
shall be returned to the Company at the Company's principal place
of business.
c. Documents. "Documents" shall mean all original written,
recorded, or graphic matters whatsoever, and any and all copies
thereof, including, but not limited to: papers; books; records;
tangible things; correspondence; communications; telex messages;
memoranda; work-papers, reports, affidavits; statements; summaries;
analyses; evaluations; customer records and information;
agreements; agendas; advertisements; instructions; charges;
manuals; brochures; publications; directories; industry lists;
schedules; price lists; customer lists; statistical records;
training manuals; computer printouts; books of account, records
and invoices reflecting business operations; all things similar to
any of the foregoing however denominated. In all cases where
originals are not available, the term "Documents" shall also mean
identical copies of original documents or non-identical copies
thereof.
d. Company's Customers. The "Company's Customers" shall be
deemed to be any partnerships, corporations, professional
associations or other business organizations for whom the Company
has performed Business Activities.
e. Restrictive Period. The "Restrictive Period" shall be deemed
to be thirty-six (36) months following termination of the
Executive's employment with the Company as described Section 6(b)
or 6(c) of this Agreement.
f. Restricted Area. The Restricted Area shall, if this
Agreement has been terminated pursuant to Section 6(b) or 6(c,), be
the United States, Canada and Mexico.
g. Competitive Business Activities. The term "Competitive
Business Activities" as used herein shall be deemed to mean
the Business.
h. Covenants as Essential Elements of this Agreement. It is
understood by and between the parties hereto that the foregoing
covenants contained in Sections 7(a) and (b) are essential elements
of this Agreement, and that but for the agreement by the Executive
to comply with such covenants, the Company would not have agreed to
enter into this Agreement. Such covenants by the Executive shall
be construed to be agreements independent of any other provisions
of this Agreement. The existence of any other claim or cause of
action whether predicated on any other provision in this Agreement,
at otherwise, as a result of the relationship between the parties
shall not constitute a defense to the enforcement of such covenants
against the Executive.
i. Survival After Termination of Agreement. Notwithstanding
anything to the contrary contained in this Agreement, the covenants
in, Sections 7(a) and (b) shall survive the termination of this
Agreement and the Executive's employment with the Company.
j. Remedies.
(1) The Executive acknowledges and agrees that the Company's
remedy at law for a breach or threatened breach of any of the
provisions of Section 7(a) or (b) herein would be inadequate
and a breach thereof will cause irreparable harm to the
Company. In recognition of this fact, in the event of a
breach by the Executive of any of the provisions of
Section 7(a) or (b), the Executive agrees that, in addition to
any remedy at law available to the Company, including, but not
limited to monetary damages, all rights of the Executive to
payment or otherwise under the, Agreement and all amounts then
or thereafter due to the Executive from the Company under this
Agreement may be terminated and the Company, without posting
any bond, shall be entitled to obtain, and the Executive
agrees not to oppose the Company's request for equitable
relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any
other equitable remedy which may then be available to the
Company.
(2) The Executive acknowledges that the granting of a
temporary injunction, temporary restraining order or permanent
injunction merely prohibiting the use of Proprietary
Information would not be an adequate remedy upon breach or
threatened breach of Section 7(a) or (b) and consequently
agrees, upon proof of any such breach, to the granting of
injunctive relief prohibiting any form of competition with the
Company. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies
available to it for such breach or threatened breach.
11. Withholding. Anything to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the Executive
or the Executive's estate or beneficiaries shall be subject to the
withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold
pursuant to say applicable law or regulation. In lieu of withholding
such amounts, the Company may accept other arrangements pursuant to
which it is satisfied that such tax and other payroll obligations
will be satisfied in a manner complying with applicable law or
regulation.
12. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent
postage prepaid by registered or certified mail, return receipt
requested by overnight delivery; by courier or by confirmed telecopy,
in the case of the Executive to the Executive's last place of business
or residence as shown on the records of the Company, or in the one of
the Company to its principal office as set forth in the first
paragraph of this Agreement, of at such other place as it may
designate.
13. Waiver. Unless agreed in writing, the failure of either party, at
any time to require performance by the other of any provisions
hereunder shall not affect its right thereafter to enforce the same nor
shall a waiver by either party of any breach of any provision hereof
be taken or hold to be a waiver of any other preceding or succeeding
breach of any term or provision of this Agreement. No extension of
time for the performance of any obligation or act shall be deemed to be
an extension of time for the performance of any other obligation or act
hereunder.
14. Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all
prior and contemporaneous agreements or understandings among the
parties hereto concerning the Employment Agreement. This Agreement may
be amended modified, superseded or canceled and any of the terms,
covenants representations, warranties or conditions hereof may be
waived only by a written instrument executed by the parties or, in the
case of a waiver, by the party to be charged.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which shall constitute but one agreement.
16. Binding Effect/Assignment. This Agreement shall be binding upon
the parties hereto their heirs, legal representatives successors and
assigns. This Agreement shall not be assignable by the Executive but
shall be assignable by the Company in connection with the sale,
transfer or other disposition of its business to any of the Company's
affiliates controlled by or under common control with the Company.
17. Governing Law. This Agreement shall become valid when executed
and accepted by Company. The parties agree that it shall be deemed
made and entered into in the State of Florida and shall be governed and
construed under and in accordance with the law of the State of Florida.
Anything in this Agreement to the contrary notwithstanding, the
Executive shall conduct the Executive's business in a lawful manner and
faithfully comply with applicable laws or regulations of the state,
city or other political subdivision in which the Executive is located.
18. Further Assurances. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to
carry out the intent and purposes of this Agreement.
19. Headings. The headings of the sections are for convenience only
and shall not control of affect the meaning or construction at limit
the scope or intent of any of the provisions of this Agreement.
20. Survival. Any termination of this Agreement shall not, however,
affect the ongoing provisions of this Agreement which shall survive
such termination in accordance with their terms.
21. Severability. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section,
subsection, paragraph, sentence, clause, phrase or word or of any
provision of this Agreement shall not affect the validity or
enforceability of the remaining portions thereof.
22 Enforcement. Should it become necessary for any party to
institute legal action to enforce the terms and conditions of this
Agreement the successful party will be awarded reasonable attorney's
fees at all trial and appellate levels, expenses and costs.
23. Venue. Company and Executive acknowledge and agree that the U.S.
District for the Southern District of Florida, or if such court lacks
jurisdiction, the 15th Judicial Circuit (or its successor in and for
Broward County, Florida, shall be the venue and exclusive proper forum
in which to adjudicate any case or controversy arising either, directly
or indirectly under or in connection with this Agreement and the
parties further agree that, in the event of litigation arising out of
or in connection with this Agreement in these courts they will not
contest or challenge the jurisdiction or venue of these courts.
24. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the
document.
THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ ALL OF THE TERMS OF THIS
AGREEMENT, UNDERSTANDS THE AGREEMENT AND AGREES TO ABIDE BY THE TERMS AND
CONDITIONS.
IN WITNESS WHEREOF, the parties have executive this Agreement as set forth in
the first paragraph of this Agreement.
Witness: The Company:
/S/JACK LEVINE /S/MARK ALFIERI
- -------------- ----------------
Jack Levine Mark Alfieri, Chief Executive Officer
Witness: The Executive:
/S/JACK LEVINE /S/ERIC WARM
- -------------- ------------
Jack Levine Eric Warm
SCHEDULE A
1999 $200,000.00 Base Salary
<TABLE>
BONUS STRUCTURE
<CAPTION>
Net Income to Company Bonus Payment (1)
------------------------- ------------------
<S> <C> <C>
$1.00 - $250,000.00 No Bonus
$250,000.01 - $350,000.00 A $25,000.00 Bonus
$350,000.01 - $450,000.00 An additional $25,000.00 Bonus
$450,000.01 - $500,000.00 An additional $12,500.00 Bonus
</TABLE>
- ----------
(1) Bonuses will be proportionate to the Company receiving a minimum bottom line
of $250,000.00 after bonuses paid.
2000 $200,000.00 Base Salary
<TABLE>
BONUS STRUCTURE
<CAPTION>
Net Income to Company Bonus Payment (1)
------------------------- ------------------
<S> <C> <C>
$1.00 - $500,000.00 No Bonus
$500,000.01 - $600,000.00 A $25,000.00 Bonus
$600,000.01 - $700,000.00 An additional $25,000.00 Bonus
$700,000.01 - $750,000.00 An additional $12,500.00 Bonus
</TABLE>
- ----------
(1) Bonuses will be proportionate to the Company receiving a minimum bottom line
of $500,000.00 after bonuses paid.
Witness: The Company:
SHOP T.V. & TELEVISION, INC.
/S/JACK LEVINE By:/S/MARK ALFIERI
-------------- -------------------
Jack Levine Mark Alfieri, Chief Executive Officer
Witness: The Executive:
/S/JACK LEVINE /S/ERIC WARM
- -------------- ------------
Jack Levine Eric Warm
SITE2SHOP.COM, INC
SUBSIDIARIES OF REGISTRANT
AS OF APRIL 30, 1999
1 Tricom Pictures and Productions,Inc.
2001 West Sample Road
Pompano Beach, Florida 33064
Telephone: (954) 969-1010
E.I.N. 59-3099845
100% of Common Stock issued and outstanding owned by SITE2SHOP.COM, Inc.
2 Shop TV & Television, Inc.
2001 West Sample Road
Pompano Beach, Florida 33064
Telephone: (954) 969-1199
E.I.N. 65-0563030
100% of Common Stock issued and outstanding owned by SITE2SHOP.COM, Inc.
SHOP T.V., INC.
1998 STOCK OPTION PLAN
1. Grant of Options: Generally. In accordance with the provisions hereinafter
set forth in this stock option plan, the name of which is the SHOP T.V., INC.
1998 STOCK OPTION PLAN (the "Plan"), the Board of Directors (the "Board") or,
the Compensation Committee (the "Stock Option Committee") of Shop T.V., Inc.
(the "Corporation") is hereby authorized to issue from time to time on the
Corporation's behalf to any one or more Eligible Persons, as hereinafter
defined, options to acquire shares of the Corporation's no par value common
stock (the "Stock").
2. Type of Options. The Board or the Stock Option Committee is authorized to
issue Incentive Stock Options ("ISOs") which meet the requirements of Section
ss.422 of the Internal Revenue Code of 1986, as amended (the "Code"), which
options are hereinafter referred to collectively as ISOs, or singularly as an
ISO. The Board or the Stock Option Committee is also, in its discretion,
authorized to issue options which are not ISOs, which options are hereinafter
referred to collectively as Non Statutory Options ("NSOs"), or singularly as an
NSO. The Board or the Stock Option Committee is also authorized to issue "Reload
Options" in accordance with Paragraph 8 herein, which options are hereinafter
referred to collectively as Reload Options, or singularly as a Reload Option.
Except where the context indicates to the contrary, the term "Option" or
"Options" means ISOs, NSOs and Reload Options.
3. Amount of Stock. The aggregate number of shares of Stock which may be
purchased pursuant to the exercise of Options shall be 1,500,000 shares. Of this
amount, the Board or the Stock Option Committee shall have the power and
authority to designate whether any Options so issued shall be ISOs or NSOs,
subject to the restrictions on ISOs contained elsewhere herein. If an Option
ceases to be exercisable, in whole or in part, the shares of Stock underlying
such Option shall continue to be available under this Plan. Further, if shares
of Stock are delivered to the Corporation as payment for shares of Stock
purchased by the exercise of an Option granted under this Plan, such shares of
Stock shall also be available under this Plan. If there is any change in the
number of shares of Stock due to of the declaration of stock dividends,
recapitalization resulting in stock split-ups, or combinations or exchanges of
shares of Stock, or otherwise, the number of shares of Stock available for
purchase upon the exercise of Options, the shares of Stock subject to any Option
and the exercise price of any outstanding Option shall be appropriately adjusted
by the Board or the Stock Option Committee. The Board or the Stock Option
Committee shall give notice of any adjustments to each Eligible Person granted
an Option under this Plan, and such adjustments shall be effective and binding
on all Eligible Persons. If because of one or more recapitalizations,
reorganizations or other corporate events, the holders of outstanding Stock
receive something other than shares of Stock then, upon exercise of an Option,
the Eligible Person will receive what the holder would have owned if the holder
had exercised the Option immediately before the first such corporate event and
not disposed of anything the holder received as a result of the corporate event.
4. Eligible Persons.
(a) With respect to ISOs, an Eligible Person means any individual who has
been employed by the Corporation or by any subsidiary of the Corporation, for a
continuous period of at least sixty (60) days.
(b) With respect to NSOs, an Eligible Person means (i) any individual who
has been employed by the Corporation or by any subsidiary of the Corporation,
for a continuous period of at least sixty (60) days, (ii) any director of the
Corporation or any subsidiary of the Corporation or (iii) any consultant of the
Corporation or any subsidiary of the Corporation.
5. Grant of Options. The Board or the Stock Option Committee has the right to
issue the Options established by this Plan to Eligible Persons. The Board or the
Stock Option Committee shall follow the procedures prescribed for it elsewhere
in this Plan. A grant of Options shall be set forth in a writing signed on
behalf of the Corporation or by a majority of the members of the Stock Option
Committee. The writing shall identify whether the Option being granted is an ISO
or an NSO and shall set forth the terms which govern the Option. The terms shall
be determined by the Board or the Stock Option Committee, and may include, among
other terms, the number of shares of Stock that may be acquired pursuant to the
exercise of the Options, when the Options may be exercised, the period for which
the Option is granted and including the expiration date, the effect on the
Options if the Eligible Person terminates employment and whether the Eligible
Person may deliver shares of Stock to pay for the shares of Stock to be
purchased by the exercise of the Option. However, no term shall be set forth in
the writing which is inconsistent with any of the terms of this Plan. The terms
of an Option granted to an Eligible Person may differ from the terms of an
Option granted to another Eligible Person, and may differ from the terms of an
earlier Option granted to the same Eligible Person.
6. Option Price. The option price per share shall be determined by the Board or
the Stock Option Committee at the time any Option is granted, and shall be not
less than (i) in the case of an ISO, the fair market value, (ii) in the case of
an ISO granted to a ten percent or greater stockholder, 110 percent of the fair
market value, or (iii) in the case of an NSO, not less than 55 % of the fair
market value (but in no event less than the par value) of one share of Stock on
the date the Option is granted, as determined by the Board or the Stock Option
Committee. Fair market value as used herein shall be:
(a) If shares of Stock shall be traded on an exchange or over-the-counter
market, the mean between the high and low sales prices of Stock on such exchange
or over-the-counter market on which such shares shall be traded on that date, or
if such exchange or over-the-counter market is closed or if no shares shall
have traded on such date, on the last preceding date on which such shares shall
have traded.
(b) If shares of Stock shall not be traded on an exchange or over-the-counter
market, the value as determined by a recognized appraiser as selected by the
Board or the Stock Option Committee.
7. Purchase of Shares. An Option shall be exercised by the tender to the
Corporation of the full purchase price of the Stock with respect to which the
Option is exercised and written notice of the exercise. The purchase price of
the Stock shall be in United States dollars, payable in cash, check, Promissory
Note secured by the Shares issued through exercise of the related Options, or in
property or Corporation stock, if so permitted by the Board or the Stock Option
Committee in accordance with the discretion granted in Paragraph 5 hereof,
having a value equal to such purchase price. The Corporation shall not be
required to issue or deliver any certificates for shares of Stock purchased upon
the exercise of an Option prior to (i) if requested by the Corporation, the
filing with the Corporation by the Eligible Person of a representation in
writing that it is the Eligible Person's then present intention to acquire the
Stock being purchased for investment and not for resale, and/or (ii) the
completion of any registration or other qualification of such shares under any
government regulatory body, which the Corporation shall determine to be
necessary or advisable.
8. Grant of Reload Options. In granting an Option under this Plan, the Board or
the Stock Option Committee may include a Reload Option provision therein,
subject to the provisions set forth in Paragraphs 20 and 21 herein. A Reload
Option provision provides that if the Eligible Person pays the exercise price of
shares of Stock to be purchased by the exercise of an ISO, NSO or another Reload
Option (the "Original Option") by delivering to the Corporation shares of Stock
already owned by the Eligible Person (the "Tendered Shares"), the Eligible
Person shall receive a Reload Option which shall be a new Option to purchase*
shares of Stock equal in number to the tendered shares. The terms of any Reload
Option shall be determined by the Board or the Stock Option Committee consistent
with the provisions of this Plan.
9. Stock Option Committee. The Stock Option Committee may be appointed from time
to time by the Corporation's Board of Directors. The Board may from time to time
remove members from or add members to the Stock Option Committee. The Stock
Option Committee shall be constituted so as to permit the Plan to comply in all
respects with the provisions set forth in Paragraph 20 herein. The members of
the Stock Option Committee may elect one of its members as its chairman. The
Stock Option Committee shall hold its meetings at such times and places as its
chairman shall determine. A majority of the Stock Option Committee's members
present in person shall constitute a quorum for the transaction of business. All
determinations of the Stock Option Committee will be made by the majority vote
of the members constituting the quorum. The members may participate in a meeting
of the Stock Option Committee by conference telephone or similar communications
equipment by means of which all members participating in the meeting can hear
each other. Participation in a meeting in that manner will constitute presence
in person at the meeting. Any decision or determination reduced to writing and
signed by all members of the Stock Option Committee will be effective as if it
had been made by a majority vote of all members of the Stock Option Committee at
a meeting which is duly called and held.
10. Administration of Plan. In addition to granting Options and to exercising
the authority granted to it elsewhere in this Plan, the Board or the Stock
Option Committee is granted the full right and authority to interpret and
construe the provisions of this Plan, promulgate, amend and rescind rules and
procedures relating to the implementation of the Plan and to make all other
determinations necessary or advisable for the administration of the Plan,
consistent, however, with the intent of the Corporation that Options granted or
awarded pursuant to the Plan comply with the provisions of Paragraphs 20 and 21
herein. All determinations made by the Board or the Stock Option Committee shall
be final, binding and conclusive on all persons including the Eligible Person,
the Corporation and its stockholders, employees, officers and directors and
consultants. No member of the Board or the Stock Option Committee will be liable
for any act or omission in connection with the administration of this Plan
unless it is attributable to that member's willful misconduct.
11. Provisions Applicable to ISOs. The following provisions shall apply to all
ISOs granted by the Board or the Stock Option Committee and are incorporated by
reference into any writing granting an ISO:
(a) An ISO may only be granted within ten (10) years from September 10, 1998,
the date that this Plan was originally adopted by the Corporation's Board of
Directors.
(b) An ISO may not be exercised after the expiration of ten (10) years from
the date the ISO is granted.
(c) The option price may not be less than the fair market value of the Stock
at the time the ISO is granted.
(d) An ISO is not transferable by the Eligible Person to whom it is granted
except by will, or the laws of descent and distribution, and is exercisable
during his or her lifetime only by the Eligible Person.
(e) If the Eligible Person receiving the ISO owns at the time of the grant
stock possessing more than ten (10%) percent of the total combined voting power
of all classes of stock of the employer corporation or of its parent or
subsidiary corporation (as those terms are defined in the Code), then the option
price shall be at least 110 % of the fair market value of the Stock, and the ISO
shall not be exercisable after the expiration of five (5) years from the date
the ISO is granted.
(f) The aggregate fair market value (determined at the time the ISO is
granted) of the Stock with respect to which the ISO is first exercisable by the
Eligible Person during any calendar year (under this Plan and any other
incentive stock option plan of the Corporation) shall not exceed $100,000.
(g) Even if the shares of Stock which are issued upon exercise of an ISO are
sold within one year following the exercise of such ISO so that the sale
constitutes a disqualifying disposition for ISO treatment under the Code, no
provision of this Plan shall be construed as prohibiting such a sale.
(h) This Plan was adopted by the Corporation on September 10, 1998, by virtue
of its approval by the Corporation's Board of Directors and a majority of the
vote of the shareholders of the Company holding 50% or more of the outstanding
capital stock of the Company.
12. Determination of Fair Market Value. In granting ISOs under this Plan, the
Board or the Stock Option Committee shall make a good faith determination as to
the fair market value of the Stock at the time of granting the ISO.
13. Restrictions on Issuance of Stock. The Corporation shall not be obligated to
sell or issue any shares of Stock pursuant to the exercise of an Option unless
the Stock with respect to which the Option is being exercised is at that time
effectively registered or exempt from registration under the Securities Act of
1933, as amended, and any other applicable laws, rules and regulations. The
Corporation may condition the exercise of an Option granted in accordance
herewith upon receipt from the Eligible Person, or any other purchaser thereof,
of a written representation that at the time of such exercise it is his or her
then present intention to acquire the shares of Stock for investment and not
with a view to, or for sale in connection with, any distribution thereof; except
that, in the case of a legal representative of an Eligible Person,
"distribution" shall be defined to exclude distribution by will or under the
laws of descent and distribution. Prior to issuing any shares of Stock pursuant
to the exercise of an Option, the Corporation shall take such steps as it deems
necessary to satisfy any withholding tax obligations imposed upon it by any
level of government.
14. Exercise in the Event of Death of Termination or Employment.
(a) If an optionee shall die (i) while an employee of the Corporation or a
Subsidiary or (ii) within three months after termination of his employment with
the Corporation or a Subsidiary because of his disability, or retirement or
otherwise, his Options may be exercised, to the extent that the optionee shall
have been entitled to do so on the date of his death or such termination of
employment, by the person or persons to whom the optionee's right under the
Option pass by will or applicable law, or if no such person has such right, by
his executors or administrators, at any time, or from time to time. In the event
of termination of employment because of his death while an employee or because
of disability, his Options may be exercised not later than the expiration date
specified in Paragraph 5 or one year after the optionee's death, whichever date
is earlier, or in the event of termination of employment because of retirement
or otherwise, not later than the expiration date specified in Paragraph 5 hereof
or one year after the optionee's death, whichever date is earlier.
(b) If an optionee's employment by the Corporation or a Subsidiary shall
terminate because of his disability and such optionee has not died within the
following three months, he may exercise his Options, to the extent that he shall
have been entitled to do so at the date of the termination of his employment, at
any time, or from time to time, but not later than the expiration date specified
in Paragraph 5 hereof or one year after termination of employment, whichever
date is earlier.
(c) If an optionee's employment shall terminate by reason of his retirement
in accordance with the terms of the Corporation's tax-qualified retirement plans
if any, or with the consent of the Board or the Stock Option Committee or
involuntarily other than by termination for cause, and such optionee has not
died within the following three months, he may exercise his Option to the extent
he shall have been entitled to do so at the date of the termination of his
employment, at any time and from to time, but not later than the expiration date
specified in Paragraph 5 hereof or thirty (30) days after termination of
employment, whichever date is earlier. For purposes of this Paragraph 14,
termination for cause shall mean; (i) termination of employment for cause as
defined in the optionee's Employment Agreement or (ii) in the absence of an
Employment Agreement for the optionee, termination of employment by reason of
the optionee's commission of a felony, fraud or willful misconduct which has
resulted, or is likely to result, in substantial and material damage to the
Corporation or a Subsidiary, all as the Board or the Stock Option Committee in
its sole discretion may determine.
(d) If an optionee's employment shall terminate for any reason other than
death, disability, retirement or otherwise, all right to exercise his Option
shall terminate at the date of such termination of employment absent specific
provisions in the optionee's Option Agreement.
15. Corporate Events. In the event of the proposed dissolution or liquidation of
the Corporation, a proposed sale of all or substantially all of the assets of
the Corporation, a merger or tender for the Corporation's shares of Common Stock
the Board of Directors may declare that each Option granted under this Plan
shall terminate as of a date to be fixed by the Board of Directors; provided
that not less than thirty (30) days written notice of the date so fixed shall be
given to each Eligible Person holding an Option, and each such Eligible Person
shall have the right, during the period of thirty (30) days preceding such
termination, to exercise his Option as to all or any part of the shares of Stock
covered thereby, including shares of Stock as to which such Option would not
otherwise be exercisable. Nothing set forth herein shall extend the term set for
purchasing the shares of Stock set forth in the Option.
16. No Guarantee of Employment. Nothing in this Plan or in any writing granting
an Option will confer upon any Eligible Person the right to continue in the
employ of the Eligible Person's employer, or will interfere with or restrict in
any way the right of the Eligible Person's employer to discharge such Eligible
Person at any time for any reason whatsoever, with or without cause.
17. Nontransferability. Unless specifically authorized under the terms of the
Option grant, no Option granted under the Plan shall be transferable other than
by will or by the laws of descent and distribution. During the lifetime of the
optionee, an Option shall be exercisable only by him unless the terms of the
Option permits the assignment of the Option.
18. No Rights as Stockholder. No optionee shall have any rights as a stockholder
with respect to any shares subject to his Option prior to the date of issuance
to him of a certificate or certificates for such shares.
19. Amendment and Discontinuance of Plan. The Corporation's Board of Directors
may amend, suspend or discontinue this Plan at any time. However, no such action
may prejudice the rights of any Eligible Person who has prior thereto been
granted Options under this Plan. Further, no amendment to this Plan which has
the effect of (a) increasing the aggregate number of shares of Stock subject to
this Plan (except for adjustments pursuant to Paragraph 3 herein), or (b)
changing the definition of Eligible Person under this Plan, may be effective
unless and until approval of the stockholders of the Corporation is obtained in
the same manner as approval of this Plan is required. The Corporation's Board of
Directors is authorized to seek the approval of the Corporation's stockholders
for any other changes it proposes to make to this Plan which require such
approval, however, the Board of Directors may modify the Plan, as necessary, to
effectuate the intent of the Plan as a result of any changes in the tax,
accounting or securities laws treatment of Eligible Persons and the Plan,
subject to the provisions set forth in this Paragraph 19, and Paragraphs 19 and
20.
20. Compliance with Rule 16b-3. This Plan is intended to comply in all respects
with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with respect to participants who are subject to Section 16 of the
Exchange Act, and any provision(s) herein that is/are contrary to Rule 16b-3
shall be deemed null and void to the extent appropriate by either the Stock
Option Committee or the Corporation's Board of Directors.
21. Compliance with Code. The aspects of this Plan on ISOs is intended to comply
in every respect with Section 422 of the Code and the regulations promulgated
thereunder. In the event any future statute or regulation shall modify the
existing statute, the aspects of this Plan on ISOs shall be deemed to
incorporate by reference such modification. Any stock option agreement relating
to any Option granted pursuant to this Plan outstanding and unexercised at the
time any modifying statute or regulation becomes effective shall also be deemed
to incorporate by reference such modification and no notice of such modification
need be given to optionee.
If any provision of the aspects of this Plan on ISOs is determined to
disqualify the shares purchasable pursuant to the Options granted under this
Plan from the special tax treatment provided by Code Section 422, such provision
shall be deemed null and void and to incorporate by reference the modification
required to qualify the shares for said tax treatment.
22. Compliance With Other Laws and Regulations. The Plan, the grant and exercise
of Options thereunder, and the obligation of the Corporation to sell and deliver
Stock under such options, shall be subject to all applicable federal and state
laws, rules, and regulations and to such approvals by any government or
regulatory agency as may be required. The Corporation shall not be required to
issue or deliver any certificates for shares of Stock prior to (a) the listing
of such shares on any stock exchange or over-the-counter market on which the
Stock may then be listed and (b) the completion of any registration or
qualification of such shares under any federal or state law, or any ruling or
regulation of any government body which the Corporation shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option may be
exercised if its exercise or the receipt of Stock pursuant thereto would be
contrary to applicable laws.
23. Disposition of Shares. In the event any share of Stock acquired by an
exercise of an Option granted under the Plan shall be transferable other
than by will or by the laws of descent and distribution within two years of the
date such Option was granted or within one year after the transfer of such Stock
pursuant to such exercise, the optionee shall give prompt written notice
thereof to the Corporation or the Stock Option Committee.
24. Name. The Plan shall be known as the "Shop T.V., Inc. 1998 Stock Option
Plan."
25. Notices. Any notice hereunder shall be in writing and sent by certified
mail, return receipt requested or by facsimile transmission (with electronic or
written confirmation of receipt) and when addressed to the Corporation shall be
sent to it at its office, 2001 West Sample Road, Suite 101, Pompano Beach,
Florida 33064, and when addressed to the Committee shall be sent to it at 2001
West Sample Road, Suite 101, Pompano Beach, Florida 33064, subject to the right
of either party to designate at any time hereafter in writing some other
address, facsimile number or person to whose attention such notice shall be
sent.
26. Headings. The headings preceding the text of Sections and subparagraphs
hereof are inserted solely for convenience of reference, and shall not
constitute a part of this Plan nor shall they affect its meaning, construction
or effect.
27. Effective Date. This Plan, the Shop T.V., Inc. 1998 Stock Option Plan, was
adopted by the Board of Directors of the Corporation on September 10, 1998. The
effective date of the Plan shall be the same date.
Dated as of September 10, 1998.
SHOP T.V., INC.
By: /S/MARK ALFIERI
-------------------
Mark Alfieri, President
PROMISSORY NOTE
$97,000.00 February 1, 1999
FOR VALUE RECEIVED, LEGAL STREET ENTERPRISES, INC. ("Borrower") promises to
pay to TRICOM PICTURES & PRODUCTIONS, INC., ("Noteholder") located at 2001 West
Sample Road, Suite 101, Pompano Beach, Florida, 33064, the sum of $97,000.00
(NINETY-SEVEN THOUSAND DOLLARS AND NO CENTS) plus interest at the rate of 8%
(Eight Percent) per annum.
Interest shall be payable monthly commencing on August 1, 1999 and for 59
consecutive months thereafter on the unpaid principal balance. The principal
shall be paid in lump sum in addition to and with the 60th interest payment.
In the event of default in the payment of any sum required under the terms
of this Promissory Note, Borrower shall be granted a grace period of fifteen
(15) days from the due date of such payment in which to cure said default. If
Borrower fails to said default within above grace period, then this Promissory
Note shall, at the option of the Noteholder become immediately and fully due and
payable, in which event, the Promissory Note shall bear interest at the highest
lawful rate permitted in the State of Florida, from the date of default until
paid.
Borrower agrees to pay all reasonable court costs and attorneys' fees
incurred by Noteholder in order to enforce and collect payment under this Note.
Borrower may prepay this Promissory Note, in whole or in part, at any time
or from time to time, without penalty.
The Promissory Note shall be governed by and construed in accordance with
the laws of the State of Florida
TRICOM PICTURES & PRODUCTION, INC.
By:/S/JACK LEVINE
Vice President
Date: /S/FEBRUARY 1, 1999
LEGAL STREET ENTERPRISES, INC.
By:/S/RON SECRETO
President
Date:/S/FEBRUARY 1, 1999
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(Replace this text with the legend)
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<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
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<CASH> 8,843 445,845
<SECURITIES> 0 0
<RECEIVABLES> 509,343 1,407,295
<ALLOWANCES> (224,000) (395,021)
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<CURRENT-ASSETS> 394,296 1,701,207
<PP&E> 98,203 647,913
<DEPRECIATION> (11,667) (327,715)
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<TOTAL-LIABILITY-AND-EQUITY> 488,404 2,060,793
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<CGS> 724,691 398,678
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<OTHER-EXPENSES> 1,698,081 1,146,660
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 1,453
<INCOME-PRETAX> (1,224,531) 624,795
<INCOME-TAX> 0 233,000
<INCOME-CONTINUING> (1,224,531) 391,795
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