As filed with the Securities and Exchange Commission on _______________.
Registration No. 333-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement
Under
THE SECURITIES ACT OF 1933
Amiga Telephony Corporation
(Exact name of registrant as specified in charter)
Delaware 4811 98-0206052
- --------------- ------------------------- -------------
(State or other (Primary Standard Classi- (IRS Employer
jurisdiction of fication Code Number) I.D. Number)
incorporation)
2770-555 W. Hastings Street
Vancouver, British Columbia,
Canada V6B 4N5
(604) 638-0188
(Address and telephone number
of principal executive offices)
2770-555 W. Hastings Street
Vancouver, British Columbia,
Canada V6B 4N5
(Address of principal place of business or
intended principal place of business)
Ian C. Hand
2770-555 W. Hastings Street
Vancouver, British Columbia,
Canada V6B 4N5
(604) 638-0188
(Name, address and telephone number of agent for service)
Copies of all communications, including all communications sent to the agent for
service, should be sent to:
William T. Hart, Esq. William M. Prifti, Esq.
Hart & Trinen Five Market Square
1624 Washington Street Amesbury, Massachusetts 01913-0398
Denver, Colorado 80203 (978)-388-4942
(303) 839-0061
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement
Page 1 of Pages
<PAGE>
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
================================================================================
Title of each Proposed Proposed
Class of Maximum Maximum
Securities Securities Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Unit (4) Price Fee
- ------------- ---------- --------- --------- ------------
Common Stock 1,150,000(1) $5.00 $ 5,750,000 $1,598
Warrants 1,150,000(1) $0.50 575,000 160
Common Stock issu-
able upon exercise of
Warrants 1,150,000(2) $8.00 9,200,000 2,558
Common Stock
issuable upon exercise
of Representative's
Warrants 100,000(3) $6.12 612,000 171
Common Stock
issuable upon exercise
of Representative's
Warrants 100,000(3) $9.60 960,000 267
Common Stock
offered by Selling
Shareholders 150,000 $5.00 750,000 209
----------- ------
Total $17,847,000 $4,963
=========== ======
(1) To be sold as Units, with each Unit consisting of one share of Common
Stock and one Common Stock Purchase Warrant.
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(2) The shares of Common Stock issuable upon the exercise of the Warrants are
subject to adjustment in accordance with the anti-dilution provisions of
such warrant.
(3) The shares of Common Stock issuable upon the exercise of the
Representative's Warrants are subject to adjustment in accordance with the
anti-dilution provisions of such warrant.
(4) Offering price computed in accordance with Rule 457(c).
Pursuant to Rule 416, this Registration Statement includes such
indeterminate number of additional securities as may be required for issuance
upon the exercise of the warrants listed above as a result of any adjustment in
the number of securities issuable by reason of the anti-dilution provisions of
the warrants.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of l933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PRELIMINARY PROSPECTUS DATED _______, 1999
SUBJECT TO COMPLETION
PROSPECTUS
AMIGA TELEPHONY CORPORATION
1,000,000 Units
Each Unit Consists of
One Share of Common Stock and
One Common Stock Purchase Warrant
The shares of common stock and warrants will be sold as units, with each
unit consisting of one share of common stock and one warrant. Each warrant
entitles the holder to purchase one share of common stock at a price of $8.00
during a period ending two years after the date of this Prospectus.
Amiga anticipates that the public offering price will be approximately
$5.50 per Unit. Prior to this offering, there has not been any market for
Amiga's units, common stock or warrants. Amiga plans to make an application to
have its securities listed on the NASDAQ SmallCap Market under the following
symbols: Units - _______; Common Stock - _______ Warrants - _______.
These securities are speculative and involve a high degree of risk and
should be purchased only by persons who can afford to lose their entire
investment. For a description of certain important factors that should be
considered by prospective investors see "Risk Factors" on page 10 of this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- --------------------------------------------------------------------------------
Proceeds
Public Underwriting to
Offering Price Commissions Amiga
- --------------------------------------------------------------------------------
Per Unit ................. $5.50 $0.55 $4.95
Total .................... $5,500,000 $550,000 $4,950,000
- --------------------------------------------------------------------------------
The units will be offered to the public through underwriters. Westport
Resources Investment Services, Inc., subsequently referred to in this prospectus
as Westport, is acting as the managing underwriter of this offering and as the
representative of the other underwriters.
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Amiga has granted the underwriters the right to purchase up to 150,000
additional shares of common stock to cover any over-allotments.
In addition to underwriting commissions, Amiga has agreed to pay other
consideration to the underwriters in connection with this offering.
This Prospectus also relates to the offer and sale of 150,000 shares of
common stock by a selling shareholder. The common stock being sold by the
selling shareholder is not part of the underwritten offering. Amiga will not
receive any proceeds from the resale of the shares offered by the selling
shareholder.
The date of this prospectus is ______.
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[The following statement will be printed in red ink and will
appear on the left-hand margin of the outside front cover page.]
The information in this preliminary prospectus is not complete and may be
changed. Amiga may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
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<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS
ENTIRETY BY, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS IN THIS
PROSPECTUS.
- --------------------------------------------------------------------------------
About Amiga Telephony Corporation
Amiga is an emerging, development stage company building an international
Internet Protocol telecommunications network. Amiga's network will be capable of
delivering multiple services including voice, fax, data and video. Amiga leases
capacity on existing private Internet Protocol or I.P. circuits from existing
carriers and installs new, carrier grade Internet Telephony Gateway equipment to
enable the reliable delivery of high quality voice, data, fax and video signals
over I.P. based networks on an international basis.
This type of service known generally as Internet Protocol Telephony, or
I.P. Telephony offers significant advantages over conventional
telecommunications systems including significantly reduced equipment costs,
improved bandwidth efficiency, direct routing of calls, lower costs and improved
ease of network administration and delivery of multi-media services over a
single network infrastructure. I.P. Telephony combines the low cost global reach
of the Internet and the high quality and security of private I.P based networks
with the public telephone system's ease of access.
Amiga has selected Lucent Technologies and Ascend Communications as its
suppliers of I.P. Telephony equipment and Amiga is presently planning the
deployment of its facilities-based I.P. network and the introduction of its
services.
According to industry sources, the global telecommunications market
generates revenues in excess of $250 billion annually and international switched
telecommunications traffic grew from 28 billion minutes of use in 1989 to 81.8
million minutes in 1997 and is projected to reach between approximately 128.7
and 158.6 billion minutes by 2001. In the United States residential long
distance callers alone represent a $67 billion dollar market. In its infancy
today, the IP services market is estimated to increase to $1.8 billion by the
year 2001. Due to competition, rates are low for both business and residential
calls placed within North America. However this is not the case when calling
internationally to certain countries where high per minute rates are common. The
international telecommunications industry is growing rapidly due to:
o deregulation
o privatization
o expansion of telecommunications infrastructure
o technological improvements
o globalization of the world's economies; and
o free trade
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Through its facilities-based Internet Telephony network, Amiga believes it can
provide existing carriers, travelers and businesses with significant cost
savings and other advantages for international communications services. For the
foreseeable future, Amiga's services will include:
o wholesale long distance services for international carriers
o prepaid long distance calling cards
o corporate long distance, fax, data and video networking
services
o e-commerce communications services for businesses selling
products and services over the Internet
o other telecommunications applications and services
Initially, Amiga plans to provide wholesale service to other carriers
seeking origination or termination in locations where Amiga establishes its
gateways and to introduce its prepaid calling card to persons traveling to
destinations such as Mexico, Central and South America, Asia, Europe, and other
locations where long distance telephone calls are substantially more expensive
than North American domestic long distance telephone calls..
To speed the deployment of its network in advance of full deregulation,
Amiga plans to establish joint venture partnerships with existing businesses in
foreign countries in which it operates to comply with any foreign ownership
regulations in effect concerning telecommunications companies. Amiga's joint
venture partners will be responsible for local marketing and operations and
Amiga will be responsible for international marketing, network management and
operations, centralized financial and business planning and expansion
initiatives.
Amiga will also evaluate investments in or the acquisition of suitable
existing telecommunications and Internet businesses to speed its growth and
network development. Amiga will also consider investing in developing software
applications designed to provide innovative new services on I.P. networks, or
consider the acquisition of companies engaged in these activities.
For further information see "Business". Amiga's executive offices are
located at 2770-555 West Hastings Street, Vancouver, British Columbia, Canada
V6B 4N5, and its telephone number is (604) 638-0188.
THE OFFERING
Securities offered
by Amiga: 1,000,000 units, at $5.50 per unit, with each unit
consisting of one share of common stock and one warrant.
Each warrant entitles the holder to purchase one share
of common stock at a price of $8.00 during a period
ending two years after the date of this Prospectus.
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<PAGE>
Securities offered
by the selling
shareholder: 150,000 shares of common stock. Amiga will not receive
any proceeds from the sale of the shares offered by the
selling shareholder.
Common Stock
Outstanding Prior
To and After
Offering: As of the date of this Prospectus, Amiga had 10,227,000
shares of common stock issued and outstanding. Following
this offering, there will be 11,227,000 shares of common
stock issued and outstanding. If the underwriters'
over-allotment option is exercised in full, 11,377,000
shares of common stock will be issued and outstanding.
This amount does not include 1,150,000 shares of common
stock issuable upon the exercise of the warrants
included as part of the units, including the warrants
which are part of the underwriters' over-allotment
option; 200,000 shares of common stock issuable upon the
exercise of warrants to be issued to Westport, 2,250,000
shares of common stock issuable upon the conversion of
preferred stock and the exercise of warrants sold by
Amiga in a private offering, and 3,245,000 shares of
common stock reserved for issuance upon the exercise of
options granted by Amiga.
Proposed NASDAQ
Symbols: Units:
Common Stock:
Warrants:
Amiga plans to make an application to have its
securities listed on the NASDAQ SmallCap Market.
Summary Financial
Data:
Statement of Operations
Fiscal Nine Months Ended
Year Ended June 30, 1998 March 31, 1999
------------------------ --------------
Interest Income $ 802 $ 2,600
Operating Expenses (157,661) (625,715)
----------- -----------
Net Loss $ (156,859) $ (623,115)
=========== ===========
Loss per
common share $ (0.03) $ (0.07)
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Weighted average common
shares outstanding 4,946,000 9,218,000
Balance Sheets
March 31,1999 March 31,1999
June 30, 1998 Actual Adjusted
------------- ------------- -------------
Total Assets $349,808 $1,154,611 $7,639,611
Current Liabilities 10,242 75,659 75,659
Total Liabilities 10,242 75,659 75,659
Working Capital 256,348 846,256 7,331,256
Shareholders'
Equity 339,566 1,078,952 7,563,952
The March 31,1999 as adjusted balance sheet reflects the receipt of the
net proceeds from the sale of Amiga's Series A Preferred Stock and the receipt
of the proceeds from this offering assuming the net offering proceeds were
received on March 31, 1999.
RISK FACTORS
An investment in Amiga's securities involves substantial risks, some of
which are summarized below. Prospective investors should carefully consider the
following risk factors, among others, relating to Amiga and this offering prior
to making an investment.
Amiga has a limited operating history and has not earned any profits.
Amiga was incorporated in July 1997. Since that date, Amiga's operations
have been limited. From the date of its formation through March 31, 1999, Amiga
incurred cumulative net losses of approximately $(780,000). Amiga expects to
continue to incur losses until such time, if ever, as it generates substantial
revenues and earns net income.
Amiga will need more capital to finance its operations.
Even if all Units offered are sold, Amiga will need additional capital in
order to finance its operations. The failure of Amiga to obtain additional
capital on terms acceptable to it, or at all, will significantly restrict
Amiga's proposed operations. There can be no assurance that Amiga will be able
to obtain additional funding, if needed, or if available on terms satisfactory
to Amiga.
Amiga may not be able to compete effectively in the Internet Telephone Industry.
There are many companies that offer telecommunications services which will
compete with Amiga at some level. These include large telecommunications
companies and carriers such as AT&T, MCI and Sprint as well as many other
smaller providers of long distance services. These companies, as well as others,
including manufacturers of
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<PAGE>
hardware and software used in the business communications industry, could in the
future develop products and services that may compete with those of Amiga on a
direct basis. Many of these entities are far better capitalized than Amiga and
control significant market share in their respective industry segments. There
can be no assurance that Amiga will be able to successfully compete in the
Internet Telephony Industry.
Amiga believes that its ability to compete in the Internet Telephony
industry successfully will depend upon a number of factors, including regulatory
change, the pricing policies of competitors and suppliers; the capacity,
reliability, availability and security of the Internet Telephony infrastructure;
market presence; the timing of introductions of new products and services into
the industry; Amiga's ability in the future to support existing and emerging
industry standards; Amiga's ability to balance network demand with the fixed
expenses associated with network capacity; and industry and general economic
trends.
Since Amiga depends on other companies for telecommunications products and
services, Amiga may experience delays and increased costs if these products or
services are not available to Amiga.
Amiga will rely on other telecommunications carriers to provide data
communications capacity via leased telecommunications lines. If these carriers
are unable to provide or expand their current levels of service to Amiga,
Amiga's operations could be materially adversely affected. Although leased
telecommunications lines are usually available from several alternative
suppliers, there can be no assurance that Amiga could obtain substitute services
from other providers at reasonable or comparable prices or in a timely fashion.
Amiga is also subject to risks relating to potential disruptions in such
telecommunications services. No assurance can be given that significant
interruptions of telecommunications services to Amiga will not occur in the
future. Changes in tariffs, regulations, or policies by any of Amiga's
telecommunications providers may adversely affect Amiga's ability to continue to
offer long-distance service on what it considers to be commercially reasonable
or profitable terms.
Amiga is dependent upon providers of equipment, software, and network and
telecommunication services. A failure by a supplier to deliver equipment on a
timely basis, or the inability to develop alternative sources if and as
required, could result in additional costs and or delays and have a material
adverse effect on Amiga's operations.
The Internet Telephony industry changes rapidly and Amiga may not be successful
in adapting to new technologies.
Amiga's success in the Internet Telephony industry will be dependent upon
its ability to develop new software and services to meet changing customer
requirements. The Internet Telephony industry is characterized by rapidly
changing technology, evolving industry standards, emerging competition and
frequent new software and service introductions. There can be no assurance that
Amiga can successfully identify new service opportunities and develop and bring
new services to the market in a timely manner, or that software, services or
technologies developed by others will not render Amiga's services
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uncompetitive or obsolete in the future. Amiga's pursuit of technological
advances may require substantial time and expense, and there can be no assurance
that Amiga will succeed in adapting its services to meet future customer
requirements..
Amiga may be unable to expand its Network Infrastructure.
Amiga may be required to expand and adapt its network infrastructure as
the number of users and the amount of information they wish to transfer
increases. The expansion and adaptation of Amiga's network will require
substantial financial, operational and management resources. There can be no
assurance, however, that Amiga will be able to expand or adapt its network to
meet additional demand or subscribers' changing requirements on a timely basis,
at a commercially reasonable cost, or at all, or that Amiga will be able to
deploy successfully any necessary network expansion. Any failure of Amiga to
expand its network, as needed, on a timely basis or to adapt to changing
subscriber requirements or evolving industry standards could have a material
adverse effect on Amiga's overall business, financial condition and results of
operations.
Amiga's operations would suffer if costs for use of telecommunications and data
networks increase.
Amiga's business relies upon on low cost access to the Internet, private
I.P. networks and public switched telephone networks for international call
completion. Should the cost of internet access, data transport or public
switched telephone networks increase or such use otherwise become subject to
additional taxes, tariffs, user fees or other costs Amiga's cost savings for
call completion as compared to conventional long distance services may
deteriorate. This occurrence would have a material adverse effect on the Amiga's
ability to operate profitably, or at all.
Amiga's operations would suffer if charges for traditional long distance
telephone service decline.
Amiga's rates for long distance telephone calls are generally less than
the telephone charges for the same long-distance service that the customer would
pay to a primary seller of such services. Amiga's ability to undersell such
primary seller arises as a result of the use of the Internet to transmit long
distance telephone calls. Amiga believes its lower rates will be one of the most
important factors in its ability to attract and retain customers. Therefore,
narrowing of the differential between the rates charged to Amiga's customers and
the cost of long distance telecommunications services provided by competitors or
traditional long distance carrier's customers would have a significant adverse
effect on Amiga.
Amiga may experience problems from computer systems that are not ready to
process information associated with the year 2000.
The "Year 2000" issue affects Amiga's installed computer systems, network
elements, software applications, and other business systems that have
time-sensitive programs that may not properly reflect or recognize the year
2000. Because many
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computers and computer applications define dates by the last two digits of the
year, "00" may not be properly identified as the year 2000. This error could
result in miscalculations or system failures. The Year 2000 issue may also
affect the systems and applications of Amiga's suppliers.
Amiga does not expect to incur any material cost relating to the Year 2000
issue because it is of the opinion that its computer systems have been developed
so as to avoid this problem. Amiga is currently determining the extent to which
it may be impacted by third parties' failure to remedy their own Year 2000
issues. Amiga is having, and will continue to have, communications with all of
its suppliers, and other third parties to determine the extent, if any, to which
Amiga's systems could by impacted by any third party Year 2000 issues and
related remedies. Amiga believes that the Year 2000 issues could adversely
impact Amiga if systems operated by third parties providing services to Amiga
are not Year 2000 compliant.
Amiga's plan to operate in foreign countries involves numerous risks.
Amiga plans to operate in several foreign markets including Central and
South America, Asia, Europe as well as other international locations. Certain
business risks arise from operating in foreign countries including exposure to
periodically volatile foreign economic, monetary and currency conditions,
compliance with foreign law and regulations as well as issues relating to the
conduct of day-to-day business in foreign language and culture business
environments. Additional international considerations include high travel costs
as well as time and distance barriers in the management and development of the
business. Although Amiga plans to mitigate the effects of international business
risk through the development of business relationships with qualified, well
connected local partners in key market locations, there can be no assurance that
Amiga will be able to operate successfully in foreign countries.
Possible changes in government regulation may increase Amiga's costs and lower
profits.
Amiga uses the Internet and private I.P networks for the transmission of
long distance telephone, fax and data signals. Presently, the Federal
Communication Commission in the United States ("FCC") does not regulate
companies that provide Internet Telephony services as common carriers or
telecommunications service providers. Notwithstanding the current state of the
rules, the FCC's potential jurisdiction over the Internet is broad because the
Internet relies on wire and radio communications facilities and services over
which this regulatory authority has long-standing authority.
The issuance of additional shares may depress the price of Amiga's common stock
and warrants.
Between March and June 1999 Amiga sold 15,000 shares of its preferred
stock and 750,000 warrants for $3,000,000. Each preferred share is convertible
into 100 shares of Amiga's common stock. Each warrant allows the holder to
purchase one share of Amiga's common stock at a price of $5.00. Promptly after
the closing of this offering
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Amiga has agreed to register for public sale the shares issuable upon the
conversion of the preferred shares and the exercise of the warrants The
1,500,000 shares of common stock issuable upon the conversion of the preferred
shares may not be sold until three months after the date of this prospectus. The
750,000 shares issuable upon the exercise of the warrants may be sold at any
time after such shares have been registered for public sale. The public sale of
these shares may depress the price of Amiga's common stock and warrants.
FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements. Amiga intends to
identify forward-looking statements in this prospectus using words such as
"believes," "expects," "may," "will," "should," "plan," "projected,"
"contemplates," "anticipates," or similar statements. These statements are based
on Amiga's beliefs as well as assumptions Amiga has made using information
currently available to Amiga. Because these statements reflect Amiga's current
views concerning future events, these statements involve risks, uncertainties
and assumptions. Actual future results may differ significantly from the results
discussed in the forward-looking statements. Some, but not all, of the factors
that may cause these differences, include those discussed in the Risk Factors
section beginning on page 10 of this prospectus. Potential investors should not
place undue reliance on these forward-looking statements which apply only as of
the date of this prospectus.
DILUTION AND COMPARATIVE SHARE DATA
As of May 31, 1999, the present shareholders of Amiga owned 10,227,000
shares of common stock, which had a net tangible book value of approximately
$0.26 per share. The following table illustrates the comparative stock ownership
of the present shareholders of Amiga, as compared to the investors in this
offering. The computations in the table below assume the price paid for a unit
is all attributable to the common stock included as a component of the unit.
Number of Note
Shares Reference
--------- ---------
Shares outstanding as of May 31, 1999 10,227,000
Shares offered by Amiga 1,000,000 A
----------
Shares to be outstanding upon completion of offering 11,227,000
==========
Net tangible book value per share as of
May 31, 1999 $0.26
Net tangible book value after offering $0.67
Public offering price $5.50
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Dilution to investors in this offering $4.83
Gain to existing shareholders $0.41
Equity ownership by present shareholders after this
offering 91%
Equity ownership by investors in this offering
25% (to be adjusted for selling shareholders) 9%
The shares outstanding as of May 31, 1999 excludes shares which may be
issued upon the exercise of the warrants (included as part of the units) and the
exercise and/or conversion of other options, warrants and other convertible
securities previously issued by Amiga. See table below.
The shares offered by Amiga excludes shares issuable upon exercise of the
underwriters over-allotment option.
"Net tangible book value" is the amount that results from subtracting the
total liabilities and intangible assets of Amiga from its total assets. The
purchasers of the securities offered by this prospectus will suffer an immediate
dilution if the conversion price of the Series A Preferred Stock or the warrant
exercise price is greater than the net tangible book value of Amiga's common
stock.
Other Shares Which May Be Issued:
As of May 31, 1999 Amiga had 10,227,000 shares of common stock issued and
outstanding. The following table reflects the shares of common stock which may
be issued by Amiga as a result of the exercise of warrants (included as part of
the units), the exercise of other options and warrants issued by Amiga and the
conversion of convertible securities issued by Amiga.
Number of Note
Shares Reference
--------- ---------
Shares issuable upon exercise of
Warrants (included as part of the Units) 1,000,000 A
Shares issuable upon conversion of preferred
stock and exercise of warrants 2,250,000 B
Shares issuable upon exercise of options 3,245,000 C
Shares issuable upon exercise of Westport's 200,000 D
warrants
Shares issuable upon exercise of Underwriters'
over-allotment option 300,000 E
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A. Each Unit consists of one share of common stock ("Common Stock") and one
warrant. Each Warrant entitles the holder to purchase one share of Common Stock
at a price of $8.00 during a period beginning on the date of this Prospectus and
ending two years thereafter.
B. Between March and June 1999 Amiga sold 15,000 shares of its Series A
Preferred Stock and 750,000 Warrants for gross proceeds of $3,000,000. Each
Series A Preferred Share is convertible into 100 shares of Amiga's common stock.
Each warrant allows the holder to purchase one share of Amiga's common stock at
a price of $5.00. Promptly after the closing of this offering the Company has
agreed to register for public sale the shares issuable upon the conversion of
the preferred shares and the exercise of the warrants. The 1,500,000 shares of
common stock issuable upon the exercise of the preferred shares may not be sold
until three months after the date of this prospectus. The 750,000 shares
issuable upon the exercise of the warrants may be sold at any time after such
shares have been registered for public sale.
C. See "Management - Stock Option and Bonus Plans".
D. In addition to the other compensation to be paid to the underwriters in
connection with this offering Amiga has agreed to sell to Westport for $100
warrants to purchase 100,000 shares of common stock at a price of $6.12 per
share and warrants to purchase an additional 100,000 shares of common stock at a
price of $9.60 per share.
E. For purposes of covering any over-allotments, Amiga has granted an option to
the underwriters, exercisable within 45 days from the date of this prospectus,
to purchase up to 150,000 additional units at $5.50 per unit, less the
underwriting commission and non-accountable expense allowance. Each unit
consists of one share of common stock and one common stock purchase warrant.
USE OF PROCEEDS
The net proceeds to Amiga from this offering will be approximately $4,685,000,
after deducting underwriting commissions, the underwriters' non-accountable
expense allowance and the other offering expenses. Amiga intends to use the net
offering proceeds for the following purposes:
Purchase of Computers, Network and other Equipment $1,100,000
Investment in Joint Ventures 1,500,000
Sales and Marketing Expenses 500,000
General and Administrative Expenses 1,585,000
----------
$4,685,000
==========
Offering proceeds allocated for the purchase of computers, network and
other equipment will be used to install gateways in selected locations. Each
gateway will cost approximately $125,000 and will require approximately four
days for installation.
A portion of the proceeds from this offering will be used to establish
joint venture
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partnerships with existing businesses in foreign countries so as to speed the
deployment of Amiga's network. In any joint venture, it is expected that Amiga's
joint venture partner will be responsible for local marketing and operations and
Amiga will be responsible for network management and operations, international
marketing, and centralized financial and business planning.
Amounts allocated to sales and marketing expenses will be used to
initially promote Amiga's services to the travel and tourism industry, small to
medium sized businesses, website owners and other potential customers.
Offering proceeds allocated to general and administrative expenses are
expected to satisfy Amiga's requirements in this area for a minimum of twelve
months following the completion of this offering.
Amiga will require additional capital separate and apart from that
received from this offering in order to finance its future operations. The
failure of Amiga to obtain additional capital on terms acceptable to it, or at
all, will significantly restrict Amiga's proposed operations. There can be no
assurance that Amiga will be able to obtain additional funding, if needed, or if
available on terms satisfactory to Amiga.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following selected financial data should be read in conjunction with
the more detailed financial statements, related notes and other financial
information included in this prospectus.
Statement of Operations Data:
Nine Months Ended
Year Ended June 30, 1998 March 31, 1999
------------------------- -----------------
Interest Income $ 802 $ 2,600
Operating Expenses (157,661) (625,715)
-------- ---------
Net Loss $(156,859) $(623,115)
========== ==========
Balance Sheet Data:
June 30, 1998 March 31, 1999
------------- --------------
Total Assets $349,808 $1,154,611
Current Liabilities 10,242 75,659
Total Liabilities 10,242 75,659
Working Capital 256,348 846,256
Shareholders' Equity 339,566 1,078,952
No Common Stock dividends have been declared by Amiga since its inception.
Amiga is in the development stage and as of the date of this prospectus
had not
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commenced commercial operations. Between March and June 1999 Amiga raised
$3,000,000 from the sale of its preferred stock and warrants. Amiga intends to
use the proceeds from its private offering, as well as the proceeds from this
offering, for general and administrative expenses, marketing and for the
installation of a limited number of gateways. Amiga expects that it will require
approximately $21,500,000 in capital over the next 36 months in order to install
100 gateways ($12,500,000) and to fund its operations ($9,000,000).
Amiga has signed a letter of intent with Lucent Technologies for the
purchase of $21,500,000 of Internet telephony equipment and services, including
the purchase of $2,500,000 of equipment from Ascend Communications, Inc. Amiga
is also negotiating with a financial institution to provide the financing for
the purchase of this equipment, professional services, installation and certain
other approved uses. Amiga does not have any definitive agreements concerning
any financing and there can be no assurance that any such financing will be
available on terms acceptable to Amiga. Without this financing, or some
alternative source of funding, Amiga will only be able to install a limited
number of gateways.
BUSINESS
Amiga is an emerging, development stage company building an international
Internet Protocol telecommunications network. Amiga's network will be capable of
delivering multiple services including voice, fax, data and video. Amiga leases
capacity on existing private Internet Protocol or I.P. circuits from existing
carriers and installs new, carrier grade Internet Telephony Gateway equipment to
enable the reliable delivery of high quality voice, data, fax and video signals
over I.P. based networks on an international basis.
This type of service known generally as Internet Protocol Telephony, or
I.P. Telephony offers significant advantages over conventional
telecommunications systems including significantly reduced equipment costs,
improved bandwidth efficiency, direct routing of calls, lower costs and improved
ease of network administration and delivery of multi-media services over a
single network infrastructure. I.P. Telephony combines the low cost global reach
of the Internet and the high quality and security of private I.P based networks
with the public telephone system's ease of access.
Amiga has selected Lucent Technologies and Ascend Communications as its
suppliers of I.P. Telephony equipment and is presently planning the deployment
of its facilities-based I.P. network and the introduction of its services.
According to industry sources, the global telecommunications market
generates revenues in excess of $250 billion annually and international switched
telecommunications traffic grew from 28 billion minutes of use in 1989 to 81.8
million minutes in 1997 and is projected to reach between approximately 128.7
and 158.6 billion minutes by 2001. In the United States residential long
distance callers alone represent a $67 billion dollar market. In its infancy
today, the IP services market is estimated to increase to $1.8 billion by the
year 2001. Due to competition, rates are low for both business and residential
calls placed
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within North America. However this is not the case when calling internationally
to certain countries where high per minute rates are common. The international
telecommunications industry is growing rapidly due to:
o deregulation
o privatization
o expansion of telecommunications infrastructure
o technological improvements
o globalization of the world's economies; and
o free trade
Significant improvements have occurred in the compression and transmission
of voice over the Internet over the last several years. The quality of service
of Internet Telephony is now equivalent to that of a digital cellular phone or a
quality analog cell phone connection. Internet Telephony technology is
continuously evolving and it is expected that further improvements in technology
will allow Internet Telephony to rival that of conventional telephony networks.
The gateway equipment being deployed by Amiga is standards-based and utilizes
the newest digital signal processing and error correction technologies for
improved voice sampling and compression and reduced latency. These technologies
enable Amiga to provide high quality, commercial voice services with carrier
class reliability (99.999% availability of service).
Unlike the transmission of telephone calls or facsimile messages over
traditional land based electrical wires, telephone calls or other data
transmitted over I.P. networks are first converted into digital packets and then
sent by means of high speed land based transmission lines, satellites and/or
microwave systems in packetized form. Data transmitted over the Internet is
also, prior to transmission, compressed such that much larger amounts of data
can be transmitted than over traditional circuit switched telephone lines. As a
result, the cost of telephone calls made over I.P networks are more bandwidth
efficient and each call is much less expensive to transport than calls made
through traditional long distance telephone carriers. Computer systems, known as
gateways, act as the interconnection between the Internet or I.P. networks and
the traditional public switched telephone networks..
A telephone call made using Internet telephony begins with a telephone
connected to the lines of the local public switched telephone network operator .
The caller dials a local telephone number that connects to a gateway nearest the
caller (the "originating gateway"). The caller is then asked by an automated
voice response system to enter a PIN number and the long distance telephone
number which the caller is attempting to reach (the "destination number"). The
originating gateway directs the call over the Internet to the gateway that is
located closest to the destination number (the "terminating gateway"). Once the
call reaches the terminating gateway the call is then switched to the local
telephone network and is routed to the destination numbera. The entire call
completion process takes only a few seconds.
If a gateway does not exist in the local calling area from which the
caller is placing the call, the call is transferred (at a charge to Amiga)
through regular telephone lines to
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the nearest originating gateway. If a gateway does not exist in the local
calling area of the destination number, the call is transferred (at a charge to
Amiga) from the terminating gateway through regular telephone lines to the
destination number. Amiga therefore is able to reduce its costs and increase its
profit for calls which originate and terminate through gateways which are in the
local calling areas of the persons originating and receiving the call.
In order to lower costs and offer extended coverage, several corporations
have formed consortiums of Internet telephony companies. Each member of the
consortium owns and operates an Internet telephony gateway that communicates
with all other gateways in the consortium to provide subscribers with the
ability to place a voice or fax call from virtually any ordinary telephone to
any other ordinary telephone (or fax machine) at a cost that is significantly
below traditional long distance carriers. Each member agrees to share revenue
generated from calls originated or terminated through their gateway on a per
call/minute basis with other gateway operators who have accessed their gateway
to route and deliver calls. A month end settlement process occurs between all
gateway operators that reflects currency exchange rates and all call traffic
volume between each gateway operator. Each gateway operator is responsible for
setting the per minute calling rates to every other gateway in the consortium.
Amiga plans to join one or more of these consortiums.
Amiga's Services
Amiga initially plans to derive its revenues from the sale of the
following services:
o wholesale long distance services for other international
carriers
o prepaid long distance calling card services
o corporate long distance, fax and data networking services
o e-commerce communications services for businesses selling
products and services over the internet
o other telecommunications applications and services
Wholesale Long Distance Services
Amiga plans to market its Internet telephony services to other
international long distance carriers and wholesale customers which have a need
for large blocks of long distance telephone time between selected locations.
Although margins at the wholesale level are lower than retail margins, the sale
of blocks of long distance time to other carriers will enable Amiga to generate
revenues with only a limited number of gateways installed. Amiga has
pre-marketed its services and identified several potential wholesale
opportunities.
Prepaid Calling Cards
Amiga plans to market prepaid calling cards to persons traveling to
destinations such as Mexico, Central, and South America, Asia, Europe and other
countries where
20
<PAGE>
long distance telephone calls are substantially more expensive than domestic
long distance telephone calls. A typical long distance telephone call from
Mexico to Vancouver, British Columbia, made from a public payphone in Mexico can
cost more than $2.00 per minute, and frequently surcharges are levied by third
party credit card call processing companies located outside of Mexico. However,
due to competition in North America, rates for calls from North America to
Central and South America are significantly less expensive than calls made from
this area to North America.
Amiga plans to market its pre-paid calling cards to travelers destined for
Mexico and other countries in which Amiga has gateways. The pre-paid calling
cards will be sold through travel agents, tourist agencies, airline ticketing
offices, tourist agencies, tour companies, car rental agencies and hotel
personnel in denominations of $10, $20, $30 and $50 and an automated voice
response system is planned to enable card holders to add time to their calling
cards by charging their credit card while on the phone.
Amiga's calling card provides instructions for the use of Amiga's system.
To place a long distance call to North America, the cardholder dials a local
access number (or an 800 number if an originating gateway does not exist in the
local calling area) and is then prompted to dial the destination number as well
as the cardholder's calling card number. The call is then routed to the nearest
originating gateway. After reaching the originating gateway the call is
transmitted over the Internet to the terminating gateway nearest the destination
number. Once the call reaches the terminating gateway the call is then switched
to the local telephone network and is routed to the destination number.
Travelers making long distance calls from a local calling areas which do
not have originating gateways will nevertheless be able to use Amiga's calling
cards. However, Amiga's operating margin will be less since these calls must be
routed via an 800 number to a distant originating gateway.
By establishing gateways in North America and select foreign countries,
Amiga believes it can service a large and identifiable market of travelers with
cost-effective prepaid calling cards to use in placing calls to North America..
Corporate Services
Amiga also plans to market its services on a selective basis to
small-to-mid sized corporate customers who need a cost-effective means of
combining long distance voice, fax and video communications between their
international offices. Amiga plans to begin marketing its corporate Internet
Telephony services to medium sized US and Canadian corporations who operate
branch offices or subsidiaries in the foreign countries in which Amiga operates
its gateways.
E- Commerce Services
Amiga's network will also support Web-to-Phone and "Call-Me" services.
Web-to-Phone connections enable the users of multimedia PCs to establish a
voice
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conversation with the owner of the website or their designated customer service
representative. Amiga will introduce this new capability to website owners and
developers in those markets in which the Amiga has gateways and demand for
e-commerce services is increasing. Amiga believes that this service will
contribute to the development of sales made through the Internet. Web-To-Phone
provides new capabilities for customers to speak directly with sales people and
reservation agents while they are online and reviewing the content of a
particular website. Web-to-phone personalizes the experience of shopping over
the Internet and provides a new level of customer service.
Call-Me services enable the personal computer user to receive a telephone
call from a merchant with a website at any telephone number and time of day the
user designates by simply filling out an onscreen form. Call-Me services offer
businesses the opportunity to provide customers with greater convenience and
more personalized service.
In addition to developing and marketing these communications applications,
Amiga will also evaluate investing in or acquiring companies engaged in the
development of innovative I.P. software and network applications.
Amiga's Network
Amiga intends to eventually install 100 gateways in seventeen countries
that it has identified as having suitable long distance opportunities, with the
first gateways to be installed in North America, Mexico, Central and South
America, Asia and Europe.
To speed the deployment of its network in advance of full deregulation,
Amiga plans to establish joint venture partnerships with existing businesses in
foreign countries in which it operates to comply with any foreign ownership
regulations in effect concerning telecommunications companies. Amiga's joint
venture partners will be responsible for local marketing and operations and
Amiga will be responsible for international marketing, network management and
operations, centralized financial and business planning and expansion
initiatives. Amiga will also evaluate investment in or the acquisition of
suitable existing telecommunications and Internet businesses to speed its growth
and network development.
Amiga is negotiating with several international groups to form joint
ventures for the installation and operation of gateways in various international
locations. By working with local partners, Amiga can secure quick entry into the
local marketplace. In addition, joint venture partners can provide key services
required for successful operations - including providing space, power,
connections to the Internet and local telephone companies as well as marketing
resources and, in many cases access to an existing customer base that can use
Internet Telephony services. Joint venture partners also bring invaluable
knowledge of local languages, cultures, regulatory processes and business
practices. It is expected that in a typical joint venture Amiga will install the
gateway equipment and provide remote network administration, centralized
billing, finance and management functions as well as global marketing of
services. There can be no assurance however that Amiga will be successful in
forming any joint venture or that any joint venture will operate profitably.
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<PAGE>
Each gateway will cost approximately $125,000, require approximately 4
days for installation and will be capable of transmitting approximately 300,000
minutes of call volume per month. With certain modifications, at an additional
cost of approximately $55,000 per gateway, each gateway will be capable of
transmitting approximately 1,000,000 minutes of call volume per month. Amiga
believes it will take approximately 36 months in order to complete the
installation of these 100 gateways. The gateways required by Amiga are available
from a variety of sources.
Amiga plans to install its gateways in secure facilities leased from third
parties. Although the gateway operates automatically, the leased facility, which
will typically house other telecommunications equipment, will be accessible to
local technicians who will be trained to correct malfunctions and repair and/or
replace Amiga's equipment as needed.
At the present time the Company has its first gateway operating in
Vancouver, British Columbia and is installing its second gateway in Los Angeles,
California. Amiga plans to install four additional gateways by November,1999.
Amiga expects that it will need approximately $12,500,000 in capital over
the next 36 months in order to install 100 gateways. Although Amiga is
negotiating with a financial institution to provide the financing for the
purchase of this equipment, Amiga does not have any definitive agreements
concerning such financing and there can be no assurance that any such financing
will be available on terms acceptable to Amiga. Without this financing, or some
alternative source of funding, Amiga will only be able to install a limited
number of gateways.
Amiga's Internet Telephony system will have multiple features for security
and billing. In order to ensure maximum security, access will be restricted to
authorized incoming or outgoing callers, specific extensions, or to users with
valid Personal Identification Numbers. Amiga's system will be able to monitor
the date, time, duration, source and destination of the call and the call
originator's name.
Competition
Two significant barriers to entry in the traditional long distance
telephone market are size (minimum efficient scale of operations) and regulatory
constraints which preclude smaller companies from gaining significant market
share. Internet telephony effectively eliminates or reduces these barriers since
it is presently unregulated and enjoys economies of scope and scale by using the
Internet and private I.P. networks as a common voice video and data network.
Internet telephony will decrease barriers to entry and increase competition in
the long distance industry.
Amiga believes that its ability to compete in the Internet Telephony
Industry successfully will depend upon a number of factors, including the
pricing policies of competitors and suppliers; the capacity, reliability,
availability and security of the Internet
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telephony infrastructure; marketing; the timing of introductions of new products
and services into the industry; Amiga's ability to support existing and emerging
industry standards; Amiga's ability to balance network demand with the fixed
expenses associated with network capacity; and industry and general economic
trends.
The market for telecommunications services is extremely competitive and
there are a growing number of competitors in the Internet Telephony Industry.
There are many companies that offer business communications services and which
will compete with Amiga at some level. These include large telecommunications
companies and carriers such as AT&T, MCI, and Sprint; smaller, regional
resellers of telephone line access; and other existing Internet telephony
companies. These companies, as well as others, including manufacturers of
hardware and software used in the business communications industry, could in the
future develop products and services that could compete with those of Amiga on a
direct basis. Many of these entities have far greater financial and
organizational resources than Amiga and control significant market share in
their respective industry segments. There is no assurance that Amiga will be
able to successfully compete in the Internet telephony Industry.
Certain large public telephone companies are positioning themselves to
enter the Internet telephony market to protect their dominant domestic market
from competition. Many of these companies are testing existing Internet
telephony gateway technology which at the present time has limited call volume
capabilities. A number of companies are waiting for gateway manufacturers to
introduce advanced gateways that will be able to handle larger call volumes and
provide better quality and service.
In North America considerable discounting has been experienced in recent
years as competition has increased. While in many countries outside of North
America local telephone companies have begun offering discounts to very large
business and government customers with high call volumes, there are few
discounts available for individuals or small and medium sized companies. It is
expected that competition in the United States will be led by carriers providing
low cost but high quality internet telephony services at rates of $0.05 to $0.09
per minute. Smaller Internet service providers and new carriers are expected to
focus primarily on international or niche markets.
International markets are attractive to smaller carriers and new entrants
while large carriers are still evaluating the technology and marketplace and
contending with competition and deregulation in their domestic markets. With
international long distance rates in many countries costing well in excess of
$0.50 per minute, Amiga believes that it can earn attractive gross profit
margins while offering service at substantial discounts to currently available
long distance rates.
Although Amiga anticipates that its primary competitors will be other
internet telephony companies which offer phone-to-phone services, none have as
of yet addressed the international hospitality market which Amiga plans to
pursue with its pre-paid calling cards, nor has any competitor introduced an
integrated product offering containing corporate and e-commerce communications
services.
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Government Regulation
Amiga uses the Internet for transmission of long distance telephone calls.
Presently, the Federal Communication Commission in the United States ("FCC")
does not regulate companies that provide Internet Telephony services as common
carriers or telecommunications service providers. Notwithstanding the current
state of the rules, the FCC's potential jurisdiction over the Internet is broad
because the Internet relies on wire and radio communications facilities and
services over which these regulatory authorities have long-standing authority.
In Canada, the Canadian Radio-Television and Telecommunication Commission
("CRTC") determined in 1998 that Internet Telephony services providers must pay
local contribution charges for calls terminating on local telephone networks,
while those calls that originate and terminate on computers are not subject to
these charges. The possibility exists that regulatory authorities may one day
make a determination to apply international call termination fees or otherwise
tariff Internet telephony.
Amiga will also be required to comply with the regulations regarding the
operation of its business in several foreign jurisdictions and will be subject
to compliance with the requirements of the authorities of these locales
regarding the establishment and operation of its business.
Access charges are assessed by local telephone companies to long distance
companies for the use of the local telephone network to originate and terminate
long distance calls generally on a per minute basis. Access charges have long
been a source of dispute; with long distance companies arguing that the access
rates are substantially in excess of cost and local telephone companies arguing
that access rates are needed to subsidize lower local rates for end user and
other purposes. The Federal Communications Commission currently is considering
whether subscriber calls to Internet service providers should be classified as
"local" or "interstate" calls. Although the Federal Communications Commission to
date has determined that Internet service providers should not be required to
pay interstate access charges to local telephone companies, this decision may be
reconsidered in the future if the Federal Communications Commission finds these
calls to be "interstate." Amiga's costs for doing business would increase if
Amiga were required to pay interstate access charges.
General Information
Amiga was incorporated in Colorado on July 25, 1997. Between July 25, 1997
and May 12, 1998 Amiga sold 10,000,100 shares of its common stock to Bona Vista
West Ltd. for $5,910 in cash.
In August 1997 Amiga issued 175,456 shares of its Common Stock in exchange
for all of the Series B Common Stock of Century International Ventures Ltd.
("Century") in a share-for-share exchange with the holders of such Series B
shares. At the time of this transaction (i) Century was not conducting any
business, and (ii) had approximately 280 holders of its Series B Common Stock.
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On May 12, 1998 Amiga purchased 10,100,000 shares of Common Stock from
Bona Vista for $1,010. The shares purchased from Bona Vista were returned to the
category of "authorized but unissued" common stock.
On May 15, 1998 Amiga sold 6,901,944 shares of common stock to
twenty-three persons for $690 in cash and issued 1,000,000 shares of common
stock for services rendered. See "Management - Transactions with Related
Parties".
On May 31, 1998 Amiga sold 1,022,500 shares of common stock to eleven
persons for $511,250.
In October 1998 Amiga issued 12,000 shares of its common stock to two
persons for services rendered. In January 1999 Amiga sold 950,000 shares of its
common stock to thirty-one persons for gross proceeds of $475,000.
Between March and June 1999 Amiga sold 15,000 shares of its preferred
stock, and warrants for the purchase of 750,000 shares of common stock, for
$3,000,000 to a group of private investors. Following the closing of this
offering, the Company has agreed to register for public sale the 2,250,000
shares of common stock issuable upon the conversion of the preferred shares and
the exercise of the warrants.
In May 1999 the Company issued 265,000 shares of its common stock to two
persons for services rendered. Up to 150,000 of these shares are being offered
to the public by means of this prospectus. See "Selling Shareholder."
In August 1997 Amiga changed its corporate domicile from Colorado to
Delaware. In May 1998 Amiga changed its name to Amiga Telephony Corporation.
Facilities and Employees
Amiga's executive offices are located in Vancouver, British Columbia and
consist of 2,700 square feet of space which are leased at an annual rent of
$72,000. This lease on this space expires in February 2002.
As of May 31, 1999 Amiga employed 6 persons on a full time basis and 4
persons on a part-time basis.
MANAGEMENT
Amiga's officers and directors are as follows:
Name Age Position
---- --- --------
Ian D. Robertson 56 Chairman and a Director
Ian C. Hand 42 President, Chief Executive Officer
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Treasurer, Secretary and a Director
Harry Galekovich 61 Senior Vice President of Business Development
Donald Morrison 50 Executive Vice President, Corporate
Development and a Director
Edward M. Clunn 42 Vice President of Operations
Roney Haboosheh 25 Principal Accounting Officer
Barry Duggan 55 Director
Philip Edwards Pearce 69 Director
Marshall Naify 79 Director
Each director holds office until his successor is duly elected by the
stockholders. Amiga's officers serve at the pleasure of the Board of Directors.
The following sets forth certain information concerning Amiga's officers
and directors.
Ian D. Robertson has been the Chairman and director of Amiga since June
1998. Since July 1996 Mr. Robertson has been the president of Novus Telecom
Group Inc., a private company engaged in telecommunications investments. From
April 1994 to June 1996 Mr. Robertson was the President of Diva Systems (Canada)
Corporation, an interactive video-on-demand technology company. Between December
1991 and June 1995 Mr. Robertson was president of Norstar Capital Inc., a
merchant banking firm and from December 1991 to September 1993 Mr. Robertson was
the President of Canadian Turbo Inc./Payless Gas Co., a independent Western
Canadian petroleum refiner and marketer.
Ian C. Hand has been an officer and director of Amiga since June 1998.
Since July 1996 Mr. Hand has been the Executive Vice President and Chief
Financial Officer of Novus Telecom Group Inc, a Canadian integrated
telecommunications service provider. From April 1994 to June 1996 Mr. Hand was
Sr. Vice President of product development for Diva Systems (Canada) Corporation,
a real time video-on-demand television technology company. Since June 1995 Mr.
Hand has also been Vice President and Chief Financial Officer of NS Telecom
Group Inc., a private company engaged in the management of investments in the
technology and telecommunication sectors. Between December 1993 and May Mr. Hand
was special projects manager for Norstar Capital Inc., a private merchant
banking firm.
Harry Galekovich has been Amiga's Senior Vice President of Business
Development since January 1, 1999. From 1997 to 1998, Mr. Galekovich was
Executive Vice President of GST Global, (an international telecommunication
voice and data service provider) where he was responsible for business strategy,
business opportunities and business plan development for International wireline
and wireless operations and emerging technologies. From 1995-1997 Mr. Galekovich
was Vice President - Engineering and Operations for exchange and wireless
services for GST Telecom, where he oversaw the deployment of 14 tandem switching
platforms and a network build-out totaling over $130 million. Mr. Galekovich has
over 30 years of experience in the Telecommunications, data
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and networking industry in senior technical and management positions with
companies such as LM Erickson, United Telephone, RCA Alaska Communications,
Alascom, PTI Communications and Americomm, Inc.
Donald Morrison has been a director of Amiga since May 1998 and was
appointed an officer in June, 1999. Since January 1993, Mr. Morrison has been
the president of Braemer Capital Corp.; a company engaged in private capital
investment and management. Since April 1996 Mr. Morrison has also been the
president of Zodiac Explorations Ltd., a resource exploration company.
Edward Clunn has been an officer of the Company since January 1999.
Between May 1995 and December 1998 Mr. Clunn was an officer and part owner of
Compu-TEL Systems, Inc., a corporation which provided software and equipment to
the long distance telephone industry. Between February 1994 and May 1995 Mr.
Clunn was an officer and part owner of Dial & Save Communications, Inc., a long
distance telephone reseller.
Roney Haboosheh has been the Company's Principal Accounting Officer since
June 1998. Mr. Haboosheh has also been the manager of corporate accounting for
Novus Telecom Group since July 1997. During 1996 and 1997 Mr. Haboosheh was a
graduate student at the University of Western Ontario. Between 1995 and 1996 Mr.
Haboosheh was the assistant controller at Healthvision Corporation. Mr.
Haboosheh received his Bachelor of Arts degree in economics from the University
of Western Ontario in 1995.
Barry F. Duggan has been a director of Amiga since June 1998. Since April
1997 Mr. Duggan has been the president of Novus Telecom Inc., a subsidiary of
Novus Telecom Group. Between July 1992 and January 1997 Mr. Duggan was president
of BCTV, Check, Chan and previously ITV, subsidiaries of WIC Western
International Communications, a major Canadian television and radio broadcaster.
Philip Edwards Pearce has been a director of Amiga since February 1999.
For the past five years Mr. Pearce has been an independent business consultant.
Mr. Pearce is an investment banker by profession, with 30 years of experience in
the capital markets and brokerage industry including being a director and
officer of E.F. Hutton for 14 years. Formerly Mr. Pearce was Chairman of the
Board of Governors of the NASD, as well as serving as a member of the Board of
Governors of the New York Stock Exchange (NYSE). Mr. Pearce attended the
University of South Carolina, graduating with a B.S. degree in 1964, and
completed post-graduate studies in Investment Banking at the Wharton School,
University of Pennsylvania.
Marshall Naify has been a director of the Company since April 1999. Mr.
Naify has been the co-chairman of the board of directors of Todd AO Corporation,
a large entertainment post-production studio since 1996. Between 1990 and 1996
Mr. Naify was the chairman of the Board of Directors of Todd AO Corporation.
Since 1990 Mr. Naify has also been the owner of 505 Farms, a thoroughbred-racing
stable in Kentucky and California. Between the early 1960's and 1986 Mr. Naify
was the chairman of the board of United Artists Communications, a worldwide
theater operation with over 2,500 screens.
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The Company formed an audit committee in June 1999. The members of the
audit committee are Barry Duggan and Philip E. Pearce.
Executive Compensation
The following table sets forth in summary form the compensation received
by (i) the Chief Executive Officer of Amiga and (ii) by each other executive
officer of Amiga who received in excess of $100,000 during the fiscal year ended
June 30, 1998.
Other Re-
Annual stricted
Compen- Stock Options
Name and Fiscal Bonus sation Awards Granted
Principal Position Year Salary (2) (3) (4) (5)
- ------------------ ------ ------ ----- ------- -------- -------
Ian C. Hand 1998 (1) -- -- 1,000,000 300,000
Chief Executive
Officer
(1) The dollar value of base salary (cash and non-cash) received. During the
year ended June 30, 1998 this person was compensated for services provided
to Amiga through Novus Telecom Group. See "Transaction with Related
Parties" for further information concerning Amiga's agreement with Novus
Telecom Group.
(2) The dollar value of bonus (cash and non-cash) received.
(3) Any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
(4) During the year ending June 30, 1998, the shares of Amiga's common stock
issued as compensation for services to Novus Telecom Group, an affiliate
of Mr. Robertson.
The table below shows the number of shares of Amiga's Common Stock owned
by the officers listed above, and the value of such shares as of June 30, 1998.
Name Shares Value
---- ------ -----
Ian C. Hand * *
* Mr. Hand has a beneficial interest in 1,000,000 shares held by Novus
Telecom Group. See "Transactions with Related Parties" below.
(5) The shares of Common Stock to be received upon the exercise of all stock
options granted during the year ending June 30, 1998.
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Proposed Compensation
The following table shows the amount which Amiga expects to pay its executive
officers during the year ending June 30, 1999 and the time which Amiga's
executive officers plan to devote to Amiga's business.
Proposed Time to be devoted to
Name Compensation Amiga's Business
---- ------------ ---------------------
Ian D. Robertson (1) 25%
Ian C. Hand (1) 25%
Harry Galekovich $90,000 100%
Donald Morrison $90,000 100%
Edward Clunn $65,000 100%
Roney Haboosheh (1) 25%
(1) Ian Robertson, Ian Hand, and Roney Haboosheh are compensated for services
rendered through payments made by Amiga to Novus Telecom Group, Inc. See
"Transactions with Related Parties" below.
Employment Agreements
Amiga does not have any employment agreements with its executive officers,
but intends in future to enter into such agreements with its senior executives
Long Term Incentive Plans - Awards in Last Fiscal Year
None.
Employee Pension, Profit Sharing or Other Retirement Plans
Amiga does not have a defined benefit, pension plan, profit sharing or
other retirement plan, although Amiga may adopt one or more of such plans in the
future.
Compensation of Directors
At present Amiga does not pay its directors for attending meetings of the
Board of Directors, although Amiga expects to adopt a director compensation
policy in the future. Amiga has no standard arrangement pursuant to which
directors of Amiga are compensated for any services provided as a director or
for committee participation or special assignments.
See " Stock Option and Bonus Plans" below for information concerning stock
options and stock bonuses granted to Amiga's directors. Except as disclosed
elsewhere in this prospectus no director of Amiga received any form of
compensation from Amiga during the year ended June 30, 1998.
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Stock Option and Bonus Plans
Amiga has an Incentive Stock Option Plan, a Non-Qualified Stock Option
Plan and a Stock Bonus Plan. A summary description of each Plan follows. In some
cases these three Plans are collectively referred to as the "Plans".
Incentive Stock Option Plan.
The Incentive Stock Option Plan authorizes the issuance of options to
purchase up to 1,000,000 shares of Amiga's Common Stock. The Incentive Stock
Option Plan became effective on December 1, 1998 and will remain in effect until
December 1, 2008, unless terminated earlier by action of the Board of Directors.
Only officers and employees of Amiga may be granted options pursuant to the
Incentive Stock Option Plan.
In order to qualify for incentive stock option treatment under the
Internal Revenue Code, the following requirements must be complied with:
1. Options granted pursuant to the Plan must be exercised no later than:
(a) The expiration of thirty (30) days after the date on which an
option holder's employment by Amiga is terminated.
b) The expiration of one year after the date on which an option
holder's employment by Amiga is terminated, if such termination is due to the
Employee's disability or death.
2. In the event of an option holder's death while in the employ of Amiga,
his legatees or distributees may exercise (prior to the option's expiration) the
option as to any of the shares not previously exercised.
3. The total fair market value of the shares of Common Stock (determined
at the time of the grant of the option) for which any employee may be granted
options which are first exercisable in any calendar year may not exceed
$100,000.
4. Options may not be exercised until one year following the date of
grant. Options granted to an employee then owning more than 10% of the Common
Stock of Amiga may not be exercisable by its terms after five years from the
date of grant.
5. The purchase price per share of Common Stock purchasable under an
option is determined by the Committee but cannot be less than the fair market
value of the Common Stock on the date of the grant of the option (or 110% of the
fair market value in the case of a person owning Amiga's stock which represents
more than 10% of the total combined voting power of all classes of stock).
Non-Qualified Stock Option Plan.
The Non-Qualified Stock Option Plan authorizes the issuance of options to
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purchase up to 3,000,000 shares of Amiga's Common Stock. The Non-Qualified Stock
Option Plan became effective on December 1, 1998 and will remain in effect until
December 1, 2008, unless terminated earlier by the Board of Directors. Amiga's
employees, directors, officers, consultants and advisors are eligible to be
granted options pursuant to the Plan, provided however that bona fide services
must be rendered by such consultants or advisors and such services must not be
in connection with the offer or sale of securities in a capital-raising
transaction. The exercise price for each option granted pursuant to this Plan is
determined by Amiga's Board of Directors at the time of grant.
Stock Bonus Plan.
Up to 1,000,000 shares of Common Stock may be granted under the Stock
Bonus Plan. Such shares may consist, in whole or in part, of authorized but
unissued shares, or treasury shares. Under the Stock Bonus Plan, Amiga's
employees, directors, officers, consultants and advisors are eligible to receive
a grant of Amiga's shares; provided, however, that bona fide services must be
rendered by consultants or advisors and such services must not be in connection
with the offer or sale of securities in a capital-raising transaction.
Other Information Regarding the Plans.
The Plans are administered by Amiga's Board of Directors. The Board of
Directors has the authority to interpret the provisions of the Plans and
supervise the administration of the Plans. In addition, the Board of Directors
is empowered to select those persons to whom shares or options are to be
granted, to determine the number of shares subject to each grant of a stock
bonus or an option and to determine when, and upon what conditions, shares or
options granted under the Plans will vest or otherwise be subject to forfeiture
and cancellation.
In the discretion of the Board of Directors, any option granted pursuant
to the Plans may include installment exercise terms such that the option becomes
fully exercisable in a series of cumulating portions. The Board of Directors may
also accelerate the date upon which any option (or any part of any options) is
first exercisable. Any shares issued pursuant to the Stock Bonus Plan and any
options granted pursuant to the Incentive Stock Option Plan or the Non-Qualified
Stock Option Plan will be forfeited if the "vesting" schedule established by the
Board of Directors at the time of the grant is not met. For this purpose,
vesting means the period during which the employee must remain an employee of
Amiga or the period of time a non-employee must provide services to Amiga. At
the time an employee ceases working for Amiga (or at the time a non-employee
ceases to perform services for Amiga), any shares or options not fully vested
will be forfeited and cancelled. In the discretion of the Board of Directors
payment for the shares of Common Stock underlying options may be paid through
the delivery of shares of Amiga's Common Stock having an aggregate fair market
value equal to the option price, provided such shares have been owned by the
option holder for at least one year prior to such exercise. A combination of
cash and shares of Common Stock may also be permitted at the discretion of the
Board of Directors.
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Options are generally non-transferable except upon death of the option
holder. Shares issued pursuant to the Stock Bonus Plan will generally not be
transferable until the person receiving the shares satisfies the vesting
requirements imposed by the Board of Directors when the shares were issued.
The Board of Directors of Amiga may at any time, and from time to time,
amend, terminate, or suspend one or more of the Plans in any manner it deems
appropriate, provided that such amendment, termination or suspension cannot
adversely affect rights or obligations with respect to shares or options
previously granted. The Board of Directors may not, without shareholder
approval: make any amendment which would materially modify the eligibility
requirements for the Plans; increase or decrease the total number of shares of
Common Stock which may be issued pursuant to the Plans except in the case of a
reclassification of Amiga's capital stock or a consolidation or merger of Amiga;
reduce the minimum option price per share; extend the period for granting
options; or materially increase in any other way the benefits accruing to
employees who are eligible to participate in the Plans.
Any options granted under the Incentive Stock Option Plan or the
Non-Qualified Stock Option Plan must be granted before November 15, 2008. Any
shares granted pursuant to the Stock Bonus Plan must be issued prior to November
15, 2008. The Plans are not qualified under Section 401(a) of the Internal
Revenue Code, nor are they subject to any provisions of the Employee Retirement
Income Security Act of 1974.
Summary
The following sets forth certain information as of May 31, 1999,
concerning the stock options granted by Amiga. Each option represents the right
to purchase one share of Amiga's Common Stock.
Shares Issuable Upon Exercise of
Options Granted Pursuant to
----------------------------------------------
Incentive Stock Non-Qualified
Name Option Plan Stock Option Plan
---- --------------- -----------------
Ian D. Robertson 300,000
Ian C. Hand 300,000
Harry Galekovitch 200,000 --
Donald Morrison 300,000
Edward Clunn 100,000
Roney Haboosheh 40,000
Barry Dugan 200,000
Philip Edwards Pearce 150,000
Others 550,000 1,105,000
------- ---------
750,000 2,495,000
======= =========
All of the foregoing options are exercisable at $0.50 per share, expire on
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December 1, 2001, and are exercisable as follows:
- - 25% of the options will be exercisable three months after Amiga's common
stock begins trading in the public market.
- - 25% of the options will be exercisable six months after Amiga's common
stock begins trading in the public market.
- - 25% of the options will be exercisable nine months after Amiga's common
stock begins trading in the public market.
- - 25% of the options will be exercisable twelve months after Amiga's common
stock begins trading in the public market.
Notwithstanding the above, Amiga's officers, directors and certain
shareholders who collectively own 6,424,444 shares of Amiga's common stock have
agreed that they will not sell their shares of Amiga's common stock, or any
shares acquired upon the exercise of any options until certain conditions occur.
See "Underwriting" for further information regarding these resale restrictions.
Total Shares Remaining
Shares Reserved for Shares Options/
Reserved Outstanding Issued As Shares
Name of Plan Under Plan Options Stock Bonus Under Plan
- ------------ ---------- ------------ ----------- ----------
Incentive Stock
Option Plan 1,000,000 750,000 N/A 250,000
Non-Qualified
Stock Option
Plan 3,000,000 2,495,000 N/A 505,000
Stock Bonus Plan 1,000,000 N/A 15,000 985,000
Transactions with Related Parties
On May 15, 1998 Amiga sold 6,901,944 shares of common stock to
twenty-three persons for $690 in cash and issued 1,000,000 shares of common
stock for services rendered. As part of these transactions Amiga issued shares
of its common stock to the following officers, directors and affiliated parties.
Name Number of Shares Consideration
- ---- ---------------- -------------
Novus Telecom Group, Inc. 1,000,000(1) Services Rendered
Donald Morrison 400,000(2) $40
(1) Novus Telecom Group, Inc. is controlled by a number of persons, including
Ian Robertson, Ian Hand and Barry Duggan, who are officers and directors
of Amiga, and such persons are deemed to be the beneficial owners of these
shares. See "Agreement with Novus Telecom Group" below
(2) Shares are registered in the name of Bojangles Enterprises Ltd., a company
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controlled by Mr. Morrison.
Agreement with Novus Telecom Group: Effective April 15, 1998 Amiga entered into
a management agreement with Canadian Digital Network, Inc., d/b/a Novus Telecom
Group, Inc. whereby Novus agreed to manage the day-to-day operations of Amiga
and to pay for the services of Ian Hand, Ian Robertson, , Barry Duggan, Roney
Haboosheh, , and certain other support personnel. In consideration for these
services Amiga agreed to issue 1,000,000 shares of its common stock to Novus,
pay Novus $20,000 per month, and grant persons designated by Novus options to
purchase 1,000,000 shares of Amiga's common stock. Of the 2,500,000 options
which have been issued pursuant to Amiga's Non-Qualified Stock Option Plan,
1,000,000 options were granted by virtue of the assignment of Novus' rights to
these options. The management agreement between Amiga and Novus expires on April
15, 2000.
The officers, directors and controlling shareholders of Novus are:
Percentage ownership
Name Position in Novus
---- -------- --------------------
Ian Robertson President and a Director 27%
Ian Hand Executive Vice President and a Director 11%
Barry Duggan Vice President and a Director 6%
Donato Iannucci Vice President and a Director 14%
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of May 31,1999, information with
respect to the only persons owning beneficially 5% or more of the outstanding
Common Stock and the number and percentage of outstanding shares owned by each
director and officer and by the officers and directors as a group both before
and after this Offering. Unless otherwise indicated, each owner has sole voting
and investment powers over his shares of Common Stock.
Percent of Class
----------------
Shares Before After
Name and Address Owned(1) Offering Offering(2)
- ---------------- -------- -------- -----------
Ian Robertson (3) -- --
750 Anderson Cres
West Vancouver, B.C
Canada V7T 1S5
Ian Hand (3) -- --
3633 W. 7th Ave
Vancouver, B.C
Canada V6R 1W5
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Harry Galekovich -- -- --
5511 SouthEast 15th Street
Vancouver, WA 98683
Edward M. Clunn -- -- --
2770-555 W. Hastings Street
Vancouver, British Columbia
Canada V6B 4N5
Donald Morrison 400,000(4) 3.9% 3.6%
4036 W. 12th Ave
Vancouver, B.C
Canada V6R 2P3
Roney Haboosheh -- -- --
1177 W. Hastings Street
Suite 2350
Vancouver, B.C
Canada V6E 2K3
Barry F. Duggan (3) -- --
5450 Cypress Street
Vancouver, B.C
Canada V6M 3R4
Philip Edwards Pearce -- -- --
6624 Glenleaf Court
Charlotte, N.C. 28270
Marshall Naify (5) -- --
72 Golden Gate Avenue
San Francisco, CA 94102
Novus Telecom Group, Inc. 1,000,000(3) 9.8% 8.9%
1177 W. Hastings Street
Suite 2350
Vancouver, B.C
Canada V6E 2K3
Acadia Capital Corp. 1,812,444 17.7% 16.1%
McLean Building
P.O. Box 62
2001 Leeward Highway
Provendiciales
Turks & Caicos Islands, BWI
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327 Teak Enterprises 840,000 8.2% 7.5%
23 Regent St., P.O. Box 63
Belize City, Belize
All officers and directors 1,400,000 13.7% 12.5%
as a group (8 persons)
(1) Excludes shares issuable upon the exercise of options granted to the
following persons:
Name Shares Subject to Option
---- ------------------------
Ian D. Robertson 300,000
Ian Hand 300,000
Harry Galekovich 200,000
Donald Morrison 300,000
Edward Clunn 100,000
Roney Haboosheh 40,000
Barry Duggan 200,000
Philip Edwards Pearce 150,000
(2) Excludes any shares issuable upon (i) the exercise of the Underwriters'
over-allotment option (ii) the exercise of the Warrants (including as part
of the Units) or (iii) upon the exercise of any other warrants or options
granted by Amiga. See "Dilution and Comparative Share Data".
(3) Ian Robertson, Ian Hand and Barry Duggan are affiliates of Novus Telecom
Group, Inc. and may be deemed the beneficial owners of the 1,000,000
shares owned by Novus.
(4) Shares are registered in the name of Bojangles Enterprises Ltd., a company
controlled by Mr. Morrison.
(5) Marshall Naify owns shares of Amiga's preferred shock and warrants which
collectively entitle Mr. Naify to receive 1,425,000 shares of Amiga's
common stock. See "Selling Shareholders."
Officers, directors and certain shareholders who collectively own 6,424,444
shares of Amiga's common stock have agreed not to sell their shares of Amiga's
common stock, or any shares they may acquire upon the exercise of any options,
until certain conditions occur. See "Underwriting" for further information
concerning these resale restrictions.
UNDERWRITING
General
The units will be offered to the public through underwriters. Westport
Resources Investment Services, Inc. is acting as the managing underwriter and as
the representative of the other underwriters.
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Amiga has entered into an underwriting agreement with Westport and the
underwriters listed below with respect to this offering. Amiga has agreed to
sell to the underwriters, less the underwriting commission of 10%, the units
offered by this prospectus.
The underwriters named below, have severally agreed, subject to the terms
and conditions of the underwriting agreement, to purchase from Amiga, on a "firm
commitment basis", the respective number of units set forth opposite their names
below. The underwriters are committed to take and pay for all the units
underwritten by them and offered hereby if any are taken.
Underwriter Number of Units
----------- ---------------
Westport Resources Investment Services, Inc.
TOTAL
The underwriters have advised Amiga that they propose to offer the units
to the public initially at the price set forth on the cover page of the
Prospectus.
The shares of common stock and warrants comprising the units may be
separated from the units and may trade as separate securities immediately.
There has been no previous market for any of Amiga's securities. The major
factors considered by Amiga and Westport in determining the public offering
price of the Units, in addition to prevailing market conditions, were Amiga's
operating history, estimates of the business potential and earnings prospects of
Amiga, the present state of Amiga's development and an assessment of Amiga's
management, as well as consideration of the above factors in relation to market
valuations of comparable companies.
Amiga has granted an option to the Underwriters, exercisable within 45
days from the date of this Prospectus, to purchase up to 150,000 additional
Units at the public offering price set forth on the cover page of this
Prospectus, less the underwriting discounts and commissions. The Underwriters
may exercise this right only for the purpose of covering over-allotments, if
any, made in connection with the sale of the 1,000,000 Units offered. To the
extent that the Underwriters exercise such option, the Underwriters will have a
firm commitment to purchase the optioned Units.
To the extent this over-allotment option is exercised in full the total
amount of the offering will be $6,325,000, the underwriting commissions will be
$632,500 and the proceeds to Amiga, after payment of the underwriters'
non-accountable expense allowance and the estimated expenses of this offering,
will be $5,402,750.
Amiga also has agreed to pay Westport a non-accountable expense allowance
in the amount of 3% of the gross proceeds from the sale of the Units, including
the Units sold to the Underwriters pursuant to the over-allotment option. The
Underwriters will
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<PAGE>
bear all expenses in excess of that amount. To the extent the actual expenses of
the Underwriters are less than the non-accountable expense allowance, the
difference may constitute additional compensation to the Underwriters. As of the
date of this Prospectus, Amiga had advanced the Representative $25,000 toward
the non-accountable expense allowance.
Upon the completion of this offering, Westport will be issued, for a
nominal sum, warrants to purchase up to 200,000 shares of Amiga's Common Stock.
The Underwriters may offer the Units through other dealers (the "Selected
Dealers") who are members of the National Association of Securities Dealers,
Inc. at the initial public offering price less a concession of $ per Unit. The
Underwriters may allow and such dealers may re-allow a concession not in excess
of $ per Unit to other brokers and dealers. The Underwriters and the Selected
Dealers will not sell any of the Units to any account over which they have
discretionary authority, without the express consent of the account holder.
In connection with this offering, some underwriters may engage in passive
market making transactions in Amiga's common stock in accordance with Rule 103
of Regulation M. Further, the underwriters' selling group members and their
respective affiliates may engage in transaction that stabilize, maintain or
otherwise affect the market price of Amiga's common stock. These transactions
may include stabilization transactions permitted by Rule 104 of Regulation M,
under which persons may bid for or purchase shares to stabilize the market
price. The underwriters may also create a "short position" for their own account
by selling more shares in the offering than they are committed to purchase, and
in that case they may purchase shares in the open market after this offering is
completed to cover all or a part of their short position. The underwriters may
also cover all or a portion of their short position, up to 150,000 shares, by
exercising their over-allotment option described above.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of Amiga's common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time.
Amiga's officers, directors and certain shareholders, who collectively own
6,424,444 shares of Amiga's common stock, have agreed that they will not sell
their shares of Amiga's common stock, or any shares they may acquire upon the
exercise of any options, without the consent of Westport until the first to
occur of the following:
(i) the date the bid price of Amiga's common stock, adjusted for any splits,
trades at or above $10.00 for 20 consecutive trading days
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<PAGE>
(ii) after 18 months from the date of closing of this Offering, the date the bid
price the price of Amiga's common stock, adjusted for any splits, trades at or
above $7.50 for 20 consecutive days or
(iii) 24 months from the date of the closing of this Offering.
Although it has no legal obligation to do so, the Representative has
indicated that from time to time it may become a market-maker and otherwise
effect transactions in Amiga's securities.
The Agreement further provides for indemnification by Amiga of and
contribution by Amiga to each of the Underwriters, and persons who may be deemed
to control each of the Underwriters, with respect to certain liabilities,
including civil liabilities under the Act.
Amiga has agreed that the Representative shall have the right, immediately
after the completion of this offering and during the one year period thereafter,
to select a member to Amiga's Board of Directors. The Representative has not
selected its nominee to the Board of Directors.
Westport Warrants
Amiga has agreed to sell to Westport, for $100, warrants to purchase up to
100,000 shares of common stock at a price of $6.12 per share and warrants to
purchase 100,000 shares of common stock at a price of $9.60 per share.
Westport's warrants are exercisable for a period of four years commencing one
year after the date of this Prospectus.
The Representative's Warrants contain provisions for adjustment of the
exercise price to prevent dilution upon the occurrence of certain events. The
Representative's Warrants will be non-transferable for a period of one year from
the date of this Prospectus except to officers of the Representative, other
underwriters, selected dealers, or their respective officers or partners. The
holders of the Representative's Warrants will have no voting, dividend or other
rights of shareholders of Amiga until such time as the Representative's Warrants
are exercised. Any gain from the sale of the Representative's Warrants or the
securities issuable upon exercise thereof may be deemed to be additional
underwriting compensation.
At the request of a majority of the holders of the Representative's
Warrants and/or underlying securities during the four year period commencing one
year after the date of this Prospectus, Amiga has agreed to file, at its expense
and on one occasion, and to use its best efforts to cause to become effective, a
new registration statement or prospectus required to permit the public sale of
the securities underlying the Representative's Warrants. In addition, if at any
time during the four year period commencing one year after the date of this
Prospectus, Amiga registers any of its securities, the holders of the
Representative's Warrants will have the right, subject to certain conditions, to
include in such registration statement at Amiga's expense, all or any part of
the securities underlying the Representative's Warrants.
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<PAGE>
A new registration statement will be required to be filed and declared
effective before distribution to the public of the securities underlying the
Representative's Warrants. Amiga will be responsible for the cost of preparing
such a registration statement.
For the life of the Representative's Warrants, the holders are given the
opportunity to profit from a rise in the market price of Amiga's securities,
with a resultant dilution in the interest of existing shareholders. In addition,
the terms on which Amiga could obtain additional capital may be adversely
affected, and the Representative's Warrants may be exercised at a time when
Amiga would, in all likelihood, be able to obtain any needed capital by a new
offering of securities on terms more favorable than those provided for by the
Representative's Warrants. The Representative and its transferees may be deemed
to be "underwriters" under the Securities Act with respect to the sale of Units,
Common Shares and Warrants to be received upon exercise of the Warrants, and any
profit realized upon such sale may be deemed to be additional underwriting
compensation.
The foregoing is a summary, which does not purport to be complete, of the
principal terms of the Agreement. Reference is made to copies of the Agreement
and form of Representative's Warrant which are on file with the Securities and
Exchange Commission as exhibits to the Registration Statement of which this
Prospectus forms a part. See "Additional Information".
SELLING SHAREHOLDER
In May 1999 Amiga issued 250,000 shares of its common stock to Steven
Heard for services rendered. By means of this prospectus Mr. Heard is offering
to sell 150,000 of these shares.
Mr. Heard is sometimes referred to in this prospectus as the selling
shareholder. Amiga will not receive any proceeds from the sale of the shares by
the Mr. Heard. If all 150,000 shares offered my Mr. Heard are sold, Mr. Heard
will own 100,000 shares (or less that 1%) of the Company's outstanding common
stock.
Mr. Heard's shares of common stock may be offered and sold by means of
this prospectus from time to time as market conditions permit in the
over-the-counter market, or otherwise, at prices and terms then prevailing or at
prices related to the then-current market price, or in negotiated transactions.
These shares may be sold by one or more of the following methods, without
limitation: (a) a block trade in which a broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant
to this prospectus; (c) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; and (d) face-to-face transactions between
sellers and purchasers without a broker/dealer. Brokers or dealers may receive
commissions or discounts from the Mr. Heard in amounts to be negotiated. Brokers
or dealers engaged by the Mr. Heard may arrange for other brokers or dealers to
participate, in sales of the common stock offered by Mr. Heard.
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<PAGE>
The costs of registering the shares offered by Mr. Heard are being paid by
Amiga. Mr. Heard will pay all other costs of the sale of the shares offered by
them.
Mr. Heard and any broker/dealers who act in connection with the sale of
the shares offered by Mr. Heard may be deemed to be "underwriters" within the
meaning of ss.2(11) of the Securities Acts of 1933, and any commissions received
by them and profit on any resale of the shares as principal might be deemed to
be underwriting discounts and commissions under the Securities Act.
Amiga has advised the Mr. Heard that he and any securities broker/dealers
or others who may be deemed to be statutory underwriters will be subject to the
Prospectus delivery requirements under the Securities Act of 1933. Amiga has
also advised the Mr. Heard that in the event of a "distribution" of the shares
owned by the Mr. Heard, Mr. Heard, any "affiliated purchasers", and any
broker/dealer or other person who participates in such distribution may be
subject to Rule 102 under the Securities Exchange Act of 1934 ("1934 Act") until
their participation in that distribution is completed. A "distribution" is
defined in Rule 102 as an offering of securities "that is distinguished from
ordinary trading transactions by the magnitude of the offering and the presence
of special selling efforts and selling methods". Amiga has also advised the Mr.
Heard that Rule 102 under the 1934 Act prohibits any "stabilizing bid" or
"stabilizing purchase" for the purpose of pegging, fixing or stabilizing the
price of the Common Stock in connection with this offering. Rule 101 makes it
unlawful for any person who is participating in a distribution to bid for or
purchase stock of the same class as is the subject of the distribution.
DESCRIPTION OF SECURITIES
Units
Each Unit consists of one share of Common Stock and one Warrant. The
shares of Common Stock and the Warrants comprising the Units will be immediately
detachable and separately transferable commencing on the date of this
Prospectus.
Common Stock
Amiga is authorized to issue 30,000,000 shares of Common Stock, (the
"Common Stock"). Holders of Common Stock are each entitled to cast one vote for
each share held of record on all matters presented to shareholders. Cumulative
voting is not allowed; hence, the holders of a majority of the outstanding
Common Stock can elect all directors.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefore and,
in the event of liquidation, to share pro rata in any distribution of Amiga's
assets after payment of liabilities. The board is not obligated to declare a
dividend. It is not anticipated that dividends will be paid in the foreseeable
future.
Holders of Common Stock do not have preemptive rights to subscribe to
additional shares if issued by Amiga. There are no conversion, redemption,
sinking fund
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or similar provisions regarding the Common Stock. All of the outstanding shares
of Common Stock are fully paid and non-assessable and all of the shares of
Common Stock offered as a component of the Units will be, upon issuance, fully
paid and non-assessable.
Preferred Stock
Amiga is authorized to issue up to 5,000,000 shares of Preferred Stock.
Amiga's Articles of Incorporation provide that the Board of Directors has the
authority to divide the Preferred Stock into series and, within the limitations
provided by Delaware statute, to fix by resolution the voting power,
designations, preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any series so
established. As the Board of Directors has authority to establish the terms of,
and to issue, the Preferred Stock without shareholder approval, the Preferred
Stock could be issued to defend against any attempted takeover of Amiga.
In April and May, 1999 Amiga raised $3,000,000 from the sale of 15,000
shares of Amiga's Series A Preferred Stock and 750,000 warrants. Each Preferred
Share is convertible into 100 shares of Amiga's Common Stock. Each warrant
allows the holder to purchase one additional share of Amiga's Common Stock for
$5.00 at any time during the period six months after the date of this
prospectus. Promptly after the completion of this offering Amiga has agreed to
register for public sale the shares issuable upon the conversion of the
preferred stock and/or the exercise of the warrants.
Warrants
The warrants (included as a component of the units) will be issued in
registered form under, and subject to the terms of, a warrant agreement dated as
of the effective date of this offering between Amiga and Oxford Transfer and
Registrar, Inc. as warrant agent. The following statements are brief summaries
of certain provisions of the warrant agreement and are subject to the provisions
the warrant agreement , to which reference is made for a complete statement of
such provisions. Amiga has authorized the issuance of 1,150,000 Warrants,
including 150,000 Warrants representing the Underwriters' over-allotment option.
Amiga has reserved an equivalent number of shares of Common Stock for issuance
upon exercise of the Warrants. The Warrants will be detachable and separately
transferable from the Common Stock included in the Units commencing on the date
of this Prospectus.
Each Warrant entitles the holder to purchase one additional share of
Amiga's Common Stock at a price of $8.00 during a period ending two years after
the date of this prospectus.
Notwithstanding the exercise period applicable to the Warrants, no Warrant
may be exercised unless Amiga has in effect a current registration statement
covering the shares underlying the Warrants. Although Amiga has registered the
shares of Common Stock issuable upon the exercise of the Warrants, no assurance
can be given that Amiga will in fact maintain a current registration statement
covering the shares underlying the Warrants, in which case the Warrants will
expire and be of no value. It should also be
43
<PAGE>
noted that even if Amiga maintains a current registration statement covering the
shares of Common Stock underlying the Warrants, Amiga may not, or may be unable
to, register such Common Stock in each state in which a Warrant holder resides,
in which case the Warrant may not be exercised by such Warrant holder. At the
time the Warrants are available for exercise, Warrant holders may contact Amiga
to determine the states in which the Warrants may be exercised.
The Warrants will be immediately transferable. Holders of the Warrants may
sell the Warrants if a market exists, rather than exercise them. However, there
can be no assurance that a market will develop or continue as to the Warrants.
The exercise price of the Warrants may not be increased during the term of
the Warrants, but the exercise price may be decreased at the discretion of
Amiga's Board of Directors by giving each Warrant holder at least thirty (30)
days notice of such decrease. Unless exercised within the time provided for
exercise, the Warrants will automatically expire. The exercise period for the
Warrants may be extended by Amiga's Board of Directors giving at least thirty
(30) days notice of such extension to each Warrant holder of record.
There is no minimum number of shares which must be purchased upon exercise
of the Warrants.
The holders of the Warrants in certain instances are protected against
dilution of their interests represented by the underlying shares of Common Stock
upon the occurrence of stock dividends, stock splits, reclassifications,
reorganizations, mergers, consolidations, and for issuances of Common Stock at a
price below the exercise price of Warrants.
The holders of the Warrants have no voting power and are not entitled to
dividends. In the event of a liquidation, dissolution, or winding up of Amiga,
holders of the Warrants will not be entitled to participate in the distribution
of Amiga's assets.
There are no present arrangements for payment to the Underwriters or any
other person of any warrant solicitation fee in connection with the exercise of
the Warrants. In no event will any compensation for the exercise of Warrants be
paid within 12 months following the date of this Prospectus. If any warrant
solicitation fees are to be paid thereafter, in no event will compensation be
paid as a result of any transaction where the market price of the underlying
security is lower than the exercise price of the Warrant, where the Warrant to
be exercised is held in any discretionary account, where the exercise of a
Warrant is in connection with an unsolicited transaction, or where disclosure of
the compensation arrangements has not been made in documents provided to the
Warrant holder at the time of exercise.
No fractional shares will be issuable upon exercise of the Warrants. Amiga
will pay to a Warrant holder, in lieu of any fractional share which is otherwise
issuable, an amount in cash based on the market value of the share of Amiga's
Common Stock on the last trading day prior to the exercise date.
44
<PAGE>
Warrants are generally more speculative than the Common Stock which is
issuable upon the exercise of the Warrants. The percentage increase or decrease
in the market price of a Warrant may to be greater than the percentage increase
or decrease in the market price of the underlying common shares. A Warrant may
become worthless, or of reduced value, if the market price of the Common Stock
decreases, or increases only modestly, over the term of the Warrant.
The Warrants may be exercised upon surrender of the Warrant certificate on
or prior to the expiration date at the offices of the Warrant Agent, with the
exercise form on the reverse side of the Warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
check payable to Amiga) to the Warrant Agent for the number of Warrants being
exercised.
Transfer Agent
Oxford Transfer and Registrar, Inc. is the transfer agent for Amiga's
Common Stock and Warrants.
EXPERTS
The financial statements as of June 30, 1998 and for the period from July
25, 1997 to June 30, 1998 included in this prospectus have been audited by Ernst
& Young LLP, independent auditors, in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
LITIGATION
The Company is not involved in any legal proceedings.
LEGAL MATTERS
Hart & Trinen has acted as counsel to Amiga and has provided Amiga with
its opinion that the securities offered by this Prospectus have been validly
authorized and when sold in accordance with the terms described in this
Prospectus will represent fully paid and non-assessable securities of Amiga.
Certain legal matters will be passed upon for the Underwriters by William
M. Prifty, Esq.
INDEMNIFICATION
Amiga's Bylaws authorize indemnification of a director, officer, employee
or agent of Amiga against expenses incurred by him in connection with any
action, suit, or proceeding to which he is named a party by reason of his having
acted or served in such capacity, except for liabilities arising from his own
misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent of
45
<PAGE>
Amiga who was found liable for misconduct or negligence in the performance of
his duty may obtain such indemnification if, in view of all the circumstances in
the case, a court of competent jurisdiction determines such person is fairly and
reasonably entitled to indemnification. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers, or persons controlling Amiga pursuant to the foregoing
provisions, Amiga has been informed that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
ADDITIONAL INFORMATION
Amiga has filed with the Securities and Exchange Commission, 450 5th
Street, N.W., Washington, D.C. 20001, a Registration Statement under the
Securities Act of l933, as amended, with respect to the securities offered by
this prospectus. This prospectus does not contain all of the information in the
Registration Statement. For further information with respect to reference is
made to the Registration Statement and to the exhibits filed with the
registration statement. Statements contained in this prospectus as to the
contents of any contract or other documents are summaries which are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. This
Registration Statement and the related exhibits may also be inspected at the
Internet Web Site maintained by the Securities and Exchange Commission at
www.sec.gov. Copies may be obtained at the Washington, D.C. office upon payment
of the charges prescribed by the Commission.
Amiga does not file reports required by the Securities Exchange Act of
1934 with the Securities and Exchange Commission, although it will be required
to file these reports following this Offering. Amiga plans to furnish annual
reports to its shareholders, which will include audited financial statements.
Amiga may also issue quarterly or other interim reports to its shareholders as
it deems appropriate.
46
<PAGE>
FINANCIAL STATEMENTS
AMIGA TELEPHONY
CORPORATION
(a development stage enterprise)
June 30, 1998
47
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Directors of
Amiga Telephony Corporation
We have audited the accompanying balance sheet of Amiga Telephony Corporation (a
development stage enterprise) as of June 30, 1998, and the related statements of
operations, stockholders' equity and cash flows from July 25, 1997 (date of
incorporation) to June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with United States 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 Amiga Telephony Corporation (a
development stage enterprise) at June 30, 1998, and the results of its
operations and its cash flows from July 25, 1997 (date of incorporation) to June
30, 1998, in conformity with accounting principles generally accepted in the
United States.
/s/ ERNST & YOUNG LLP
Vancouver, Canada,
July 20, 1998. Chartered Accountants
48
<PAGE>
Amiga Telephony Corporation
(a development stage enterprise)
BALANCE SHEET
(expressed in U.S. dollars)
As of June 30
1998
$
- --------------------------------------------------------------------------------
ASSETS
Current
Cash 242,614
Other receivable 6,476
Prepaid expenses 17,500
- --------------------------------------------------------------------------------
Total current assets 266,590
- --------------------------------------------------------------------------------
Investment [note 3] 175
Deposit [note 6] 83,043
- --------------------------------------------------------------------------------
349,808
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable 10,242
- --------------------------------------------------------------------------------
Total current liabilities 10,242
- --------------------------------------------------------------------------------
Commitments [note 6]
Stockholders' equity
Share capital [note 3]
Common stock - $0.0001 par value
30,000,000 authorized, 8,970,000 issued and outstanding 897
Preferred stock - $0.0001 par value
5,000,000 authorized --
Additional paid in capital 495,528
Deficit accumulated in the development stage (156,859)
- --------------------------------------------------------------------------------
Total stockholders' equity 339,566
- --------------------------------------------------------------------------------
349,808
================================================================================
See accompanying notes
On behalf of the Board:
Director Director
49
<PAGE>
Amiga Telephony Corporation
(a development stage enterprise)
STATEMENT OF OPERATIONS
(expressed in U.S. dollars)
Period from
July 25, 1997
(date of
incorporation) to
June 30,
1998
$
- -------------------------------------------------------------------------
INCOME
Interest 802
- -------------------------------------------------------------------------
EXPENSES
Legal and audit 30,121
Management and administration [note 5] 110,200
Marketing 986
Office expenses 194
Bank charges 208
Travel 15,952
- -------------------------------------------------------------------------
157,661
- -------------------------------------------------------------------------
Loss for period and deficit, end of period (156,859)
=========================================================================
See accompanying notes
50
<PAGE>
Amiga Telephony Corporation
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Common stock
------------ Additional
Number Paid in Accumulated
of shares Amount capital deficit Total
# $ $ $ $
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Issuance of common shares 19,070,000 1,907 495,528 -- 497,435
Repurchase of common shares (10,100,000) (1,010) -- -- (1,010)
Loss -- -- -- (156,859) (156,859)
- ----------------------------------------------------------------------------------------------------
Balance, June 30, 1998 8,970,000 897 495,528 (156,859) 339,566
====================================================================================================
</TABLE>
See accompanying notes
51
<PAGE>
Amiga Telephony Corporation
(a development stage enterprise)
STATEMENT OF CASH FLOWS
(expressed in U.S. dollars)
Period from
July 25, 1997
(date of
incorporation) to
June 30,
1998
$
- ----------------------------------------------------------------------------
OPERATING ACTIVITIES
Loss for period (156,859)
Changes in non-cash working capital (13,734)
- ----------------------------------------------------------------------------
Net cash used in operating activities (170,593)
- ----------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from share issuances 496,425
- ----------------------------------------------------------------------------
Net cash provided by financing activities 496,425
- ----------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of investment [note 3] (175)
Deposit (83,043)
- ----------------------------------------------------------------------------
Net cash used in investing activities (83,218)
- ----------------------------------------------------------------------------
Net change in cash during the period and cash,
end of period 242,614
- ----------------------------------------------------------------------------
See accompanying notes
52
<PAGE>
Amiga Telephony Corporation
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
(expressed in U.S. dollars)
June 30, 1998
1. DESCRIPTION OF BUSINESS
Amiga Telephony Corporation (the "Company") was incorporated under the laws of
the State of Delaware, USA on July 25, 1997 with nominal share capital under the
name of PRR Inc. On August 25, 1997 PRR Inc. merged with Power Research
Incorporated, a company with negligible net assets, and changed its name to
Power Research Incorporated. On January 15, 1998, the Company's name was changed
to Fortunet Technologies Inc. and then changed to Amiga Telephony Corporation on
May 11, 1998. The Company is developing an internet telephony network.
Activities through June 30, 1998 include the organization of the Company and the
raising of equity capital.
2. ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States. Because a precise
determination of many assets and liabilities depends on future events, the
preparation of financial statements necessarily involves the use of management's
estimates and approximations. Actual results could differ from those estimates.
Investment
The Company's investment in Century International Ventures, Ltd., a company
incorporated under the laws of the State of Colorado, is recorded at cost.
Income taxes
The Company uses the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on the
difference between financial statement and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to reverse. Deferred tax assets are
reduced by a valuation allowance in respect of amounts considered by management
to be less likely than not of realization in future periods.
Foreign currency translation
The Company follows the temporal method of accounting for the translation of
foreign currency amounts into U.S. dollars. Under this method all monetary
assets and liabilities, expressed in foreign currencies, are translated at the
rate of exchange prevailing at year end. Non-monetary assets and liabilities are
translated at the rate of exchange prevailing on the date of the translation.
Gains and losses arising on foreign currency translation are included in income.
53
<PAGE>
Amiga Telephony Corporation
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
(expressed in U.S. dollars)
June 30, 1998
3. SHARE STOCK
[i] Authorized
The authorized capital of the Company consists of 30,000,000 common shares with
$.0001 par value, and 5,000,000 Class A preferred shares with $.0001 par value.
[ii] Issued
<TABLE>
<CAPTION>
Number
of Shares Amount
# $
- -------------------------------------------------------------------------------------------
<S> <C> <C>
For cash consideration:
Issuance of common shares at $.10 per share on incorporation 100 1
Issuance of common shares at $.0001 per share 11,001,944 1,100
Issuance of common shares at $.00012 per share 4,600,000 460
Issuance of common shares at $.50 per share 992,500 99
Repurchase of common shares at $.0001 per share (10,100,000) (1,010)
Issuance of common shares on merger with PRR, Inc. 1,475,456 147
Issuance of common shares pursuant to management
services agreement with Novus Telecom Group Inc. [note 5] 1,000,000 100
- -------------------------------------------------------------------------------------------
Balance at June 30, 1998 8,970,000 897
===========================================================================================
</TABLE>
During the period ended June 30, 1998, the Company issued common shares for
consideration greater than the par value of $.0001 per share. The excess of the
consideration received over the par value of the shares issued in the amount of
$495,528 has been allocated to additional paid in capital.
On August 25, 1997, the Company issued 1,475,456 common shares in exchange for
the issued and outstanding common shares of PRR, Inc. which was merged into the
Company. At the date of merger, PRR, Inc.'s net assets comprised cash of $5,000
and a $175 investment in Century International Ventures, Ltd.
54
<PAGE>
Amiga Telephony Corporation
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
(expressed in U.S. dollars)
June 30, 1998
3. SHARE STOCK (cont'd.)
[iii] Commitments to issue options
[a] Pursuant to the management services agreement with Novus Telecom Group
Inc. ("Novus"), a company related through common directors, dated April
15, 1998 [see note 5], the Company is committed to grant 1,000,000 options
to purchase 1,000,000 common shares at an exercise price to be determined
at a later date, to officers, employees, consultants or service providers
of Novus as determined by its board of directors.
[b] Pursuant to a consulting agreement dated May 11, 1998, the Company is
committed to grant 50,000 options to acquire 50,000 common shares at an
exercise price to be determined at a later date upon the creation of a
stock option plan.
4. INCOME TAXES
The Company has non-capital loss carryforwards of approximately $150,000 which
will expire in 2005.
A valuation allowance has been recognized to offset deferred tax assets totaling
approximately $68,000 arising from non-capital loss carryforwards for which
realization is uncertain.
5. RELATED PARTY TRANSACTIONS
Management services fees totaling $72,500 were paid to companies, including
Novus, related through common directors.
55
<PAGE>
Amiga Telephony Corporation
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
(expressed in U.S. dollars)
June 30, 1998
6. COMMITMENTS
[i] The Company is obligated to make payments for management services [see
note 5] under management and consulting agreements as follows:
$
--------------------------------------------------------------------------
1999 272,000
2000 190,000
--------------------------------------------------------------------------
362,000
==========================================================================
[ii] On May 15, 1998, the Company agreed to purchase $332,171 of equipment and
software. Complete delivery and installation is expected in September,
1998. The Company has paid a deposit of $83,043 in respect of this
purchase.
7. SUBSEQUENT EVENTS
Subsequent to June 30, 1998, the Company received a subscription for 30,000 of
the Company's common shares for gross proceeds of $15,000.
56
<PAGE>
AMIGA TELEPHONY CORPORATION
(a development stage enterprise)
BALANCE SHEET
As of March 31, 1999
STATED IN US $ (Prepared by Management)
================================================================================
<TABLE>
<CAPTION>
31-Mar-99 30-Jun-98
-----------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current
Cash $ 891,638 $ 242,614
Other receivables 28,010 6,476
Prepaid expenses 2,267 17,500
- --------------------------------------------------------------------------------------------------
921,915 266,590
Investment -- 175
Deposits 15,331 83,043
Deferred share issue costs 25,000 --
Capital assets (Note 3) 192,365 --
- --------------------------------------------------------------------------------------------------
$ 1,154,611 $ 349,808
==================================================================================================
LIABILITIES
Current
Accounts payable $ 75,659 $ 10,242
- --------------------------------------------------------------------------------------------------
Commitments (Note 7)
Stockholders' equity Share capital (Note 4)
Common Shares - $0.0001 par value
30,000,000 authorized; 9,962,000 issued and outstanding 996 897
Preferred shares - non-voting, non-cumulative, convertible
with $0.0001 par value
5,000,000 authorized; 5,000 issued and outstanding 1 --
Additional paid-in capital 1,842,929 495,528
Stock based compensation 15,000 --
Deficit accumulated in the development stage (779,974) (156,859)
- --------------------------------------------------------------------------------------------------
1,078,952 339,566
- --------------------------------------------------------------------------------------------------
$ 1,154,611 $ 349,808
==================================================================================================
</TABLE>
57
<PAGE>
AMIGA TELEPHONY CORPORATION
(a development stage enterprise)
Statement of Operations
For 9 months ended March 31, 1999
STATED IN US $ (Prepared by Management)
================================================================================
<TABLE>
<CAPTION>
Period from 25-
Jul-97 (date of
Nine Months Nine Months incorporation)
Ending 31-Mar-99 Ending 31-Mar-98 to 31-Mar-99
-----------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
INCOME
Interest Income $ 2,600 $ -- $ 3,402
EXPENSES
Depreciation $ 38,061 $ -- $ 38,061
Legal & Audit 51,378 -- 81,499
Management & Administration 346,724 -- 456,924
Marketing 37,794 -- 38,780
Bank charges 2,735 -- 2,943
Office Expenses 39,716 -- 39,910
Stock based compensation 15,000 -- 15,000
Travel 32,621 -- 48,573
Write-down of vendor deposits (Note 8) 61,511 -- 61,511
Write-off investment 175 -- 175
- ------------------------------------------------------------------------------------------------
625,715 -- 783,376
- ------------------------------------------------------------------------------------------------
LOSS FOR PERIOD (623,115) -- (779,974)
DEFICIT, BEGINNING OF PERIOD (156,859) -- --
- ------------------------------------------------------------------------------------------------
DEFICIT, END OF PERIOD $(779,974) $ -- $(779,974)
================================================================================================
</TABLE>
58
<PAGE>
AMIGA TELEPHONY CORPORATION
(a development stage enterprise)
STATEMENT OF CASH FLOWS
For 9 months ended March 31, 1999
STATED IN US $ (Prepared by Management)
================================================================================
<TABLE>
<CAPTION>
Period from 25-
Jul-97 (date of
Nine Months Nine Months incorporation)
Ending 31-Mar-99 Ending 31-Mar-98 to 31-Mar-99
-----------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Loss for period $ (623,115) $ -- $ (779,974)
Items not involving cash
Amortization 38,061 -- 38,061
Stock based compensation 15,000 -- 15,000
Write-off investment 175 -- 175
Changes in non-cash operating
working capital 59,116 -- 45,382
- --------------------------------------------------------------------------------------------------
Net cash used in operations (510,763) -- (681,356)
- --------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of capital assets (230,426) -- (230,426)
Deposit 42,712 -- (40,331)
- --------------------------------------------------------------------------------------------------
Net cash used in investing activities (187,714) -- (270,757)
- --------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of share capital 1,347,501 -- 1,843,751
- --------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,347,501 -- 1,843,751
- --------------------------------------------------------------------------------------------------
NET CASH INFLOW 649,024 -- 891,638
CASH, BEGINNING OF THE PERIOD 242,614 -- --
- --------------------------------------------------------------------------------------------------
CASH, END OF THE PERIOD $ 891,638 $ -- $ 891,638
==================================================================================================
</TABLE>
59
<PAGE>
AMIGA TELEPHONY CORPORATION
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
STATED IN US $ (Prepared by Management)
================================================================================
<TABLE>
<CAPTION>
Common Stock
Number of Paid in Stock based Accumulated
shares Amount capital compensation deficit Total
# $ $ $ $ $
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock 19,070,000 1,907 495,528 -- -- $ 497,435
Repurchase of common stock (10,100,000) (1,010) -- -- -- $ (1,010)
Loss -- -- -- -- (156,859) $ (156,859)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1998 8,970,000 $ 897 $ 495,528 -- $ (156,859) $ 339,566
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Issuance of common stock 992,000 99 447,402 -- -- $ 447,501
Stock based compensation -- -- -- 15,000 -- $ 15,000
Loss -- -- -- -- (608,115) $ (608,115)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1999 9,962,000 $ 996 $ 942,930 $ 15,000 $ (764,974) $ 193,952
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Preferred Shares
Number of Paid in Stock based Accumulated
shares Amount capital compensation deficit Total
# $ $ $ $ $
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of preferred shares -- -- -- -- -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1998 -- $ -- $ -- $-- $-- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Issuance of Class
A preferred shares 5,000 1 899,999 -- -- $900,000
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1999 5,000 $ 1 $899,999 $-- $-- $900,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
60
<PAGE>
- --------------------------------------------------------------------------------
Amiga Telephony Corporation
(a development stage corporation)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
================================================================================
March 31, 1999 (in US dollars)
1. DESCRIPTION OF BUSINESS
Amiga Telephony Corporation (the "Company") was incorporated under the laws of
the State of Delaware, USA on July 25, 1997 with nominal share capital under the
name of PRR Inc. On August 25, 1997 PRR Inc. merged with Power Research
Incorporated, a company with negligible net assets, and changed its name to
Power Research Incorporated. On January 15, 1998, the Company changed its name
to Fortunet Technologies Inc. and then changed to Amiga Telephony Corporation on
May 11, 1998. The Company is developing a facilities-based internet telephony
network consisting of computerized IP telephone gateways and other IP network
equipment. Activities through March 31, 1999, include the organization of the
Company, the raising of seed equity capital, and the development of the
Company's business plan.
2. ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles that are generally accepted in the United States. Because a precise
determination of many assets and liabilities depends on future events, the
preparation of financial statements necessarily involves the use of management's
estimates and approximations. Actual results could differ from those estimates.
Capital assets
Capital assets are recorded at cost and amortized over their useful lives on a
straight-line basis on the following basis;
Computer equipment 3 years
Furniture and fixtures 5 years
Foreign currency translation
The US dollar is used as the reporting currency in these financial statements.
Assets and liabilities of the Company are translated into US dollars using
current exchange rates in effect at the balance sheet date and income and
expense accounts are translated using the weighted average exchange rate during
the period. Exchange gains and losses are included in the determination of net
income in the period incurred.
61
<PAGE>
- --------------------------------------------------------------------------------
Amiga Telephony Corporation
(a development stage corporation)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
================================================================================
March 31, 1999 (in US dollars)
2. ACCOUNTING POLICIES (cont'd)
Income taxes
The Company uses the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on the
difference between financial statement and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to reverse. Deferred tax assets are
reduced by a valuation allowance in respect of amounts considered by management
to be less likely than not of realization in future periods.
Stock-based compensation
The Company accounts for stock-based compensation based on the provision of
Accounting Principles Board Opinion #25 whereby the intrinsic value of options
granted is recorded at the measurement date. The Company has elected to only
disclose the effects of the fair value method of accounting for stock options
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 123.
3. CAPITAL ASSETS
----------------------------------------------------------------------
Accumulated Net Book
Cost Amortization Value
----------------------------------------------------------------------
Computer equipment $217,469 $37,670 $179,799
Furniture & fixtures 12,957 391 12,566
----------------------------------------------------------------------
Total 230,246 38,061 192,365
----------------------------------------------------------------------
4. SHARE CAPITAL
[i] Authorized
The authorized capital of the Company consists of 30,000,000 common shares with
$.0001 par value, and 5,000,000 Class A preferred shares with $.0001 par value.
62
<PAGE>
- --------------------------------------------------------------------------------
Amiga Telephony Corporation
(a development stage corporation)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
================================================================================
March 31, 1999 (in US dollars)
4. SHARE CAPITAL (cont'd)
Each Class A preferred share is non-voting and entitles the holder to a
non-cumulative dividend of $15 per year. Additionally, each Class A preferred
share is convertible into the number of common shares determined by dividing
$200 by the lower of (1) $2.00 or (2) the offering price of the common shares
which the Company plans to sell in its proposed public offering. The Class A
preferred shares may be converted into common shares at any time after the first
to occur of (1) three months after the effective date of the Company's proposed
public offering or (2) if the effective date of the proposed public offering is
not before August 31, 1999, at any time after August 31, 1999.
[ii] Issued
<TABLE>
<CAPTION>
Common Shares Number Amount
of Shares $
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
For cash consideration:
Issuance of common shares at $.01 per share on organization 100 1
Issuance of common shares at $.0001 per share 11,001,944 1,100
Issuance of common shares at $.00012 per share 4,600,000 460
Issuance of common shares at $.50 per share 992,500 99
Repurchase of common shares at $.0001 per share (10,100,000) (1,010)
Issuance of common shares on merger with PRR, Inc. 1,475,456 147
Issuance of common shares pursuant to management
services agreement with Novus Telecom Group Inc. [note 6] 1,000,000 100
- ----------------------------------------------------------------------------------------------
Balance at June 30, 1998 8,970,000 897
For cash consideration:
Issuance of common shares at $.50 per share 980,000 98
Issuance of common shares pursuant to management
services agreement 12,000 1
- ----------------------------------------------------------------------------------------------
Balance at March 31, 1999 9,962,000 996
==============================================================================================
Class A Preferred Shares
For cash consideration:
Issuance of preferred shares at $200 per share 5,000 1
- ----------------------------------------------------------------------------------------------
Balance at March 31, 1999 5,000 1
==============================================================================================
</TABLE>
63
<PAGE>
- --------------------------------------------------------------------------------
Amiga Telephony Corporation
(a development stage corporation)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
================================================================================
March 31, 1999 (in US dollars)
4. SHARE CAPITAL (cont'd)
During the period to June 30, 1998, the Company issued 8,970,000 common shares
for consideration greater than the par value of $.0001 per share. The excess of
the consideration received over the par value of the shares issued in the amount
of $495,528 has been allocated to additional paid in capital. During the nine
months ended March 31, 1999, the Company issued 980,000 common shares for
consideration greater than the par value of $.0001 per share. The excess of the
consideration received over the par value of the shares issued in the amount of
$447,402 has been allocated to additional paid in capital.
In February 1999, the Company initiated a private offering of a maximum of
15,000 units at a price of $200 per unit. Each unit is comprised of one Class A
preferred share and fifty warrants to purchase common shares. Each warrant
allows the holder to purchase 1 common share at a price equal to (1) the
offering price of the common stock to be sold in the Company's proposed public
offering or (2) if the effective date of the Company's proposed public offering
is not before August 31, 1999, $2.00 per share. The warrants may be exercised
(1) at any time during the six month period beginning on the effective date of
the Company's proposed public offering or (2) if the effective date of the
Company's proposed public offering is not before August 31, 1999, at any time
during the twelve month period beginning August 31, 1999. If by May 31, 2000 the
Company's common shares have not been included in a Registration Statement which
has been filed with the Securities and Exchange Commission then in lieu of
exercising this warrant by paying the exercise price in cash, the holder may
from time to time convert the warrant, in whole or in part, into a number of
common shares determined by dividing the aggregate fair market value of the
common shares minus the aggregate exercise price of the warrant by the fair
market value of one common share.
At March 31, 1999, 5,000 units were issued for net proceeds of $900,000. The
excess of the consideration over par value of $899,999 has been allocated to
additional paid in capital.
On August 25, 1997, the Company issued 1,475,456 common shares in exchange for
the issued and outstanding common shares of PRR, Inc. which was merged into the
Company. At the date of merger, PRR, Inc.'s net assets comprised cash of $5,000
and a $175 investment in Century International Ventures, Ltd.
64
<PAGE>
- --------------------------------------------------------------------------------
Amiga Telephony Corporation
(a development stage corporation)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
================================================================================
March 31, 1999 (in US dollars)
4. SHARE CAPITAL (cont'd)
[iii] Stock option plans
On December 1, 1998, the Board of Directors approved the adoption of an
incentive stock option plan and a non-qualified stock option plan whereby
1,000,000 common shares and 3,000,000 common shares have been reserved for
issuance pursuant to the incentive and non-qualified stock option plans,
respectively. Pursuant to the plans 750,000 incentive stock options and
2,495,000 non-qualified stock options have been granted and remain outstanding
at March 31, 1999. Each stock option allows the holder to acquire one common
share at an exercise price of $0.50 per share expiring December 1, 2001. The
stock options vest quarterly over a twelve month period pursuant to the date of
an initial public offering.
[iv] Stock bonus plan
On December 1, 1998, the Board of Directors approved the adoption of a stock
bonus plan whereby 1,000,000 common shares have been reserved for issuance.
Under the stock bonus plan, the Company may issue common shares to employees,
directors, officers, consultants and advisors for services rendered. Pursuant to
the plan, the Company has issued 15,000 common shares in the period subsequent
to March 31, 1999 [see note 10].
[v] Stock based compensation
Had compensation cost been determined based on the fair value at the grant dates
for those options issued to employees and consultants, consistent with the
method described in SFAS No. 123, the Company's loss for the period would have
been increased to the pro forma amounts indicated below:
1998 1997
$ $
----------------------------------------------------------------------
Loss for period As reported (623,115) --
Pro forma (645,115) --
======================================================================
The fair value of each option granted in 1998 was estimated on the date of the
grant using the Minimum Value option-pricing model with the following
assumptions: no dividend yield; no volatility as the Company's stock was not
trading at the grant date; risk-free interest rate of 5% and an expected life of
2.7 years.
The weighted-average fair value of options granted during the year was $0.50.
5. INCOME TAXES
As at June 30, 1998, the Company has non-capital loss carry-forwards of
approximately $150,000 which will expire in 2005.
A valuation allowance has been recognized to offset deferred tax assets totaling
approximately $68,000 arising from non-capital loss carryforwards for which
realization is uncertain.
65
<PAGE>
- --------------------------------------------------------------------------------
Amiga Telephony Corporation
(a development stage corporation)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
================================================================================
March 31, 1999 (in US dollars)
6. RELATED PARTY TRANSACTIONS
Management fees totaling $232,500 (1998 - $ 72,500) were paid to companies,
including Novus, related through common directors.
7. COMMITMENTS
The Company is obligated to make minimum annual lease payments for office
premises and for management services [note 6] under management and consulting
agreements as follows:
$
-------------------------------------------------------------------
1999 (three months) 72,000
2000 238,000
2001 48,000
2002 48,000
-------------------------------------------------------------------
390,000
-------------------------------------------------------------------
8. WRITE-DOWN OF VENDOR DEPOSITS
In May, 1998, the Company entered into an agreement to purchase $332,171 in
computer equipment and software. In February, 1999, the Company decided to
terminate the supply agreement and incurred a loss of $61,511 which represents
the non-refundable deposits paid to vendor.
9. STOCK BASED COMPENSATION
During the period ended March 31, 1999, the Company recorded stock based
compensation expense of $15,000 relating to stock option issued to consultants.
66
<PAGE>
- --------------------------------------------------------------------------------
Amiga Telephony Corporation
(a development stage corporation)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
================================================================================
March 31, 1999 (in US dollars)
10. SUBSEQUENT EVENTS
The following events occurred subsequent to March 31, 1999.
(i) The Company issued 265,000 common shares for services rendered. Of the
total 15,000 common shares were issued as part of the stock bonus plan
[see note 4].
(ii) In May, 1999, the Company obtained cash subscriptions for an additional
7,500 units (note 4) for net proceeds of $1,350,000. The balance of 2,500
units of the February, 1999 offering has been subscribed for by Ascend
Communications Inc. ("Ascend"), one of the Company's technology partners,
and the proceeds have been placed into trust to be released upon the
finalization of the business relationship agreement with Ascend.
(iii) On April 19, 1999, the Company entered into a non-binding letter of intent
with Lucent Technologies Canada and Ascend, its primary technology
partners, to finalize the structure of the business relationship between
the Company and its partners for the deployment of its IP telephone
gateways. In May, 1999, the Company paid a refundable deposit of $100,000
as a guarantee to its technology and financing partners.
(iv) The Company intends to enter into an underwriting agreement pursuant to
which the Company expects to offer up to 1,000,000 shares of common stock
and 1,000,000 common share purchase warrants. Net proceeds are anticipated
to be $4,685,000, net of the underwriter commission and anticipated costs
of the offering. In addition, the Company has agreed to sell to the
underwriter, for considerations of $100, warrants to purchase up to
100,000 common shares at a price of $6.12 per share and warrants to
purchase 100,000 common shares at a price of $9.60 per share. The
underwriter's warrants are exercisable for four years commencing one year
after the date of the Company's proposed public offering.
67
<PAGE>
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY ..............................................
RISK FACTORS.....................................................
FORWARD LOOKING STATEMENTS.......................................
DILUTION AND COMPARATIVE SHARE DATA .............................
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS ......
BUSINESS ........................................................
MANAGEMENT ......................................................
PRINCIPAL SHAREHOLDERS ..........................................
UNDERWRITING.....................................................
SELLING SHAREHOLDER .............................................
DESCRIPTION OF SECURITIES .......................................
EXPERTS .........................................................
LITIGATION ......................................................
LEGAL MATTERS....................................................
INDEMNIFICATION .................................................
ADDITIONAL INFORMATION...........................................
FINANCIAL STATEMENTS ............................................
In this prospectus, references to "dollars" and "$" are to U.S. dollars.
Throughout this prospectus Amiga has used industry data obtained from market
research, publicly available information and industry publications. Industry
publications generally state that the information they contain has been obtained
from sources believed to be reliable but that the accuracy and completeness of
this information is not guaranteed. Although these data have been correctly
reproduced in this prospectus from the market research, publicly available
information and industry publications, Amiga has not independently verified the
data.
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this prospectus, and
if given or made, such information or representations must not be relied upon as
having been authorized by Amiga. This prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any of the securities offered in any
jurisdiction to any person to whom it is unlawful to make such an offer in such
jurisdiction. Neither the delivery of this prospectus or any sale made by this
Prospectus shall, under any circumstances, create any implication that the
information in this prospectus is correct as of any time subsequent to the date
of this prospectus or that there has not been any change in the affairs of Amiga
since such date.
Until _____, 1999 all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
68
<PAGE>
PART II
Information Not Required in Prospectus
Item 24. Indemnification of Officers and Directors.
The Delaware Business Corporation Act and the Company's Bylaws provide
that the Company may indemnify any and all of its officers, directors, employees
or agents or former officers, directors, employees or agents, against expenses
actually and necessarily incurred by them, in connection with the defense of any
legal proceeding or threatened legal proceeding, except as to matters in which
such persons shall be determined to not have acted in good faith and in the best
interest of the Company.
Item 25. Other Expenses of Issuance and Distribution.
SEC Filing Fee $4,963
NASD Filing Fee 2,284
Blue Sky Fees and Expenses 10,000
Printing and Engraving Expenses 20,000
Legal Fees and Expenses 40,000
Accounting Fees and Expenses 10,000
Miscellaneous Expenses 12,753
--------
TOTAL $100,000
========
All expenses other than the S.E.C. and NASD filing fees are estimated.
Item 26. Recent Sales of Unregistered Securities.
The following information sets forth all securities of the Company which
have been sold and which were not registered under the Securities Act of 1933.
Between July 25, 1997 and May 12, 1998 Amiga sold 10,000,100 shares of its
common stock to Bona Vista Ltd. for $5,910 in cash.
In August 1997 Amiga issued 175,456 shares of its common stock in exchange
for all of the Series B Preferred Stock of Century International Ventures Ltd.
("Century") in a share-for-share exchange with the holders of such Series B
Preferred Stock.
On May 12, 1998 Amiga purchased 10,100,000 shares of common stock from
Bona Vista for $1,010. The shares purchased from Bona Vista were returned to the
category of "authorized but unissued" common stock.
On May 15, 1998 Amiga sold 6,901,944 shared of common stock to twenty
three persons for $690 in cash and issued 1,000,000 shares of common stock for
services rendered.
69
<PAGE>
On May 31, 1998 Amiga sold 1,022,500 shares of common stock to eleven
persons for $511,250.
In October 1998 Amiga issued 12,000 shares of its common stock to two
persons for services rendered. Between October 1998 and January 1999 Amiga sold
950,000 shares of its common stock to thirty-one persons for $475,000.
All of the foregoing sales of the Company's common stock were exempt from
registration pursuant to Rule 504 of the Securities and Exchange Commission.
Although no underwriters were used in connection with the sale of these
securities, the Company paid sales commissions of $43,500 to two persons for
their assistance in selling these shares.
Between March and June 1999 Amiga sold 15,000 shares of its Series A
Preferred Stock, plus warrants for the purchase of 750,000 shares of common
stock, for $3,000,000 to a group of private investors.
The sales of the Company's Series A Preferred Stock and warrants were
exempt from registration pursuant to Rule 506 of the Securities and Exchange
Commission. All shares of the Series A Preferred Stock were acquired for
investment purposes only and without a view to distribution. All of the persons
who acquired the Company's Preferred Shares were fully informed and advised
about matters concerning the Company, including its business, financial affairs
and other matters. The purchasers of the Company's Preferred Stock acquired the
securities for their own accounts. All the Preferred Shares are "restricted"
securities as defined in Rule 144 of the Rules and Regulations of the Securities
and Exchange Commission. Although no underwriters were used in connection with
the sale of these securities, the Company paid sales commissions of $250,000 and
issued shares of common stock to one person for his assistance in selling these
securities.
In May 1999 the Company issued 250,000 shares of its common stock to one
person as partial compensation for his assistance in the sale of the Company's
Series A Preferred Stock (and warrants) and for other services rendered. In May
1999 the Company issued 15,000 shares of its common stock to another person for
services rendered. The issuance of these shares was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933. All of these shares were
acquired for investment purposes only and without a view to distribution. The
persons who received these shares were fully informed about matters concerning
the Company, including its business, financial affairs and other matters and
acquired the securities for their own accounts. The 265,000 shares are
"restricted" securities as defined in Rule 144 of the Rules and Regulations of
the Securities and Exchange Commission. No underwriters were used and no
commissions were paid in connection with the issuance of these shares.
Item 27. Exhibits
1.1 Underwriting Agreement
1.2 Underwriters' Warrant
70
<PAGE>
1.3 Agreement Among Underwriters
1.4 Selected Dealer Agreement
3.1 Certificate of Incorporation and Amendments
3.2 Certificate of Designation of Series A Preferred Stock
3.3 Bylaws
4.1 Incentive Stock Option Plan
4.2 Non-Qualified Stock Option Plan
4.3 Stock Bonus Plan
5 Opinion of Counsel
10 Management Services Agreement between Canadian Digital Network Inc. (d/b/a
Novus Telecom Group) and the Company.
23.1 Consent of Hart and Trinen
23.2 Consent of Accountants
24 Power of Attorney-- Included as part of the Signature Page
27 Financial Data Schedules
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement.
(i) To include any Prospectus required by Section l0(a)(3) of the
Securities Act of l933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change
71
<PAGE>
to such information in the Registration Statement, including (but not limited
to) any addition or deletion of a managing underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act of l933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) To provide to the Underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of l933 may be permitted to directors, officers and controlling
persons of the Registrant, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
72
<PAGE>
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with full
power to act alone, to file one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such agent
for service as attorney-in-fact, with full power to act alone, to execute in the
name and in behalf of the Registrant and any such person, individually and in
each capacity stated below, any such amendments to this Registration Statement.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Vancouver, Province of British Columbia on June 16, 1999.
AMIGA TELEPHONY, INC.
By /s/ Ian C. Hand
---------------------------------------
Ian C. Hand, President, Chief Executive
Officer and Principal Financial Officer
By /s/ Roney Haboosheh
---------------------------------------
Roney Haboosheh,
Principal Accounting Officer
Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Title Date
----- ----
/s/ Ian D. Robertson Director June 16, 1999
- ------------------------------
Ian D. Robertson
/s/ Ian C. Hand Director June 16, 1999
- ------------------------------
Ian C. Hand
73
<PAGE>
/s/ Donald Morrison Director June 16, 1999
- ------------------------------
Donald Morrison
/s/ Barry Duggan Director June 16, 1999
- ------------------------------
Barry Duggan
Director June __, 1999
- ------------------------------
Philip Edwards Pearce
Director June __, 1999
- ------------------------------
Marshall Naify
74
Amiga Telephony Corporation
1,000,000 Units
Each Unit Consisting of
One Share of
Common Stock
And
One Common Stock Purchase Warrant
UNDERWRITING AGREEMENT
,1999
Westport Resources Investment Services, Inc.
315 Post Road West
Westport, CT 06880
Dear Sirs:
Amiga Telephony Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto, who are acting severally and not jointly, (the "Underwriters"), one
million units each unit consisting of one share of Common Stock and one Common
Stock Purchase Warrant of the Company (the "Securities"). The Company hereby
confirms the agreement made by it with respect to the purchase of the Securities
by the Underwriter, which Securities are more fully described in the
Registration Statement referred to below. Westport Resources Investment
Services, Inc. is referred to herein as the "Underwriter" or the
"Representative."
You have advised the Company that the Underwriters desire to act on a firm
commitment basis to publicly offer and sell the Securities for the Company and
that you are authorized to execute this Agreement. The Company confirms the
agreement made by it with respect to the relationship with the Underwriters as
follows:
1. Filing of Registration Statement with S.E.C. and Definitions. A Registration
Statement and Prospectus on Form SB-2 (File No.333- ) with respect to the
Securities has been carefully and accurately prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the published rules and regulations (the "Rules and Regulations")
thereunder or under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and has been filed with the Securities and Exchange Commission
(the "Commission") and such other states that the Underwriter deems necessary in
its discretion to so file to permit a public offering and trading thereunder.
Such registration statement, including the prospectus, Part II, and all
financial schedules and exhibits thereto, as amended at the time when it shall
become effective, is herein referred to as the "Registration Statement," and the
prospectus included as part of the Registration Statement on file with the
Commission that discloses all the information that was omitted from the
prospectus on the effective date pursuant to Rule 430 A of the Rules and
Regulations with any changes contained in any prospectus filed with the
Commission by the Company with the Underwriters consent after the effective date
of the Registration Statement, is herein referred to as the "Final Prospectus."
The prospectus included as part of the Registration Statement of the Company and
in any amendments thereto prior to the effective date of the Registration
Statement is referred to herein as a "Preliminary Prospectus."
2. Discount, Delivery, and Sale of the Securities
(a) Subject to the terms and conditions of this Agreement, and on the
basis of the representations, warranties, and agreements herein contained, the
Company agrees to sell to, and the Underwriters agree to buy from the Company at
a purchase price of $ per Unit before any underwriter expense allowances, an
aggregate of 1,000,000 Units on a firm commitment basis the "Initial
Securities".
1
<PAGE>
It is understood that the Underwriters propose to offer the Securities to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
The Underwriters may enter into one or more agreements as the Underwriters in
their sole discretion deem advisable with one or more broker-dealers who shall
act as dealers in connection with the offering.
(b) Delivery of the Securities against payment of the purchase price
therefor by certified or official bank check or checks or wire transfer in
next-day funds, payable to the order of the Company shall take place at the
offices of the clearing broker for the Underwriter at New York City, within
three (3) business days after the Securities are first traded (or such other
place as may be designated by agreement between you and the Company) at 11:00
A.M., New York time or such time and date as you and the Company may agree upon
in writing, such time and date of payment and delivery for the Securities being
herein called the "Initial Closing Date."
The Company will make the certificates for the shares of Common Stock to
be purchased by the Underwriters hereunder available to the Underwriter for
inspection and packaging at least two (2) full business days prior to the
Initial Closing Date. The certificates shall be in such names and denominations
as the Underwriter may request to the Company in writing at least two (2) full
business days prior to any Closing Date.
(c) In addition, subject to the terms and conditions of this Agreement and
on the basis of the representations, warranties and agreements herein contained,
the Company grants an option to the Underwriters to purchase up to an additional
150,000 Units ("Option Securities") at the same terms as the Underwriters shall
pay for the Initial Securities being sold by the Company pursuant to the
provisions of Section 2(a) hereof. This option may be exercised from time to
time, for the purpose of covering overallotments, within forty-five (45) days
after (i) the effective date of the Registration Statement if the Company has
elected not to rely on Rule 430A under the Rules and Regulations or (ii) the
date of this Agreement if the Company has elected to rely upon Rule 430A under
the Rules and Regulations, upon written notice by the Underwriter setting forth
the number of Option Securities as to which the Underwriter is exercising the
option and the time and date at which such certificates are to be delivered.
Such time and date shall be determined by the Underwriter but shall not be
earlier than four (4) nor later than ten (10) full business days after the date
of the exercise of said option. Nothing herein shall obligate the Underwriter to
make any overallotment.
(d) Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered at the closing by the
Company to the Underwriters against payment of the purchase price by the
Underwriters by certified or bank cashier's checks or wire transfer in next day
funds payable to the order of the Company.
(e) The information set forth under "Underwriting" in any preliminary
prospectus and Prospectus relating to the Securities and the information set
forth in the last paragraph on the front cover page, under the last paragraph on
page 2 concerning stabilization and over-allotment by the Underwriters, and
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriter to the Company for inclusion therein,
and you represent and warrant to the Company that the statements made therein
are correct.
(f) On the Initial Closing Date, the Company shall issue and sell to the
Representative, warrants (the "Representative's Warrants") at a
purchase price of $.001 per Representative's Warrant, which shall
entitle the holders thereof to purchase an aggregate of 100,000
shares of Common Stock and 100,000 Common Stock Purchase Warrants.
The shares of common stock issuable upon the exercise of the
Representative's Warrants are hereafter referred to as the
"Representative's Securities" or "Representative's Warrants." The
Representative's Warrants shall be exercisable for a period of four
(4) years commencing one (1) year from the effective date of the
Registration Statement at a price equaling one hundred twenty
percent (120%) of the initial public offering price of the
Securities. The form of Representative's Warrant Certificate shall
be substantially in the form filed as an Exhibit to the Registration
Statement. Payment for the Representative's Warrant shall be made on
the Initial Closing Date.
2
<PAGE>
3. Representations and Warranties of the Company.
(a) The Company represents and warrants to you as follows:
(i) The Company has prepared and filed with the Commission a registration
statement, and an amendment or amendments thereto, on Form SB-2 (No.333- ),
including any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Securities, the Representative's Warrant (sometimes referred
to herein collectively as the "Registered Securities"), under the Act, which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the Rules and
Regulations. The Company will promptly file a further amendment to said
registration statement in the form heretofore delivered to the Underwriter and
will not file any other amendment thereto to which the Underwriter shall have
objected verbally or in writing after having been furnished with a copy thereof.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, any
schedules, exhibits and all other documents filed as a part thereof or that may
be incorporated therein (including, but not limited to those documents or
information incorporated by reference therein) and all information deemed to be
a part thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Rules and Regulations), is hereinafter called the "Registration Statement," and
the form of prospectus in the form first filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations, is hereinafter called the
"Prospectus."
(ii) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any Prospectus or the Registration
Statement and no proceeding for an order suspending the effectiveness of the
Registration Statement or any of the Company's securities has been instituted or
is pending or threatened. Each such Prospectus and/or any supplement thereto has
conformed in all material respects with the requirements of the Act and the
Rules and Regulations and on its date did not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading, in light of the circumstances under which they were made
and (i) the Prospectus and/or any supplement thereto will contain all statements
which are required to be stated therein by the Act and Rules and Regulations,
and (ii) the Prospectus and/or any supplement thereto will not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
in light of the circumstances under which they were made; provided, however,
that no representations, warranties or agreements are made hereunder as to
information contained in or omitted from the Prospectus in reliance upon, and in
conformity with, the written information furnished to the Company by you as set
forth in Section 2(e) above.
(iii) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its incorporation,
with full power and authority (corporate and other) to own its properties and
conduct its businesses as described in the Prospectus and is duly qualified to
do business as a foreign corporation in good standing in all other jurisdictions
in which the nature of its business or the character or location of its
properties requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the business, properties or
operations of the Company and the subsidiaries as a whole.
(iv) The Company has full legal right, power and authority to authorize,
issue, deliver and sell the Securities, the Option Securities and the
Representative's Securities and to enter into this Agreement, the
Representative's Warrant dated as of the initial closing date to be exercised
and delivered by the Company to the Representative (the "Representative's
Warrant Agreement"), and to consummate the transactions provided for in such
agreements, and each of such agreements has been duly and properly authorized,
and on the Initial Closing Date will be duly and properly executed and delivered
by the Company. This Agreement constitutes and on the Initial Closing Date the
Representative's Warrant Agreement will then constitute valid and binding
agreements, enforceable in accordance
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with their respective terms (except as the enforceability thereof may be limited
by bankruptcy or other similar laws affecting the rights of creditors generally
or by general equitable principles and except as the enforcement of
indemnification provisions may be limited by federal or state securities laws).
(v) Except as disclosed in the Prospectus, the Company is not in violation
of its respective certificate or articles of incorporation or bylaws or in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any material bond, debenture, note or other
evidence of indebtedness or in any material contract, indenture, mortgage, loan
agreement, lease, joint venture, partnership or other agreement or instrument to
which the Company is a party or by which it may be bound or is not in material
violation of any law, order, rule, regulation, writ, injunction or decree of any
governmental instrumentality or court, domestic or foreign; and the execution
and delivery of this Agreement, the Representative's Warrant Agreement ;and the
consummation of the transactions contemplated therein and in the Prospectus and
compliance with the terms of each such agreement will not conflict with, or
result in a material breach of any of the terms, conditions or provisions of, or
constitute a material default under, or result in the imposition of any material
lien, charge or encumbrance upon any of the property or assets of the Company
pursuant to, any material bond, debenture, note or other evidence of
indebtedness or any material contract, indenture, mortgage, loan agreement,
lease, joint venture, partnership or other agreement or instrument to which the
Company is a party nor will such action result in the material violation by the
Company of any of the provisions of its respective certificate or articles of
incorporation or bylaws or any law, order, rule, regulation, writ, injunction,
decree of any government, governmental instrumentality or court, domestic or
foreign, except where such violation will not have a material adverse effect on
the financial condition of the Company.
(vi) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus and the Company will have the adjusted
capitalization set forth therein on the Initial Closing Date; all of the shares
of issued and outstanding capital stock of the Company set forth therein have
been duly authorized, validly issued and are fully paid and nonassessable; the
holders thereof do not have any rights of rescission with respect therefor and
are not subject to personal liability for any obligations of the Company by
reason of being stockholders under the laws of the State in which the Company is
incorporated; none of such outstanding capital stock is subject to or was issued
in violation of any preemptive or similar rights of any stockholder of the
Company; and such capital stock (including the Securities, the Option Securities
and the Representative's Securities) conforms in all material respects to all
statements relating thereto contained in the Prospectus.
(vii) The Company is not a party to or bound by any instrument, agreement
or other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement or as described
in the Prospectus. The Securities, the Option Securities and the
Representative's Securities are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable and will conform to the respective
descriptions thereof contained in the Prospectus; except for payment of the
applicable purchase price paid upon exercise of the options or warrants, as the
case may be the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities, the Option Securities and the Representative's
Securities has been duly and validly taken; and the certificates representing
the Securities, the Option Securities and the Representative's Securities will
be in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities, the Option Securities and the Representative's
Securities to be sold by the Company hereunder, the Underwriter will acquire
good and marketable title to such Securities, Option Securities and
Representative's Securities free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction of any kind
whatsoever other than restrictions as may be imposed under the securities laws.
(viii) The Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described or referred
to in the Prospectus or which are not materially significant or important in
relation to its business or which have been incurred in the ordinary course of
business; except as described in the Prospectus all of the leases and subleases
under which the Company holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and the Company is not
in material default in respect of any of the terms or provisions of any of such
leases or subleases, and no claim has been asserted by anyone adverse to the
Company's rights as lessor, sublessor,
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lessee or sublessee under any of the leases or subleases mentioned above or
affecting or questioning the Company's right to the continued possession of the
leased or subleased premises or assets under any such lease or sublease; and the
Company owns or leases all such properties as are necessary to its operations as
now conducted and as contemplated to be conducted, except as otherwise stated in
the Prospectus.
(ix) The financial statements, together with related notes, set forth in
the Prospectus fairly present the financial position and results of operations
of the Company at the respective dates and for the respective periods to which
they apply. Said statements and related notes have been prepared in accordance
with generally accepted accounting principles applied on a basis which is
consistent in all material respects during the periods involved but any stub
period has not been audited by an independent accounting firm. There has been no
material adverse change or material development involving a prospective change
in the condition, financial or otherwise, or in the prospects, value, operation,
properties, business or results of operations of the Company whether or not
arising in the ordinary course of business, since the date of the financial
statements included in the Registration Statement and the Prospectus.
(x) Subsequent to the respective dates as of which information is given in
the Prospectus as it may be amended or supplemented, and except as described in
the Prospectus, the Company has not, directly or indirectly, incurred any
liabilities or obligations, direct or contingent, not in the ordinary course of
business or entered into any transactions not in the ordinary course of
business, which are material to the business of the Company as a whole and there
has not been any change in the capital stock of, or any incurrence of long term
debts by, the Company or any issuance of options, warrants or rights to purchase
the capital stock of the Company or declaration or payment of any dividend on
the capital stock of the Company or any material adverse change in the condition
(financial or other), net worth or results of operations of the Company as a
whole and the Company has not become a party to, any material litigation whether
or not in the ordinary course of business.
(xi) To the knowledge of the Company, there is no pending or threatened,
action, suit or proceeding to which the Company is a party before or by any
court or governmental agency or body, which might result in any material adverse
change in the condition (financial or other), business or prospects of the
Company as a whole or might materially and adversely affect the properties or
assets of the Company as a whole nor are there any actions, suits or proceedings
against the Company related to environmental matters or related to
discrimination on the basis of age, sex, religion or race which might be
expected to materially and adversely affect the conduct of the business,
property, operations, financial condition or earnings of the Company as a whole;
and no labor disturbance by the employees of the Company individually exists or
is, to the knowledge of the Company, imminent which might be expected to
materially and adversely affect the conduct of the business, property,
operations, financial condition or earnings of the Company as a whole.
(xii) Except as may be disclosed in the Prospectus, the Company has
properly prepared and filed all necessary federal, state, local and foreign
income and franchise tax returns, has paid all taxes shown as due thereon, has
established adequate reserves for such taxes which are not yet due and payable,
and does not have any tax deficiency or claims outstanding, proposed or assessed
against it.
(xiii) The Company has sufficient licenses, permits, right to use trade or
service marks and other governmental authorizations currently required for the
conduct of its business as now being conducted and as contemplated to be
conducted and the Company is in all material respects complying therewith.
Except as set forth in the Prospectus, the expiration of any such licenses,
permits, or other governmental authorizations would not materially affect the
Company's operations. To its knowledge, none of the activities or businesses of
the Company are in material violation of, or cause the Company to materially
violate any law, rule, regulations, or order of the United States, any state,
county or locality, or of any agency or body of the United States or of any
state, county or locality.
(xiv) The Company has not at any time (i) made any contributions to any
candidate for political office in violation of law, or failed to disclose fully
any such contribution, or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasi public duties, other than payments required or allowed by applicable law.
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(xv) Except as set forth in the Prospectus the Company knows of no
outstanding claims for services either in the nature of a finder's fee,
brokerage fee or otherwise with respect to this financing for which the Company
or the Underwriters may be responsible, or which may affect the Underwriter's
compensation as determined by the National Association of Securities Dealers,
Inc. ("NASD") except as otherwise disclosed in the Prospectus or known by the
Underwriters.
(xvi) The Company has its property adequately insured against loss or
damage by fire and maintains such other insurance as is customarily maintained
by companies in the same or similar business.
(xvii) The Representative's Warrants herein described are duly and validly
authorized and upon delivery to the Representative in accordance herewith will
be duly issued and legal, valid and binding obligations of the Company, except
as the enforceability thereof may be limited by bankruptcy or other similar laws
affecting the rights of creditors generally or by equitable principles, and
except as the enforcement of indemnification provisions may be limited by
federal or state securities laws.
The Representative's Securities issuable upon exercise of any of the
Representative's Warrants have been duly authorized, and when issued upon
payment of the exercise price therefor, will be validly issued, fully paid and
nonassessable.
(xviii) Except as set forth in the Prospectus, no default exists in the
due performance and observance of any term, covenant or condition of any
material license, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, stockholders agreement, note, loan
or credit agreement, purchase order, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which the property or assets (tangible or intangible) of the Company is
subject or affected.
(xix) To the best of the Company's knowledge it has generally enjoyed a
satisfactory employer-employee relationship with its employees and, to the best
of its knowledge, is in substantial compliance in all material respects with all
federal, state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours. To the best of the Company's knowledge, there are no pending
investigations involving the Company, by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. To the best of the Company's
knowledge, there is no unfair labor practice charge or complaint against the
Company pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or to its knowledge involving the Company, or any predecessor entity, and none
has ever occurred. To the best of the Company's knowledge, no representation
question is pending respecting the employees of the Company, and no collective
bargaining agreement or modification thereof is currently being negotiated by
the Company. To the best of the Company's knowledge, no grievance or arbitration
proceeding is pending or to its knowledge threatened under any expired or
existing collective bargaining agreements of the Company. No labor dispute with
the employees of the Company is pending, or, to its knowledge is imminent; and
the Company is not aware of any pending or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors which
may result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company.
(xx) Except as may be set forth in the Registration Statement, the Company
does not maintain, sponsor or contribute to any program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(l) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). The Company does not maintain or contribute, now or
at any time previously, to a defined benefit plan, as defined in Section 3(35)
of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Internal Revenue Code (the "Code"), which could subject the Company
to any tax penalty on prohibited transactions and which has not adequately been
corrected. Each
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ERISA Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401
(a), stating that such ERISA Plan and the attendant trust are qualified
thereunder. The Company has never completely or partially withdrawn from a
"multiemployer plan."
(xxi) None of the Company, or any of its employees, directors,
stockholders, or affiliates (within the meaning of the Rules and Regulations)
has taken or will take, directly or indirectly, any action designed to or which
has constituted or which might be expected to cause or result in, under the
Exchange Act, or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities,
Option Securities, Representative's Securities or otherwise.
(xxii) None of the patents, patent applications, trademarks, service
marks, trade names, copyrights, and licenses and rights to the foregoing
presently owned or held by the Company, are in dispute or, to the best knowledge
of the Company's management are in any conflict with the right of any other
person or entity. The Company (i) except as disclosed in the Prospectus owns or
has the right to use, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing, and except as set forth in the Prospectus or otherwise disclosed
to the Underwriter in writing, to the best knowledge of the Company's management
is not obligated or under any liability whatsoever to make any material payments
by way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any patent, trademark, service mark, trade name, copyright,
know-how, technology or other intangible asset, with respect to the use thereof
or in connection with the conduct of its business or otherwise. There is no
suit, proceeding, inquiry, arbitration, investigation, litigation or
governmental or other proceeding, domestic or foreign, pending or, to the best
of the Company's knowledge, threatened ( or circumstances that may give rise to
the same) against the Company which challenges the rights of the Company with
respect to any trademarks, trade names, service marks, service names,
copyrights, patents, patent applications or licenses or rights to the foregoing
used in the conduct of its business.
(xxiii) Except as disclosed in the Prospectus the Company owns and has
adequate right to use to the best knowledge of the Company's management all
trade secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
designs, processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual property") required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company, free and clear of and
without violating any right, lien or claim of others, including without
limitation, former employers of its employees. The Company is not aware of any
such development of similar or identical trade secrets or technical information
by others. The Company has valid and binding confidentiality agreements with all
of its officers, covering its intellectual property (subject to the equitable
powers of any court), which agreements have remaining terms of at least two
years from the effective date of the Registration Statement except where the
failure to have such agreements would not materially and adversely effect the
Company's business taken as a whole. The Company has good and marketable title
to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus, to be owned or leased by it free and
clear of all liens, charges, claims, encumbrances, pledges, security interests,
defects, or other restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus and liens for taxes not yet due and payable.
(xxiv) Ernst & Young whose reports are filed with the Commission as a part
of the Registration Statement, are independent certified public accountants as
required by the Act and the Rules and Regulations.
(xxv) The Company has agreed to cause to be duly executed, agreements
pursuant to which each of the Company's officers and directors,
holders of more than 5% of the outstanding Common Stock calculated
as of the date immediately preceding the date of the Letter of
Intent which is dated February 26, 1999, and any person or entity
deemed to be an affiliate of the Company pursuant to
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SEC Rules and Regulations, has agreed not to, directly or
indirectly, sell, assign, transfer, or otherwise dispose of any
shares of Common Stock or securities convertible into, exercisable
or exchangeable for or evidencing any right to purchase or subscribe
for any shares of Common Stock (either pursuant to Rule 144 of the
Rules and Regulations or otherwise) for a period commencing on the
effective date until the first to occur of the following: the
holders described above, (i) will have agreed not to dispose of
(sell or transfer) their shares until the share price, adjusted for
any splits, trades at or above 200% of the offering price for a
twenty (20) consecutive trading day period;(ii) after 18 months from
the effective date of the offering, the price of the Common Stock,
adjusted for any splits, trades at 150% of the public offering price
for 20 consecutive days;(iii) or 24 months from the effective date
of the prospectus.( the Lock-up).
Any shares of common stock released from the foregoing restrictions
will remain restricted securities subject however to the resale
provisions of Rule 144. Notwithstanding the above, shares subject to
a pooling agreement will not be released for sale until the time
specified in the pooling agreement.
Shares issued upon the exercise of any options held by the Company's
officers, directors or holders of 5% or more of the Company's Common
Stock, it is agreed shall be locked up in accordance with the terms
of the preceding paragraph. Options issued to any other person it is
agreed will be subject to the following restrictions concerning
exercise: 25% of the options will be exercisable 3 months after the
effective date of the offering; 25% exercisable 6 months after the
effective date; 25% exercisable 9 months after the effective date
and 25% exercisable 12 months after the effective date of the
offering.
The Company will cause the Transfer Agent, as defined below, to mark an
appropriate legend on the face of stock certificates representing all of
such securities and to place "stop transfer" orders on the Company's stock
ledgers. The Company also agrees that it will not release any securities
subject to this Agreement without the written consent of the
Representative. It is also agreed that upon the second anniversary of the
first day of the Lock-Up Period, the securities subject to the Lock-Up
will no longer be subject to the restrictions contained in such agreement.
(xxvi) The Registered Securities have been approved for listing on NASDAQ
or an Exchange.
(xxvii) Except as set forth in the Prospectus or disclosed in writing to
the Underwriter (which writing specifically refers to this Section), no officer
or director of the Company, holder of 5% or more of securities of the Company or
any "affiliate" or "associate" (as these terms are defined in Rule 405
promulgated under the Rules and Regulations) of any of the foregoing persons or
entities has or has had, either directly or indirectly, (i) an interest in any
person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services, or
(ii) a beneficiary interest in any contract or agreement to which the Company is
a party or by which it may be bound or affected. Except as set forth in the
Prospectus under "Certain Transactions" or disclosed in writing to the
Underwriter (which writing specifically refers to this Section) there are no
existing agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director, principal stockholder of the Company, or any
partner, affiliate or associate of any of the foregoing persons or entities.
(xxviii) Any certificate signed by any officer of the Company, and
delivered to the Underwriter or to the Underwriter's counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriter
as to the matters covered thereby.
(xxix) Each of the minute books of the Company has been made available to
the Underwriter and contains a complete summary of all meetings and actions of
the directors and stockholders of the Company, since the time of its
incorporation and reflect all transactions referred to in such minutes
accurately in all respects.
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(xxx) Intentionally left blank.
(xxxi) Except and only to the extent described in the Prospectus or
disclosed in writing to the Underwriter (which writing specifically refers to
this Section), no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have the
right to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or to require
the Company to file a registration statement under the Act and no person or
entity holds any anti-dilution rights with respect to any securities of the
Company. Except as disclosed in the Prospectus, all rights so described or
disclosed have been waived or have not been triggered with respect to the
transactions contemplated by this Agreement and the Representative's Warrant
Agreement (including the warrants issuable thereunder).
(xxxii) The Company has not entered into any employment agreements with
its executive officers, except as disclosed in the Prospectus.
(xxxiii) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Registered Securities pursuant to
the Prospectus and the Registration Statement, the issuance of the Underwriter's
Warrants, the performance of this Agreement, the Representative's Warrant
Agreement, and the transactions contemplated hereby and thereby, including
without limitation, any waiver of any preemptive, first refusal or other rights
that any entity or person may have for the issue and/or sale of any of the
Securities, the Option Securities and the Underwriter's Securities, except such
as have been or may be obtained under the Act, otherwise or may be required
under state securities or blue sky laws in connection with the Underwriter's
purchase and distribution of the Securities, the Option Securities, the
Representative's Securities and the Underwriter's Warrants to be sold by the
Company hereunder or may be required by the Rules of the National Association of
Securities Dealer, Inc. ("NASD"). Since a portion of the Securities are to be
offered and sold through foreign broker-dealers not registered with the NASD,
any sales by such broker-dealers are to be made in compliance with the
securities laws of the country thereof and any required orders from a regulatory
body obtained therefrom.
(xxxiv) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or businesses may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company, enforceable
against the Company, in accordance with their respective terms. The descriptions
in the Registration Statement of agreements, contracts and other documents are
accurate and fairly present the information required to be shown with respect
thereto by Form SB-2, and there are no contracts or other documents which are
required by the Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not described or filed as
required, and the exhibits which have been filed are complete and correct copies
of the documents of which they purport to be copies.
(xxxv) Within the past five (5) years, none of the Company's independent
public accountants has brought to the attention of the Company's management any
"material weakness" as defined in the Statement of Auditing Standard No. 60 in
any of the Company's internal controls.
4. Covenants of the Company. The Company covenants and agrees with you that:
(a) It will cooperate in all respects in making the Prospectus effective
and will not at any time, whether before or after the effective date, file any
amendment to or supplement to the Prospectus of which you shall not previously
have been advised and furnished with a copy or to which you or your counsel
shall have reasonably objected or which is not in material compliance with the
Act and the Rules and Regulations or applicable state law.
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As soon as the Company is advised thereof, the Company will advise you,
and confirm the advice in writing, of the receipt of any comments of the
Commission or any state securities department, when the Registration Statement
becomes effective if the provisions of Rule 430A promulgated under the Act will
be relied upon, when the Prospectus has been filed in accordance with said Rule
430A, of the effectiveness of any posteffective amendment to the Registration
Statement or Prospectus, or the filing of any supplement to the Prospectus or
any amended Prospectus, of any request made by the Commission or any state
securities department for amendment of the Prospectus or for supplementing of
the Prospectus or for additional information with respect thereto, of the
issuance of any stop order suspending the effectiveness of the Prospectus or any
order preventing or suspending the use of any Prospectus or any order suspending
trading in the Common Stock of the Company, or of the suspension of the
qualification of the Securities, the Option Securities or the Representatives
Securities for offering in any jurisdiction, or of the institution of any
proceedings for any such purposes, and will use its best efforts to prevent the
issuance of any such order and, if issued, to obtain as soon as possible the
lifting or dismissal thereof.
The Company has caused to be delivered to you copies of such Prospectus, and the
Company has consented and hereby consents to the use of such copies for the
purposes permitted by law. The Company authorizes you and the dealers to use the
Prospectus and such copies of the Prospectus in connection with the sale of the
Securities, the Option Securities and the Representative's Securities for such
period as in the opinion of your counsel and our counsel the use thereof is
required to comply with the applicable provisions of the Act and the Rules and
Regulations. The Company will prepare and file with the states, promptly upon
your request, any such amendments or supplements to the Prospectus, and take any
other action, as, in the opinion of your counsel, may be necessary or advisable
in connection with the initial sale of the Securities, the Option Securities and
the Underwriter's Securities and will use its best efforts to cause the same to
become effective as promptly as possible.
The Company shall file the Prospectus (in form and substance satisfactory
to the Underwriter) or transmit the Prospectus by a means reasonably calculated
to result in filing with the Commission pursuant to rule 424(b)(1) or pursuant
to Rule 424(b)(3) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement, and (ii) the fifth business day after the effective date of the
Registration Statement.
In case of the happening, at any time within such period as a Prospectus
is required under the Act to be delivered in connection with the initial sale of
the Securities, the Option Securities and the Representative's Securities of any
event of which the Company has knowledge and which materially affects the
Company, or the securities thereof, and which should be set forth in an
amendment of or a supplement to the Prospectus in order to make the statements
therein not then misleading, in light of the circumstances existing at the time
the Prospectus is required under the Act to be delivered, or in case it shall be
necessary to amend or supplement the Prospectus to comply with the Act, the
Rules and Regulations or any other law, the Company will forthwith prepare and
furnish to you copies of such amended Prospectus or of such supplement to be
attached to the Prospectus, in such quantities as you may reasonably request, in
order that the Prospectus, as so amended or supplemented, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances under which they are made. The preparation and
furnishing of any such amendment or supplement to the Prospectus or supplement
to be attached to the Prospectus shall be without expense to you.
The Company will to the best of its ability comply with the Act, the
Exchange Act and applicable state securities laws so as to permit the initial
offer and sales of the Securities, the Option Securities and the Representatives
Securities under the Act, the Rules and Regulations, and applicable state
securities laws.
(b) It will cooperate to qualify the Securities and the Option Securities
and the Representative's Securities for initial sale under the securities laws
of such jurisdictions as you may designate and will make such applications and
furnish such information as may be required for that purpose, provided the
Company shall not be required to qualify as a foreign corporation or a dealer in
securities. The Company will, from time to time, prepare and file such
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statements and reports as are or may be required to continue such qualification
in effect for so long as the Underwriter may reasonably request.
(c) So long as any of the Securities, the Option Securities or the
Representative's Securities remain outstanding in the hands of the public, the
Company, at its expense, will annually furnish to its shareholders a report of
its operations to include financial statements audited by independent public
accountants, and will furnish to the Underwriter as soon as practicable after
the end of each fiscal year, a balance sheet of the Company as at the end of
such fiscal year, together with statements of operations, shareholders' equity,
and changes in cash flow of the Company for such fiscal year, all in reasonable
detail and accompanied by a copy of the certificate or report thereon of
independent public accountants.
(d) It will deliver to you at or before the Initial Closing Date three
signed copies of the signature pages to the Registration Statement and three
copies of the registration statement including all financial statements and
exhibits filed therewith, whether or not incorporated by reference. The Company
will deliver to you, from time to time until the effective date of the
Prospectus, as many copies of the Prospectus as you may reasonably request. The
Company will deliver to you on the effective date of the Prospectus and
thereafter for so long as a Prospectus is required to be delivered under the Act
and the Rules and Regulations as many copies of the Prospectus, in final form,
or as thereafter amended or supplemented, as you may from time to time
reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Securities and the Option Securities substantially in the manner set forth under
"Use of Proceeds" in the Prospectus. No portion of the proceeds shall be used,
directly or indirectly, to acquire any securities issued by the Company, without
the prior written consent of the Underwriter.
(f) As soon as it is practicable, but in any event not later than the
first (lst) day of the fifteenth (15th) full calendar month
following the effective date of the Registration Statement, the
Company will make available to its security holders and the
Underwriter an earnings statement (which need not be audited)
covering a period of at least twelve (12) consecutive months
beginning after the effective date of the Registration Statement,
which shall satisfy the requirements of Section 11(a) of the Act and
Rule 158(a) of the Rules and Regulations.
(g) Non-Accountable Expense Allowance and other Costs and Expenses.
The Company shall pay to the Underwriter at each closing date, and to be
deducted from the purchase price for the Securities and the Option Securities,
an amount equal to three percent (3%) of the gross proceeds received by the
Company from the sale of the Securities and the Option Securities at such
closing date less in the case of the Initial Closing Date, the sum of $50,000
previously paid by the Company. If the sale of the Securities by the Underwriter
is not consummated for any reason not attributable to the Underwriter, or if (i)
the Company unilaterally withdraws the Registration Statement or does not
proceed with the public offering for reasons other than the affirmative
wrongdoing of the Underwriter, or (ii) the representations in Section 3 hereof
are not correct or the covenants cannot be complied with, or (iii) there has
been a materially adverse change in the condition, prospects or obligations of
the Company or a materially adverse change in stock market conditions from
current conditions, or (iv) the road show presentation produced a negative
affect on the intended syndicate members, or (v) the Company unilaterally
terminates the financing contemplated within 7 months of the date of the signing
of this Letter of Intent, the Company will pay a re-structuring fee of $50,000
(excluding the $50,000 previously paid by the Company and deliver 200,000 shares
of common stock to designates of the Underwriter.
Costs and Expenses. Subject to the provisions above the Company will pay
all costs and expenses incident to the performance of this Agreement by the
Company including, but not limited to, the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement and Prospectus (including the fee of the Commission, any
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securities exchange and the NASD in connection with the filing required by the
NASD relating to the offering of the Securities contemplated hereby); all
expenses, including fees of counsel, which shall be due and payable on the
Closing Date in connection with the qualification of the Securities under the
state securities or blue sky laws; the cost of furnishing to you copies of the
Prospectus, this Agreement, the cost of printing the certificates representing
the Securities and of preparing and photocopying the Underwriting Agreement and
related Underwriting documents, the cost of three underwriter's bound volumes,
any advertising costs and expenses, including but not limited to the Company's
expenses on "road show" information meetings and presentations, prospectus
memorabilia, issue and transfer taxes, if any. The Company will also pay all
costs and expenses incident to the furnishing of any amended Prospectus of or
any supplement to be attached to the Prospectus.
(h) As a condition of the closing, the Company shall obtain from its officers
and directors, employee option holders and holders of 5% of the outstanding
Common Stock of the Company, written commitments restricting the sale of 100% of
their common stock for (24) months after the closing pursuant to lock-up
agreements satisfactory to the Underwriter and as described in section 3(a)(xxv)
of this Agreement.
(i) During a date five years after the date hereof, the Company will make
available to its shareholders, as soon as practicable, and deliver to the
Underwriter:
(1) as soon as they are available, copies of all reports (financial
or other) mailed to shareholders;
(2) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD
or any securities exchange;
(3) every press release and every material news item or article of
interest to the financial community in respect of the Company or its
affairs which was prepared and released by or on behalf of the Company;
and
(4) any additional information of a public nature concerning the
Company (and any future subsidiaries) or its businesses which the
Underwriter may request.
During such five-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(j) The Company will maintain a Transfer Agent and, if necessary under the
jurisdiction of incorporation of the Company, a Registrar (which may be the same
entity as the Transfer Agent) for its Common Stock.
(k) The Company will furnish to the Underwriter or on the Underwriter's
order, without charge, at such place as the Underwriter may designate, copies of
each Preliminary Prospectus, the Final Prospectus the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriter may request.
(l) Neither the Company nor any of its officers, directors, stockholders
or any of its affiliates will take, directly or indirectly, any action designed
to, or which might in the future reasonably be expected to cause or result in
stabilization or manipulation of the price of any of the Company's securities.
(m) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
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<PAGE>
(n) The Company shall cause the Securities to be listed on the NASDAQ
Small Cap Market or on an exchange for a period of five (5) years from the date
hereof, and use its best efforts to maintain the listing of the Securities to
the extent they are outstanding.
(o) As soon as practicable, (i) before the effective date of the
Registration Statement, file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities and (ii) but in no event
more than 30 days from the effective date of the Registration Statement, take
all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and/or Moody's OTC Manual and to continue such
inclusion for a period of not less than five years if the securities are not
listed on an exchange. The Company also agrees to take such steps as may be
necessary to comply with the requirements of any state to be in compliance with
the aftermarket provisions of Section 18 of the Securities Act of 1933, as
amended, and as further amended by the National Securities Markets Improvement
Act of 1996.
(p) Until the completion of the distribution of the Securities, the
Company shall not without the prior written consent of the Underwriter and its
counsel which consent shall not be unreasonably withheld or delayed, issue,
directly or indirectly, any press release or other communication or hold any
press conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in 'the ordinary course of
the Company's business consistent with past practices with respect to the
Company's operations.
(q) During the five (5) year period from the date hereof, the Company will
not take any action or actions which may prevent or disqualify the
Company's use of Form SB-2 (or other appropriate form) for the
registration under the Act of the Representative's Securities.
(r) For a period of three (3) years from the Initial Closing Date, the
Company shall, at the Company's sole expense, (i ) promptly provide the
Representative, upon any and all requests of the Representative, with a "blue
sky trading survey" for secondary sales of the Company's securities, prepared by
counsel to the Company, and (ii) take all necessary and appropriate actions to
further qualify the Company's securities in all jurisdictions of the United
States in order to permit secondary sales of such securities pursuant to the
"blue sky" laws of those jurisdictions, provided that such jurisdictions do not
require the Company to qualify as a foreign corporation.
5. Conditions of the Underwriter's Obligations. The obligation of the
Underwriters to offer and sell the Securities and the Option Securities is
subject to the accuracy (as of the date hereof, and as of the Closing Dates) of
and compliance with the representations and warranties of the Company to the
performance by it of its agreement and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective as and when
cleared by the Commission, and you shall have received notice thereof, on or
prior to any closing date no stop order suspending the effectiveness of the
Prospectus shall have been issued and no proceedings for that or similar purpose
shall have been instituted or shall be pending, or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the Commission; any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel to the Underwriter; and
qualification, under the securities laws of such states as you may designate, of
the issue and sale of the Securities upon the terms and conditions herein set
forth or contemplated and containing no provision unacceptable to you shall have
been secured, and no stop order shall be in effect denying or suspending
effectiveness of such qualification nor shall any stop order proceedings with
respect thereto be instituted or pending or threatened under such law.
(b) On any closing date and, with respect to the letter referred to in
subparagraph (iii), as of the date hereof, you shall have received:
(i) the opinion, together with such number of signed or facsimile copies
of such opinion as you may reasonably request, addressed to you by Hart &
Trinen, counsel for the Company, in form and substance reasonably satisfactory
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<PAGE>
to the Underwriter and William M. Prifti, Esq., counsel to the Underwriter,
dated each such closing date, to the effect that:
(A) The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the jurisdiction in which it is
incorporated and has all necessary corporate power and authority to carry on its
business as described in the Prospectus.
(B) The Company is qualified to do business in each jurisdiction in which
conducting its business requires such qualification, except where the failure to
be so qualified would not have a material adverse effect on the Company's
business or assets.
(C) The Company has the full corporate power and authority to enter into
this Agreement, the Representative's Warrant Agreement and to consummate the
transactions provided for therein and each such Agreement has been duly and
validly authorized, executed and delivered by the Company. Each of this
Agreement and the Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other party thereto, constitutes a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency or
similar laws governing the rights of creditors and to general equitable
principles, and provided that no opinion need be given as to the enforceability
of any indemnification or contribution provisions, and none of the Company's
execution or delivery of this Agreement, or the Representative's Warrant
Agreement, its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its business as
described in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, conflicts with or will conflict with or results or will
result in any material breach or violation of any of the terms or provisions of,
or constitutes or will constitute a material default under, or result in the
creation or imposition of any material lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company pursuant to the terms
of (A) the articles of incorporation or by-laws of the Company, (B) to the
knowledge of such counsel, any material license, contract, indenture, mortgage,
deed of trust, voting trust agreement, stockholders' agreement, note, loan or
credit agreement or any other agreement or instrument to which the Company is a
party or by which it is or may be bound, or (C) to the knowledge of such
counsel, any statute, judgment, decree, order, rule or regulation applicable to
the Company, whether domestic or foreign.
(D) The Company had authorized and outstanding capital stock as set forth
in the Prospectus under the heading "Capitalization" as of the date set forth
therein, and all of such issued and outstanding shares of capital stock have
been duly and validly authorized and issued, and to the knowledge of such
counsel are fully paid and nonassessable, and to the knowledge of such counsel
no stockholder of the Company is entitled to any preemptive rights to subscribe
for, or purchase shares of the capital stock and to the knowledge of such
counsel none of such securities were issued in violation of the preemptive
rights of any holders of any securities of the Company.
(E) To the knowledge of such counsel, the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities, except
for this Agreement, the Representative's Warrant Agreement, and except as
described in the Prospectus. The Common Stock, and the Representative's Warrants
each conforms in all material respects to the respective descriptions thereof
contained in the Prospectus. The outstanding shares of Common Stock and the
Representative's Warrant Stock, upon issuance and delivery and payment therefore
in the manner described herein, the Warrant Agreement and the Representative
Agreement, as the case may be, will be, duly authorized, validly issued, fully
paid and nonassessable. There are no preemptive or other rights to subscribe for
or to purchase, or any restriction upon the voting or transfer of, any shares of
Common Stock pursuant to the Company's articles of incorporation, by-laws, other
governing documents or any agreement or other instrument known to such counsel
to which the Company is a party or by which it is bound.
(F) The certificates representing the Securities comprising the Common
Stock are in due and proper form and and the Representative's Warrant has been
duly authorized and reserved for issuance and when issued and delivered
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<PAGE>
in accordance with the respective terms of the Warrant Agreement and
Representative's Warrant Agreement, respectively, will duly and validly issued,
fully paid and nonassessable.
(G) To the knowledge of such counsel, there are no claims, suits or other
legal proceedings pending or threatened against the Company in any court or
before or by any governmental body which might materially affect the business of
the Company or the financial condition of the Company as a whole, except as set
forth in or contemplated by the Prospectus.
(H) Based on oral and/or written advice from the staff of the Commission,
the Registration Statement has become effective and, to the knowledge of such
counsel, no stop order suspending the effectiveness of the Prospectus is in
effect and no proceedings for that purpose are pending before, or threatened by,
federal or by a state securities administrator
(I) To the knowledge of such counsel, there are no legal or governmental
proceedings, actions, arbitrations, investigations, inquiries or the like
pending or threatened against the Company of a character required to be
disclosed in the Prospectus which have not been so disclosed, questions the
validity of the capital stock of the Company or this Agreement or the
Representative's Warrant Agreement or might adversely affect the condition,
financial or otherwise, or the prospects of the Company or which could adversely
affect the Company's ability to perform any of its obligations under this
Agreement, or the Representative's Warrant Agreement.
(J) To such counsel's knowledge, there are no material agreements,
contracts or other documents known to such counsel required by the Act to be
described in the Registration Statement and the Prospectus not filed as exhibits
to the Registration Statement and the Prospectus , and to such counsel's
knowledge (A) the exhibits which have been filed are correct copies of the
documents of which they purport to be copies; (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company is a party or by
which it is bound, including any document to which the Company is a party or by
which it is bound incorporated by reference into the Prospectus and any
supplement or amendment thereto, are accurate in all material respects and
fairly represent the information required to be shown by Form SB-2.
(K) No consent, approval, order or authorization from any regulatory
board, agency or instrumentality having jurisdiction over the Company, or its
properties (other than registration under the Act or qualification under state
or foreign securities law or approval by the NASD) is required for the valid
authorization, issuance, sale and delivery of the Securities, the Option
Securities or the Representative's Warrant.
(L) The statements in the Prospectus under "Risk Factors- Dependence on
Key Personnel" "Management-Limitation of Liability" "Description of the
Securities," and "Shares Eligible For Future Sale" have been reviewed by such
counsel, and insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions, are correct in
all material respects.
In addition, such counsel shall state that such counsel has participated
in conferences with officials and other representatives of the Company, the
Underwriter, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not certified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the Closing Date and on any later date on which Option Shares are to
be purchased, the Registration Statement and any amendment or supplement, when
such documents became effective or were filed with the Commission (other than
the financial statements including the notes thereto and supporting schedules
and other financial and statistical information derived therefrom, as to which
such counsel need express no comment) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or at the Closing
Date or any later date on which the Option Shares are to be purchased, as the
case may be, the Prospectus and any amendment or supplement thereto (other than
the financial statements including the notes thereto and other financial and
statistical information derived therefrom, as to which
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<PAGE>
such counsel need express no comment) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Such opinion shall also cover such other matters incident to the
transactions contemplated hereby and the offering Prospectus as you or counsel
to the Underwriter shall reasonably request. In rendering such opinion, to the
extent deemed reasonable by them, such counsel may rely upon certificates of any
officer of the Company or public officials as to matters of fact of which the
maker of such certificate has knowledge.
(ii) a certificate, signed by the Chief Executive Officer and the
Principal Financial or Accounting Officer of the Company dated the Closing Date,
to the effect that with regard to the Company, each of the conditions set forth
in Section 5(d) have been satisfied.
(iii) a letter, addressed to the Underwriter and in form and substance
satisfactory to the Underwriter in all respects (including the nonmaterial
nature of the changes or decreases, if any, referred to in clause (D) below),
from Ernst & Young dated, respectively, as of the effective date of the
Registration Statement and as of the Closing Date, as the case may be:
(A) Confirming that they are independent public accountants with respect
to the Company and its consolidated subsidiaries, if any, within the meaning of
the Act and the applicable published Rules and Regulations.
(B) Stating that, in their opinion, the financial statements, related
notes and schedules of the Company and its consolidated subsidiaries, if any,
included in the Registration Statement examined by them comply as to form in all
material respects with the applicable accounting requirements of the Act and the
published Rules and Regulations thereunder.
(C) Stating that, with respect to the period from June 30, 1998, to a
specified date (the specified date") not earlier than five (5) business days
prior to the date of such letter, they have read the minutes of meetings of the
stockholders and board of directors (and various committees thereof) of the
Company and its consolidated subsidiaries, if any, for the period from June 30,
1998 through the specified date, and made inquiries of officers of the Company
and its consolidated subsidiaries, if any, responsible for financial and
accounting matters and, especially as to whether there was any decrease in
sales, income before extraordinary items or net income as compared with the
corresponding period in the preceding year; or any change in the capital stock
of the Company or any change in the long term debt or any increase in the
short-term bank borrowings or any decrease in net current assets or net assets
of the Company or of any of its consolidated subsidiaries, if any, and further
stating that while such procedures and inquiries do not constitute an
examination made in accordance with generally accepted auditing standards,
nothing came to their attention which caused them to believe that during the
period from June 30, 1998, through the specified date there were any decreases
as compared with the corresponding period in the preceding year in sales, income
before extraordinary items or net income; or any change in the capital stock of
the Company or consolidated subsidiary, if any, or any change in the long term
debt or any increase in the short-term bank borrowings (other than any increase
in short-term bank borrowings in the ordinary course of business) of the Company
or any consolidated subsidiary, if any, or any decrease in the net current
assets or net assets of the Company or any consolidated subsidiary, if any; and
(D) Stating that they have carried out certain specified procedures
(specifically set forth in such letter or letters) as specified by the
Underwriter (after consultations with Ernst & Young, CPA's relating to such
procedures), not constituting an audit, with respect to certain tables,
statistics and other financial data in the Prospectus specified by the
Underwriter and such financial data not included in the Prospectus but from
which information in the Prospectus is derived, and which have been obtained
from the general accounting records of the Company or consolidated subsidiaries,
if any, or from such accounting records by analysis or computation, and having
compared such financial data with the accounting records of the Company or the
consolidated subsidiaries, if any, stating that they have found such financial
data to agree with the accounting records of the Company.
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(c) All corporate proceedings and other legal matters relating to this
Agreement, the Prospectus and other related matters shall be satisfactory to or
approved by counsel to the Underwriter and you shall have received from Hart &
Trinen a signed opinion dated as of each closing date, with respect to the
incorporation of the Company, the validity of the Securities, the form of the
Prospectus, (other than the financial statements together with related notes and
other financial and statistical data contained in the Prospectus or omitted
therefrom, as to which such counsel need express no opinion), the execution of
this Agreement and other related matters as you may reasonably require.
(d) At each closing date, (i) the representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects with the same effect as if made on and as of such closing date; (ii)
the Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations and in all material respects conform to the
requirements thereof, and neither the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary, in light of the
circumstances under which they were made, in order to make the statements
therein not misleading; (iii) there shall have been since the respective dates
as of which information is given no material adverse change in the business,
properties or condition (financial or otherwise), results of operations, capital
stock, long term debt or general affairs of the Company from that set forth in
the Prospectus, except changes which the Prospectus indicates might occur after
the effective date of the Prospectus, and the Company shall not have incurred
any material liabilities or material obligations, direct or contingent, or
entered into any material transaction, contract or agreement not in the ordinary
course of business other than as referred to in the Prospectus and which would
be required to be set forth in the Prospectus; and (iv) except as set forth in
the Prospectus, no action, suit or proceeding at law or in equity shall be
pending or threatened against the Company which would be required to be set
forth in the Prospectus, and no proceedings shall be pending or threatened
against the Company or any subsidiary before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company.
(e) On the Initial Closing Date, the Company shall have executed and
delivered to the Underwriter, (i) the Representatives' Warrant Agreement
substantially in the form filed as an Exhibit to the Registration Statement in
final form and substance satisfactory to the Underwriter, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(f) On or before the Initial Closing Date, the Securities shall have been
duly approved for listing on an exchange or on NASDAQ, Small Cap Market.
(g) On or before the Initial Closing Date, there shall have been delivered
to the Underwriter all of the Lock-up Agreements required to be delivered
pursuant to Section 3(a)(xxv) and 4(h), in form and substance satisfactory to
the Underwriter and Underwriter's counsel.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Underwriter may terminate this
Agreement or, if the Underwriter so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
6. Conditions of the Company's Obligations. The obligation of the Company to
sell and deliver the Securities is subject to the following:
(a) The provisions regarding the effective date, as described in Section
10.
(b) At the Initial Closing Date, no stop order suspending the
effectiveness of the Prospectus shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission or by any state
securities department.
(c) Tender of payment by the Underwriter in accord with Section 2 hereof.
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7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
its employees and each person, if any, who controls you within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or several
(which shall, for any purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), to which
each Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission made in the Prospectus, or such amendment or supplement to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, which is in reliance upon and in conformity
with written information furnished by the Company to you specifically for use in
the preparation thereof, and provided further that the indemnity agreement
contained in this subsection (a) shall not inure to the benefit of you with
respect to any person asserting any such loss, claim, damage or liability who
has purchased the Securities which are the subject thereof if you or any
participants failed to send or give a copy of the Prospectus to such person at
or prior to the written confirmation of the sale of such Securities to such
person and except that, with respect to any untrue statement or omission or any
alleged untrue statement or omission, made in any Pre-Effective Prospectus, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Underwriter ( or to any person controlling any such underwriter)
from whom the person asserting any such loss, claim, damage or liability
purchased the securities concerned to the extent that such untrue statement or
omission, or alleged untrue statement or omission, has been corrected in a later
Pre-Effective Prospectus or in the Final Prospectus unless the Underwriter
circulated a later Pre-Effective Prospectus or the Final Prospectus to such
person
(b) Each Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers, each person, if any, who controls the
Company within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission was made in the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by you specifically for use in the preparation thereof. This indemnity
will be in addition to any liability which any Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party, similarly notified, to assume the
defense thereof, subject to the provisions herein stated, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that, if the indemnified party is you or a person who controls you, the fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in writing
by the indemnifying party or (ii) the named parties to any such action
(including any impleaded
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parties) include both you or such controlling person and the indemnifying party
and you or such controlling person shall have been advised by such counsel that
there is a conflict of interest which would prevent counsel for the indemnifying
party from representing the indemnifying party and you or such controlling
person (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of you or such controlling person, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction or which are consolidated into the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for you
and all such controlling persons, which firm shall be designated in writing by
you). No settlement of any action against an indemnified party shall be made
without the consent of the indemnified party, which shall not be unreasonably
withheld in light of all factors of importance to such indemnified party.
8. Contribution. In order to provide for just and equitable contribution
tinder the Act in any case in which (i) the indemnifying party makes a claim for
indemnification pursuant to Section 7 hereof but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of the
Underwriters, then the Company and the Underwriters in the aggregate shall
contribute to the aggregate losses, claims, damages, or liabilities to which
they may be subject (which shall, for all purposes of this Agreement, include,
but not be limited to, all costs of defense and investigation and all attorneys'
fees) in either such case (after contribution from others) in such proportions
that the Underwriters are responsible in the aggregate for that portion of such
losses, claims, damages or liabilities determined by multiplying the total
amount of such losses, claims, damages or liabilities times the difference
between the public offering price and the commission to the Underwriter and
dividing the product thereof by the public offering price, and the Company, if
applicable, shall be responsible for that portion of such losses, claims,
damages or liabilities times the commission to the Underwriters and dividing the
product thereof by the public offering price; provided, however, that the
Underwriters shall not be required to so contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by the Underwriters
hereunder if such allocation is not permitted by applicable law, then the
relative fault of the Company and the Underwriters in connection with the
statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 12(2) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The foregoing contribution agreement shall in no
way affect the contribution liabilities of any person having liability under
Section 12 of the Act other than the Company and the Underwriter. As used in
this paragraph, the term "Underwriters" includes any person who controls the
Underwriters within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this paragraph is not permitted by law, then any
Underwriter and each person who controls any Underwriter shall be entitled to
contribution from the Company, to the full extent permitted by law.
9. Effective Date. This Agreement shall become effective at 10:00 a.m. New
York time on the next full business day following the effective date of the
Registration Statement, or at such other time after the effective date of the
Prospectus as you in your discretion shall first commence the public offering of
any of the Securities covered thereby, provided, however, that at all times the
provisions of Sections 7, 8, 9 and 11 shall be effective.
10. Termination.
(a) This Agreement, may be terminated at any time prior to the
Closing Date by you if in your judgment it is impracticable to offer for sale or
to enforce contracts made by you for the sale of the Securities agreed to be
sold hereunder by reason of (i) the Company as a whole having sustained a
material loss, whether or not insured, by reason of fire, earthquake, flood,
accident or other calamity, or from any labor dispute or court or government
action, order or decree, (ii) trading in securities of the Company having been
suspended by a state securities administrator or by the Commission, (iii)
material governmental restrictions having been imposed on trading in securities
generally (not in force and effect on the date hereof) or trading on the New
York Stock Exchange, American Stock Exchange, or in the over-the-counter market
shall have been suspended, (iv) a banking moratorium
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having been declared by federal or New York State authorities, (v) an outbreak
or escalation of hostilities or other national or international calamity having
occurred, (vi) the passage by the Congress of the United States or by any state
legislative body, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is believed likely by you to have
a material impact on the business, financial condition or financial statements
of the Company; or (vii) any material adverse change having occurred, since the
respective dates as of which information is given in the Prospectus, in the
condition, financial or otherwise, of the Company as a whole, whether or not
arising in the ordinary course of business, (viii)Ian Robertson and Ian C. Hand
cease to be employed by the Company in their present capacity; (ix)or the
Securities are not listed on NASDAQ.
(b) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 10 or in Section 9,
the Company shall be promptly notified by you, by telephone or telegram,
confirmed by letter.
11. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company (or its officers) and the Underwriter set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation made by or on behalf of the Underwriter, the Company, or
any of their officers or directors and will survive delivery of and payment for
the Securities.
12. Notices. All communications hereunder will be in writing and, except
as otherwise expressly provided herein, if sent to you, will be mailed,
delivered or telephoned and confirmed to you at, Westport Resources
Investment Services, Inc. 315 Post Road West, Westport, Ct. 06880, Attn:
John Lane, Vice President; and to Amiga Telephony Corporation,2770-555 W.
Hastings Street, Vancouver, British Columbia, Canada V6B4N5,Attn: Ian C.
Hand, President.
13. Parties in Interest. This Agreement is made solely for the benefit of
the Underwriter(s), and the Company, and their respective controlling
persons, directors and officers, and their respective successors, assigns,
executors and administrators. No other person shall acquire or have any
right under or by virtue of this Agreement.
14. Headings. The Section headings in this Agreement have been inserted as
a matter of convenience of reference and are not a part of this Agreement.
15. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, without giving effect to
conflict of law principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which together shall constitute one and the same
instrument.
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If the foregoing correctly sets forth the understanding between the
Company and you, as Representative of the several underwriters, please so
indicate in the space provided below for such purpose, whereupon this letter and
your acceptance shall constitute a binding agreement between us.
Very truly yours,
Amiga Telephony Corporation
By _________________________________________
(Authorized Officer)
Ian C. Hand , President
Accepted as of the date first above written:
Westport Resources Investment Services, Inc.
As Representative of the several Underwriters
By _______________________________________
(Authorized Officer)
John D. Lane, Vice President
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EXHIBIT A
SCHEDULE I
UNDERWRITERS
Underwriter Units
Each unit consisting of
one share of common stock
and
one common stock purchase warrant
Westport Resources Investment Services, Inc.
TOTAL 1,000,000
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT AS TO SUCH
SECURITIES FILED UNDER THE ACT, OR AN EXEMPTION FROM REGISTRATION, AND
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER MAY REQUIRE AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HEREOF THAT SUCH REGISTRATION IS
NOT REQUIRED AND THAT SUCH LAWS ARE COMPLIED WITH.
Void After 3:30 P.M., Eastern Time, on , 2004
Underwriter's
Warrant to Purchase
Common Stock and
Common Stock Purchase Warrants
of
AMIGA TELEPHONY CORPORATION
This is to Certify That, FOR VALUE RECEIVED, Westport Resources Investment
Services, Inc. the "Holder") is entitled to purchase subject to the provisions
of this Warrant, shares of Common Stock and Common Stock Purchase
Warrants, ("Securities") from Amiga Telephony Corporation ("Company"), a
Delaware corporation, at any time on or after , 2000, and not later than 3:30
p.m., Eastern Time, on , 2004, exercisable at a purchase price for the
Securities of $ per share which is 120% of the public offering price. The
number of Securities to be received upon the exercise of this Warrant and the
price to be paid for the Securities may be adjusted from time to time as
hereinafter set forth. The purchase price of a Security in effect at any time
and as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price." This Warrant is or may be one of a series of Warrants
identical in form issued by the Company to purchase an aggregate of 100,000
Shares of Common Stock and 100,000 Common Stock Purchase Warrants. The
Securities, as adjusted from time to time, underlying the Warrants are
hereinafter sometimes referred to as "Warrant Securities". The Securities
issuable upon the exercise hereof are in all respects identical to the
securities being purchased by the Underwriter for resale to the public pursuant
to the terms and conditions of the Underwriting Agreement entered into on this
date between the Company and Holder
(a) Exercise of Warrant. Subject to the provisions of Section (g) hereof, this
Warrant may be exercised in whole or in part at anytime or from time to time on
or after , 2000, but not later than 3:30 p.m., Eastern Time on , 2004,
or if , 2004 is a day on which banking institutions are authorized by law to
close, then on the next succeeding day which shall not be such a day, by
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of shares of Common
Stock, together with all federal and state taxes applicable upon such exercise.
If this Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver a new Warrant
evidencing the right of the Holder to purchase the balance of the shares
purchasable hereunder. Upon receipt by the Company of this Warrant at the office
of the Company or at the office of the Company's stock transfer agent, in proper
form for exercise and accompanied by the total Exercise Price, the Holder shall
be deemed to be the holder of record of the Securities issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such Securities shall not then
be actually delivered to the Holder. The Company agrees to provide notice
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to the Holder that any tender offer is being made for the Securities no later
than the first business day after the day the Company becomes aware that any
tender offer is being made for the Securities.
(b) Reservation of Securities. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of shares of Securities as shall be required for issuance or
delivery upon exercise of this Warrant. The Company covenants and agrees that,
upon exercise of the Warrants and payment of the Exercise Price therefor, all
Securities and other securities issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As long as the Warrants shall be outstanding, the
Company shall use its best efforts to cause all Securities issuable upon the
exercise of the Warrants to be listed (subject to official notice of issuance)
on all securities exchanges on which the Common Stock issued to the public in
connection herewith may then be listed and/or quoted on NASDAQ. The Company also
agrees that in the event the common stock purchase warrants are called by the
Company, that any remaining unpurchased common stock purchase warrants hereunder
shall be convertible into common stock and available for purchase on the same
terms as the original exercise price to the underwriters.
(c) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as
follows:
(1) If the Securities are listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange, the current value
shall be the last reported sale price of the Common Stock on such exchange on
the last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average of the closing bid and asked prices
for such day on such exchange; or
(2) If the Securities are not so listed or admitted to unlisted trading
privileges, the current value shall be the mean of the last reported bid and
asked prices reported by the National Association of Securities Dealers
Automated Quotation System (or, if not so quoted on NASDAQ or quoted by the
National Quotation Bureau, Inc.) on the last business day prior to the date of
the exercise of this Warrant; or
(3) If the Securities are not so listed or admitted to unlisted trading
privileges and bid and asked prices are not so reported, the current value shall
be an amount, not less than book value, determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company, such determination
to be final and binding on the Holder.
(d) Exchange, Assignment or Loss of Warrant. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof to the Company or at the office of its stock transfer agent, if any, for
other Warrants of different denominations entitling the Holder thereof to
purchase (under the same terms and conditions as provided by this Warrant) in
the aggregate the same number of Securities purchasable hereunder. This Warrant
may not be sold, transferred, assigned, or hypothecated until after one year
from the effective date of the registration statement except that it may be (i)
assigned in whole or in part to the officers of the "Underwriter(s)", and
(ii)transferred to any successor to the business of the "Underwriter(s)." Any
such assignment shall be made by surrender of this Warrant to the Company, or at
the office of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and with funds sufficient to pay any transfer tax;
whereupon the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in-such instrument of assignment, and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other Warrants which carry the same rights upon presentation hereof at the
office of the Company or at the office of its stock transfer agent, if any,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants issued in substitution for or
replacement of this Warrant, or into which this Warrant may be divided or
exchanged. Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and
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cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not the Warrant so lost, stolen, destroyed, or mutilated
shall be at any time enforceable by anyone.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) Notices to Warrant Holders. So long as this Warrant shall be
outstanding and unexercised (i) if the Company shall pay any dividend exclusive
of a cash dividend, or make any distribution upon the Common Stock, or (ii) if
the Company shall offer to the holders of Common Stock for subscription or
purchase by them any shares of stock of any class or any other rights, or (iii)
if any capital reorganization of the Company, reclassification of the capital
stock of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or transfer of all or substantially all of the
property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then, in any such case, the Company shall cause to be delivered to the
Holder, at least ten (10) days prior to the date specified in (x) or (y) below,
as the case may be, a notice containing a brief description of the proposed
action and stating the date on which (x) a record is to be taken for the purpose
of such dividend, distribution or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, lease, dissolution,
liquidation or winding up is to take place and the date, if any, is to be fixed,
as of which the holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for equivalent securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
(g) Adjustment of Exercise Price and Number of Shares of Common Stock
Deliverable.
(A)(i) Except as hereinafter provided, in the event the Company shall, at
any time or from time to time after the date hereof, issue any shares of Common
Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such issuance, subdivision or combination being herein call a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the Exercise Price of the Common Stock issuable upon the exercise of the Warrant
in effect immediately prior to such Change of Shares shall be changed to a price
(including any applicable fraction of a cent to the nearest cent) determined by
dividing (i) the sum of (a) the total number of shares of Common Stock
outstanding immediately prior to such Change of Shares, multiplied by the
Exercise Price in effect immediately prior to such Change of Shares, and (b) the
consideration, if any, received by the Company upon such issuance, subdivision
or combination by (ii) the total number of shares of Common Stock outstanding
immediately after such Change of Shares; provided, however, that in no event
shall the Exercise Price be adjusted pursuant to this computation to an amount
in excess of the Exercise Price in effect immediately prior to such computation,
except in the case of a combination of outstanding shares of Common Stock.
For the purposes of any adjustment to be made in accordance with this
Section (g) the following provisions shall be applicable:
(I) Shares of Common Stock issuable by way of dividend or other
distribution on any capital stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the record
date for the determination of shareholders entitled to receive such dividend or
other distribution and shall be deemed to have been issued without
consideration.
(II) The number of shares of Common Stock at any one time outstanding
shall not be deemed to include the number of shares issuable (subject to
readjustment upon the actual issuance thereof) upon the exercise of options,
rights or warrants and upon the conversion or exchange of convertible or
exchangeable securities.
(ii) Upon each adjustment of the Exercise Price pursuant to this Section
(g), the number of shares of Common Stock purchasable
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<PAGE>
shall be the number derived by multiplying the number of shares of Common Stock
purchasable immediately prior to such adjustment by the Exercise Price in effect
prior to such adjustment and dividing the product so obtained by the applicable
adjusted Exercise Price.
(B) In case of any reclassification or change of outstanding Securities
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value or as a result
of a subdivision or combination), or in case of any consolidation or merger of
the Company with or into another corporation other than a merger with a
"Subsidiary" (which shall mean any corporation or corporations, as the case may
be, of which capital stock having ordinary power to elect a majority of the
Board of Directors of such corporation (regardless of whether or not at the time
capital stock of any other class or classes of such corporation shall have or
may have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned by the Company or by one or more Subsidiaries)
or by the Company and one or more Subsidiaries in which merger the Company is
the continuing corporation and which does not result in any reclassification or
change of the then outstanding shares of Common Stock or other capital stock
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value or as a result
of subdivision or combination) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such successor or purchasing
corporation, as the case may be, shall make lawful and adequate provision
whereby the Holder of each Warrant then outstanding shall have the right
thereafter to receive on exercise of such Warrant the kind and amount of
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of
securities issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and shall
forthwith file at the principal office of the Company a statement signed on its
behalf by its President or a Vice President and by its Treasurer or an Assistant
Treasurer or its Secretary or an Assistant Secretary evidencing such provision.
Such provisions shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section
(g)(A). The above provisions of this Section (g)(B) shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(C) Irrespective of any adjustments or changes in the Exercise Price or
the number of Securities purchasable upon exercise of the Warrants, the Warrant
Certificates theretofore and thereafter issued shall, unless the Company shall
exercise its option to issue new Warrant Certificates pursuant hereto, continue
to express the Exercise Price per share and the number of shares purchasable
thereunder as the Exercise Price per share and the number of shares purchasable
thereunder as expressed in the Warrant Certificates when the same were
originally issued.
(D) After each adjustment of the Exercise Price pursuant to this Section
(g), the Company will promptly prepare a certificate signed on its behalf by the
President or Vice President, and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Exercise Price as so adjusted, (ii) the number of Securities purchasable upon
exercise of each Warrant, after such adjustment, and (iii' a brief statement of
the facts accounting for such adjustment. The Company will promptly file such
certificate in the Company's minute books and cause a brief summary thereof to
be sent by ordinary first class mail to each Holder at his last address as it
shall appear on the registry books of the Company. No failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity thereof except as to the holder to whom the Company failed to mail such
notice, or except as to the holder whose notice was defective. The affidavit of
an officer or the Secretary or an Assistant Secretary of the Company that such
notice has been mailed shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
(E) No adjustment of the Exercise Price shall be made as a result of or in
connection with the issuance or sale of Securities if the amount of said
adjustment shall be less than $.10, provided, however, that in such case, any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment that shall amount, together with any adjustment so carried forward,
to at least $.10. In addition, Holders shall not be entitled to cash dividends
paid by the Company prior to the exercise of any Warrant or Warrants held by
them.
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(F) In the event that the Company shall at any time prior to the
exercise of all Warrants declare a dividend consisting solely of
shares of Common Stock or otherwise distribute to its stockholders
any assets, property, rights, or evidences of indebtedness, the
Holders of the unexercised Warrants shall thereafter be entitled, in
addition to the Securities or other securities and property
receivable upon the exercise thereof, to receive, upon the exercise
of such Warrants, the same property, assets, rights, or evidences of
indebtedness, that they would have been entitled to receive at the
time of such dividend or distribution as if the Warrants had been
exercised immediately prior to such dividend or distribution. At the
time of any such dividend or distribution, the Company shall make
appropriate reserves to ensure the timely performance of the
provisions of this Section (g).
(G.1) Right to Exercise on a Net Issuance Basis. In lieu of exercising
this Warrant for cash, the Holder shall have the right to exercise this Warrant
or any portion thereof ( the "Net Issuance Right") into Common Stock as provided
in this Section G.1 at any time or from time to time during the period specified
on page one of this Warrant Agreement, by the surrender of this Warrant to the
Company with a duly executed and completed Exercise Form marked to reflect net
issuance exercise. Upon exercise of the Net Issuance Right with respect to a
particular number of shares subject to this Warrant and noted on the Exercise
Form (the "Net Issuance Warrant Shares"), the Company shall deliver to the
Holder (without payment by the Holder of any Exercise Price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable shares
of Common Stock equal to the quotient obtained by dividing the value of this
Warrant (or the specified portion hereof) on the Net Issuance Exercise Date,
which value shall be determined by subtracting (A) the aggregate Exercise price
of the Net Issuance Warrant Shares immediately prior to the exercise of the Net
Issuance Right from (B) the aggregate fair market value of the Net Issuance
Warrant Shares issuable upon exercise of this Warrant ( or the specified portion
hereof) on the Net Issuance Exercise Date ( as herein defined) by (Y) the fair
market value one share of Common Stock on the Net Issuance Exercise Date ( as
herein defined).
Expressed as a formula, such net issuance exercise shall be computed as
follows:
X = B-A/Y
Where: X = the number of shares of Common Stock that may be issued to the
Holder
Y= the fair market value ("FMV") of one share of Common Stock as of the
Net Issuance Exercise Date
A= the aggregate Exercise Price (i.e. the product determined by
multiplying the Net Issuance Warrant Shares by the Exercise Price)
B= the aggregate FMV ( i.e. the product determined by multiplying the
FMV by the Net Issuance Warrant Shares.
G.1.2 Determination of Fair Market Value. For purposes of this Section G.1.2,
"fair market value" of a share of Common Stock as of the Net Issuance Exercise
Date shall mean:
(i) if the Net Issuance Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's
registration Statement relating to such Public Offering has
been declared effective by the SEC, then the initial "Price to
Public" specified in the final Prospectus with respect to such
offering.
(ii) if the Net Issuance Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
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(A) If traded on a securities exchange, the fair market value of the
Common Stock shall be deemed to be the average of the closing prices
of the Common Stock on such exchange over the 20-day period ending
five business days prior to the Net Issuance Date;
(B) If traded on the Nasdaq National Market or the Nasdaq Small Cap
Market, the fair market value of the Common Stock shall be deemed to
be the average of the last reported sales prices of the common Stock
on such Market over the 20-day period ending five business days
prior to the Net Issuance Exercise Date;
(C) If traded over-the-counter other than on the Nasdaq National market
or the Nasdaq SmallCap Market, the fair market value of the Common
Stock shall be deemed to be the average of the midpoint between the
closing bid and ask prices of the Common Stock over the 20-day
period ending five business days prior to the Net Issuance Exercise
Date; and
(D) If there is no public market for the Common Stock, then the fair
market value shall be determined by mutual agreement of the
Warrantholder and the Company, and if the Warrantholder and the
company are unable to so agree, at the Company's sole expense, by an
investment banker of national reputation selected by the Company and
reasonably acceptable to the Warrantholder.
(h) Piggyback Registration. If, at any time commencing one year from the
effective date of the registration statement and expiring four (4) years
thereafter, the Company proposes to register any of its securities under the
Securities Act of 1933, as amended (the "Act") (other than in connection with a
merger or pursuant to Form S-8, S-4 or other comparable registration statement)
it will give written notice by registered mail, at least thirty (30) days prior
to the filing of each such registration statement, to the Holders and to all
other Holders of the Warrants and/or the Warrant Securities of its intention to
do so. If the Holder or other Holders of the Warrants and/or Warrant Securities
notify the Company within twenty (20) days after receipt of any such notice of
its or their desire to include any such securities in such proposed registration
statement, the Company shall afford each of the Underwriter and such Holders of
the Warrants and/or Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement. In the event any
underwriter underwriting the sale of securities registered by such registration
statement shall limit the number of securities includable in such registration
by shareholders of the Company, the number of such securities shall be allocated
pro rata among the holders of Warrants and the holders of other securities
entitled to piggyback registration rights.
Notwithstanding the provisions of this Section, the Company shall have the
right at any time after it shall have given written notice pursuant to this
Section (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
(i) Demand Registration.
(1) At any time commencing one year from the effective date of the registration
statement and expiring four (4) years thereafter, the Holders of the Warrants
and/or Warrant Securities representing a "Majority" (as hereinafter defined) of
such securities (assuming the exercise of all of the Warrants) shall have the
right (which right is in addition to the registration rights under Section (i)
hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Securities and Exchange Commission (the "Commission"),
on one occasion, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Underwriter and Holders, in order to comply with the
provisions of the Act, so as to permit a public offering and sale of their
respective Warrant Securities for nine (9) consecutive months by such Holders
and any other holders of the Warrants and/or Warrant Securities who notify the
Company within ten (10) days after receiving notice from the Company of such
request.
(2) The Company covenants and agrees to give written notice of any
registration request under this Section (i) by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(3) In addition to the registration rights under this Section (i) at any
time commencing one year after the effective date of the registration statement
and expiring four (4) years thereafter, the Holders of Warrants and/or
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Warrant Securities shall have the right, exercisable by written request to the
Company, to have the Company prepare and file, on one occasion, with the
Commission a registration statement so as to permit a public offering and sale
for nine (9) consecutive months by such Holders of its Warrant Securities;
provided, however, that the provisions of Section (i)(2) hereof shall not apply
to any such registration request and registration and all costs incident thereto
shall be at the expense of the Holder or Holders making such request.
(j) Covenants of the Company With Respect to Registration. In connection with
any registration under Section (h) or (i) hereof, the Company covenants and
agrees as follows:
(i) The Company shall use its best efforts to file a registration
statement within sixty (60) days of receipt of any demand therefor, shall use
its best efforts to have any registration statement declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Securities such number of prospectuses as shall reasonably be requested. The
Company will deliver the securities within three-days of the effective date or
sooner.
(ii) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections (h), (i) and (j) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. If the
Company shall fail to comply with the provisions of Section (j)(i), the Company
shall, in addition to any other equitable or other relief available to the
Holder(s), extend the Exercise Period by such number of days as shall equal the
delay caused by the Company's failure.
(iii) The Company will take all necessary action which may be required in
qualifying or registering the Warrant Securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as are reasonably requested by the Holder(s), provided that the Company
shall not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(iv) The Company shall indemnify the Holder(s) of the Warrant Securities
to be sold pursuant to any registration statement and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), from
and against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify the Underwriter contained in Section 7 of the
Underwriting Agreement relating to the offering.
(v) The Holder(s) of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement to the same extent with the
same effect as the provisions contained in Section 7 of the Underwriting
Agreement pursuant to which the Underwriter has agreed to indemnify the Company.
(vi) The Holder(s) may exercise their Warrants prior to the initial
filing of any registration statement or the effectiveness thereof.
(vii) The Company shall not permit the inclusion of any securities other
than the Warrant Securities to be included in any registration statement filed
pursuant to Section (i) hereof, or permit any other registration statement to be
or remain effective during the effectiveness of a registration statement filed
pursuant to Section (i) hereof, other than a
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secondary offering of equity securities of the Company, without the prior
written consent of the Holders of the Warrants and Warrant Securities
representing a Majority of such securities (assuming an exercise of all the
Warrants underlying the Warrants).
(viii) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriter, of (x) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (y) a "cold comfort" letter dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(ix) The Company shall as soon as practicable after the effective date of
the registration statement, and in any event within 15 months thereafter, make
"generally available to its security holders" (within the meaning of Rule 158
under the Act) an earnings statement (which need not be audited) complying with
Section 11(a) of the Act and covering a period of at least 12 consecutive months
beginning after the effective date of the registration statement.
(x) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below and to the
managing underwriters, copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD") or an Exchange. Such investigation shall include access
to books, records and properties and opportunities to discuss the business of
the Company with its officers and independent auditors, all to such reasonable
extent and at such reasonable times and as often as any such Holder or
underwriter shall reasonably request.
(xi) The Company shall enter into an underwriting agreement with the
managing underwriters, which may be the Underwriter. Such agreement shall be
satisfactory in form and substance to the Company, and such managing
underwriters, and shall contain such representations, warranties and covenants
by the Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter; provided however, that no Holder
shall be required to make any representations, warranties or covenants or grant
any indemnity to which it shall object in any such underwriting agreement. The
Holders shall be parties to any underwriting agreement relating to an
underwritten sale of their Warrant Securities and may, at their option, require
that any or all the representations, warranties and covenants of the Company to
or for the benefit of such underwriters shall also be made to and for the
benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
(xii) For purposes of this Agreement, the term " Majority" in reference to
the Holders of Warrants or Warrant Securities, shall mean in
excess of fifty (50%) of the then outstanding Warrants and
Warrant Securities that (i) are not held by the Company, an
affiliate, officer, creditor, employee or agent thereof or any
of their respective affiliates, members of their family,
persons acting as nominees or in conjunction therewith or (ii)
have not been resold to the public pursuant to a registration
statement filed with the Commission under the Act or pursuant
to Rule 144.
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(xiii) Buy-Out of Registration Demand. In lieu of carrying out its
obligations to effect a Piggyback Registration or Demand
Registration or any other registration of any registrable
securities pursuant to this Agreement, the Company may carry
out such obligation by offering to purchase and purchasing
such Registrable Securities requested to be registered in an
amount in cash equal to the difference between (a) 95% of the
last sale price of the Common Stock on the day the request for
registration is made and (b) the Exercise Price in effect on
such day; the purchase transaction closing within three (3)
business days; provided however, that the Holder or Holders
may decline such request rather than accept such offer by the
Company.
(k) Conditions of Company's Obligations. The Company's obligation under Section
j hereof shall be conditioned as to each such public offering, upon a timely
receipt by the Company in writing of:
(A) Information as to the terms of such public offering furnished by or on
behalf of the Holders making a public distribution of their Warrant Securities;
and
(B) Such other information as the Company may reasonably require from such
Holder, or any underwriter for any of them, for inclusion in such registration
statement or offering statement or post-effective amendment.
(C) An agreement by the Holder to sell his Warrants and Warrant Securities
on the basis provided in the Underwriting Agreement.
(1) Continuing Effect of Agreement. The Company's agreements with respect
to the Warrant Securities in this Warrant will continue in effect regardless of
the exercise or surrender of this Warrant.
(m) Notices. Any notices or certificates by the Company to the Holder and
by the Holder to the Company shall be deemed delivered if in writing and
delivered personally or sent by certified mail, to the Holder, addressed to him
or sent to Westport Resources Investment Services, Inc., 315 Post Road West,
Westport, CT 06880 or, if the Holder has designated, by notice in writing to the
Company, any other address, to such other address, and, if to the Company,
addressed to Amiga Telephony Corporation, 640-625 Howe Street, Vancouver, B.C.
V6C 2T6, Attn:Ian C. Hand, President. The Company may change its address by
written notice to Westport Resources Investment Services, Inc.
(n) Limited Transferability. This Warrant Certificate and the Warrant may
not be sold, transferred, assigned or hypothecated for a one-year period after
the effective date of the Registration Statement except to underwriters of the
Offering referred to in the Underwriting Agreement or to individuals who are
either partners or officers of such an underwriter or by will or by operation of
law. and if transfer occurs after one year, the warrant must be exercised
immediately upon transfer or it shall lapse. The Warrant may be divided or
combined, upon request to the Company by the Warrant holder, into a certificate
or certificates evidencing the same aggregate number of Warrants. The Warrant
may not be offered, sold, transferred, pledged or hypothecated in the absence of
any effective registration statement as to such Warrant filed under the Act, or
an exemption from the requirement of such registration, and compliance with the
applicable federal and state securities laws. The Company may require an opinion
of counsel satisfactory to the Company that such registration is not required
and that such laws are complied with. The Company may treat the registered
holder of this Warrant as he or it appears on the Company's book at any time as
the Holder for all purposes. The Company shall permit the Holder or his duly
authorized attorney, upon written request during ordinary business hours, to
inspect and copy or make extracts from its books showing the registered holders
of Warrants.
(o) Transfer to Comply With the Securities Act of 1933. The Company may
cause the following legend, or one similar thereto, to be set forth on the
Warrants and on each certificate representing Warrant Securities, or any other
security issued or issuable upon exercise of this Warrant not theretofore
distributed to the public or sold to underwriters for distribution to the public
pursuant to Sections (h) or (i) hereof; unless counsel satisfactory to the
Company is of the opinion as to any such certificate that such legend, or one
similar thereto, is unnecessary:
"The warrants represented by this certificate are restricted securities
and may not be offered for sale, sold or otherwise transferred unless an opinion
of counsel satisfactory to the Company is obtained stating that such offer,
sale or transfer is in compliance wrath state and federal securities law.
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(p) Applicable Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Connecticut, without giving effect to
conflict of law principles.
(q) Assignability. This Warrant may not be amended except in a writing signed by
each Holder and the Company. (r) Survival of Indemnification Provisions. The
indemnification provisions of this Warrant shall survive until , 2007.
Amiga Telephony Corporation
By ___________________________________
Ian C. Hand , President
Date: ___________________________
Attest:
_________________________________
, Secretary
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PURCHASE FORM
Dated ________________ 19__
The undersigned hereby irrevocably elects to exercise the Warrant to the extent
of purchasing _________ shares of Common Stock and hereby makes payment of
$ in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
Signature ______________________________________________________________________
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<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ____________________________________________________________
hereby sells, assigns and transfers unto
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
the right to purchase shares of Common Stock as represented by this Warrant to
the extent of shares of Common Stock as to which such right is
exercisable and does hereby irrevocably constitute and appoint,
________________________
attorney, to transfer the same on the books of the Company with full power of
substitution in the premises.
Signature ______________________________________________________________________
Dated: ____________ 19__
12
AMIGA TELEPHONY CORPORATION
1,000,000 Units
each unit consisting of
One Share of Common Stock
And
One Common Stock Purchase Warrant
AGREEMENT AMONG UNDERWRITERS
, 1999
Westport Resources Investment Services, Inc.
315 Post Road West
Westport, CT 06880
as Representative
GENTLEMEN:
We wish to confirm as follows the agreement among you, the undersigned and
the other members of the Underwriting Group named in Schedule I to the
Underwriting Agreement, as it is to be executed (all such parties being herein
called the "Underwriters"), with respect to the purchase by the Underwriters
severally from Amiga Telephony Corporation ("Company") of 1,000,000 shares of
Common Stock and 1,000,000 Common Stock Purchase Warrants ("Securities") offered
as units as described above and as set forth in Schedule I to the Underwriting
Agreement. The number of Securities to be purchased by each Underwriter from the
Company shall be determined in accordance with Section 2 of the Underwriting
Agreement. It is understood that changes may be made in those who are to be
Underwriters and in the respective numbers of Securities to be purchased by
them, but that the Underwriting Agreement will not be changed without our
consent, except as provided herein, and in the Underwriting Agreement. The
obligations of the Underwriters to purchase the number of Securities set
opposite their respective names in Schedule I to the Underwriting Agreement, are
herein called their "underwriting obligations." The number of Securities set
opposite our names in said Schedule I, are herein called "our Securities." For
purposes of this Agreement the following definitions shall be applicable:
(a) "Manager's Concession" shall be the compensation to you for acting as
Manager as provided in Paragraph 1 of not less than percent ( %) of the
underwriting discount. The Manager's Concession shall include the right to a
portion of the warrants to be issued pursuant to the Underwriting Agreement and,
the right to the nonaccountable expenses to be paid pursuant to the Underwriting
Agreement.
(b) "Underwriting Group Concession" shall mean compensation to members of
the Underwriting Group for assuming the underwriting risk and shall be not less
than percent ( %) of the underwriting discount.
(c)"Dealer's Concession" shall mean compensation to Dealers, who are
members of the Selling Group and shall, as to Dealers who have executed an
agreement with you, be not less than percent ( %) of the underwriting
discount.
(d) "Dealer's Reallowance Concession" shall mean the compensation allowed
Dealers by Underwriters other than you and shall be one-half (1/2) of the
Dealer's Concession.
(e) It is contemplated that the underwriting discount will be percent ( %)
of the offering price. You, in your absolute discretion, shall determine, within
the foregoing limitations, the precise allocation of the underwriting discount
and shall notify us of same at least twenty-four (24) hours prior to the
execution of the Underwriting Agreement.
<PAGE>
1. Authority and Compensation of Representative. We hereby authorize you, as our
Representative and on our behalf, (a) to enter into an agreement with the
Company substantially in the form attached hereto as Exhibit A ("Underwriting
Agreement"), but with such changes therein as in your judgment are not
materially adverse to the Underwriters, (b) to exercise all the authority and
discretion vested in the Underwriters and in you by the provisions of the
Underwriting Agreement, and (c) to take all such action as you, in your
discretion, may deem necessary or advisable in order to carry out the provisions
of the Underwriting Agreement and this Agreement and the sale and distribution
of the Securities, provided, however, that the time within which the
Registration Statement is required to become effective pursuant to the
Underwriting Agreement will not be extended more than forty-eight (48) hours
without the approval of a majority in interest of the Underwriters (including
you). We authorize you, in executing the Underwriting Agreement on our behalf,
to set forth in Schedule I of the Underwriting Agreement as our commitment to
purchase the number of Securities (which shall not be substantially in excess of
the number of Securities included in your invitation to participate unless we
have agreed otherwise) included in a wire, telex, or similar means of
communication transmitted by you to us at least twenty-four (24) hours prior to
the commencement of the offering as our finalized underwriting participation.
As our share of the compensation for your services hereunder, we will pay you,
and we authorize you to charge to our account, a sum equal to the Manager's
Concession.
2. Public Offering. A public offering of the Securities is to be made, as
herein provided, as soon after the Registration Statement relating thereto shall
become effective as in your judgment is advisable. The Securities shall be
initially offered to the public at the public offering price of $5.10 per Unit.
You will advise us by telegraph or telephone when the Securities shall be
released for offering. We authorize you as Representative of the Underwriters,
after the initial public offering, to vary the public offering price, in your
sole discretion, by reason of changes in general market conditions or otherwise.
The public offering price of the Securities at any time in effect is herein
called the "Offering Price." Unless otherwise permitted, we will not sell any of
the Securities to any account over which we have discretionary authority.
We hereby agree to deliver all preliminary and final Prospectuses as
required for compliance with the provisions of Rule 15c2-8 under the Securities
Exchange Act of 1934 and Section 5(b) of the Securities Act of 1933. You have
heretofore delivered to us such preliminary Prospectuses as have been requested
by us, receipt of which is hereby acknowledged, and will deliver such final
Prospectuses as will be requested by us.
3. Offering to Dealers and Group Sales. We authorize you to reserve for
offering and sale, and on our behalf to sell, to institutions or other retail
purchasers (such sales being herein called "Group Sales") and to dealers
selected by you (such dealers being herein called the "Dealers") all or any part
of our Securities as you may determine. Such sales of Securities, if any, shall
be made (i) in the case of Group Sales, at the Offering Price, and (ii) in the
case of sales to Dealers, at -the Offering Price less the Dealer's Concession.
Any Group Sales shall be as nearly as practicable in proportion to the
underwriting obligations of the respective Underwriters. Any sales to Dealers
made for our account shall be as nearly as practicable in the ratio that the
Securities reserved for our account for offering to Dealers bears to the
aggregate of all Securities of all Underwriters, including you, so reserved. On
any Group Sales or sales to Dealers made by you on our behalf, we shall be
entitled to receive only the Underwriter's Concession.
You agree to notify us not less than twenty-four (24) hours prior to the
commencement of the public offering as to the number of Securities, if any,
which we may retain for direct sale. Prior to the termination of this Agreement,
you may reserve for offering and sale, as herein before provided, any Securities
remaining unsold theretofore retained by us and we may, with your consent,
retain any Securities remaining unsold theretofore reserved by you. Sales to
Dealers shall be made under a Selected Dealers Agreement, attached hereto as
Exhibit B and by this reference incorporated herein. We authorize you to
determine the form and manner of any communications with Dealers, and to make
such changes in the Selected Dealers Agreement, as you may deem appropriate. In
the event that there shall be any such agreements with Dealers, you are
authorized to act as managers thereunder, and we agree, in such event, to be
governed by the terms and conditions of such agreements. Each Underwriter agrees
that it will not offer any of the Securities for sale at a price below the
Offering Price or allow any concession therefrom, except as herein
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<PAGE>
otherwise provided. We, as to our Securities, may enter into agreements with
Dealers, but any Dealer's Reallowance Concession shall not exceed half of the
Dealer's Concession.
It is understood that any person to whom an offer may be made, as herein before
provided, shall be a member of the National Association of Securities Dealers,
Inc. ("NASD") or dealers or institutions with their principal place of business
located outside of the United States, its territories or possessions, and who
are not eligible for membership under Section 1 of the Bylaws of the NASD who
agree to make no sales within the United States, its territories or possessions,
or to persons who are nationals thereof, or residents therein, and, in making
sales, to comply with the NASD's Rules of Fair Practice.
We authorize you to determine the form and manner of any public
advertisement of the Securities.
Nothing in this Agreement contained shall be deemed to restrict our right,
subject to the provisions of this Section 3, to offer our Securities prior to
the effective date of the Registration Statement, provided, however, that any
such offer shall be made in compliance with any applicable requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934 and the rules and
regulations of the Securities and Exchange Commission thereunder and of any
applicable state securities laws.
4. Repurchases in the Open Market. Any Securities sold by us (otherwise
than through you) which, prior to the termination of this Agreement, or such
earlier date as you may determine, shall be contracted for or purchased in the
open market by you on behalf of any Underwriter or Underwriters, shall be
repurchased by us on demand at a price equal to the cost of such purchase plus
commissions and taxes, if any, on redelivery. Any Securities delivered on such
repurchase need not be the identical Securities originally sold by us. In lieu
of delivery of such Securities to us, you may (i) sell such Securities in any
manner for our account and charge us with the amount of any loss or expense, or
credit us with the amount of any profit, less any expense, resulting from such
sale, or (ii) charge our account with an amount not in excess of the concession
to Dealers on such Securities.
5. Delivery and Payment. We agree to deliver to you, at or before 9:00
A.M., New York, New York Time, on the Closing Date referred to in the
Underwriting Agreement, at your office, a certified or bank cashier's check
payable to your order for the offering price of the Securities less Dealer's
Concession of the Securities which we retained for direct sale by us, the
proceeds of which check shall be delivered to you, in the manner provided in the
Underwriting Agreement, to or for the account of the Company against delivery of
certificates for such Securities to you for our account. You are authorized to
accept such delivery and to give receipts therefor. You may advance funds for
Securities which have been sold or reserved for sale to retail purchasers or
Dealers for our account. If we fail (whether or not such failure shall
constitute a default hereunder) to deliver to you, or you fail to receive, our
check and/or payment for sales made by you for our account for the Securities
which we have agreed to purchase, you, individually and not as Representative of
the Underwriters, are authorized (but shall not be obligated) to make payment,
in the manner provided in the Underwriting Agreement, to or for the account of
the Company for such Securities for our account, but any such payment by you
shall not relieve us of any of our obligations under the Underwriting Agreement
or under this Agreement and we agree to repay you on demand the amount so
advanced for our account.
We also agree on demand to take up and pay for or to deliver to you funds
sufficient to pay for at cost any Securities of the Company purchased by you for
our account pursuant to the provisions of Section 9 hereof, and to deliver to
you on demand any Securities sold by you for our account, pursuant to any
provision of this Agreement.
We authorize you to deliver our Securities, and any other Securities
purchased by you for our account pursuant to the provisions of Section 9 hereof,
against sales made by you for our account pursuant to any provision of this
Agreement.
Upon receipt by you of payment for the Securities sold by us and/or
through you for our account, you will remit to us promptly an amount equal to
the Underwriter's Concession on such Securities. You agree to cause to be
delivered to us, as soon as practicable after the Closing Date referred to in
the Underwriting Agreement, such part of our Securities purchased on such
Closing Date as shall not have been sold or reserved for sale by your for our
account.
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<PAGE>
In case any Securities reserved for sale in Group Sales or to Dealers
shall not be purchased and paid for in due course as contemplated hereby, we
agree to accept delivery when tendered by you of any Securities so reserved for
our account and not so purchased and pay you the offering price less the
Dealer's and Underwriter's Concessions.
6. Authority to Borrow. We authorize you to advance your funds for our
account (charging current interest rates) and to arrange loans for our account
for the purpose of carrying out this Agreement, and in connection therewith to
execute and deliver any notes or other instruments, and to hold, or pledge as
security therefor, all or any part of our Securities of the Company purchased
hereunder for our account. Any lending bank is hereby authorized to accept your
instructions as Representative in all matters relating to such loans. Any part
of our Securities held by you, may be delivered to us for carrying purposes, and
if so delivered, will be redelivered to you upon demand.
7. Allocation of Expense and Liability. We authorize you to charge our
account with, and we agree to pay (a) all transfer taxes on sales made by you
for our account, except as herein otherwise provided, and (b) our proportionate
share (based on our underwriting obligations) of all expenses in excess of those
reimbursed by the Company incurred by you in connection with the purchase,
carrying and distribution, or proposed purchase and distribution, of the
Securities and all other expenses arising under the terms of the Underwriting
Agreement or this Agreement. Your determination of all such expenses and your
allocation thereof shall be final and conclusive. Funds for our account at any
time in your hands as our Representative may be held in your general funds
without accountability for interest. As soon as practicable after the
termination of this Agreement, the net credit or debit balance in our account,
after proper charge and credit for all interim payments and receipts, shall be
paid to or paid by us, provided, however, that you, in your discretion, may
reserve from distribution an amount to cover possible additional expenses
chargeable to the several Underwriters.
8. Liability for Future Claims. Neither any statement by you, as
Representative of the Underwriters, of any credit or debit balance in our
account nor any reservation from distribution to cover possible additional
expenses relating to the Securities shall constitute any representation by you
as to the existence or nonexistence of possible unforeseen expenses or
liabilities of or charges against the several Underwriters. Notwithstanding the
distribution of any net credit balance to us or the termination of this
Agreement, or both, we shall be and remain liable for, and will pay on demand,
(a) our proportionate share (based on our underwriting obligations) of all
expenses and liabilities which may be incurred by, or for the accounts of the
Underwriters, including any liability which may be incurred by the Underwriters
or any of them, and (b) any transfer taxes paid after such settlement on account
of any sale or transfer for our account.
9. Stabilization. We authorize you, until the termination of this
Agreement, (a) to make purchases and sales of the Securities, in the open market
or otherwise, for long or short account, and on such terms, and at such prices
as you in your discretion may deem desirable, (b) in arranging for sales of
Securities, to overallot, and (c) either before or after the termination of this
Agreement, to cover any short position incurred pursuant to this Section 9;
subject, however, to the applicable rules and regulations of the Securities and
Exchange Commission under the Securities Exchange Act of 1934. All such
purchases, sales and overallotments shall be made for the accounts of the
several Underwriters as nearly as practicable in proportion to their respective
underwriting obligations; provided, however, that our net position resulting
from such purchases and sales and overallotments shall not at any time exceed,
either for long or short account, fifteen percent (15%) of the number of
Securities agreed to be purchased by us.
If you engage in any stabilizing transactions as representative of the
underwriters, you shall promptly notify us of that fact and in like manner you
agree to promptly notify and file with us any stabilizing transaction in
accordance with the requirements of Rule 17a-2(d) under the Securities Exchange
Act of 1934.
We agree to advise you from time to time, upon request, until the settlement of
accounts hereunder, of the number of Securities at the time retained by us
unsold, and we will upon request sell to you, for the accounts of one or more of
the several Underwriters, such number of our unsold Securities as you may
designate, at the Offering Price less such amount, not in excess of the
concession to Dealers, as you may determine.
4
<PAGE>
10. Open Market Transactions. We agree that, except with your consent and
except as herein provided upon advice from you, we will not make purchases or
sales on the open market or otherwise, or attempt to induce others to make
purchases or sales, either before or after the purchase of the Securities, and
prior to the completion (as defined in Regulation M of the Securities Exchange
Act of 1934) of our participation in the distribution, we will otherwise comply
with Regulation M. Nothing in this Section 10 contained shall prohibit us from
acting as broker or agent in the execution of unsolicited orders of customers
for the purchase or sale of any securities of the Company.
11.Blue Sky. Prior to the initial offering by the Underwriters, you will
inform us as to the states under the respective securities or Blue Sky laws of
which it is believed that the Securities have been qualified or are exempt for
sale, but you do not assume any responsibility or obligation as to the accuracy
of such information or as to the right of any Underwriter or Dealer to sell the
Securities in any jurisdiction. We will not sell any Securities in any other
state or jurisdiction and we will not sell Securities in any state or
jurisdiction unless we are qualified or licensed to sell securities in such
state or jurisdiction. We authorize you, if you deem it inadvisable in arranging
sales of Securities for our account hereunder, to sell any of our Securities to
any particular Dealer, or other buyer, because of the securities or Blue Sky
laws of any jurisdiction, to sell our Securities to one or more other
Underwriters at the Offering Price less, in the case of a sale to any Dealer,
such amount, not in excess of the concession to Dealers thereon, as you may
determine. The transfer tax on any such sales among Underwriters shall be
treated as an expense and charged to the respective accounts of the several
Underwriters, in proportion to their respective underwriting obligations.
12. Default by Underwriters. Default by one or more Underwriters, in
respect to their obligations under the Underwriting Agreement shall not release
us from any of our obligations. In case of such default by one or more
Underwriters, you are authorized to increase, pro rata, with the other
nondefaulting Underwriters, the number of defaulted Securities which we shall be
obligated to purchase from the Company, provided, however, that the aggregate
amount of all such increases for all Underwriters shall not exceed ten percent
(10%) of such Securities, and, if the aggregate number of the Securities not
taken up by such defaulting Underwriters exceeds such ten percent (10%), you are
further authorized, but shall not be obligated, to arrange for the purchase by
other persons, who may include yourselves, of all or a portion of the Securities
not taken up by such Underwriters. In the event any such increases or
arrangements are made, the respective numbers of Securities to be purchased by
the nondefaulting Underwriters and by any such other person or persons shall be
taken as the basis for the underwriting obligations under this Agreement, but
this shall not in any way affect the liability of any defaulting Underwriters to
the other Underwriters for damages resulting from such default.
In the event of default by one or more Underwriters in respect of their
obligations under this Agreement to take up and pay for any Securities purchased
by you for their respective accounts, pursuant to Section 9 hereof, or to
deliver any such Securities sold or overallotted by you for their respective
accounts pursuant to any provisions of this Agreement, and to the extent that
arrangements shall not have been made by you for other persons to assume the
obligations of such defaulting Underwriter or Underwriters, each nondefaulting
Underwriter shall assume its proportionate share of the aforesaid obligations of
each such defaulting Underwriter without relieving any such Underwriter of its
liability therefor.
13. Termination of Agreement. Unless earlier terminated by you, the
provisions of Sections 2, 3, 4, 6, 9 and 10 of this Agreement shall, except as
otherwise provided therein, terminate thirty (30) full business days after the
effective date of the Registration Statement herein referred to, but may be
extended by you for an additional period or periods not exceeding thirty (30)
full business days in the aggregate. You may, however, terminate this Agreement,
or any provisions hereof, at any time by written or telegraphic notice to us.
14. General Position of the Representative. In taking action under this
Agreement, you shall act only as agent of the several Underwriters. Your
authority as Representative of the several Underwriters shall include the taking
of such action as you may deem advisable in respect of all matters pertaining to
any and all offers and sales of the Securities, including the right to make any
modifications which you consider necessary or desirable in the arrangements with
Dealers or others. You shall be under no liability for or in respect of the
value of the Securities or the validity or the form thereof, the Registration
Statement, the Prospectus, the Underwriting Agreement, or other instruments
executed by the Company or others of any agreement on its or their part; nor
shall you, as such Representative or otherwise, be liable under any of the
provisions hereof, or for any matters connected herewith,
5
<PAGE>
except for want of good faith, and except for any liability arising under the
Securities Act of 1933; and no obligation not expressly assumed by you as such
Representative herein shall be implied from this Agreement. In representing the
Underwriters hereunder, you shall act as the representative of each of them
respectively. Nothing herein contained shall constitute the several Underwriters
partners with you or with each other, or render any Underwriter liable for the
commitments of any other Underwriter, except as otherwise provided in Section 12
hereof. The commitments and liabilities of each of the several Underwriters are
several in accordance with their respective underwriting obligations and are not
joint.
15. Acknowledgment of Registration Statement, etc. We hereby confirm that
we have examined the Registration Statement (including all amendments thereto)
relating to the Securities as heretofore filed with the Securities and Exchange
Commission, that we are familiar with the amendment(s) to the Registration
Statement and the final form of Prospectus proposed to be filed, that we are
willing to accept the responsibilities of an underwriter thereunder, and that we
are willing to proceed as therein contemplated. We further confirm that the
statements made under the heading "Underwriting" in such proposed final form of
Prospectus are correct and we authorize you so to advise the Company on our
behalf. We understand that the aforementioned documents are subject to further
change and that we will be supplied with copies of any amendment or amendments
to the Registration Statement and of any amended Prospectus promptly, if and
when received by you, but the making of such changes and amendments shall not
release us or affect our obligations hereunder or under the Underwriting
Agreement.
16. Indemnification. Each Underwriter, including you, agrees to indemnify
and hold harmless each other Underwriter and each person who controls any other
Underwriter within the meaning of Section 15 of the Securities Act of 1933, as
amended, to the extent of their several commitments under the Underwriting
Agreement and upon the terms that such Underwriter agrees to indemnify and hold
harmless the Company as set forth in Section 7 of the Underwriting Agreement.
The Agreement contained in this Section 16 shall survive any termination of this
Agreement Among Underwriters.
17. Capital Requirements. We confirm that our ratio of aggregate
indebtedness to net capital is such that we may, in accordance with and pursuant
to Rule 15c3-1, promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, agree to purchase the number of Securities we
may be obligated to purchase under any provision of the Underwriting Agreement
or this Agreement.
18. Miscellaneous. We have transmitted herewith a completed Underwriters'
Questionnaire on the form thereof supplied by you. Any notice hereunder from you
to us or from us to you shall be deemed to have been duly give if sent by
registered mail, telegram, teletype, telex, telecopier, graphic scan, or other
written form of telecommunication to us at our address as set forth in the
Underwriting Agreement, or to you at the address set forth on the first page of
this Agreement.
You hereby confirm that you are registered as a broker-dealer with the
United States Securities and Exchange Commission and that you are a member of
the NASD and we confirm that we are either a member of the NASD or a foreign
broker-dealer not eligible for membership under Section I of the Bylaws of the
NASD, who agrees to make no sales within the United States, its territories or
possessions, or to persons who are nationals thereof or residents therein, and,
in making sales, to comply with the requirements of the NASD's Interpretation
with Respect to Free Riding and Withholding, and with Sections 2730, 2740, and
2420 to the extent applicable to foreign nonmember brokers or dealers, and
Section 2750 of the NASD's Rules of Fair Practice.
We will comply with all applicable federal laws, the laws of the states or
other jurisdictions concerned and the Rules and Regulations of the NASD,
including, but not limited to, Section 2740 of the Rules of Fair Practice.
6
<PAGE>
This instrument may be signed by the Underwriters in various counterparts
which together shall constitute one and the same agreement among all the
Underwriters and shall become effective as between us at such time as you shall
have confirmed same by returning an executed copy to us, and thereafter, as to
us and the other Underwriters, upon execution by them of counterparts which are
confirmed by you. In no event, however, shall we have any liability under this
Agreement if the Underwriting Agreement is not executed.
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to us a counterpart hereof.
Very truly yours,
__________________________________
Attorney-in-Fact
for the several Underwriters
named in Schedule I
to the Underwriting Agreement
Confirmed as of the date first above written.
Westport Resources Investment Services, Inc.
As Representative
By ____________________________________
Vice President
7
EXHIBIT B
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. NO
OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE
CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND ANY
SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY
KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE
DATE. YOUR EXECUTION HEREOF WILL INVOLVE NO OBLIGATION OR COMMITMENT OF ANY KIND
UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE.
AMIGA TELEPHONY CORPORATION
SELECTED DEALERS AGREEMENT
,
Dear Sirs:
1. Westport Resources Investment Services, Inc. named as the Underwriter
("Underwriter") in the enclosed preliminary Prospectus, proposes to offer, along
with several underwriters, on a firm commitment basis, subject to the terms and
conditions and execution of the Underwriting Agreement, 1,000,000 units each
unit consisting of one share of common stock and one common stock purchase
warrant at $5.10 per unit ("Securities") of the above Company. The Securities
are more particularly described in the enclosed preliminary Prospectus,
additional copies of which will be supplied in reasonable quantities upon
request. Copies of the definitive Prospectus will be supplied after the
effective date of the Registration Statement.
2. The Underwriter is soliciting offers to buy, upon the terms and
conditions hereof, a part of the Securities from Selected Dealers, including you
who are to act as principal and who are (i) registered with the Securities and
Exchange Commission ("Commission") as broker-dealers under the Securities
Exchange Act of 1934, as amended ("1934 Act"), and members in good standing with
the National Association of Securities Dealers, Inc. ("NASD"), or (ii) dealers
or institutions with their principal place of business located outside the
United States, its territories and possessions who are not eligible for
membership in the NASD and who agree to make no sales within the United States,
its territories or possessions or to persons who are nationals thereof or
residents therein and, in making sales, to comply with the NASD's Interpretation
with Respect to Free Riding and Withholding and with Sections 2730, 2740,2420,
to the extent applicable to foreign nonmember brokers or dealers, and Section
2750 of the NASD's Rules of Fair Practice. The Securities are to be offered at a
public price of $5.10 per unit. Selected Dealers will be allowed a concession of
$... per unit , except as provided below. You will be notified of the precise
amount of such concession prior to the effective date of the Registration
Statement. You may reallow not in excess of $ per unit to dealers who meet the
requirements set forth in this Section 2. This offer is solicited subject to the
issuance and delivery of the Securities and their acceptance by the Underwriter,
to the approval of legal matters by counsel and to the terms and conditions as
herein set forth.
3. Your offer to purchase may be revoked in whole or in part without obligation
or commitment of any kind by you and any time prior to acceptance and no offer
may be accepted by us and no sale can be made until after the registration
statement covering the Securities has become effective with the Commission.
Subject to the foregoing, upon execution by you of the Offer to Purchase below
and the return of same to us, you shall be deemed to have offered to purchase
the number of Securities set forth in your offer on the basis set forth in
paragraph 2 above. Any oral notice by us of acceptance of your offer shall be
immediately followed by written or telegraphic confirmation preceded or
accompanied by a copy of the Prospectus. If a contractual commitment arises
hereunder, all the terms of
<PAGE>
this Selected Dealers Agreement shall be applicable. We may also make available
to you an allotment to purchase Securities, but such allotment shall be subject
to modification or termination upon notice from us any time prior to an exchange
of confirmations reflecting completed transactions. All references hereafter in
this Agreement to the purchase and sale of Securities assume and are applicable
only if contractual commitments to purchase are completed in accordance with the
foregoing. If prior to termination of this Agreement, we purchase or contract to
purchase any Securities (or any Securities which we believe have been
substituted therefor) purchase by you from us, you hereby agree that we
(i)reserve the right not to pay such concession on any of such securities; (ii)
may sell for your account any such securities so purchased and debit or credit
your account with the loss or profit resulting from such sale; or (iii) may
require you to purchase any such Securities at a price equal to the total cost
of such purchase including commissions and transfer taxes (if any) on
redelivery.
4. You agree that in reoffering said Securities, if your offer is accepted
after the effective date, you will make a bona fide public distribution of same.
You will advise us upon request of Securities purchased by you remaining unsold
and we shall have the right to repurchase such Securities upon demand at the
public offering price without paying the concession with respect to any
Securities so repurchased. Any of the Securities purchased by you pursuant to
this Agreement are to be subject to the terms hereof. Securities shall not be
offered or sold by you below the public offering price before the termination of
this Agreement.
5. Payment for Securities which you purchase hereunder shall be made by you on
or before three (3) business days after the date of each confirmation by
certified or bank cashier's check payable to the Underwriter. Certificates for
the Securities shall be delivered as soon as practicable after delivery
instructions are received by the Underwriter.
6. A registration statement covering the offering has been filed with the
Securities and Exchange Commission in respect to the Securities. You will be
promptly advised when the registration statement becomes effective. Each
Selected Dealer in selling Securities pursuant hereto agrees (which agreement
shall also be for the benefit of the Company) that it will comply with the
applicable requirements of the Securities Act of 1933 and of the Securities
Exchange Act of 1934 and any applicable rules and regulations issued under said
Acts. No person is authorized by the Company or by the Underwriter to give any
information or to make any representations other than those contained in the
Prospectus in connection with the sale of the Securities. Nothing contained
herein shall render the Selected Dealers a member of the Underwriting Group or
partners with the Underwriter or with one another.
7. You will be informed by us as to the states in which we have been
advised by counsel the Securities have been qualified for sale or are exempt
under the respective securities or blue sky laws of such states, but we have not
assumed and will not assume any obligation or responsibility as to the right of
any Selected Dealer to sell Securities in any state. You agree not to sell
Securities in any other state or jurisdiction and to not sell Securities in any
state or jurisdiction unless you are qualified or licensed to sell securities in
such state or jurisdiction.
8. The Underwriter shall have full authority to take such action as it may
deem advisable in respect of all matters pertaining to the offering or arising
thereunder. The Underwriter shall not be under any liability to you, except such
as may be incurred under the Securities Act of 1933 and the rules and
regulations thereunder, except for lack of good faith and except for obligations
assumed by us in this Agreement, and no obligation on our part shall be implied
or inferred herefrom.
9. Selected Dealers will be governed by the conditions herein set forth
until this Agreement is terminated. This Agreement will terminate when the
offering is completed. Nothing herein contained shall be deemed a commitment on
our part to sell you any Securities; such contractual commitment can only be
made in accordance with the provisions of paragraph 3 hereof.
10. You represent that you are a member in good standing of the NASD and
registered as a broker-dealer with the Commission, or that you are a foreign
broker-dealer not eligible for membership under Section 1 of the Bylaws of the
NASD who agrees to make no sales within the United States, its territories or
possessions or to persons who are nationals thereof or residents therein and, in
making sales, to comply with the NASD's interpretation with Respect to
FreeRiding and Withholding and with Sections 2730, 2740, 2420 to the extent
applicable to foreign nonmember
2
<PAGE>
brokers and dealers, and Section 2750 of the NASD's Rules of Fair Practice. Your
attention is called to and you agree to comply with the following: (a) Article
III, Section 1 of the Rules of Fair Practice of the NASD and the interpretations
of said Section promulgated by the Board of Governors of the NASD including
Section 2740 and the interpretation with respect to "Free-Riding and
Withholding;" (b) Section 10(b) of the 1934 Act and Regulation M, 10b-10 of the
general rules and regulations promulgated under the 1934 Act; and (c) Rule
15c2-8 of the general rules and regulations promulgated under the 1934 Act
requiring the distribution of a preliminary Prospectus to all persons reasonably
expected to be purchasers of the Securities from you at least 48 hours prior to
the time you expect to mail confirmations. You, as a member of the NASD, by
signing this Agreement, acknowledge that you are familiar with the cited laws
and rules and agree that you will not directly and/or indirectly violate any
provisions of applicable law in connection with your participation in the
distribution of the Securities.
11. In addition to compliance with the provisions of paragraph 10 hereof,
you will not, until advised by us in writing or by wire that the entire offering
has been distributed and closed, bid for or purchase Securities in the open
market or otherwise make a market in the Securities or otherwise attempt to
induce others to purchase the Securities in the open market. Nothing contained
in this paragraph 11 shall, however, preclude you from acting as agent in the
execution of unsolicited orders of customers in transactions effectuated for
them through a market maker.
12. You understand that the Underwriter may in connection with the
offering engage in stabilizing transactions. If the Underwriter contracts for or
purchases in the open market in connection with such stabilization any
Securities sold to you hereunder and not effectively placed by you, the
Underwriter may charge you the Selected Dealer's concession originally allowed
you on the Securities so purchased and you agree to pay such amount to us on
demand.
13. We agree that without your consent we will not sell to any account
over which we exercise discretionary authority any of the Securities which we
purchase and which are subject to the terms of this Agreement.
14. By submitting an Offer to Purchase you confirm that you may, in
accordance with Rule 15c3-1 adopted under the 1934 Act, agree to purchase the
number of Securities you may become obligated to purchase under the provisions
of this Agreement.
15. All communications from you should be directed to us at 315 Post Road
West, Westport, Ct. 06880 Attn: John D. Lane, Vice President , (1-800-935-0222
or 203-221-6450) and fax (203-291-7931) (All communications from us to you shall
be directed to the address to which this letter is mailed. Any notice from us to
you shall be deemed to have been fully authorized by the Underwriter and to have
been duly given if mailed, telegraphed or telexed to you at the address to which
this letter is mailed).
Very truly yours,
Westport Resources Investment Services, Inc.
By ____________________________________
(Authorized Officer)
3
<PAGE>
OFFER TO PURCHASE
The undersigned does hereby offer to purchase (subject to the right to
revoke as set forth in paragraph 3) _______________________* Securities in
accordance with the terms and conditions set forth above. We hereby acknowledge
receipt of the Prospectus referred to in the first paragraph thereof relating to
such Securities. We further state that in purchasing such Securities we have
relied upon such Prospectus and upon no other statement whatsoever, written or
oral.
_________________________________________
By ______________________________________
(Authorized Officer)
*If a number appears here which does not correspond with what you wish to offer
to purchase, you may change the number by crossing out the number, inserting a
different number and initializing the change.
4
CERTIFICATE OF INCORPORATION
OF
POWER RESEARCH INCORPORATED
The undersigned natural, adult person, acting as incorporator of a
corporation (hereinafter usually referred to as the "Corporation") pursuant to
the provisions of the Delaware Corporation Law, hereby adopts the following
Certificate of Incorporation for said Corporation:
ARTICLE I
Name
The name of the Corporation shall be Power Research Incorporated.
ARTICLE II
Duration
The period of duration of the Corporation shall be perpetual.
ARTICLE III
Purpose
The purpose for which the Corporation is organized is to transact any or
all lawful business for which corporations may be incorporated pursuant to the
Delaware Corporation Law.
ARTICLE IV
Capital Stock
The authorized capital stock of the Corporation shall consist of
30,000,000 shares of common stock, $0.0001 par value, and 5,000,000 shares of
preferred stock, $0.0001 par value.
ARTICLE V
Preferences, Limitations,
and Relative Rights of
Capital Stock
No share of the common stock shall have any preference over or limitation
in respect to any other share of such common stock. All shares of common stock
shall have equal rights and privileges, including the following:
1. All shares of common stock shall share equally in dividends. Subject to
the applicable provisions of the laws of this State, the Board of Directors of
the Corporation may, from time to time, declare and the Corporation may pay
dividends in cash, property, or its own shares, except when the Corporation is
insolvent or when the payment thereof would render the Corporation insolvent or
when the declaration or payment thereof would be contrary to any restrictions
contained in this Certificate of Incorporation. When any dividend is paid or any
<PAGE>
other distribution is made, in whole or in part, from sources other than
unreserved and unrestricted earned surplus, such dividend or distribution shall
be identified as such, and the source and amount per share paid from each source
shall be disclosed to the stockholder receiving the same concurrently with the
distribution thereof and to all other stockholders not later than six months
after the end of the Corporation's fiscal year during which such distribution
was made.
2. All shares of common stock shall share equally in distributions in
partial liquidation. Subject to the applicable provisions of the laws of this
State, the Board of Directors of the Corporation may distribute, from time to
time, to its stockholders in partial liquidation, out of stated capital or
capital surplus of the Corporation, a portion of its assets in cash or property,
except when the Corporation is insolvent or when such distribution would render
the Corporation insolvent. Each such distribution, when made, shall be
identified as a distribution in partial liquidation, out of stated capital or
capital surplus, and the source and amount per share paid from each source shall
be disclosed to all stockholders of the Corporation concurrently with the
distribution thereof. Any such distribution may be made by the Board of
Directors from stated capital without the affirmative vote of any stockholders
of the Corporation.
3. Each outstanding share of common stock shall be entitled to one vote at
stockholders' meetings, either in person or by proxy.
(b) The designations, powers, rights, preferences, qualifications,
restrictions and limitations of the preferred stock shall be established from
time to time by the Corporation's Board of Directors, in accordance with the
Delaware Corporation Law.
(c) 1. Cumulative voting shall not be allowed in elections of directors or
for any purpose.
2. No holders of shares of capital stock of the Corporation shall be
entitled, as such, to any preemptive or preferential right to subscribe to any
unissued stock or any other securities which the Corporation may now or
hereafter be authorized to issue. The Board of Directors of the Corp- oration,
however, in its discretion by resolution, may determine that any unissued
securities of the Corporation shall be offered for subscription solely to the
holders of common stock of the Corporation, or solely to the holders of any
class or classes of such stock, which the Corporation may now or hereafter be
authorized to issue, in such proportions based on stock ownership as said board
in its discretion may determine.
3. The Board of Directors may restrict the transfer of any of the
Corporation's stock issued by giving the Corporation or any stockholder "first
right of refusal to purchase" the stock, by making the stock redeemable, or by
restricting the transfer of the stock under such terms and in such manner as the
directors may deem necessary and as are not inconsistent with the laws of this
State. Any stock so restricted must carry a conspicuous legend noting the
restriction and the place where such restriction may be found in the records of
the Corporation.
<PAGE>
4. The judgment of the Board of Directors as to the adequacy of any
consideration received or to be received for any shares, options, or any other
securities which the Corporation at any time may be authorized to issue or sell
or otherwise dispose of shall be conclusive in the absence of fraud, subject to
the provisions of these Articles of Incorporation and any applicable law.
ARTICLE VI
Registered Agent
The name and address of the Corporation's initial registered agent shall
be:
The Company Corporation
1313 North Market Street
New Castle County
Wilmington, Delaware 19801-1151
The Board of Directors, however, from time to time may establish such
other offices, branches, subsidiaries, or divisions which it may consider to be
advisable.
ARTICLE VII
Directors
The affairs of the Corporation shall be governed by a board of not less
than one (1) director, who shall be elected in accordance with the Bylaws of the
Corporation. Subject to such limitation, the number of directors shall be fixed
by or in the manner provided in the Bylaws of the Corporation, as may be amended
from time to time. The organization and conduct of the board shall be in
accordance with the following:
l. The name and address of the initial Director, who shall hold office
until the first annual meeting of the stockholders of the Corporation or
until his successor shall have been elected and qualified, is:
Name Address
------------ ----------------------------------
Norm Wareham 1177 West Hastings St., Suite 1818
Vancouver, British Columbia
Canada V6E-2K3
2. The directors of the Corporation need not be residents of Delaware and
shall not be required to hold shares of the Corporation's capital stock.
3. Meetings of the Board of Directors, regular or special, may be held
within or without Delaware upon such notice as may be prescribed by the
Bylaws of the Corporation. Attendance of a director at a meeting shall
constitute a waiver by him of notice of such meeting unless he attends
only for the express purpose of objecting to the transaction of any
business thereat on the ground that the meeting is not lawfully called or
convened.
<PAGE>
4. A majority of the number of directors at any time constituting the
Board of Directors shall constitute a quorum for the transaction of
business.
5. By resolution adopted by a majority of the Directors at any time
constituting the Board of Directors, the Board of Directors may designate
two or more directors to constitute an Executive Committee or one or more
other committees each of which shall have and may exercise, to the extent
permitted by law or in such resolution, all the authority of the Board of
Directors in the management of the Corporation; but the designation of any
such committee and the delegation of authority thereto shall not operate
to relieve the Board of Directors, or any member thereof, of any
responsibility imposed on it or him by law.
6. Any vacancy in the Board of Directors, however caused or created, may
be filled by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office and until his successor is duly elected and
qualified.
ARTICLE VIII
Officers
The officers of the Corporation shall be prescribed by the Bylaws of this
Corporation.
ARTICLE IX
Meetings of Stockholders
Meetings of the stockholders of the Corporation shall be held at such
place within or without Delaware and at such times as may be prescribed in the
Bylaws of the Corporation. Special meetings of the stockholders of the
Corporation may be called by the President of the Corporation; the Board of
Directors, or by the record holder or holders of at least ten percent (l0%) of
all shares entitled to vote at the meeting. At any meeting of the stockholders,
except to the extent otherwise provided by law, a quorum shall consist of a
majority of the shares entitled to vote at the meeting; and, if a quorum is
present, the affirmative vote of the majority of shares represented at the
meeting and entitled to vote thereat shall be the act of the stockholders unless
the vote of a greater number is required by law.
ARTICLE X
Voting
When, with respect to any action to be taken by stockholders of this
Corporation, the laws of Delaware requires the affirmative vote of the holders
of more than a majority of the outstanding shares entitled to vote thereon, or
of any class or series, such action may be taken by the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote on such action.
ARTICLE XI
<PAGE>
Bylaws
The initial Bylaws of the Corporation shall be adopted by its Board of
Directors. Subject to repeal or change by action of the stockholders, the power
to alter, amend, or repeal the Bylaws or to adopt new Bylaws shall be vested in
the Board of Directors.
ARTICLE XII
Transactions with Directors and
Other Interested Parties
No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by the Corporation, and no act of the
Corporation shall in any way be affected or invalidated by the fact that any of
the directors of the Corporation are pecuniarily or otherwise interested in, or
are directors or officers of, such other corporation. Any director of the
corporation, individually, or any firm with which such director is affiliated
may be a party to or may be pecuniarily or otherwise interested in any contract
or transaction of the Corporation; provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of the Corporation, or a majority thereof, at or before the
entering into such contract or transaction; and any director of the Corporation
who is also a director or officer of such other corporation, or who is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize such
contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so interested.
ARTICLE XIII
Limitation of Director Liability
and Indemnification
No director of the Corporation shall have liability to the Corporation or to its
stockholders or to other security holders for monetary damages for breach of
fiduciary duty as a director; provided, however, that such pro- visions shall
not eliminate or limit the liability of a director to the Corp- oration or to
its shareholders or other security holders for monetary damages for: (i) any
breach of the director's duty of loyalty to the Corporation or to its
shareholders or other security holders; (ii) acts or omissions of the director
not in good faith or which involve intentional misconduct or a knowing violation
of the law by such director; (iii) acts by such director as specified by the
Delaware Corporation Law; or (iv) any transaction from which such director
derived an improper personal benefit.
No officer or director shall be personally liable for any injury to person
or property arising out of a tort committed by an employee of the Corp- oration
unless such officer or director was personally involved in the situation giving
rise to the injury or unless such officer or director committed a criminal
offense. The protection afforded in the preceding sentence shall not restrict
other common law protections and rights that an officer or director may have.
<PAGE>
The word "director" shall include at least the following, unless limited by
Delaware law: an individual who is or was a director of the Corporation and an
individual who, while a director of a Corporation is or was serving at the
Corporation's request as a director, officer, partner, trustee, employee or
agent of any other foreign or domestic corporation or of any partnership, joint
venture, trust, other enterprise or employee benefit plan. A director shall be
considered to be serving an employee benefit plan at the Corporation's request
if his duties to the Corporation also impose duties on or otherwise involve
services by him to the plan or to participants in or beneficiaries of the plan.
To the extent allowed by Delaware law, the word "director" shall also include
the heirs and personal representatives of all directors.
This Corporation shall be empowered to indemnify its officers and
directors to the fullest extent provided by law, including but not limited to
the provisions set forth in the Delaware Corporation Law, or any successor
provision.
ARTICLE XIII
Incorporator
The name and address of the incorporator of the Corporation is as follows:
Name Address
------------ ----------------------------------
William T. Hart 1624 Washington Street
Denver, CO 80203
IN WITNESS WHEREOF, the undersigned incorporator has hereunto affixed his
signature on the 24th day of July, 1997.
William T. Hart
Amiga Cert. of Incorp. (Power)
<PAGE>
POWER RESEARCH INCORPORATED
AMENDMENT
to the
CERTIFICATE OF INCORPORATION
Pursuant to the provisions of the Delaware Corporation Law, Power Research
Incorporated adopts the following Amendment to its Certificate of Incorporation.
The following amendment was adopted on October 24, l997, pursuant to
Section 242 of the Delaware Corporation Law. Such amendment was adopted by the
consent of shareholders owning a majority of the Corporation's issued and
outstanding shares of common stock. Notice of this amendment has been sent to
all shareholders of record pursuant to Section 228 of the Delaware Corporation
Law.
Amendment
ARTICLE ONE OF THE CERTIFICATE OF INCORPORATION WAS AMENDED TO READ AS FOLLOWS:
The name of this Corporation shall be Mad Genius Software Corporation.
POWER RESEARCH INCORPORATED
By: Andrew Hromyk, President
Amiga Amendment to Cert. of Inc.
<PAGE>
MAD GENIUS SOFTWARE CORPORATION
AMENDMENT
to the
CERTIFICATE OF INCORPORATION
Pursuant to the provisions of the Delaware Corporation Law, Mad Genius
Software Corporation adopts the following Amendment to its Certificate of
Incorporation.
The following amendment was adopted on the 15th of January 1998, pursuant
to Section 242 of the Delaware Corporation Law. Such amendment was adopted by
the consent of shareholders owning a majority of the Corporation's issued and
outstanding shares of common stock. Notice of this amendment has been sent to
all shareholders of record pursuant to Section 228 of the Delaware Corporation
Law.
Amendment
ARTICLE ONE OF THE CERTIFICATE OF INCORPORATION WAS AMENDED TO READ AS FOLLOWS:
The name of this Corporation shall be Fortunet Technologies, Inc.
MAD GENIUS SOFTWARE CORPORATION
By: Andrew Hromyk, President
Misc Mad Genius Amend to Cert of Inc
<PAGE>
FORTUNET TECHNOLOGIES, INC.
AMENDMENT
to the
CERTIFICATE OF INCORPORATION
Pursuant to the provisions of the Delaware Corporation Law, Fortunet
Technologies, Inc. adopts the following Amendment to its Certificate of
Incorporation.
The following amendment was adopted on May 11, 1998, pursuant to Section
242 of the Delaware Corporation Law. Such amendment was adopted by the consent
of shareholders owning a majority of the Corporation's issued and outstanding
shares of common stock. Notice of this amendment has been sent to all
shareholders of record pursuant to Section 228 of the Delaware Corporation Law.
Amendment
ARTICLE ONE OF THE CERTIFICATE OF INCORPORATION WAS AMENDED TO READ AS FOLLOWS:
The name of this Corporation shall be Amiga Telephony Corporation.
FORTUNET TECHNOLOGIES, INC
By: Andrew Hromyk, President
Amiga Fortunet Cert of Inc
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF THE SERIES A PREFERRED STOCK OF
AMIGA TELEPHONY CORPORATION.
I, Ian C. Hand, the President of Amiga Telephony Corporation, a
corporation organized and existing under the laws of Delaware, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Articles of Incorporation of this Corporation, the Board of Directors on
February 10, 1999, adopted the following resolution creating a series of
Preferred Shares, $0.0001 par value per share, designated as the Series A
Preferred Shares.
The relative rights and preferences of the Series A Preferred Shares are
as follows:
1. Designation and Amount. The shares of such series shall be designed as
"Series A Preferred Shares" (the "Series A Preferred Shares"), and the number of
shares constituting such series shall be 1,500. The number of shares
constituting such series may, unless prohibited by the Articles of
Incorporation, be decreased by resolution of the Board of Directors; provided
that no decrease shall reduce the number of Series A Preferred Shares to a
number less than the number of shares then outstanding plus the number of shares
issuable upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible in Series A Preferred Shares.
2. Dividends and Distributions
(a) The holders of Series A Preferred Shares, in preference to the
holders of Common Shares, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose, annual
dividends payable in cash on the 31st day of December in each year (each such
date being referred to herein as a "Dividend Payment Dates"), commencing on
December 3l, 1999 at the rate of $15.00 per share per year.
(b) Dividends which are not declared will not accrue. Dividends not
declared will not cumulate. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the Series A Preferred Shares in an amount less than
the total amount of such dividends at the time such dividends are declared and
become payable shall be allocated pro rata on a share-by-share basis among all
such shares outstanding at that time. The Board of Directors may fix a record
date for the determination of holders of Series A Preferred Shares entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than thirty (30) days prior to the date fixed for the
payment thereof.
3. Voting Rights. Except as provided by Delaware law, the Series A
Preferred Shares will not have any voting rights.
4. Certain Restrictions. Whenever dividends declared or other
distributions payable on the Series A Preferred Shares as provided in Section 2
hereof are in arrears, thereafter and
<PAGE>
until all unpaid dividends and distributions on Series A Preferred Shares
outstanding shall have been paid in full, the Corporation shall not:
(a) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Shares;
(b) declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Shares,
except dividends paid ratably on the Series A Preferred Shares and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(c) redeem or purchase or otherwise acquire for consideration any
Series A Preferred Shares, or any shares of stock ranking on a parity with the
Series A Preferred Shares, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series of
classes.
5. Reacquired Shares. Any Series A Preferred Shares purchased or otherwise
acquired by the Corporation in any manner whatsoever (including shares
surrendered upon conversion) shall constitute authorized but unissued Preferred
Shares and may be reissued as part of a new series of Preferred Shares by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein, in the Articles of Incorporation,
or in any other Certificate of Designation creating a series of Preferred Shares
or as otherwise required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Shares unless,
prior thereto, the holders of Series A Preferred Shares shall have received
$2.00 per share, plus an amount equal to declared and unpaid dividends and
distributions thereon to the date of such payment.
7. Conversion. Each Series A Preferred Share may be converted into shares
of the Company's common stock at any time after the first to occur of the
following: (i) three months after the effective date of the Company's initial
public offering or (ii) if the effective date of the initial public offering is
not before August 31,1999, at any time after August 31, 1999. The number of
shares issuable upon the conversion of each Series A Preferred Share will be
determined by dividing $200 by the lower of (i) $2.00 or (ii) the offering price
of the shares of common stock which the Company plans to sell in its initial
public offering.
In the event the Corporation shall at any time after February 10, 1999
declare or pay any dividend on Common Shares payable in Common Shares, or effect
a subdivision or combination
<PAGE>
or consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a greater or lesser number of Common Shares, then in each such
case the number of Common Shares issuable upon the conversion of the Series A
Preferred Shares immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is the number of
Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately prior to
such event.
8. Consolidation, Merger, Exchange, etc.. In case the Corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the Common Shares are exchanged for or changed into
other stock or securities, money and/or any other property, then in any such
case the Series A Preferred Shares shall at the same time be similarly exchanged
or changed into preferred shares of the surviving entity providing the holders
of such Preferred Shares with (to the extent possible) the same relative rights
and preferences as the Series A Preferred Shares.
IN WITNESS WHEREOF, I have executed this Certificate of Designation,
Preferences and Rights this 10th day of Febuary,1999.
------------------------------------
Ian C.Hand
President and Secretary
amiga/cert Desig
Amiga Corp. Papers
BYLAWS
OF
POWER RESEARCH INCORPORATED
ARTICLE I
OFFICES
Section l. Offices:
The principal office of the Corporation shall be determined by the Board
of Directors, and the Corporation shall have other offices at such places as the
Board of Directors may from time to time determine.
ARTICLE II
STOCKHOLDER'S MEETINGS
Section l. Place:
The place of stockholders' meetings shall be the principal office of the
Corporation unless some other place shall be determined and designated from time
to time by the Board of Directors.
Section 2. Annual Meeting:
The annual meeting of the stockholders of the Corporation for the election
of directors to succeed those whose terms expire, and for the transaction of
such other business as may properly come before the meeting, shall be held each
year on a date to be determined by the Board of Directors.
Section 3. Special Meetings:
Special meetings of the stockholders for any purpose or purposes may be
called by the President, the Board of Directors, or the holders of ten percent
(l0%) or more of all the shares entitled to vote at such meeting, by the giving
of notice in writing as hereinafter described.
Section 4. Voting:
At all meetings of stockholders, voting may be viva voce; but any
qualified voter may demand a stock vote, whereupon such vote shall be taken by
ballot and the Secretary shall record the name of the stockholder voting, the
number of shares voted, and, if such vote shall be by proxy, the name of the
proxy holder. Voting may be in person or by proxy appointed in writing, manually
signed by the stockholder or his duly authorized attorney-in-fact. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided therein.
<PAGE>
Each stockholder shall have such rights to vote as the Articles of
Incorporation provide for each share of stock registered in his name on the
books of the Corporation, except where the transfer books of the Corporation
shall have been closed or a date shall have been fixed as a record date, not to
exceed, in any case, fifty (50) days preceding the meeting, for the
determination of stockholders entitled to vote. The Secretary of the Corporation
shall make, at least ten (l0) days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each, which list, for a period of ten (l0) days prior
to such meeting, shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting.
Section 5. Order of Business:
The order of business at any meeting of stockholders shall be as follows:
l. Calling the meeting to order.
2. Calling of roll.
3. Proof of notice of meeting.
4. Report of the Secretary of the stock represented at the meeting and the
existence or lack of a quorum.
5. Reading of minutes of last previous meeting and disposal of any
unapproved minutes.
6. Reports of officers.
7. Reports of committees.
8. Election of directors, if appropriate.
9. Unfinished business.
10. New business.
11. Adjournment.
To the extent that these Bylaws do not apply, Roberts' Rules of Order
shall prevail.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section l. Organization and Powers:
The Board of Directors shall constitute the policy-making or legislative
authority of the Corporation. Management of the affairs, property, and business
of the Corporation shall be vested in the Board of Directors, which shall
consist of not less than one nor more than ten members, who shall be elected at
the annual meeting of stockholders by a plurality vote for a term of one (l)
year, and shall hold office until their successors are elected and qualify.
Directors need not be stockholders. Directors shall have all powers with respect
to the management, control, and determination of policies of the Corporation
that are not limited by these Bylaws, the Articles of Incorporation, or by
statute, and the enumeration of any power shall not be considered a limitation
thereof.
Section 2. Vacancies:
Any vacancy in the Board of Directors, however caused or created, shall be
filled by the affirmative vote of a majority of the remaining directors, though
less than a quorum of the Board, or at a special meeting of the stockholders
called for that purpose. The directors elected to fill vacancies shall hold
office for the unexpired term and until their successors are elected and
qualify.
Section 3. Regular Meetings:
A regular meeting of the Board of Directors shall be held, without other
notice than this Bylaw, immediately after and at the same place as the annual
meeting of stockholders or any special meeting of stockholders at which a
director or directors shall have been elected. The Board of Directors may
provide by resolution the time and place, either within or without the State of
Delaware, for the holding of additional regular meetings without other notice
than such resolution.
Section 4. Special Meetings:
Special meetings of the Board of Directors may be held at the principal
office of the Corporation, or such other place as may be fixed by resolution of
the Board of Directors for such purpose, at any time on call of the President or
of any member of the Board, or may be held at any time and place without notice,
by unanimous written consent of all the members, or with the presence and
participation of all members at such meeting. A resolution in writing signed by
all the directors shall be as valid and effectual as if it had been passed at a
meeting of the directors duly called, constituted, and held.
Section 5. Notices:
Notices of both regular and special meetings, save when held by unanimous
consent or participation, shall be mailed by the Secretary to each member of the
Board not less than three
<PAGE>
days before any such meeting and notices of special meetings may state the
purposes thereof. No failure or irregularity of notice of any regular meeting
shall invalidate such meeting or any proceeding thereat.
Section 6. Quorum and Manner of Acting:
A quorum for any meeting of the Board of Directors shall be a majority of
the Board of Directors as then constituted. Any act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. Any action of such majority, although not at a regularly
called meeting, and the record thereof, if assented to in writing by all of the
other members of the Board, shall always be as valid and effective in all
respects as if otherwise duly taken by the Board of Directors.
Section 7. Executive Committee:
The Board of Directors may by resolution of a majority of the Board
designate two (2) or more directors to constitute an executive committee, which
committee, to the extent provided in such resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
Corporation; but the designation of such committee and the delegation of
authority thereto shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed on it or him by law.
Section 8. Order of Business:
The order of business at any regular or special meeting of the Board of
Directors, unless otherwise prescribed for any meeting by the Board, shall be as
follows:
l. Reading and disposal of any unapproved minutes.
2. Reports of officers and committees.
3. Unfinished business.
4. New business.
5. Adjournment.
To the extent that these Bylaws do not apply, Roberts' Rules of Order
shall prevail.
Section 9. Remuneration:
No stated salary shall be paid to directors for their services as such,
but, by resolution of the Board of Directors, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board. Members of special or standing committees may be allowed
like compensation for attending meetings. Nothing herein contained shall be
construed to preclude any director from receiving compensation for serving the
<PAGE>
Corporation in any other capacity, subject to such resolutions of the Board of
Directors as may then govern receipt of such compensation.
ARTICLE IV
OFFICERS
Section l. Titles:
The officers of the Corporation shall consist of a President, one or more
Vice Presidents, a Secretary, and a Treasurer, who shall be elected by the
directors at their first meeting following the annual meeting of stockholders.
Such officers shall hold office until removed by the Board of Directors or until
their successors are elected and qualify. The Board of Directors may appoint
from time to time such other officers as it deems desirable who shall serve
during such terms as may be fixed by the Board at a duly held meeting. The
Board, by resolution, shall specify the titles, duties and responsibilities of
such officers.
Section 2. President:
The President shall preside at all meetings of stockholders and, in the
absence of a, or the, Chairman of the Board of Directors, at all meetings of the
directors. He shall be generally vested with the power of the chief executive
officer of the Corporation and shall countersign all certificates, contracts,
and other instruments of the Corporation as authorized by the Board of Directors
or required by law. He shall make reports to the Board of Directors and
stockholders and shall perform such other duties and services as may be required
of him from time to time by the Board of Directors.
Section 3. Vice President:
The Vice President shall perform all the duties of the President if the
President is absent or for any other reason is unable to perform his duties and
shall have such other duties as the Board of Directors shall authorize or
direct.
Section 4. Secretary:
The Secretary shall issue notices of all meetings of stockholders and
directors, shall keep minutes of all such meetings, and shall record all
proceedings. He shall have custody and control of the corporate records and
books, excluding the books of account, together with the corporate seal. He
shall make such reports and perform such other duties as may be consistent with
his office or as may be required of him from time to time by the Board of
Directors.
Section 5. Treasurer:
The Treasurer shall have custody of all moneys and securities of the
Corporation and shall have supervision over the regular books of account. He
shall deposit all moneys, securities, and other valuable effects of the
Corporation in such banks and depositories as the Board of Directors may
designate and shall disburse the funds of the Corporation in payment of just
debts
<PAGE>
and demands against the Corporation, or as they may be ordered by the Board of
Directors, shall render such account of his transactions as may be required of
him by the President or the Board of Directors from time to time and shall
otherwise perform such duties as may be required of him by the Board of
Directors.
The Board of Directors may require the Treasurer to give a bond
indemnifying the Corporation against larceny, theft, embezzlement, forgery,
misappropriation, or any other act of fraud or dishonesty resulting from his
duties as Treasurer of the Corporation, which bond shall be in such amount as
appropriate resolution or resolutions of the Board of Directors may require.
Section 6. Vacancies or Absences:
If a vacancy in any office arises in any manner, the directors then in
office may choose, by a majority vote, a successor to hold office for the
unexpired term of the officer. If any officer shall be absent or unable for any
reason to perform his duties, the Board of Directors, to the extent not
otherwise inconsistent with these Bylaws, may direct that the duties of such
officer during such absence or inability shall be performed by such other
officer or subordinate officer as seems advisable to the Board.
Section 7. Compensation:
No officer shall receive any salary or compensation for his services
unless and until the Board of Directors authorizes and fixes the amount and
terms of such salary or compensation.
ARTICLE V
STOCK
Section 1. Regulations:
The Board of Directors shall have power and authority to take all such
rules and regulations as they deem expedient concerning the issue, transfer, and
registration of certificates for shares of the capital stock of the Corporation.
The Board of Directors may appoint a Transfer Agent and/or a Registrar and may
require all stock certificates to bear the signature of such Transfer Agent
and/or Registrar.
Section 2. Restrictions on Stock:
The Board of Directors may restrict any stock issued by giving the
Corporation or any stockholder "first right of refusal to purchase" the stock,
by making the stock redeemable or by restricting the transfer of the stock,
under such terms and in such manner as the directors may deem necessary and as
are not inconsistent with the Certificate of Incorporation or by statute. Any
stock so restricted must carry a stamped legend setting out the restriction or
conspicuously noting the restriction and stating where it may be found in the
records of the Corporation.
<PAGE>
ARTICLE VI
DIVIDENDS AND FINANCES
Section l. Dividends:
Dividends may be declared by the directors and paid out of any funds
legally available therefor under the laws of Delaware, as may be deemed
advisable from time to time by the Board of Directors of the Corporation. Before
declaring any dividends, the Board of Directors may set aside out of net profits
or earned or other surplus such sums as the Board may think proper as a reserve
fund to meet contingencies or for other purposes deemed proper and to the best
interests of the Corporation.
Section 2. Monies:
The monies, securities, and other valuable effects of the Corporation
shall be deposited in the name of the Corporation in such banks or trust
companies as the Board of Directors shall designate and shall be drawn out or
removed only as may be authorized by the Board of Directors from time to time.
Section 3. Fiscal Year:
The Board of Directors by resolution shall determine the fiscal year of
the Corporation.
ARTICLE VII
AMENDMENTS
These Bylaws may be altered, amended, or repealed by the Board of
Directors by resolution of a majority of the Board.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify any and all of its directors or officers,
or former directors or officers, or any person who may have served at its
request as a director or officer of another corporation in which this
Corporation owns shares of capital stock or of which it is a creditor and the
personal representatives of all such persons, against expenses actually and
necessarily incurred in connection with the defense of any action, suit, or
proceeding in which they, or any of them, were made parties, or a party, by
reason of being or having been directors or officers or a director or officer of
the Corporation, or of such other corporation, except in relation to matters as
to which any such director or officer or person shall have been adjudged in such
action, suit, or proceeding to be liable for negligence or misconduct in the
performance of any duty owed to the Corporation. Such indemnification shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled, independently of this Article, by law, under any Bylaw agreement, vote
of stockholders, or otherwise.
<PAGE>
ARTICLE IX
CONFLICTS OF INTEREST
No contract or other transaction of the Corporation with any other
persons, firms or corporations, or in which the Corporation is interested, shall
be affected or invalidated by the fact that any one or more of the directors or
officers of the Corporation is interested in or is a director or officer of such
other firm or corporation; or by the fact that any director or officer of the
Corporation, individually or jointly with others, may be a party to or may be
interested in any such contract or transaction.
Amiga Bylaws Power
AMIGA TELEPHONY CORPORATION
1998 INCENTIVE STOCK OPTION PLAN
1. Purpose. The purpose of the Incentive Stock Option Plan (the
"Plan") is to advance the interests of Amiga Telephony Corporation and any
subsidiary corporation (hereinafter referred to as the "Company") and all of its
shareholders, by strengthening the Company's ability to attract and retain in
its employ individuals of training, experience, and ability, and to furnish
additional incentive to officers and valued employees upon whose judgment,
initiative, and efforts the successful conduct and development of its business
largely depends, by encouraging such officers and employees to become owners of
capital stock of the Company.
This will be effected through the granting of stock options as
herein provided, which options are intended to qualify as "Incentive Stock
Options" within the meaning of Section 422 of the Internal Revenue Code, as
amended (the "Code").
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the directors duly appointed to
administer the Plan.
(c) "Common Stock" means the Company's Common Stock.
(d) "Date of Grant" means the date on which an Option is
granted under the Plan.
(e) "Option" means an Option granted under the Plan.
(f) "Optionee" means a person to whom an Option, which has not
expired, has been granted under the Plan.
(g) "Successor" means the legal representative of the estate
of a deceased optionee or the person or persons who acquire the right to
exercise an Option by bequest or inheritance or by reason of the death of any
Optionee.
3. Administration of Plan. The Plan shall be administered by the
Company's Board of Directors or in the alternative, by a committee of two or
more directors appointed by the Board (the "Committee"). If a Committee should
be appointed, the Committee shall report all action taken by it to the Board.
The Committee shall have full and final authority in its discretion, subject to
the provisions of the Plan, to determine the individuals to whom and the time or
times at which Options shall be granted and the number of shares and purchase
price of Common Stock covered by each Option; to construe and interpret the
Plan; to determine the terms and provisions of the respective Option agreements,
which need not be identical, including, but without limitation, terms covering
the payment of the Option Price; and to make all other determinations and take
all other actions deemed necessary or advisable for the proper administration of
the Plan. All such actions and determinations shall be conclusively binding for
all purposes and upon all persons.
1
<PAGE>
4. Common Stock Subject to Options. The aggregate number of shares
of the Company's Common Stock which may be issued upon the exercise of Options
granted under the Plan shall not exceed 1,000,000. The shares of Common Stock to
be issued upon the exercise of Options may be authorized but unissued shares,
shares issued and reacquired by the Company or shares bought on the market for
the purposes of the Plan. In the event any Option shall, for any reason,
terminate or expire or be surrendered without having been exercised in full, the
shares subject to such Option but not purchased thereunder shall again be
available for Options to be granted under the Plan.
The aggregate fair market value (determined as of the time any
option is granted) of the stock for which any employee may be granted options
which are first exercisable in any single calendar year under this Plan (and any
other plan of the Company meeting the requirements for Incentive Stock Option
Plans) shall not exceed $100,000.
5. Participants. Options will be granted only to persons who are
employees of the Company and only in connection with any such person's
employment. The term "employees" shall include officers as well as other
employees, and the officers and other employees who are directors of the
Company. The Committee will determine the employees to be granted options and
the number of shares subject to each option.
6. Terms and Conditions of Options. Any Option granted under the
Plan shall be evidenced by an agreement executed by the Company and the
recipient and shall contain such terms and be in such form as the Committee may
from time to time approve, subject to the following limitations and conditions:
(a) Option Price. The purchase price of each option shall not
be less than 100% of the fair market value of the Company's common stock at the
time of the granting of the option provided, however, if the optionee, at the
time the option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, the purchase price
of the option shall not be less than 110% of the fair market value of the stock
at the time of the granting of the option.
(b) Period of Option. The maximum period for exercising an
option shall be 10 years from the date upon which the option is granted,
provided, however, if the optionee, at the time the option is granted, owns
stock possessing more than l0% of the total combined voting power of all classes
of stock of the Company, the maximum period for exercising an option shall be
five years from the date upon which the option is granted and provided further,
however, that these periods may be shortened in accordance with the provisions
of Paragraph 7 below.
Subject to the foregoing, the period during which each option may be
exercised, and the expiration date of each Option shall be fixed by the
Committee.
If an optionee shall cease to be employed by the Company due to
disability, as defined in Section 22(e)(3) of the Code, he may, but only within
the one year next succeeding such cessation of employment, exercise his option
to the extent that he was entitled to exercise it on the date of such cessation.
The Plan will not confer upon any optionee any right with respect to continuance
of employment by the Company, nor will it interfere in any way with his right,
or his employer's right, to terminate his employment at any time.
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(c) Vesting of Shareholder Rights. Neither an Optionee nor his
successor shall have any rights as a shareholder of the Company until the
certificates evidencing the shares purchased are properly delivered to such
Optionee or his successor.
(d) Exercise of Option. Each Option shall be exercisable from
time to time during a period (or periods) determined by the Committee and ending
upon the expiration or termination of the Option; provided, however, the
Committee may, by the provisions of any Option Agreement, limit the number of
shares purchaseable thereunder in any period or periods of time during which the
Option is exercisable. An Option shall not be exercisable in whole or in part
prior to the date of shareholder approval of the Plan.
Options may be exercised in part from time to time during the
option period. The exercise of any option will be contingent upon compliance by
the Optionee (or purchaser acting pursuant to Section 6(b)) with the provisions
of Section 10 below and upon receipt by the Company of either (i) cash or
certified bank check payable to its order in the amount of the purchase price of
such shares (ii) shares of Company stock having a fair market value equal to the
purchase price of such shares, or (iii) a combination of (i) and (ii). If any
law or regulation requires the Company to take any action with respect to the
shares to be issued upon exercise of any option, then the date for delivery of
such stock shall be extended for the period necessary to take such action.
(e) Nontransferability of Option. No Option shall be
transferable or assignable by an Optionee, otherwise than by will or the laws of
descent and distribution and each Option shall be exercisable, during the
Optionee's lifetime, only by him. No Option shall be pledged or hypothecated in
any way and no Option shall be subject to execution, attachment, or similar
process except with the express consent of the Committee.
(f) Death of Optionee. In the event of the death of an
optionee while in the employ of the Company, the option theretofore granted to
him shall be exercisable only within the three months succeeding such death and
then only (i) by the person or persons to whom the optionee's rights under the
option shall pass by the optionee's will or by the laws of descent and
distribution, and (ii) if and to the extent that he was entitled to exercise the
option at the date of his death.
7. Assumed Options. In connection with any transaction to which
Section 424(a) of the Code is applicable, options may be granted pursuant hereto
in substitution of existing options or existing options may be assumed as
prescribed by that Section and any regulations issued thereunder.
Notwithstanding anything to the contrary contained in this Plan, options granted
pursuant to this Paragraph shall be at prices and shall contain such terms,
provisions, and conditions as may be determined by the Committee and shall
include such provisions and conditions as may be necessary to meet the
requirements of Section 424(a) of the Code.
8. Certain Dispositions of Shares. Any options granted pursuant to
this Plan shall be conditioned such that if, within the earlier of (i) the
two-year period beginning on the date of grant of an option or (ii) the one-year
period beginning on the date after which any share of stock is transferred to an
individual pursuant to his exercise of an option, such an individual makes a
disposition of such share of stock by way of sale, exchange, gift, transfer of
legal title, or otherwise, such individual shall promptly report such
disposition to the Company in writing and shall furnish to the Company such
details concerning such disposition as the Company may reasonably request.
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9. Reclassification, Consolidation, or Merger. If and to the extent
that the number of issued shares of Common Stock of the Corporaton shall be
increased or reduced by change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to Option and the Option price per share shall be proportionately
adjusted by the Committee, whose determination shall be conclusive. If the
Corporation is reorganized or consolidated or merged with another corporation,
an Optionee granted an Option hereunder shall be entitled to receive Options
covering shares of such reorganized, consolidated, or merged company in the same
proportion, at an equivalent price, and subject to the same conditions. The new
Option or assumption of the old Option shall not give Optionee additional
benefits which he did not have under the old Option, or deprive him of benefits
which he had under the old Option.
10. Restrictions on Issuing Shares. The exercise of each Option
shall be subject to the condition that if at any time the Company shall
determine in its discretion that the satisfaction of withholding tax or other
withholding liabilities, or that the listing, registration, or qualification of
any shares otherwise deliverable upon such exercise upon any securities exchange
or under any state or federal law, or that the consent or approval of any
regulatory body, is necessary or desirable as a condition of, or in connection
with, such exercise or the delivery or purchase of shares purchased thereto,
then in any such event, such exercise shall not be effective unless such
withholding, listing, registration, qualification, consent, or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company.
Unless the shares of stock covered by the Plan have been registered
with the Securities and Exchange Commission pursuant to Section 5 of the
Securities Act of l933, each optionee shall, by accepting an option, represent
and agree, for himself and his transferrees by will or the laws of descent and
distribution, that all shares of stock purchased upon the exercise of the option
will be acquired for investment and not for resale or distribution. Upon such
exercise of any portion of an option, the person entitled to exercise the same
shall, upon request of the Company, furnish evidence satisfactory to the Company
(including a written and signed representation) to the effect that the shares of
stock are being acquired in good faith for investment and not for resale or
distribution. Furthermore, the Company may, if it deems appropriate, affix a
legend to certificates representing shares of stock purchased upon exercise of
options indicating that such shares have not been registered with the Securities
and Exchange Commission and may so notify its transfer agent. Such shares may be
disposed of by an optionee in the following manner only: (l) pursuant to an
effective registration statement covering such resale or reoffer, (2) pursuant
to an applicable exemption from registration as indicated in a written opinion
of counsel acceptable to the Company, or (3) in a transaction that meets all the
requirements of Rule l44 of the Securities and Exchange Commission. If shares of
stock covered by the Plan have been registered with the Securities and Exchange
Commission, no such restrictions on resale shall apply, except in the case of
optionees who are directors, officers, or principal shareholders of the Company.
Such persons may dispose of shares only by one of the three aforesaid methods.
11. Use of Proceeds. The proceeds received by the Company from the
sale of Common Stock pursuant to the exercise of Options granted under the Plan
shall be added to the Company's general funds and used for general corporate
purposes.
l2. Amendment, Suspension, and Termination of Plan. The Board of
Directors may alter, suspend, or discontinue the Plan, but may not, without the
approval of a majority of those holders of the Company's Common Stock voting in
person or by proxy at any meeting of the Company's shareholders, make any
alteration or amendment thereof which operates to (a) make any material
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change in the class of eligible employees as defined in Section 5, (b) extend
the term of the Plan or the maximum option periods provided in paragraph 6, (c)
decrease the minimum option price provided in paragraph 6, except as provided in
paragraph 9, or (d) materially increase the benefits accruing to employees
participating under this Plan.
Unless the Plan shall theretofore have been terminated by the Board,
the Plan shall terminate ten years after the effective date of the Plan. No
Option may be granted during any suspension or after the termination of the
Plan. No amendment, suspension, or termination of the Plan shall, without an
Optionee's consent, alter or impair any of the rights or obligations under any
Option theretofore granted to such Optionee under the Plan.
13. Limitations. Every right of action by any person receiving
options pursuant to this Plan against any past, present or future member of the
Board, or any officer or employee of the Company arising out of or in connection
with this Plan shall, irrespective of the place where such action may be brought
and irrespective of the place of residence of any such director, officer or
employee cease and be barred by the expiration of one year from the date of the
act or omission in respect of which such right of action arises.
14. Governing Law. The Plan shall be governed by the laws of the
State of Delaware.
l5. Expenses of Administration. All costs and expenses incurred in
the operation and administration of this Plan shall be borne by the Company.
5
AMIGA TELEPHONY CORPORATION
NON-QUALIFIED STOCK OPTION PLAN
l. Purpose. This Non-Qualified Stock Option Plan (the "Plan") is
intended to advance the interests of Amiga Telephony Corporation (the "Company")
and its shareholders, by encouraging and enabling selected officers, directors,
consultants and key employees upon whose judgment, initiative and effort the
Company is largely dependent for the successful conduct of its business, to
acquire and retain a proprietary interest in the Company by ownership of its
stock. Options granted under the Plan are intended to be Options which do not
meet the requirements of Section 422 of the Internal Revenue Code of 1954, as
amended (the "Code").
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the directors duly appointed to administer the
Plan.
(c) "Common Stock" means the Company's Common Stock.
(d) "Date of Grant" means the date on which an Option is granted
under the Plan.
(e) "Option" means an Option granted under the Plan.
(f) "Optionee" means a person to whom an Option, which has not
expired, has been granted under the Plan.
(g) "Successor" means the legal representative of the estate of a
deceased optionee or the person or persons who acquire the right to exercise an
Option by bequest or inheritance or by reason of the death of any Optionee.
3. Administration of Plan. The Plan shall be administered by the
Company's Board of Directors or in the alternative, by a committee of two or
more directors appointed by the Board (the "Committee"). If a Committee should
be appointed, the Committee shall report all action taken by it to the Board.
The Committee shall have full and final authority in its discretion, subject to
the provisions of the Plan, to determine the individuals to whom and the time or
times at which Options shall be granted and the number of shares and purchase
price of Common Stock covered by each Option; to construe and interpret the
Plan; to determine the terms and provisions of the respective Option agreements,
which need not be identical, including, but without limitation, terms covering
the payment of the Option Price; and to make all other determinations and take
all other actions deemed necessary or advisable for the proper administration of
the Plan. All such actions and determinations shall be conclusively binding for
all purposes and upon all persons.
4. Common Stock Subject to Options. The aggregate number of shares
of the Company's Common Stock which may be issued upon the exercise of Options
granted under the Plan shall not exceed 3,000,000. The shares of Common Stock to
be issued upon the exercise of Options may be authorized but unissued shares,
shares issued and reacquired by the Company or shares bought on the market for
the purposes of the Plan. In the event any Option shall, for any reason,
terminate or expire or be surrendered without having been exercised in full, the
shares subject to such Option but not purchased thereunder shall again be
available for Options to be granted under the Plan.
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5. Participants. Options may be granted under the Plan the Company's
employees, directors and officers, and consultants or advisors to the Company,
provided however that bona fide services shall be rendered by such consultants
or advisors and such services must not be in connection with the offer or sale
of securities in a capital-raising transaction.
6. Terms and Conditions of Options. Any Option granted under the
Plan shall be evidenced by an agreement executed by the Company and the
recipient and shall contain such terms and be in such form as the Committee may
from time to time approve, subject to the following limitations and conditions:
(a) Option Price. The Option Price per share with respect to
each Option shall be determined by the Committee but shall in no instance be
less than the par value of the Common Stock.
(b) Period of Option. The period during which each option may
be exercised, and the expiration date of each Option shall be fixed by the
Committee, but, notwithstanding any provision of the Plan to the contrary, such
expiration date shall not be more than ten years from the date of Grant.
(c) Vesting of Shareholder Rights. Neither an Optionee nor his
successor shall have any rights as a shareholder of the Company until the
certificates evidencing the shares purchased are properly delivered to such
Optionee or his successor.
(d) Exercise of Option. Each Option shall be exercisable from
time to time during a period (or periods) determined by the Committee and ending
upon the expiration or termination of the Option; provided, however, the
Committee may, by the provisions of any Option Agreement, limit the number of
shares purchaseable thereunder in any period or periods of time during which the
Option is exercisable.
(e) Nontransferability of Option. No Option shall be
transferable or assignable by an Optionee, otherwise than by will or the laws of
descent and distribution and each Option shall be exercisable, during the
Opionee's lifetime, only by him. No Option shall be pledged or hypothecated in
any way and no Option shall be subject to execution, attachment, or similar
process except with the express consent of the Committee.
(f) Death of Optionee. If an Optionee dies while holding an
Option granted hereunder, his Option privileges shall be limited to the shares
which were immediately purchasable by him at the date of death and such Option
privileges shall expire unless exercised by his successor within four months
after the date of death.
7. Reclassification, Consolidation, or Merger. If and to the extent
that the number of issued shares of Common Stock of the Corporation shall be
increased or reduced by change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to Option and the Option price per share shall be proportionately
adjusted by the Committee, whose determination shall be conclusive. If the
Corporation is reorganized or consolidated or merged with another corporation,
an Optionee granted an Option hereunder shall be entitled to receive Options
covering shares of such reorganized, consolidated, or merged company in the same
proportion, at an equivalent price, and subject to the same conditions. The new
Option or assumption
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<PAGE>
of the old Option shall not give Optionee additional benefits which he did not
have under the old Option, or deprive him of benefits which he had under the old
Option.
8. Restrictions on Issuing Shares. The exercise of each Option shall
be subject to the condition that if at any time the Company shall determine in
its discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares purchased thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
Unless the shares of stock covered by the Plan have been
registered with the Securities and Exchange Commission pursuant to Section 5 of
the Securities Act of l933, each optionee shall, by accepting an option,
represent and agree, for himself and his transferees by will or the laws of
descent and distribution, that all shares of stock purchased upon the exercise
of the option will be acquired for investment and not for resale or
distribution. Upon such exercise of any portion of an option, the person
entitled to exercise the same shall, upon request of the Company, furnish
evidence satisfactory to the Company (including a written and signed
representation) to the effect that the shares of stock are being acquired in
good faith for investment and not for resale or distribution. Furthermore, the
Company may, if it deems appropriate, affix a legend to certificates
representing shares of stock purchased upon exercise of options indicating that
such shares have not been registered with the Securities and Exchange Commission
and may so notify the Company's transfer agent. Such shares may be disposed of
by an optionee in the following manner only: (l) pursuant to an effective
registration statement covering such resale or reoffer, (2) pursuant to an
applicable exemption from registration as indicated in a written opinion of
counsel acceptable to the Company, or (3) in a transaction that meets all the
requirements of Rule l44 of the Securities and Exchange Commission. If shares of
stock covered by the Plan have been registered with the Securities and Exchange
Commission, no such restrictions on resale shall apply, except in the case of
optionees who are directors, officers, or principal shareholders of the Company.
Such persons may dispose of shares only by one of the three aforesaid methods.
9. Use of Proceeds. The proceeds received by the Company from the
sale of Common Stock pursuant to the exercise of Options granted under the Plan
shall be added to the Company's general funds and used for general corporate
purposes.
l0. Amendment, Suspension, and Termination of Plan. The Board of
Directors may alter, suspend, or discontinue this Plan at any time.
Unless the Plan shall theretofore have been terminated by the
Board, the Plan shall terminate ten years after the effective date of the Plan.
No Option may be granted during any suspension or after the termination of the
Plan. No amendment, suspension, or termination of the Plan shall, without an
Optionee's consent, alter or impair any of the rights or obligations under any
Option theretofore granted to such Optionee under the Plan.
11. Limitations. Every right of action by any person receiving
options pursuant to this Plan against any past, present or future member of the
Board, or any officer or employee of the Company arising out of or in connection
with this Plan shall, irrespective of the place where such action
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<PAGE>
may be brought and irrespective of the place of residence of any such director,
officer or employee cease and be barred by the expiration of one year from the
date of the act or omission in respect of which such right of action arises.
l2. Governing Law. The Plan shall be governed by the laws of the
State of Delaware.
13. Expenses of Administration. All costs and expenses incurred in
the operation and administration of this Plan shall be borne by the Company.
Amiga/non-qualified stock option
4
AMIGA TELEPHONY CORPORATION
1998 STOCK BONUS PLAN
l. Purpose. The purpose of this Stock Bonus Plan is to advance the
interests of Amiga Telephony Corporation (the "Company") and its shareholders,
by encouraging and enabling selected officers, directors, consultants and key
employees upon whose judgment, initiative and effort the Company is largely
dependent for the successful conduct of its business, to acquire and retain a
proprietary interest in the Company by ownership of its stock, to keep personnel
of experience and ability in the employ of the Company and to compensate them
for their contributions to the growth and profits of the Company and thereby
induce them to continue to make such contributions in the future.
2. Definitions.
A. "Board" shall mean the board of directors of the Company.
B. "Committee" means the directors duly appointed to
administer the Plan.
C. "Plan" shall mean this Stock Bonus Plan.
D. "Bonus Share" shall mean the shares of common stock of the
Company reserved pursuant to Section 4 hereof and any such shares issued to a
Recipient pursuant to this Plan.
E. "Recipient" shall mean any individual rendering services
for the Company to whom shares are granted pursuant to this Plan.
3. Administration of Plan. The Plan shall be administered by a
committee of two or more directors appointed by the Board (the "Committee"). The
Committee shall report all action taken by it to the Board. The Committee shall
have full and final authority in its discretion, subject to the provisions of
the Plan, to determine the individuals to whom and the time or times at which
Bonus Shares shall be granted and the number of Bonus Shares; to construe and
interpret the Plan; and to make all other determinations and take all other
actions deemed necessary or advisable for the proper administration of the Plan.
All such actions and determinations shall be conclusively binding for all
purposes and upon all persons.
4. Bonus Share Reserve. There shall be established a Bonus Share
Reserve to which shall be credited 1,000,000 shares of the Company's common
stock. In the event that the shares of common stock of the Company should, as a
result of a stock split or stock dividend or combination of shares or any other
change, or exchange for other securities by reclassification, reorganization,
merger, consolidation, recapitalization or otherwise, be increased or decreased
or changed into or exchanged for, a different number or kind of shares of stock
or other securities of the Company or of another corporation, the number of
shares then remaining in the Bonus Share Reserve shall be appropriately adjusted
to reflect such action. Upon the grant of shares hereunder, this reserve shall
be reduced by the number of shares so granted. Distributions of Bonus Shares
may, as the Committee shall in its sole discretion determine, be made from
authorized but unissued shares or from treasury shares. All authorized and
unissued shares issued as Bonus Shares in accordance with the Plan shall be
fully paid and nonassessable and free from preemptive rights.
5. Eligibility, and Granting and Vesting of Bonus Shares. Bonus
Shares may be granted under the Plan to the Company's employees, directors and
officers, and consultants or advisors
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to the Company, provided however that bona fide services shall be rendered by
such consultants or advisors and such services must not be in connection with
the offer or sale of securities in a capital-raising transaction.
The Committee, in its sole discretion, is empowered to grant
to an eligible Participant a number of Bonus Shares as it shall determine from
time to time. Each grant of these Bonus Shares shall become vested according to
a schedule to be established by the Committee directors at the time of the
grant. For purposes of this plan, vesting shall mean the period during which the
recipient must remain an employee or provide services for the Company. At such
time as the employment of the Recipient ceases, any shares not fully vested
shall be forfeited by the Recipient and shall be returned to the Bonus Share
Reserve. The Committee, in its sole discretion, may also impose restrictions on
the future transferability of the bonus shares, which restrictions shall be set
forth on the notification to the Recipient of the grant.
The aggregate number of Bonus Shares which may be granted
pursuant to this Plan shall not exceed the amount available therefore in the
Bonus Share Reserve.
6. Form of Grants. Each grant shall specify the number of Bonus
Shares subject thereto, subject to the provisions of Section 5 hereof.
At the time of making any grant, the Committee shall advise
the Recipient by delivery of written notice, in the form of Exhibit A hereto
annexed.
7. Recipients' Representations.
A. The Committee may require that, in acquiring any Bonus
Shares, the Recipient agree with, and represent to, the Company that the
Recipient is acquiring such Bonus Shares for the purpose of investment and with
no present intention to transfer, sell or otherwise dispose of shares except
such distribution by a legal representative as shall be required by will or the
laws of any jurisdiction in winding-up the estate of any Recipient. Such shares
shall be transferrable thereafter only if the proposed transfer shall be
permissable pursuant to the Plan and if, in the opinion of counsel (who shall be
satisfactory to the Committee), such transfer shall at such time be in
compliance with applicable securities laws.
B. To effectuate Paragraph A above, the Recipient shall
deliver to the Committee, in duplicate, an agreement in writing, signed by the
Recipient, in form and substance as set forth in Exhibit B hereto annexed, and
the Committee shall forthwith acknowledge its receipt thereof.
8. Restrictions Upon Issuance.
A. Bonus Shares shall forthwith after the making of any
representations required by Section 6 hereof, or if no representations are
required then within thirty (30) days of the date of grant, be duly issued and
transferred and a certificate or certificates for such shares shall be issued in
the Recipient's name. The Recipient shall thereupon be a shareholder with
respect to all the shares represented by such certificate or certificates, shall
have all the rights of a shareholder with respect to all such shares, including
the right to vote such shares and to receive all dividends and other
distributions (subject to the provisions of Section 7(B) hereof) paid with
respect to such shares. Certificates of stock representing Bonus Shares shall be
imprinted with a legend to the effect that the shares represented thereby are
subject to the provisions of this Agreement, and to the vesting and
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<PAGE>
transfer limitations established by the Committee, and each transfer agent for
the common stock shall be instructed to like effect with respect of such shares.
B. In the event that, as the result of a stock split or stock
dividend or combination of shares or any other change, or exchange for other
securities, by reclassification, reorganization, merger, consolidation,
recapitalization or otherwise, the Recipient shall, as owner of the Bonus Shares
subject to restrictions hereunder, be entitled to new or additional or different
shares of stock or securities, the certificate or certificates for, or other
evidences of, such new or additional or different shares or securities, together
with a stock power or other instrument of transfer appropriately endorsed, shall
also be imprinted with a legend as provided in Section 7(A), and all provisions
of the Plan relating to restrictions herein set forth shall thereupon be
applicable to such new or additional or different shares or securities to the
extent applicable to the shares with respect to which they were distributed.
C. The grant of any Bonus Shares shall be subject to the
condition that if at any time the Company shall determine in its discretion that
the satisfaction of withholding tax or other withholding liabilities, or that
the listing, registration, or qualification of any Bonus Shares upon such
exercise upon any securities exchange or under any state or federal law, or that
the consent or approval of any regulatory body, is necessary or desirable as a
condition of, or in connection with, the issuance of any Bonus Shares, then in
any such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been ef-
fected or obtained free of any conditions not acceptable to the Company.
D. Unless the Bonus Shares covered by the Plan have been
registered with the Securities and Exchange Commission pursuant to Section 5 of
the Securities Act of l933, each Recipient shall, by accepting a Bonus Share,
represent and agree, for himself and his transferrees by will or the laws of
descent and distribution, that all Bonus Shares were acquired for investment and
not for resale or distribution. The person entitled to receive Bonus Shares
shall, upon request of the Committee, furnish evidence satisfactory to the
Committee (including a written and signed representation) to the effect that the
shares of stock are being acquired in good faith for investment and not for
resale or distribution. Furthermore, the Committee may, if it deems appropriate,
affix a legend to certificates representing Bonus Shares indicating that such
Bonus Shares have not been registered with the Securities and Exchange
Commission and may so notify the Company's transfer agent. Such shares may be
disposed of by a Recipient in the following manner only: (l) pursuant to an
effective registration statement covering such resale or reoffer, (2) pursuant
to an applicable exemption from registration as indicated in a written opinion
of counsel acceptable to the Company, or (3) in a transaction that meets all the
requirements of Rule l44 of the Securities and Exchange Commission. If Bonus
Shares covered by the Plan have been registered with the Securities and Exchange
Commission, no such restrictions on resale shall apply, except in the case of
Recipients who are directors, officers, or principal shareholders of the
Company. Such persons may dispose of shares only by one of the three aforesaid
methods.
9. Limitations. Neither the action of the Company in establishing
the Plan, nor any action taken by it nor by the Committee under the Plan, nor
any provision of the Plan, shall be construed as giving to any person the right
to be retained in the employ of the Company.
Every right of action by any person receiving shares of common
stock pursuant to this Plan against any past, present or future member of the
Board, or any officer or employee of the Company arising out of or in connection
with this Plan shall, irrespective of the place where action may be brought and
irrespective of the place of residence of any such director, officer or employee
cease and
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<PAGE>
be barred by the expiration of one year from the date of the act or omission in
respect of which such right of action arises.
l0. Amendment, Suspension or Termination of the Plan. The Board of
Directors may alter, suspend, or discontinue this Plan at any time.
Unless the Plan shall theretofore have been terminated by the Board,
the Plan shall terminate ten years after the effective date of the Plan. No
Bonus Share may be granted during any suspension or after the termination of the
Plan. No amendment, suspension, or termination of the Plan shall, without a
recipient's consent, alter or impair any of the rights or obligations under any
Bonus Share theretofore granted to such recipient under the Plan.
ll. Governing Law. The Plan shall be governed by the laws of the
State of Delaware.
l2. Expenses of Administration. All costs and expenses incurred in
the operation and adminstration of this Plan shall be borne by the Company.
4
<PAGE>
- EXHIBIT A -
AMIGA TELEPHONY CORPORATION
STOCK BONUS PLAN
TO: Recipient:
PLEASE BE ADVISED that Amiga Telephony Corporation has on the date hereof
granted to the Recipient the number of Bonus Shares as set forth under and
pursuant to the Stock Bonus Plan. Before these shares are to be issued, the
Recipient must deliver to the Committee that administers the Stock Bonus Plan an
agreement in duplicate, in the form as Exhibit B hereto. The Bonus Shares are
issued subject to the following vesting and transfer limitations.
Vesting:
Number of Shares Date of Vesting
Transfer Limitations:
AMIGA TELEPHONY CORPORATION
________________________ By _______________________________
Date
5
<PAGE>
- EXHIBIT B -
Amiga Telephony Corporation
2350-1177 West Hastings St.
Vancouver, British Columbia
Canada V6E 2K3
Gentlemen:
I represent and agree that said Bonus Shares are being acquired by
me for investment and that I have no present intention to transfer, sell or
otherwise dispose of such shares, except as permitted pursuant to the Plan and
in compliance with applicable securities laws, and agree further that said
shares are being acquired by me in accordance with and subject to the terms,
provisions and conditions of said Plan, to all of which I hereby expressly
assent. These agreements shall bind and inure to the benefit of my heirs, legal
representatives, successors and assigns.
My address of record is:
and my social security number:
Very truly yours,
Receipt of the above is hereby acknowledged.
AMIGA TELEPHONY CORPORATION
____________________ By ___________________________
Date _______________ its __________________________
6
June 16, 1999
Amiga Telephone Corporation
2770-555 West Hastings Street
Vancouver, British Columbia
Canada V6B 4N5
This letter will constitute an opinion upon the legality of the sale by
Amiga Telephony Corporation (the "Company") and by a selling shareholder of
shares of the Company's common stock, all as referred to in the Registration
Statement on Form SB-2 filed by the Company with the Securities and Exchange
Commission.
We have examined the Articles of Incorporation, the Bylaws and the minutes
of the Board of Directors of the Company, the applicable laws of the State of
Delaware and a copy of the Registration Statement. In our opinion:
1. The Company is authorized to issue the 1,150,000 shares of common stock
to be sold by means of the Registration Statement and such shares, when issued,
will represent fully paid and non-assessable shares of the Company's Common
Stock.
2. The Company is authorized to issue the 1,150,000 warrants to be sold by
means of the Registration Statement and the shares of common stock, when issued
upon the exercise of the warrants, will represent fully paid and non-assessable
shares of the Company's common stock.
3. The Company is authorized to issue the 200,000 warrants to be issued to
the underwriters participating in this offering and the shares of common stock,
when issued upon the exercise of the warrants, will represent fully paid and
non-assessable shares of the Company's common stock.
4. The 150,000 shares of common stock to be sold by the selling
shareholder have been validly issued and represent fully paid and non-assessable
shares of the Company's common stock.
Very truly yours,
HART & TRINEN
By __________________________________
William T. Hart
WTH:ag
Amiga Opinion of Counsel
MANAGEMENT SERVICES AGREEMENT
between
Canadian Digital Network Inc.
and
Fortunet IM Technologies Inc.
<PAGE>
TABLE OF CONTENTS
PART 1: INTERPRETATION ..................................................... 1
DEFINITIONS .............................................................. 1
PROPER LAW OF AGREEMENT .................................................. 2
PART 2: APPOINTMENT AND DUTIES OF MANAGER .................................. 2
APPOINTMENT OF MANAGER ................................................... 2
TERM OF APPOINTMENT ...................................................... 2
MANAGEMENT SERVICES ...................................................... 2
NON-EXCLUSIVITY .......................................................... 3
PART 3: MANAGEMENT FEES AND EXPENSES ....................................... 3
MANAGEMENT FEES .......................................................... 3
PAYMENT DATES ............................................................ 3
EXPENSES RELATING TO PROVISION OF MANAGEMENT SERVICES .................... 3
INDEMNITY OF MANAGER ..................................................... 4
INDEMNITY OF COMPANY ..................................................... 4
PART 4: RELATIONSHIP OF THE PARTIES ........................................ 4
AGENCY ................................................................... 4
STATUS OF OFFICERS AND EMPLOYEES ......................................... 5
PART 5: TERMINATION ........................................................ 5
BY AGREEMENT ............................................................. 5
DEFAULT BY MANAGER ....................................................... 5
DEFAULT BY COMPANY ....................................................... 6
PART 6: CONFIDENTIALITY .................................................... 6
CONFIDENTIAL INFORMATION ................................................. 6
NON-DISCLOSURE ........................................................... 7
OBLIGATIONS OF TERMINATION ............................................... 7
CORPORATE PROPERTY ....................................................... 7
PART 7: NOTICE ............................................................. 8
GIVING NOTICE ............................................................ 8
RECEIPT OF NOTICE ........................................................ 8
CHANGE OF ADDRESS ........................................................ 8
PART 8: GENERAL PROVISIONS ................................................. 9
AMENDMENTS AND WAIVERS ................................................... 9
ASSIGNMENT ............................................................... 9
TIME OF ESSENCE .......................................................... 9
ENTIRE AGREEMENT ......................................................... 9
COUNTERPARTS ............................................................. 9
SCHEDULE "A" ............................................................... 10
SCHEDULE "B" ............................................................... 13
<PAGE>
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT made as of the 15th day of April, 1998
BETWEEN:
Canadian Digital Network Inc. a corporation incorporated under the
laws of Canada and having an office at 2350 - 1177 West Hastings
Street, Vancouver, British Columbia V6E 2K3
(the "Manager)
AND:
Fortunet Communications Technologies Inc. a corporation incorporated
under the laws of the state of Delaware USA, and having a business
office located at 640 - 625 Howe Street, Vancouver, British
Columbia, V6C 2T6
(the "Company")
WHEREAS:
(A) The Manager is in the business of providing senior executive management and
consulting services to the communications industry including business entities
similar to the Company; and
(B) The Company wishes to retain the services of the Manager on the terms
provided in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
of the mutual covenants and agreements herein set forth and for other good and
valuable consideration, the sufficiency and receipt of which is acknowledged by
all the parties hereto, the parties hereto covenant and agree as follows:
PART 1: INTERPRETATION
Definitions
1.1 In this Agreement, unless there is something in the subject matter or
context inconsistent therewith:
Board means the board of directors of the Company from time to time;
Business means the principal business of the Company, which includes
but is not limited to the provision of long distance internet
telephony services.
Page 1
<PAGE>
Business Day means a day other than a Saturday, Sunday or a
statutory holiday in British Columbia;
Effective Date means April 15th, 1998; and
Management Services means the services described in ss.2.3 hereof.
Proper Law of Agreement
1.2 This Agreement is governed by and construed in accordance with the laws of
the Province of British Columbia.
PART 2: APPOINTMENT AND DUTIES OF MANAGER
Appointment of Manager
2.1 The Company hereby appoints the Manager to perform the Management Services
and the Manager hereby accepts the Appointment on the terms and conditions
hereinafter set out.
Term of Appointment
2.2 The Manager will provide the Management Services to the Company for a period
commencing on the Effective Date for an initial term of two years and continuing
thereafter without a term until terminated by either party, for any reason, on
the giving of not less than 90 days written notice to the other party.
Management Services
2.3 The Management Services to be provided by the Manager to the Company will
consist of the duties and responsibilities more particularly described in
Schedule "A" hereto attached and any other activities deemed appropriate by the
Board. The Management Services will be provided by such officers and employees
of the Manager as it shall, in its absolute discretion, deem necessary.
The Manager shall and shall cause its officers and employees to:
(a) exercise the degree of care, diligence and skill that a reasonably
prudent manager would exercise in comparable circumstances;
(b) act honestly and in good faith in what the Manager reasonably believes
to be the best interests of the Company; and
(c) generally use its best efforts to promote the business and interests
of the Company.
Page 2
<PAGE>
Non-Exclusivity
2.4 The Company acknowledges that the Manager provides services similar to the
Management Services to other business entities and agrees that nothing in this
Agreement obliges the Manager to devote all or substantially all of its human
resources to the Company.
PART 3: MANAGEMENT FEES AND EXPENSES
Management Fees
3.1 In consideration of the Management Services, the Company will pay to the
Manager during the Term, monthly management fee and additional
compensation in the amounts provided in Schedule "B".
Payment Dates
3.2 Monthly Management fees payable pursuant to Section 3.1 will be paid by the
Company to the Manager in bi-monthly installments on:
(a) the 15th day of each month unless the 15th day of any month is not a
Business Day, in which case, the next preceding Business Day; and
(b) the last Business Day of each month.
Expenses Relating to Provision of Management Services
3.3 The parties acknowledge and agree that:
(a) the Manager will supply office facilities, secretarial, accounting and
administration services reasonably required to perform the Management
Services at the office of the Manager in Vancouver, B.C. for the monthly
amount set out in Schedule "B";
(b) all salaries, benefits, consulting fees and other expenses relating to
the operation of the Business on a day to day basis other than those
Services provided by the officers and employees of the Manager identified
in Schedule "A", shall be borne and be paid directly by the Company to
such employees and consultants so required for the efficient operation of
the Business; it being understood that the Manager shall be responsible
only for strategic planning, senior management supervision and other
activities as set out in Schedule "A";
(c) all other costs incurred in operating and maintaining the Company's
facilities in Vancouver such as local, cellular and long distance
telephone expenses, office supplies, freight & courier, customs & duty,
publications & manuals, trade show & conference fees, legal fees,
accounting and audit fees or other professional or consulting fees will be
borne by the Company, and the Manager will invoice the Company for these
services on a monthly basis;
Page 3
<PAGE>
(d) should it become necessary or expedient under the circumstances for
the Manager to incur out-of-pocket expenses in the course of providing the
Management Services, the Company will promptly reimburse the Manager for
such expenses upon presentation of expense receipts or other similar
evidence that such expense has been incurred in connection with the
provision of Management Services; and
(e) the Manager will not be obliged to incur any out-of-pocket expenses in
performing the Management Services outside Vancouver. Authorized travel,
accommodation, and other reasonable expenses incurred in performing the
services outside Vancouver will be borne by the Company;
Indemnity of Manager
3.4 The Company will indemnify and save harmless the Manager from and against
any action, cause of action, suit, debt, cost, expense, claim or demand
whatsoever at law or in equity resulting from the performance by the Manager of
the Management Services provided that:
(a) the act or omission with respect to which the Manager seeks indemnity
was performed in accordance with the terms of this Agreement;
(b) the foregoing indemnity will not extend to any negligence or wrongful
act, omission or neglect of the Manager or any act or omission of the
Manager outside the provisions of the Agreement or beyond the scope of the
Manager's authority hereunder; and
(c) notwithstanding the foregoing, if the liability for which the Manager
seeks indemnity arises from an act or omission by an officer or employee
of the Manager acting in the capacity of director or officer of the
Company or arises by reason only that such officer or employee of the
Manager is a director or officer of the Company, the Manager will only be
indemnified to the extent that the Company would ordinarily have
indemnified the Manager in those capacities were he an employee of the
Company or a member of the Board otherwise than pursuant to this
Agreement.
Indemnity of Company
3.5 The Manager will indemnify and save harmless the Company against all
actions, suits, damages, losses or liabilities arising in whole or in part
out of or in connection with the grossly negligent or unlawful performance
of the Services hereunder.
PART 4: RELATIONSHIP OF THE PARTIES
Agency
4.1 In performing the Management Services, the Manager will, to that extent, be
the authorized agent of the Company, subject always to the ultimate authority of
the Board to
Page 4
<PAGE>
control and direct the Company's affairs and nothing in this Agreement will be
construed to create between the Manager and the Company:
(a) a relationship of principal and agent exceeding in scope that which is
necessary to give effect to the spirit and intent of this Agreement; or
(b) a relationship as employees, joint venturers, partners or members of a
joint enterprise;
it being the intent of this Agreement that the Manager is otherwise engaged by
the Company as an independent contractor.
Status of Officers and Employees
4.2 Under no circumstances will any officers or employees of the Manager, or any
of them, be construed as employees of the Company, notwithstanding that, as an
incident to the performance of the Management Services, such officers or
employees of the Manager may act as directors and officers of the Company and
the parties acknowledge that:
(a) all of the Company's remunerative obligations under this Agreement are
owed to the Manager and not to any individual officer or employee of the
Manager; and
(b) the Manager will be solely responsible for compensating its officers
or employees in lieu of any salaries, wages, bonuses or other benefits
which would otherwise have been payable by the Company were such officers
or employees performing services similar to the Management Services as
employees of the Company.
PART 5: TERMINATION
By Agreement
5.1 The parties may terminate the Appointment by mutual agreement at any time.
Default by Manager
5.2 The Company may, at its option, immediately terminate this Agreement:
(a) without notice upon the occurrence of any fraudulent or grossly
negligent conduct on the part of the Manager while acting in any capacity
on behalf of the Company;
(b) if the Manager is wound up or ceases to exist;
(c) if the Manager files a voluntary petition in bankruptcy or insolvency
or a petition for reorganization under any bankruptcy or insolvency law;
Page 5
<PAGE>
(d) upon the consent by the Manager to an involuntary petition in
bankruptcy or the failure to act immediately upon entry thereof or any
order approving an involuntary petition in respect of the Manager;
(e) upon the appointment of a receiver or a receiver-manager for all or
substantially all of the Manager's property; or
(f) if the Manager fails to provide the services agreed to be provided
under this Agreement and such failure continues for 30 days after the
Company has, in writing, demanded that such failure be cured.
Default by Company
5.3 The Manager may, at its option, immediately terminate this Agreement without
notice upon the occurrence of any of the following:
(a) any fraudulent or grossly negligent conduct by the Company;
(b) the failure by the Company to pay monies to the Manager required to be
paid hereunder for a period of forty-five (45) days after such monies
become payable;
(c) the filing by the Company of a voluntary petition in bankruptcy or
insolvency or a petition for reorganization under any bankruptcy or
insolvency law;
(d) the consent by the Company to an involuntary petition in bankruptcy or
the failure to act immediately upon entry thereof of any order approving
an involuntary petition in respect of the Company; or
(e) the appointment of a receiver or a receiver-manager for all or
substantially all of the Company's property.
whereupon the management fees, allowances, benefits and other monies which would
otherwise have been payable pursuant to Part 3 hereof had the Appointment
remained in effect for the balance of the Term will become immediately due and
payable as a lump sum.
PART 6: CONFIDENTIALITY
Confidential Information
6.1 As used herein, "Confidential Information" shall mean any information
relating to the private or confidential affairs of the Company, or their
respective suppliers, customers, business contacts or counter-parties or
relating to any secrets of the Company, or their respective customers including,
but not limited to:
(a) information relating to sales, profit margins, pricing methods, plans
and strategies, and any other unpublished financial, marketing or pricing
information;
Page 6
<PAGE>
(b) proprietary information, trade secrets and know-how;
(c) customer lists, agreements with key customers (or any of the terms or
conditions thereof) and detailed information regarding customers'
requirements or business plans; and
(d) specific business, research and new product plans and objectives.
Non-Disclosure
6.2 The Manager covenants and agrees with the Company that it will not, either
during the term of this Agreement or for a period of two (2) years following
termination of this Agreement, disclose or reveal in any manner whatsoever to
any other person, firm or corporation, nor will it use, directly or indirectly,
for any purpose other than the purposes of the Company, the private affairs of
the Company or any Confidential Information which they may acquire during the
term of this Agreement, unless the Manager shall be specifically ordered to do
so by a court of competent jurisdiction.
Obligations of Termination
6.3 Upon termination of the Manager's Appointment, the Manager shall deliver to
the Company all confidential documents, papers, plans, materials and property of
or relating to the business and affairs of the Company which may then be in its
possession or under its control, without keeping any copies or records thereof.
Corporate Property
6.4 The Manager agrees that:
(a) its work in progress and work output during the Appointment in the
provision of the Management Services; and
(b) all information, knowledge and materials related exclusively to:
(i) the client lists, accounts, business practices, methods,
technology, know-how, intellectual property and goodwill of the
Company; or
(ii) the clients, suppliers or transactions of the Company; or
(iii) the systems, programs, designs, strategies, ideas, products or
services which during the Appointment the Manager alone or with
others may devise, make, produce or conceive exclusively in
connection with the business and affairs of the Company;
and all rights and interest therein and thereto including, without limitation,
trade secrets, designs, plans, specifications, technical information and other
proprietary rights shall be the property of the Company exclusively and the
Manager hereby assigns to the Company and agrees that on request the Manager
will hereafter assign to the Company all the Manager's
Page 7
<PAGE>
right, title and interest therein and thereto. On termination of the
Appointment, the Manager shall immediately deliver up to the Company all
documents, information, contracts, and other property which the Manager has
under the Manager's control or in the Manager's possession which may be owned by
or which may in any way relate to the business and affairs of the Company as
acquired by or developed by the Manager in the provision of the Management
Services pursuant to the Appointment only.
PART 7: NOTICE
Giving Notice
7.1 Any notice, approval or other communication required or permitted to be
given hereunder ("Notice") will be in writing and will be personally delivered,
sent by pre-paid registered mail or by facsimile:
in the case of the Manager, to:
Canadian Digital Network Inc.
2350 - 1177 West Hastings Street
Vancouver, British Columbia, V6E 2K3
Fax: (604) 685-7832
Attention: Ian D. Robertson
in the case of the Company, to:
Fortunet IM Technologies Inc.
640 -- 625 Howe Street
Vancouver, British Columbia, V6C 2T6
Receipt of Notice
7.2 Any Notice so given will be deemed conclusively to have been given and
received:
(a) if personally delivered, on the date of delivery;
(b) if sent by pre-paid registered mail, on the third (3rd) Business Day
following the date of mailing, provided that for such purposes no day
during which there is a strike or other occurrence which interferes with
normal mail service will be considered a Business Day; or
(c) if sent by facsimile, on the next Business Day following the day of
transmission.
Change of Address
7.3 Each of the parties may from time to time change its address for service by
Notice to the other party.
Page 8
<PAGE>
PART 8: GENERAL PROVISIONS
Amendments and Waivers
8.1 No amendment, waiver or early termination of this Agreement is binding
unless executed in writing by the party to be bound thereby. No waiver of any
provision of this Agreement is deemed or will constitute a waiver of any other
provision nor will any such waiver constitute a continuing waiver unless
otherwise expressly provided.
Assignment
8.2 This Agreement is not capable of assignment by the Manager. The Company
shall be entitled upon prior written notice but without the Manager's consent to
assign all its rights and interest in this Agreement to a corporation as part of
a transfer of all or substantially all its assets to another corporation, and
the Manager agrees to be retained by and to serve the assignee on the terms and
conditions as set out in or referred to in this Agreement.
Time of Essence
8.3 Time is of the essence in the performance of the respective obligations of
the parties to this Agreement.
Entire Agreement
8.4 This Agreement constitutes the entire agreement between the parties and
supercedes all previous agreements and understandings between the parties in any
way relating to the subject matter hereof.
Counterparts
8.5 This Agreement may be executed in counterparts, which together shall be
deemed to constitute one agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as of the day and
year first above written.
CANADIAN DIGITAL NETWORK INC. FORTUNET IM TECHNOLOGIES INC.
By: /s/ Ian D. Robertson By: /s/ [ILLEGIBLE]
--------------------------------- -------------------------------
Ian D. Robertson, President & CEO Director
By: /s/ Ian C. Hand
---------------------------------
Ian C. Hand, Vice President & CFO
Page 9
<PAGE>
SCHEDULE "A"
Management Services
The services to be provided by the Manager to the Company shall include:
1. formulating business plans for the review and approval of the Board and
devising medium and long term strategies to enhance the efficiency and
productivity of the Business and the profitability of the Company;
2. supervising the implementation of those corporate and business planning
strategies, in consultation with the Board, most advantageous to the
Company and the Business under applicable laws;
3. supervising the activities of senior management personnel and engaging,
re-assigning or terminating the employment of such personnel on a
discretionary basis but subject to Board approval in the case of Company
officers;
4. negotiating, under the direction of the Board, and with the assistance of
professional advisors, if necessary, all material contracts to be entered
into by the Company;
5. reviewing and generally supervising the Company's activities and the
operations comprising the Business for the purpose of ensuring that the
Company is in substantial compliance with:
(i) all applicable laws, statutes, orders, rules, regulations and
policies of governmental authorities; and
(ii) its obligations under any trust deed, debenture, mortgage, lease,
security agreement or other material contract;
6. reporting to the Board any failure by the Company to comply with
applicable laws or perform its contractual obligations if such failure can
reasonably be expected to adversely affect the Company's financial
condition or its ability to carry on the Business;
7. liaising with and instructing the Company's professional advisors;
(i) on a discretionary basis, with respect to those legal and
non-financial business matters arising in the ordinary course of the
Business which require professional advice;
(ii) in consultation with the Board, with respect to the structuring and
implementation of the legal and non-financial business aspects of
any material transaction to which the Company is a party; and
(iii) in consultation with the Board, with respect to the formulation and
implementation of those corporate and business planning strategies
most advantageous to the Company and the Business under applicable
laws.
Page 10
<PAGE>
8. maintaining and enhancing the Company's relationship with its major
suppliers, employees and key customers and developing, in consultation
with the Board, new relationships on behalf of the Company with other
persons that may be of material advantage to the Company and the Business;
9. preparing financial models, budgets and statements for the review and
approval of the Board and devising medium and long term strategies to
enhance the efficiency and productivity of the Business and the
profitability of the Company;
10. assisting the Board in arranging adequate debt and equity financing
facilities with financial institutions, financiers, private investors,
investment dealers or others to meet the short, medium and long term
financial needs of the Company as and when such needs arise. Such
assistance will include the attendance of one or all of Ian D. Robertson,
Barry Duggan or Ian C. Hand at meetings with prospective investors or
financiers of the Company as may be reasonably requested by the board from
time to time;
11. maintaining and enhancing the Company's relationship with its bankers,
security holders and other creditors and developing, in consultation with
the Board, new relationships on behalf of the Company with other persons
that may be of material advantage to the Company in meeting its present
and future financing needs;
12. preparing marketing, sales and advertising plans and their associated
budgets for the review and approval of the Board and assisting in efforts
to enhance the productivity and profitability of the Company;
13. supervising the implementation of the Company's marketing, sales and
advertising plans;
14. assisting in the establishment and maintenance of the Company's sales and
marketing policies and practices as well as tracking, measuring and
reporting on the various business development initiatives undertaken by
the Company;
15. assisting in the enhancement and maintenance of the Company's corporate
image and reputation through the development and management of all Company
logos, trademarks and proprietary advertising slogans, as well as by
managing all other aspects of corporate communications, including but not
limited to acting as the Company's official spokesperson;
16. supervising the preparation of annual and other operations plans and their
associated budgets for the review and approval of the Board;
17. assisting the Board in establishing and maintaining the Company's
operating policies and practices as well as tracking, measuring and
reporting on the various operating initiatives and programs undertaken by
the Company;
18. supervising the activities of operations management personnel and
engaging, reassigning or terminating the employment of such personnel on a
discretionary basis, but subject to the approval of the Board;
Page 11
<PAGE>
19. preparing a Internet Telephony engineering and deployment plan and an
associated budget for the review and approval of the Board;
20. assisting in the planning of and managing the subsequent implementation of
the Company's Internet telephony system including both Gateway Systems and
Network Elements as directed by the Board;
21. supervising the establishment and maintenance of the Company's Network
engineering procedures and practices as well as tracking, measuring and
reporting on the various networks and gateways deployed and operated by
the Company;
22. supervising the activities of technical personnel, but engaging,
reassigning or terminating the employment of such personnel subject to the
approval of the Board;
It is understood that in the performance of the Management Services the Manager
will provide the services of Ian D. Robertson, Ian C. Hand, Barry Duggan, Don
Iannucci, George Burnes and D. Kelly Daniels in such capacities and for such
amount of time as the Manager shall deem appropriate for the efficient operation
of the Business. It is expected that collectively the services of these officers
and employees of the Manager provided to the Company will be, on average, 240
hours per month in aggregate.
Page 12
<PAGE>
SCHEDULE "B"
Monthly Fees
The monthly management fees payable by the Company to the Manager during the
Term will be $20,000 United States plus GST.
Stock
In consideration of the execution of this agreement the Company will issue in
the name of the Manager 1,000,000 Common shares in the capital stock of the
Company. The stock will be issued for nominal consideration of $1.00
Options
Additional compensation will be paid by the Company to the Manager in the form
of 1,000,000 options to purchase Common shares in the capital stock of the
Company. The options will be issued in the name of such officers, employees,
consultants or service providers as designated by Canadian Digital Network
Inc.'s Board of Directors. The issue price of these options, as well as the
terms of the option agreement will be determined between the Company and the
Manager in accordance with prevailing securities law.
Page 13
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement of Amiga Telephony
Corporation (the Company") whereby the Company and a selling shareholder propose
to sell up to 3,800,000 shares of the Company's Common Stock. Reference is also
made to Exhibit 5 included in the Registration Statement relating to the
validity of the securities proposed to be sold.
We hereby consent to the use of our opinion concerning the validity of the
securities to be issued and sold.
Very truly yours,
HART & TRINEN, LLP
William T. Hart
Denver, Colorado
June 16, 1999
Amiga Consent of Attys SB-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 20, 1998 in the Registration Statement (Form SB-2)
and related Prospectus of Amiga Telephony Corporation for the registration of
1,150,000 shares of its common stock and 1,150,000 warrants to acquire shares of
its common stock.
ERNST & YOUNG LLP
Vancouver, Canada Chartered Accountants
June 18, 1999
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